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

Good morning, everybody. Thanks for being here bright and early. Last day of the conference. I appreciate you all sticking around. My name is Bhavan Suri. I'm the analyst at William Blair that covers Jamf. You can find the appropriate disclosures on our website at www.williamblair.com. It's a great pleasure today to have 2 friends of mine, Dean Hager and Jill Putman, CEO and CFO, over at Jamf. Dean, Jill, good to see you. I saw you a couple of weeks ago, so I like this regular interaction. But thank you for your support. Thank you for being here. Really appreciate it. We're going to keep this as a fireside chat. To the investors, if they want to jump in with questions, feel free to jump in on the chat room, and I'll curate them and read them out loud.

But Dean, I guess, just to start off at a high level, for those who are new to the story, maybe a quick introduction to Jamf, the markets you serve, and more importantly, the problem you solve for customers.

Sure. So Jamf is the creator and the standard for the software space called Apple Enterprise Management. It is that space that exists between what Apple builds and the enterprise requires. And we do not limit ourselves from an expansion perspective within that space. We're like, if it is a problem within the enterprise, we will help solve it. And our strategic approach is to go out. And obviously, there's a lot of Apple devices out there and a lot of Apple devices used in the enterprise. We go and try and solve the stickiest problems first, and we attempt to win every market segment we go into. So Jamf actually started years ago managing the Mac and securing the Mac within the enterprise environment, and we became the standard for that alone. 23 of the top 25 brands in the world use Jamf for that purpose today. We moved into Apple in education, once again became the leader. 7 of the top 10 school districts in the U.S. use us for that. But it's the strength in those markets that then help us expand, winning health care, winning iOS, iPad and iPhones within commercial use. So what we typically do is it's not just about management of the device, but the management of the workflow that, that device is going to be on, whether that is a shared device, whether it is a device that has a lot of custom apps on it. We think of the workflow of the device, and those are the problems that we try and solve as they're a little bit stickier for the enterprise.

Yes. I'll have you describe one example. Let's pick maybe IBM or SAP as an example. What sort of the benefit the customers received as they move to Jamf? Just a quick one, so customers get an understanding of why people do this.

Sure. I'll give you 2 different scenarios. IBM decided that they wanted to recruit the folks that are coming up out of college and prefer the Mac, and they know that the strong preference is going for the Mac. So they said, "Hey, we want to give people a choice of what kind of laptop they're going to use when they come here." And they started to provide Mac choice back in 2015. They use Jamf in order to do that because they knew that there were going to be a lot of employees choosing that. So they didn't have time for IT to prepare every one of those machines. So they use Jamf to simply send the employees at their home, a brand-new, still-in-the-shrink-box Mac. And the employee unwraps it and powers it on. And during first power on, it automatically sets itself up and secures it fit for use for IBM. IBM saves a ton of money, and they have super-happy employees as a result. They deployed 150,000 Macs in the first 3 years, just unthinkable using any other type of technology. SAP did the same on the Mac front. But then they also said, "Wait a second, we don't have any of the issues on the Mac that we're experiencing on our iOS devices. Jamf is always ready same day. They handle the trickier Apple workflows. So let's move all our iOS devices over to Jamf." SAP, of course, develops over 100 internal iOS apps. So they actually see us as an app life cycle management system for all of the apps that they build internally, putting those into the hands of employees all with a single log-on.

Yes. I think those examples is super helpful. Let's start a little bit on the market size and sort of tapping into the market. There's 2 interesting things that are happening, right? So you've got sort of the growth of Mac within enterprise. You've got obvious massive proliferation of iOS. And you've got multiple products. So maybe help us size the market opportunity for you guys because it's pretty unique, right? There's no one else at the scale where you do, and you do it for Apple themselves, at the store, at their offices, Facebook, et cetera. So maybe help us size of the market is and the penetration for that market would be really helpful.

Yes. So the headline on that is we say -- we've done a third-party study with Frost & Sullivan that says our market size is about $12 billion -- just over $12 billion of annual subscription opportunity within the market. And if I were to break that out, it's essentially saying that the market size on the iOS front is about $7 billion, and the market size on the Mac front is about $5 billion. Now you might go, oh, wait a second. Everybody knows that the iOS market is way bigger than the Mac market. However, we have a lot more product for the Mac. And as a result, our ASP, our potential price per Mac, is much higher than it is on iOS. And as a result, fewer devices, but the market share is growing of Mac. So that $5 billion that's available on Mac is growing sharply as Macs are being used in the enterprise like with IBM. The iOS market of $7 billion, we have lesser product for that but just as differentiating, just the ASP is a little bit lower until, and this gets to the strategic reason for the Wandera acquisition, we just way upped our ASP per device. And we actually added another $6 billion onto that iOS market with the Wandera solutions. So we have really 3 ways to expand our ARR. One is through Mac growth, which we already dominate; the other is bringing iOS devices over to the Jamf system; and the third is selling our follow-on solutions.

And while we're at it, Dean, why don't we talk a little bit Wandera. Maybe describe the acquisition and the security features it brings the endpoint management, which is driving the market. So just talk about the synergies about that acquisition and kind of why you did it.

So anybody that's listened to the Jamf story knows that we break all of our solutions up into managing the ecosystem, connecting users and protecting the data or protecting the devices. Well, amazingly, Wandera has a solution for each one of those areas, yet their solutions in no way overlap ours. They have a solution called data policy enforcement. That's Management. They have a solution called Threat Defense. That's in the Protect realm. And they have a solution called Private Access. That's in the Connect realm. Yet all 3 are things we don't do. And as a result, they're all an upsell for what we can go back to with our customers. Their specialty has been iOS devices. Our greatest differentiation has been on Mac. So by bringing Wandera in to strengthen us on the iOS side, we not only strengthen our market competitiveness on the iOS side, but like I said, we grew our TAM as well.

Yes. And I'll dig one more question in there -- or squeeze one more question in there, which is you mentioned about sort of the TAM expansion, but maybe just give us a more granular approach of for one iOS device, what does it do to the ASP?

More than doubles it, that if you take a look at what we do from a pricing perspective for iOS, our iOS prices for just management are about half what our prices are for Mac for just management. But then on Mac, of course, we also have Connect and Protect on top of it, so therefore, really building the ASP. What we will have just done on iOS has added 3 additional products on top of the product we have. So as a result, we have the potential of doubling our ASP there.

That's great. That's great. And maybe this one goes to both you and Jill. Talk a little bit about what happened through COVID. You've maintained really solid growth, but definitely puts and takes on it. Just a little bit about those dynamics and then what you're seeing for demand now that we're coming out of COVID. You bounce out some of the tailwinds and headwinds, that would be great just to walk through those.

Yes. I'll start with that, and then Dean can pile on. So if we net out the last 15 months, we actually think of COVID as being net-neutral to our business overall. In fact, in 2020, we hit our original plan for the year. We just got there -- it was a different mix of how we got there. Our education was stronger, longer into the year, actually all the way through the year and through this first quarter even, as the schools embraced technology as well as the government funding programs that were rolled out, right? Those -- and it was really -- we think of it as an awakening within education on the need for technology in the hands of students. So where that was -- how do we get kids learning from distance learning in place, shifting more now towards your thinking about it as just education technology, right? It's not going away, but it really accelerated that demand and that need. And then on the commercial side, where we might have seen a little bit of softness early on in COVID as there were budget restrictions and maybe some reduction in workforces, it was really offset by education. But we're really starting to see that come back, especially in the U.S. as we came out of the first quarter. And we think about that going forward as being more of a, again, not just how do we have empowered people to work from home during COVID, but really this -- building this capability that's going to remain around mobile -- the mobile workforce and providing -- we anticipate that more organizations are going to provide that flexibility to their employees going forward. So again, accelerated a lot of that, and we can see -- we see -- continue to see momentum building.

Yes. It's interesting. Let's unpack a little bit of that. On the education side, obviously, Japan, Europe some great initiatives. Those will last some time. But then if other countries don't pick up, that ends up being a headwind. So maybe is a 300, 400 basis points, how do you think about that? And then on the commercial side, if you think about it, there's more and more applications we're giving the end users. So some retail guy in the store is going to have a mobile device, right? The Nike guys already have a mobile device to check inventory. I think I want to imagine exactly how Apple employee in a retail store has a mobile device, too. That's a tailwind. I guess I'd love to understand how you and Dean talk about sort of 30%-ish-plus sustainable growth for a while as we think about these markets. Just build those puts and takes over 3 to 5 years how that looks because if the education slows down the commercial offset, so just help me build that bridge.

Yes. I'll chime in a little bit, Jill, you can give some color on it. So again, if we go back to, I'll call it, last June through this February, you saw this really heightened selling within education, perhaps a little bit muted on the commercial side. By the way, like on March 1, it started to normalize a little bit more. We started to see that, like Jill said, the commercial coming back in the U.S. pretty strong. It's almost exactly what Jill predicted on our -- was it March 4 earnings call. I mean just -- we are absolutely seeing that today. But the point that Jill made in education is that it is an important one. When she calls it an awakening that occurred across the world, it wasn't an awakening of the needs of distance learning. It was an awakening of realization of how inequitable technology has been for our students around the world. The governments are jumping in still with funding programs for a reason because the last year shone a light on the fact that if kids are on their own, they have no ability to use the same technology that the wealthy kids have. So I was asked not long ago, "Gosh, how many more funding programs are like this?" And I said, "We were keeping a list of these government funding programs like in Europe." And somebody asked me, "Well, can you give me the list of countries?" and my response was, "Yes. It looks a lot like the map of Europe," because it's most of the countries are establishing brand-new funds to be able to fund these technology initiatives. So it's no longer about COVID. It's about the education market realizing that something had to be done to create an equitable environment for their students. So we're still in the middle of that, and there's -- still see a lot of energy around it. And the great thing is that while we're still in the middle of that, we're seeing the commercial markets coming on strong now as well. As you move forward, we believe that those are going to take years for the government of funds to fully be spent within educators. The schools have not spent most of those funds yet. We think it's going to take years. And for commercial businesses, the whole argument of remote work versus coming into office, the one thing that is -- you can't argue with is there will be more mobile work in the future than there has been in the past. That's just a fact. And that's just going to create more opportunity for us.

Right. And I actually think the other piece is there will be more Apple in the future, too, which is just a trend that in.

I've said forever that the thing that's driving Apple in the enterprise is the consumerization of IT. What does more mobile work do? It consumerizes IT. What is the greatest movement of people into their homes that ever exist and work history done, it's going to accelerate the consumerization of IT. I think the last year, I saw more digitization of the enterprise than years prior.

Right. Right. But let's touch on the enterprise for a second. So education, I think everyone's pretty comfortable. But let's talk about penetration within the enterprise because while you have some very marquee names, the Apple adoption is interesting by itself, iOS is a separate thing, but Mac is different. But how do you view that? And how do you think the drivers play out over the next 3 to 5 years for adoption in the enterprise?

Yes. Well, there's 3 components that I talked about earlier. One is the Mac market share growth. And as long as that continues to happen, that's great for Jamf because we have such a strong position in that space. The movement of the iOS devices from legacy systems over to Jamf, that market is already huge, and then us selling add-on solutions. We have 50,000 customers, as I mentioned, 23 of the top 25 global brands. And we estimate that we are well under 10% penetrated in terms of the total potential within that customer base. We don't see our customer list as a sign of saturation but as a sign of opportunity. As we go back and sell additional product, grow the Macs and move the iOS devices, that's going to be great for our net revenue retention.

Yes. Let's touch on the products since you brought it up. If I think about the business, it's still, to a large extent, driven by the core Jamf Pro solution. But with Jamf Connect and Protect, they've been picking up nicely. Just an update on the traction with the adjacent solutions and sort of the ability for them to enhance the value proposition of the core product. So are we seeing people buy more of them together? And sort of how is the cross-sell and upsell playing out?

Jill, do you want to take that one?

Yes. I'll take that one. I can bundle kind of a couple of initiatives there together, not only with the launch of Connect and Protect but then also our launch of our business plan, which bundle those together. But if we think about it, we're very pleased with the attach rate of both -- actually all 3 of those offerings. Having said that, both Connect and Protect, they're still very, very early on there. They're still single-digit percentages of our business. In fact, Connect, we've got about somewhere between 2,500 and 3,000 customers who have purchased it out of our 50,000. So still a long ways to go there, getting really positive feedback on Protect. We're even earlier into the market with that, just launching it last fall. We've got over 700 customers. There's still a long way to go there. Then when we think about the value proposition to our -- the base -- customer who's got the core management product, this really does nothing but create even a stickier situation inside their environment, right, when we start to layer these in. And then with the offering of business plan and customers being able to bundle those together and really get some price economies and really removing some of the friction in the sales cycle, that's where we're really starting to get some traction there. And again, still very early there. Just started offering it to our existing customers in February, launched it to the -- to new customers back in the fall. And again, really getting some good traction there.

Great. That's awesome. Let's touch on competition. And the question I always get -- and it's funny, I was explaining this to my 11-year-old, too, is why doesn't Apple do this? Because they're in a school and they're getting control set around their devices. And that's a question I actually get from investors a lot, like why isn't Apple do this. Apple bought a company called Fleetsmith. We can discuss that if you want . I'm not overly concerned by that. That comes up less. But I'd like to talk about competition. Who else does is even some of the smaller sort of ankle bites, let's call that? But the broader question is, help us think through Apple's reticence to do this because of what you saw and they don't want to do it. But walk us through that thought process, and more importantly, Apple's thought process because you're very close to them, obviously.

Yes. And so I want to be clear that I don't speak for Apple. What I say about Apple is what my impression would be of what their strategy is. And my impression of their strategy that's fairly well informed is that Apple builds out frameworks for the enterprise on which other providers provide the solutions. And they're very committed to that strategy. And the primary framework that they have is called Apple Business Manager. And on Apple Business Manager, all of us out here build our solutions for the enterprise. And that model has been working. Apple, I think, would be the very first to say that they're not necessarily enterprise experts. They're great at building devices and frameworks, but they're not going to try and build out enterprise workflows. And frankly, if they do, they still hear voices of the past say, "The moment you focus on the organization, you stop focusing on the individual." And that is not Apple's deal. They have grown tremendously in the enterprise over the past 10 years by doing exactly this strategy: provide the framework and let the enterprise experts provide the enterprise solution. So I have no concerns whatsoever about Apple's strategy going forward. I think that it fuels Jamf's strategy. Even the Fleetsmith acquisition, we believe, was about making Apple Business Manager stronger, which is actually something we've been asking for.

Great. Great. Dean, you want to touch about any of the smaller competitors sort of who do you look at there...

Yes.

I will categorize kind of all of Jamf's actual competitors into one of 3 buckets. There is one bucket simply Microsoft and VMware. And then another bucket of the smaller startups who have seen what Jamf has been doing and are trying to replicate it. And they've been getting some nice funding since our IPO. You're welcome for that. All of the other providers in this space -- and I will tell you that I see no momentum for any of the other providers in the space right now. It appears -- we only really see them when we're in a replacement situation. So it really comes down to what is our strategy with VMware Microsoft. That's simple. Partner with the Microsoft, compete with VMware. And we actually work in partnership with Microsoft very effectively. As you've heard me say before, I categorize them as our second most important partner. We have so many integration points to create the apple experience in the Microsoft enterprise. And then the smaller providers, just out to innovate them and use our size and scale.

It is interesting, right? Because it's a big market. It's not a $1 billion market, a $2 billion market. It's in the tens of billions. And you sit there and say, this market should support multiple players, but you could also see this being a single-player-takes-all kind of market as you think about it. I don't know how you think about the company in 10 years or plus, and I'm sure you've got the strategic plan laid out, but that is an interesting kind of view as you think about separating yourself from the small players. Let's turn to product road map. You've obviously expanded security with Wandera, your other acquisition. Just what can you share about the internal development road maps today? And I guess what would be the most natural adjacencies post the integration obviously of the acquisitions that you would be focused on?

Right. So one of the things that we do with our acquisition strategy -- and I will say that prior to 2018, Jamf had never acquired a company. We've acquired several tuck-ins since. Wandera is our biggest move, and there's a reason for that because we identified 2 great strengths of Jamf: one is we have an incredibly large and loyal customer base; and two, we have a great, efficient and effective go-to-market channel. So we find solutions that bring customers greater value. We have proven now several times over that we are effective in moving those solutions to our customers. So what we typically do when we do, in addition to our internal innovations, when we acquire, we don't launch those solutions immediately. You saw us acquire a C&D reporter not long ago. Yesterday, we released the product called Compliance Reporter from Jamf. Because we bring it in, we Jamf-ize it, and we launch it to our sales team in the same way that we would launch internal developments to our sales team. So we're expanding in all 3 of those areas: management, connection and protection. But then in addition, we are creating -- like Apple does for the consumer, we're creating an experience across the Apple ecosystem that nobody else is touching, like, for instance, working on if you want 2-factor authentication to your Mac and to your cloud identity, look at your phone. It just creates -- it's the simplest using biometrics, 2-factor authentication, and you're off and running. It actually creates enterprise-grade security with consumer simplicity, and we're constantly innovating to make things even more simple for the user for our customers.

Got you. Got you. Let's touch on go-to-market, too. So you just brought up the sales force. You've got a really interesting approach to direct sales. So maybe talk us through that. And then, Jill, maybe talk us through what that investment in that continues to look like. You're growing nicely, but you've got 2 interesting motions: one is partners, one is obviously your own salespeople. We'll get to partners in a second. We have enough time to get to that one. But let's talk through that in investment and sales. What does that sales head count growth look like, maybe 12 months, 24 months, et cetera?

Yes. Sure. So when it comes to our investment in go-to-market, we have -- if you look -- we've consistently been investing in that area at the same rate that our top line revenue has been growing. And we'll continue to do that. When we think about -- Dean talked about the size of the TAM, and we have just over $300 million of that. We've got a long ways to go. So we're going to continue to invest both on our direct sales force, but also we invest in our channel relationships. In the U.S., we're about 60% direct, 40% channel. So we've got opportunity there. We played with Apple, CDW, SHI, for example. Outside of the U.S., though, we rely 80% of our business to go through the channel. That's a very fragmented channel, but that's really where we're gaining the most efficiency when we go to market. But when we do go into new markets, we look for those markets where we're going to have the best -- the synergy with Apple. Where is Apple being the most successful? And we'll enter that market arm in arm with them and rely not only on them, but again, that fragmented channel. And we'll continue to look for ways. In fact, bringing Wandera into the family opens up a whole another set of channel partners to the carriers, something we've been trying to tap into for a few years. And that was one of the things that gets us really excited about bringing them in. And then we'll be able to leverage our direct sales force on that. But really taking advantage of this carrier network and relationships that they've established is going to really extend our partnership capabilities.

When you think about efficiency, right, the channel approach seems more efficient than direct sales from a leverage perspective to the business. And when I think about that and I think about the large telcos that you now have access to, why not invest more in driving greater work with like more partner people, more education people, more support people, whatever it is, with the telcos to drive that penetration of growth? Because that's a huge channel potentially that maybe we flip it and it's 60% channel, 40% direct sales when you're $500 million, $600 million, $700 million. Help me think through how you think about that, the question -- I guess, the comments I'm making.

So I can chime in here a little bit. One of the things -- and Jill's right. With the carrier channel, if we can get people buying our seats at the time that they're buying the devices, that's what we want. That's why whether it be CDW, SHI, all of them, the strategy is the same. Just buy us at the same time that you're buying the device. With that said, let's take Apple for instance. Apple to the enterprise sells entirely through channels, yet they still have a lot of enterprise salespeople just like Jamf. Why? Because you actually want to not just wait for people to come buy more devices, but you want to influence the kind of business transformation that will result into buying more devices. For example, when we first entered health care, nobody was deploying iPads to patient bedsides. We were actually in there influencing a brand-new business process and the benefits of it that has resulted in thousands and thousands of new devices deployed into health care. Similar to taking the IBM story for the Mac choice program and all of the great business benefits that's been driving. We then go out and sell that value even if it's going to be driven through the channel. So call it, in large part, it's direct sales, but it's also influenced channel sales because we're out there selling business transformation.

Yes. Yes. The opportunity just seems with the telcos a really interesting way to leverage their ability to sell that point of purchase that maybe drives tremendous leverage for your business, essentially on the margin side.

You're absolutely right. The one that I mentioned about how the market forces for driving Wandera are the same as ours, but yet there's no overlap. We believe the same was true on the channel, that they've from the ground up entirely went through third-party channels, mostly telcos. And that is an area that we haven't been strong in. So it's truly a 1 plus 1 equal something more than 2.

Yes. No, no. That's very, very cool. Let's touch another partner of yours really quickly, what you said is your second most important partner, Microsoft. Tell us a little bit about the relationship and sort of explain the importance of Microsoft. I think some investors who may not understand the nuances of why that's pretty important.

Well, if you think about it, Microsoft is really not a client operating systems company anymore. If you look at their growth, if you look at the percentage of their revenue, it's just not the most influential thing within Microsoft. By far, their cloud presence, their identity, their productivity apps that are in the cloud, that is the growing and the most important part of Microsoft. So to influence Microsoft to care about the partnership with Jamf was really pretty simple. Going in there and saying, "We will create a better experience for users using your cloud environment. And as long as those users have a great experience, they are going to want to stick with the Microsoft Cloud." And frankly, who's Microsoft's real competitor in that space? It's going to be Google, right? So Microsoft wants to be a part of the modern workplace, and the modern workplace is not Windows only, and they know it. And we create that great environment within the Microsoft. And so we have -- the number of integrations is actually too many to me rattle off here. But all of our inventory could be mirrored over. All of our security telemetry can be mirrored over. Our intention is to not be the telemetry engine for IT because we know we're just Apple. So we have to fit into whatever the IT infrastructure is that a company has chosen. And if Microsoft is their enterprise IT, infrastructure and telemetry, we feed their systems, and they love that.

Yes. No, that's super helpful. I have got the notice we are at time. I'll squeeze one quick one in here, and it's just -- it's a really quick one around Jamf Nation. It's a great grassroot support organization. You get tremendous leverage from that. I guess how has Jamf Nation held up during this? But more importantly, does Jamf Nation provide a place for you as you think about acquisition opportunity or development opportunity and things like that? Or is it largely just support functionality that's almost outsourced in some way?

Yes. I'm going to say that there's 2 big benefits that we get out of it. One is the community around Jamf and the community around Apple is so tightknit. We're talking about over 100,000 members. And one of the things that you get out of that is a true community relationship with your customers, which is overwhelmingly powerful. But also, they help one another. It helps us grow. We added 3,000 customers in Q1 alone. We don't have to grow linearly with our customer set because with every customer comes a new member of Jamf Nation. They help each other. We get more efficient with every customer that we win. So that's one thing we get. The other thing we get is visibility into solutions that are developed within Jamf Nation. A couple of those have resulted in acquisitions. Not only do we see the solution, we see all the chatter about the solution. We have references before we ever make a call.

Yes. Yes. Super helpful. Guys, this is awesome. I know we are out of time. Again, I appreciate your support and your time. To all the investors on the call, thank you all for being here, and stay safe and enjoy the last day of the conference. Thanks.

Thanks. Thanks, Bhavan.

Thanks, Bhavan.

Bye, guys. Thank you.