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) July 25, 2017

Juniper Networks, Inc.
(Exact name of registrant as specified in its charter)

 
					
Delaware	 	001-34501	 	770422528	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(I.R.S. Employer
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 2.02 Results of Operations and Financial Condition.
On July 25, 2017, Juniper Networks, Inc. (“we”, “us”, “our” or “the Company”) issued a press release in which we announced preliminary financial results for the quarter ended June 30, 2017. The Company also posted on the Investor Relations section of its website (www.juniper.net) prepared remarks with respect to the quarter ended June 30, 2017. 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 9.01 Financial Statements and Exhibits.
 
(d)	Exhibits.	

Exhibit No.	  	Description	
		
99.1	  	Press release issued by Juniper Networks, Inc. on July 25, 2017	
		
99.2	  	Prepared remarks by Juniper Networks, Inc. dated as of July 25, 2017	

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.	
				
July 25, 2017	 		 	By:	 	/s/ Brian M. Martin	
	 		 		 	Name: Brian M. Martin	
	 		 		 	Title:  Senior Vice President and General Counsel	

Exhibit Index

Exhibit No.	  	Description	
		
99.1	  	Press release issued by Juniper Networks, Inc. on July 25, 2017	
		
99.2	  	Prepared remarks by Juniper Networks, Inc. dated as of July 25, 2017	

Exhibit 99.1
Investor Relations:
Kathleen Nemeth
Juniper Networks
(408) 936-8687
kbnemeth@juniper.net
Media Relations:
Leslie Moore
Juniper Networks
(408) 936-5767
llmoore@juniper.net
JUNIPER NETWORKS REPORTS PRELIMINARY SECOND QUARTER 2017 FINANCIAL RESULTS
Company delivers year-over-year and sequential revenue and earnings growth
SUNNYVALE, Calif., July 25, 2017 - Juniper Networks (NYSE: JNPR), an industry leader in automated, scalable and secure networks, today reported preliminary financial results for the three months ended June 30, 2017 and provided its outlook for the three months ending September 30, 2017.
Q2 2017 Financial Performance
Net revenues were $1,308.9 million, an increase of 7% year-over-year and sequentially.
GAAP operating margin was 19.7%, an increase from 16.7% in the second quarter of 2016, and an increase from 12.8% in the first quarter of 2017.
Non-GAAP operating margin was 24.2%, an increase from 22.5% in the second quarter of 2016, and an increase from 20.8% in the first quarter of 2017.
GAAP net income was $179.8 million, an increase of 28% year-over-year and 65% sequentially, resulting in diluted earnings per share of $0.47.
Non-GAAP net income was $220.5 million, an increase of 15% year-over-year and 24% sequentially, and diluted earnings per share was $0.57.
The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Preliminary Net Revenues by Geographic Region table below.
“We had good revenue growth and earnings expansion in the second quarter,” said Rami Rahim, chief executive officer, Juniper Networks. “We are executing on our strategy to lead the transformation to the cloud, and I am pleased with the continued strength in our cloud solutions. We believe our innovative product portfolio has us well positioned to expand our business opportunities as customers look for high-performance network solutions that deliver scale, performance and automation.”
“We delivered solid profitability and continued to generate healthy cash flow from operations,” said Ken Miller, chief financial officer, Juniper Networks. “We remain focused on delivering shareholder value through revenue growth and diversification, earnings expansion and an optimized capital structure.”
 
Page 1 of 11

Balance Sheet and Other Financial Results
Total cash, cash equivalents, and investments as of June 30, 2017 were $4,215 million, compared to $3,491 million as of June 30, 2016, and $4,044 million as of March 31, 2017.
Net cash flows provided by operations for the second quarter of 2017 was $299 million, compared to net cash flows provided by operations of $360 million in the second quarter of 2016, and $545 million in the first quarter of 2017.
Days sales outstanding in accounts receivable, or “DSO,” was 52 days in the second quarter of 2017, compared to 55 days in the second quarter of 2016, and 49 days in the first quarter of 2017.
Capital expenditures were $32 million and depreciation and amortization expense was $55 million during the second quarter of 2017.
Juniper’s Board of Directors has declared a quarterly cash dividend of $0.10 per share to be paid on September 22, 2017 to shareholders of record as of the close of business on September 1, 2017.
During the second quarter of 2017, the Company repurchased $125 million of shares and paid $38 million in dividends. In 2017, the Company intends to return approximately 50% of annual free cash flow to its shareholders, inclusive of share repurchases and dividends. Free cash flow is calculated as net cash provided by operating activities less capital expenditures.
Outlook
These metrics are provided on a non-GAAP basis, except for revenue and share count. 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.
Juniper Networks expects revenue growth for 2017 to be near the midpoint of its long-term model range of 3 to 6%.
For the remainder of 2017, the Company expects similar gross margin dynamics as seen in the first half of the year.
The Company is focused on earnings expansion for the full year, through revenue growth, operating expense discipline, and strong execution. Juniper is driving to its long-term model of 39% of operating expense as a percentage of revenue for the full year.
Juniper’s guidance for the quarter ending September 30, 2017 is as follows:
 
 	•	 	Revenues will be approximately $1,320 million, plus or minus $30 million.	
 
 	•	 	Non-GAAP gross margin will be approximately 62.0%, plus or minus 0.5%.	
 
 	•	 	Non-GAAP operating expenses will be approximately $500 million, plus or minus $5 million.	
 
 	•	 	Non-GAAP operating margin will be approximately 24.1% at the midpoint of revenue guidance.	
 
 	•	 	Non-GAAP tax rate will be approximately 27.5%.	
 
 	•	 	Non-GAAP net income per share will be approximately $0.58, plus or minus $0.03. This assumes a share count of approximately 385 million.	
 
Page 2 of 11

All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition-related charges, restructuring charges, impairment charges, litigation settlement and resolution charges, supplier component remediation charges, gain or loss on equity investments, retroactive impact of certain tax settlements, 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 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.
Second Quarter 2017 Financial Commentary Available Online
A CFO Commentary reviewing the Company’s second quarter 2017 financial results, as well as third quarter 2017 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, July 25, 2017, 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.
About Juniper Networks
Juniper Networks (NYSE: JNPR) challenges the status quo with products, solutions and services that transform the economics of networking. Our team co-innovates with our customers and partners to deliver automated, scalable and secure networks with agility, performance and value. Additional information can be found at Juniper Networks ( www.juniper.net ) or connect with Juniper on Twitter and Facebook .
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.
 
Page 3 of 11

Safe Harbor
Statements in this release concerning Juniper Networks’ business outlook, economic and market outlook, future financial and operating results, expectations with respect to market trends (including product mix fluctuations), execution, optimization of our capital structure, revenue growth and diversification, future strategy, strength of our product portfolio, ability to expand business opportunities, gross margin expectations, cost management, operating expense discipline, and 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 and spending by communication service providers and major customers; the network capacity requirements of communication service providers; contractual terms that may result in the deferral of revenue; increases in and the effect of competition; the timing of orders and their fulfillment; manufacturing and supply chain constraints, changes or disruptions; availability of key product components; ability to establish and maintain relationships with distributors, resellers and other partners; variations in the expected mix of products sold; changes in customer mix; changes in geography mix; customer and industry analyst perceptions of Juniper Networks and its technology, products and future prospects; delays in scheduled product availability; market acceptance of Juniper Networks products and services; rapid technological and market change; adoption of regulations or standards affecting Juniper Networks products, services or the networking industry; the ability to successfully acquire, integrate and manage businesses and technologies; product defects, returns or vulnerabilities; the ability to recruit and retain key personnel; significant effects of tax legislation and judicial or administrative interpretation of tax regulations; currency fluctuations; litigation settlements and resolutions; and other factors listed in Juniper Networks’ most recent report on Form 10-Q filed with the Securities and Exchange Commission. 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 in this release in the event facts or circumstances subsequently change after the date of this press release.
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 .
 
Page 4 of 11

Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Operations
(in millions, except per share amounts)
(unaudited)

 	  	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	  	2017	 	 	2016	 	 	2017	 	 	2016	 	
Net revenues:	  				 				 				 				
Product	  	$	917.2	 	 	$	862.1	 	 	$	1,746.1	 	 	$	1,615.1	 	
Service	  	 	391.7	 	 	 	359.2	 	 	 	783.8	 	 	 	704.1	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total net revenues	  	 	1,308.9	 	 	 	1,221.3	 	 	 	2,529.9	 	 	 	2,319.2	 	
Cost of revenues:	  				 				 				 				
Product	  	 	360.2	 	 	 	328.3	 	 	 	690.4	 	 	 	606.2	 	
Service	  	 	146.8	 	 	 	136.6	 	 	 	291.0	 	 	 	265.7	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cost of revenues	  	 	507.0	 	 	 	464.9	 	 	 	981.4	 	 	 	871.9	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross margin	  	 	801.9	 	 	 	756.4	 	 	 	1,548.5	 	 	 	1,447.3	 	
Operating expenses:	  				 				 				 				
Research and development	  	 	240.2	 	 	 	247.9	 	 	 	516.4	 	 	 	498.9	 	
Sales and marketing	  	 	239.9	 	 	 	243.7	 	 	 	484.1	 	 	 	475.5	 	
General and administrative	  	 	55.6	 	 	 	58.6	 	 	 	106.1	 	 	 	118.0	 	
Restructuring charges	  	 	8.0	 	 	 	2.4	 	 	 	27.4	 	 	 	2.4	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	543.7	 	 	 	552.6	 	 	 	1,134.0	 	 	 	1,094.8	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	  	 	258.2	 	 	 	203.8	 	 	 	414.5	 	 	 	352.5	 	
Other expense, net	  	 	(13.0	) 	 	 	(11.6	) 	 	 	(28.7	) 	 	 	(33.8	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before income taxes	  	 	245.2	 	 	 	192.2	 	 	 	385.8	 	 	 	318.7	 	
Income tax provision	  	 	65.4	 	 	 	52.2	 	 	 	97.2	 	 	 	87.3	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	  	$	179.8	 	 	$	140.0	 	 	$	288.6	 	 	$	231.4	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income per share:	  				 				 				 				
Basic	  	$	0.47	 	 	$	0.37	 	 	$	0.76	 	 	$	0.60	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	$	0.47	 	 	$	0.36	 	 	$	0.74	 	 	$	0.60	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares used in computing net income per share:	  				 				 				 				
Basic	  	 	380.4	 	 	 	382.8	 	 	 	380.6	 	 	 	383.0	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	 	385.6	 	 	 	386.3	 	 	 	387.6	 	 	 	388.6	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash dividends declared per common stock	  	$	0.10	 	 	$	0.10	 	 	$	0.20	 	 	$	0.20	 	

Page 5 of 11

Juniper Networks, Inc.
Preliminary Net Revenues by Product and Service
(in millions)
(unaudited)

 	  	Three Months Ended June 30,	 	  	Six Months Ended June 30,	 	
 	  	2017	 	  	2016	 	  	2017	 	  	2016	 	
Routing	  	$	572.5	 	  	$	574.7	 	  	$	1,094.1	 	  	$	1,078.8	 	
Switching	  	 	276.0	 	  	 	209.2	 	  	 	517.6	 	  	 	384.7	 	
Security	  	 	68.7	 	  	 	78.2	 	  	 	134.4	 	  	 	151.6	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total product	  	 	917.2	 	  	 	862.1	 	  	 	1,746.1	 	  	 	1,615.1	 	
Total service	  	 	391.7	 	  	 	359.2	 	  	 	783.8	 	  	 	704.1	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,308.9	 	  	$	1,221.3	 	  	$	2,529.9	 	  	$	2,319.2	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Juniper Networks, Inc.
Preliminary Net Revenues by Vertical
(in millions)
(unaudited)

 	  	Three Months Ended June 30,	 	  	Six Months Ended June 30,	 	
 	  	2017	 	  	2016	 	  	2017	 	  	2016	 	
Cloud	  	$	379.6	 	  	$	287.3	 	  	$	711.2	 	  	$	552.1	 	
Telecom/Cable	  	 	562.4	 	  	 	571.0	 	  	 	1,130.9	 	  	 	1,089.1	 	
Strategic Enterprise	  	 	366.9	 	  	 	363.0	 	  	 	687.8	 	  	 	678.0	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,308.9	 	  	$	1,221.3	 	  	$	2,529.9	 	  	$	2,319.2	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Juniper Networks, Inc.
Preliminary Net Revenues by Geographic Region
(in millions)
(unaudited)

 	  	Three Months Ended June 30,	 	  	Six Months Ended June 30,	 	
 	  	2017	 	  	2016	 	  	2017	 	  	2016	 	
Americas	  	$	800.8	 	  	$	720.0	 	  	$	1,512.4	 	  	$	1,348.2	 	
Europe, Middle East, and Africa	  	 	288.2	 	  	 	300.1	 	  	 	572.7	 	  	 	585.5	 	
Asia Pacific	  	 	219.9	 	  	 	201.2	 	  	 	444.8	 	  	 	385.5	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,308.9	 	  	$	1,221.3	 	  	$	2,529.9	 	  	$	2,319.2	 	

Page 6 of 11

Juniper Networks, Inc.
Preliminary Reconciliations between GAAP and non-GAAP Financial Measures
(in millions, except percentages and per share amounts)
(unaudited)

 	  	 	 	  	Three Months Ended	 	
 	  	 	 	  	June 30, 2017	 	 	March 31, 2017	 	 	June 30, 2016	 	
GAAP operating income	  				  	$	258.2	 	 	$	156.3	 	 	$	203.8	 	
GAAP operating margin	  				  	 	19.7	% 	 	 	12.8	% 	 	 	16.7	% 	
Share-based compensation expense	  	 	C	 	  	 	44.1	 	 	 	62.0	 	 	 	55.6	 	
Share-based payroll tax expense	  	 	C	 	  	 	1.7	 	 	 	4.4	 	 	 	1.6	 	
Amortization of purchased intangible assets	  	 	A	 	  	 	4.2	 	 	 	4.3	 	 	 	4.8	 	
Restructuring charges	  	 	B	 	  	 	8.0	 	 	 	19.4	 	 	 	2.4	 	
Acquisition-related and other charges	  	 	A	 	  	 	—  	 	 	 	0.3	 	 	 	6.4	 	
Supplier component remediation charges	  	 	B	 	  	 	—  	 	 	 	7.1	 	 	 	—  	 	
	  				  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP operating income	  				  	$	316.2	 	 	$	253.8	 	 	$	274.6	 	
Non-GAAP operating margin	  				  	 	24.2	% 	 	 	20.8	% 	 	 	22.5	% 	
	  				  	 	 	 	 	 	 	 	 	 	 	 	
GAAP net income	  				  	$	179.8	 	 	$	108.8	 	 	$	140.0	 	
Share-based compensation expense	  	 	C	 	  	 	44.1	 	 	 	62.0	 	 	 	55.6	 	
Share-based payroll tax expense	  	 	C	 	  	 	1.7	 	 	 	4.4	 	 	 	1.6	 	
Amortization of purchased intangible assets	  	 	A	 	  	 	4.2	 	 	 	4.3	 	 	 	4.8	 	
Restructuring charges	  	 	B	 	  	 	8.0	 	 	 	19.4	 	 	 	2.4	 	
Acquisition-related and other charges	  	 	A	 	  	 	—  	 	 	 	0.3	 	 	 	6.4	 	
Supplier component remediation charges	  	 	B	 	  	 	—  	 	 	 	7.1	 	 	 	—  	 	
Gain on equity investments	  	 	B	 	  	 	—  	 	 	 	—  	 	 	 	(3.3	) 	
Income tax effect of non-GAAP exclusions	  	 	B	 	  	 	(17.3	) 	 	 	(28.3	) 	 	 	(15.9	) 	
	  				  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP net income	  				  	$	220.5	 	 	$	178.0	 	 	$	191.6	 	
	  				  	 	 	 	 	 	 	 	 	 	 	 	
GAAP diluted net income per share	  				  	$	0.47	 	 	$	0.28	 	 	$	0.36	 	
	  				  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP diluted net income per share	  	 	D	 	  	$	0.57	 	 	$	0.46	 	 	$	0.50	 	
	  				  	 	 	 	 	 	 	 	 	 	 	 	
Shares used in computing diluted net income per share	  				  	 	385.6	 	 	 	388.0	 	 	 	386.3	 	

Page 7 of 11

Discussion of Non-GAAP Financial Measures
This press release, including the tables above, includes the following non-GAAP financial measures derived from our Preliminary Condensed 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 operations 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.
 
Page 8 of 11

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; (ii) gain or loss on equity investments; (iii) supplier component remediation charges; and (vi) 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 transactions may limit the comparability of our on-going operations with prior and future periods. Restructuring 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. Whether we realize gains or losses on equity investments is based primarily on the performance and market value of those independent companies. Accordingly, we believe that these gains and losses do not reflect the underlying performance of our continuing operations. 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 income per share includes additional dilution from potential issuance of common stock, except when such issuances would be anti-dilutive.
 
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Juniper Networks, Inc.
Preliminary Condensed Consolidated Balance Sheets
(in millions)
(unaudited)

 	  	June 30,
        2017        	 	  	December 31,
        2016        	 	
ASSETS	  				  				
Current assets:	  				  				
Cash and cash equivalents	  	$	2,392.5	 	  	$	1,833.2	 	
Short-term investments	  	 	752.7	 	  	 	752.3	 	
Accounts receivable, net of allowances	  	 	750.4	 	  	 	1,054.1	 	
Prepaid expenses and other current assets	  	 	249.5	 	  	 	332.3	 	
	  	 	 	 	  	 	 	 	
Total current assets	  	 	4,145.1	 	  	 	3,971.9	 	
Property and equipment, net	  	 	1,026.2	 	  	 	1,063.8	 	
Long-term investments	  	 	1,069.4	 	  	 	1,071.8	 	
Restricted cash and investments	  	 	63.4	 	  	 	99.9	 	
Purchased intangible assets, net	  	 	121.7	 	  	 	130.2	 	
Goodwill	  	 	3,079.4	 	  	 	3,081.7	 	
Other long-term assets	  	 	247.7	 	  	 	237.2	 	
	  	 	 	 	  	 	 	 	
Total assets	  	$	9,752.9	 	  	$	9,656.5	 	
	  	 	 	 	  	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	  				  				
Current liabilities:	  				  				
Accounts payable	  	$	210.7	 	  	$	221.0	 	
Accrued compensation	  	 	206.0	 	  	 	233.6	 	
Deferred revenue	  	 	998.0	 	  	 	1,032.0	 	
Other accrued liabilities	  	 	258.1	 	  	 	249.3	 	
	  	 	 	 	  	 	 	 	
Total current liabilities	  	 	1,672.8	 	  	 	1,735.9	 	
Long-term debt	  	 	2,135.0	 	  	 	2,133.7	 	
Long-term deferred revenue	  	 	503.0	 	  	 	449.1	 	
Long-term income taxes payable	  	 	221.1	 	  	 	209.2	 	
Other long-term liabilities	  	 	134.8	 	  	 	166.1	 	
	  	 	 	 	  	 	 	 	
Total liabilities	  	 	4,666.7	 	  	 	4,694.0	 	
Total stockholders’ equity	  	 	5,086.2	 	  	 	4,962.5	 	
	  	 	 	 	  	 	 	 	
Total liabilities and stockholders’ equity	  	$	9,752.9	 	  	$	9,656.5	 	

Page 10 of 11

Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)

 	  	Six Months Ended June 30,	 	
 	  	2017	 	 	2016 (*)	 	
Cash flows from operating activities:	  				 				
Net income	  	$	288.6	 	 	$	231.4	 	
Adjustments to reconcile net income to net cash provided by operating activities:	  				 				
Share-based compensation expense	  	 	106.1	 	 	 	107.4	 	
Depreciation, amortization, and accretion	  	 	112.1	 	 	 	98.6	 	
Deferred income taxes	  	 	(6.1	) 	 	 	42.7	 	
(Gain) loss on investments and disposal of fixed assets, net	  	 	(1.8	) 	 	 	1.8	 	
Changes in operating assets and liabilities, net of effects from acquisitions:	  				 				
Accounts receivable, net	  	 	304.8	 	 	 	39.5	 	
Prepaid expenses and other assets	  	 	46.4	 	 	 	(55.2	) 	
Accounts payable	  	 	(5.1	) 	 	 	62.9	 	
Accrued compensation	  	 	(20.6	) 	 	 	(67.2	) 	
Income taxes payable	  	 	27.9	 	 	 	(23.6	) 	
Other accrued liabilities	  	 	(27.6	) 	 	 	(22.3	) 	
Deferred revenue	  	 	19.3	 	 	 	116.4	 	
	  	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	844.0	 	 	 	532.4	 	
	  	 	 	 	 	 	 	 	
Cash flows from investing activities:	  				 				
Purchases of property and equipment	  	 	(64.3	) 	 	 	(116.9	) 	
Purchases of available-for-sale investments	  	 	(776.4	) 	 	 	(794.9	) 	
Proceeds from sales of available-for-sale investments	  	 	429.1	 	 	 	665.8	 	
Proceeds from maturities and redemptions of available-for-sale investments	  	 	350.4	 	 	 	152.8	 	
Proceeds from Junos Pulse note receivable	  	 	75.0	 	 	 	—  	 	
Purchases of privately-held investments	  	 	(9.8	) 	 	 	(10.5	) 	
Proceeds from sales of privately-held investments	  	 	—  	 	 	 	2.8	 	
Purchases of trading investments	  	 	(2.5	) 	 	 	(3.2	) 	
Payments for business acquisitions, net of cash and cash equivalents acquired	  	 	—  	 	 	 	(22.8	) 	
Changes in restricted cash	  	 	—  	 	 	 	0.5	 	
	  	 	 	 	 	 	 	 	
Net cash provided by (used in) investing activities	  	 	1.5	 	 	 	(126.4	) 	
	  	 	 	 	 	 	 	 	
Cash flows from financing activities:	  				 				
Purchases and retirement of common stock	  	 	(255.3	) 	 	 	(210.1	) 	
Proceeds from issuance of common stock	  	 	35.5	 	 	 	32.2	 	
Payment of cash dividends	  	 	(75.8	) 	 	 	(76.4	) 	
Payment of debt	  	 	—  	 	 	 	(300.0	) 	
Payment of financing obligations	  	 	—  	 	 	 	(16.4	) 	
Issuance of debt, net	  	 	—  	 	 	 	494.0	 	
	  	 	 	 	 	 	 	 	
Net cash used in financing activities	  	 	(295.6	) 	 	 	(76.7	) 	
	  	 	 	 	 	 	 	 	
Effect of foreign currency exchange rates on cash and cash equivalents	  	 	9.4	 	 	 	6.7	 	
	  	 	 	 	 	 	 	 	
Net increase in cash and cash equivalents	  	 	559.3	 	 	 	336.0	 	
Cash and cash equivalents at beginning of period	  	 	1,833.2	 	 	 	1,420.9	 	
	  	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period	  	$	2,392.5	 	 	$	1,756.9	 	

(*)  	During the first quarter of fiscal 2017, the Company adopted the new accounting pronouncement on Improvements to Employee Share-Based Payment Accounting, requiring excess tax benefits to be presented as an operating activity in the consolidated statements of cash flows. The Company applied this provision on a retrospective basis. For the six months ended June 30, 2016, the Company reclassified $5.6 million of excess tax benefits from share-based compensation to operating activities from financing activities.	
 
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Exhibit 99.2

 
Juniper Networks, Inc.
1133 Innovation Way
Sunnyvale, CA 94089
July 25, 2017
CFO Commentary on Second Quarter 2017 Preliminary Financial Results
Related Information
The following commentary is provided by management and should be referenced in conjunction with Juniper Networks’ second quarter 2017 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.
Q2 2017 Preliminary Financial Results
GAAP

(in millions, except per share amounts and percentages)	  	Q2’17	 	 	Q1’17	 	 	Q2’16	 	 	Q/Q Change	 	 	Y/Y Change	 	
Revenue	  	$	1,308.9	 	 	$	1,221.0	 	 	$	1,221.3	 	 	 	7	% 	 	 	7	% 	
Product	  	 	917.2	 	 	 	828.9	 	 	 	862.1	 	 	 	11	% 	 	 	6	% 	
Service	  	 	391.7	 	 	 	392.1	 	 	 	359.2	 	 	 	—	% 	 	 	9	% 	
Gross margin %	  	 	61.3	% 	 	 	61.1	% 	 	 	61.9	% 	 	 	0.2pts	 	 	 	(0.6	)pts 	
Research and development	  	 	240.2	 	 	 	276.2	 	 	 	247.9	 	 	 	(13	)% 	 	 	(3	)% 	
Sales and marketing	  	 	239.9	 	 	 	244.2	 	 	 	243.7	 	 	 	(2	)% 	 	 	(2	)% 	
General and administrative	  	 	55.6	 	 	 	50.5	 	 	 	58.6	 	 	 	10	% 	 	 	(5	)% 	
Restructuring charges	  	 	8.0	 	 	 	19.4	 	 	 	2.4	 	 	 	(59	)% 	 	 	233	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				 				
Total operating expenses	  	$	543.7	 	 	$	590.3	 	 	$	552.6	 	 	 	(8	)% 	 	 	(2	)% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				 				
Operating margin %	  	 	19.7	% 	 	 	12.8	% 	 	 	16.7	% 	 	 	6.9pts	 	 	 	3.0pts	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				 				
Net income	  	$	179.8	 	 	$	108.8	 	 	$	140.0	 	 	 	65	% 	 	 	28	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 				 				
Diluted EPS	  	$	0.47	 	 	$	0.28	 	 	$	0.36	 	 	 	68	% 	 	 	31	% 	

Non-GAAP

(in millions, except per share amounts and percentages)	  	Q3’17 Guidance	 	  	Q2’17	 	 	Q1’17	 	 	Q2’16	 	 	Q/Q Change	 	 	Y/Y Change	 	
Revenue (1)	  	$	1,320 +/- $30	 	  	$	1,308.9	 	 	$	1,221.0	 	 	$	1,221.3	 	 	 	7	% 	 	 	7	% 	
Product (1)	  				  	 	917.2	 	 	 	828.9	 	 	 	862.1	 	 	 	11	% 	 	 	6	% 	
Service (1)	  				  	 	391.7	 	 	 	392.1	 	 	 	359.2	 	 	 	—	% 	 	 	9	% 	
Gross margin %	  	 	62.0% +/- 0.5%	 	  	 	62.0	% 	 	 	62.5	% 	 	 	63.0	% 	 	 	(0.5	)pts 	 	 	(1.0	)pts 	
Research and development	  				  	 	225.6	 	 	 	239.6	 	 	 	218.0	 	 	 	(6	)% 	 	 	3	% 	
Sales and marketing	  				  	 	222.2	 	 	 	226.5	 	 	 	228.3	 	 	 	(2	)% 	 	 	(3	)% 	
General and administrative	  				  	 	48.0	 	 	 	43.0	 	 	 	48.0	 	 	 	12	% 	 	 	—	% 	
	  				  	 	 	 	 	 	 	 	 	 	 	 	 				 				
Total operating expenses	  	$	500 +/- $5	 	  	$	495.8	 	 	$	509.1	 	 	$	494.3	 	 	 	(3	)% 	 	 	—	% 	
	  				  	 	 	 	 	 	 	 	 	 	 	 	 				 				
Operating margin %	  	 	~24.1% at the
midpoint	 
 	  	 	24.2	% 	 	 	20.8	% 	 	 	22.5	% 	 	 	3.4pts	 	 	 	1.7pts	 	
	  				  	 	 	 	 	 	 	 	 	 	 	 	 				 				
Net income	  				  	$	220.5	 	 	$	178.0	 	 	$	191.6	 	 	 	24	% 	 	 	15	% 	
	  				  	 	 	 	 	 	 	 	 	 	 	 	 				 				
Diluted EPS	  	$	0.58 +/- $0.03	 	  	$	0.57	 	 	$	0.46	 	 	$	0.50	 	 	 	24	% 	 	 	14	% 	

(1)	Revenue numbers are GAAP.	
This CFO Commentary contains non-GAAP financial measures, and the reconciliation between GAAP and non-GAAP financial measures can be found at the end of this document. We are unable to provide a reconciliation of forward-looking non-GAAP guidance measures to corresponding GAAP measures without unreasonable effort due to the overall high variability and low visibility of most of the items that are excluded from our non-GAAP guidance measures. More information on these exclusions can be found under “Outlook” below.
Q2 2017 Overview
The results for the second quarter of 2017 reflect good sequential and year-over-year revenue growth, continued expansion of earnings and healthy cash flows.
The industry shift towards Cloud networking continued to play to our strengths. The Cloud vertical grew 32% year-over-year and from a product perspective, we had a record revenue quarter in Switching, led by the QFX product family. Our Services business remained solid, growing 9% year-over-year.
In reviewing our top 10 customers for the quarter, four were Cloud, five were Telecom / Cable, and one was a Strategic Enterprise. Of these customers, two were located outside of the U.S. One customer accounted for greater than 10% of revenue for the quarter.
Product deferred revenue was $297 million, up $7 million or 2% year-over-year and up $16 million or 6% sequentially.
In the quarter, we continued to generate healthy cash flows from operations of $299 million, down $61 million year-over-year and down $247 million sequentially. During the quarter, we repurchased $125 million shares and paid $38 million in dividends.

Revenue

Product & Service
 
 	•	 	Routing product revenue : $572 million, flat year-over-year and up 10% sequentially. Year-over-year, the Cloud vertical increased, offset by Telecom / Cable and Strategic Enterprise. The sequential increase was driven by Cloud and Strategic Enterprise, partially offset by Telecom / Cable. Within the routing products, the sequential results were driven by an increase from our MX and PTX products partially offset by declines from our legacy products.	
 
 	•	 	Switching product revenue : $276 million, up 32% year-over-year and up 14% sequentially. All verticals increased year-over-year and sequentially. We saw continued data center strength with our QFX product family and our EX product family increased both year-over-year and sequentially.	
 
 	•	 	Security product revenue : $69 million, down 12% year-over-year and up 5% sequentially. All verticals decreased year-over-year. The sequential increase was due to Telecom / Cable and Strategic Enterprise customers partially offset by a decrease in Cloud.	
 
 	•	 	Service revenue: $392 million, up 9% year-over-year and flat sequentially. The year-over-year increase was driven by strong demand for professional services and strong renewal and attach rates of support contracts. As a reminder, in the first quarter of 2017 we recognized previously deferred revenue of approximately $15 million related to the completion of delivery to an APAC Telecom customer.	
Vertical
 
 	•	 	Cloud: $380 million, up 32% year-over-year and up 14% sequentially. The year-over-year increase was driven by Switching and Routing deployments at several large customers. The sequential increase was primarily driven by Routing and to a lesser extent Switching, partially offset by a decrease in Security.	
 
 	•	 	Telecom / Cable: $562 million, down 2% year-over-year and down 1% sequentially. The year-over-year decrease was primarily due to Routing, partially offset by increases in Services and Switching. Sequentially, the decrease was primarily due to Routing, partially offset by increases in Switching. Sequentially, U.S. Cable declined, partially offset by an increase in U.S. and EMEA Telecom.	

 	•	 	Strategic Enterprise: $367 million, up 1% year-over-year and up 14% sequentially. The year-over-year increase was driven by higher Switching and Services, partially offset by decreases in Routing and Security. All technologies and Services increased sequentially. Sequentially, the increase was due to the broader Enterprise market, National Government and Financial Services.	
Geography
 
 	•	 	Americas: $801 million, up 11% year-over-year and up 13% sequentially. The year-over-year increase was driven by Cloud. Sequentially, all verticals increased, primarily driven by Cloud.	
 
 	•	 	EMEA: $288 million, down 4% year-over-year and up 1% sequentially. Year-over-year Telecom / Cable and Cloud declined, which was partially offset by an increase in Strategic Enterprise. The majority of the decline was in the U.K. and Germany. Sequentially, the increase was due to Telecom/ Cable, partially offset by a decrease in Cloud. The sequential increase was driven primarily by the Middle East partially offset by Europe.	
 
 	•	 	APAC: $220 million, up 9% year-over-year and down 2% sequentially. The year-over-year increase was due to an increase across all verticals. The sequential decrease was due to Telecom / Cable, partially offset by Strategic Enterprise and Cloud. The year-over-year increase was driven primarily by Australia. The sequential decrease was primarily due to Southeast Asia partially offset by Australia.	
Gross Margin
 
 	•	 	GAAP gross margin: 61.3%, compared to 61.9% from the prior year and 61.1% from last quarter.	
 
 	•	 	Non-GAAP gross margin: 62.0%, compared to 63.0% from the prior year and 62.5% from last quarter.	
Non-GAAP gross margin was within our guided range for the quarter, reflecting the expected market dynamics. We remain focused on delivering innovation and continued improvements to our cost structure.
 
 	•	 	GAAP product gross margin : 60.7%, down 1.2 points from the prior year and up 0.5 points from last quarter.	
Year-over-year, the decrease in product gross margin, on a GAAP basis was primarily due to customer mix as we continue to expand our footprint with certain strategic customers, particularly Cloud and Telecom / Cable in APAC, the product mix related to the strong performance of Switching, and higher costs of certain memory components. The decrease was partially offset by improvements in our cost structure and higher revenue.
The sequential increase, on a GAAP basis, was due to a charge related to supplier component remediation in the first quarter of 2017, improvements in our cost structure and higher revenue, partially offset by customer mix as we continue to expand our footprint with certain strategic customers, product mix and higher costs of certain memory components.
 
 	•	 	Non-GAAP product gross margin : 61.2%, down 1.6 points from the prior year and down 0.3 points from last quarter.	

Year-over-year the decrease in product gross margin, on a non-GAAP basis was primarily due to customer mix as we continue to expand our footprint with certain strategic customers, particularly Cloud and Telecom / Cable customers in APAC. Additionally, the product mix primarily related to the strong performance of Switching and higher costs for certain memory components had an adverse impact. The decrease was partially offset by improvements in our cost structure and higher revenue.
Sequentially, the decrease in product gross margin, on a non-GAAP basis was primarily due to customer mix as we continue to expand our footprint with certain strategic customers, product mix and higher costs of certain memory components partially offset by improvements in our cost structure and higher revenue.
 
 	•	 	GAAP service gross margin : 62.5%, up 0.5 points from the prior year and down 0.7 points from last quarter.	
 
 	•	 	Non-GAAP service gross margin : 64.0%, up 0.7 points from the prior year and down 0.5 points from last quarter.	
Year-over-year, the increase in service gross margin, on a GAAP and non-GAAP basis, was due to higher service revenue and continued improvements in our customer support model.
The sequential decrease in service gross margin, on a GAAP and non-GAAP basis, was primarily due to the recognition of previously deferred revenue related to the completion of delivery to an APAC Telecom customer from the prior quarter
Operating Expenses
 
 	•	 	GAAP operating expenses: $544 million, a decrease of $9 million, or 2% year-over-year, and a decrease of $47 million, or 8% sequentially.	
The year-over-year decrease in operating expense was primarily due to lower share-based compensation, lower variable compensation and cost discipline, partially offset by higher costs related to acquisitions completed in the second half of 2016. The sequential decrease was primarily due to lower share-based and variable compensation and restructuring charges.
GAAP operating expenses were 41.5% of revenue, down 3.7 points year-over-year and down 6.8 points quarter-over-quarter.
 
 	•	 	Non-GAAP operating expenses: $496 million, an increase of $2 million, or flat year-over-year, and a decrease of $13 million or 3% sequentially.	
The flat year-over-year operating expense was primarily due to lower variable compensation and cost discipline offset by higher costs related to acquisitions completed in the second half of 2016. The sequential decrease was primarily the result of lower variable compensation and cost discipline.
Non-GAAP operating expenses were 37.9% of revenue, down 2.6 points year-over-year and down 3.8 points quarter-over-quarter.
Operating Margin
 
 	•	 	GAAP operating margin: 19.7%, an increase of 3.0 points year-over-year and 6.9 points sequentially.	

 	•	 	Non-GAAP operating margin: 24.2%, an increase of 1.7 points year-over-year and an increase of 3.4 points sequentially.	
Tax Rate
 
 	•	 	GAAP tax rate: 26.7%, an increase of 4.1 points compared to 22.6% last quarter.	
 
 	•	 	Non-GAAP tax rate: 27.3%, an increase of 2.1 points compared to 25.2% last quarter.	
The sequential change in the effective tax rate, on a GAAP and non-GAAP basis, was primarily due to the benefit of discrete items in the previous quarter.
Diluted Earnings Per Share
 
 	•	 	GAAP diluted earnings per share: $0.47, an increase of $0.11 year-over-year and an increase of $0.19 sequentially.	
The year-over-year increase was driven by higher revenue and lower operating expenses, partially offset by lower gross margin. The sequential increase was primarily due to higher revenue and lower operating expenses, partially offset by a higher tax rate.
 
 	•	 	Non-GAAP diluted earnings per share: $0.57, an increase of $0.07 year-over-year and an increase of $0.11 sequentially.	
The year-over-year increase was primarily driven by higher revenue partially offset by lower gross margin. The sequential increase was primarily due to higher revenue and lower operating expense, partially offset by higher tax rate and lower gross margin.
Balance Sheet, Cash Flow, Capital Return, and Other Financial Metrics

(in millions, except days sales outstanding (“DSO”), and headcount)	  	Q2’17	 	  	Q1’17	 	  	Q4’16	 	  	Q3’16	 	  	Q2’16	 	
Cash (1, 2)	  	$	4,214.6	 	  	$	4,043.7	 	  	$	3,657.3	 	  	$	3,480.1	 	  	$	3,491.1	 	
Debt	  	 	2,135.0	 	  	 	2,134.4	 	  	 	2,133.7	 	  	 	2,133.1	 	  	 	2,132.5	 	
Net cash and investments (3)	  	 	2,079.6	 	  	 	1,909.3	 	  	 	1,523.6	 	  	 	1,347.0	 	  	 	1,358.6	 	
Operating cash flow (4)	  	 	298.7	 	  	 	545.3	 	  	 	334.7	 	  	 	245.6	 	  	 	360.0	 	
Capital expenditures	  	 	32.2	 	  	 	32.1	 	  	 	51.8	 	  	 	46.0	 	  	 	67.6	 	
Depreciation and amortization	  	 	54.8	 	  	 	54.2	 	  	 	53.9	 	  	 	52.2	 	  	 	49.2	 	
Share repurchases	  	 	125.0	 	  	 	125.0	 	  	 	—  	 	  	 	112.4	 	  	 	125.5	 	
Dividends	  	$	37.8	 	  	$	38.0	 	  	$	38.1	 	  	$	38.0	 	  	$	38.1	 	
Diluted shares	  	 	385.6	 	  	 	388.0	 	  	 	385.6	 	  	 	384.5	 	  	 	386.3	 	
DSO	  	 	52	 	  	 	49	 	  	 	68	 	  	 	53	 	  	 	55	 	
Headcount (5)	  	 	9,661	 	  	 	9,694	 	  	 	9,832	 	  	 	9,863	 	  	 	9,617	 	

(1)  	Includes cash, cash equivalents, and investments.	
(2)	17% held onshore as of the end of Q2’17.	
(3)	Net cash and investments includes, cash, cash equivalents, and investments, net of debt.	
(4)	In Q1’17, we adopted the new accounting pronouncement on Improvements to Employee Share-Based Payment Accounting, requiring excess tax benefits to be presented as an operating activity in our consolidated statements of cash flows. We applied this provision on a retrospective basis, resulting in the reclassification of certain excess tax benefits from share-based compensation to operating activities from financing activities.	
(5)	Q2’17 and Q1’17 excludes headcount impacted by restructuring activities.	

Cash Flow
 
 	•	 	Cash flow from operations: $299 million, down $61 million year-over-year and $247 million sequentially. The year-over-year and sequential decrease was the result of timing differences in working capital, primarily related to fluctuations in accounts receivable.	
Days Sales Outstanding
 
 	•	 	DSO: 52 days, compared to 49 days from the prior quarter, an increase of 3 days. The increase in DSO was driven by a return to normalized invoicing linearity.	
Capital Return
 
 	•	 	In the quarter, we repurchased $125 million of shares and paid a dividend of $0.10 per share for a total of $38 million.	
 
 	•	 	Diluted shares were approximately flat year-over-year.	
 
 	•	 	In 2017, we intend to return approximately 50% of annual free cash flow to our shareholders, inclusive of share repurchases and dividends. Free cash flow is calculated as net cash provided by operating activities less capital expenditures.	
Demand metrics
 
 	•	 	Total deferred revenue was $1,501 million, up $205 million year-over-year and up $8 million quarter-over-quarter.	
 
 	•	 	Product deferred revenue was $297 million, an increase of $7 million year-over-year and an increase of $16 million quarter-over-quarter.	
Headcount
 
 	•	 	Ending headcount was 9,661, excluding headcount impacted by restructuring activities, an increase of 44 employees year-over-year and a decrease of 33 employees sequentially. The year-over-year increase was primarily related to Services and acquisitions completed in the second half of 2016 partially offset by restructuring of headcount. The sequential decrease was primarily related to restructuring of headcount.	
Outlook
These metrics are provided on a non-GAAP basis, except for revenue and share count. 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.
As a company, we remain committed to the financial principles we outlined at the beginning of the year, which, are: we expect revenue growth for the year; we are focused on earnings expansion with long-term consistency and we intend to maintain an optimized capital structure. In addition, we remain committed to delivering strong operating cash flow.

We continue to expect revenue growth for 2017 to be near the midpoint of our long-term model range of 3 to 6%. As we shared with you last quarter, some elements of our addressable markets are challenged and timing of customer deployments may vary. We are pleased with our product portfolio and expect to see continued strength from the Cloud vertical.
We expect similar gross margin dynamics to persist for the remainder of the year as seen in the first half of the year.
We are focused on driving earnings expansion for the full year, through revenue growth, operating expense discipline and strong execution. As we stated last quarter, we are driving to our long-term model of 39% of operating expense as a percent of revenue for the full year.
We intend to return approximately 50% of annual free cash flow to our shareholders, inclusive of share repurchases and dividends.
Our guidance for the quarter ending September 30, 2017, is as follows:
 
 	•	 	Revenues will be approximately $1,320 million, plus or minus $30 million.	
 
 	•	 	Non-GAAP gross margin will be approximately 62.0%, plus or minus 0.5%.	
 
 	•	 	Non-GAAP operating expenses will be approximately $500 million, plus or minus $5 million.	
 
 	•	 	Non-GAAP operating margin will be approximately 24.1% at the midpoint of revenue guidance.	
 
 	•	 	Non-GAAP tax rate will be approximately 27.5%.	
 
 	•	 	Non-GAAP net income per share will be approximately $0.58, plus or minus $0.03. This assumes a share count of approximately 385 million.	

Forward-Looking Statements
Statements in this CFO Commentary and related conference call concerning Juniper Networks’ business, economic and market outlook, including pricing pressure and product mix, factors that impact gross margin, long-term financial model, product portfolio and success of particular products and product families, success in obtaining revenue growth, future financial and operating results, including our financial guidance, focus on and ability to deliver on growth, operational expense discipline, and cash flows, improvements to our cost structure and expense reductions and management, strength of certain customer segments, capital structure, capital return program, and 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; 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; increases in and the effect of competition; the timing of orders and their fulfillment; manufacturing and supply chain constraints, changes or disruptions; availability of key product components; ability to establish and maintain relationships with distributors, resellers and other partners; variations in the expected mix of products sold; changes in customer mix; changes in geography mix; customer and industry analyst perceptions of Juniper Networks and its technology, products and future prospects; delays in scheduled product availability; market acceptance of Juniper Networks products and services; rapid technological and market change; adoption of regulations or standards affecting Juniper Networks products, services or the networking industry; the ability to successfully acquire, integrate and manage businesses and technologies; product defects, returns or vulnerabilities; the ability to recruit and retain key personnel; significant effects of tax legislation and judicial or administrative interpretation of tax regulations; currency fluctuations; litigation settlements and resolutions; the potential impact of activities related to the execution of capital return, restructurings and product rationalization; 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”). All statements contained 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 contained in this document or the related conference call in the event facts or circumstances subsequently change after the date of this document.
Use of 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; and diluted earnings per share. 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 charges, impairment charges, litigation settlement and resolution charges, gain or loss on equity investments, retroactive impact of certain tax settlements, 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 quarter. 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	 	
 	  	June 30,
        2017        	 	 	December 31,
        2016        	 	
Deferred product revenue:	  				 				
Undelivered product commitments and other product deferrals	  	$	265.5	 	 	$	302.4	 	
Distributor inventory and other sell-through items	  	 	76.1	 	 	 	74.2	 	
	  	 	 	 	 	 	 	 	
Deferred gross product revenue	  	 	341.6	 	 	 	376.6	 	
Deferred cost of product revenue	  	 	(44.3	) 	 	 	(53.7	) 	
	  	 	 	 	 	 	 	 	
Deferred product revenue, net	  	 	297.3	 	 	 	322.9	 	
Deferred service revenue	  	 	1,203.7	 	 	 	1,158.2	 	
	  	 	 	 	 	 	 	 	
Total	  	$	1,501.0	 	 	$	1,481.1	 	
	  	 	 	 	 	 	 	 	
Reported as:	  				 				
Current	  	$	998.0	 	 	$	1,032.0	 	
Long-term	  	 	503.0	 	 	 	449.1	 	
	  	 	 	 	 	 	 	 	
Total	  	$	1,501.0	 	 	$	1,481.1	 	
	  	 	 	 	 	 	 	 	
Vertical Reporting: Quarterly Revenue Trend

 	  	FY 2015	 	  	FY 2016	 	  	Q2’16	 	  	Q3’16	 	  	Q4’16	 	  	Q1’17	 	  	Q2’17	 	  	Q/Q Change	 	  	Y/Y Change	 	
Cloud	  	$	1,021.2	 	  	$	1,322.3	 	  	$	287.3	 	  	$	359.4	 	  	$	410.8	 	  	$	331.6	 	  	$	379.6	 	  	$	48.0	 	 	 	14%	 	  	$	92.3	 	 	 	32%	 	
Telecom / Cable	  	 	2,417.1	 	  	 	2,324.7	 	  	 	571.0	 	  	 	599.4	 	  	 	636.2	 	  	 	568.5	 	  	 	562.4	 	  	 	(6.1	) 	 	 	(1)%	 	  	 	(8.6	) 	 	 	(2)%	 	
Strategic Enterprise	  	 	1,419.5	 	  	 	1,343.1	 	  	 	363.0	 	  	 	326.5	 	  	 	338.6	 	  	 	320.9	 	  	 	366.9	 	  	 	46.0	 	 	 	14%	 	  	 	3.9	 	 	 	1%	 	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total revenue	  	$	4,857.8	 	  	$	4,990.1	 	  	$	1,221.3	 	  	$	1,285.3	 	  	$	1,385.6	 	  	$	1,221.0	 	  	$	1,308.9	 	  	$	87.9	 	 	 	7%	 	  	$	87.6	 	 	 	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	 	
 	  	June 30, 2017	 	 	March 31, 2017	 	 	June 30, 2016	 	
GAAP gross margin - Product	  	$	557.0	 	 	$	498.7	 	 	$	533.8	 	
GAAP product gross margin % of product revenue	  	 	60.7	% 	 	 	60.2	% 	 	 	61.9	% 	
Share-based compensation expense	  	 	1.4	 	 	 	0.9	 	 	 	1.5	 	
Share-based payroll tax expense	  	 	—  	 	 	 	0.2	 	 	 	—  	 	
Amortization of purchased intangible assets	  	 	3.1	 	 	 	3.1	 	 	 	3.6	 	
Acquisition-related and other charges	  	 	—  	 	 	 	—  	 	 	 	2.8	 	
Supplier component remediation charges	  	 	—  	 	 	 	7.1	 	 	 	—  	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP gross margin - Product	  	$	561.5	 	 	$	510.0	 	 	$	541.7	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP product gross margin % of product revenue	  	 	61.2	% 	 	 	61.5	% 	 	 	62.8	% 	
GAAP gross margin - Service	  	$	244.9	 	 	$	247.9	 	 	$	222.6	 	
GAAP service gross margin % of service revenue	  	 	62.5	% 	 	 	63.2	% 	 	 	62.0	% 	
Share-based compensation expense	  	 	5.3	 	 	 	4.3	 	 	 	4.3	 	
Share-based payroll tax expense	  	 	0.3	 	 	 	0.7	 	 	 	0.3	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP gross margin - Service	  	$	250.5	 	 	$	252.9	 	 	$	227.2	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP service gross margin % of service revenue	  	 	64.0	% 	 	 	64.5	% 	 	 	63.3	% 	
GAAP gross margin	  	$	801.9	 	 	$	746.6	 	 	$	756.4	 	
GAAP gross margin % of revenue	  	 	61.3	% 	 	 	61.1	% 	 	 	61.9	% 	
Share-based compensation expense	  	 	6.7	 	 	 	5.2	 	 	 	5.8	 	
Share-based payroll tax expense	  	 	0.3	 	 	 	0.9	 	 	 	0.3	 	
Amortization of purchased intangible assets	  	 	3.1	 	 	 	3.1	 	 	 	3.6	 	
Acquisition-related and other charges	  	 	—  	 	 	 	—  	 	 	 	2.8	 	
Supplier component remediation charges	  	 	—  	 	 	 	7.1	 	 	 	—  	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP gross margin	  	$	812.0	 	 	$	762.9	 	 	$	768.9	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP gross margin % of revenue	  	 	62.0	% 	 	 	62.5	% 	 	 	63.0	% 	
GAAP research and development expense	  	$	240.2	 	 	$	276.2	 	 	$	247.9	 	
Share-based compensation expense	  	 	(14.1	) 	 	 	(34.8	) 	 	 	(29.5	) 	
Share-based payroll tax expense	  	 	(0.5	) 	 	 	(1.8	) 	 	 	(0.4	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP research and development expense	  	$	225.6	 	 	$	239.6	 	 	$	218.0	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
GAAP sales and marketing expense	  	$	239.9	 	 	$	244.2	 	 	$	243.7	 	
Share-based compensation expense	  	 	(16.3	) 	 	 	(15.3	) 	 	 	(13.8	) 	
Share-based payroll tax expense	  	 	(0.5	) 	 	 	(1.4	) 	 	 	(0.8	) 	
Amortization of purchased intangible assets	  	 	(0.9	) 	 	 	(1.0	) 	 	 	(0.8	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP sales and marketing expense	  	$	222.2	 	 	$	226.5	 	 	$	228.3	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
GAAP general and administrative expense	  	$	55.6	 	 	$	50.5	 	 	$	58.6	 	
Share-based compensation expense	  	 	(7.0	) 	 	 	(6.7	) 	 	 	(6.5	) 	
Share-based payroll tax expense	  	 	(0.4	) 	 	 	(0.3	) 	 	 	(0.1	) 	
Amortization of purchased intangible assets	  	 	(0.2	) 	 	 	(0.2	) 	 	 	(0.4	) 	
Acquisition-related and other charges	  	 	—  	 	 	 	(0.3	) 	 	 	(3.6	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP general and administrative expense	  	$	48.0	 	 	$	43.0	 	 	$	48.0	 	

Juniper Networks, Inc.
Preliminary Reconciliations between GAAP and non-GAAP Financial Measures
(in millions, except percentages and per share amounts)
(unaudited)

 	  	Three Months Ended	 	
 	  	June 30, 2017	 	 	March 31, 2017	 	 	June 30, 2016	 	
GAAP operating expenses	  	$	543.7	 	 	$	590.3	 	 	$	552.6	 	
GAAP operating expenses % of revenue	  	 	41.5	% 	 	 	48.3	% 	 	 	45.2	% 	
Share-based compensation expense	  	 	(37.4	) 	 	 	(56.8	) 	 	 	(49.8	) 	
Share-based payroll tax expense	  	 	(1.4	) 	 	 	(3.5	) 	 	 	(1.3	) 	
Amortization of purchased intangible assets	  	 	(1.1	) 	 	 	(1.2	) 	 	 	(1.2	) 	
Restructuring charges	  	 	(8.0	) 	 	 	(19.4	) 	 	 	(2.4	) 	
Acquisition-related and other charges	  	 	—  	 	 	 	(0.3	) 	 	 	(3.6	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP operating expenses	  	$	495.8	 	 	$	509.1	 	 	$	494.3	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP operating expenses % of revenue	  	 	37.9	% 	 	 	41.7	% 	 	 	40.5	% 	
GAAP operating income	  	$	258.2	 	 	$	156.3	 	 	$	203.8	 	
GAAP operating margin	  	 	19.7	% 	 	 	12.8	% 	 	 	16.7	% 	
Share-based compensation expense	  	 	44.1	 	 	 	62.0	 	 	 	55.6	 	
Share-based payroll tax expense	  	 	1.7	 	 	 	4.4	 	 	 	1.6	 	
Amortization of purchased intangible assets	  	 	4.2	 	 	 	4.3	 	 	 	4.8	 	
Restructuring charges	  	 	8.0	 	 	 	19.4	 	 	 	2.4	 	
Acquisition-related and other charges	  	 	—  	 	 	 	0.3	 	 	 	6.4	 	
Supplier component remediation charges	  	 	—  	 	 	 	7.1	 	 	 	—  	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP operating income	  	$	316.2	 	 	$	253.8	 	 	$	274.6	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP operating margin	  	 	24.2	% 	 	 	20.8	% 	 	 	22.5	% 	
GAAP income tax provision	  	$	65.4	 	 	$	31.8	 	 	$	52.2	 	
GAAP income tax rate	  	 	26.7	% 	 	 	22.6	% 	 	 	27.2	% 	
Income tax effect of non-GAAP exclusions	  	 	17.3	 	 	 	28.3	 	 	 	15.9	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP provision for income tax	  	$	82.7	 	 	$	60.1	 	 	$	68.1	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP income tax rate	  	 	27.3	% 	 	 	25.2	% 	 	 	26.2	% 	
GAAP net income	  	$	179.8	 	 	$	108.8	 	 	$	140.0	 	
Share-based compensation expense	  	 	44.1	 	 	 	62.0	 	 	 	55.6	 	
Share-based payroll tax expense	  	 	1.7	 	 	 	4.4	 	 	 	1.6	 	
Amortization of purchased intangible assets	  	 	4.2	 	 	 	4.3	 	 	 	4.8	 	
Restructuring charges	  	 	8.0	 	 	 	19.4	 	 	 	2.4	 	
Acquisition-related and other charges	  	 	—  	 	 	 	0.3	 	 	 	6.4	 	
Supplier component remediation charges	  	 	—  	 	 	 	7.1	 	 	 	—  	 	
Gain on equity investments	  	 	—  	 	 	 	—  	 	 	 	(3.3	) 	
Income tax effect of non-GAAP exclusions	  	 	(17.3	) 	 	 	(28.3	) 	 	 	(15.9	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP net income	  	$	220.5	 	 	$	178.0	 	 	$	191.6	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
GAAP diluted net income per share	  	$	0.47	 	 	$	0.28	 	 	$	0.36	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP diluted net income per share	  	$	0.57	 	 	$	0.46	 	 	$	0.50	 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Shares used in computing diluted net income per share	  	 	385.6	 	 	 	388.0	 	 	 	386.3