Yeah. All right. Perfect. Welcome, everybody. I'm gonna read some brief disclosures first that you've heard many times. For important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For those who don't know me, I'm Meta Marshall. I cover the networking space here at Morgan Stanley. We're delighted to have Juniper Networks and have Ken Miller, CFO, with us here today. We saw you at Mobile World Congress last week, but I saved all of my good financial questions for today, so. Sounds good. Maybe to start with, you know, Juniper has transformed from its legacy as a primarily service provider company to enterprise now being its largest segment. How has Mist helped transform the company, and where can Mist continue to derive its greatest competitive advantage today? Yeah. Before I get started, I would like to also do my own disclosure, right? We will likely be making some forward-looking comments today, and those comments do carry risks, so please take a look at our SEC documents, which you can find at our website, for a full listing of those risks. You're absolutely right, Meta. The enterprise business is really the biggest change for Juniper over the last several years. Mm-hmm. It's now 40% of our business the last quarter. It's our biggest vertical, as you mentioned. It grew over 20% last year on a full year basis. This is a revenue number, which is constrained by supply, which I'm sure we'll get into. All that said, Mist has turbocharged that business. Mist is leading the way. Our Mistified business grew 67% last year. A $500 million business on a full year basis, $300 million the year before, $150 million the year before that. It's been growing, you know, aggressively for the last couple years. Last year, 67%. It really is the differentiation that Mist brings to the market. Not only the AI engine, which is, you know, one of the big differentiators, but the cloud-architected for scale, the microservices, you know, software stack. It truly is a differentiated product offering, and the industry is transitioning to a cloud-delivered model, and Mist really leads the way there. Got it. Who makes up that ideal Mist customer today? You know, how is that different from maybe the you know, general enterprise customer that maybe kind of some of the other competitors are targeting? I would say anybody who wants to run their network, the most efficiently, reduce costs, reduce trouble tickets. I mean, that's kind of an easy answer. I mean, the reality is we've had a lot of success on the high end of the market. Mm-hmm. You know, 4 of the Fortune 10 are Mist customers today, Mist Juniper customers, 1 Global 10. That's really, I believe, largely due to our focus from a sales perspective, where we have limited sales coverage. It's an area we're investing in, but we obviously have a much smaller sales coverage than some of our competitors, so we're going after some of the larger customers first. Now though, it's really our opportunity to take it to the broad market, and it really does have, you know, those features that the large customers enjoy, also resonate well with really customers of any size. What are some of those channel investments made, and kind of where are we on some of those channel investments? Every year we obviously continue to revamp our channel program. We're seeing good success from a deal registration, over 20% deal registration, which basically means we're getting an increase in the zero-touch Juniper business coming from the channel by a 20% clip. Our commercial business is growing nearly 40% on a year-over-year basis. We're seeing the channel really start to accelerate. What, to me, the difference is they see the product, they understand the differentiation. They see the Magic Quadrant where we're the leader amongst leaders. They wanna be a part of it. This isn't us pushing to the channel and saying, "Please sell our solutions. It looks and feels a lot like the competitors." This is, in many cases, the channel coming to us and say, "We see your solution is differentiated. It's winning in the market. We want to participate as well." We're getting a lot, more lift from the channel, and I think we're still, pretty early in our, you know, our opportunity there. Got it. Maybe you could just kind of walk through how a Mist deal develops. You know, does it start with Wi-Fi? When does it bring EX into the portfolio? You know, is there a way to think of how many Mist customers are kind of these multi-product customers? It's a really great question because a lot of times when we acquired Mist in 2019, it was a Wi-Fi only wireless company. What we've done since acquisition is integrated the full campus and branch suite, so wired switching, secure SD-WAN, and now we're working on NAC, you know, NAC, or Network Access Control, which would be a feature within Mist. We're continuing to expand the feature set within that Mist umbrella. Really what Mist is the platform. It's the cloud-delivered AI engine that operates your entire network, records wireless or wired or SD-WAN. The answer to your question, we're seeing tremendous traction on our wired business. That business has been kind of flatlined. When it was, you know, predominantly a legacy on-prem switch, it wasn't getting much traction. We've seen record revenue results over the last couple of years since we've Mistified that business. We're seeing it, you know, accelerate the growth quite meaningfully. Our ability to win with Mist is really taking a new logo and then expanding that across the portfolio, as well as expanding it up the software stack with more features and functions. You asked about portfolio specifically. Last quarter, for example, we had an, you know, an 80% increase in customers that buy more than one solution. Okay. A year ago, they might have bought one. Now they're buying multiple solutions. Oftentimes now it's gonna be wired and wireless. Mm-hmm. SD-WAN is the newer part of the portfolio, and that's something we're gonna be focused on going forward. I guess just another question we get from investors is just, you know, when we enter times of macro-sensitivity, traditionally, generally people are a little bit more wary to kind of change vendors. Does the Mist pitch change in that time to be more of an ROI case? Like, just how are you having to adapt the sales pitch? No, it's a great question. I would say in times where you're introducing complexity by changing vendors... Mm-hmm. I would agree with you that people would be hesitant in times of-. Yeah. a macro concern. The reality is we're introducing simplicity, right? It is an ROI story. It is about saving operating costs. It's about lowering help desk tickets. You know, ServiceNow, you used to have a competitor network, they ripped it out, and they're now 100% Juniper Mist, and their reduction in help desk tickets was 90% reduction. Mm-hmm. Because we truly are the only solution that doesn't just help you set up your network, but actually runs your network, going forward with AI intelligence. It truly is a differentiator. It saves cost. That always sells. I would say it sells even more in times of macro uncertainty. Again, this isn't a complex integration, a complex sale. You don't need trained engineers. In fact, that's the exact opposite of what Mist believes is, which is lay simplicity into your IT department. Got it. You know, you've enhanced that campus portfolio. You just spoke about NAC, but you've also enhanced it with 128 Technology, giving you SD-WAN functionality. You know, how should we consider this portfolio kind of growing over time? We'll continue, obviously, to invest in our leadership. We're pleased obviously with our differentiation today. We want to continue to invest in that. From a solution perspective, you know, we definitely believe we have what we need to take considerable market share. I mean, the exciting, you know, one of the most exciting things about Mist, not just the success we're having and the win rates we enjoy, which is roughly 90%. If we get to a proof of concept, we win 90% of the time. The technical advantage shines and enables us to win. We're only 3% of the market, right? We've been growing very quickly, but we're still very small in a $25+ billion market opportunity. Yeah. We have all the pieces to go after that entire $25 billion market. We're not missing anything. We might be able to add adjacencies and expand. Mm-hmm. the market opportunity, like NAC is a good example. Yeah. We have what we need to win in the traditional kind of campus to branch networking security solutions, and that's where we have a lot of runway left. Got it. I mean, another area in which there's a lot of campus investment is kind of SASE or cloud security. You have a large security pedigree with your firewall background. Just are there better ways to kind of take advantage of this cloud security opportunity? We think so. I mean, we've definitely taken our security features, our SRX firewall features and virtualized them, containerized them. We're now delivering them, you know, from the cloud. That's really as, you know, we see the direction of travel where customers want to digest their security from the cloud and we are definitely a big part of that. We're seeing a transition in our products from kind of an appliance-based upfront revenue model to more of a subscription-based SaaS, you know, SASE security revenue model. I would say we're, you know, we're doing that transition, but we feel very good about, you know, the leveraging the products and the IP that we had on security and now taking it to a cloud delivered model. Got it. Your cloud customers have also been a notable area of expansion for you over the past few years, you know, going from maybe one large routing customer to kind of multiple opportunities across both the routing and switching portfolio. Just given the competitiveness of the cloud switching market, you know, where do you find the greatest opportunities here? Yeah. We see opportunities in routing across particularly the high-end of cloud, you know, the hyperscale is where we have footprint amongst all those hyperscale customers. You know, we have enjoyed some more diversity in our hyperscale cloud business. We, you know, a few years ago, we were, you know, pretty concentrated on one of the largest hyperscale clouds. Now we have better diversity across all the hyperscalers in the routing space. The opportunity there is really 400 gig upgrades, right? As they upgrade their network, the cloud customers are leading the way in the 400 gig transition. We've seen a lot of great wins there, and we're excited about continuing to satisfy the, I believe, insatiable demand of cloud. I mean, there might be some digestion periods. Up until, you know, I believe the cloud vertical, the hyperscale routing is a growth opportunity for us for many years. In addition to routing, data center switching is obviously an area of opportunity for our cloud business. Particularly for us, it's gonna be for the cloud majors. These are gonna be customers kind of 5 through, you know, 100 or 200, where we've seen some great traction there. In our cloud-ready data center business, which is effectively data center switching and our Apstra software as well as some security, grew 20% last year on a full year basis. We are doing really well in kind of the non-hyperscale data centers. Yeah. We're competing quite effectively against all comers and 400G upgrades and just new architectures with software control with Apstra is really our key differentiator there. Got it. I mean, do you think that understanding those customers are smaller, but they have more needs that you can kind of address either with Apstra or other pieces? Like, I guess, just how do you determine, like, where to best allocate resources, you know, whether it's trying to go after these four or five big guys or actually kind of going after the meat of the market? We, we've definitely made a strategic decision that we're not gonna spend a lot of our resources going after the top two, right? I mean, of the top four, you know, two are white box, two are. Yeah. you know, OEM vendor. At this point, we feel the opportunity to go after customer 5 through 100 is the place for us to be. It's more broad-based applicable technology. We're not gonna build custom features and functions for 1 customer. Mm-hmm. We're gonna really focus on the broader market. We've seen success. You mentioned Apstra, and you're right in that the largest customers are gonna build their own, oftentimes build their own automation and intent-based management system, which is what Apstra brings to the broad market. We're able to fulfill not just the infrastructure, but the management system that 'cause they don't build their own. They're looking for someone like a Juniper to help them operate their data center. It's a lot like what we've done with Mist in the campus and branch. We have great infrastructure, but what really differentiates our solution in the data center is the operations. It's the software stack that runs the network simpler. It's getting more and more complex every day. Networks are getting much bigger, much broader, and having that software layer that helps you operate the network is really where we're competing and winning. We had this discussion at Mobile World Congress last week, but, you know, AI is certainly the topic of the day. We put out a piece last week, or a week, two weeks ago at this point, that looked at kind of the AI opportunity for networking, and, you know, networking is a huge bottleneck for these AI workloads today. I think our conversation revealed that Juniper kind of has some of the features that can kind of help remove some of those bottlenecks. I guess, just where are you seeing traction or kind of movement on kind of helping maybe that 5 through 200- kind of with their AI needs? Yeah. Really when we talk about AI at Juniper, there's really two concepts. Yeah. There's the using AI for our own products. Yeah Mist is a great example where we've had AI for 7 years, and that's really what differentiates our ability to run your network better, to give you a better network experience, less trouble tickets, et cetera. It's continuously learning, so it's getting better and better. We're taking some of those AI principles into Apstra and our data center solution, as well as Paragon, which is our metro routing solution. AI to enable an easier running network and a better experience network is really something we've been spending a lot of time on and are continuing to invest in across our entire portfolio. AI, as, you know, as others are using AI and the workloads increase with GPUs versus CPUs, it's gonna require more networking 'cause the bandwidth requirements, and it's also gonna require what I would, you know, to simplify, is higher performance networking. Mm-hmm. You know, deeper buffer, that's really where Juniper excels, right? We have, you know, obviously a fantastic routing portfolio with all the protocols. We have a great switching lineup that's high performance. As AI clouds get built, Juniper will be in great position to take advantage of those bandwidth requirements. Got it. Maybe just last question on cloud. You've mentioned kind of diversifying that base of customers. Do you think that that can kind of help make it far less lumpy than we think of kind of cloud businesses across the board? I believe it can. I mean, Juniper has over the last 5+ years or so, has really been focused on diversifying our business. There was a point where we were too dependent on, you know, kind of tier 1 telcos. Mm-hmm. They had their own cycles. I'm sure we'll get into that shortly. Yeah. We kind of switched into cloud, which was a pretty concentrated vertical, and we had too much concentration within cloud, so we diversified cloud, we diversified some of our telco footprint, and obviously the big one is enterprise, where we have grown, you know, and then now it's our biggest vertical as we mentioned earlier. That's a diverse vertical kind of by definition. We're seeing diversification advantages across all three segments. I do think it should help us considerably ride out some of the volatility we've had in kind of years past. Got it. Maybe let's kind of step on to the service provider piece of the business. You know, this is, as you've just noted, kind of more subject to carrier CapEx cycles. Just how does 400G upgrade cycles kind of help this opportunity? Just where are we on kind of some of the routing tailwinds that we were kind of expecting over the next couple of years? Yeah, it's a great question. service provider routing, particularly if you talk about kind of core and multi-service edge- Yeah Which is where Juniper's participated, for, you know, a couple of decades now, it's cyclical. I mean, it does ride cycles. Now, I would argue that the cycles are multi-year, you know, 3-5-year cycles. They're not, you know, one year up, one year down kind of thing. They're typically longer term. I believe we're on an up cycle right now. I do believe, you know, we have a long-term model of service provider of, you know, flat plus or minus 2, because the market is flat plus or minus. It's not a growth market overall, but as they are in investment cycles, you could be on the plus side of zero, maybe you're at the plus 2 side. Last year we just did 3% on a full year basis within service provider. What's happened, the pandemic actually, created some demand and basically they had to shore up their networks to deal with the new traffic load. That was a bit of an investment cycle for networking service provider for the last couple of years. Now they're transitioning to more of the strategic architectural upgrades, 400G that you mentioned, 5G, not just the rollouts from the radios, but actually getting the traffic and taking it into the multi-service edge and the core. I believe the more, you know, cyclical cycle, which is typically in, you know, inflection point related, is still happening in front of us versus happened the last couple of years. I feel good about the opportunity, in that vertical to not, you know, to not be a boat anchor like it's been in years past, and to actually be, hold up quite well for us. You guys are also entering some new markets within routing. Just, you're starting to see kind of early traction. Yeah kind of how does that help expand that opportunity as well? No, it's a great question. I mentioned kind of core and edge routing, which is where Juniper's is strong and has always been strong. You know, over a long period of time, it's a flattish market on most estimates. There's one piece of the routing, service provider routing market that is growing more sustainably, and that's the metro market, metro routing, access aggregation, a lot of people call it. That is, you know, a mid-single digit kind of growth market for us. Juniper has not participated in that market in any sort of meaningful way. We have completely revamped the portfolio. We are going after that market, you know, fully, and we're not going after it with just new products, which we do have great products. We also have a software play, just like I mentioned, Mist for campus and branch, Apstra for data center. Paragon is our software package for the metro opportunity, and it really is about managing your metro network easier, right? Mm-hmm. It's complicated. It's tens of thousands of devices. It's a lot, you know, lot more devices than, say, a core network would have. Managing becomes the most difficult part of the equation, and reducing costs there is how we think we can provide value with obviously a great routing switch with our software, our routing stack, et cetera. There's, we feel like there's a great opportunity to insert and take some of those, you know, lessons from other markets into the metro service provider, metro market. Got it. Maybe just kind of rounding out the innovation area you guys have had. You know, you made a silicon photonics acquisition a couple of years ago. Just, where are we on kind of this opportunity and where can it kind of help bring in other opportunities? We actually sold the majority stake in our silicon photonics business early last year to Synopsys. We are now a minority owner in the new company called OpenLight. We're very excited about the IP, the intellectual property that business has. Moving it to more of a licensing model versus a product model is really the strategy of the new company that we're the minority owner of. Okay, got it. Maybe now kind of stepping into the last quarter. You know, gross margins have been meaningfully impacted by supply chain costs and product mix. Just how do you view the supply chain situation as resolving itself, and when can we get to where price increases pass through can kind of help offset those headwinds? Yeah. Obviously it's been quite a rocky road for the last couple of years on the supply chain front. The one thing I would note is, as far as volume, we've been able to get more volume. We've seen that for the last several quarters. You know, last year was a 15% product revenue growth year, which is a great revenue growth year, and that implies a lot more volume. We're getting parts, we're just paying too much for them, and it's impacting gross margin, and we're not getting as much as we would like. We're still constrained, but we are getting more and more. I think that's a good sign that started happening, say, a year plus ago. We're starting to see the light at the end of the tunnel. I would like to think by 2nd half this year, we're gonna see significant improvement in the supply chain. We're down to, you know, less and less parts that are the bottleneck. It used to be pretty much everything was constrained. Now we're down to just, you know, a few parts that cause, you know, cause issues. From a cost and kind of pricing perspective, you know, the cost is going to take time to burn through. I talked about on the guidance, you know, for the year, that margins, gross margins should be flat to up. That's being relatively prudent on how quickly the supply chain costs come back. If they alleviate quicker, there could be upside to that flat to slightly up. I think it's gonna take some time because we have to burn through the inventory. We have a lot of purchase orders out there. You know, we still made commitments in prior years to secure supply that have longer-lasting terms. It's not gonna come down immediately, but there is an opportunity over time to see gross margin go up as those supply costs come down. On our pricing side, you know, we have seen a benefit from pricing. We'll see more benefit this year than last year as we made an action, you know, in the second, you know, July last year. That action hasn't worked its way through the backlog quite yet. We are seeing a benefit on our own pricing to offset some of that gross profit loss that we've been seeing from the supply chain side. I think one of the questions investors generally have is like, well, what do we get back to? Because I think across the industry, people have been surprised at how long some of these kind of... Yeah supply chain challenges have lasted. You guys also have kind of a product mix element. Just how should investors think about where growth margins get back to? We've been disclosing an adjusted gross margin where we think real gross margins would have been if it wasn't for some of these elevated costs. That's, you know, that was approximately 60% last year. We're talking about a couple hundred basis points of loss that I believe we should get back over time. How, you know, how quickly that comes back is not yet known, but I do think we'll get that back over time. You mentioned, you know, hardware or product mix, I would agree that on the hardware side, product mix, campus and branch carries a lower margin than our core routing business does. Yeah. Since we're growing that, you know, much faster, that's a margin headwind. That's, you know, offset on our, you know, we believe by software. Software's becoming a bigger piece of our overall business, nearly $1 billion of revenue last year, as well as just volume. Yeah. You know, to me, there's no reason why we can't get back, you know, towards that 60% kinda number over time. I mean, maybe just last question on supply chain. I mean, obviously it imp-- I think we have all seen the backlog through as you had more visibility from... You guys had more visibility 'cause people were trying to get orders in ahead of supply chain constraints and maybe we're kind of reversing some of that as supply chain becomes more normalized. I mean, just maybe just reiterating your kind of previous statements about like how we should think about kind of order normalization that we're seeing? Orders are normalizing. You saw us post, you know, greater than 20% reduction in orders, which is what we expected to happen. I mean, effectively, we already have the orders in-house, and to me, that's a strong position to be in. I'd rather have the order. They want the supply this year, they booked it last year. That's a better position to be in than booking this year and wanting it this year, right? Supply chain, as lead times come in, backlog's going to come down. Bookings will normalize from prior levels. You know, I know it's a little bit difficult 'cause some models are based on bookings growth rates. Yeah. I really think that the best indicator of demand these days is going to be revenue because customers still want the product. We're shipping more and more every quarter. Just because they booked it last year or previously doesn't really take away the true demand of this year. I know people are trying to get to true demand, and it's challenging. We tried to help by, you know, during the times, the good times when bookings were 50%+, year-over-year, we were, you know, trying to normalize that with our adjusted demand. Right now we're dealing with the backlog drop, I feel like backlog is $2 billion. It's going to remain elevated as we go through the year. It's not gonna go from $2 billion to $500 million, anytime soon. It's gonna take a while for this to normalize, but it will normalize over time. Got it. You've noted that there's operating leverage in the business, but I guess, you know, you guys have a lot of opportunities. You have needing to invest in the channel for Mist. You have a lot of opportunities to kind of go after more cloud customers. You clearly are expanding kind of the routing portfolio. Just how are you balancing that, where to invest versus where to find leverage? Yeah, it's a great question. We definitely expect there to be leverage this year, and to be honest with you, I expect there to be leverage for years to come. You know, we just closed last year at 15.7% operating margin. This year we've committed to at least 100 basis points improvement, and there's really no reason why we can't continue to improve from there as we get towards 20%. Honestly, when we get to 20% in due course, we'll probably set our sights for 25%. There's definitely leverage in this model as we scale our business. It goes back to 3% market share, right? We need to compete. We need more scale and more top line in our investments. We should be able to grow considerably slower than overall revenue growth. That said, there will be areas of investment. Go-to-market is a big one. Go-to-market, enterprise, go-to-market, both sellers and channel. You know, I would expect there to be much less leverage if you're looking at go-to-market as% of revenue as there would be in other areas like R&D and G&A. That's where, there'll be more leverage, but it definitely doesn't mean we're doing the same things. You know, you mentioned Metro. We've been investing in Metro for the last several years. We obviously had a 400G upgrade cycle recently. That's, you know, that takes a fair amount of investment. We're already thinking about 800G. There's ongoing investments. It's really about making sure you prioritize, your investments in the right areas. Although R&D and, you know, might be, you know, flattish, you know, compared to sales and marketing, it doesn't mean we're doing the same things. There's a lot of changes going on underneath where we're reaping some legacy investment and reducing some legacy investment and plowing that into the cloud, plowing that into our Mist solution, where we are growing R&D. There's definitely pockets of growth within an overall R&D envelope. Got it. I have more questions. Are there any questions from the audience? All right. Perfect. Maybe just kind of last question from me. You know, there's been a pullback in valuations. You guys have been acquisitive in the past. Obviously, Mist was kind of a stellar acquisition for you guys. How do you look at the M&A environment and where do you see the biggest potential opportunities? Mist was obviously a very good acquisition. I'm also very pleased with the others we've done, Apstra, 128T and Netrounds. Had a good track record over the last several years on M&A. You notice a common theme there, software control points that allows us to win domains, whether it's campus and branch with all of our infrastructure, data center with our infrastructure or the metro routing with infrastructure. It's software controlled, infrastructure enabled. Going forward, we have what we need to be successful. As I mentioned in the campus and branch, you know, we have what we need, we believe, to take significant share for years to come in a $25 billion market, of which we're 3%. That said, you know, if there are adjacencies that can help us accelerate our strategy, we'll always, you know, consider opportunities. You know, I wouldn't expect us to be as acquisitive as, you know, that period when we were making those acquisitions. We'll always keep our eyes open for opportunities. Just how is kinda current macro informing capital structure, decisions or kinda capital allocation? We have a commitment of greater than 50% of free cash flow to shareholders, you know, we definitely plan on delivering to that this year. We'll be opportunistic on the buyback front, and we did just raise our dividend on the last call, you know, 5% to $0.22 per quarter. We feel our capital allocation strategy is largely unchanged. I mean, the, probably the biggest change to capital, working capital was cash and inventory. Where last year was a pretty significant inventory build year to deal with some of these supply chain issues. That did, you know, unfortunately result in a relatively low cash flow year for us. I expect that to re-recover this year, where cash flow will be much more tied to net income and inventory levels will stabilize. We won't see a shift in capital in assets, towards inventory. We'll see more stable balance sheet this year. All right. Perfect. Well, Ken, thanks so much for being here today and telling us more about Juniper. Thank you. Thank you, Meta.