Juniper Networks, Inc.

Greetings. Welcome to the Juniper Network's Q1 2023 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 first quarter 2023 conference call. Joining me today, Arami 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 10-K the press release furnished with our 8 file today, the CFO commentary posted on the investor relations portion of our website 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 Q1 2023 results. We delivered better than expected results during the first quarter, with total revenue of $1,372,000,000 growing 17% year-over-year and exceeding the midpoint of our guidance. Total product sales grew 23% year-over-year, and we saw year-over-year growth across all customer solutions and all geographies. Profitability was also strong in Q1, as our non-GAAP growth and operating margin both exceeded expectations, resulting in non-GAAP earnings per share of $0.48 above the high end of our quarterly guidance range. These results reflect healthy customer demand for our solutions, as well as the improvements we're seeing in the availability of supply. Our teams continue to execute extremely well, and we remain confident in our positioning from a technology go-to-market and supply chain perspective to capitalize on our customers' digital transformation and cloudification initiatives that are likely to further increase network requirements over the next several years. As expected, total orders softened during the March quarter, declining more than 30% year-over-year. I do not believe this reflects true underlying demand due to our customers' consumption of previously placed early orders and the reduced need for new early orders as lead times have improved. With that said, we believe customer ordering patterns are normalizing, and we would expect to see a return to more traditional seasonal patterns on a sequential basis starting this quarter. This would imply that our year-over-year order declines should improve on a go-forward basis and return to year-over-year growth potentially as soon as Q4 of this year. From a vertical basis, I remain extremely encouraged by the momentum we're seeing in our enterprise business, which grew nearly 30% year-over-year in Q1, with double-digit revenue growth in both the campus and branch and the data center. We also saw strong momentum in the channel where deal registration grew by more than 30% year over year, and in the commercial market where orders grew by 40% year over year. As of the March quarter, the enterprise accounted for more than 40% of our total revenue and represented both our largest and our fastest growing vertical for a second consecutive quarter. Our enterprise campus and branch business performed exceptionally well in Q1, with revenue growing nearly 50% year over year. Our customers are clearly recognizing the value of our cloud-native, AI-driven architecture, which helps them optimize user experiences from client to cloud and minimize operating costs through proactive automation. Revenue from the mystified segment of our business, which is defined as products driven by missed AI, grew by nearly 60% year-over-year in the Q1 timeframe, with new logos increasing by nearly 30% year-over-year. Wi-Fi momentum continues to outpace the market, and we are seeing record pull-through of wired switching, as well as increased attacks of our AI-driven SD-WAN offerings. Important wins this quarter included a top-tier U.S. bank, one of the largest U.S. retailers, a leading global logistic provider, and a top pharmaceutical company, just to name a few. Not to be overlooked, our Astra pipeline continued to build, as new logos more than doubled on a year-over-year basis, and we experienced strong hardware pull-through for every dollar of software, which we view as a positive indicator for our enterprise data center prospects. Given our level of portfolio differentiation, balanced against our relatively modest share in the large markets where we compete, I expect us to grow both enterprise revenue and orders during the year, even in a more challenged macro environment. Our service provider business also performed well in Q1, due in large part to the timing of supply, which enabled us to fulfill prior orders with some of our larger tier one service provider customers particularly for MX and PTX platforms. While revenue with these customers is likely to remain lumpy on a quarter to quarter basis, I'm optimistic about our ability to grow this business during the year based on the momentum we're seeing around customer 400 gig win, many of which remain large opportunities in the early stages of deployment. We also continue to see strong early interest in our cloud metro portfolio led by our Paragon Automation Suite. In fact, our ACX 7K platform saw another quarter of triple-digit year-over-year order growth. With further enhancements to this portfolio expected later this year and next, we expect momentum within this business to build through the year and become more material to revenue in 2024 and beyond. I'd like to acknowledge we continue to see accounts across each of our customer verticals more closely scrutinizing budgets and project deployment timelines due to the macro uncertainties that are happening around the world. While order cancellations continue to remain extremely low, as supply improves, we're seeing more customers reschedule delivery dates to better match current project timelines. This is proving to be particularly true in the cloud vertical, where certain customers are digesting prior purchases, and we saw a series of projects pushed to future periods during the March quarter. While these delays may negatively impact our ability to grow our cloud business in the current year, based on the conversations we've had with many of these accounts, we're confident these delays are a function of timing. and remain positive regarding our long-term growth outlook in cloud. In summary, I remain confident in our strategy and optimistic regarding our ability to navigate market uncertainties. My enthusiasm is fueled by our continued enterprise momentum, the success we're seeing around service provider 400 gig deployments, the ongoing strength of our backlog, which remains well above historical levels, and the improvements we're seeing in supply. Longer term, I continue to see attractive growth opportunities in the cloud where we've already maintained meaningful footprint and remain closely engaged with many of these customers on potential new opportunities, both in the wide area and the data center that could present additional growth drivers. Finally, I remain encouraged by the improved diversity of our business which is lessening our sensitivity to any one customer or vertical and enabling us to navigate pockets of weakness in the market by pivoting resources to the greatest areas of opportunity. Based on these dynamics, coupled with our Q1 actuals and expectations for Q2, we are raising our full year revenue outlook and currently expect to deliver at least 9% growth for the year. We continue to remain focused on delivering improved profitability and expect to deliver greater than 100 basis points of operating margin improvements in 2023. I will now turn the call over to Ken, who will discuss our quarterly financial results in more detail.