Juniper Networks, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Juniper Network's Q4 2021 FY 2021 Financial Results Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Jess Lubert. Sir, the floor is yours.

Thank you, operator. Good afternoon, and welcome to our fourth 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 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 filed 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 in 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 turn the call over to Rami.

Good afternoon everyone and thank you for joining us on today's call to discuss our Q4 and full year 2021 results. I hope you and your families are well and my thoughts go out to all those who continue to be affected by the global pandemic. We delivered strong results during the fourth quarter with revenue and non-GAAP earnings per share both exceeding the midpoint of our guidance despite continued challenges from a supply chain perspective. Demand remained strong and exceeded our expectations with orders seeing high teams year-over-year growth when adjusted to account for extended lead times. On an unadjusted basis, orders grew by more than 50% year-over-year for a third consecutive quarter, and our ending backlog increased to a record level of more than $1.8 billion. Order momentum was strong across all verticals, all customer solutions, and all geographies, with each of these categories experiencing strong double-digit order growth year-over-year. Our Q4 results capped a very strong 2021, which saw us grow our enterprise business for a fifth consecutive year, grow our cloud business for a third consecutive year, and return our service provider business to growth. Not to be overlooked, we also expanded our non-GAAP operating margins year-over-year despite absorbing material increases in both supply chain and acquisition-related costs. Our teams are executing extremely well, and we are entering the new year with strong momentum. This momentum is being driven by our strategic action, and there are four pillars that give me confidence as we look forward to 2022. First, our commitment to experience-first networking. and delivering technologies that simplify customer operations and improve the end-user experience. While our experience-first journey started with MIST and then 128 Technology in our AI-driven enterprise portfolio, we subsequently extended this vision to the data center with the Astra acquisition and the service provider market with our Paragon automation suite. These software-centric solutions give us important strategic control points that not only create new recurring revenue opportunities, but also differentiate and pull through other Juniper products, creating a multiplier effect that will benefit growth in the years to come. Our experience-first vision is a key point of differentiation for our products that we believe is resonating across customers, and providing confidence in our future prospects. Second, we are highly focused and aligned to three major use cases, automated WAN, AI-driven enterprise, and cloud-ready data center solutions. And we are enabling security to be seamlessly embedded within all of them. Each of these use cases is likely to see attractive market tailwinds over the next several years. Focusing our company from a product management to engineering to go to market on a handful of meaningful and growing opportunities enabled us to accelerate our growth in 2021. This focus also enables us to continue to deliver the technical differentiation and new innovations to capitalize on the big market inflection that we see unfolding in 2022 and beyond. Third, our go-to-market transformation is yielding meaningful results. This started with a change in sales leadership back in early 2019, which was followed by a meaningful increase in quota-carrying sales reps during 2020 and incremental sales development and enablement capabilities in 2021. We have also made meaningful investments in our channel, increasing the total number of Juniper Channel partners by more than 30% since 2019. This investment not only resulted in record channel sales this past quarter, but also more than a 100% increase in year-over-year deal registration, which reflects robust demand generated solely by the channel. These investments in our sales and channel organizations have enabled us to accelerate our growth and should position us to do so again in the upcoming year. To be clear, we view our go-to-market organization as a competitive advantage where we will continue to invest to capture share. Finally, we continue to transition our business to a more software-centric model. This includes transforming more of our perpetual offerings to term-based licenses, introducing more ratable subscription offerings and training our sales organizations to better monetize the value of our software stack. While these efforts remain in the early innings, we experienced encouraging momentum in the Q4 timeframe, which saw total software and related services revenue grow 41% year-over-year and orders increase by more than 100% year-over-year. Our annualized recurring revenue, which solely consists of truly radical software subscriptions and related services, increased 32% year-over-year due to strong demand for missed and certain security subscriptions. We are encouraged by the progress we're making in our efforts to capture more software revenue, which we view as critical to not only accelerating growth, but also improving customer stickiness and margins. Our strategy is well aligned against a backdrop of healthy end markets that should position us for growth over the next few years. This growth is being driven by the strategic importance of the network, which is only likely to increase in the coming years as enterprise digital transformation and clarification initiatives accelerate, cloud and service provider 400 gig upgrades build momentum, and service provider 5G investments expand beyond the radioactive layers to the metro, edge, and core portions of the network. While I'm encouraged by the market dynamics we're seeing, I strongly believe the products we are delivering, the customer engagement we've developed, and the investments we've made in our go-to-market organization will position us to gain share and deliver sustainable growth in the years to come, regardless of end market conditions. As you can tell, I am very optimistic regarding our future prospects, despite the supply chain challenges we're continuing to navigate. I believe these challenges are likely to prove transitory, and the strong order momentum we're seeing and the backlog we have developed sets us up extremely well to deliver solid growth and improve profitability in 2022 and beyond. Based on our recent order momentum, current backlog levels, and our assumptions regarding supply, we currently expect to deliver 7% to 9% sales growth and at least a point of operating margin expansion in 2022. Our expectations for 2022 assume current supply chain challenges persist and that we are unable to work down backlog during the year, potentially creating longer-term tailwind for our business once the supply chain improves and backlog returns to more normal levels. While we would expect growth orders to decline in 2022 as lead time stabilized and we start seeing fewer early orders, we expect adjusted orders to grow for the year. Now I'd like to provide some additional insights into the quarter and address some of the key developments we're seeing from a customer solutions perspective. Starting with our automated WAN solutions, we saw strong momentum from both a revenue and order perspective, particularly with our cloud and service provider customers. We saw healthy demand across both our MX and PTS product families and strong adoption of our newer products as well as our Paragon automation portfolio. Our 400 gig solutions are performing well, and we now have more than 200 wide area wins, that should present building tailwinds from a revenue perspective in the years to come. We're continuing to invest in our automated WAN portfolio, and just recently announced next-gen custom silicon families for our MX and PTX platforms that will offer industry-leading throughput, power efficiency, and logical scale, all while maintaining investment protection. We're also continuing to invest in our ACX Metro portfolio where we continue to see strong early interest that should further build as we complete the portfolio later this year. These investments are resonating with our service provider and cloud customers who appreciate that no single silicon family is optimized for all use cases and prefer to purchase systems with silicon that is purpose-built for the job at hand. We are playing to win across all areas of automated land solutions and making the investments needed to capitalize on our customers' core, edge, and metro requirements that we believe present opportunities for growth over the next several years. Our AI-driven enterprise revenue significantly outpaced the market, growing 29% year-over-year in Q4 and 27% on a full-year basis. It has been especially exciting to see our missed solution go from a cool technology to a leader in the 2021 Gartner Magic Quadrant for wired and wireless access, with top scores in both vision and ability to execute. Buoyed by several unique architectural differences, including leading AIOps and a modern microservices cloud, we continue to see record numbers in our wired and wireless access business. For example, our wireless revenue more than doubled year-over-year in Q4, and the winning continues as we recently closed a multimillion-dollar win with a major multinational bank based on simplified operations via AIOps and location services that leverage our patented virtual BLE technology. We're also seeing strong missed pull-through of our EF switching portfolio which experienced record orders and units sold in the fourth quarter. Our mystified revenue of wireless LAN, wired access, MARVIS virtual network assistance, and associated EX pull-through more than doubled in Q4 as compared to last year, and our annualized order run rate surpassed $600 million in the quarter. On a full year basis, our MIST defined revenue was approximately 300 million in 2021 and nearly doubled year-over-year. Our AI-driven SD-WAN solution, which combines a unique session smart routing technology acquired by 128 Technology with the automation and insight of MIST AI, is following in the same footsteps. We saw triple-digit year-over-year revenue and order growth in Q4. with key wins in various sectors like retail and banking and strong traction within the federal government. One new customer deployed 300 sites the week before Christmas, highlighting the ease and scale of the Juniper SD-WAN solution driven by Mist AI. With new product enhancements announced this month, including day zero and one operation via the Mist cloud, new SSR hardware platform and bundled security capabilities we expect demand to further build in future quarters. Of special note are the full-stack multi-million dollar opportunities we continue to win and deploy, where companies are turning to Juniper for a combination of their wired access, wireless access, and WAN edge needs. Based on our recent order momentum, third-party validation, and the technical superiority of our AI-driven enterprise portfolio, I remain highly confident regarding the outlook for our AI-driven enterprise business during the upcoming year. While our cloud-ready data center revenue declined in Q4 due solely to the timing of shipments related to supply chain challenges, we experienced another quarter of encouraging order trends driven by broad-based strengths across verticals and geographies. We continue to see strong momentum with new logos, and we secured a record number of deals greater than $1 million. 400 gig momentum remains strong. We now have more than 6,400 gig data center wins that include cloud majors, large enterprise, and service provider accounts. Key to our continued growth in the data center is Astra, the industry's leading intent-based networking solution. that provides users with a superior experience versus our competitors across day zero, day one, and day two operations. Astra remains the only open fabric management platform on the market, which is not only creating software-only management opportunities, but also driving full-stack data center wins. We're investing in sales enablement and the tools needed to accelerate our Astra-driven success during the upcoming year. Customer interest in our cloud-ready data center portfolio is high, and we continue to be optimistic about the growth prospects for this business in the upcoming year. Our security revenue was essentially flat in Q4, but orders saw double-digit year-over-year growth. We remain confident in our connected security strategy and believe the convergence of networking and security provides us with a competitive advantage in the portions of the market where we are currently focused. 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. I'd like to mention that our services team delivered another impressive quarter and our services business continues to grow year over year due to record renewals and strong attach rates. Our customer satisfaction scores once again set new all-time highs. and our service margins came in better than expected due to higher revenue and lower costs. On a full year basis, our service margins achieved a new all-time record of 65.8%, up 170 basis points as compared to the prior year. Our services organization continues to execute extremely well and is focused on driving incremental efficiency through automation and cloud-delivered insights to not only create new revenue opportunities, but also benefit margins and customer experience. Before I conclude, I'd like to state that our mission at Juniper is to power connections and empower change. Now, more than ever, we are committed to ensuring networking is a force for good in this world. That includes building global resilience to combat climate risk throughout our business and supply chains, and enabling solutions for a low-carbon future. We continue to make, monitor, and report our environmental, social, and governance progress through our annual corporate social responsibility report and CDP responses. Today, we are responding to the need for urgent and bold action. We're committing our global facilities to be carbon neutral by 2025. You can follow our progress on our new climate webpage, juniper.net, 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.