Juniper Networks, Inc.

Welcome to Juniper Network's Q3 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the former 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, Jeff Lubert, Head of Investor Relations at Juniper. You may begin.

Thank you, Operator. Good afternoon, and welcome to our third 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 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 Q3 2023 results. We delivered better than expected results during the third quarter, with total revenue of $1,398,000,000, exceeding the midpoint of our guidance. Profitability was also strong in Q3, as our non-GAAP growth and operating margins both exceeded expectations, resulting in non-GAAP earnings per share of $0.60 which was above the high end of our quarterly guidance range. Our teams continue to execute well against the backdrop of a challenging macro environment. We remain confident in our positioning from a technology perspective and our ability to win across industry verticals as customers increasingly look to leverage AIOps and software automation tools to improve network operations and reduce overhead costs. what we call experience-first networking. We believe our attention to providing customers with the best user experience, along with our continued go-to-market focus, will position us to deliver healthy, long-term growth and improve profitability. Total product orders came in largely as expected during Q3, and the rate of year-over-year order decline improved as compared to the prior few quarters. Our enterprise business remained healthy as orders experienced high single-digit sequential growth and exceeded our expectations. Enterprise strengths helped offset order weakness with our cloud and service provider customers, where we continued to see accounts digesting prior purchases before placing new orders. I'm extremely encouraged by the momentum we're seeing in our enterprise business, which once again delivered record revenue results and accounted for more than 50% of total revenue for the first time in Juniper's history. Total enterprise revenue grew by nearly 40% year-over-year in the Q3 timeframe and represented our largest and fastest-growing vertical for our fourth consecutive quarter. Importantly, new logos saw another quarter of healthy double-digit growth, and we continued to see strong mid-market success as enterprise deal registration through the channel grew by more than 20% year-over-year and commercial orders grew by nearly 20% year-over-year. We believe continued growth in new logos and mid-market strength speaks to the differentiation of our products and our ability to capture share. Our campus and branch business had another record quarter in Q3. with our AI-driven enterprise revenue growing more than 40% year-over-year. Revenue from the Mystified segment of our business, which consists of products driven by Myst AI, also had a record quarter, growing by nearly 100% year-over-year in the Q3 timeframe. Our Mystified orders also achieved a notable milestone in Q3, surpassing a billion-dollar run rate on an annualized basis. less than four years after crossing the $100 million run rate milestone in Q4 2019. Customers and the industry are recognizing Juniper's clear and defensible leadership when it comes to AI-driven operations delivered via a modern microservices cloud and the meaningful benefits these solutions can provide in terms of reducing network trouble tickets, automating manual tasks, feeding time to deployment, and reducing mean time to repair as compared to competitive platforms. We see these benefits resulting in share gain opportunities as customers transition from legacy on-prem solutions managed by people to next-gen solutions managed using AI and the cloud. We believe this architectural transition remains in the early innings and will represent attractive growth opportunities for years to come. In Q3, we secured a win with a global pharmaceutical leader, the world's largest healthcare provider added to its Juniper Mist rollout, and two very large retailers extended their Juniper Mist network to include our full stack across Wi-Fi, wired, and SUN. One of these retailers is approaching 10,000 locations. Initial demand for our cloud-based network access control product was also strong, securing more than 50 customer wins and a little more than a quarter of availability, with customers highlighting dramatic reductions in rollout time from days to minutes and simplified operations as being key differentiators. Mystified strength was broad-based 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 indicator given our belief that for every dollar of wireless, there is two to three dollars of wired switching and additional SD-WAN and NAC opportunity. Our enterprise data center business also performed well in Q3, with Astra continuing to see strong momentum in the market. Astra new logos grew by more than 80% year-over-year in Q3, and the pipeline of opportunities remains solid. Hardware pull-through for every dollar of Astra software has been meaningful and growing, which we view as a positive forward indicator for our data center prospects. Key data center wins in the quarter for Astra and our QFX switch offerings included large government agencies, international tier one service providers, and one of the largest global appliance manufacturers. 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 our enterprise revenue and orders in 2023 and 2024, 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 has been particularly true in the cloud verticals. where many of our customers are still in the process of digesting prior purchases. While these dynamics are likely to pressure our cloud segment for at least the next few quarters, we remain optimistic regarding our longer-term prospects in the cloud. Our optimism is driven by our strong wide-area footprint, the rapid traffic growth that continues in many of these customers' environments, and the opportunity to capitalize on the adoption of large language models and the build-out of AI clusters, where we are seeing strong customer engagement that is driving optimism regarding our opportunity to benefit as the industry increasingly considers Ethernet as the right choice for a wide array of AI ML use cases, including front-end, back-end, inference, and storage networks. As I mentioned last quarter, We expect AI adoption to drive a meaningful uptick in traffic growth that is likely to benefit our cloud wide area footprint over time. We also remain optimistic regarding our AI data center switching opportunity, where we are already seeing success with cloud major and enterprise accounts due to 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. Additionally, by incorporating Apster in our AIML design, Juniper differentiates in its ability to deliver the turnkey deployment and reliable operations of AIML clusters, which is critical to achieving the performance goals required by AIML teams. Our service provider business softened in Q3 and was impacted by some of the macro uncertainties that are happening around the world. These dynamics are causing many carriers to more closely scrutinize budgets, and in some cases, to run their networks harder than planned. We found this to be particularly true amongst our Tier 2 and Tier 3 customers, as well as certain large international accounts while activity with the US Tier 1 operators has largely tracked according to plan. Despite these macro headwinds, we remain encouraged by the momentum we're seeing in our cloud metro portfolio, where our new ACX 7K platform had a record revenue quarter and saw solid year-over-year growth from an orders perspective. These products secured six new footprint wins in the Q3 timeframe. including a win with an international tier one account. We expect this business to build through the remainder of the year and become more material to revenue in the 2024 timeframe and beyond. I'd like to highlight that our services team continued to execute extremely well and delivered another quarter of record revenue and margins during the Q3 timeframe. Services accounts for more than 35% of our total revenue. and we believe represents an underappreciated aspect of the business that is not only recurring and likely to grow in the years to come, but also presents opportunities for margin expansion as the team continues to identify and capture efficiency. In summary, while the macro environment remains uncertain and is impacting our near-term outlook, I remain confident with 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 service provider metro opportunities. I'd also like to emphasize that we remain committed to delivering improved profitability and still expect to deliver greater than 100 basis points of non-GAAP operating margin improvement in 2023. We also expect further improvement in 2024. While we view revenue growth as the primary lever to achieving improved profitability and reducing costs is never easy, we recently announced an action to protect profitability while preserving investments in strategic areas of the company. I will now turn the call over to Ken, who will discuss our quarterly financial results and outlook in more detail.