Juniper Networks Q1 2022 Earnings Call Transcript

Participants

Corporate Executives

• Jess Lubert, Vice President of Investor Relation
• Rami Rahim, Chief Executive Officer
• Ken Miller, Executive Vice President and Chief Financial Officer

Analysts

• Simon Leopold, Raymond James
• David Vogt, UBS Group AG
• Rod Hall, The Goldman Sachs Group, Inc.
• Aaron Rakers, Wells Fargo & Company
• George Notter, Jefferies Financial Group Inc.
• Amit Daryanani, Evercore ISI
• Jim Suva, Smith Barney Citigroup
• Meta Marshall, Morgan Stanley
• Paul Silverstein, Cowen Inc
• Jim Fish, Piper Sandler Companies

Presentation

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Juniper Networks First Quarter 2022 Financial Results Conference Call. [Operator Instructions]

It is now my pleasure to turn the floor over to your host, Jess Lubert. Sir, the floor is yours.

[Jess Lubert, Vice President of Investor Relation at Juniper Networks]

Thank you, operator. Good afternoon, and welcome to our first quarter 2022 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-K, 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. [Operator Instructions]

With that, I will now hand the call over to Rami.

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Good afternoon, everyone, and thank you for joining us on today's call to discuss our Q1 2022 results. Before I begin, I'd like to provide a brief statement on the Russian invasion of Ukraine. My thoughts are with all those affected by this tragic war, particularly our colleagues in the region and those with the loved ones who have been impacted. When the war began, we quickly suspended all sales and services within Russia and Belarus. Given the complexity of the events, we are continuing to closely monitor the situation and hope for the restoration of peace and safety. In the meantime, Juniper and its employees made contributions to support humanitarian efforts in Ukraine and the Juniper Foundation made a donation to UNICEF to help its vital work in the region. Turning to the quarter. We delivered strong Q1 results. Revenue growth accelerated year-over-year, and we met the midpoint of our non-GAAP earnings per share guidance despite continued challenges from a supply chain perspective. Our teams continue to execute extremely well and are focused on delivering solutions that simplify the life of network operators and delight network users, what we call experience-first networking continues to resonate across each of the markets we serve. This is evident in our Q1 results, which not only benefited from a fourth consecutive quarter of double-digit year-over-year growth in cloud, but also an exceptional performance by our enterprise business, which saw revenue grow nearly 20% year-over-year.

This enterprise performance is particularly noteworthy as it was the first quarter in Juniper's history that Enterprise was the company's largest customer vertical. Cloud and enterprise strength more than offset a modest decline in our service provider vertical, which was due entirely to the timing of shipments as a result of supply chain challenges. Demand remained strong in the March quarter with orders estimated to have seen double-digit year-over-year growth when adjusted to account for certain large customers placing orders ahead of their normal order rate to account for extended lead times. On an unadjusted basis, orders grew by more than 35% year-over-year, and our ending backlog increased meaningfully on both a sequential and year-over-year basis. Order momentum was strong across all customer verticals and all customer solutions with each of these categories experiencing strong double-digit order growth year-over-year. While some of this strength reflects healthy customer spending patterns across each of our core customer verticals, where the importance of the network has never been more clear, we believe much of this demand is attributable to our strong execution across our product management, engineering and go-to-market organization which is enabling us to capitalize on significant customer initiatives.

Examples of these initiatives that continue to see strong investments include enterprise digital transformation and office reopening projects, 400-gig upgrade at cloud and service provider customers and the broad adoption of cloud-based services and associated network architectures. As we enter the June quarter, momentum is strong, and I remain optimistic regarding our prospects for the year despite the various supply chain challenges we are facing. I continue to believe these challenges are likely to prove transitory and the strong order momentum we are seeing and the backlog we have developed sets us up extremely well to deliver solid growth and improved profitability in the 2022 timeframe and beyond. Based on our recent order momentum, current backlog levels and our assumptions regarding supply, we still expect to deliver 7% to 9% sales growth and still are targeting at least eight points of non-GAAP operating margin expansion in 2022. Our expectations for 2022 assume current supply chain challenges persist and that we're unable to work down backlog during the year, potentially creating long-term tailwinds for our business once the supply chain situation improves and backlog returns to more normal levels. Now I'd like to provide some additional insight into the quarter and address some key developments we're seeing from a customer solutions perspective. Starting with automated WAN.

While this solution set experienced only modest Q1 revenue growth year-over-year due entirely to the timing of shipments, demand for these solutions remains exceptionally strong as we experienced a fleet double-digit order growth across all customer verticals and all major product families, including our MX, PTX and ATX offerings. We are continuing to see strong 400-gig momentum with our cloud and service provider customers, which should present building tailwinds for our business over the next several years. In this most recent quarter, I was particularly encouraged to see strong early interest in several of our newer automated WAN solution. To this point, our MX10K product family experienced a record quarter and our new LC 9600 programmable 10-terabit 400-gig capable line card, which leverages our latest 306 silicon experienced the strongest adoption of any automated WAN product launched over the last five years. We also saw another quarter of triple-digit order growth for our ACX Metro portfolio and growing demand for our Paragon automation software. With additional 306 based MX products and new ACX Metro offerings expected to launch over the next several quarters and new PTX products leveraging our next-generation Express five silicon also coming to market next year, I am optimistic regarding the long-term growth potential of our automated WAN solutions and our ability to capitalize on our customers' core, edge and metro requirements.

Our cloud-ready data center solutions experienced 20% year-over-year revenue growth during the March quarter due to broad-based strength across customer verticals and geographies. Orders were exceptionally strong in Q1 due to the momentum we're seeing with cloud major customers as well as certain service provider accounts. Our 400-gig solutions are resonating in the market, and we have now secured more than 70 data center switching opportunities that span across cloud majors, enterprise and service provider accounts. One opportunity, which I believe speaks to the strength of our data center switching systems and software capabilities is a meaningful new data center win with a top 10 cloud provider. This deal is already generating orders and is likely to drive meaningful revenue over the next few years. Customer interest in our cloud-ready data center portfolio remains high and given the wins we've already secured, we are increasingly optimistic regarding our ability to capitalize on the attractive growth within this market over the next several years. Our AI-driven enterprise revenue continued to materially outpace the market, growing 33% year-over-year. This strength was led by our Mistified portfolio, which surpassed a $400 million annualized revenue run rate in Q1 as both the wireless business and the related EX Wired switching pull-through more than doubled year-over-year to record levels.

Mistified revenue grew at 135% year-over-year, and we continue to see exceptional order momentum due to the success with existing customers and new logos. As a reminder, Juniper leverages the industry's leading Mist-AI engine, a modern microservices cloud and a proven AI-driven virtual network assistant market to improve customer operations across the smallest to the largest customer environment. The ability to scale cost effectively, to reduce IT health desk tickets, to quickly remediate problems and to rapidly introduce new business-enhancing services are among the reasons customers of all sizes are swapping out the competition and standardizing on Mist-AI. While many of these capabilities are well known, Juniper also delivered industry-leading location-based services based on Mist-AI, which is incredibly important to certain verticals such as retail. We're also seeing strong interest from enterprises as they ready their offices for return to work. Recognizing this point the critical differentiation, Gartner recently listed Juniper Mist as a Magic Quadrant Leader for location-based services, making us the only vendor to make the leaders quadrant for both wired and wireless access and location-based services, which is an important validation that we believe is likely to further benefit demand. Despite our lead, we are continuing to invest in our Mist-AI differentiation.

In Q4 of 2021, we acquired WiteSand, a small private company with exceptional talent that will accelerate our development of a cloud-native network access control solution. We believe this solution will prove highly attractive to many customers, which have grown frustrated by existing on-prem solutions, which are expensive and difficult to both deploy and manage. And not to be overlooked, we continue to make progress Mistifying our 128 Technology SD-WAN solution. The completion of this process is expected to further cement our ability to provide the industry best assured and secured connectivity experience from client to cloud. We continue to be encouraged by the momentum that 128 Technology is experiencing with recent wins with Fortune 200 enterprises in the U.S. and the large financial services organization in Europe. Based on our recent order momentum, third-party validation and the technical superiority of our AI-driven enterprise portfolio, I remain highly confident regarding the outlook of our AI-driven enterprise business. Our security revenue slightly declined in Q1 year-over-year, but I continue to expect growth for this business.

My confidence is fueled by the efficacy with performance of our firewall product, which were recently ranked number one by ICSA, a leading third-party independent security testing company for a fifth consecutive quarter with 100% detection rate against cyber threats, the top results achieved by all other security peers. Customers are telling us that in light of ongoing geopolitical difficulties, 100% security effectiveness is more important than ever and give Juniper a unique competitive advantage. I believe the convergence of networking and security will only increase across the markets we serve, and I'm confident that this will present a competitive advantage in all of our strategic customer use cases. Importantly, we continue to make progress transitioning our business to a more software-centric model by transforming more of our perpetual offerings to term-based licenses, introducing more ratable subscription offerings and training our sales organization to better monetize the value of our software stack. While these efforts remain in the early innings, we experienced another quarter of encouraging momentum in the Q1 timeframe, which saw total software and related services revenue grew by 60% year-over-year to account for 20% of our total revenue. Software orders were also strong in the period, increasing by more than 80% year-over-year.

Our annualized recurring revenue, which solely consists of truly ratable software subscriptions and related services increased 30% year-over-year due to the strong demand for Mist and security subscriptions. We are encouraged by the progress we are making in our efforts to capture more software revenue, which we view as critical to not only accelerating growth but also improving customer stickiness and margin. Our services team delivered another impressive quarter due to strong services renewal and attach rates. In addition to strong revenue, we also delivered record service margin. Our services organization continues to execute extremely well and is focused on driving innovation through automation and cloud delivered insights that not only create new revenue opportunities, but also benefit margins and the customer experience. Now I'd like to provide an update on our silicon photonics efforts, which have been focused on disrupting the optical component market through unmatched optical integration that would result in lower cost and superior power efficiency as compared to traditional solutions in the market. Through our investment and working closely with customers and partners, we've validated the advantages of our integrated hybrid laser technology and the broad market opportunity with applications in networking, data center disaggregation, AI, LiDAR and beyond.

However, we learned that the full potential of this opportunity would be best realized if we could enable a large ecosystem of partners to design on the technology and drive volume economics. In order to capitalize on this broader opportunity set, we have created a new company that has launched the first open foundry platform for integrated silicon photonics. Synopsys has acquired a majority interest in this new company. They are an ideal partner to launch this company as they bring deep expertise and customer presence as a leader in intellectual property licensing and semiconductor design. We believe this new entity will be better equipped to target the broad array of silicon photonics opportunities the technology can address through both discrete component sales and licensing models. We will also maintain an ownership interest in a new entity that will allow us to benefit from its product as well as the businesses' future financial success.

Finally, you may have noticed our announcement that our Chief Revenue Officer, Marcus Jewell, has decided to leave Juniper for a new opportunity. Daryl James, Executive Vice President of Customer Experience will assume the role on an interim basis. I'd like to thank Marcus for his services and the contributions he's made to the company over the last few years. Marcus leads our sales organization in excellent shape. And I'm confident we have the talent and the organizational tools to navigate this transition and maintain our momentum without any disruption. 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.

[Ken Miller, Executive Vice President and Chief Financial Officer at Juniper Networks]

Thank you, Rami, and good afternoon, everyone. I will start by discussing our first quarter results and end with some color on our outlook. We ended the first quarter of 2022 at $1.168 billion in revenue, above the midpoint of our guidance and up 9% year-over-year. Non-GAAP earnings per share was $0.31, in line with our guidance and increased 3% year-over-year. Product orders remained strong in the first quarter, posting greater than 35% year-over-year growth and we again saw double-digit order growth year-over-year across all verticals and customer solutions. Some of this order strength continues to be attributable to industry supply chain challenges resulting in customers placing orders ahead of their normal order rate to account for the extended lead time. After adjusting for these early orders for certain large customers, total product orders are estimated to have grown double digits versus last year. Our backlog increased more than $300 million on a sequential basis. Looking at our revenue by customer solutions, we saw revenue growth in all areas on a year-over-year basis. Automated WAN solutions revenue increased 1% versus the first quarter of 2021, Cloud-ready data center revenue increased 20% year-over-year, and AI-driven Enterprise revenue increased 33% year-over-year. Turning to revenue by vertical. Momentum in our Enterprise business continued and grew 19% versus the first quarter of last year. For the first time in our history, it represented our largest customer vertical.

Our cloud business grew 13% year-over-year, our fourth consecutive quarter of double-digit growth, while Service Provider revenue declined 2% year-over-year due to the timing of shipments, Orders increased double digits versus the first quarter of last year. Total software and related services revenue was $228 million, which was an increase of 60% year-over-year. Annual recurring revenue, or ARR, grew approximately 30% year-over-year. Total security revenue was $161 million, down 1% versus the first quarter of last year. In reviewing our top 10 customers for the quarter, three were Cloud, six were Service Provider and one was an Enterprise. Our top 10 customers accounted for 32% of total revenue as compared to 31% in the first quarter last year. In the quarter, we had one cloud customer that accounted for more than 10% of our total revenue. Non-GAAP gross margin was 57.5%, which was below the midpoint of our guidance, primarily due to the unfavorable product and customer mix, partially offset by an increase in service margin. As expected, COVID-19-related supply costs continued to be elevated. And if not for these costs, we estimate that we would have posted non-GAAP gross margin of approximately 60%.

Operating expenses on a non-GAAP basis increased 5% year-over-year and was essentially flat sequentially. Non-GAAP operating margin was 11.8% for the quarter which was in line with our expectations. Cash flow from operations was $193 million for the quarter. We paid $68 million in dividends reflecting a quarterly dividend of $0.21 per share. We also repurchased $112 million worth of shares in the quarter. Total cash, cash equivalents and investments at the end of the first quarter of 2022 was $1.7 billion. I'm very pleased with the financial performance in the first quarter. The performance is a testament to our team's dedication and resiliency through these challenging and dynamic times. Now I'd like to provide some color on our guidance, which you could find detailed in the CFO commentary available on our Investor Relations website. We expect second quarter revenue of $1.255 billion, plus or minus $50 million, which is growth of 7% year-over-year. We continue to experience significant supply chain-related headwinds associated with elevated component, freight and logistics costs which are expected to continue throughout the year. We also expect to see a decrease in service margin on a sequential basis. Therefore, we expect second quarter non-GAAP gross margin of approximately 58%, plus or minus 8%, which is up sequentially at the midpoint.

Our non-GAAP earnings per share is expected to be approximately $0.45, plus or minus $0.05, assuming a share count of approximately 330 million shares. Turning to our expectation for the full year 2022. I'd like to echo Rami's sentiment with respect to the war between Russia and Ukraine. In addition, I'd like to point out that we do not expect this ongoing conflict to have a material impact on our business. Given the strong order momentum and current backlog, we continue to expect 7% to 9% revenue growth for the full year. This assumes the supply chain environment remains constrained throughout the year, similar to current levels and does not further deteriorate. We expect revenue to grow sequentially through the remainder of the year. We expect supply chain constraints to be particularly tight during the second quarter and remain challenged throughout the year. We also anticipate backlog to remain at elevated levels throughout the course of the year. Moving on to non-GAAP gross margin, which can be difficult to predict due to the uncertain macroeconomic environment, we expect to see sequential improvement through the year.

However, given our current view of freight costs and other pressures on supply chain costs, we now expect full year non-GAAP gross margin to be below the midpoint of our 58% to 60% range. We remain committed to disciplined expense management and will target full year non-GAAP operating margin expansion of at least 100 basis points versus 2021. That said, we will continue to invest to take advantage of market opportunities and non-GAAP operating expense is expected to be up on a full year basis, consistent with the guidance we provided previously. Our non-GAAP tax rate on worldwide earnings is expected to be 20%, plus or minus 1%. Our non-GAAP EPS is expected to grow faster than revenue on a full year basis. In closing, I would like to thank our team for their continued dedication and commitment to Juniper's success, especially in this challenging environment.

Now I'd like to open the call for questions.

Questions and Answers

[Operator]

[Operator Instructions] Your first question is coming from Simon Leopold from Raymond James. Your line is live.

[Simon Leopold, Analyst at Raymond James]

Thanks for taking the question. I just wanted to see if maybe you could unpack a little bit about what's going on with your cloud customers. So notable that you talked about a 10% customer breaking in. But I wanted to see if you could dig into the patterns or behaviors of the cloud majors and what's going on with that group in terms of what are they buying? And how do you see them growing in their contributions to your cloud vertical?

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Yes. Thanks for the question. What I'm seeing within the cloud vertical is strength and momentum in ordering and just our ability to compete and win net new opportunity. I think that strength is broad-based. We're capitalizing on existing footprint that we have in both our Tier one as well as our cloud major space. Most of that footprint, as you know, in the hyperscale is in routing. But beyond that, it's in both routing and in switching. So where we have footprint, I think the fact that this customer class continues to invest is something that bodes very well for our business and continues to do so. But then the other thing that's really notable that I think we provided several updates on key wins that we've had of net new footprint in the cloud provider space, and there's one notable one that I mentioned in my prepared remarks, this is a top 10 cloud provider. We were already a routing supplier for this customer, and then we had an opportunity in essentially one net new data center footprint that's quite meaningful from an order standpoint thus far, but eventually, it will become a revenue standpoint. And I think we won based on the strength of our engagement in routing that essentially translated to an opportunity in switching. We won based on the strength of our sales engagement and also our ability to provide equipment in a timely manner, which was very important for this project as well. So it's a combination of real good, solid industry tailwinds, coupled with excellent execution on the part of our sales and engineering team.

[Simon Leopold, Analyst at Raymond James]

Thank you.

[Operator]

Thank you. Your next question is coming from David Vogt from UBS. Your line is live.

[David Vogt, Analyst at UBS Group]

Great. Thanks for taking my questions guys. So just quickly on service provider and cloud-ready data center growth. It looks like the timing of the shipments due to supply chain had an impact in Q4 and then a snapback this quarter. How should we think about normalized growth rate for cloud-ready data center going forward, given sort of the volatility in the supply chain is sort of a 5% to 9% CAGR still the right way to think about it? And then along the same lines, it looks like SP was impacted by similar dynamics this quarter but also hurt automated WAN. Should we expect a similar recovery next quarter like what we saw in this quarter in cloud data? And I'll just stop there.

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Okay. Let me start and then maybe, Ken, you can jump in as well on this one. So I'll start with service provider. From the orders standpoint, I think we performed exceptionally well. The slight decline in revenue is entirely due to the timing of shipments when we were basically able to provide product to our customers. And this, after the Q4 timeframe, where we actually saw a strong service provider revenue performance primarily again there because of the timing of shipments in that timeframe. All in all, I feel very good about where we are with our service provider customers, the strength of our solutions, the pickup of net new technologies that we've just recently introduced into the market. I mentioned in my prepared remarks, a new MX line card based on our latest generation silicon technology that we recently introduced into the market and has seen the fastest adoption of any new MX product in the last five years. I think that speaks again to the health of the market as well as to the strength of the technology that we're offering.

So I still think that in terms of the long-term outlook for this particular vertical, minus 2% to plus 2%, we're at, if not better, than that going forward. I think the other part of the question was around the cloud-ready data center, there, from a revenue standpoint, we did very well, 20% year-over-year growth. And from an order perspective, even better. And I think there, again, it's a combination of good industry tailwinds solid execution. I talked about the cloud provider data center win in top 10 that's net new for us. That's just an example of the kind of wins that we're able to achieve these days. Rapid adoption of new merchant silicon technologies and our product offering, Apstra as a key piece of the end-to-end differentiation that brings industry-leading automation intent-based networking to our solutions. So there's a lot we have going for us in the cloud-ready data center vertical right now. And again, there, our long-term view is 5% to 9%, I think we'll do at, if not better than that long-term view. Ken, anything else you'd like to add?

[Ken Miller, Executive Vice President and Chief Financial Officer at Juniper Networks]

I mean I would just reiterate, I think for all of our verticals, including service provider and all of our customer solutions, including CRBC, we haven't given specific FY '22 revenue guidance, but I do believe all verticals, all customer solutions could be at or better than the long-term model that we put out there. In any given quarter, you're going to see a little bit of anomalies, which is really going to be shipment-based or supply chain base and you mentioned a couple you saw last quarter in the Q4, and that will continue. But for the long run, we feel very good about all verticals, all customer solutions.

[David Vogt, Analyst at UBS Group]

Great. Thanks Ken, thanks Rami.

[Operator]

Thank you. Your next question is coming from Rod Hall from Goldman Sachs. Your line is live.

[Rod Hall, Analyst at The Goldman Sachs Group]

Hey guys, thanks for the question. Just wanted to check back on the sequential product gross margin weakness. I know you guys talked a little bit about customer mix and also the cost. But I wonder if you could dig into the mix side of it a little bit and talk about how much of that is temporary, just any more color you can give us on the mix, and how that affected the margins?

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Absolutely. And if you go back -- if you look at it on a trend basis, the biggest impact to product gross margin by far are going to be these kind of COVID-related supply constraint related costs that we've been talking about for a while. And even in Q1, the most recent quarter here, we posted 57.5% gross margin. It would have been approximately 250 basis points higher, nearly 60% that work for some of these costs that we do believe will be transitory. But if you compare it to the guidance, I mean, obviously, we knew about much of that cost, we set our guide at 58, and we came in at 57.5%, that is a systems mix or kind of a hardware mix issue. And in particular, MX was down a bit, and this is from a shipping perspective. Obviously, it has to do with our ability to procure the components and ship the product. We don't have the demand issue with MX. It was actually very strong, and we're building a lot of backlog. But from what we shipped in Q1, we shipped a little bit less MX than we anticipated, and we shipped a little bit more Mist access points, which at the time of shipment carries a relatively low margin compared to the rest of our portfolio, but obviously, as we sell more software and we recognize that software, which happens over time, it is margin positive over the long run. But in Q1 specifically, a little less MX we expected to ship and a little more access points, and that is really the primary driver in the 50 basis point missed from our guidance.

[Rod Hall, Analyst at The Goldman Sachs Group]

And then maybe follow that up with just an additional question on that same topic. Do you guys have any line of sight to that supply? Or is it just all these disruptions just make it impossible to know when supply there gets a little bit better? I know that's been kind of an ongoing supply issue for you. So just wondering what the visibility looks here.

[Ken Miller, Executive Vice President and Chief Financial Officer at Juniper Networks]

Yes. It's difficult to predict in any given 90 days, what we're going to show up more of or less of. It's even difficult to predict beyond that. I mean I would say for several quarters now, we've seen a kind of a series of continuous disruptions, whether it's COVID-related shutdowns or material shortages, logistics, bottlenecks, even the war in Ukraine, and we've even had some system outages with some of our suppliers and partners. We continue to navigate through these disruptions to the best of our ability. At this point in time, I think it's prudent to presume we'll have more unpredictable disruptions for the next couple of quarters. I have to admit, I was a little more bullish on potentially seeing improvements in the second half of '22 at the beginning of the year. But now I now don't anticipate significant improvements throughout the entire year. And I do think we'll see improvements in 2023. I still feel we'll get to supply necessary, obviously, to get to our revenue goals of 7% to 9% this year and that will be up year-on-year. We'll grow revenue faster this year than last year as an example. So supply will be more plentiful and absolute, but it will still be very constrained as compared to what our demand signals are and our ability to ship even more.

[Rod Hall, Analyst at The Goldman Sachs Group]

Are you guys -- given that change, are you guys expecting the $1.8 billion of backlog, I know you said you kind of exit the year with that amount. Do you -- is there upward pressure on that now? Do you think maybe the backlog you exit was a little bit higher than that? Or are you still thinking that you can kind of pick it up, I guess it was 1.8, if I'm remembering right.

[Ken Miller, Executive Vice President and Chief Financial Officer at Juniper Networks]

Yes, it was 1.8, we did grow it, greater than 300 million this last quarter. It's hard to predict, Rod, with any certainty where we're going to land, but I'll tell you this, it will be significantly elevated, whether it's 1.8 or 2.1 somewhere in that order of magnitude would be my expectation as we exit the year. So if supply does not get better later this year, obviously, that will result in even more opportunity in 2023 and beyond as we exit the year with significantly elevated backlog.

[Operator]

Thank you. Your next question is coming from Aaron Rakers from Wells Fargo. Your line is live.

[Aaron Rakers, Analyst at Wells Fargo & Company]

Yes, thanks. Just following up on that last question first. Just curious, I think in your 10-K filings, you note that the backlog that you're carrying definitely extends out 12 months that $2.1 billion plus that you're carrying now, how would you characterize the duration of that relative to what you saw coming out of last quarter? And I have a quick follow-up, if I can, as well.

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Yes, the duration is similar to what we saw last quarter. Just to clarify, I mean, customers are largely looking for the product sooner than we're able to supply. So that kind of 12-month horizon is unfortunately because of the supply constraints we're seeing and the lead times that we're dealing with. Customers are actually interested in getting product sooner than we're able to deliver.

[Aaron Rakers, Analyst at Wells Fargo & Company]

Yes. And then as a quick follow-up, going back to Simon's question on the data center footprint win. It sounds like a big deal. I think, Ken, in the past, you've been reluctant to think about data center switching wins as a big opportunity for Juniper inside some of the major cloud vendors. Has your opinion changed on that? And how would you characterize or what was the competitive -- was it a competitive displacement? Just any kind of further additional color on that seemingly large cloud win?

[Ken Miller, Executive Vice President and Chief Financial Officer at Juniper Networks]

Yes, Aaron, it's a good question. So we have been reluctant to call a hyperscale data center win because there are very few number of hyperscale customers that are -- that use OEMs for their data centers. So let's just say there's a very few at that, which we are completely continuing to compete for, but at this point in time, we're just not announcing any. That said, we've all along said that the opportunity beyond hyperscale is large with many [Indecipherable], and we absolutely saw that as a strategic opportunity for us to go and compete for to take more than our fair share and we're doing just that. So this net new is a perfect example of a non-hyperscale top 10, very meaningful in terms of orders and revenue, where we competed on the strength of our switching technology, the engagement that we already have with the customer in the routing side that we were able to translate into the switching side, the ability for us to do when necessary achieve pretty difficult task of getting the supply when it was, in fact, required and requested by the customer. So all of the above led to a sizable win. And I want to be clear that we continue to see large net new opportunities before us, both in hyperscale and in cloud majors beyond hyperscale in routing and in switching that we're competing for. And I am -- I feel very good about our opportunity to win more of these types of really lucrative deals just based on all of what I've mentioned.

[Aaron Rakers, Analyst at Wells Fargo & Company]

Great. Congrats. Thank you.

[Ken Miller, Executive Vice President and Chief Financial Officer at Juniper Networks]

Thank you.

[Operator]

Thank you. Your next question is coming from George Notter from Jefferies. Your line is live.

[George Notter, Analyst at Jefferies Financial Group]

Hi thanks a lot. I guess I wanted to ask about pricing. I think you guys looking back, have taken a couple of pricing actions. But could you give us an update on where you stand there? Just how much extra price have you embedded into the price list and maybe talk about when that flows into the model? And is there some potential for additional pricing increases going forward?

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Yes, we have taken a couple of actions, pretty significant actions last year. It will take some time for that flow into the model given that the strength of our backlog, but we do expect to see some benefit of last year's actions in the second half of this year. So we'll start to realize some of that here in a few quarters. As far as future actions, we are always looking at opportunities that we think makes sense for us to take advantage of, nothing to announce on this call, but you could count on us continuing to look at all options and making price decisions that we think make the best sense for Juniper moving forward. And we haven't quantified the previous actions, but really, our intent here is to offset some of the gross profit dollars that we are going -- effectively, we're losing due to the cost increases that we're seeing. There is a timing lag here where we're seeing the cost increases hit much sooner and some of these pricing actions are going to take a few quarters to materialize.

[George Notter, Analyst at Jefferies Financial Group]

Got it. And then also, one of the things I noticed, you guys seem to be hiring pretty aggressively. Just looking at your headcount numbers. I know there was a little acquisition in here also, but can you talk about where the sales and marketing investments are going and when you expect to start to see the yield out of those investments?

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Yes. No, it's a great question. I mean, headcount is up, and we talked about this year opex, we expect to be up as well on a full year basis compared to last year. We do absolutely expect to remain very prudent in our opex spend, and we absolutely expect to outpace revenue to outpace opex this year, which is why we feel confident we could expand our operating margin, and we continue to target 100 basis points improvement in operating margin. From a headcount perspective and where are we investing in general, the majority of it is go-to-market. The majority of it is in the enterprise space, where we believe we have an opportunity to really take advantage of the portfolio differentiation that we have, and we want to make sure that we're thinking beyond this current quarter, next quarter and think for the next several years to make sure we take advantage of the opportunity that we see in the marketplace. These do take -- when you hire sales folks, obviously, there is a learning curve and the productivity ramp, and we've modeled it in, and we feel very good that we could continue to outpace the market in enterprise like we have been, and continuing to invest everything will just give us years of revenue momentum to come.

[George Notter, Analyst at Jefferies Financial Group]

Thank you.

[Operator]

Thank you. Your next question is coming from Amit Daryanani from Evercore. Your line is live.

[Amit Daryanani, Analyst at Evercore ISI]

Thanks a lot for taking my question. I guess just full staff, there's always a bit of a debate on the durability of demand that you're seeing, so money, if you look at your backlog, which is north of $2 billion, I think what you said, if you just talk about the quality of this backlog and your comfort and confidence around this. I mean I guess if I look at the trajectory of how this backlog has build up, it should imply normally do you see high single-digit top line growth in '22, but perhaps even for the years after that. So maybe walk me through the puts and takes around in terms of does this enable you to see high single-digit growth on a multiyear basis versus just a one year?

[Ken Miller, Executive Vice President and Chief Financial Officer at Juniper Networks]

Yes. So we're not prepared to provide specifics on 2023. I will say this. Last year, we did 6.5% revenue growth on a full year basis. This year, we're expecting 7% to 9% growth on a full year basis, and we are expecting to exit the year with significantly elevated backlog. So that does give us a lot of confidence in 2023. We've been outperforming the model, and I think there's really no reason to believe we wouldn't continue to outperform in 2023, especially if supply chain starts to normalize because we do have the backlog built up and the opportunity to turn that to revenue, I think will be with us for not just 2023, but quite honestly, a few years to come.

[Amit Daryanani, Analyst at Evercore ISI]

Right. If I could just kind of follow up on this. And when you think about this outperformance that's almost like it's accelerating over here right now for you, what do you attribute that? Because I don't think that -- I mean end market is some degree of load that I'm guessing from a Juniper perspective, do you think it's share gains? Or is it you are just able to get somewhat better supply than some of your peers and that somewhat helping you. So I'm just curious what do you think the components that are enabling the share gains for you right now?

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Yes, it's a good question. I do think we have done a really good job of managing what is a difficult supply situation, but I don't think that's the primary factor. I think the primary factor is a number of things. One is healthy demand dynamics in the market, really strong product differentiation, solution differentiation in the use cases that we are maniacally focused on and have been focused on for the last several years and then solid execution. I mean take, for example, our AI-driven enterprise business, grew 33% year-over-year in terms of revenue and also exceptional order growth. That's driven by what is as a market-leading, very differentiated, no longer just WiFi, it's really an enterprise architecture that's cloud-delivered AI-driven solution based on the Mist acquisition, but expanded to include EX switching and SD-WAN, it really is the best solution in the market. I can also say the same thing about our data center now with the combination of Apstra for automation and our underlay switching technology. The differentiation is solid. It addresses the key pain point for our customers, and it's working. And then even in automated WAN, where we have these new product introductions in the MX with brand-new silicon technologies, so we're essentially starting just now a new product cycle associated with the MX, and PTX continuing to perform. I think the strength of that solution is helping us out tremendously in winning net new opportunities in the market.

[Operator]

Thank you. Your next question is coming from Jim Suva from Citigroup. Your line is live.

[Jim Suva, Analyst at Smith Barney Citigroup]

Thank you. In your prepared comments, Rami, you mentioned some new wins. And I think you mentioned them where they could be significant or material. Were those new wins after you gave your full year 2022 guidance? Are they kind of new since then -- I'm just trying to get a view when you say significant, are you talking like top 10 customer, just need clarity to help us, I guess, calibrate the excitement and optimism around that, that would be great.

[Ken Miller, Executive Vice President and Chief Financial Officer at Juniper Networks]

Yes. So I'll take the question. We're very excited about the win and the opportunity. It absolutely has been meaningful to our order strength and it will soon be meaningful to our revenue results going forward from a size of customer perspective. That said, Jim, honestly, our revenue guide to 7% to 9% is more based on supply than anything else. And our supply picture has not changed. If anything, I would say my optimism that might get better in the second half is probably a little lessend today than it was 90 days ago. So it's really a matter of who gets the supply, not so much if you have incremental customers and incremental demand, can we upside our revenue because the supply is kind of fixed at what it is. But this customer has the potential to be a very meaningful customer for us. I would say, yes, a top 10 customer for us in certain quarters depending on when products ship.

[Rami Rahim, Chief Executive Officer at Juniper Networks]

And just to add, Jim, I'm excited. Cloud-ready data center grew 20% year-over-year. I don't think that the market is growing that fast at this point in time. And I'm excited not just by this specific win, but what this win, in addition to the ones prior to this one that we've also talked about, means for us in our ability to win even more going forward. We're now competing with new technology that's in the market technology that we have been working with our teams together on for years that's now in the market. And so we have a much better understanding of the competitive landscape, what we're up against in terms of peer technologies. And the fact that we are able to win these new solutions in a competitive space is -- gives us a lot of confidence in our ability to do even more going forward.

[Jim Suva, Analyst at Smith Barney Citigroup]

Thank you so much.

[Rami Rahim, Chief Executive Officer at Juniper Networks]

You bet.

[Operator]

Thank you. Your next question is coming from Meta Marshall from Morgan Stanley. Your line is live.

[Meta Marshall, Analyst at Morgan Stanley]

Great. Thanks. A couple of questions for me. One, just any additional context you could give on what you're seeing as far as supply chain constraints on maybe more of the specialized networking chips versus some of the general componentry and just if there's any different trends there. And then the second question may be built upon that last quarter, you guys have had some availability kind of free up on the service provider side. And so just kind of wondering, is it some of the constraints on the service provider side, just coming from the new products? Or just what has kind of changed from maybe categories of semiconductors that you're waiting for?

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Yes. So when it comes to kind of ships versus general components, I really -- the answer is that unfortunately, it's a bit of a whack-a-mole game. I mean it really does kind of go back and forth a bit depending on the situation, depending on the quarter. Right now, I would say we're constrained pretty much across the board, I would say, relatively equally between some of our higher-end ASICs and some of those lower-end transistors, if you will. We are scouring the market and like everybody to try to picture as many parts as we can across a broad spectrum of components. It's -- yes, we were able to ship more in Q4 for kind of a higher-end routing portfolio as compared to, say, Q1 and our Q1 expectations. But that's really just -- it's just the timing of shipments thing. I don't think there's been a material change. I mean, we've been -- we would have liked to ship more in Q4 than we did, right? I would still argue, we were short supply in Q4, we were perhaps a little bit more short in Q1, but the shortages have persisted. And it's just all a matter of what we could build, when we could ship, and that's going to kind of fluctuate quarter-to-quarter.

[Meta Marshall, Analyst at Morgan Stanley]

Got it. Thanks.

[Operator]

Thank you. Your next question is coming from Paul Silverstein from Cowen. Your line is live.

[Paul Silverstein, Analyst at Cowen]

Two quick questions, if I may. I recognize that Mist in and of itself seems to be a significant differentiator for Juniper in your product portfolio and enterprise is far larger than when you entered enterprise, if I recall back in 2008, but my question is when you entered enterprise way back when in 2008, you had a several-year span where you took that business from ground zero to, if I recall, about $850 million of revenue. It's phenomenally successful, product launch was extremely exciting at the time. Again, I recognize it was just campus switching, but it did pursuit to flat line when you hit 2015, 2016, my question for you is above and beyond the breadth and depth of the product portfolio today, which is very different from back [Indecipherable] or so it seems. What's the risk that from a channel go-to-market or other factors perspective because it's never straightforward as in peers. What's the risk that notwithstanding the significant momentum you have in enterprise today that's similar to what happened back when that you get a replay of that scenario. And I realize the numbers would success is far off, but if you could address that question, then I've got a quick question about the Orion Synopsys JV.

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Okay, Paul, I'm going to take a crack at that. I think the big difference today is three key things, maybe 4, actually. One, the talent that we have leading the enterprise business that has unbelievable first-hand experience in what it takes to win all up from a solution, go-to-market channels, you name it. We really have talent with the right depth and breadth that can do it. Second, we did not just set out to solve the technology differentiation that we know is necessary to win, but we set out to solve the go-to-market requirements that we understood based on the lessons that we have learned, some painful ones in the past on what it takes to win and to win sustainably. And this, by the way, includes not just the direct selling motion, but the channel selling motion. And keep in mind, again, new talent, new leadership that understands what it takes to win and to create a fabulous channel motion to get this technology to continue to perform well in the market. And then finally, of course, it's the strength of the solution itself. I think the level of differentiation that we enjoy right now in the AI-driven enterprise, in particular, but I would also include data center with Apstra is second to none. I have not seen this magnitude of differentiation qualified not just by internal analysis, but by our customers, by third-party independent analysts ever in the history of Juniper. So I have utmost confidence that this is not a short-term thing. This is a long-term sustainable competitive advantage and growth vertical for the company.

[Paul Silverstein, Analyst at Cowen]

I appreciate the response. And then on the Synopsys JV, those are an asset. I assume there's a decent amount of opex you've been putting into that since you acquired Orion back, I think it was in '16 or '17. But Ken, is there going to be a benefit to opex now that I assume it will be shown in already interest on the income statement, you'll get rid of whatever R&D in any sales and marketing that you put into that? And if you could respond to that, can any concerns on China lockdown?

[Jess Lubert, Vice President of Investor Relation at Juniper Networks]

I didn't catch your last part. Concerns on what channel what?

[Paul Silverstein, Analyst at Cowen]

China. China lockdown.

[Ken Miller, Executive Vice President and Chief Financial Officer at Juniper Networks]

Oh, China, sorry. So on the RNP, yes, if you look at just our silicon photonic spend, it's going to go to zero here since this transaction is closed. So year-on-year, we would see less opex spent on silicon photonics internally than say, last year. That said, this transaction was contemplated for a while. We've been working on it for several months now, and it was factored into our plans for the year. So factored into our long-term guidance. We talked about opex being up year-on-year in absolute total opex predominantly in go-to-market as we continue to invest to take advantage of the opportunities that Rami just mentioned earlier about our enterprise motion in particular. So it is factored into the long-term targets, Paul, is the short answer. On China, we have not seen any real impact due to the more recent shutdowns, COVID-related shutdowns, obviously something we're watching very closely. We have reduced our footprint and manufacturing footprint in China, but we still have some dependents there, particularly on the component side. But for the most recent shutdowns, we were so far unimpacted, and who knows what's going to happen tomorrow, but it is something we're watching very closely.

[Paul Silverstein, Analyst at Cowen]

Thank you.

[Operator]

Thank you. Your next question is coming from Jim Fish from Piper Sandler. Your line is live.

[Jim Fish, Analyst at Piper Sandler Companies]

Hi guys, Just thinking about the security business. We've seen some recent [Indecipherable] growth despite the strong market demand but you note opportunity for growth kind of longer term here. Can you help us understand what you're seeing that makes you confident that we can return to some sort of security strength? And then any color you can provide in terms of how sustainable this is? Is it a 1- or 2-quarter bump? Or is this something that could kind of persist through '22 and '23?

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Yes, it's a good question. And I'm actually glad you asked. So I think first, it's important to understand that the way we look at our security business primarily is that it's an attached business to our strategic solutions, in particular, our AI-driven enterprise and our cloud-ready data center solutions. And it's already absolutely helping and contributing to the success and growth of those particular businesses. Also, security has a strong software attached. That's good for gross margins. It's a profitable business. There is an element of our security business that's high-end that sells to a relatively fewer number of cloud and SP accounts and that just tends to be cyclical. It really depends on the purchasing and deployment patterns of these large accounts that tend to buy sort of in bulk orders every now and then that makes the security business is just somewhat lumpy. So based on the fact that we continue to see strength in our solutions [Indecipherable] of security, I think, bodes well for us in the future, and why I remain confident about this business.

[Jim Fish, Analyst at Piper Sandler Companies]

Thanks. Thank you.

[Operator]

Thank you. That concludes our Q&A session. I will now hand the conference back to CEO, Rami Rahim, for closing remarks. Please go ahead.

[Rami Rahim, Chief Executive Officer at Juniper Networks]

Thanks very much. I just want to say that I continue to be very encouraged by the strong momentum we're seeing in our business. I believe that our end markets are performing well, they're healthy. I think they're even recovering in areas that were, in fact, affected by the pandemic. I love the diversity of the strength that we're seeing across solution areas, across vertical market segments. And I believe that the demand strength we're seeing as well as the execution sets us up well to do very well relative to our long-term outlook that we've already provided. So I want to thank everyone for the opportunity and the time today.

[Operator]

[Operator Closing Remarks]