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

Good afternoon, and welcome back. My name is Doug Bruehl, and I'm an associate on the software research team. Joining me, we have CEO, Dean Hager; CFO, Jill Putman; and President and COO, John Strosahl of Jamf. So we'll do about 20 minutes of Q&A up here and then save the final 15 for any questions from the audience. So you can either submit questions electronically, if you're listening to the webcast or just a if you're here. So starting off for those not as familiar with the Jamf story, can you give a brief overview of both the platform and the business?

Sure. First of all, thanks for having us, Doug. Thanks for doing this. And thanks to all you three-dimensional people for being here. I appreciate it. It's good to see you. Next month, Jamf will celebrate our 20th birthday. Since 2002, we've been helping our organizations succeed with Apple. Organizations large and small from just about every industry, commercial, education, health care, we've grown to, in our most recent quarter, $436.5 million of ARR, which represents 42% growth year-over-year. We serve 62,000 customers running Jamf on over 27 million devices. We started 20 years ago essentially as a Mac imaging company, helping organizations deploy Mac, and that has grown into helping organizations with any number of use cases that you can imagine. But because we've been with the Mac as long as we have, we really established a dominant position in the space with Mac, 22 of the top 25 brands in the world use Jamf to deploy their Mac to employees. And we also, as you would guess that some of the industries that Apple is very strong in: education, health care, similar types of market strength. Seven of the top 10 U.S. school districts use Jamf to help teachers educate their students and 13 of the top 20 hospitals in the United States, including 8 of the top 10 children's hospitals in the United States, use us to help optimize clinical communications workflows, patient bedside workflows. So we have been in the Apple management space that entire time. And in the recent years, we've also established a footprint with security solutions. So we now offer Apple management with Apple security. And so as a result, are able to detect potential threats within a business or an organization and with our management automatically apply policies that can mitigate those threats all as we seek our quest to simplify the workplace with consumer simple technology that is also enterprise secure.

Great. Great. Thanks for that. So you've had this relationship with Apple for over 20 years. How has that evolved over time? And where is it headed?

Yes. So our relationship with Apple is multidimensional. Obviously, we're a big Apple customer, all using Mac and iPhones and iPads, but Apple is also a customer of ours as well, and has been since 2010. And Apple is also a reseller of Jamf. Everywhere that Apple sells direct within organization, so for instance, their education sales channel in the U.S., resells Jamf, their retail channels, resell Jamf for a small business. In addition to that, even more they don't resell Jamf, we partner as we provide enterprises solutions, typically then together going through resellers. We collaborate when it comes to development, although all of our products are built using open available-to-the-public APIs. We rely on nothing private from Apple. We've always taken the approach that a close partnership with Apple benefits our business, but our business isn't dependent on it, and that goes from both a go-to-market perspective and also a product development perspective. Together, we have the -- a similar goal and that is to make the enterprise to make organizations arm them with consumer simple technology.

Great. And then diving into the growth profile, how much of the business is exposed to commercial versus education? And then can you characterize the revenue growth and pricing profile between the 2?

Yes. Thanks, Doug. I'll take that one. So while our foundation was in the education sector, and we continue to remain strong there, today, our fastest-growing sector is the commercial market, the commercial customers, which now represents over 70% of our total ARR. And then when we think about what those growth profiles have looked like, if you look over the last 6 or 8 quarters, we had some anomalies due to the pandemic and COVID spending, where our education market grew a little bit faster than it had prior to the pandemic and commercial was a little bit softer. But as we've kind of lapped Q1 of last year, we're starting to see those normalize back to pre-pandemic levels. And we'll continue to see our commercial outperform or outgrow our education by a few multiples. And so part of that comes from the pricing dynamic as well as adding devices and the adoption of Apple Enterprise. But when it comes to pricing specific, we get about 5x the amount per commercial device as we do for education device partly because of different price sensitivities. We do have 2 different price books, but we also have these add-on products that we've brought to market that we're starting to layer on top of the devices, particularly in commercial, we're seeing a lot of strength there.

And then as a follow-up to that, how much are you targeting enterprise versus SMBs?

I can take that one. We really don't see them as mutually exclusive. We have a very different buy cycle from the small to medium-sized businesses to the enterprise. And as such, we've segmented our sales team so that we don't lose out on one while we're focusing on another. And our product line really from Jamf now, down from the single user to buy it on e-commerce, all the way up to, as Dean mentioned, 22 of the top 25 brands use us. So we have a very broad horizontal appeal as far as our customer base, and we've organized our go-to-market team to really focus and optimize on that.

Okay. And then how does your growth profile correlate with Apple product cycles or shipments?

Sure. A lot of people make the mistake of taking a look at any given quarter of Apple's success and thinking that there might be a correlation with Jamf's success. I urge people to just whether Apple has a good or a bad quarter, I say the same thing, kind of break that connection because the market, our total addressable, market is over $18 billion. And as I mentioned earlier, we have $436 million of ARR. That leaves a lot of market out there available to us. And that's because there are already a lot of enterprise deployable Apple devices after all. The iPhone is the most popular phone used within business. The iPad is the most popular tablet used in business. And the Mac is the fastest-growing computer being used in business right now. Throughout the pandemic, the Mac had a tremendous resurgence although it has been growing for the last 10 years. It's our belief that Apple, across those different types of devices, is going to continue to grow over the next decade, taking more and more share from the traditional sort of legacy Windows platforms. And that popularity, over time, will grow our TAM, but the popularity in any given quarter has no direct relation to what our quarter might turn out to be.

Okay. And so what is the mix between Mac and iOS devices? And is growth tied to one more than the other?

Yes. So about 70% of our devices are iOS right now and 30% are Mac, but it's quite different in education. Education's, the majority is iOS and in commercial, the majority are Mac devices. But having said that, within commercial, iOS is the fastest-growing portion of that and there's a few things happening there. We lead with Mac, and Mac tends to be our land product within the enterprise. And then once the company has established that and seen the simplification that brings to those workflows then they tend to adopt and bring their iOS devices on. And there's a few things that we have going for us that are going to continue to drive that, one of those being we just recently launched a new BYOD offering for -- that will help bring growth -- fuel the growth for the iOS in commercial as well.

Great. And then we saw ARR growth per device accelerate from about 10% last year to 13% in the latest quarter. Can you unpack what's happening there to drive this growth? And is mid-teens growth durable going forward?

So there are a few different things impacting that. One in particular, as we acquired Wandera in July of last year, and the price point on that was quite a bit higher than our base pricing. So that brought a little bit of uplift. But on top of that, it continues to be the layering of add-on products to the device helps skew our average price per device higher. And then the other thing we have is I talked about the fact that the commercial device garners about 5x the education device. And as we see that sector growing faster, there's a mix shift occurring. So the larger component of our added devices are going to come from commercial that has a higher price point.

Okay. And let's go a bit deeper into the Wandera acquisition. What is the cross-sell or upsell opportunity on that?

John, you want to take that?

Yes. Well, we have -- as we've mentioned, we had about -- we disclosed about a $75 million in security business. And the majority of that was from our historical or pre-Wandera security products. And so we've grown that over tenfold just in the last couple of years. We're really trying to organize the go-to-market team to specialize and support that security growth because we see a ton of opportunity. In addition to our current market, we see a ton of opportunity there. We had, as we mentioned on the call, our top 20 deals, over half of them had at least one or more security products along with it. So we're really seeing, especially in the enterprise add-on products being with security, and we're landing certainly some new logos with security products as well, where we might not otherwise been able to play because they already had some sort of either unmanaged or another MDM in place.

Okay. Great. And then part 2 of that question would be, are there any further bundling opportunities there?

Absolutely. We've really been able to go into some of these even small organizations when -- given the credibility that we have in device management, being able to expand that out into including either security products along with that or with some of the recent new bundling opportunities that we've announced. We've got some good traction with that as well.

Great. And then what percentage of the customer base is purchasing Jamf Pro or Now or School, with the Jamf data policy and Wandera? And then do you have long-term targets for this?

All of them is our long-term target. No, we have -- as I mentioned, about half of our largest deals have come with the security, at least 1 security product. And given the fact that we can that we do have a security. So we've taken the historical Wandera sales team at the acquisition and fashioned them into a security sales overlay team that's helped our territory reps quite a bit. And that's really where a lot of the expertise we've noticed that there can be in some larger organizations, especially a bit of a different buying motion and sometimes different economic buyers. So having that expertise help has certainly given us some traction there.

Yes, and just to chime in. One of the reasons why we take all of our security products together, and we disclosed that, that has grown from $5 million to $75 million in the last 2 years in ARR is because we do have bundling plans between those security products. So we won't break out what our ARR is for each and every one because it actually makes sense to provide a greater depth and defense solution for our customers by bundling them together.

Okay. So you've been building up your partner channel. Are you seeing significant changes in the way that your partners are going to market with Jamf?

In the channel, you said?

In the channel, yes.

No, not significantly different. I mean we have about half our business comes from their channel partners, a little more than that outside the U.S., less of that inside the U.S. And we've had a very concerted effort to leverage the channel because we see really that's where a lot of scale is going from. And we had a question earlier today, someone asked, do you have any white spaces in your channel. And I don't believe we have any white spaces there. We can extend our current channel relationships that we have, and there are some that we don't have yet, especially those that focus on the security piece. Sometimes, in our third-party channel today, there are different organizations within them that have a security-focused team that we're now extending our partnership into that. I don't see any gaping holes there, but certainly, we have a lot more depth to go in our current channel and then add some of those that are more channel industry-specific.

Okay. And then we're seeing a lot of supply chain headwinds with a number of our other names. Are they impacting you in any way?

There's such a broad Apple installed base out there already. So as Dean mentioned, where Apple shipments may go up or down, it really doesn't impact our growth because we have such a big installed base to go into. And so we're not seeing that, especially on the commercial side. Sometimes on education, when there's a very large order, they may say, well, we're going to start this license when we -- when the devices come, but then we're usually talking about weeks' worth of delay, but nothing more than that.

Yes. The 42% ARR growth is in that environment with supply chain issues. I can't wait for the day where there's not supply chain issues. We look forward to that.

Great. And then you recently rolled out Jamf Fundamentals in March. What sort of reception are you getting from customers on this?

Yes. So Jamf Fundamentals is actually a first of its kind IT solution that bundles device management and application management with endpoint security. So, therefore, a small IT shop that -- maybe they don't even have an IT shop, they just have somebody that needs to secure their Apple devices. With a single solution, they can bring them under management, get them deployed, make sure that the accounts and passwords are synced with whoever their cloud identity provider is and have malware, anti-malware running on that device as well, all with just a single click. So usually, when you deploy that kind of a sophisticated solution, you need a relatively sophisticated IT team. Jamf Fundamentals is intended for the small business who really doesn't have that skill base and doesn't have any time to do the training. And the uptake on that, that we've seen has been terrific. There's been a lot of interest in it. I would remind everybody that it's one of those, whenever you have a small business solution, while you might scoop up a lot of customers very rapidly, the device count typically is not going to be all that great. So from a financial perspective, obviously, the higher end of the market has a more meaningful impact on our financials, but it's super important for us from a brand value perspective and also from an onboarding and growth perspective to be able to provide the right solution for the high end of the market and also the right solution for the low end of the market.

Okay. And then related to that, what security services are you seeing gaining the greatest traction with your customers?

Yes. I mean, the security solutions that we offer, just, in summary, we provide on-device threat hunting security with Apple devices. We also provide security solutions that integrate with whoever the identity provider is, so you can actually do the authentication in the way that it should be, which is biometrics on the device. And once you have that identity, you get to have access into, not only the device itself, but within whatever cloud resources are available to you. We also provide network security solutions both outgoing communications for those that are approved, meaning we have a next-gen cloud VPN that keeps all communications with enterprise apps secure. And then on the flip side, we have threat hunting in the network as well, where we'll do anti-phishing, anti-malicious downloads. So that combination of doing network security and on-device security is commonly referred to as a depth of security or defense in depth. So no solution is perfect. So if it gets past 1 layer of defense, you have another layer of defense to help them.

Okay. So turning to competition. We've discussed Apple at length to this point. But can you touch on your competitive landscape as well as your moat?

Yes. So there's really 2 types of competitors that we face out there. I'll call the -- on one side is the very large-scale companies that are either intending to provide solutions for all platforms, or they're very, very Windows-specific, one of those two. But they're going to be the very large. Microsoft, for instance. However, Microsoft is actually more of a partner than they are a competitor. VMware would fit into that category as well. On the other end of the spectrum are small, well-funded start-ups that are well funded because the market saw the success that Jamf was having and decided to invest in the same space. And frankly, we agree with their strategies because their strategies are to do what Jamf is doing. We think we have a pretty good strategy. And it -- those companies are Mosyle and Kandji are 2 good examples. But they tend to be in those 2 categories. And so we compete differently in both spaces. In both cases, we provide what we believe to be the best solution for the Apple environment with the ability to scale at any level. The way we compete against the large-scale providers is through Apple specialty. Most commonly, when Apple comes out with new technology, we are always ready same day. When Apple innovated around the M1 chip, that was actually an accelerator for our business. Why? Because it broke most security companies out there, whereas our security solution was designed to be ready same day. And at the small end of the market, those that do specialize on Apple, we separate with a depth and a breadth in our overall solution. But today, our focus on Apple is no longer the most unique thing about us. The most unique thing about us is that we bring management and security together in one solution. And after all, I think if you can count, on one hand, the number of companies that do that in the world. And the reason it's so important is because you want to be able to identify risk and mitigate risk all automatically so you can create a great experience for the user, technology that they love, but then also technology that the organization trusts.

Makes sense. So before we jump into audience Q&A, is there anything you want to point out to current or potential investors that we haven't covered to this point?

I guess I would just go back to our performance. We have been public 8 quarters now. We have beat [ raise ] every single quarter. When we filed our S-1 in Q1 of -- after our Q1 results of 2020, we had $224 million of ARR at the time and growing, I think, at those like 36%. And all the questions that we got were, "Geez, can you maintain this level of growth?" And 2 years later, we've added over $200 million of ARR and a growing at 42%. So it's gone fairly well for us. And everything that we've modeled or predicted or stated that, that was going to happen along the way, has indeed come true. So thanks to the work that John and Jill do, our visibility into our business is the best that I've ever been a part of, which is one of the reasons why we're able to confidently state what we intend to do in the future and then back it up.

Okay. Great. So the floor is open to questions. And speaking of iPads, John, can I get the iPad sitting on your left?

I thought he was literally asking for your - that's bold, dude.

I'm keeping it. No. But yes, the floor is open for anyone. Yes?

I appreciate the time here. Dean, I wanted to come back to the comment that you made, and I've heard you make it before about look, there's not some tight correlation between Jamf versus how many devices Apple sells in the quarter and that sort of thing, which sort of suggests that basically there must be a very large installed base of devices that are not managed by Jamf yet, but they're already out there that people are using. And so I would love to just hear a little bit more elaboration on do you have a sense of how many -- ballpark estimate of how many of those devices exist? And what -- if people aren't using Jamf for them today, is it because they're using one of the cross-platform management tools or what's their approach today that you're hoping to convince them that you have a better solution for them?

Yes, great question. And I'll tell you, as time goes on, and our solutions grow broader, it becomes an increasingly difficult question to answer because it really depends on device type and it also depends on the solution set. So when it comes to Mac device management in the commercial space, where we -- where 22 of the top 25 brands use us, generally speaking, if it is not Jamf-managed, we consider it to be under-managed. We consider it a greenfield, whether it has another management solution on it or not because, generally speaking, it's not going to have the level of capability that Jamf is able to offer. And there are still a number -- we still get a number of customers come to us and say, we think we have 300 rogue Macs out there, but now the Chief Marketing Officer, the Chief Financial Officer, got one -- I know it wouldn't be the Chief Financial Officer, but no, I'm kidding -- got one so, therefore, we think we have to get it under control, and that's when they'll bring management into the environment. So In that case, the -- it's Jamf-managed or under-managed, if you will. On the security front, for Macs, they're all going to be running something. However, we'll refer to that as kind of check-the-box security because we are aware of several security solutions that run on the Mac that are literally using a Windows feed for anti-malware, which means it's never going to find anything, but yet you can check the box saying you have security software on it. So fortunately, when we sell our security solutions for the Mac, we're able to just say, you know what? Go ahead and install Jamf right next to whatever else you have, and it can run in parallel because we're very noninvasive on the Mac. And usually within hours that organization will find exploits that they didn't know that they had before. Now iOS is a very different story. We are under-penetrated overall from a market perspective because we are very niche market-focused. Every market that we focus on, we intend to go in and win and then be able to move on from there. And we went out to win in the commercial space, Mac first. In the education space, iOS first because there was an in-classroom dynamic going about that we thought we could help with. So in any case, there is a lot of space for us yet to penetrate on the iOS side. And our method of going to market there is, first of all, we're already installed because of the Mac, right? And what will end up happening within those customers is they will discover over time the Jamf keeps pace with Apple innovations, and we always support whatever is coming out and they will run into some issues on the iOS side trying to do the same. And then one day, we'll either point out or they'll ask is managing and securing that iOS device more like Mac or more like Android? And as time goes on, more and more Apple support is all consolidated between Mac and iOS and actually further differentiating away from Android. There isn't a lot of commonality that iOS has with Android anymore other than how the device physically looks. So customer will eventually move their iOS devices over to the Jamf system as well.

Great. Anyone else? All right. I guess we'll talk about your revenue growth and margin targets for this year. What assumptions are you baking into those, particularly related to inflation and labor costs?

Yes. I'll take that one. So we recently updated our guidance for the full year, and we set our revenue guidance at 29% to 30% is our range as a growth rate year-over-year. That's actually the strongest full year guidance -- or stronger full year guidance than we gave a year ago. So just demonstrating the confidence we have in the model. But Dean and I and John, we've always taken this very balanced approach to how we are managing the business with really focusing both on top line revenue growth as well as profit -- operating profit. And our operating profit guidance for the year is about 5%. But we're going to -- we're continuing to invest in the organization and our go-to-market, geographic expansion, innovating in our products and then investing in our people. And specific to that, in our guidance, we have -- there's a lot of talk and chatter out there around market conditions when it comes to the workforce and hiring. And that's already been layered in. We went through that cycle in March with our market and merit adjustments. So that's already fully baked into the guidance that we've given. But again, the other thing we enjoy is, not only that top line revenue growth, but if you look at our trailing 12 months, unlevered free cash flow, we will expect to post something for the year that's at or better than 18% that we reported a year ago or for last year.

Okay. So speaking of labor costs, we're seeing a lot of friction in the hiring market, particularly for developers and sales within the SaaS software universe. How are you dealing with that issue? And how are you differentiating yourself from other competitors that both current employees or potential employees could move to as well?

I'll take -- I'll start.

You start, I'll chime in.

Well, one thing we consider ourselves a big destination employer. We've been awarded quite a few accolades in the last couple of years, most recently, Fortune Top 100 Places to Work, we were ranked #62. And then on top of that, it's really advocating for the great culture that we've created, and we've worked hard to maintain as we've gone through the IPO and become a larger company of scale and a public company. We've doubled our headcount in the last 2 years during this pandemic, and we've done a great job, we think, of preserving that culture and that continues to be something that attracts talent. Having said that, there are definitely pressures out there when it comes to wages. And so we're just -- we're very aware of that, and we're putting a lot of effort into making sure we know what's going on in our market spaces. And then specifically to sales and development headcount hiring, John, I don't know if you have anything specific to add to that?

Well, on the sales side, well, as you mentioned, we are a destination employer. And a lot of that does come down from the culture. And if you look at our retention rates, especially in the sales area, one of the highest, in my cohort, and anybody that I've spoken with, we certainly do very, very well there. We have had to look at some compensations most recently, but we haven't been completely out around with that. And certainly, we're seeing maybe even the backside of some of that hiring pressure that we saw 3, 4, 5 months ago.

I would just add that year-to-date, we've added net new over 200 employees to our head count. And from a year ago, we've added net new organic over 500. So we consider ourselves being pretty fortunate as far as being able to attract what we need.

And to just quantify it, John -- both John and Jill talked about our retention. When we finish 2021, we announced that our voluntary retention over the prior year was 91%, which, if you talk to -- I've yet to speak to a CEO that had retention or really any executive of any company that had retention of 91% last year. It was a year of a lot of departures. And one of the things that we do to be a destination employer just how we've handled remote work. I get asked all the time, what are we doing about the office environment? And we very early on in the pandemic, we're very clear with the employees that from going forward, our offices are a service to our employees, not an expectation of them. We simply ask that they work wherever they feel most productive. And to our managers, we very clearly communicate that they cannot mandate as a regular work -- a meeting is one thing, but a regular work location, they can't mandate a regular work location, including in an office. However, if they want to draw people into the office more often, just make it absolutely irresistible, which is just a terrific goal for managers to have.

Great. And I think we have time for one more. Can you elaborate on the international opportunity? And does this require a shift in your go-to-market strategy?

Yes, I can take that one. For one, we all know that there's a greater IT spend outside the U.S. than inside the U.S. And if you just look at Apple's financial reports, you'll see that reflects that as well. The installed base is larger outside the U.S. We've spent a considerable amount of resources in our investment in our international growth. And despite very fast U.S. growth, we've had faster growth outside the U.S. than inside the U.S., and that's by design. If you -- recently, we announced the GIGA project last year with the government of Japan for their education needs. And we wouldn't have had that had we not put a Kabushiki Kaisha in place and then had very deep relationships with major partners there, including Apple. And we're doing the same thing across Continental Europe and then Latin America as well.

Great. And then any closing comments from any of the 3 you?

Sure. I'll chime in on something. What gets me really excited when I look at the coming 10 years, if you take the trends over the last 10 years, Microsoft is our second most important partner. Obviously, Apple is our most important partner. So I mean nothing disparaging, what I'm about to say. But Windows has been on the decline within the enterprise substantially for the last 10 years. Mac and mobile have been on the rise in the enterprise substantially within the last 10 years. The growth we've seen over the last 10 years was the hard growth. That was beginning started growth. That was the changing the perception of what a Mac is from being a creative machine to being a business machine. Going forward, it's all going to be about preference. And right now, when you take a look at who's entering the workforce over the coming 10 years, right now, it's the iPod babies. It's the ones that were born after the resurgence of Apple and never knew of the dominance of Windows within the workplace, while the final 10 years of the Baby Boomers start to retire. That is a huge demographic shift within the workplace. Combine that with what has brought Apple into the workplace has been the IT consumerization. Well, what do we think the greatest movement to remote work and home-work that has ever been done in the history of business over the last couple of years is going to do to IT consumerization? It's going to accelerate it. And then you combine that with the incredible innovation, specifically the M1 chip coming out of Apple, and you combine all 3 of those things and the fact that Microsoft is phenomenal in the server space, in the productivity app space, in the Azure and cloud identity space, which is really their growth and scaling business right now, I think you're going to see greater change in the coming 10 years of Mac and mobile in business than we've even seen in the last 10 years. And if that happens, Jamf is in an outstanding position to take advantage of it.

Great. Thank you. So John, Jill, Dean, really appreciate you being here today. I certainly learned a lot more, and we look forward to hearing more about your success.

Appreciate it. Thank you very much.

Thank you.

Thank you.