8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported)        April 25, 2019

Juniper Networks, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-34501	770422528
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification No.)

1133 Innovation Way, Sunnyvale, California	94089
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code        (408) 745-2000

Not Applicable

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 1.01. Entry into a Material Definitive Agreement

On April 25, 2019, Juniper Networks, Inc. (“we”, “our” or the “Company”) entered into a Credit Agreement (the “New Credit Agreement”) among the Company, the lenders from time to time party thereto and Citibank, N.A. (“Citibank”), as administrative agent. Bank of America, N.A. acted as syndication agent and Citibank and Merrill Lynch, Pierce, Fenner & Smith Incorporated acted as joint lead arrangers and joint bookrunners in connection with the New Credit Agreement. The New Credit Agreement replaces the Company’s revolving credit facility provided under the Credit Agreement, dated June 27, 2014, among the Company, the lenders party thereto and Citibank, as administrative agent (as amended on November 21, 2017, the “Prior Credit Agreement”), which agreement was terminated substantially concurrently with the Company entering into the New Credit Agreement.

The New Credit Agreement provides for a $500 million unsecured revolving credit facility, with an option of the Company to increase the amount of the credit facility by up to an additional $200 million, subject to certain terms and conditions as set forth therein. Proceeds of loans made under the New Credit Agreement may be used by the Company for working capital and general corporate purposes. Revolving loans may be borrowed, repaid and reborrowed until April 25, 2024 (subject to two one-year maturity extension options, on the terms and conditions set forth in the Credit Agreement), at which time all amounts borrowed must be repaid. Borrowings may be denominated, at the Company’s option, in U.S. dollars, pounds sterling or Euro. No loans are currently outstanding under the New Credit Agreement.

Revolving loans will bear interest, at the Company’s option, at either (i) a floating rate per annum equal to the base rate plus a margin of between 0.000% and 0.375%, depending on the Company’s public debt rating or (ii) a per annum rate equal to the reserve adjusted Eurocurrency rate, plus a margin of between 0.910% and 1.375%, depending on the Company’s public debt rating. Base rate is defined as the greatest of (A) Citibank’s prime rate, (B) the federal funds rate plus 0.500% or (C) the London interbank offered rate for deposits in U.S. dollars for a period of one month plus 1.00%. The Eurocurrency rate is determined for U.S. dollars and pounds sterling as the rate at which deposits in such currency are offered in the London interbank market for the applicable interest period and for Euro as the rate specified for deposits in Euro with a maturity comparable to the applicable interest period.

A default interest rate shall apply, at the Agent’s option or upon the request of the required lenders, on all obligations during a payment event of default under the New Credit Agreement at a rate per annum equal to 2.000% above the applicable interest rate. The Company will pay to each lender a facility fee on a quarterly basis based on the amount of each lender’s commitment to make loans, of between 0.090% and 0.250%, depending on the Company’s public debt rating. Revolving loans may be prepaid without penalty, subject to customary breakage costs for loans bearing interest at the Eurocurrency rate. The Company is also obligated to pay customary fees for a credit facility of this size and type.

The New Credit Agreement requires the Company to maintain a maximum leverage ratio and a minimum interest coverage ratio during the term of the credit facility. In addition, the New Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the ability of the Company and its subsidiaries to, among other things, grant liens, merge or consolidate, dispose of all or substantially all of its assets, change their accounting or reporting policies, change their business and incur subsidiary indebtedness, in each case subject to customary exceptions for a credit facility of this size and type.

The New Credit Agreement includes customary events of default that, include among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of covenants, cross default to certain other indebtedness, bankruptcy and insolvency events involving the Company or its material subsidiaries, material judgments, change of control and certain ERISA events. The occurrence of an event of default could result in the acceleration of the obligations under the New Credit Agreement.

The foregoing description of the New Credit Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the New Credit Agreement. A copy of the New Credit Agreement will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2019.

Item 1.02. Termination of a Material Definitive Agreement

The information set forth above under Item 1.01 with respect to the Prior Credit Agreement is incorporated herein by reference. For a description of the material terms of the Prior Credit Agreement, please see the Company’s Current Report on Form 8-K as filed with the Commission on June 27, 2014, which description is incorporated herein by reference.

Item 2.02 Results of Operations and Financial Condition.

On April 25, 2019, the Company issued a press release in which we announced preliminary financial results for the quarter ended March 31, 2019. The Company also posted on the Investor Relations section of its website (www.juniper.net) prepared remarks with respect to the quarter ended March 31, 2019. Copies of the press release and prepared remarks by the Company are furnished as Exhibits 99.1 and 99.2, respectively, to this report. Information on our website is not, and will not be deemed, a part of this report or incorporated into any other filings the Company makes with the Securities and Exchange Commission.

The information furnished pursuant to this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed as “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information set forth above under Item 1.01, “Entry into a Material Definitive Agreement,” is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Press release issued by Juniper Networks, Inc. on April 25, 2019
99.2	Prepared remarks by Juniper Networks, Inc. dated as of April 25, 2019

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Juniper Networks, Inc.
April 25, 2019	By:	/s/ Brian M. Martin
		Name:   Brian M. Martin
		Title:   Senior Vice President and General Counsel

EX-99.1

Exhibit 99.1

Investor Relations:

Jess Lubert

Juniper Networks

(408) 936-3734

jlubert@juniper.net

Media Relations:

Leslie Moore

Juniper Networks

(408) 936-5767

llmoore@juniper.net

JUNIPER NETWORKS REPORTS PRELIMINARY FIRST QUARTER 2019 FINANCIAL RESULTS

SUNNYVALE, Calif., April 25, 2019 - Juniper Networks (NYSE: JNPR), an industry leader in automated, scalable and secure networks, today reported preliminary financial results for the three months ended March 31, 2019 and provided its outlook for the three months ending June 30, 2019.

First Quarter 2019 Financial Performance

Net revenues were $1,001.7 million, a decrease of 7% year-over-year, and 15% sequentially.

GAAP operating margin was 4.3%, a decrease from 5.1% in the first quarter of 2018, and a decrease from 16.7% in the fourth quarter of 2018.

Non-GAAP operating margin was 11.2%, a decrease from 12.3% in the first quarter of 2018, and a decrease from 21.1% in the fourth quarter of 2018.

GAAP net income was $31.1 million, a decrease of 10% year-over-year, and a decrease of 84% sequentially, resulting in diluted earnings per share of $0.09.

Non-GAAP net income was $92.7 million, a decrease of 7% year-over-year and a decrease of 55% sequentially, resulting in non-GAAP diluted earnings per share of $0.26.

“The first quarter played out largely as we expected, with slightly better than forecasted sales across each of our core verticals,” said Rami Rahim, chief executive officer, Juniper Networks. “While we are pleased with the progress we experienced versus our guidance, we are not satisfied with these results and remain focused on delivering a return to growth later this year. We believe the investments we are making in our go-to-market organization, new products we are bringing to market and the acquisition of Mist Systems should position us to achieve this objective.”

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“We exceeded our profitability targets during the first quarter, with non-GAAP gross margin, non-GAAP operating margin and non-GAAP earnings per share all coming in above the mid-point of our guidance,” said Ken Miller, chief financial officer, Juniper Networks. “While we were delayed in executing our proposed $300 million accelerated share repurchase program during the first quarter, due to our acquisition of Mist Systems, we plan to execute this program during the current quarter given our ongoing belief in our future prospects.”

Balance Sheet and Other Financial Results

Total cash, cash equivalents, and investments as of March 31, 2019 were $3,502.7 million, compared to $3,448.4 million as of March 31, 2018, and $3,758.1 million as of December 31, 2018.

Net cash flows provided by operations for the first quarter of 2019 was $159.4 million, compared to $271.1 million in the first quarter of 2018, and $212.4 million in the fourth quarter of 2018.

Days sales outstanding in accounts receivable, or “DSO,” was 58 days in the first quarter of 2019, compared to 57 days in the first quarter of 2018, and 58 days in the fourth quarter of 2018.

Capital expenditures were $27.9 million, and depreciation and amortization expense was $51.0 million during the first quarter of 2019.

Juniper’s Board of Directors has declared a quarterly cash dividend of $0.19 per share to be paid on June 24, 2019 to shareholders of record as of the close of business on June 3, 2019.

Outlook

These metrics are provided on a non-GAAP basis, except for revenue and share count. Non-GAAP earnings per share is on a fully diluted basis. The outlook assumes that the exchange rate of the U.S. dollar to other currencies will remain relatively stable at current levels.

Our Q2 revenue outlook reflects normal seasonal trends.

We expect revenue to grow on a sequential basis beyond the second quarter. While we continue to expect better trends during the second half of the year, we do expect to see some impact from seasonality during the third quarter. We expect to return to year-over-year growth in the fourth quarter. We remain confident in the long-term financial model we outlined at our Investor Day in November last year.

Full year non-GAAP gross margins are expected to improve directionally with revenue volume from Q1’19 levels, and we believe non-GAAP gross margin for the year will be toward the mid-point of our long-term financial model.

We plan to manage our operating expenses prudently; however, we expect the Mist Systems acquisition to be dilutive in 2019. Based on our current forecast, we expect non-GAAP operating expenses on a full year basis to be flat to slightly up versus 2018.

For the remainder of 2019, we expect a non-GAAP tax rate lower than Q1’19 levels.

We expect higher interest income compared to the prior year.

Due to the acquisition of Mist Systems and a higher than anticipated tax rate, we expect non-GAAP earnings per share of $1.75 +/- $0.05 for 2019. If not for these items, our non-GAAP EPS guidance for the year would remain unchanged.

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Our guidance for the quarter ending June 30, 2019 is as follows:

• Revenue will be approximately $1,100 million, plus or minus $30 million.

• Non-GAAP gross margin will be approximately 59.5%, plus or minus 1%.

• Non-GAAP operating expenses will be approximately $485 million, plus or minus $5 million.

• Non-GAAP operating margin will be approximately 15.5% at the midpoint of revenue guidance.

• Non-GAAP net income per share will be approximately $0.39, plus or minus $0.03. This assumes a share count of approximately 350 million.

All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition-related charges, restructuring benefits or charges, impairment charges, strategic partnership-related charges, legal reserve and settlement charges or benefits, supplier component remediation charges and recoveries, gain or loss on equity investments, retroactive impact of certain tax settlements, significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the impact of income tax reform, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and the income tax effect of non-GAAP exclusions, and do not include the impact of tariffs and the impact of any future acquisitions, divestitures, or joint ventures that may occur in the period. Juniper is unable to provide a reconciliation of non-GAAP guidance measures to corresponding U.S. generally accepted accounting principles or GAAP measures on a forward-looking basis without unreasonable effort due to the overall high variability and low visibility of most of the foregoing items that have been excluded. For example, share-based compensation expense is impacted by the Company’s future hiring needs, the type and volume of equity awards necessary for such future hiring, and the price at which the Company’s stock will trade in those future periods. Amortization of intangible assets is significantly impacted by the timing and size of any future acquisitions. The items that are being excluded are difficult to predict and a reconciliation could result in disclosure that would be imprecise or potentially misleading. Material changes to any one of these items could have a significant effect on our guidance and future GAAP results. Certain exclusions, such as amortization of intangible assets and share-based compensation expenses, are generally incurred each quarter, but the amounts have historically and may continue to vary significantly from quarter to quarter.

First Quarter 2019 Financial Commentary Available Online

A CFO Commentary reviewing the Company’s first quarter 2019 financial results, as well as second quarter 2019 financial outlook will be furnished to the SEC on Form 8-K and published on the Company’s website at http://investor.juniper.net. Analysts and investors are encouraged to review this commentary prior to participating in the conference call webcast.

Conference Call Webcast

Juniper Networks will host a conference call webcast today, April 25, 2019, at 2:00 pm PT, to be broadcast live over the Internet at http://investor.juniper.net. To participate via telephone in the US, the toll free dial-in number is 1-877-407-8033. Outside the US, dial +1-201-689-8033. Please call 10 minutes prior to the scheduled conference call time. The webcast replay will be archived on the Juniper Networks website.

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About Juniper Networks

Juniper Networks simplifies the complexities of networking with products, solutions and services in the cloud era to transform the way we connect, work and live. We remove the traditional constraints of networking to enable our customers and partners to deliver automated, scalable and secure networks that connect the world. Additional information can be found at Juniper Networks (www.juniper.net).

Investors and others should note that the Company announces material financial and operational information to its investors using its Investor Relations website, press releases, SEC filings and public conference calls and webcasts. The Company also intends to use the Twitter account @JuniperNetworks and the Company’s blogs as a means of disclosing information about the Company and for complying with its disclosure obligations under Regulation FD. The social media channels that the Company intends to use as a means of disclosing information described above may be updated from time to time as listed on the Company’s Investor Relations website.

Juniper Networks, the Juniper Networks logo, Juniper, and Junos are registered trademarks of Juniper Networks, Inc. and/or its affiliates in the United States and other countries. Other names may be trademarks of their respective owners.

Safe Harbor

Statements in this release concerning Juniper Networks’ business outlook, economic and market outlook, including currency exchange rates; our future financial and operating results; our expectation for potential near-term dilution and long-term benefits from our Mist acquisition; our plans to enter into an accelerated share repurchase in the near term; our expectations regarding our sales execution and investments in our go-to-market organization; the strength of our solution portfolio and strategy; our ability to deliver on our long-term financial model; our ability to expand business opportunities, improve profitability and make necessary investments; our expectations around obtaining revenue and margin growth (including sequential revenue growth throughout the year and a return to year-over-year growth later in the year); our future financial and operating results, including our financial guidance; and our overall future prospects are forward-looking statements within the meaning of the Private Securities Litigation Reform Act that involve a number of uncertainties and risks. Actual results or events could differ materially from those anticipated in those forward-looking statements as a result of several factors, including: general economic and political conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending by our customers, including Cloud providers and Service Providers; the network capacity requirements of our customers and, in particular, cloud and telecommunication service providers; contractual terms that may result in the deferral of revenue; the timing of orders and their fulfillment; manufacturing and supply chain constraints, changes or disruptions; availability of key product components; delays in scheduled product availability; adoption of regulations or standards affecting Juniper Networks products, services or the networking industry; product defects, returns or vulnerabilities; significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the Tax Cuts and Jobs Act, and judicial or administrative interpretation of tax regulations; legal settlements and resolutions; the potential impact of activities related to the execution of capital return, restructurings and product rationalization; the impact of import tariffs, depending on their scope and how they are implemented; and other factors listed in Juniper Networks’ most recent report on Form 10-Q or 10-K filed with the Securities and Exchange Commission. Note that our estimates as to tax rate on our business are based on current tax law, including current interpretations of the Tax Cuts and Jobs Act, and could be materially affected by changing interpretations of the Act, as well as additional legislation and guidance around the Act. All statements made in this press release are made only as of the date set forth at the beginning of this release. Juniper Networks undertakes no obligation to update the information made in this release in the event facts or circumstances subsequently change after the date of this press release.

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Use of Non-GAAP Financial Information

Juniper Networks believes that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. For further information regarding why Juniper Networks believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the “Discussion of Non-GAAP Financial Measures” section of this press release. The following tables and reconciliations can also be found on our Investor Relations website at http://investor.juniper.net.

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Juniper Networks, Inc.

Preliminary Condensed Consolidated Statements of Operations

(in millions, except per share amounts)

(unaudited)

	Three Months Ended March 31,
	2019		2018
Net revenues:
Product	$	618.7	$	710.8
Service		383.0		371.8
Total net revenues		1,001.7		1,082.6
Cost of revenues:
Product		270.0		306.4
Service		149.4		157.8
Total cost of revenues		419.4		464.2
Gross margin		582.3		618.4
Operating expenses:
Research and development		227.6		269.4
Sales and marketing		228.5		239.4
General and administrative		68.2		56.0
Restructuring charges (benefits)		15.3		(1.9	)
Total operating expenses		539.6		562.9
Operating income		42.7		55.5
Other income (expense), net		1.8		(14.1	)
Income before income taxes		44.5		41.4
Income tax provision		13.4		7.0
Net income	$	31.1	$	34.4
Net income per share:
Basic	$	0.09	$	0.10
Diluted	$	0.09	$	0.10
Shares used in computing net income per share:
Basic		348.1		355.3
Diluted		352.7		360.6

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Juniper Networks, Inc.

Preliminary Net Revenues by Product and Service

(in millions)

(unaudited)

	Three Months Ended March 31,
	2019		2018
Routing	$	374.7	$	408.1
Switching		176.4		230.0
Security		67.6		72.7
Total Product		618.7		710.8
Total Service		383.0		371.8
Total	$	1,001.7	$	1,082.6

Juniper Networks, Inc.

Preliminary Net Revenues by Vertical^(*)

(in millions)

(unaudited)

	Three Months Ended March 31,
	2019		2018
Cloud	$	223.1	$	270.9
Service Provider		435.6		480.1
Enterprise		343.0		331.6
Total	$	1,001.7	$	1,082.6

^(*)  Certain prior-period amounts have been reclassified to conform to the current-period classifications.

Juniper Networks, Inc.

Preliminary Net Revenues by Geographic Region

(in millions)

(unaudited)

	Three Months Ended March 31,
	2019		2018
Americas	$	543.6	$	587.6
Europe, Middle East, and Africa		286.2		308.0
Asia Pacific		171.9		187.0
Total	$	1,001.7	$	1,082.6

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Juniper Networks, Inc.

Preliminary Reconciliations between GAAP and non-GAAP Financial Measures

(in millions, except percentages and per share amounts)

(unaudited)

		Three Months Ended
		March 31, 2019			December 31, 2018			March 31, 2018
GAAP operating income		$	42.7		$	196.8		$	55.5
GAAP operating margin			4.3	%		16.7	%		5.1	%
Share-based compensation expense	C		33.9			36.9			70.4
Share-based payroll tax expense	C		4.7			0.4			5.6
Amortization of purchased intangible assets	A		4.9			4.3			4.4
Restructuring charges (benefits)	B		15.3			5.0			(1.9	)
Acquisition-related charges	A		10.2			4.3			0.1
Strategic partnership-related charges	B		0.8			1.0			—
Legal reserve and settlement benefits	B		—			—			(0.6	)
Non-GAAP operating income		$	112.5		$	248.7		$	133.5
Non-GAAP operating margin			11.2	%		21.1	%		12.3	%
GAAP net income		$	31.1		$	192.2		$	34.4
Share-based compensation expense	C		33.9			36.9			70.4
Share-based payroll tax expense	C		4.7			0.4			5.6
Amortization of purchased intangible assets	A		4.9			4.3			4.4
Restructuring charges (benefits)	B		15.3			5.0			(1.9	)
Acquisition-related charges	A		10.2			4.3			0.1
Strategic partnership-related charges	B		0.8			1.0			—
Legal reserve and settlement benefits	B		—			—			(0.6	)
Loss on equity investments	B		1.1			1.3			—
Estimated tax expense from income tax reform	B		—			3.2			—
Recognition of previously unrecognized tax benefits	B		—			(5.4	)		—
Reduction of expected tax liabilities from tax accounting method change	B		—			(26.7	)		—
Income tax effect of non-GAAP exclusions	B		(9.3	)		(10.8	)		(12.9	)
Non-GAAP net income		$	92.7		$	205.7		$	99.5
GAAP diluted net income per share		$	0.09		$	0.55		$	0.10
Non-GAAP diluted net income per share	D	$	0.26		$	0.59		$	0.28
Shares used in computing diluted net income per share			352.7			350.8			360.6

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Discussion of Non-GAAP Financial Measures

This press release, including the tables above, includes the following non-GAAP financial measures derived from our Preliminary Consolidated Statements of Operations: operating income; operating margin; net income; and diluted net income per share. These measures are not presented in accordance with, nor are they a substitute for GAAP. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. The non-GAAP financial measures used in the table above should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, certain of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, forecasting and planning for future periods, and determining payments under compensation programs. We consider the use of the non-GAAP measures presented above to be helpful in assessing the performance of the continuing operation of our business. By continuing operation, we mean the ongoing revenue and expenses of the business, excluding certain items that render comparisons with prior periods or analysis of on-going operating trends more difficult, such as expenses not directly related to the actual cash costs of development, sale, delivery or support of our products and services, or expenses that are reflected in periods unrelated to when the actual amounts were incurred or paid. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for financial measures prepared in accordance with GAAP, allows for greater transparency in the review of our financial and operational performance. In addition, we have historically reported non-GAAP results to the investment community and believe that continuing to provide non-GAAP measures provides investors with a tool for comparing results over time. In assessing the overall health of our business for the periods covered by the table above and, in particular, in evaluating the financial line items presented in the table above, we have excluded items in the following three general categories, each of which are described below: Acquisition-Related Charges, Other Items, and Share-Based Compensation Related Items. We also provide additional detail below regarding the shares used to calculate our non-GAAP net income per share. Notes identified for line items in the table above correspond to the appropriate note description below. With respect to the items excluded from our forward-looking non-GAAP measures and reconciliation of such measures, please see the “Outlook” section above.

Note A: Acquisition-Related Charges. We exclude certain expense items resulting from acquisitions including amortization of purchased intangible assets associated with our acquisitions. The amortization of purchased intangible assets associated with our acquisitions results in our recording expenses in our GAAP financial statements that were already expensed by the acquired company before the acquisition and for which we have not expended cash. Moreover, had we internally developed the products acquired, the amortization of intangible assets, and the expenses of uncompleted research and development would have been expensed in prior periods. Accordingly, we analyze the performance of our operations in each period without regard to such expenses. In addition, acquisitions result in non-continuing operating expenses, which would not otherwise have been incurred by us in the normal course of our business operations. We believe that providing non-GAAP information for acquisition-related expense items in addition to the corresponding GAAP information allows the users of our financial statements to better review and understand the historic and current results of our continuing operations, and also facilitates comparisons to less acquisitive peer companies.

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Note B: Other Items. We exclude certain other items that are the result of either unique or unplanned events, including the following, when applicable: (i) restructuring charges or benefits; (ii) strategic partnership-related charges (iii) legal reserve and settlement charges or benefits; (iv) gain or loss on equity investments; (v) significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the impact of income tax reform; (vi) recognition of previously unrecognized tax benefits that are non-recurring in nature; (vii) the income tax effect on our financial statements of excluding items related to our non-GAAP financial measures. It is difficult to estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these unique or unplanned transactions may limit the comparability of our on-going operations with prior and future periods. Restructuring benefits or charges result from events that arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. These expenses do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred. We also exclude certain expenses incurred for the formation of a strategic partnership, as they are directly related to an event that is distinct and does not reflect current ongoing business operations. In the case of legal reserves and settlements, these gains or losses are recorded in the period in which the matter is concluded or resolved even though the subject matter of the underlying dispute may relate to multiple or different periods. As such, we believe that these expenses do not accurately reflect the underlying performance of our continuing operations for the period in which they are incurred. Additionally, we exclude previously unrecognized tax benefits that are non-recurring in nature which are recorded in the period in which applicable statutes of limitation lapse or upon the completion of tax review cycles as the tax matter may relate to multiple or different periods. Further, the impact of certain income tax reform, including the revaluation of our deferred tax assets and liabilities are unique events that occur in periods that are generally unrelated to the level of business activity to which such tax reform or legislation applies. We believe these tax events limit the comparability with prior periods and that these expenses or benefits do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred. We also believe providing financial information with and without the income tax effect of excluding items related to our non-GAAP financial measures provide our management and users of the financial statements with better clarity regarding the on-going performance and future liquidity of our business. Because of these factors, we assess our operating performance with these amounts both included and excluded, and by providing this information, we believe the users of our financial statements are better able to understand the financial results of what we consider our continuing operations.

Note C: Share-Based Compensation Related Items. We provide non-GAAP information relative to our expense for share-based compensation and related payroll tax. Due to the varying available valuation methodologies, subjective assumptions and the variety of award types, which affect the calculations of share-based compensation, we believe that the exclusion of share-based compensation and related payroll tax allows for more accurate comparisons of our operating results to our peer companies and is useful to investors to understand the impact of share-based compensation to our results of operations. Further, expense associated with granting share-based awards does not reflect any cash expenditures by the company as no cash is expended.

Note D: Non-GAAP Net Income Per Share Items. We provide diluted non-GAAP net income per share. The diluted non-GAAP net income per share includes additional dilution from potential issuance of common stock, except when such issuances would be anti-dilutive.

Page 10 of 12

Juniper Networks, Inc.

Preliminary Condensed Consolidated Balance Sheets

(in millions)

(unaudited)

	March 31, 2019		December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	2,155.6	$	2,489.0
Short-term investments		1,227.4		1,070.1
Accounts receivable, net of allowances		645.4		754.6
Prepaid expenses and other current assets		281.2		268.1
Total current assets		4,309.6		4,581.8
Property and equipment, net		892.4		951.7
Operating lease right-of-use assets		184.2		—
Long-term investments		119.7		199.0
Purchased intangible assets, net		113.5		118.5
Goodwill		3,109.3		3,108.8
Other long-term assets		409.2		403.5
Total assets	$	9,137.9	$	9,363.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	219.1	$	208.8
Accrued compensation		166.8		221.0
Deferred revenue		860.1		829.3
Short-term portion of long-term debt		—		349.9
Other accrued liabilities		243.1		233.5
Total current liabilities		1,489.1		1,842.5
Long-term debt		1,789.6		1,789.1
Long-term deferred revenue		370.8		384.3
Long-term income taxes payable		407.3		404.4
Long-term operating lease liabilities		176.7		—
Other long-term liabilities		53.2		119.8
Total liabilities		4,286.7		4,540.1
Total stockholders’ equity		4,851.2		4,823.2
Total liabilities and stockholders’ equity	$	9,137.9	$	9,363.3

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Juniper Networks, Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(in millions)

(unaudited)

	Three Months Ended March 31,
	2019			2018
Cash flows from operating activities:
Net income	$	31.1		$	34.4
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense		33.9			70.4
Depreciation, amortization, and accretion		48.7			55.7
Other		(2.2	)		1.7
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net		108.6			170.8
Prepaid expenses and other assets		0.5			(11.7	)
Accounts payable		10.1			(31.2	)
Accrued compensation		(54.9	)		(14.1	)
Income taxes payable		(5.7	)		(7.6	)
Other accrued liabilities		(27.9	)		(51.1	)
Deferred revenue		17.2			53.8
Net cash provided by operating activities		159.4			271.1
Cash flows from investing activities:
Purchases of property and equipment		(27.9	)		(42.2	)
Purchases of available-for-sale debt securities		(884.4	)		(8.1	)
Proceeds from sales of available-for-sale debt securities		232.8			968.0
Proceeds from maturities and redemptions of available-for-sale debt securities		578.3			215.4
Purchases of equity securities		(5.1	)		(2.0	)
Proceeds from sales of equity securities		2.2			3.3
Subsequent payments related to acquisitions in prior years		—			(22.2	)
Net cash (used in) provided by investing activities		(104.1	)		1,112.2
Cash flows from financing activities:
Repurchase and retirement of common stock		(2.9	)		(754.2	)
Proceeds from issuance of common stock		29.5			29.3
Payment of dividends		(66.2	)		(62.1	)
Change in customer financing arrangement		—			(16.6	)
Payment of debt		(350.0	)		—
Net cash used in financing activities		(389.6	)		(803.6	)
Effect of foreign currency exchange rates on cash, cash equivalents, and restricted cash		1.6			6.2
Net increase in cash, cash equivalents, and restricted cash		(332.7	)		585.9
Cash, cash equivalents, and restricted cash at beginning of period		2,505.8			2,059.1
Cash, cash equivalents, and restricted cash at end of period	$	2,173.1		$	2,645.0

Page 12 of 12

EX-99.2

Exhibit 99.2

Juniper Networks, Inc.

1133 Innovation Way

Sunnyvale, CA 94089

April 25, 2019

CFO Commentary on First Quarter 2019 Preliminary Financial Results

Related Information

The following commentary is provided by management and should be referenced in conjunction with Juniper Networks’ first quarter 2019 preliminary financial results press release available on its Investor Relations website at http://investor.juniper.net. These remarks represent management’s current views of the Company’s financial and operational performance and outlook and are provided to give investors and analysts further insight into the Company’s performance in advance of the earnings call webcast.

Q1 2019 Preliminary Financial Results

GAAP

(in millions, except per share amounts and percentages)	Q1’19			Q4’18			Q1’18			Q/Q Change			Y/Y Change
Revenue	$	1,001.7		$	1,181.0		$	1,082.6			(15	)%		(7	)%
Product		618.7			776.7			710.8			(20	)%		(13	)%
Service		383.0			404.3			371.8			(5	)%		3	%
Gross margin %		58.1	%		60.2	%		57.1	%		(2.1	)pts		1.0	pts
Research and development		227.6			231.2			269.4			(2	)%		(16	)%
Sales and marketing		228.5			224.9			239.4			2	%		(5	)%
General and administrative		68.2			53.0			56.0			29	%		22	%
Restructuring charges (benefits)		15.3			5.0			(1.9	)		206	%		N/M
Total operating expenses	$	539.6		$	514.1		$	562.9			5	%		(4	)%
Operating margin %		4.3	%		16.7	%		5.1	%		(12.4	)pts		(0.8	)pts
Net income		31.1			192.2			34.4			(84	)%		(10	)%
Diluted net income per share	$	0.09		$	0.55		$	0.10			(84	)%		(10	)%

N/M - Not meaningful

Non-GAAP

(in millions, except per share amounts and percentages)	Q2’19 Guidance	Q1’19			Q4’18			Q1’18			Q/Q Change			Y/Y Change
Revenue	$1,100 +/- $30	$	1,001.7		$	1,181.0		$	1,082.6			(15	)%		(7	)%
Product			618.7			776.7			710.8			(20	)%		(13	)%
Service			383.0			404.3			371.8			(5	)%		3	%
Gross margin %	59.5% +/- 1.0%		59.3	%		60.9	%		58.2	%		(1.6	)pts		1.1	pts
Research and development			213.5			212.3			222.9			1	%		(4	)%
Sales and marketing			217.3			213.6			223.9			2	%		(3	)%
General and administrative			50.9			45.2			49.8			13	%		2	%
Total operating expenses	$485 +/- $5	$	481.7		$	471.1		$	496.6			2	%		(3	)%
Operating margin %	~15.5% at the midpoint		11.2	%		21.1	%		12.3	%		(9.9	)pts		(1.1	)pts
Net income		$	92.7		$	205.7		$	99.5			(55	)%		(7	)%
Diluted net income per share	$0.39 +/- $0.03	$	0.26		$	0.59		$	0.28			(56	)%		(7	)%

Q1 2019 Overview

We ended the first quarter at $1,002 million in revenue, above the mid-point of our guidance. In addition, non-GAAP gross margin of 59.3% was toward the high-end of our guidance range. These results, along with prudent expense management and higher than anticipated other income, drove non-GAAP earnings per share of $0.26, above our guidance range.

Looking at our revenue by vertical, results were largely in-line with our expectations. Enterprise increased 3% year-over-year. Sequentially, Enterprise decreased 20%, more than normal seasonality impacted by transitions in our go-to-market structure. Service Provider decreased 9% year-over-year and 16% sequentially, due to weakness across all geographies. Cloud decreased 18% year-over-year and 6% sequentially. While Cloud capacity continued to grow year-over-year, the growth in units was not enough to off-set expected ASP erosion.

From a technology perspective, Routing decreased 8% year-over-year and 16% sequentially. Switching decreased 23% year-over-year and sequentially. Security decreased 7% year-over-year and 35% sequentially. Our Services business increased 3% year-over-year but decreased 5% sequentially.

Software revenue grew year-over-year for the ninth consecutive quarter and was greater than 10 percent of total revenue.

In reviewing our top 10 customers for the quarter, three were Cloud, six were Service Provider, and one was an Enterprise.

Product deferred revenue was $140 million, down 12% year-over-year and down 3% sequentially. The year-over-year decline was due to the timing of the delivery of contractual commitments.

Non-GAAP operating expenses were down 3% year-over-year and up 2% sequentially.

Cash flow from operations was $159 million for the quarter. We paid $66 million in dividends, reflecting a quarterly dividend of $0.19 per share. The total cash, cash equivalents, and investments at the end of the first quarter of 2019 was $3.5 billion. The sequential decline was due primarily to the repayment of our $350 million bond that matured in the quarter.

Revenue

Product & Service

• Routing product revenue: $375 million, down 8% year-over-year and down 16% sequentially. The year-over-year decrease was primarily due to Service Provider, and to a lesser extent Cloud, partially offset by strength in Enterprise. The sequential decline was due to Service Provider and to a lesser extent, Enterprise. The MX and PTX product families declined both year-over-year and sequentially.

• Switching product revenue: $176 million, down 23% year-over-year and sequentially. The year-over-year decrease was primarily due to Cloud, and to a lesser extent, Service Provider. The sequential decrease was primarily due to Enterprise. The QFX and EX product families declined both year-over-year and sequentially.

• Security product revenue: $68 million, down 7% year-over-year and down 35% sequentially. The year-over-year decrease was primarily due to Cloud, partially offset by growth in Enterprise. The sequential decrease was primarily due to Enterprise.

• Service revenue: $383 million, up 3% year-over-year and down 5% sequentially. The year-over-year increase was due to strong renewal and attach rates of support contracts. Sequentially, the decrease was primarily due to timing of professional services projects.

Vertical

• Cloud: $223 million, down 18% year-over-year and down 6% sequentially. The year-over-year decrease was primarily due to Switching and Routing, partially offset by growth in Service. The sequential decrease was primarily due to Security and Routing.

• Service Provider: $436 million, down 9% year-over-year and down 16% sequentially. The year-over-year and sequential decreases were primarily due to Routing.

• Enterprise: $343 million, up 3% year-over-year and down 20% sequentially. The year-over-year increase was primarily driven by strength in Routing and to a lesser extent, Service and Security, partially offset by Switching. The sequential decrease was primarily due to Switching.

Geography

• Americas: $544 million, down 7% year-over-year and down 14% sequentially. Year-over-year, the decrease was primarily due to Cloud and, to a lesser extent, Service Provider. Sequentially, the decline was primarily due to Enterprise, and to a lesser extent, Service Provider.

• EMEA: $286 million, down 7% year-over-year and down 17% sequentially. Year-over-year, the decrease was primarily due to Service Provider and Cloud, partially offset by growth in Enterprise. Sequentially, the decrease was due to Service Provider and Enterprise, partially offset by growth in Cloud.

• APAC: $172 million, down 8% year-over-year and down 15% sequentially. The year-over-year decrease was due to Service Provider and Cloud, partially offset by an increase in Enterprise. The sequential decrease was driven by all verticals.

Gross Margin

• GAAP gross margin: 58.1%, compared to 57.1% from the prior year and 60.2% from last quarter.

• Non-GAAP gross margin: 59.3%, compared to 58.2% from the prior year and 60.9% from last quarter.

• GAAP product gross margin: 56.4%, down 0.5 points from the prior year and down 2.2 points from last quarter.

• Non-GAAP product gross margin: 57.4%, down 0.3 points from the prior year and down 1.8 points from last quarter.

Year-over-year, the decrease in product gross margin, on a GAAP and non-GAAP basis, was primarily due to lower revenue and to a lesser extent, China tariffs, partially offset by growth in software.

The sequential decrease in product gross margin, on a GAAP and non-GAAP basis, was primarily due to lower revenue.

• GAAP service gross margin: 61.0%, up 3.4 points from the prior year and down 2.3 points from last quarter.

• Non-GAAP service gross margin: 62.4%, up 3.3 points from the prior year and down 1.9 points from last quarter.

Year-over-year, the increase in service gross margin, on a GAAP and non-GAAP basis, was primarily driven by lower delivery costs and a one-time recovery of goods and services tax.

Sequentially, the decrease in service gross margin was primarily due to lower service revenue.

Operating Expenses

• GAAP operating expenses: $540 million, a decrease of $23 million year-over-year, and an increase of $26 million, sequentially.

The year-over-year decrease in operating expenses was primarily due to lower share-based compensation and lower headcount, partially offset by higher restructuring costs and acquisition-related costs associated with Mist Systems. The sequential increase reflects higher restructuring costs, the annual reset of variable compensation and the seasonal increase in fringe costs.

GAAP operating expenses were 53.9% of revenue, up 1.9 points year-over-year and up 10.4 points quarter-over-quarter.

• Non-GAAP operating expenses: $482 million, a decrease of $15 million year-over-year, and an increase of $11 million sequentially.

The year-over-year decrease in operating expenses was primarily due to lower headcount related costs.

The sequential increase in operating expenses reflects the annual reset of variable compensation and the seasonal increase in fringe costs.

Non-GAAP operating expenses were 48.1% of revenue, up 2.2 points year-over-year and up 8.2 points quarter-over-quarter.

Operating Margin

• GAAP operating margin: 4.3%, a decrease of 0.8 points year-over-year and a decrease of 12.4 points sequentially.

• Non-GAAP operating margin: 11.2%, a decrease of 1.1 points year-over-year and a decrease of 9.9 points sequentially.

Tax Rate

• GAAP tax rate: 30.0%, compared to 16.9% in Q1’18 and a 2.0% benefit last quarter.

The year-over-year and quarter-over-quarter increase in the effective tax rate was primarily due to a change in the level of discrete items in the comparative period, a change in the geographic mix of earnings, and a reduction in the tax liability in Q4’18 of approximately $32.2 million resulting from a tax accounting method change.

• Non-GAAP tax rate: 19.6%, compared to 16.7% in Q1’18 and 14.9% last quarter.

The year-over-year and sequential increase in the effective tax rate was primarily due to changes in the benefit of discrete tax items and the geographic mix of earnings compared to the prior quarters.

Diluted Earnings Per Share

• GAAP diluted earnings per share: $0.09, a decrease of $0.01 year-over-year and a decrease of $0.46 sequentially.

• Non-GAAP diluted earnings per share: $0.26, a decrease of $0.02 year-over-year and a decrease of $0.33 sequentially.

The year-over-year decrease in EPS, on a GAAP and non-GAAP basis, was primarily due to lower revenue. The sequential decrease in EPS on a GAAP and non-GAAP basis, was primarily due to lower revenue and higher operating expenses.

Balance Sheet, Cash Flow, Capital Return, and Other Financial Metrics

(in millions, except days sales outstanding (“DSO”), and headcount)	Q1’19		Q4’18		Q3’18		Q2’18		Q1’18
Cash(1)	$	3,502.7	$	3,758.1	$	3,648.0	$	3,530.5	$	3,448.4
Debt		1,789.6		2,139.0		2,138.3		2,137.7		2,137.0
Net cash(2)		1,713.1		1,619.1		1,509.7		1,392.8		1,311.4
Operating cash flow		159.4		212.4		207.3		170.3		271.1
Capital expenditures		27.9		36.5		31.6		37.1		42.2
Depreciation and amortization		51.0		52.2		48.8		54.6		55.0
Share repurchases(3)		—		—		—		—		750.0
Dividends	$	66.2	$	62.3	$	62.1	$	62.8	$	62.1
Diluted shares		352.7		350.8		350.5		351.3		360.6
DSO		58		58		49		52		57
Headcount		9,068		9,283		9,311		9,341		9,363

⁽¹⁾  Includes cash, cash equivalents, and investments.

⁽²⁾ Net cash includes cash, cash equivalents, and investments, net of debt.

⁽³⁾ For Q1’18, $750 million represents the full amount under the accelerated share repurchase program (the “ASR”). 23.3 million shares were received initially for an aggregate price of $600 million. The ASR concluded in Q3’18, and at final settlement, an additional 6.0 million shares were received.

Cash Flow

• Cash flow from operations: $159 million, down $112 million year-over-year and down $53 million sequentially.

The year-over-year decrease was primarily due to lower cash collections, partially offset by lower payments to suppliers.

The sequential decrease was primarily due to lower net income, partially offset by the net change to working capital related to accounts receivable, prepaid expenses and other assets, and accrued compensation.

Days Sales Outstanding (DSO)

• DSO: 58 days, flat from the prior quarter, as lower overall invoicing volume was offset by lower revenue.

Capital Return

• In the quarter, we paid a dividend of $0.19 per share for a total of $66 million.

• Although the accelerated share repurchase program (ASR) initially planned for Q1’19 was delayed in connection with our acquisition of Mist Systems, we anticipate entering into an ASR for approximately $300 million, this quarter, reflecting our continued conviction in our future prospects.

Financing Activities

• Debt: We paid down our $350 million bond that matured in February. We continue to focus on maintaining an efficient capital structure.

• Credit facility: Today we also announced that we entered into a five-year, $500 million revolving credit facility, replacing the existing facility that was set to terminate in June 2019. The new facility has terms similar to the existing credit facility. Additional details can be found in our Form 8-K filed today.

Demand metrics

• Total deferred revenue was $1,231 million, down $26 million year-over-year and up $17 million sequentially.

• Product deferred revenue was $140 million, down $19 million year-over-year and down $5 million quarter-over-quarter.

The year-over-year decline in product deferred revenue was due to the timing of the delivery of contractual commitments.

• Service deferred revenue was $1,091 million, down $7 million year-over-year and up $22 million sequentially.

The sequential increase in service deferred revenue was primarily driven by the timing of contract renewals.

Deferred Revenue

(in millions)	March 31, 2019		December 31, 2018		March 31, 2018
Deferred product revenue, net	$	139.6	$	144.4	$	158.8
Deferred service revenue		1,091.3		1,069.2		1,098.1
Total	$	1,230.9	$	1,213.6	$	1,256.9

Headcount

• Ending headcount for Q1’19 was 9,068, a decrease of 295 employees year-over-year and 215 sequentially. The year-over-year and sequential decreases were primarily related to restructuring in Q1’19.

Outlook

These metrics are provided on a non-GAAP basis, except for revenue and share count. Non-GAAP earnings per share is on a fully diluted basis. The outlook assumes that the exchange rate of the U.S. dollar to other currencies will remain relatively stable at current levels.

Our Q2 revenue outlook reflects normal seasonal trends.

While we expect revenue to grow on a sequential basis beyond the second quarter, we do expect to see some impact from seasonality in Q3. We expect to return to year-over-year growth in the fourth quarter. We remain confident in the long-term financial model we outlined at our Investor Day in November last year.

Full year non-GAAP gross margin is expected to improve directionally with revenue volume from Q1’19 levels, and we believe non-GAAP gross margin for the year will be toward the mid-point of our long-term financial model.

We plan to manage our operating expenses prudently; however, we expect the Mist Systems acquisition will be dilutive to non-GAAP earnings in 2019. Based on our current forecast we expect non-GAAP operating expenses on a full year basis to be flat to slightly up versus 2018.

For the remainder of 2019, we expect a non-GAAP tax rate to be lower than Q1’19 levels.

We expect higher interest income compared to the prior year.

Due to the acquisition of Mist Systems and a higher than anticipated non-GAAP tax rate, we expect non-GAAP earnings per share of $1.75 +/- $0.05 for 2019. If not for these items, our previous non-GAAP EPS guidance for the year would remain unchanged.

Juniper’s Board of Directors has declared a quarterly cash dividend of $0.19 per share to be paid on June 24, 2019 to shareholders of record as of the close of business on June 3, 2019.

Our guidance for the quarter ending June 30, 2019 is as follows:

• Revenue will be approximately $1,100 million, plus or minus $30 million.

• Non-GAAP gross margin will be approximately 59.5%, plus or minus 1%.

• Non-GAAP operating expenses will be approximately $485 million, plus or minus $5 million.

• Non-GAAP operating margin will be approximately 15.5% at the midpoint of revenue guidance.

• Non-GAAP net income per share will be approximately $0.39, plus or minus $0.03. This assumes a share count of approximately 350 million.

Forward-Looking Statements

Statements in this CFO Commentary and related conference call concerning Juniper Networks’ business, economic and market outlook, including seasonal trends, pricing pressure, product mix, tax rates, interest income and currency exchange rates; our long-term financial model; the financial impact of our acquisitions (including Mist Systems); factors that impact our gross margin; the architectural transition of our customers’ networks and timing of deployments by our customers; our capital return program, including our commitment to grow dividends with our earnings and the expected timing of any share repurchases; our expectations around revenue (including year-over-year growth in the fourth quarter of 2019), operating expense, and earnings (including guidance related to our 2019 non-GAAP earnings per share); our expectations regarding product and geographic mix; our future financial and operating results, including our financial guidance; strength of certain of our customer segments; and our overall future prospects are forward looking statements within the meaning of the Private Securities Litigation Reform Act that involve a number of uncertainties and risks. Actual results or events could differ materially from those anticipated in those forward-looking statements as a result of several factors, including: general economic and political conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending by our customers, including Cloud providers and Service Providers; the network capacity requirements of our customers and, in particular, cloud and telecommunication service providers; contractual terms that may result in the deferral of revenue; the timing of orders and their fulfillment; manufacturing and supply chain constraints, changes or disruptions; availability of key product components; delays in scheduled product availability; adoption of regulations or standards affecting Juniper Networks products, services or the networking industry; product defects, returns or vulnerabilities; significant effects of tax legislation, including the Tax Act, and judicial or administrative interpretation of tax regulations; legal settlements and resolutions; the potential impact of activities related to the execution of capital return, restructurings and product rationalization; the potential impact of tariffs; and other factors listed in Juniper Networks’ most recent report on Form 10-K or 10-Q filed with the Securities and Exchange Commission (”SEC”). Note that our estimates as to tax rate and the impact of the Tax Act on our business are based on current tax law, including current interpretations of the Tax Act, and could be materially affected by changing interpretations of as well as and additional legislation and guidance around the Tax Act. All statements made in this CFO Commentary and related conference call are made only as of the date set forth at the beginning of this document. Juniper Networks undertakes no obligation to update the information made in this document or the related conference call in the event facts or circumstances subsequently change after the date of this document.

Non-GAAP Financial Measures

This CFO Commentary contains references to the following non-GAAP financial measures: gross margin; product gross margin; service gross margin; product gross margin as a percentage of product revenue; service gross margin as a percentage of service revenue; gross margin as a percentage of revenue; research and development expense; sales and marketing expense; general and administrative expense; operating expense; operating expense as a percentage of revenue; operating income; operating margin; provision for income tax; income tax rate; net income; diluted earnings per share; diluted shares outstanding; and free cash flow. For important commentary on why Juniper Networks considers non-GAAP information a useful view of the company’s financial results, please see the press release furnished with our Form 8-K filed today with the SEC. With respect to future financial guidance provided on a non-GAAP basis, we have excluded estimates for amortization of intangible assets, share-based compensation expenses, acquisition-related charges, restructuring benefits or charges, impairment charges, strategic partnership-related charges, legal reserve and settlement charges or benefits, supplier component remediation charges and recoveries, gain or loss on equity investments, retroactive impact of certain tax settlements, significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the impact of income tax reform, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and the income tax effect of non-GAAP

exclusions, and do not include the impact of tariffs and the impact of any future acquisitions, divestitures, or joint ventures that may occur in the applicable period. These measures are not presented in accordance with, nor are they a substitute for U.S. generally accepted accounting principles, or GAAP. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. The non-GAAP financial measures used in this CFO Commentary should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis due to the high variability and low visibility with respect to the charges which are excluded from these non-GAAP measures. For example, share-based compensation expense is impacted by the Company’s future hiring needs, and restructuring actions, the type and volume of equity awards necessary for such future hiring, and the price at which the Company’s stock will trade in those future periods. Amortization of intangible assets is significantly impacted by the timing and size of any future acquisitions. The items that are being excluded are difficult to predict and a reconciliation could result in disclosure that would be imprecise or potentially misleading. Material changes to any one of these items could have a significant effect on our guidance and future GAAP results. Certain exclusions, such as amortization of intangible assets and share-based compensation expenses, are generally incurred each quarter, but the amounts have historically and may continue to vary significantly from quarter to quarter.

Juniper Networks, Inc.

Preliminary Supplemental Data

(in millions, except percentages)

(unaudited)

Deferred Revenue

	As of
	March 31, 2019			December 31, 2018
Deferred product revenue:
Undelivered product commitments and other product deferrals	$	152.3		$	163.3
Deferred gross product revenue		152.3			163.3
Deferred cost of product revenue		(12.7	)		(18.9	)
Deferred product revenue, net		139.6			144.4
Deferred service revenue		1,091.3			1,069.2
Total	$	1,230.9		$	1,213.6
Reported as:
Current	$	860.1		$	829.3
Long-term		370.8			384.3
Total	$	1,230.9		$	1,213.6

Vertical Reporting: Revenue Trend

	2017		2018		Q1’18		Q2’18		Q3’18		Q4’18		Q1’19		Q/Q Change					Y/Y Change
Cloud	$	1,310.7	$	1,049.9	$	270.9	$	284.4	$	257.1	$	237.5	$	223.1	$	(14.4	)	(6.1	)%	$	(47.8	)	(17.6	)%
Service Provider		2,319.4		2,066.7		480.1		524.9		545.3		516.4		435.6		(80.8	)	(15.6	)%		(44.5	)	(9.3	)%
Enterprise		1,397.1		1,530.9		331.6		394.8		377.4		427.1		343.0		(84.1	)	(19.7	)%		11.4		3.4	%
Total revenue	$	5,027.2	$	4,647.5	$	1,082.6	$	1,204.1	$	1,179.8	$	1,181.0	$	1,001.7	$	(179.3	)	(15.2	)%	$	(80.9	)	(7.5	)%

Juniper Networks, Inc.

Preliminary Reconciliations between GAAP and non-GAAP Financial Measures

(in millions, except percentages and per share amounts)

(unaudited)

	Three Months Ended
	March 31, 2019			December 31, 2018			March 31, 2018
GAAP gross margin - Product	$	348.7		$	455.0		$	404.4
GAAP product gross margin % of product revenue		56.4	%		58.6	%		56.9	%
Share-based compensation expense		1.9			1.2			1.9
Share-based payroll tax expense		0.3			—			0.2
Amortization of purchased intangible assets		4.4			3.8			3.8
Non-GAAP gross margin - Product	$	355.3		$	460.0		$	410.3
Non-GAAP product gross margin % of product revenue		57.4	%		59.2	%		57.7	%
GAAP gross margin - Service	$	233.6		$	255.9		$	214.0
GAAP service gross margin % of service revenue		61.0	%		63.3	%		57.6	%
Share-based compensation expense		4.5			3.8			4.8
Share-based payroll tax expense		0.8			0.1			1.0
Non-GAAP gross margin - Service	$	238.9		$	259.8		$	219.8
Non-GAAP service gross margin % of service revenue		62.4	%		64.3	%		59.1	%
GAAP gross margin	$	582.3		$	710.9		$	618.4
GAAP gross margin % of revenue		58.1	%		60.2	%		57.1	%
Share-based compensation expense		6.4			5.0			6.7
Share-based payroll tax expense		1.1			0.1			1.2
Amortization of purchased intangible assets		4.4			3.8			3.8
Non-GAAP gross margin	$	594.2		$	719.8		$	630.1
Non-GAAP gross margin % of revenue		59.3	%		60.9	%		58.2	%
GAAP research and development expense	$	227.6		$	231.2		$	269.4
Share-based compensation expense		(12.2	)		(18.8	)		(44.1	)
Share-based payroll tax expense		(1.9	)		(0.1	)		(2.4	)
Non-GAAP research and development expense	$	213.5		$	212.3		$	222.9
GAAP sales and marketing expense	$	228.5		$	224.9		$	239.4
Share-based compensation expense		(9.4	)		(10.7	)		(13.5	)
Share-based payroll tax expense		(1.4	)		(0.2	)		(1.6	)
Amortization of purchased intangible assets		(0.4	)		(0.4	)		(0.4	)
Non-GAAP sales and marketing expense	$	217.3		$	213.6		$	223.9
GAAP general and administrative expense	$	68.2		$	53.0		$	56.0
Share-based compensation expense		(5.9	)		(2.4	)		(6.1	)
Share-based payroll tax expense		(0.3	)		—			(0.4	)
Amortization of purchased intangible assets		(0.1	)		(0.1	)		(0.2	)
Acquisition-related charges		(10.2	)		(4.3	)		(0.1	)
Strategic partnership-related charges		(0.8	)		(1.0	)		—
Legal reserve and settlement benefits		—			—			0.6
Non-GAAP general and administrative expense	$	50.9		$	45.2		$	49.8

Juniper Networks, Inc.

Preliminary Reconciliations between GAAP and non-GAAP Financial Measures

(in millions, except percentages and per share amounts)

(unaudited)

	Three Months Ended
	March 31, 2019			December 31, 2018			March 31, 2018
GAAP operating expenses	$	539.6		$	514.1		$	562.9
GAAP operating expenses % of revenue		53.9	%		43.5	%		52.0	%
Share-based compensation expense		(27.5	)		(31.9	)		(63.7	)
Share-based payroll tax expense		(3.6	)		(0.3	)		(4.4	)
Amortization of purchased intangible assets		(0.5	)		(0.5	)		(0.6	)
Restructuring (charges) benefits		(15.3	)		(5.0	)		1.9
Acquisition-related charges		(10.2	)		(4.3	)		(0.1	)
Strategic partnership-related charges		(0.8	)		(1.0	)		—
Legal reserve and settlement benefits		—			—			0.6
Non-GAAP operating expenses	$	481.7		$	471.1		$	496.6
Non-GAAP operating expenses % of revenue		48.1	%		39.9	%		45.9	%
GAAP operating income	$	42.7		$	196.8		$	55.5
GAAP operating margin		4.3	%		16.7	%		5.1	%
Share-based compensation expense		33.9			36.9			70.4
Share-based payroll tax expense		4.7			0.4			5.6
Amortization of purchased intangible assets		4.9			4.3			4.4
Restructuring charges (benefits)		15.3			5.0			(1.9	)
Acquisition-related charges		10.2			4.3			0.1
Strategic partnership-related charges		0.8			1.0			—
Legal reserve and settlement benefits		—			—			(0.6	)
Non-GAAP operating income	$	112.5		$	248.7		$	133.5
Non-GAAP operating margin		11.2	%		21.1	%		12.3	%
GAAP income tax provision (benefit)	$	13.4		$	(3.8	)	$	7.0
GAAP income tax (benefit) rate		30.0	%		(2.0	)%		16.9	%
Estimated tax expense from income tax reform		—			(3.2	)		—
Recognition of previously unrecognized tax benefits		—			5.4			—
Reduction of expected tax liabilities from tax accounting method change		—			26.7			—
Income tax effect of non-GAAP exclusions		9.3			10.8			12.9
Non-GAAP provision for income tax	$	22.7		$	35.9		$	19.9
Non-GAAP income tax rate		19.6	%		14.9	%		16.7	%

Juniper Networks, Inc.

Preliminary Reconciliations between GAAP and non-GAAP Financial Measures

(in millions, except percentages and per share amounts)

(unaudited)

	Three Months Ended
	March 31, 2019			December 31, 2018			March 31, 2018
GAAP net income	$	31.1		$	192.2		$	34.4
Share-based compensation expense		33.9			36.9			70.4
Share-based payroll tax expense		4.7			0.4			5.6
Amortization of purchased intangible assets		4.9			4.3			4.4
Restructuring charges (benefits)		15.3			5.0			(1.9	)
Acquisition-related charges		10.2			4.3			0.1
Strategic partnership-related charges		0.8			1.0			—
Legal reserve and settlement benefits		—			—			(0.6	)
Loss on equity investments		1.1			1.3			—
Estimated tax expense from income tax reform		—			3.2			—
Recognition of previously unrecognized tax benefits		—			(5.4	)		—
Reduction of expected tax liabilities from tax accounting method change		—			(26.7	)		—
Income tax effect of non-GAAP exclusions		(9.3	)		(10.8	)		(12.9	)
Non-GAAP net income	$	92.7		$	205.7		$	99.5
GAAP diluted net income per share	$	0.09		$	0.55		$	0.10
Non-GAAP diluted net income per share	$	0.26		$	0.59		$	0.28
Shares used in computing diluted net income per share		352.7			350.8			360.6