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

Thanks, everyone, for joining us. My name is Sterling Auty. I'm the software analyst here at JPMorgan. Very happy to have with us the team from Jamf for our next session. We have Dean Hager, who's CEO; Jill Putman, who is CFO. Hey guys, thanks for joining us.

Hey. Good afternoon.

Thanks for having us, Sterling.

All right. Maybe just to get started, kind of the common question I'm asking all of my companies during the conference is just remind us what did the pandemic actually do to your business, both the positives and the negatives.

Oh. So I'll tell you what, first of all, I just have to give kudos to the Jamf team themselves for not allowing our business to be disrupted. We made some decisions in our own IT environment 5 years ago that we never thought we were making for a pandemic but yet proved to be very useful. We are a serverless environment. So everything that Jamf uses internally is all cloud-based. We have not had landline phones for years. Obviously, an Apple partner, we deploy awesome Apple end points to all employees. And so when we sent everybody home on March 12 of last year and all of the call routing software that we have running in the cloud, we simply told everybody take your Mac and take your iPhone home, and there was 0 disruption in our business. When it comes to the market perspective, yes, we ended up the year for 2020 almost exactly where we expected that we would end up, except just how we got there was a little bit different. I think the commercial market slowed a little bit compared to the very rapid growth that it had been on, but then the education markets that were on a slower growth trajectory really sped up. The result was we ended the year where commercial still outgrew our education markets, but yet they were just a little bit closer than what they normally are. And I think as we transition into the post-COVID period that they'll start to separate back to their normal levels a little bit. But overall, believe it or not, we ended up just about where Jill budgeted us to end up, which is typically our history.

That's great. So maybe for investors that are new, as you mentioned, both business and education, just maybe give just the quick 1 minute on what is it that you do offer to those markets.

So thanks. Jamf is the standard for Apple Enterprise Management, which is a space we defined and now lead. We define it very simply as that space between what Apple creates and the enterprise requires. And it can be filled and needs to be filled with quite a few solutions, and we do not limit ourselves at all within that space. We have products that span the core management of the device, installing applications, configurations and policies into connecting the users to the enterprise resources that they need in a secure way and then protecting the end point from threats. And we were founded in 2002 and over the years, are very fortunate to have now grown to serving over 50,000 customers around the world. We added 3,000 customers to that list just in -- that's net. That's after churn and add, 3,000 adds in Q1 alone, and we run on over 21.8 million devices where we added, I believe, it was 1.4 million devices in Q1 alone as well. Our vertical focus on the Apple ecosystem has created a few advantages for Jamf and our customers and our shareholders. I'll just mention 3. First is we innovate at the pace of Apple. And so therefore, Apple never has to worry about, "I wonder if our latest tech is going to be supported with our customers." They just know that Jamf will be there, and our customers know that as well. Two is whether we can solve really complex problems for customers like things like clinical workflows and clinical communication workflows because we focus on embracing the Apple capabilities. And third is we have just a really powerful and efficient go-to-market engine with our direct and our channel sales but partially because we have so many large influential friends. Apple recommends us. Microsoft recommends us. Other large organizations recommend us because we enhance their presence in the enterprise, and we don't really compete with them. So strong solution, strong customer base, really powerful friends has resulted in a healthy growing business.

Let's hit that last part head on because that's obviously the question I get the most, which is why doesn't -- why hasn't Apple done this themselves.

Yes. Other than what does Jamf stand for, that's probably the #1 customer -- or question that we get. The simple answer is because Steve said that once you start focusing on an organization, you stop focusing on the individual, and that fear still looms amongst the engineering team within Apple. That culture is still there. So as a result, Apple focuses on providing great devices and a framework which others then could build the enterprise solution. And that framework is known as Apple Business Manager and in schools is known as Apple School Manager. And it empowers Jamf and anyone like a Jamf to actually build very robust solutions on top that is hard to actually achieve with non-Apple devices. So if you think about it from Apple's perspective, they've gotten the best of both worlds. Their engineering team completely focuses on the individual. They get companies like Jamf, mostly Jamf, building out the enterprise solution that they need. And then they recently, in recent years, have hired enterprise salespeople to go out and influence the enterprise buy without really having to provide the enterprise solution. So you said that we've grown in the enterprise because of the consumerization of IT. Another way of saying that is that Apple has actually grown in the enterprise because of their consumer focus, which is kind of weird, but that's what they did, right? They created a product that people love. And as a result, you want to use that at work.

It's kind of ironic, right? We've always thought at it the other way.

Yes. It is.

You get something at work, and like, geez, I wish I could use this in my personal life. So yes, I'm with it. But what about Microsoft? Microsoft with Intune, especially with E5 licensing, so investors are like, "Well, you're getting it for free. So why would I need Jamf in a Microsoft Intune world?"

Well, to create the Apple experience in a Microsoft enterprise, right? We -- when we first met with Microsoft back in 2017, we said, hey, we know we've got some overlapping solutions. But you know what we're great at? We're great at Apple simple. And we're also great at enterprise grade. When we talk enterprise grade, we'll talk with you. When we talk about Apple simple, we'll talk with Apple. But we can create both experiences. So within your world, what do you really want? You want Azure? You want Azure Active Directory. You want Office 365? You want that whole work. If you can get the Apple simple experience within that enterprise, is that a good trade-off? And for them, 100% of the time. And so let's face it. Who does Microsoft really compete with these days? It's not Apple or Jamf. It's VMware on the end user compute stage. And let them completely battle it out, and Microsoft actually uses their Jamf partnership to compete more effectively in that area. So -- and by the way, that's a common theme across all of our competitors. Most of them are also Jamf customers, and most of them have realized that if they go out to an enterprise, it's better to say, "Hey, we'll take care of your environment and we partner with Jamf," as opposed to, "We'll take care of your environment. Get rid of Jamf." It's way more effective for those to say that they partner with Jamf.

So you talked about kind of serving both business and education customers. What's the split of the business?

Jill, you want to take that?

Yes, I'll take that. So 40% -- well, 40% of our customers are commercial -- 60% of our ARR comes from commercial. And it's that commercial ARR that's actually growing faster when we think about the 2. Dean alluded to what was happening during this past year with COVID, where both of our -- both of those segments have had very strong growth rates. Historically, there's been a bigger gap with commercial growing faster. This past year, education is growing faster than typical. Still not as fast as commercial but between the 2 of them, they both have kind of great growth momentum.

How does the growth kind of correlate with Apple product cycles if at all?

So yes, there's 2 things to come to mind on that. One is I'm going to say Apple innovations drive, of course, Apple demand, and that is great for Jamf as it -- Jamf unlocks the ability to deploy Apple in mass within organizations. But more importantly, Apple innovations sometimes disrupt the market. Take a look at the M1 chip, for instance, that the M1 chip comes on, and it changes everybody's perspective of Apple and the competitiveness of the device. Not only does that create more demand for Apple, it also creates demand for organizations that support Apple same day. So there are security providers out there today who still don't support the M1 chip, and that is one of the things that's driven such high demand for the Jamf Protect product. But there is another way to think about the Apple demand. I get asked this question a lot. Is -- Apple has been putting up gargantuan growth numbers of late. So does the gargantuan growth for Apple equal gargantuan growth for Jamf? Now the easy thing for me to sit here to say is, oh, yes, when Apple grows big, so does Jamf. But the truth of the matter is it actually doesn't work that way. We have been working with analysts and potential investors for the last year saying don't equate Apple's quarterly growth numbers to our quarterly growth numbers for a couple of reasons. First of all, Jamf putting up $308 million of ARR. Yes, the market is $12 billion. That means that we've got about 3% of the total opportunity that's out there. Apple doesn't need to grow a lick and Jamf has got plenty of room to grow. Secondly, our growth doesn't necessarily grow with Apple device growth. Our growth grows with the enterprise's acceptance of Apple to be used at work. And that trajectory is much faster than the Apple device growth, even though lately the Apple device growth is significant as well. And then my final point on that is if Apple device growth in any way affects Jamf's growth, and of course, over time, high growth would eventually really nicely affect Jamf's business. But it's a leading indicator, not a same quarter thing. So the way our renewals work -- for instance, we have 50,000 customers. Those 50,000 customers have purchased Apple devices in the last year. We don't get that revenue the moment they purchase the device. We pick it up at the next renewal. So Q1, Apple had a huge growth quarter. Jamf hasn't necessarily seen those seats. We'll see them over the coming 12 months as we do the renewals. Just another -- Jill mentioned in the earnings call that we had one customer that had a really large Mac [ order ]. Well, those Macs weren't purchased in Q1. They were purchased since March of last year. So that's a little bit where we lag the Apple unit sales if there's any connection whatsoever. That's a good thing because Apple has been putting up some big growth numbers of late.

Exactly. So that points for good things to come. So when you talk about the Apple device adoption in the enterprise, we talked about consumerization of IT. But is there anything else that's really driving the momentum that those devices have in the enterprise at the moment?

Well, the other big thing coming is going to be the demographics change in the workforce. I've got 3 daughters. Two are college graduates, and one's in college. None of the 3 have used a Windows machine, I think, probably in their life. And so as you get this huge demographic change that is coming as well, they know 2 things. One, they know Apple; and two, is they actually think that they deserve choice in life. The combination of the 2 is resulting in workplaces saying, "Yes, we want to recruit the best. We've got to let them select Apple." And that is something that's got legs for many years to come.

How does 5G adoption, the fact that a lot of these M1 chip devices are 5G-enabled already, does that -- does that help drive penetration as well?

Well, yes, the notion that you can be connected anywhere, anytime very rapidly is going to drive adoption, but the other thing that is going to drive adoption of is Zero Trust network access because, after all, you don't have to be in the network in order to connect and you don't want to have to VPN every time you need to connect, but yet you need that enterprise-grade security. Zero Trust network access has become increasingly important. Enter our announced acquisition of Wandera.

And I think that's a good segue. So what does that provide for you?

So if you think about us historically, and Sterling, you've heard us talk about this a lot, and I introduced it at the beginning, we manage the devices. We protect the devices. We connect the users. Those are our 3 categories of solutions. But the truth is that we've only done all 3 on the Mac. On the iOS side, we've only done the managing of the devices. We haven't had an end point threat detection system, and we also have not had a cloud identity connect system for iOS devices either. We've thought about porting our Mac solutions over, but frankly, it's an entirely different solution on the iOS front. As we took a look at building it and we took a look at what was available in the market, we found in Wandera a couple of things: one, a company where 80% of the devices that they secure are iOS devices, so it's the exact gap we have but yet built with Apple first technology using native Apple capabilities, meaning it's built in the way that we would have built it. So therefore, what we just did is strengthened our whole iOS solution, which, let's face it, is the largest segment of the TAM. And in addition, since it's all additive, we added another 50% to our total TAM because of the ASP that you can get from the Wandera solution. So we strengthened our space. We added 2 solutions together that are entirely additive, and we grew our TAM, all through providing a greater solution for our customers.

What's been the customer response so far both on the Wandera existing customers and Jamf customers?

Well, I mean, I would love to say, oh, my word, I'm just getting fan letters like crazy. The truth is it's fairly early, so our chatting with customers have been somewhat limited. And frankly, we've had opportunity to chat with any Jamf customer that's running Wandera, and from every one of those, it has been a lot of happiness because they want to see their life gets easier with the integration of these solutions. But then the one innovation of these -- what that provides then is proof point for anybody that doesn't have both solutions of how good life can get when you're running both. So we've been really pleased. As a matter of fact, it would be a true statement that I have not received a single negative piece of feedback about the 2 companies coming together. And so you know in this chair, there's -- I hear some negative feedback occasionally, and I have not gotten it on this acquisition.

What's the road map on integration look like? I know it's still early, so you're hammering down the exact details, but just conceptually, what are you thinking about?

Jill, do you want to take just a moment and talk about the road map and expectations for closure? And then maybe I'll talk about the integration specifically?

Yes. So right now, we're going through the statutory requirements and reviews, and we've announced our plan, and we're on track to close early in the third quarter. Between now and then, there's lots of integration conversations that are happening, and we're going to be well positioned to execute on that. Not so much looking for cost synergies and head count synergies. That's not what this acquisition is about. So that -- take that off the table. We can get focused immediately right on the business integration part of it and really focusing our efforts on the cross-sell opportunity? Yes.

Yes. And there's really 2 integration points that are going to be the critical success factors, and that's going to be the product integration point specifically to make sure that additional value is created for the customer, and it's going to be the go-to-market synergy as well. The product synergy, I already mentioned. They're driven by the same forces that we're driven by, remote work, mobile workforce, security needs, yet connectivity all the time. But yet, there's no overlap. So it's truly 1 plus 1 equals something more than that. On the go-to-market side, surprisingly, similar Wandera has not built up a direct go-to-market engine. They go to market through resellers but yet not the same resellers that Jamf has gone to market through. One of the most significant path to market that Wandera has taken is through the carriers. Over 50% of all their sales come through carriers. Less than 1% of Jamf sales have come through carriers, and it hasn't been from the lack of trying. I would say, of our failures, unleashing that one channel has been one of them. We've never really been effective at doing that. We were late moving to them. And now we have an opportunity to go to an abundance of carrier resellers for Wandera and actually up the ante and provide a better whole solution.

Makes ton of sense. So we talked about the -- switching back over to education versus business. Let's talk about education for a bit. You talked about the faster growth there. I think it makes sense, especially in the K-12 market. But how do those trends kind of play out as you have to annualize that growth?

Jill, do you want to try a little bit on the guidance on commercial versus education?

So it's been an unusual year for us, right, this past year. Education typically is strongest kind of in the -- straddling in the second and third quarter. We actually saw strength because of government -- not only because of government funding, though, however, in the U.S. and outside of the U.S. but also there's awakening that we -- it's kind of how we're thinking about it. The educators have discovered that -- the importance of not just computer labs in the classroom but a device in the hands of every student. So when they go home, they've got that device and then equity across the students as well. So they all have the same -- similar high-quality device that they're working on. So we believe that momentum is going to continue. The adoption of that technology -- particularly in Europe right now, we're seeing a lot of funding just coming forward and being -- programs being put in place. There's still quite a bit of tail and momentum there. But the technology is not going to go away. They're not going to rip these devices out of the hands of the students and the students come back to the classroom. It's just not going to happen, right? So -- but there's still so much opportunity out there to get everybody caught up. There's lots of regions of the world that were so far behind and trying to get caught up. And again, we're seeing that across -- Japan was an example. They were bleeding edge. They were doing this even before COVID hit, right? And we've participated and partnered side by side with Apple as they've won a large portion of that market share and really starting to see some of that success in some of the other global regions as well.

Got it. So well, 2 things. One, Google's market share in education is a lot stronger than -- and I would say, for those of us that watch Apple dominate education, I think it's pretty surprising that they let them get to that point. What have you seen in terms of that share? And how does that impact your business?

I'd tell you what, I had the same observation on the historical Apple within education and how Google emerged. I can point to a time period between 2012 and 2014 of how that really happened. Apple fortunately ended up closing down that huge gap that they had that created that surge for Google, but yet the surge was already occurring. But there are a couple of things. They've been very successful within education Google has, but the focus has predominantly been on keeping things simple and inexpensive. And of course, that's a good thing, but Chromebooks haven't transformed how learning gets done. The real value with Google has been with the cloud capabilities that Google provides in the classroom. The other thing that is important to recognize with Google is we think about a level of dominance in education. It's really only K-12. It's not high ed. And it's really U.S. It's not outside of the U.S. That's -- Google has really carved out a space in K-12 U.S. education. And Jamf -- Apple is there as well, but that's the one spot where Google has a market share leadership position. Apple's strength is growing, especially as we see the needs for technology in brand-new ways growing. And I'll just give you the global awakening that Jill had mentioned has resulted not only in technology around the world but an Apple kind of clawing back share in my view because what organizations are and schools are seeing is that there's a real potential to transform the way learning is done with a form factor on the iPad specifically, where it's your book, it's your notebook and it's you're a computer. I mean the form factor for the iPad works great for education, and plus, the learning applications that are available on the App Store is the largest repository of learning applications in the world. And then finally, the advantage that Apple does have is, let's face it, privacy. That is not a strong point of Google's reputation. And so more and more schools, especially with an influx of funding, are saying, "Hey, we need the best learning environment that is equitable for students, and we don't want an environment where the wealthy kids are going to use great tech and the poor kids are going to use bad tech. So let's get some excellent learning tools in the hands of students, and that's where Jamf and Apple exceed -- excel together.

Makes sense. I had another question. It came in from an investor saying that it looks like New York City is really going to push to go away from remote learning in the fall. Others are likely to follow suit. How does that really impact your business for the year?

Yes. So we're not planning on -- Sterling, can you still see me?

Just a profile picture. It's a great profile pic.

Okay. Appreciate it. So on my way back here, and I apologize, my camera got wonky here. I just literally had a power outage in my home. So it was a perfect time to ask about remote learning and the longevity of remote learning. I will tell you that our plans are not that there's going to be really any full-time remote learning in the future. We've actually stopped even using that language, as we've described the business. We're simply using it -- talking about the surge of education technology. Remote learning was the catalyst that awoke the industry, but what is happening is education is realizing what COVID did is shown a light on the inequity that exists within the students that there were some students that did not have access to great learning tools and some students that did. Well, that's still true when they come back to the classroom, and the ability to be able to use those best tools is super important. That's why Jill describes it as an awakening, not a onetime event. The only thing that I will say, speaking to you here from Minnesota, is the day of the snow day might be gone forever because remote learning can replace the old snow days that so many of us enjoyed as kids.

Exactly. Now the kids in Florida go, "What's a snow day?" That's completely different. What about in terms of like the packages that an education customer is taking in terms of the mix of your products? Did that change through the pandemic and moving forward?

I mean it's still Jamf Pro and Jamf School. I think the -- just because of the extraordinarily rapid deployments that were needed during the pandemic, it created a surge of buying for our education-specific solution that is Jamf School. It was just a tremendous offer within that space. One of the things that we're excited about with the Wandera offer is that Wandera has not gone into education at all, but yet they have an appropriate use data policy engine that can actually turn it on and off a user's ability to access gambling sites, adult sites or those types of things. Well, companies will deploy that for their employees. But you want to know who really deploys that? Schools for their students, and Jamf has never had a solution in this space, yet there is regulation that tells schools, specifically the Children's Internet Protection Act, CIPA, that you have to deploy a solution like this. It was one of the driving forces amongst the many for adopting and completing the Wandera acquisition. And coming the year after the greatest expansion of technology in history within education, it's going to be a really good follow-on solution.

Switching over to business. You announced some new price options in the business segment. How has that uptake gone? And how is that impacting the business?

Jill, do you want to take that?

Yes. I'll take that one, Dean. So again, just as a reminder, launched it just in the fall of 2020 to new customers coming onboard, saw some great response there, got great feedback, took that then and opened up that offering to our existing customers in February. So as they come up for renewal now and we're engaging with them, we'll start to see and hope to see an uptick on them bringing that into their environment. The impact it's going to have on us, though, over time, though, is an increase in ARR per device. And not only because we've bundled it and the way the pricing works, we're not at this point offering tiered pricing, and even in spite of or as it moves to the channel, the channel discounting, we're still seeing an uptick in ARR per device. Now the beauty of the Wandera acquisition, of course, is we have 0 overlap with their product portfolio and ours. So we see opportunity, I'll call it, TBD on exactly what that's going to look like, but opportunity to bundle more things and revisit kind of what that bundling option looks like for our customers.

All right. Excellent. And any sense of what -- do you expect that penetration to go to 100% of your customers? Or does it become an option?

Yes, I'm going to say the penetration, I'm not sure I understood that question, Sterling.

So in terms of the price introduction, does everybody roll on to it regardless or do they -- can they grandfather and stay?

Well, I'll tell you what, you mentioned the E5 program with Microsoft earlier. Of course, not everybody is going to roll on to it, but we have really similar strategy of as we continue to add products to the portfolio, we can turn an E3, which was connect, protect, pro into an E5 or 6, which could be a connect, protect, pro, threat, defense, private access. And so we will grow them that way and always giving our strong go-to-market engine yet another ability to go back and offer differentiated value to our customers.

How about on the international front? What do you see as your opportunities there over the coming years as some of those economies come out of the pandemic?

Well, international has been one of our -- has -- in the most recent quarters, our fastest-growing portion of the business. We've talked a lot on the calls in the last couple of quarters on the strength of education, specifically in Japan and in Europe. Those are going to -- those continue. But when we think about how we go to market in new geographies, we really follow Apple and go hand in hand. Japan is a great example of one of our most successful recent markets that we entered. We went in together, and we've stayed together. Latin America, we recently went into Mexico City with Apple. And in both cases, arm and arm as we go in but really following where they've got a strength and a strong position, and then we follow them in. We'll follow them in, and once we establish a presence, we're establishing entities and putting sales reps in the country.

Great. And how does that -- how do we think about that level of investment impacting margins?

So our margins are going to remain consistent. Outside of the U.S., we're primarily a channel model. So we're making less investment in head count, but we leverage our channel. About 80% of our business goes through the channel. I'll also highlight the fact that with the Wandera acquisition, they've got strength in Europe in an area that we didn't. I think we talked about this already, about their carrier, their relationships that they have with their carriers and that being another go-to-market opportunity that opens up for us that we won't necessarily have to go out and start from scratch and have that heavy investment. We'll just go step in and take advantage of that.

Makes sense. And then, Dean, last question, as you think about product road map adjacencies, areas to expand, not that I'm expecting you give us exactly what you do, but where are the big conceptual high-level opportunities for you to take the product portfolio on both the business and the education side?

Well, I mean, I've mentioned to you on education where our next big move will be in the area of student protection because you can actually expand as the on-filtering into a greater student protection system. On the commercial side, it's going to be absorbing all the products that we have, integrating them together, but more and more what you're going to see from us as well is going to be the same type of approach that Apple uses to have things work consistently across the ecosystem with Apple. We want things to just work across the ecosystem within the enterprise, too. That might involve things like super easy 2-factor authentication, like looking at my phone and having my Mac pop up alive and yet having it be an enterprise-grade solution. You'll be seeing more and more of that type of stuff because, after all, Apple and Jamf, it's just supposed to work. And I'm actually grinning ear to ear because you've seen that my camera has switched a couple of times in this because of my power outage, yet I was never down. I was able to just keep on going because it just switched from my MacBook back up to my display. It's just supposed to work. In this particular case, it did.

I love it. I love it. All right. With that, Dean, Jill, thank you so much for joining us. We really appreciate it.

Appreciate it, Sterling.

Thanks.

Thanks a lot. Thanks, everybody.