BRINGING IT TOGETHER TO CREATE VALUE · © 2018 Juniper Networks, Inc. All rights reserved BRINGING...

© 2018 Juniper Networks, Inc. All rights reserved

BRINGING IT TOGETHER TO CREATE VALUE

Ken MillerChief Financial Officer


CAUTIONARY STATEMENTS

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Forward-Looking Statements. This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of1934, as amended, which statements involve substantial risks and uncertainties. Except for historical information contained herein, all statements could be deemed forward-looking statement, including, without limitation, Juniper Networks’ views concerning our business outlook; economic and market outlook; our future financial and operating results; the expected impact of network transitions and timing of deployments with large customers; our capital return program; the potential impact of import tariffs; our expectations with respect to market trends; our future strategy; the strength of certain customer segments; our ability to expand business opportunities (including in hyperscale-switching, 5G buildouts and with enterprise customers); our expectations with respect to revenue growth or cost containment or our ability to improve profitability and make necessary investments; the introduction of future products; the strength of our solution portfolio; and overall future prospects.

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; the network capacity requirements of our customers and, in particular, cloud and communication service providers; the timing of orders and their fulfillment; manufacturing and supply chain constraints, changes or disruptions; availability of product components; delays in scheduled product availability; adoption of regulations or standards affecting Juniper Networks’ products, services or the networking industry; the impact of import tariffs; and other factors listed in Juniper Networks’ most recent report on Form 10-Q and 10-K filed with the Securities and Exchange Commission. These forward-looking statements are not guarantees of future performance and speak only as of the date of this presentation. Juniper Networks undertakes no obligation to update the information in this presentation in the event facts or circumstances subsequently change.

Non-GAAP Financial Measures. This presentation contains information regarding Juniper Networks’ financial results prepared on a basis of accounting generally accepted in the United States of America (“GAAP”) as well as certain financial measures calculated and presented on the basis of methodologies other than in accordance with GAAP (“non-GAAP”). The non-GAAP financial measures disclosed by Juniper Networks should not be considered a substitute for, or superior to, the financial measures prepared in accordance with GAAP. Please refer to “Discussion of Non-GAAP Financial Measures” in our quarterly earnings release for a detailed explanation of the adjustments made to the comparable GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide investors with useful supplemental information.

With respect to future financial guidance provided on a non-GAAP basis, we exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition-related charges, restructuring benefits or charges, impairment charges, litigation settlement benefits or charges and resolution charges, 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 any future acquisitions, divestitures, or joint ventures that may occur in the period. Juniper Networks is unable to provide a reconciliation of non-GAAP guidance measures to corresponding 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. 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.

Statement of Product Direction. Juniper Networks may disclose information related to development and plans for future products, features or enhancements (“SOPD”). SOPD information is subject to change at any time, without notice. Except as may be set forth in definitive agreements, Juniper Networks provides no assurances, and assumes no responsibility, that future products, features or enhancements will be introduced and third parties should not base purchasing decisions upon reliance of timeframes or specifics outlined in an SOPD, because Juniper may delay or never introduce the future products, features or enhancements.

Company Logos. 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 and/or logos may be trademarks of their respective owners, and Juniper Networks’ use hereof does not imply an affiliation with, or endorsement by, the owners of these trademarks or logos.


PRINCIPLES OF VALUE CREATION

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REVENUE GROWTHOPTIMIZED CAPITAL

STRATEGYEARNINGS

EXPANSION


CREATING VALUE THROUGH REVENUE GROWTH

• Positioned to benefit from attractive markets

• Invest in strategic and differentiated solutions

• Leverage and expand customer base

• Maintain healthy Services business

REVENUE GROWTH

4


A LARGE AND GROWING MARKET

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Source: 650 Group, Dell’Oro, IHS MarkitNote: All CAGRs are 3 Years 2018-2021

SwitchingCAGR ~4%

RoutingCAGR ~(1%)

SecurityCAGR ~6%

Total Addressable Market (TAM)

$13 $13

$28 $31

$8$10

2021E2018E

$49B

$54B

• Routing impacted by Service Provider spending potentially offset by 5G

• Switching data center TAM growing faster than campus and branch

• Security market seeing steady growth


TECHNOLOGY MIX EXPECTED TO SHIFT TO GROWTH AREAS

Note: FY’17 shown in ASC 605; FY’18 and onwards in ASC 606; All CAGRs are 3 Years 2018-2021

• Routing: Service Provider spending pressure offset by growth in Cloud and uptake of new products

• Switching: Cloud / data center solution focus and Enterprise momentum

• Security: Maintain share with refreshed products and solution selling

• Services: Growth expected to continue

SwitchingCAGR 5%-9%

RoutingCAGR (4%)-0%

SecurityCAGR 3%-7%

ServiceCAGR 1%-5%

Technology Mix

44%

19%

31%

6%

FY’17

~7%

~40%

~20%

FY’18E

~33%

~35%

~23%

~8%

~34%

FY’21Target

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CUSTOMER VERTICALS ARE DIVERSIFIED

46%

26%

28%

FY’17

~26%

~44%

~22%

~36%~34%

~38%

FY’18E FY’21Target

Vertical Mix

• Service Provider: Spending pressure partially offset by Telco Cloud, Metro and 5G investments

• Cloud: Positioned to protect WAN footprint and capture new use cases

• Enterprise: Leverage strong product portfolio and solution selling

Note: FY’17 shown in ASC 605; FY’18 and onwards in ASC 606; All CAGRs are 3 Years 2018-2021

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Service ProviderCAGR (5%)-(1%)

CloudCAGR 6%-10%

EnterpriseCAGR 2%-6%


CUSTOMER CONCENTRATION REMAINS HIGH

Customer Concentration By Vertical*

~50%

~80%

~30%

~50%

~20%

~70%

Service Provider Cloud Enterprise

*Revenue through Q3’18 & under ASC 606

• Service Provider customer concentration remains steady

• Significant customer and use case concentration in the Cloud vertical

• More diversified base of Enterprise customers

8

OtherCustomers

Top 10 Customers


SERVICES BUSINESS WILL REMAIN STRONG

Service Revenue ($M)

FY’16

$1,581

$1,295

FY’15 FY’17 FY’18E

$1,461

*All FY’15-FY’18 shown in ASC 605; Q4’18 assumes ASC 606 adjustment comparable to Q1’18-Q3’18 levels and Q4’18 Consensus as of 10/29/2018

• Service revenue growth ~9% CAGR ‘15-’18E on a normalized basis

• >90% of total Services is recurring

• Strong attach and renewal rates

• Growth in Software and Professional Services

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ASC 606 Adjustment*


CREATING VALUE THROUGH EARNINGS EXPANSION

• Drive revenue growth

• Focus on gross margin optimization

• Prudent management of operating expense and investments

EARNINGS EXPANSION

10


GROSS MARGIN FLUCTUATES WITH MIX

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We are focused on gross margin improvement through:

• Design for value and value engineering

• Supply chain optimization

• Value and solution selling

• Services optimization

ACX

QFX

Software

PTXSRX

MX

EX

*Non GAAP Gross Margin

Juniper Average(~60%)

AboveJuniper Average

BelowJuniperAverage

Gross Margin* Profile


$4,209$4,686

$2,124 $1,961

OPERATING EXPENSE DISCIPLINE WILL CONTINUE

*Non-GAAP(1) FY’12 Revenue normalized for the sale of Pulse and shown in ASC 605; FY’18 and onwards in ASC 606

FY’12(1) FY’12-FY’18E FY’18E

FY’12 FY’18EFY’12-FY’18E

+11%

-8%

• Focus on productivity gains & operational excellence

• Reprioritize investments to focus on strategic growth areas

Growing Revenue vs. Declining OpEx*($M)

$477M

$163M

12

Operating Expense*

Revenue


CREATING VALUE THROUGH AN OPTIMIZED CAPITAL STRATEGY

• Continued strong free cash flow generation

• Maintain healthy and flexible balance sheet

• Deploy capital into value enhancing organic and inorganic opportunities

• Deliver consistent capital return to shareholders

OPTIMIZED CAPITAL STRATEGY

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• Consistently strong free cash flow generation

• Investment grade rating (Baa2/BBB) provides ready access to capital markets

• Liquidity to invest in the business, support value-enhancing M&A, and fund our return of capital to shareholders

STRONG CASH FLOW AND HEALTHY BALANCE SHEET

Total Cash & Debt ($M)

(1) Adjusted EBITDA is calculated as non-GAAP operating income plus depreciation and amortization(2) Q3’18 Debt/Adjusted EBITDA based on Q3’18 Debt and trailing 12 months of Adjusted EBITDANote: Cash includes cash, cash equivalents, and investments

1.2x 1.5x 1.6x 1.6x 2.0x(2)

$1,341$1,937 $2,134 $2,136 $2,138

$1,764$1,255

$1,523 $1,885 $1,510

$3,105 $3,192$3,657

$4,021$3,648

FY'14 FY'15 FY'16 FY'17 Q3'18

Debt/Adjusted

EBITDA(1)

14

Net Cash

Cash

Debt


RETURNED SIGNIFICANT CAPITAL TO SHAREHOLDERS

• ~170% average annual capital return as % of free cash flow over last five years

• 80% increase in dividend in Q1’18

• Go forward expectation of returning >50% of free cash flow to shareholders

• Plan to return ~75% of free cash flow to shareholders in 2019

Dividend & Share Repurchases ($M)

$2,250

$1,143

$313$720 $750

$86

$156

$153

$150 $249

FY'14 FY'15 FY'16 FY'17 FY'18

(1) FY’18E includes Q1-Q4 dividends and Q1 ASR, but does not include any potential opportunistic repurchases in Q4’18. Assumes consensus estimates for FY18 FCF as of 10/31/18.

Note: Free Cash Flow is calculated as Operating Cash Flow less CAPEX

FY’18E(1)

409% 188% 52% 78% ~130%% of FCF

15

Dividend

Buybacks


541

351

(15)(16)

(53)

(58) (11) (4)

(33)

FY'11 FY'12 FY'13 FY'14 FY'15 FY'16 FY'17 FY'18YTD

Q3'18

• ~35% reduction in share count since FY’11

• Decreased every year since FY’11

• Lowered burn rate from ~2.8% in FY’11 to ~2.3% in FY’18

MEANINGFUL REDUCTION IN SHARE COUNT

Diluted Share Count (in Millions)(1)

(1) Change in full year diluted share count for FY12-FY17, and change YTD FY18 to Q3’18 ending diluted share count.

-6% CAGR

16

Share count


3-YEAR BASE CASE FINANCIAL MODEL

*All financial values Non-GAAP except for Revenue(1) FY’18E includes Q1-Q4 dividends and Q1 ASR, but does not include any potential opportunistic repurchases in Q4’18(2) Based on the closing stock price on 10/31/18 of $29.27

P&L FY’18E FY’19 – FY’21

Revenue $4,686M Low single digit growth

Gross Margin* 59.6% 58-62%

Operating Expenses* $1,961M Grow slower than revenue

Operating Margin* 17.8% ~22%

EPS* $1.87 High single digit growth

Capital Management FY’18E FY’19 – FY’21

Capital Return ~130% of FCF(1) FY’19: 75% of FCFFY’20 – FY’21: >50% of FCF

Dividends$0.18/share/quarter

Grew 80% y/y; 2.5% yield(2) Grow with earnings

Share Buyback $750M ASR + Opportunistic Opportunistic

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SUMMARY

Positioned to Own Transitions in Key Customer Verticals

Committed to Increasing Shareholder Value

Continued Investment in Innovation

Maintain Financial Discipline

© 2018 Juniper Networks

GAAP TO NON-GAAP RECONCILIATION TABLES


GAAP TO NON-GAAP RECONCILIATIONS

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(In millions)

FY’12

GAAP operating expense $ 2,400.7

Share-based compensation expense (221.8)

Share-based payroll tax expense (1.1)

Amortization of purchased intangible assets (4.7)

Restructuring charges (46.8)

Acquisition-related charges (2.0)

Non-GAAP operating expense $ 2,124.3

(In millions)

FY’12

Revenue, As Reported

Product Revenue 3,262.1$

Services Revenue 1,103.3

Total Revenue 4,365.4$

Revenue, Excluding Junos Pulse

Product Revenue 3,166.6$

Services Revenue 1,042.3

Total Revenue 4,208.9$

(In millions)



21

(In millions) FY’14 FY’15 FY’16 FY’17 LTM Q3'18

GAAP operating (loss) income $ (419.7) $ 912.0 $ 889.7 $ 848.1 $ 578.1

Share-based compensation expense 240.0 217.3 226.8 187.5 216.6

Share-based payroll tax expense 13.1 6.4 5.8 6.6 6.8

Amortization of purchased intangible assets 36.3 28.4 16.2 17.5 18.0

Restructuring charges (benefits) 208.6 (4.1) 3.3 65.6 38.5

Acquisition-related and other charges 1.7 2.7 14.5 2.1 0.5

Strategic partnership-related charges - - - - 2.1

Legal reserve and settlement charges - - - 13.2 11.4

Supplier component remediation charges 20.7 - 10.8 6.1 -

Professional services related to non-routine stockholder matters 7.7 3.0 - - -

Impairment of goodwill 850.0 - - - -

Non-GAAP operating income $ 958.4 $ 1,165.7 $ 1,167.1 $ 1,146.7 $ 872.0

Depreciation and amortization 178.2 170.1 200.7 220.3 213.4

Non-GAAP Adjusted EBITDA $ 1,136.6 $ 1,335.8 $ 1,367.8 $ 1,367.0 $ 1,085.4

(In millions)



22

(In millions)(In millions)FY’14 FY’15 FY’16 FY’17

Operating Cash Flow $ 763.4 $ 899.5 $ 1,107.2 $ 1,260.1

Capex (192.9) (210.3) (214.7) (151.2)

Free Cash Flow $ 570.5 $ 689.2 $ 892.5 $ 1,108.9

(In millions)

(In millions)

A reconciliation of FY’18 non-GAAP operating expenses and Free Cash Flow to the corresponding GAAP measures are 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.

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