Juniper Networks, Inc.

Greetings. Welcome to the Juniper Network's Q2 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 second quarter 2023 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 furnished with our 8K 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 Q2 2023 results. We delivered better than expected results during the second quarter with total revenue of $1,430,000,000, growing 13% year over year and exceeding the midpoint of our guidance. Product revenue grew by 15% year over year and we saw year over year growth across all geographies. Profitability was also strong in Q2, as our non-GAAP gross and operating margin both exceeded expectations, resulting in non-GAAP earnings per share of 58 cents towards the high end of our quarterly guidance range. Our Q2 results reflect strong execution by our teams, as well as the improvements we're seeing in the availability of supply. We remain confident in our positioning from a technology perspective, and our ability to capitalize as our customers build their networks for the next decade, which we believe will leverage AI-powered software automation, an area where we have invested meaningfully over the last few years. We believe these investments, along with our go-to-market focus, will enable us to not only deliver sustained top-line growth, but also improve profitability even in a challenged end-market environment. With respect to demand, total product orders grew nearly double digits on a sequential basis. And while the year-over-year rate of decline improved relative to last quarter, it was still meaningful due to the strong sequential performance in Q2 2022. While we are continuing to see positive momentum in our enterprise business, we experienced weaker than expected trends with our cloud and service provider customers, which we believe is due to the timing of projects and the digestion of prior purchases. Despite these trends, we continue to expect the decline in orders to moderate further over the next few quarters and return to year-over-year growth potentially as soon as Q4 of this year. From a vertical perspective, I remain extremely encouraged by the momentum we're seeing in our enterprise business, which delivered record revenue results and accounted for more than 45% of our total revenue, representing both our largest and fastest growing vertical for a third consecutive quarter not only did our enterprise revenue grow by nearly 40 percent year-over-year in the q2 time frame our enterprise product orders also saw healthy year-over-year growth despite a 20 plus comp in the year ago period importantly new logos grew by more than 30 percent year-over-year which we view as an important forward indicator given the opportunity to expand after landing many of these accounts. Not to be overlooked, deal registration through the channel and commercial orders both grew by more than 40% year over year, which we think speaks to the differentiation of our products and our ability to capture share. Within the enterprise, our campus and branch business had another record quarter in Q2, with our AI-driven enterprise revenue growing more than 60% year over year. Customers are recognizing Juniper's clear and defensible leadership when it comes to AI-driven operations delivered via a modern microservices cloud. While the rest of the industry continues to talk, we have real AI solutions that deliver real results, including a 90% reduction in worldwide trouble tickets at a global software company 85% fewer store visits by IT at a multinational retailer, and the fastest branch network rollout in the history of a national mobile operator. Revenue from the mystified segment of our business, which are products driven by missed AI, had a record quarter, growing by nearly 100% year-over-year in the Q2 timeframe, with orders growing by nearly 40% year-over-year. Strength was broad across the portfolio, with record wireless, wired, and SD-WAN revenue in the quarter, as well as record full-stack wins, where customers purchased several of these campus and branch products together. We view momentum with these full-stack wins as a positive forward-looking indicator, given our belief that for every dollar of wireless, there is $2 to $3 of wired switching and additional SD-WAN opportunity. Marquee new AI-driven enterprise customers this quarter include a Fortune 10 technology company, a Fortune 50 financial institution, an American super center chain, the UK's largest cycling retailer, and a multinational manufacturing company. We introduced several new innovations to the Juniper Mist portfolio this past quarter, including the industry's first AI-driven cloud-based network access assurance solution, which we believe has the ability to revolutionize a very dated NAC industry. In addition, we expanded our AIOps leadership by integrating the Marvis Virtual Network Assistant with ChatGPT for enhanced knowledge-based queries using large language models. And we integrated with a leading internet collaboration platform for superior video performance. Our enterprise data center business also performed well in Q2. with Astra reporting a record quarter, both from a revenue and an orders perspective. The Astra pipeline continues to grow, with new logos more than doubling year-over-year for a second consecutive quarter, and we continue to see strong hardware pull-through for every dollar of software, which we view as a positive indicator for our enterprise data center prospects. Our automation-driven data center revenue in the enterprise posted a record quarter, primarily due to the increasing adoption of Astra. New cloud-ready data center wins this quarter include a Fortune 250 financial services firm, a large US restaurant chain, and a large US government agency. The performance of our enterprise business shows our diversification strategy is working. and 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 our enterprise revenue and orders during the year, even in a more challenged macro environment. As highlighted over the last few quarters, 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. This is proving to be particularly true in the cloud, where we're seeing more customers digesting prior purchases and pushing projects to future periods. While these dynamics are likely to pressure our cloud business for the next few quarters, We remain optimistic regarding our longer-term growth prospects in the cloud given our strong wide-area footprint, the rapid traffic growth that continues in many of these customer environments, and the opportunity to capitalize on the adoption of large language models and the build-out of AI clusters. To this last point, we expect AI adoption to drive a meaningful uptick in traffic growth that is likely to benefit our cloud wide area footprint over time. However, we also see an attractive data center opportunity emerging where we believe the performance and power efficiency of our custom silicon, the congestion management capabilities embedded within our Junos operating system, and our support for technologies such as RDMA networking will position us well to capture share, particularly with cloud major accounts that are likely to bet on Ethernet as the protocol of choice to support their AI cluster investments. In fact, we've already begun to see successes in non-hyperscaler accounts. Our service provider business performed as expected in Q2, but moderated on both a sequential and year-over-year basis following the strong shipments we experienced in the Q1 timeframe. We expect this business to remain lumpy going forward as the continued momentum we're seeing with respect to 400 gig deployments, particularly with some of our larger tier one customers, is being offset by incremental weakness with tier two and tier three carriers that are being impacted by the software macro environment. Despite these headwinds, we remain encouraged by the momentum we're seeing in our cloud metro portfolio. where our new ACX 7K platforms experience a record quarter, both from a revenue and an orders perspective, and the pipeline of opportunities remains strong. We expect this business to build through the remainder of the year and become more material to revenue in 2024 and beyond. In summary, I remain confident in our strategy and optimistic regarding our long-term growth prospects. My enthusiasm is fueled by our continued enterprise momentum and the attractive longer-term opportunities we continue to see in the cloud, as well as the SB Metro opportunity. However, given the digestion of prior purchases and the uncertain timing of customer deployments, particularly amongst some of our larger cloud customers, we have less visibility and our revenue results are likely to be pressured over the next few quarters. Based on these dynamics, we are reducing our full-year revenue growth forecast. We remain committed to delivering improved profitability and still expect to deliver greater than 100 basis points of operating margin improvement in 2023. I will now turn the call over to Ken, who will discuss our quarterly financial results in more detail.