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

Welcome to our next session. I'm really happy to have the team from Jamf on.

Dean, like let's maybe start with the elephant in the room question. So the biggest beta I have or the biggest question marks I got from investors is like, oh, how do I have to think about now Apple? And you're a great partner with Apple, but they obviously, at the announcement there recently -- like first of all, was it a surprise for you? And how should we think about it?

Thanks for having us, Raimo. Really appreciate it. Thanks for everybody who's watching as well. So was it a surprise? I would say, mostly no. But in truth, it was yes and no. So let me cover the no part first. Most importantly, the device management content that we're really talking about. That wasn't a surprise at all. In June 2020, when Apple acquired Fleetsmith, we stated that Apple would do exactly as they did, build an extension to Apple Business Manager for simple first-party MDM capability for small businesses, which is really where Fleetsmith was focused and where Apple has provided, and people forget about this, Apple has provided first-party MDM since 2011. So we've always coexisted with it. And Apple has to do it. They simply can't tell a small business that they need to buy third-party software in order to remotely lock a device if they lose it. So their intent is not to be competitive with Jamf or any other provider, as I've stated a few times, but we were helped yesterday when Jeremy Butcher, who is the very person who launched Apple Business Essentials, was quoted in Apple Insider as saying this is an exact thought. This is not about going after the market in a way that's trying to be competitive. In fact, the headline said, Apple Chief says Apple Business Essentials doesn't compete with Jamf. Couldn't be more specific than that. For the last couple of weeks, I've had some people saying, "Well, it's great to hear it from you, Dean. It would be great to hear it from Apple," and now everybody has. And honestly, though, I was just surprised by 2 little things. One, the timing a little bit. I actually expected it earlier. And then when it didn't happen earlier, I thought that they would announce when the GA is next spring. Remember, it's only beta. But for whatever reason, Apple decided that they really wanted to get it out there when it is in beta form. But we were super-appreciative that they did it the day before our earnings call, so we could address it right away and we weren't in the quiet period, which really would have been problematic, like we would have been sitting there. And then, they also bundled it with AppleCare and iCloud, which I consider to be a big plus.

And like maybe for the audience that is not so deep in your space, like what's the core problem they needed to solve with this? Because it does feel like they were just closing a problem that was always there and it wasn't very well addressed?

You're absolutely right. Apple was addressing a problem that only they could address, which is why they did. When you set up a management system with Apple Business Manager, Apple has to trust you, so you have to download a certificate, sign a certificate, upload a certificate. For IT organization, it's no big deal. It takes only 5 to 10 minutes. But for very small businesses, they don't know what a certificate is. So therefore, it was really only Apple as a first party. They trust themselves. They don't have to force the whole download and upload certificates. So this was an issue that existed only at the very small end of the market. And Apple has finally, after many years of bringing it to their attention, addressed it. And we were thankful that they have. We think it will raise the overall focus of Apple within business, and that's going to rise the tide for everybody. So we're very pleased about it.

Yes. And I apologize to stay longer on here, and I think we're through with the subject. But like in case something comes up in the future, I think people need to understand certain things a little bit better to kind of avoid a big panic we just had a couple of weeks ago. Just compared also a little bit to when Microsoft goes into a market. Part of the problem back then was like, everyone was like, oh, look at Microsoft, their EMS, and they came in and they rolled up the market from below. ARPU is different, I think, but like maybe you can speak to that?

Yes. So first of all, let me just say, both Apple and Microsoft are great partners of ours. And if anybody is out there listening, I have nothing but love for both of the originations. But I will frequently get a question about, well, "Hey, you know what, Microsoft did this, why won't Apple do that?" Oh my goodness, if you know Apple, the fact that Microsoft did something is reason for Apple not to do it. They are just very, very different organizations. Apple's DNA is the consumer and the individual. And there's a general belief that once you start focusing on organizations, you stop focusing on the individual. And Microsoft's DNA is the organization. So one is, as far as Apple's future plans go, it's not in their DNA. They haven't had an enterprise solution in 45 years. The other thing that you should know is Jamf is a significant moneymaker for Apple. Wherever we get installed, more devices are deployed and more apps are deployed, for which Apple gets margin against those apps. And as a matter of fact, we issued a press release just today that said that we're celebrating deploying 1 million M1 Macs, which is more than anybody in the world, just in the last year it has been available. And if you noticed, in that press release, Vice President at Apple, Susan Prescott, is quoted with a statement of support for Jamf. If you're familiar with Apple, you know that just doesn't happen. Unless there is a valued partnership in both directions, you would never see something like that. And then as long as I'm at it, Apple not only doesn't want to compete with Jamf, trust me, they don't want to compete with VMware or Microsoft either. And by trying to come up with solutions that would compete with Jamf, they'd be going right into the belly of the beast of enterprise providers who would be trying to force Apple out. They want no part of that in my point of view.

Yes. Okay. Perfect. Okay. So let's leave this now. I think we kind of addressed it really well. And I hope people realize this was all a storm in a tea cup, I think as they say it in England.

I'd say one more thing about it.

Yes. Of course.

I've got something I forgot. The one piece of it that everybody is not noticing is this work iCloud storage. This is so exciting for Jamf because if combined with the new user enrollment that's been made available this fall from Apple, it actually removes the #1 competitive disadvantage that we had selling against large MDM, which is this thing called containerization. With this new capability from Apple, containerization is essentially dead, and we can actually provide the same type of capability using native Apple functionality, and we'll be alone in doing that. So when we say we're enthusiastic about this set of announcements, it's because we've had to compete against this thing for years and now we have the solution to compete against it.

Yes, yes. Okay. Okay. That's interesting. I haven't picked up on that. Yes, thanks for mentioning that. Then, I want to get Jill involved as well. Like as we're moving now beyond the whole Apple discussion. Like if I look at the underlying business and your performance in underlying business, you're doing really, really well. Just to get everyone up to speed, like maybe just talk a little bit about like what you're seeing in the underlying performance?

Yes. Well, what we're seeing is as we've come out of the pandemic, which we've moved past our toughest comps, the year is really playing out exactly as we predicted at the beginning of the year, which is that the commercial would start to come back in the second half of the year. And we saw that as we talked to you, right, at the beginning of the second quarter, and as we closed out the third quarter, and we're seeing that momentum continue. Commercial is our largest, by far, fastest-growing segment of our business compared to education. While education has retracted a bit from where it was this past year, not all the way back to pre-pandemic growth rates, we still see a lot of opportunity there as well. In fact, outside of the U.S., there's still a lot of countries that have devices to deploy. And then on top of that, whereas last year was spent focusing on getting devices into the hands of students, now the school is going to be focused on securing those devices and then also student safety. And so we have solutions to help satisfy both of those. So we still see a lot of opportunity going forward in education, and then really seeing the strength of commercial coming back as the M1 is becoming a big part of that adoption within the enterprise.

Yes, yes. Okay. And then one question for Dean that is more -- it goes near and dear to my heart a little bit. So now that I'm trying to come back more in the office, I'm kind of almost expecting a next wave of technology refresh, because in the pandemic, we had to give laptops out to people so they can work remotely, et cetera. And so we had that wave. But now I am sitting here on a nice Mac and I'm then coming to the office and I have a screen from 2007, literally, and working with something like that. Do you think that there will be, like on the enterprise side, like another -- it's almost like, you gave me a new device, and then I'm coming back to the office and I'm sitting on something that is ancient. Do you see that? Or is it just my firm?

No, I do not see that happening. In fact, there was an old saying that the former CIO of IBM, I saw him say and I loved it, is there is no reason that we are the Jetsons at home and the Flintstones at work. So now that everybody has been in their home using this great awesome Apple technology for a couple of years, the notion of coming back into the office and using something worse, that's just not going to fly. That would be trying to put the genie back in the bottle and it's not going to happen. In my view, Apple in the workplace and Jamf in the workplace is driven by the consumerization of IT and sending everybody home to work for 1.5 years is going to do nothing but accelerate the consumerization of IT. Whether the people come back into the office or not, the one thing we all agree on is we're going to be dealing with more remote work than ever in history going forward, and that's just going to be great for Apple and Jamf.

And are you seeing early signs of that already in terms of like...?

Oh, yes. I mean if you take a look at -- we've always said, do not take a look at any given quarter of Apple results to try and equate what Jamf results might be. However, you can't look over years of Apple results and go, hey, the trends are going in the right direction. That's going to bode well for Jamf. And according to IDC, from the 4 quarters of 2020, and the first 3 quarters of 2021, Mac is the fastest-growing laptop in the world, outpacing all others. So that trend, I think, is directly tied to what happened with the pandemic. And now we've got 3 big drivers. You have got the consumerization of IT, which has been accelerated. You've got the younger demographic of workers coming into the workforce and many have only used Apple combined with, frankly, the hottest laptop, I should say, the coolest laptop, because there's no heat coming off of it, coolest laptop in existence, which is the M1. All of those things are going to drive substantial Apple adoption in the workplace.

Yes, yes, yes. Okay. Perfect. Okay. Sounds good. And Jill started talking a little bit about it, like you have the commercial segment and the education segment. And the pandemic was a little bit of a counter list to kind of start looking deeper in the educational part. And look, I'm German, I saw like how kind of the whole country had to wake up to, oh, we need to kind of -- we are way behind on technology. I think Japan is going through that. How do you see that education segment play out for you. I suspect you can't kind of catch up so quickly. So it almost feels like it might have a chance for elevated growth for a little bit longer than just like a couple of quarters.

Well, as Jill said, pretty much what is happening is almost precisely what I believe Jill said in our March earnings call, which was, the first half of the year, we'd see a little bit of accelerated education growth and a little bit decelerated commercial growth, and then it would flip in the second half of the year. It's exactly what has happened and that flip is actually healthier for our business because 70% of our ARR comes from the commercial side. So when your largest part of your business is your fastest-growing part of your business, that's generally a pretty good thing. And that is what the normal state of Jamf typically has been. We just saw a little bit of an anomaly during COVID. But as is the case with diverse businesses, diversity has been our friend. If any section of the business has been down, the other section has been up. So we've delivered remarkably consistent results. And going forward, we just think that education is going to continue to deliver solid results because a lot of the world hasn't deployed devices yet, and there's a lot of sell-back product to the existing organizations that have already deployed devices, but then the growth engine is going to continue to be commercial. Larger market, larger need.

Yes, yes, yes. Okay. Perfect. And then talk a little bit -- so one is obviously, it's more devices in commercial and more education, et cetera. But there's also then the upsell cross-sell of Jamf Connect, Jamf Protect, et cetera. Can you just speak a little bit about the momentum there?

Yes. So historically, the last couple of years since 2018, and then 2019, we've had these products, Jamf Connect and Jamf Protect that our sell-backs into the organization. Jamf Connect now has, at the end of Q3, over 3,500 customers. Jamf Protect, in just over a year, has over 1,500 customers. So we're really pleased with the uptick of those, and our customers have embraced them fully. But with over 57,000 customers, we have a long way to go yet. And then in the spring, on July 1, actually, we closed the acquisition of Wandera. And Wandera has now what we've rebranded Jamf Threat Defense, Jamf Private Access and Jamf Data Policy. And then, of course, we also launched Jamf Compliance Reporter. We have got more upsell products than at any time in our history by a long shot. So when you have that amount of sell-back products, you have the natural device growth and you have a sales and marketing organization that can bring in 3,000 net new logos basically every quarter. Gosh, that's a great combination of activity in order to keep the growth engine going.

Yes, yes. And then how is that the -- Jill, from your perspective, like in terms of dollar net retention, et cetera, do you see that kind of starting to come through in terms of numbers?

Yes. I mean to date, historically, our net retention has been primarily device -- the addition of devices within our installed base. But over the last, call it, 3 or 4 quarters, we've seen 1% or 2% uptick. So we're starting to see a little bit of that is offsetting a little bit of softness we saw during COVID, but the addition of the add-on products is really starting to come through and we consider it to be probably about 2 percentage points at this point.

Oh, well. Yes. Okay. That's really interesting. And then, Dean, what's been the customer feedback? Or like the 1 question I get a lot from investors is, that now you're doing security protection, but people often have like security protection framework. So why do you need the #1? Or how does this kind of play out? And can you really do side by side? Like what's the feedback that you're getting?

Well, I'll tell you what -- I mean, it's a great question. And in 2018, we wondered the same thing. And that was when our customers had told us, "Hey, Jamf, we really need you to enter into endpoint protection because, frankly, there was not good native Apple endpoint protection solution. So we worked hard, we acquired some tech, and then we built out Jamf Protect. And we launched it, of course, just before the M1. And sometimes it's better to be lucky than good in that the M1 just completely disrupted the security space and so many security providers were not ready. Jamf was able to take advantage of that. We sold very, very rapidly. And in doing so, we realized, when it comes to Apple, it's so specialized that our customers will look to us for their security solutions, even if it means running something different for Apple than running elsewhere. We, of course, partner with the Microsofts of the world and everybody else in the space to make sure that we feed our security telemetry into their systems, so that they can continue to be the base for the CECLs and the head of IT. That way, we see all of the security providers as more of a partner than a competitor. But it also gave us permission to go and acquire an Apple First security provider like Wandera to be able to then provide even further solutions. And just we had a Jamf Connect that was about authentication. Wandera brought in a private access that is about encryption and VPN. They are natural solutions that go together. Our Jamf Protect that protects on the devices and their threat defense that protects in their network, natural byproduct together as well. But the reason why customers notice that they need something more Apple specific, I'll just start with the Mac. Any security provider you can think of, first place to go is go look at the Mac App Store. If they don't have an app in the Mac App Store, then they don't support the Mac natively. If they offer it as a third party, see whether they're using Rosetta translation in order to support the M1 or whether they're supporting it natively. Most of them are still using Apple's Rosetta translation, which means that it's running slower on the Mac, hogging resources and impacting the user. So yes, you can say, check mark, I have security software for Apple, but look a level deeper and you'll understand why people are selecting Jamf.

Yes, yes. Okay. Correct. Okay. Makes sense. And then I want to shift gear a little bit. Like so post the IPO, you got a lot more visibility. Now people talk about Jamf and I was like a real successful part of the IPO. What usually happens is that if someone is successful in the market, you have like ankle biters or other guys saying, "Well, hang on, I can do this, or actually, I've been doing this all the time." What are you seeing in terms of competitive field out at the moment?

Yes. So you're right, Raimo, that after our IPO, there were a couple of lower-end companies that got multiple nice rounds of funding to essentially mimic the Jamf strategy. And while I'm still waiting for the thank you card from those organizations on their funding, because clearly it was driven by some of Jamf's succuss that we had with our IPO, to be perfectly honest, and this is going to sound strange, I'm happy about their existence. And the reason why I am is, it validates the market. We've been saying for some time that Apple Specialty, just like I did in the last question, Apple Specialty is needed. By other providers coming along and being able to get the funding, what we are finding is that we're actually going into competitive situations. And instead of competing against VMware, we're competing against these smaller Apple-specific providers. And I'll tell you, when that happens, we already won, because the argument we've been trying to win is that Apple Specialty is needed. So when we're going in and competing with them, we feel like we won the first part of the argument. The next thing we have to do is just stay on our toes and innovate faster than these young upstarts. And that's great for our customers. If new arrivals in the market are forcing us to innovate faster, that's only good for our customers, and they love the solutions that they get as a result. So I actually think it's healthy for the market. But it has changed the competitive dynamic a little bit.

Yes, yes. Okay. That's really interesting. And then the -- and I maybe should have started with that positive effect, like how did the IPO help you in terms of like customer acceptance, like knowledge of who you are and what you are?

Well, we're definitely better known. I said long before we IPO-ed. As a matter of fact, I was with another company's IPO, I just realized, 20 years ago today, and that experience showed me that IPO-ing can be the greatest marketing money you can buy, because you just have a lot more eyeballs on you. Your brand value becomes much more popular. And so we get some bluebird calls. We get some calls that just are simply, "Hey, we hear you're the leader. We need something for our Apple devices. Rather than making a long selection process, I'm just going to select you." And we've seen our sales cycle in some areas shrink specifically because of that. Of course, it's only great marketing dollars as long as you deliver results. Unfortunately, Jamf, in the 6 quarters we've been public, our organic ARR growth has been 36%, 37%, 37%, 37%, 38%, 37% growth, with the free cash flow getting us to a rule of 60 in the last quarter. As long as we continue to deliver consistent results, yes, being public is a really good thing. I know what Jill would probably say is, well, it makes it easier for us to share how healthy of a company we are. Some of our customers want to see that. That was a little bit more problematic when we were private.

Yes. Yes. So let's call for you, Jill, then, I guess, for kind of talking through the numbers and convincing people. Yes.

Yes.

Okay. One of the last questions I wanted to ask was around the supply chain management situation, like that's something that everyone is talking about. How is that impacting you? Like do you see it in the upper ecosystem? Is it impacting you? Or is that something that doesn't really matter?

So I'll take the hardware supply question, and I'll kick it over to Jill to talk more about ours. Our supply is a little bit different than, say, Apple's supply. And so when it comes to Apple's supply, we will hear anecdotally once in a while that a large school or a customer is trying to get their Apple devices, but I generally think Apple has done a better job with their suppliers than some of their competitors. In fact, I've also seen situations where customers have said, "Hey, I'm buying Apple because that's what I can get right now. So I've see some positives on that as well. But there have been some anecdotal situations. I would simply say that if we're performing this well in a supply-constrained environment, my goodness, I can't wait until there is no supply constraints. And that's really regarding Apple. Jill, do you want to chat a little bit about our supply?

Yes. Well, when we think about our TAM, we've sized our TAM prior to the Wandera acquisition at $12 million and with Wandera at $18 million. So we're at $384 million of ARR. We're very early on into our opportunity. And we've proven out a very predictable formula of investment in our go-to-market. And we've proven, as Dean said, over the last several quarters, a very consistent ARR growth rate. That's the result of this consistent level of investment that we've been making into our go-to-market as well as all the other infrastructure to support that. And we intend to continue to invest at that rate. Dean and I have a philosophy of investing responsibly, trying to balance the top line. We feel like if we're resetting quotas any more often than a couple of times a year, it's going to be too disruptive for the sales force. So we've kind of got this engine that's proven out to be very effective and predictable in the productivity we can get out of it.

Yes, yes. So it's a combination, and you keep like the rule of, what, do you have 63? It's a combination of both, basically, yes.

I mean those both are pretty healthy numbers on their own, which is why we get to the rule of 60 organically together.

Yes, exactly. Yes. Okay. Perfect. From my perspective, this was a really great session. It's nice to hopefully settle down that whole Apple thing and look at the underlying business and the strength of the underlying business, and it's great to see the progress you guys are making there. So thanks for joining us here.

We appreciate Raimo, and we're excited to talk about the results because we think that's the real news and consistent news. And we're super excited that we don't feel market constrained at all. It's really down to our ability to execute with the competitive products we have, hiring, training, and onboarding people to go capture all of the opportunity that's out there. So it was a pleasure to speak with you and everybody out there watching. Thank you.

Thank you. Okay. Yes. Good to have you.