Jamf Holding Corp. (JAMF) Earnings Call Transcript & Summary

Hey, good morning. Welcome to our next session. I'm really happy to have the management team from Jamf here. I think that's the first major conference the 2 of us have since you went public. So good luck. Well done. Questions will be tough. No, not really.

The -- but Dean, like just let me kick off with one. Like on paper, if you look at what you're addressing, which is the Apple ecosystem, it looks kind of not like the whole market. It's just that one ecosystem. Why should you [ even get excited ]? Or why did you got excited when you joined the company?

Well, obviously, it's really hard to work at Jamf and not be an Apple fan. So of course, creating the consumer Apple experience which I love within the enterprise. Let's face it, the enterprise is not known for it-just-works technology, and the opportunity to do that within the enterprise was very, very appealing. But also from a market perspective, people think of the Apple ecosystem is, oh, it's only part of the market. Well, by our measurement, it's over a $12 billion market this year and expanding by 17% as Apple grows within the enterprise. So we grow our market by expanding breadth of our solution within the Apple ecosystem. The result is that Apple is a great friend of ours. But guess what? So is Microsoft and so is Google. So we get differentiation and powerful friends.

Yes, yes, yes. Okay. And then maybe give us a little bit of background on Jamf. Because the one question I get a lot from investors, like why is Apple not doing that themselves? Why do you -- why did Jamf come up and be such a strong player in the market?

Well, of course, anybody that's been following Apple for years. I mean, Steve Jobs used to talk about not liking the enterprise. And the reason for that was because he wanted to build product for the individual. And because they loved it, he wanted them to choose that product. But in the enterprise, people chose your product for you. And that wasn't something he was particularly fond of. That's been changing, and Jamf's been able to facilitate where users choose their own technology. But Apple themselves, it's still in their DNA since the very beginning to focus on the individual, focus on the individual. We'll say it this way: Apple focuses on the person, Jamf focuses on the people. And Apple's success in the enterprise, frankly, has come through their focus on the person because the consumerization of IT has brought the consumer technology into the enterprise.

Yes, yes. And I mean just a little story. Like the first time I thought, like, oh, there's something going on with Apple and the enterprises when -- so I also cover SAP and I know the team really well. And they are like, "We are on Macs." And I was like, "Really? You're on a Mac at SAP? Like what's going on here?" Is that like a typical example? Or what -- do you see that more and more often?

Yes. Well, first of all, SAP is right, and your friends there, that Mac is growing substantially in the enterprise. Of course, maybe the most famous story of that, IBM was very public about they went, in a period of 3 years, from allowing employees to choose Mac for the first time to having 150,000 Macs deployed within a 3-year period of time. So SAP, very similar. But now SAP has expanded and said, "You know what, it's an Apple experience, not a Mac experience." Whether it be a tablet, a phone or a map, we want everybody who chooses Apple to have the Apple it-just-works experience. So they created a Center of Excellence at SAP called Apple At SAP, and they create that common, zero-touch, very simple consumer experience across the Apple ecosystem, all using Jamf.

Yes, yes, yes. Okay. Wow, that's -- I didn't realize that. And what's a typical adoption path then for an enterprise? I mean are you starting through a Mac, through a phone? Or how does that work?

Well, SAP is also very typical there as well. They actually started with Jamf with Mac. And frankly, that's how most organizations start with Jamf because it's really the path of least resistance. They have more people wanting Mac, Jamf is the clear leader in the Mac space. I mean, after all, 24 of the top 25 global brands in the world use Jamf for Macs. So oftentimes, it's not even really a decision cycle, it's just we need to use Jamf for Mac. But then after we're already in there, somebody in IT will realize, hey, are all these iOS devices more like Android or are they more like Mac? And increasingly, over the years, they're actually more like Mac. And because of our strong competitive moat around the Mac, organizations then bring the iOS devices into the same system that has Mac.

Yes. And how do you -- if I look at your installed base, and we were able to take some rough numbers, it looks like you have more Macs than iOS. But on the other hand, I would think there's probably more iPhone kind of in the corporate than there are Macs in the corporate. So how do you see that? Is that kind of something where you came to late? Is a lost opportunity? Or is that like a huge kind of opportunity, because the more Mac you have, the more you can argue for the iPhones?

It's the latter. It's very clearly a cross-sell opportunity for us. I mean, frankly, the reason why we focused on the Mac, Jamf has a very specific way that we develop strategy: Focus where our competitors aren't. And there was nobody building solutions for the Mac until recent years, where all of a sudden, it got people's attention. But we were sort of alone in that space and we were able to just focus on the Mac. 5 years ago, we had -- I mean, our iOS focus was really only education 5 years ago because, again, it was a market nobody else was focused on. We could build out differentiation within education, and we won that space. So we had a great moat around that, and we had a great moat around Mac in the commercial space. In the meantime, all of the unified everything to every device company, they battled over the iPhone space. The result was they had fairly little differentiation for the iPhone and iPad and a lesser moat. So now we're both in these enterprises, and we've got a strong moat around the Mac and a fairly weaker moat around the iPhone our competitors do. And as a result, those phones move over. Just by the numbers, we have more iOS devices at SAP today than we had in the commercial market 5 years ago. But now today, if you look at our commercial space, it's about -- overall, we have more iOS devices than Mac because of our strong education presence. But in the commercial space, we're about 2/3 Mac, 1/3 iOS. So it's actually come on very strong. We just have more Macs because we've been in it for such a long time.

Yes. And then maybe on an example, like just talk a little bit about that differentiation on the iPhone. Because like as you alluded, and I used to cover MobileIron, I still cover VMware, Citrix as well. So I've seen the space, and everyone comes up and tries to come up with like a little angle or like, oh, I can do zero trust. And it's like, well, everyone's doing zero trust. And all like this sort of stuff. Like how do you -- how does that fit into your ecosystem? Why are you kind of so different, then?

One of the things that I say. Whenever -- because you're right, everybody says they do everything, right?

Yes.

And there's a big difference between a county fair that says they have rides and Disneyland with FASTPASS that says they have rides. There's a huge experience difference between the 2. And so even though some things might be technically supported in various platforms, the amount of effort that a user needs to get to, let's face it, the it-just-works apple technology, is pretty substantial. Technically speaking, just very quickly, what we do is we always support the native features that Apple provides on the same day they provide them. And then we do more than support them, we exploit and enhance them. The result of those 3 things is we create the FASTPASS Disney experience, power it on and go. We also have industry workflows in health care and retail that are patented and unmatched. And then we also -- this is actually a significant coming thing. The ability to do all your iOS devices in the same system as your Mac cuts down the effort and lifts the experience in a huge way when it comes to zero touch. But it's going to increase because what did Apple just announce? They just announced that iOS and iPadOS apps were going to be able to run on the new silicon Macs. They didn't say they're going to be able to run on an Android machine or a Windows machine, they said silicon Mac. So scope it once, deploy it to your users, no matter what the Apple device is.

Okay. Yes. So that makes the differentiation for you even stronger then, yes. I wanted to go back to one point that you mentioned. You're kind of, in a way, like also working with Microsoft and Google. Like -- and just how does that fit in? Like -- because it seems kind of, at first sight, it looks like, hmm, that doesn't really make sense. But...

Okay. Well, let me ask you a question, and I don't even know how you'll answer this. But to Microsoft, what's the most important thing to them? Their cloud solutions or windows?

It's now cloud, yes.

It's now cloud, isn't it? And that has been the transformation of Microsoft. And as long as we create a great Apple user experience in a Microsoft enterprise, we continue to be very, very strong friends with Microsoft because they want to create a modern workplace, and a modern workplace has Apple in it. And so that's how our friendship continues to blossom. And guess what? Same is true on the Google side. What's most important to Google is their cloud solutions and identity.

Yes. It's -- and going back, that's kind of the question. And where the old timers will probably fight back or the other vendors saying like, "Oh, I can do universal." While with you, you will have like 2. You will have like an Apple, and that's you; and then you have like a [ nice other ] world with someone else. How do you see that play out? And I give you -- the Microsoft answer is actually which surprised me, was no, you will have 2, at least 2, because you want to have the optimized experience, going back to your point. But like how do you see that play out?

What we tell customers is actually the same thing that Microsoft tells customers: All you need is Microsoft and Jamf because Microsoft takes care of everything non-Apple and Jamf takes care of everything Apple because Apple requires a very specific, differentiated focus. The notion of putting everything into a single system and somehow you're going to be more efficient is the equivalent of a repairman or repairwoman coming to your house with one tool belt not knowing whether it's an HVAC issue or refrigerator issue or whether it's a -- you need custom tools for specific tasks. And when you can deploy Apple devices and support Apple devices, never touching them, that feels really efficient to me. And IT teams have found that that's a very efficient approach.

Yes. Yes. Okay. Perfect. Okay. I wanted to move on a little bit. It's like we obviously been like quite a few months and quarters now in the pandemic. How did it play out for you? Like what were the things that surprised you both ways, actually?

Yes. We've chatted that the pandemic impacted Jamf really in 3 core areas, to be education, health care and the commercial markets. Let me talk about the commercial markets first, what we experienced, first off. Of course in April, everything slowed down. April and the beginning of May were the slowest periods. But clearly, budgets got tighter. Some budgets got deferred. Frankly, some customers reduced their staff and required fewer devices. On one -- that's the one side of the ledger. The other side of the ledger was that differentiation, the ability for users to be able to do things themselves without IT nearby, and the need was greater. So the need was greater while budgets were tighter, and so those things kind of balanced each other. But at some point in time in the future, hopefully, the not-too-distant future, the headwinds will dissipate and we'll just see the need and the demand. Now within health care, there were some very acute needs as in education that just came right away. Immediately, doctors had to be able to do virtual visits with their patients. And immediately, you had to get equitable access to technology to students that were still in their homes. So those were just you had to meet the need. But in the commercial markets, it was that balance between budgets and an increased need.

Yes. And then on commercial, like do you see -- and what you hear in terms of pipeline building? Or what your sales reps are telling you, like the change towards more strategic where we figured out like, okay. Everyone's [ at home. It's kind of hard working ]. It's not great. But it's probably going to be more -- a more flexible work environment will be the future. So let's think about it, doing this properly. Have those discussions started already?

Yes. They're very strategic discussions, and they're more long term as opposed to -- I mean, there are some terrific examples. Starling Bank in the U.K. has been very public with the fact that the moment the pandemic hit, the IT person out there said, they bought every MacBook in the U.K. because they knew that, that was the fastest way to empower their workforce at home immediately. So there are some stories like that. But more often than that, there has been more long-term thinking of wait a second. We've got to rethink our strategy. And our strategy needs to, all of a sudden, realize not only do our employees need to be empowered from a distance, but this notion of the consumerization of IT just got put on steroids in 2020. Because all of a sudden, the home technology you use is right next to the business technology you use. And employees are saying, "This just doesn't make sense anymore. Let me use what I love in my personal life for work purposes as well." And that's going to -- you combine that with Apple's recent announcements with their unbelievable M1 chip in the MacBooks, and that's going to increase demand for those machines.

Yes. Okay. I need to look at that chip. Yes, okay. Okay. The...

It's right here, by the way.

It's slow going. I just got a new Mac a couple of months ago. [ One of the old ]. The -- quick one on education. So what surprised me last quarter was that the -- like in theory, education should be done by September. Like everyone's getting ready for school, thank you very much. And that comes the typical kind of education season. But if you look last quarter, it still was very, very strong. Can you maybe talk a little bit about what's driving it?

A couple of things. One is obvious, the need of distance learning has been the overall theme. However, what has happened in education is the fact that everybody had to go to their homes to be educated. School districts woke up and said, "Wait a second. Kids don't have equitable access to technology." And then the realization came that, you know what? They didn't have equitable access to technology even when we were learning in schools. So this isn't just a response to a pandemic. This is a problem we need to fix in education. So like in the commercial space, this is a longer-term strategy. So if they weren't able to get done what they needed to get done in the summer, it actually went into the fall. That's one reason. Two is, in education, there were alternative sources of funding. So the CARES Act in the U.S., you could actually use it to buy equipment for your distance learning needs. Well, there's just paperwork involved in that. So that kind of elongated the buying season a little bit. And then the third, it's gone global in a big way. The U.S. has been in front of other countries when it comes to providing technology to students. And all of a sudden, these other countries, some of whom had actually announced student technology programs prior to the pandemic. Germany and Japan are great examples. Germany's DiGA path program and Japan's GIGA program were known pre-pandemic. But when the pandemic hit, they got put on steroids. And those are not 1-quarter programs, these are multiyear programs. And we're seeing buying very, very sharply -- growing sharply in Japan and Germany.

Yes. And how do you think in that respect for your long-term mix? And I'm asking, are there differences in profitability of education versus commercial? Like growth on both sides is kind of good for you, but like what are the puts and takes we need -- we should think about it?

So Raimo, I'll jump in and take that one. You kind of bundled quite a few topics together there. And I think if I -- first of all, I want to piggyback up what Dean just said about the government-funded programs. We know of almost a dozen other different countries in Europe that have similar programs that have just recently been launched. So again, more of a longer runway and a tail on that yet to come. But I think it's important to frame up what our current splits look like between commercial and education as a starting point. And while our customer split is about 50-50, our ARR, about -- over 60% of that actually is coming from our commercial customers. And that's driven by the mix of the products and the price point. But when we think about profitability, we don't really think -- well, we don't have segment financial reporting for those 2 segments. We avoid that. But we don't think of there being a significant difference in profitability. And that's really demonstrated by the fact that we have discounts from our education customers. Again, while our revenue is tilted more towards commercial, 74% of our devices are still education. So -- and then within that mix, in the third quarter, we talked about the fact that while our overall ARR grew 37%, the commercial piece is growing the fastest, it grew 45%. And that's been pretty consistent. Education was very strong as well in the third quarter, stronger than normal. It grew 25% year-over-year, whereas a typical run rate is more like 18% to 20%. So strong, but commercial is going to remain our strongest growth driver in the mix.

Yes. Yes. So actually, for you, it doesn't matter. Like if either grows, like it doesn't really impact you over another...

Yes. There's no -- it's not diluting our bottom line if one grows faster than the other.

Yes, yes, yes. Okay. Yes. Okay, makes sense. And then talking a little bit about -- and we stay with you, Jill. Like if you think growth and you gave us some growth numbers and profitability and -- how do you -- like -- maybe like what's the status quo at the moment? And then how do you have to think going forward? Because like this year, actually, like, yes, what's the status going forward? I have a follow-up, but I don't want to bundle everything.

On the mix?

Yes.

Yes. So again, it won't change dramatically. It will change gradually over time because of the growth rate of the commercial, but because education is such a big piece of it. Now it's going to be a little distorted here for the next -- probably the next couple of years because of -- off of what our trend was because of these government-funded programs that are special and kind of heavy on the front end. So it'll be distorted just a bit off of what it's typically been, but it will tend to shift -- continue to gradually shift towards more commercial in our mix.

Okay. Good. And then let's talk a little bit about profitability, like for -- on the company level. Like what's the situation now this year in terms of margins that you're talking about? And if I think going forward, like how do you think that's kind of evolving?

Yes. Well, our margins are -- both our gross margins and our operating margins are benefiting year-to-date through the third quarter primarily -- well, strength on the top line, but we're overperforming in margins because we're not spending at the pace that we had planned to. A large part of that is travel, right? We stopped traveling. We put -- hit the pause button on a few projects that we've now turned back on. So our spend is ticking back up and -- as we exit the year. And then hiring. We paused our hiring for about 6 or 8 weeks right there in the April, May time frame. Turned that back on. We've added over 300 people to the organization since the 1st of the year. So that engine's back on, but again, kind of back-end loaded. So our margins are benefiting from that. But if we think about going forward, we'll go back to what our run rates were prior to COVID hitting, which is gradual improvement in our operating margin, maintaining the healthy gross margins. And then that really translates into really strong operating cash flow, right, and which we've had. We've always had strong cash flow. We've funded our operations just right off of our balance sheet. Now we have a supersized cash balance right now, coming out of the IPO. And we're working hard at identifying great ways to put that cash to use for us and for our shareholders and driving value. We'll really look towards not only investing in our organic growth, but inorganic, as you've seen us start to do over the last couple of years. And really, we just brought on a VP of Corp Dev who is going to help us really fine-tune that muscle. And we'll be able to kind of get started on that a little bit faster than we had in the past.

Yes. Okay. Perfect. And then last minute, I want to kind of bring it over to Dean. Dean, like talk a little bit about expansion. So we talked about commercial and education and doing -- managing devices here, but you have like a couple of initiatives around connect, protect, et cetera. So like how is that going to help you? Or like how important are they? And how are they going to help you?

Yes. So we mentioned on our Q3 call that the connect product that we launched in 2018, in the 6 months since the beginning of the pandemic through the end of Q3, we had brought on 700 new Jamf Connect customers. And in that same 6-month period, we brought on 200 new Jamf Protect customers, which was just launched really at the beginning of the year. So they're fantastic cross-sell opportunities. But if you think about what Apple Enterprise Management is, it's really managing the workflow and the ecosystems of everything Apple, from their cloud services to their devices and apps. It is the access and connection of individuals into the enterprise resources that they need using biometrics on the device, and it is endpoint protection. And in just those 3 areas, there's actually still a lot of solution expansion to go. For instance, we don't offer the endpoint protection beyond our management in the iOS space yet. That's a whole area of expansion we can get into. We did also close recently on a life cycle management, a little small acquisition in the fall that we will launch as a Jamf product as we get on into next year. So app life cycle management is an area of great interest to us as well.

Okay. Perfect. Well, guys, my time is up. So I could talk for quite a bit longer, actually. But thanks for this. This was really, really interesting. It sounds really exciting. And congratulations on your successful IPO, and good luck.

Thanks a lot, Raimo. Really appreciate it. Thanks, everybody.

Thank you.