Greetings and welcome to the Juniper Networks First Quarter 2020 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jess Lubert, Vice President, Investor Relations. Thank you. You may begin.

Thank you, operator. Good afternoon and welcome to our first quarter 2020 conference call. Joining me today are Rami Rahim, Chief Executive Officer and Ken Miller, Chief Financial Officer. Today’s call contains certain forward-looking statements based on our current expectations. These statements are subject to risks and uncertainties and actual results might differ materially. These risks are discussed in our most recent 10-Q, the press release and CFO commentary furnished with our 8-K filed today and in our other SEC filings. Our forward-looking statements speak only as of today and Juniper undertakes no obligation to update any forward-looking statements. Our discussion today will include non-GAAP financial results. Reconciliation information can be found on the Investor Relations section of our website under Financial Reports. Commentary on why we consider non-GAAP information a useful view of the company’s financial results is included in today’s press release. Following our prepared remarks, we will take questions. Please limit yourself to one question and one follow-up. With that, I will now hand the call over to Rami.

Good afternoon, everyone. And thank you for joining us during these difficult times. Before I comment on our results, I'd like make a few comments regarding the Covid-19 pandemic which is impacting the way all of us work and live. I like to emphasis that the help and safety of our employees, customers and business partners remain our top priority and remain an integral part of all we do. I couldn't be more proud of the Juniper team which has worked tirelessly to meet the needs of our customer and deliver new innovation to market despite the recent challenges introduced by Covid-19. I believe we are well positioned not only navigate the current crisis, but also to emerge stronger player. In the meantime, we are helping to support the fight against Covid-19 by offering free secured wireless connectivity kit to pop up field hospitals and giving back to the community through the Juniper Foundation which is working to support those in needs during this difficult time. And now on to our results. We reported Q1 revenue and non-GAAP EPS of $998 million and $0.23 respectively both slightly below the low end of our guidance. Revenue for Q1 was impacted due to Covid-19 related supply chain challenges, which negatively affected customer lead time and our ability to recognize the revenue in the quarter, particularly within our service provider business. However, actual Q1 demand remained healthy with product orders growing 10% year-over-year. We experienced Q1 order growth across all customers vertical, if not for challenges securing supply, we believe our Q1 revenue and non-GAAP EPS would have been between the mid and high end of our guidance range. We are entering Q2 with strong backlog and starting to see improvements within our supply chain, which Ken will touch on in greater detail during his prepared remarks. We are also seeing healthy momentum in our Cloud and Service Provider businesses, which typically account for approximately 55% of sales in any given quarter. We believe these businesses are likely to prove resilience within the current environment and could even benefit from the recent surge in traffic that is straining many networks around the world. While our enterprise pipeline has softened as a result of Covid-19 induced macro pressure, this has been factored into our near-term forecasts and is the primary driver behind our increased range for the June quarter and the withdrawal of prior commentary for the full year. I'd like to emphasize that Juniper remains financially strong with more than $2.5 billion in cash and highly liquid securities as compared to just $1.7 billion in debt. We also maintain an untapped $500 million credit facility. We expect to generate positive free cash flow in 2020 and we have no debt maturing until 2024. We believe these attributes should not only position us to weather the current crisis but also to support our customers and take opportunistic action that helped us come out stronger and gain share as a business environment eventually improve. Now I'd like to provide some insight into the quarter and address some of the key developments we are seeing within each of our core vertical. Starting with Cloud, we experienced better than expected results during the March quarter as a business grew 17% year-over-year and increased year-over-year for a fourth consecutive quarter. We continue to see momentum within our Cloud customers wide area network particularly for some of our switching products although our clouds routing business also saw double-digit growth year-over-year. Order trends remained healthy as we saw improved momentum across multiple hyperscale account and continued strength with our Tier-2 customers. Based on our Q1 results and recent order, we still expect to modestly grow our cloud business in 2020. We maintain strong and durable franchises at each of our hyper skilled customers and should be well positioned to benefit from the capacity growth in use cases we own. We continue to remain optimistic regarding our potential to win net new hyperscale use cases during the 400 gig cycle. We are in the process of working through customer qualifications and believe we have delivered the software systems and silicon needed to gain share within the opportunities we are targeting. While we are ready to meet our customers' requirement, we do anticipate some risk to 400 gig timeline in light of the current Covid-19 challenges, which may slow testing and cause some customers to focus more on scaling existing, footprint and less on deployment of new network architectures. While our Service Provider Business declined 14% year-over-year during Q1, this business was most heavily impacted by Covid-19 related supply chain challenges as I previously mentioned. If not for these challenges, we anticipate our service provider business would have experienced a mid to high single digit year-over-year decline and performed in line with our original expectations for the period. Importantly, our service provider orders increased 4% year-over-year in Q1 representing the first year-over-year increase since 2017. While we believe we are seeing some modest Covid-19 related benefits within our service provider business, we believe most of the service provider orders strength we experience is attributable to our diversification efforts across customers and products over the last few years. To this point, we are starting to see improved momentum with several of our US Cable customers as well as tier-2 and tier-3 carriers in international markets. We are also seeing increased carrier adoption of our switching and security offering in addition to our traditional routing platforms. We believe we remain well-positioned with our service provider customers and that our continuing efforts to diversify our customer base and increase the breadth of our offering should benefit this business throughout the remainder of the year. While we acknowledge that some of our service provider customers are continuing to face business challenges that may impact their ability to spend in future quarters, based on our recent momentum and customer conversation, we continue to believe our service provider business is likely to see a mid-single digit decline in 2020. Our enterprise business experienced 5% sales growth and double-digit order growth during Q1. We experienced growth in both our Campus and datacenter offering with strengthened US more than offsetting some enterprise headwinds in EMEA and APAC where demand impacts of Covid-19 became more apparent earlier in the quarter. We believe our Q1 results speak to the strength of our enterprise portfolio and ability to gain share even in the challenged environment. While our enterprise orders were strong during the March quarter, we lost some momentum towards the end of the period and our pipeline has been impacted by Covid-19 related macro dynamics that are clouding our visibility into Q2 and the remainder of the year. We now believe our enterprise business is likely to decline sequentially during the June quarter and come in weaker than we previously expected for the year. Despite the Covid-19 related headwind we are facing, we remain confidence regarding our ability to gain enterprise share for the following reason. First, we continue to see strong momentum with Mist which we acquired in April 1st of last year and are the center piece of our AI enterprise strategy. Mist makes networking simple for customers and improves the user experience and reduces its operational costs. We believe these attributes are likely to resonate with customers under any environment. We are seeing this in our continued business momentum. New Mist logos through more than a 100% year-over-year in the March quarter and standalone Mist bookings exceeded a $100 million run rate on an annualized basis. While Mist is continuing to exceed expectation, we believe we have just scratched the surface of Mist potential and the impact it is likely to have on the broader Juniper portfolio. To this point, we are seeing strong demand for our Mist wired assurance offering that launched in Q4 of last year and brings cloud management and AI capabilities to the ES portfolio. This capability has now enabled us to secure EX wins with three Fortune 10 account and in Q1 over a 100 joint Mist and EX customers. We plan to mystify additional elements of our switching and security portfolio throughout the year, which should create increment pull through opportunities for enterprise offering in future period. Second, we believe our enterprise switching portfolios continuing to gain share with both revenues and orders growing during the March quarter. We believe our industry-leading EVPN VXLAN capabilities and Contrail Fabric Management are positioned to win in the datacenter market while our ES portfolio is likely to benefit from synergy with Mist and pull through from our Wired Assurance offerings in future quarters. Third, I believe the investments we have made in our go-to-market organization over the last 12-months should position us to capitalize on our innovation, particularly in the enterprise market as conditions improve and our account reps ramp to full productivity. And fourth, our enterprise mix should work in our favor given our high exposure to government sector and mid to large-sized enterprise account, which are likely to prove more resilient to recent industry headwind and be well positioned to recover when the environment normalizes. I'd like to mention that we are continuing to see momentum in our security and software segment. Our security revenue increased 10% year-over-year in Q1 due to strong demand for our high-end portfolio, which continues to gain traction particularly with our cloud and service provider customers. We remain encouraged by the momentum we are seeing and the success of our secured networking strategy which focuses on embedded security of the key elements of several routing and switching solution. We think customers are increasingly looking to consume security as part of a networking solution and believe we are well positioned to capitalize on this trend. Our software business grew 9% year-over-year and accounted for more than 11% of revenue in Q1. While much of our software revenue today is driven by on box software licenses, our off box software orders increase more than 50% year-over-year and off box subscriptions increased more than 180% year-over-year due to Mist. Based on the momentum we're seeing, we believe our software; the percentage of revenue will continue to increase over time especially as subscription-based pricing models become more pervasive and gain traction in the market. I would like to extend my thanks to our customers, partners and shareholders for their continued support and confidence in Juniper. I especially want to thank our employees for their hard work and dedication which is essential to creating value for our stakeholders. I will now turn the call over to Ken who will discuss our quarterly financial results in more detail.

Thank you, Rami. And good afternoon, everyone. I'll start by discussing our first quarter results inclusive of supply chain challenges due to the Covid-19 pandemic, then provide some color on our outlook and end with an overview of our financial position in light of the pandemic. We ended the first quarter of 2020 at $998 million in revenue flat year-over-year. Non-GAAP earnings per share were $0.23. Both results were slightly below the low end of our guidance range due to supply constraints related to the Covid-19 pandemic. Without the impact of the pandemic related supply constraints, we estimate that revenue and non-GAAP EPS would have been between the mid and high end of the range we provided in January. I'd like to briefly address some of the dynamics in our supply chain. We have a global supply chain footprint with our primary manufacturing partners located in China, Taiwan, Malaysia, Mexico and the United States. Our component suppliers are even more geographically distributed with suppliers from many countries throughout the world. During the quarter, the supply constraints we experienced were due to both constrained manufacturing capacity particularly in China and Malaysia, as well as component parts shortages as our component suppliers were also facing manufacturing challenges. These challenges resulted in extended lead times to our customers and ultimately caused us to fall short of our revenue guidance for the quarter. While the situation remains very dynamic, we have improvements to our manufacturing capacity. However, we expect several of our component suppliers will remain challenged throughout most of the second quarter as they are operating under restricted work condition. As a result, we have factored continued supply chain challenges into our current Q2 forecast. While we have a robust and flexible supply chain, the Covid-19 pandemic has brought the industry unprecedented challenges. Our supply chain teams have been working tirelessly to meet our customer needs during the pandemic. We have been executing a strong risk mitigation plan including multi-sourcing, pre-ordering components, transforming our logistics network and prioritizing critical customers, all the while we are working with local government agencies to understand challenges and partner on solutions that ensure the safety of our employees, partners and suppliers. As a result of these mitigation efforts, we believe we are delivering the best possible outcomes for safety and satisfying customer needs and we will continue to do so. Turning back to the first quarter results, while supply constraints negatively impacted our top and bottom line results, we saw strong demand in the quarter with orders growing 10% year-over-year exceeding our expectations. Additionally, the order strength was broad-based with all verticals and all geographies growing year-over-year. Looking at our revenue by vertical on a year-over-year basis, Cloud increased 17% and Enterprise increased 5% while service provider declined 14%. If not for the supply constraints related to the Covid-19 pandemic, service provider revenue decline would have likely been in the mid to high single digits. From a technology perspective, switching revenue increased 25% year-over-year and security revenue increased 10% year-over-year. Routing revenue which was the most impacted by supply constraints related to the Covid-19 pandemic decreased 16% year-over-year. Our services business increased 2% year-over-year. We continue to see solid performance from our software offerings where software revenue was approximately 11% of total revenue and grew 9% year-over-year. In reviewing our Top 10 customers for the quarter, four were Cloud, five were Service Provider, and one was an Enterprise. Non-GAAP gross margins were 59.6%, in-line with our expectations. Non-GAAP operating expenses increased 1%year-over-year and were flat sequentially, which was slightly below the low-end of our guidance range. As expected, cash flow from operations in the first quarter was strong at $272 million. We paid $66million in dividends, reflecting a quarterly dividend of $0.20 per share. Also repurchased $200 million worth of shares in the open market and completed accelerated share repurchase program we entered into in the fourth quarter of 2019. Total cash, cash equivalents, and investments at the end of the first quarter of 2020 were $2.5 billion which was flat from the fourth quarter 2019. Now I'd like to provide some color on our guidance which you could find details in the CFO commentary available on our website. While we are seeing uncertainty in our business due to the Covid-19 pandemic, we expect to see sequential revenue and earnings growth in the second quarter. Confidence in our forecast is driven by strong backlog and healthy momentum with our service provider and cloud customers. We believe these factors should help offset increased uncertainty in certain segments of the enterprise market. Due to the uncertain macro environment, we have widened our revenue range for the second quarter. We expect non-GAAP gross margin to be essentially flat sequentially relative to the first quarter. We expect to see sequential volume driven improvements in margin during the June quarter to be offset by certain strategic insertion opportunities in addition to increased logistics and other supply chain related cost due to the Covid-19 pandemic. We expect second quarter non-GAAP operating expense to decline sequentially as we continue to focus on prudent cost management, while continuing to invest to capture future opportunities. While we are optimistic regarding our long-term prospects and opportunity to gain share across each of our customer verticals, we are withdrawing our previously announced full year 2020 commentary because we cannot predict the specific extent or duration of the impact of the Covid-19 pandemic on our financial results. Turning to our capital return program, our Board of Directors has declared a cash dividend of $0.20 per share to be paid during the second quarter. We remain committed to paying our dividend. And while we expect to remain opportunistic with respect to share buybacks, we expect to place a greater emphasis on further building liquidity in this uncertain environment. Before we move on to Q&A, I would like to spend a few moments outlining the financial strength of Juniper in light of the Covid-19 pandemic. We have a high degree of confidence and our ability to meet our commitment and weather the current economic environment. Juniper is a financially strong company with over $2.5 billion in highly liquid, high credit rated cash and investments with access to additional liquidity sources, if needed. We are profitable and generate strong operating cash flows, both of which we currently expect will continue. Further, the diversity of our revenue streams is favorable and our position with our cloud and service provider customers should help offset pressure in the enterprise market. We intend to implement additional cost controls by continuing to invest in areas to take advantage of the market opportunities ahead. Our objective is to protect our talent and at this time we expect to retain our workforce. Despite the uncertain macroeconomic environment, we believe we are well positioned to sustain a financial strength. Our long-term financial principles remain unchanged. Our objective is to grow revenue, expand earnings over time and maintain our balanced capital strategy. In closing, I would like to thank our team for their continued dedication and commitment to Juniper success, especially in this challenging environment. Now I'd like to open the call for questions.

[Operator Instructions] Our first question comes from the line of Samik Chatterjee with JPMorgan. Please proceed with your question,

Hi. Good afternoon and thanks for taking the question. If I can just start off with the cloud revenue growth that you had double-digit growth for a couple of quarters now. If you can help me think about how much of that growth is being driven by your existing customers and if there were any new logo wins in the tier-2 cloud side that helped on that front? And I believe you've briefly mentioned WAN upgrades with cloud customers. Are you expecting any cloud customers to act straight line upgrade activities as they scale the current architecture that you were referring to?

Yes. Thanks for the questions, Samik. So obviously very pleased with our results in the cloud vertical, 70% year-over-year growth in revenue. This is actually the fourth quarter in a row where we've seen year-over-year strengths and in fact the strength was pretty broad based across technologies both sorry -- in all three areas of routing, switching and security. The other thing that I liked about the results in Q1 is the breadth across Tier-1 hyperscale cloud providers, as well as Tier-2 and Tier-3. In the Tier-1 space, it's mostly around the deployed footprint that we already have and the traffic requirements over those networks which resulted in goods bookings and revenue momentum and in the Tier-2, 3 space there were some of that as well as and in that area because we've really been focusing on net new logos in our go-to-market organization. There were probably a few new accounts that contributed to the momentum as well.

Okay and if I can just quickly follow up with, Ken, on the gross margin. Was there any headwind in 1Q gross margin from the supply chain challenges that you have? And I think you mentioned in your commentary here strategic insertion opportunities that are offset to gross margins in 2Q. Can you just elaborate on that?

Yes. So from a gross margin perspective we did have a strong Q1. We did have some cost rated Covid-19 was fairly immaterial. I do expect to have additional cost in Q2 that's actually one reason why the Q2 guide is relatively flat even though volume is up. So we had some cost in Q1, we should have a little bit more in Q2, still not super material but it's going to be a few tenths of a points of a headwind in Q2 as compared to Q1, but overall margin is tracking fairly in line with that exception.

Our next question comes from the line of Simon Leopold with Raymond James. Please proceed with your question.

Thanks for taking the question. First, I wanted to see if maybe you could help us unpack your enterprise market vertical a little bit in that, I think one of the points you've tried to make is that you've got exposure to generally healthy enterprises. And I am assuming that would be financial services, governments and just if there's some more color you can give us as to the uncertain verticals that you reference in the prepared remarks. Thank you.

Thanks for the question, Simon. So again pleased with our performance in what is a dynamic and competitive environment in the enterprise space. We saw strength in switching, US government performed well; our sales transformation that we have been embarking on over the last year starting to pay off. Mist had a record quarter and the momentum there has been strong. You're absolutely right. I think if you look at our enterprise business and unpack it, we have significant exposure to elements of the enterprise market like federal government, public sector, education, financial services that we believe are going to be more resilient to any economic downturn. The parts of the enterprise market like retail that is probably going to be less resilience we just have less exposure to.

And just in terms of my follow up, I'd like to see whether you've done anything in terms of actions to help out particularly your enterprise customers. Whether it's financing or more flexible terms on payments. Whether we should expect maybe DSOs become more extended just what are you doing in terms of the response and the adjustment to the shifting environment? Thanks.

Yes. So and just to add on to Rami's previous answer, the travel, retail and hospitality, those segments of the enterprise which we think are more exposed that's less than 15% of our total enterprise sales on the average core. So we feel good about our, the exposure levels we have in some of the more resilient enterprise sub segments. On a financing and cash receivable perspective, we have not seen any change to date. We are anticipating some modest push outs of collectibility and perhaps a little bit more bad debt, but to date we haven't seen it. We are aggressively working with customers on our Juniper financing services programs that we do offer leasing and extended payment term programs and we have revamped some of those and are offering those to customers as we speak. And I do expect to see some more traction in that space going forward.

From line of Paul Silverstein with Cowen. Please proceed with your question.

I appreciate it. Ken, is it -- it's just too much inserting the market to talk about where gross margin and operating margin can go over the next 12- months or so?

Yes. I would say there is, in particular on enterprise side and we feel pretty good about our cloud and service provider visibility for the year; really nothing has changed there from where we were 90 days ago, but from the enterprise side it's very difficult to predict the second half and therefore the full P&L.

All right. And just two clarifications, if I may, sort of a follow up. So the question I was asked earlier in your comment about strategic insertion opportunities impacting margin and you're giving it, I assume that's a clever way of putting that you're using, understandably using discounting to get into market opportunities. And then you mention exposure to government. Can you tell us how - remind how large government as a percentage of revenue? Appreciate it.

Yes. So the strategic insertion opportunities, there's really a couple deals that we have in our Q2 pipeline that are in emerging markets. They'd carry a higher discount and lower margin. These are breaking opportunities. They also have an unfavorable mix where it's heavy on chassis, light on LAN card, so these insertion opportunities are typically lower margin and we expect to recoup some of that margin over time as they add more line cards into the install base of the chassis. And we have a couple of those deals in the Q2 forecast that are impacting margin a bit. I'm sorry second part of the question?

Government business and federal revenue.

Yes. I'm sorry. So we did break out a couple years back that the US federal government was 15% of total enterprise and that percentage is largely unchanged. That's just the US Federal. We obviously have international federal government, local, state government and other government agencies that are not part of that 15%, but that gives you some sort of order of magnitude there.

Our next question comes from the line of Ittai Kidron with Oppenheimer. Please proceed with your question.

Thanks. Appreciate it. Ken, I just, I want to make sure you can help me walk through from the first quarter to the second quarter. It sounds like there's about $50 million that you could have shipped that you didn't. Ken, tell me in your guidance for the second quarter how much of that you expect to capture in the second quarter and then with regards to the order patterns, clearly, you had a very good quarter orders, but maybe you could talk by linearity in the quarter, and how do we should we think about orders in the second quarter? And I'm really trying to triangulate and what kind of backlog do you hope to finish the second quarter?

Yes. So the linearity in Q2 was actually in line with our normal expectations that across geography kind of across vertical et cetera. So linearity was on track. We already mentioned booking -- I am sorry in Q1. Bookings was stronger than we expected but it wasn't kind of a last week booking, it was really throughout the quarter, we saw strength. We expect most of what we weren't able to ship in Q1 to ship in Q2. We still have certain supply constraints that we are working through, but I feel like most of the backlog we carried in Q2 will ship in Q2. That said Q2, we do believe cloud and SP momentum will continue. So we expect another quarter of strong bookings there. Enterprise is probably the one that has the most uncertainty. We have seen some pipeline softness in our enterprise business. Clearly, we factored all that into our Q2 guide.

Very good and for, Rami, as a follow up as I try to think about the clouds and the service providers sounds like you have some interesting opportunities there. Is there a way for you to get your hands around how much of that is clearly just a reaction to traffic patterns given everything that's going on? And I am asking more in the context of timing of spend. What are the odds and what you're seeing right here right now? It's just time shifting those customers just saying you're not, we had strong plans for the second half, let's just put them in the first half and then we get to a little bit of our, we're low on gas as we get to the second half of the year.

Yes. It's a good question, Ittai. We obviously took a hard look at this and when we analyzed the numbers and we saw where the bookings momentum was coming from, I'd say that the Covid related orders were there, but they represented a relatively small part of the performance that we saw in the Q1 timeframe. And so let me expand on that a little bit more. In the service broader space, we have had a deliberate strategy over the last few years to diversify not just in the Tier-1 accounts where we have strength and footprint, but in to Tier-2 and Tier-3 and we saw the Tier 2, Tier-3 SPs kick in. We saw good momentum in the cable space for example especially here in the US. So I actually think the diversification of our SP business has helped us more than any Covid related increases in traffic. And on the cloud side, again, I do think that there were certain elements of cloud momentum that were a result of cloud services especially those that were in the business of offering connectivity and services like video conferencing for work from home users, but there the exposure to tier 2, tier 3 that strategy certainly helped us and of course, the hard work over the last couple of years in transitioning our customers to a new scale of product set and as a result of that retaining that footprint has allowed us to be in a position where we can reap the benefits of deployments today.

Our next question comes from the line of Tal Liani with Bank of America. Please proceed with your question.

Hi, guys. I'm trying to understand the source for the strength with cloud and with service providers and also on the enterprise, its kind of the same question. Do you feel that customers had brought in or brought forward demand from future quarters just because of either on the service of either side it could be because of increased traffic, so they just deployed plans sooner than they wanted? And on the enterprise side maybe there was also a concern that the budgets will shut down. So do you see any abnormal behavior of customers that is driving what you're seeing on the positive side is driving the strength in the order you're discussing.

Yes. Tal, thanks for the question and my answer is largely similar to that I just provided to Ittai. Like I said there has been some order patterns especially in cloud and SP that were clearly tied to increase traffic within network as a result of the Covid-19 situation. But in our analysis that is a relatively small portion of the overall performance that we saw especially from a booking standpoint in those verticals. And in the enterprise side, we actually saw sort of a balance of maybe some pull in but also some push out near the end of the quarter in particular, so on average I think it was probably a wash at least in the Q1 timeframe.

Got it. Can we talk about, I want to talk it's a bigger question not about the quarter. We hosted many calls recently about white box routing; Cisco launched a product in December. Where do you stand with your position on white box routing and your preparation for this change in this market?

Yes. A good question as well. So we were one of the first established networking vendors to embrace white box routing and switching years ago. We've never resisted the movement. We've actually offered that as a business model to our customers where they can procure software and hardware separately or procure software and deploy on white boxes if they choose to do. So we've had many customer conversations about this over the years and we've actually invested in the architectural principles behind white box routing where we decoupled software from hardware because it makes sense for us to do so irrespective of whether customers embrace the business model. Quite frankly, the uptake, the interest level from customers in embracing it has just been limited. And I think that many of our customers appreciate the fact that we're not resisting it. We're offering it as an option but also appreciate the fact and choose to deploy the simpler model of just an integrated stack whether software running on systems that are merchants silicon-based or software that's running on systems that's custom silicon-based.

Our next question comes from the line of Tim Long with Barclays. Please proceed with your question.

Thank you. Rami, I was hoping you could discuss kind of the 400 gig switching into the cloud vertical. Do you think any of the disruptions that we've seen impacts timeframe or Juniper's position to kind of insert into that market? And then I have a follow-up.

Yes. Certainly, Tim. I mean if anything Covid-19 has been a reminder of just how important the performance and the resilience of global networks are to Juniper, but also certainly to the world and the big industry trends 400 gig being one of them, one that we've invested in; one that we're certainly counting on are going to be more important rather than less important as a result of the this pandemic. Your question is around timing, my belief is if there is an impact to timing to the deployment of 400 gig, it will be fairly minimal because I do see that many cloud providers, some of the service providers today are just so focused on deployment in existing network to meet the capacity requirements of those networks that there might be some defocusing from the projects for 400 gig. But that said, I think, if it is an impact it will be relatively small and the opportunity remains large and our ability to compete in our opportunity I feel very good about.

Okay. Great. And then just to follow up on the service provider side. It sounds like it's pretty diversified business now which is helped and it's not just Covid impact. Seeing the orders being the best it's been in several years, it's probably early to call but how do you feel about this kind of being a turning point for this business where it could turn back into a more sustainable growth business kind of like you saw in the cloud vertical over the past year.

Yes. There are two elements to the diversification in this business that I like. The first is around diversification in customers, geographically and also in segments sort of tier-1 and tier-2, tier-3, but then the second thing that I really like is the diversification of the solutions that we're offering them. So certainly there is traditional routing, but we saw double-digit growth in switching; double-digit growth in security that we sold into the service provider market. And I think that diversity is certainly healthy. We exited Q1 with solid booking, so I actually expect you to see a meaningful sequential recovery. And I think for the full year seeing sort of what we expected sort of mid-single digit declines in service provider probably a good way to think about the business.

Our next question comes from the line of Alex Henderson with Needham. Please proceed with your question.

Thank you very much. So I was hoping you could talk a little bit about the inability to supply not so much in the first quarter because you think you're pretty clear on that, but rather to what extent you're holding back your expectation for the second quarter. What's the size and nut on the supply chain challenges for 2Q as you're exiting the quarter in your assumed guide.

Yes. So we're presuming similar dynamics in Q2 that's what we're assuming when we created our Q2 guide. We're not counting on significant improvements in the supply chain. Lead time started to extend in kind of early February. They've been extended throughout the rest of Q1 and they're currently still extended and I believe that's going to improve over time. Exactly when is still yet to be determined. There's obviously every day we seem to get a different update on what country is struggling to actually get into the factories and produced goods. So we anticipate similar dynamics. Again, we're trying to improve them. We're working very diligently to improve our flexibility and supply chain, but we're not counting on that when we set the Q2 guide.

So if I'm hearing that correctly does that imply that you're expecting a book-to-bill in the June quarter to continue to be above one as it was in the March quarter?

I would say we expect to maintain a healthy backlog as we execute to, as we enter Q2. So I won't comment specifically on book-to-bill, but I do believe our backlog that we've grown in Q1 will remain strong as we exit Q2.

And just one more clarification on the backlog assumptions. I assume that that's going to continue to be in the routing space and predominantly in the service providers space as we continue through 2Q or is there shift in the mix of the type of business that you're looking at.

Yes. It's pretty hard to predict to be honest with you. I mean a lot of us going to do adjust the timing of the orders; the particular components that that we're struggling to procure. So I wouldn't assume it's going to be one vertical or the other in Q2. Clearly, in Q1, it did impact service provider more than the other verticals, but again it wasn't some sort of structural reason; it was just really the timing and the situation that we ran in this last quarter that could very well change moving forward. All lead times are extended not just service provider lead times, in enterprise and cloud lead times; we've also seen an extension in those due to supply constraints.

Our next question comes from the line of Rod Hall with Goldman Sachs. Please proceed with your question.

Yes. Hi, guys. Thanks for the question. I wanted to just come back to the geographic assumptions you're making in the guide. I think if I heard the answer that last question right, when you say similar dynamics, Ken, do you mean $50 million or so of impact in the guide because you assume supply shortages. What do you mean by similar dynamics? I guess just to clarify.

What I mean by similar dynamics is, I think, our ability to ship product as compared to what we book will be in similar from a ratio perspective. So based on the linearity that we expect, I think, our ability to fulfill orders on a percentage basis of total orders will be largely in line with what we did in Q1 which would literally right. As we were not able to ship as many orders as we normally do.

Yes. Okay. That makes sense. And then if I think about that then in the context of the guide and the geographies, I'm just wondering what do you expect for the Americas? I mean it's grown year-over-year the last couple quarters, so about the same rate, it closes just under 7%. Do you think that's flat or do you think it's down or what are you thinking happens in the Americas and then maybe you could drill into enterprise versus service provider within that context?

Yes. So because we saw booking strength across all geographies in Q1 and yet revenue you'll note the only Americas grew the rest of world did not. I do believe that the rest of world has a strong sequential growth opportunity had given the backlog we built in Q1. On the Americas side, there is a heavy cloud focus there. We had a very strong cloud quarter in Q1, expected to remain strong and I expect a quarter you're going to see if some lumpiness there and we do have a more difficult compared Q2 last year than growth will be what we've had the last few quarters. And that will impact Americas, but beyond that, Rod, it's difficult to get into specifics on geographic mix of Q2. We feel good about the overall revenue objective. I do think SP will be up sequentially quite strong and the rest of business as we outlined.

Our next question comes from the line of Meta Marshall with Morgan Stanley. Please proceed with your question.

Great. I wanted to dig a little bit into the enterprise market. You had noted that you were kind of seeing a pause in that market, but I just wondered if any of the conversation it kind of turned to cost-saving initiatives. So whether that be SD-WAN projects or whether there have been focused on kind of outfitting Wi-Fi while people were out of the office. And then maybe just second follow-up question on professional services you noted kind of services being down because of professional services sequentially and just should we expect services to grow in Q2 or will the professional services kind of down tick prevent that? Thanks.

Yes. Let me let me answer the first question and then I'll pass it on to Ken to talk a little bit about your question on services. In the enterprise space, I wouldn't actually classify it as a pause in so much as a weakening of pipeline. The outlook and especially over the next immediate few quarters that pipeline we were counting on just softened up a little bit, but actually the momentum as I mentioned in Q1 was relatively strong all up and that's true for both the datacenter side, as well as the Campus and LAN side. Your question around transformation initiatives, enterprise transformations as they pertain to things like when transformation or SD-WAN Campus transformation moving to cloud managed solutions for wireless LAN and LAN, is actually a very good one. I do think there will be some perturbation in the business as a result of economic uncertainty due to Covid in the short term. I also think that as we emerge from the Covid crisis and things normal, I believe that those transformational efforts, especially Enterprise are going to become more important as opposed to less important. So that's exactly what we have been counting on as a trend that shapes our strategy and where we have been investing. We're not going after the generic wireless LAN and LAN market. We're going after the AI driven, cloud delivered wireless LAN and LAN market and even in the WAN the things we are after is the SD-WAN transformation and I think that the long-term prospects for that part of the enterprise market is actually good. And that's what we're investing in.

Yes and on the services front, the business continues to do quite well. We grew a 2% in this first quarter and most of that revenue and the vast majority of that revenue is service and maintenance contracts. We do have a smaller kind of professional services business and in that's out of the business it is a bit lumpy based on when we actually complete services. So really the PS, professional services volatility you're going to see a quarter-to-quarter has to do with just timing of revenue recognition and current quarter as compared to the prior compare whether it be the private quarter or the prior year quarter. So really nothing unusual there. I expect the service business to remain strong the rest of this year and I think the growth rates we've been seeing in the recent past kind of the low single-digit growth rates are what I would expect going forward in aggregate basis.

Our next question comes from the line of Amit Daryanani with Evercore. Please proceed with your question.

Yes. Thanks a lot for taking my question, guys. I think it's true for me as well, first one just on gross margins, perhaps I missed this earlier, but sequentially in June, looks like you have some decent revenue leverage but gross margins I think are guided flat. Maybe what are the offsets to that and then the supply chain disruptions impacting you? What - is there a gross margin headwind in Q1 and Q2 as well from there?

Yes. So, yes, I do think that the things that are going in our favor sequentially in the Q2 gross margin would be volume. Increase in volume is typically favorable as well as the customer mix as we expect service provider to actually have a nice sequential growth in Q2. Those are both positives. The reasons that while we're guiding to flat is there are a couple offsetting factors. One of which is we've mentioned a certain strategic insertion opportunities in some of the emerging markets that we forecast to LAN in the second quarter. And those are lower margin deals with the opportunity to expand margin over time, but those handful of deals are negatively impacting our forward guide from a gross margin perspective. In addition, we do expect there to be some supply chain related cost due to Covid-19. We're doing everything we can to securing source supply. We're doing everything we can to ship and create the logistics machines that we need to actually deliver products to customers. It's very challenging in today's environment. So some of those -- some of those actions are actually more costly than they would have been in a normal environment.

Got it. That's really helpful. If I just follow up on Mist. I think you talked about a couple of metrics that showed a lot of traction that you're gaining over there. I think you mentioned $100 million in bookings if I am not mistaken. Is it a bit to think about the strengths you see with Mist, how much of that is from cross something to Juniper's existing customer base versus net new logo wins for you as you go forward.

Yes. Mist had a record quarter and I did say that the customer count grew a 100% year-over-year and standalone bookings have now exceeded a $100 million on an annualized basis on a standalone basis. So it does not include any pull through of other products. So your question is a good one because we're very much now investing in a strategy where Mist, the platform behind Mist, the clouds enabled AI driven platform actually starts to manage and monitor more and more of our enterprise focus. The first one being our EX wired switching platform that happened. We delivered that as a product offering in the Q4 timeframe and we're already seeing meaningful momentum. So while most of the Mist strength has been in just wireless LAN, the component which is due to sort of attached products under the Mist umbrella is becoming increasingly significant quarter-by-quarter. And I think that's going to be a big part of the success story in the next several quarters and years.

Our next question comes from the line of Jeff Kvaal with Nomura Internet. Please proceed with your question.

Thank you, gentlemen for taking the question. My first question is fairly a broad one. I think we appreciate now is that customers are compressing three or four years worth of changes into three or four weeks worth of your time frame. What do you see as just some sustainable changes on the other side of this crisis? You talked a little bit about what might be different enterprise to that, what might we see in service provider or cloud. And I preference that by saying there has been some talk that the cloud networks have not necessarily held up wholly as well as the service provider networks have.

Jeff thanks for the question. Well, I will say this, if I think about how well Juniper as a company has been executing in a work-from-home basis over the last several weeks, I think it's eye-opening to see just how well we have done under those extreme conditions. And in many of the conversations that I've had with customers CEOs, CTOs, CIOs many would express the same thing. So there has -- this has been this grand experiment in some ways of trying to determine how well we can work remotely. And the one thing that enabled us to do this is the global network that we Juniper as well as our peers in this industry have had a hand in building over the years. In some sense like the network has almost been taken for granted for the last few years and this has been a reminder of just how important it is. Your question is about lasting effect, and I do think there is going to be a lasting effect. My belief is more meetings will happen after, even after we return to offices. And I'm sure that will happen at some point. There will be more meetings that will be held through video conferencing as opposed to travel. More conferences will be conducted virtually as opposed to conferences that require a lot of travel and people congregating in similar places. And I think that's good for obviously for our business. We're on the right side of that change and specifically when you look at the areas where we've invested. And I just mentioned around enterprise transformation, cloud delivered AI driven et cetera. These are elements of the new normal that I think are going to work in our favor.

Okay. Thanks Rami. And then a follow up would be on the enterprise sales build. I think last quarter, we talked that it was going to be a little bit ahead of what you had previously thought. This time it sounds like you've ratcheted that down a little bit. Can you help us square that circle?

Yes. You're talking about the sales go-to-market investment that we've talked about historically?

Yes. I think yes.

Okay. So we have as you know restructured sales to create an opportunity for us to invest in more quota carrying sellers. I think that started now more than a year ago. We started to see the benefits of that in Q4 and I think they continued into Q1 to the extent that the Covid uncertainty will impact the enterprise market more than anything else. We will monitor and modulate our investments in sales accordingly. So we're going to keep a very close eye on what happens in that vertical. And we won't -- the last thing we want to do is get ahead of ourselves and invest more than what we need to do, but at the same time I think the momentum that we have seen; the differentiation that we have in the market. The strengths of our products and the fact that we have relatively small share and an opportunity to take share even in a more challenging market gives us the confidence that some investment as we're doing today still makes sense.

Our next question comes from the line of Jim Suva with Citigroup. Please proceed with your question

Hey. Thank you so much and especially for fitting me in as the last question. I think you saved the smartest and handsome for the last question anyway so. I think what I'll do to make it very easy, I'll just ask one question and it's probably kind of both of you can chime in on that just to show my appreciation. When we look at the orders and the bookings you have, is there any change to the historical linearity in the world that we live in now and what I'm getting at is if Juniper had orders that they couldn't fill because there weren't enough parts out there, it's fair to assume that Juniper wants to order a little bit sooner and so your customers probably would have liked to have their product a week or two ago instead of when it was delivered. So I'm thinking about the linearity of the orders; the visibility both on your customer side, as well as your supplier side. Thank you, gentlemen so much.

I think at the highest level, we haven't seen a material difference to linearity. Q1 linearity was largely tracking as we would normally expect Q1 linearity to track. That said I do believe there are situations where our sellers and our customers are working together on when they actually need the product. When the time to deploy is currently scheduled and they might be backtracking forward maybe a couple more months and they normally would to place that order. So I do believe there's going to be some of that going forward, Jim. But it's been -- has it been big enough -- has it been enough of that to really move the numbers materially at a macro level.

I would completely agree, have nothing more to add.

Our final question comes from the line of Sami Badri from Credit Suisse. Please proceed with your question.

Well, that means I get to steal Jim's statement. And so I just wanted to clarify one specific thing which is given you saw some supply constraints and that in turn led to less sales generation in the quarter. The real kind of question I have as kind of two parts or is looking for two-part answers. First, as your customers probably didn't have many alternatives so where they went. So for where they went that would be very helpful to understand if they even did choose an alternative vendor. And then the second thing is do you perceive these Mist sales opportunities as potential like catch-up sales opportunities through the rest of the year or even 2021 or should we think of these as just lost sales for the time being and the sharp clock recommences and you guys need to go back and win in the market.

Okay. Sami, so the first question, if I understood correctly in terms of Juniper versus alternative to Juniper and the decisions our customers make. I mean that's not a new dynamic in the industry. This is a competitive industry and we're very comfortable operating in a competitive industry. I did mention earlier in the call and I believe this is true that when you have periods like this where traffic capacities and traffic dynamics are changing and your service providers and cloud providers in particular are supporting a work from home type of scenario. I think that environment favors those cut -- those technology providers that have deployed footprint. And we certainly have a very wide global deployed footprint that we can and continue to take advantage of. On your question around Mist, in the enterprise space in Q1 in particular what we saw was more broadly than just Mist really an enterprise all up and Mist obviously the significant component of enterprises. There were some orders that pushed out in time and there were some ordered that were pulled in and net-net is probably a wash in terms of how that affected the performance of the enterprise business in the Q1 timeframe.

The only thing I would add is from the orders and shipments perspective, we had strong orders. We are dealing with extended lead times. We talked about that. Just to give you guys some data there, the average lead time for our product is two to four weeks depending on the product and we've seen that extend by about two weeks. So we're looking at four to six weeks on average as the current lead times. And we've seen that for the last couple months. Customers, if we're working with our customers, we're booking order; we're doing our best to get them the product; the timelines they need. We have not seen customers de-book orders. Customers aren't -- when we aren't able to fill the timeline that we are driving to, we're working with those customers and we're still being able to retain those bookings. So we're not seeing de-booking, they're not shipping from our gear to something else because of supplies constraint at this point, obviously, we continue to look to avoid that type of behavior, but we haven't seen any to date. End of Q&A

That is all the time we have for questions. I'd like to hand it back to management for closing remarks.

Thank you everyone for your great questions. We look forward to meeting and speaking with you during the quarter.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.