Juniper Networks, Inc.

Greetings. Welcome to the Juniper Network's Q3 2021 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Jess Lubert. You may begin.

Thank you, operator. Good afternoon, and welcome to our third quarter 2021 conference call. Joining me today are Rami Rahim, Chief Executive Officer, and Ken Miller, Chief Financial Officer. Today's call contains certain forward-looking statements based on our current expectations. These statements are subject to risks and uncertainties, and the actual results might differ materially. These risks are discussed in our most recent 10Q, the press release, and CFO commentary furnished with our 8-K file today and in our other SEC filings. Our forward-looking statements speak only as of today, and Juniper undertakes no obligation to update any forward-looking statements. Our discussion today will include non-GAAP financial results. Reconciliation information can be found on the investor relations section of our website under financial reports. Commentary on why we consider non-GAAP information a useful view of the company's financial results is included in today's press release. Following our prepared remarks, we will take questions. We ask that you please limit yourself to one question so that as many people as possible who would like to ask a question have a chance. With that, I will now hand the call over to Rami.

Good afternoon, everyone, and thank you for joining us on today's call to discuss our Q3 2021 results. We experienced very strong demand during the September quarter and delivered a fifth consecutive quarter of year-of-year growth, even though supply chain challenges impacted revenue in the period. Orders saw another quarter of mid-teens year-of-year growth when adjusted to account for extended lead time. On an unadjusted basis, orders grew by more than 50% year-of-year for a second consecutive quarter, and our ending backlog has now increased by more than $1 billion as compared to year-end 2020. Order momentum was strong across verticals, customer solutions, and geographies, with each of these categories experiencing growth well into double-digit territory. Needless to say, our team is executing extremely well. Our strategy is working. And the investments we have made in technologies that enhance customer operations and improve the end user experience, what we call experience-first networking, are allowing us to differentiate across the markets we serve. This technical differentiation, along with the investments we've made in our go-to-market organization, are paying off and enabling us to take share and capitalize on some of the big market transitions that are beginning to unfold across the verticals we serve. This is particularly true in the enterprise market, where customers are increasingly recognizing the value delivered by platforms such as Mist and Astra that dramatically reduce deployment time, eliminate trouble tickets, and reduce mean time to resolution for network problems. These platforms are not only enabling us to win new logos in the campus and the data center, but also to pull through other Juniper products that present meaningful opportunities to expand with customers over time. In the cloud and service provider verticals, we're seeing strong early adoption of our 400 gig capable platforms due to the strength of our Junos Evolved operating system, our differentiated silicon capabilities, and the deep engagement we maintain with these important customers. These factors are not only enabling us to maintain our core franchises, but also to secure a new footprint, including a large new hyperscale WAN deployment that should present tailwinds for our business over the next few years. I'm also encouraged by the early customer interest in our Metro routing portfolio, which addresses a large and fast-growing market where historically we haven't placed. We expect this opportunity to steadily ramp through the course of next year as new products come to market and service provider 5G investments steadily increase. The bottom line is that I remain very optimistic regarding our future prospects despite the supply chain challenges we are currently navigating. I believe these challenges are likely to prove transitory in nature and the strong order momentum we're seeing and the backlog we have developed sets us up extremely well to deliver improved growth and profitability in 2022 and beyond. While it remains early, and we'll provide a more detailed 2022 outlook when we report our Q4 results, based on current backlog and the order strength we're continuing to see in the market, we currently expect to deliver at least mid-single-digit sales growth and at least a point of operating margin expansion in 2022. Our expectations for 2022 do not assume a material improvement in supply chain constraints. Now I'd like to provide some additional insights into the quarter and address some key developments we're seeing from a customer solutions perspective. Starting with our automated WAN solutions, while revenue declined year-over-year due entirely to supply chain constraints, we experienced another quarter of strong order growth with solid momentum in both our service provider and cloud segments. We saw healthy demand across both our MX and PTF product families and strong adoption of our newer products as well as our automation software portfolio. Our 400 gig solutions are performing well and enabled us to not only protect our existing footprint, but also to secure new wins that include several large opportunities with our cloud customers, including the hyperscale opportunity I previously referenced. Driven in part by these opportunities, our cloud orders saw a second consecutive quarter of triple digit growth year over year. While we are continuing to see strong customer demand for our automated WAN solutions, these products are currently the most impacted by supply chain challenges. As a result, we continue to expect revenue from this segment to be within the range of our long-term model, calling for a 1% decline to a 3% growth this year, despite the strong demand we are seeing. Our cloud-ready data center solutions experience 26% year-over-year revenue growth in Q3 and another quarter of encouraging order trends from our cloud, enterprise, and service provider customers. We continue to see strong momentum with new logos and deals greater than $1 million. As I mentioned last quarter, Astra is creating a significant buzz in the market, which is not only leading to more software opportunities, but also full-stack data center wins. Customer interest in our cloud-ready data center portfolio is high, and we continue to be optimistic about the outlook of this business. Based on the momentum we're seeing, our cloud-ready data center business is now tracking to meet or exceed the high end of our long-term model, looking for 5% to 9% growth year over year. Finally, Our AI-driven enterprise solution significantly outpaced the market and grew 35% year-over-year. Our missed AI differentiation continues to win in the market as wireless orders experience another record quarter with triple-digit growth and a record number of deals greater than $1 million. Our mystified revenue of wireless LAN, wired access, Marvis virtual network assistance, and associated EX pull-through nearly double year-over-year, and we experienced record EX pull-through in the period, with this pull-through revenue growing more than 200% year-over-year. This momentum enabled EX to achieve the highest level of sales since 2014. We expect this momentum to continue in future quarters as customers increasingly recognize the value of AI-driven cloud operations, including new and innovative features such as EVPN VXLAN Fabric Management in the MITS Cloud, which is launched this quarter. On a year-to-date basis, our mystified revenue has more than doubled year-over-year. We're also seeing very positive results with our AI-driven SD-WAN solution, which earned Juniper Distinction as the only visionary in the Gartner WAN Edge Magic Quadrant published last quarter. We saw a record quarter for our Session Smart Router portfolio acquired from 128 Technology with triple-digit year-of-year growth and key wins in various sectors like retail and banking, plus especially strong traction with the federal government. In addition, branch SRX sales last quarter hit a two-year high, The pipeline for our AI-driven SUN is strong, as both prospects and partners are gravitating towards the unique benefits provided by Juniper AIOps with assured client-to-cloud experiences. We are particularly encouraged by the number of full-stack, multi-million dollar wins we're seeing in the campus and branch, where companies are turning to Juniper for a combination of their wired access, wireless access, and WAN edge needs. Examples include a prominent retail chain in North America, a multinational energy company, a European multinational retailer, a leading international construction company in Europe, and managed services providers in North America and Europe. This highlights the value of our AI-driven enterprise offerings to customers and partners across all verticals and all geos. We believe Mist AI continues to offer unique and market-leading differentiation, including self-driving operations and predictive actions driven by our virtual network assistant, Marvis, resulting in the best user and operator experiences. I am very pleased with the momentum we're seeing in this business and now expect our AI-driven enterprise solutions to see at least 20% growth Our security revenue experienced strong results in Q3, with total revenue growing 9% year-over-year and product revenue increasing by 16% year-over-year, which marks a third consecutive quarter of double-digit product growth. Strength was broad-based across our high-end, mid-range, and branch SRX products, as well as our virtual SRX offerings. Our connected security strategy is gaining traction in the market because the convergence of networking and security provides us with a competitive advantage. And we continue to receive third-party accolades on our solutions from organizations such as ICSA and NetSec Open, often besting all competitors in head-to-head tests. We believe our technical strength in both security and networking will continue to provide tailwinds in future quarters and should enable us to grow our security business during the current year. Our software momentum accelerated in Q3. Software and related services revenue grew 67% year-over-year as we experienced growth with ratable subscriptions, solid uptake of our Flex software licenses, and strong sales of certain perpetual unboxed licenses. ARR grew 34% year-over-year, driven by a combination of missed subscriptions, ratable security software offerings, and the related services associated with these software offerings. We experienced record software orders in the quarter due to broad base strength across verticals and customer solutions. Momentum is strong in both ratable subscriptions offerings as well as on BoxFlex licenses. Based on the momentum we're seeing, We're currently tracking ahead of the long-term total software and ARR targets we presented at our recent Investor Day. I'd like to mention that our services team delivered another solid quarter and continued to grow on a year-over-year basis due to strong renewals and services tax rates. Our services team continues to execute extremely well to ensure our customers receive an excellent experience. I would like to extend my thanks to our customers, partners, and shareholders for their continued support and confidence in Juniper. I especially want to thank our employees for their hard work and dedication, which is essential to creating value for our stakeholders. I will now turn the call over to Ken, who will discuss our quarterly financial results in more detail.