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

All right. We'll kick it off. I'm DJ Hynes, I'm Canaccord's senior software analyst. This is the 42nd year we've done this conference. It's a credit to the clients that support it. It's a credit to the corporates that make this all possible. So I want to thank the Jamf team for being here. We really appreciate it. We have CEO, Dean Hager; CFO, Ian Goodkind. We're going to do this as a fireside chat. It's meant to be interactive. If there are questions, raise your hand, I'll integrate them into the conversation.

But maybe just to kick things off, Dean, I'm going to assume we have some folks maybe who don't know the Jamf story. So give like the 30-second overview and bridge that into kind of -- 30 seconds, maybe, wishful thinking, and then you can bridge it into Q2 and kind of what you're seeing.

DJ, you know me better than that. Thank you, first of all, and thanks for everybody that's come. I will do my best on the 30-second timer. But Jamf has been around for 20 years. We were founded in 2002. Our purpose in life is to simplify work. And for anybody that has technology that they use in their home and technology that they use at work, you know what I mean. Generally, work technology is just more complicated, disruptive and prevent you from being your absolute best. But we don't think that's the way it should be. And the technology that we have majored in to help solve that problem is Apple technology. So our mission is to help organizations succeed with Apple. The result of that over the years is we have really become the dominant provider of empowering people with Apple technology in the workplace and also at schools. 22 of the top 25 brands in the world use Jamf. We have grown now to over 67,000 customers running on 28.4 million devices. And for what it's worth, we went public 2 years ago, we've been around 20 years, 27,000 of those 67,000 customers have come since we've been public. Over 10 million of our 28.4 million devices has come since we've been public. And we offer a combination of device management and device and network security solutions. We believe that, that's 2 sides of the same coin because on one side, you need to detect whether there are security vulnerabilities. And on the other side, management is where you remediate or you maybe block individuals from having access to the network if you're detecting that there are risks. Packaging that together is a unique combination in the market, which is why we have grown our ARR in the last year by 40% to, we just reported last week, $466 million of ARR. I'd say, we're proud of our results. We've also, for what it's worth, public 9 quarters, we've had a good healthy beat, 9 consecutive quarters or so.

So macro is top of mind, right? Let's talk about the demand environment. So sales cycles, what are you seeing? And then maybe unique to Jamf, supply chain, is certainly going on. And then I think of like slower headcount growth at companies, right? I mean, that used to be just a nice tailwind for your business. Just how does it all fit together?

Yes. Overall, we don't believe that we're demand or market limited. When we look at our growth trajectory, even in today's environment, we're actually more execution limited than anything else. So like of all of the macroeconomic issues, you've got FX, you've got Russia, you've got potentially a slower growth environment, some of the supply issues. All of those together might add to a couple of percentage points of a difference. Our greatest challenge is just hiring as fast as we need to hire. We've added 300 people, a net add of about 300 people so far this year, and it's actually not fast enough. Hiring people in this very tough talent for war environment, onboarding them and getting them out to talk to customers is probably the bigger issue for us. And I think one of the reasons why we see a little bit of the Director of IT might give us a call and say, "Well, I just found out we're going into a hiring freeze. So maybe my seat count is going to be a little bit different than I thought." We see a little bit of that. But one, because of the value we deliver. And I mean, no Board in the world is saying spend less on security software. And the fact that as a price per customer, our cost per customer, we typically don't rake in the top 10 expenses. And so we're not on that list where some CIO is saying, "I got to cut my expenses." But yet you've got to secure the devices. So we haven't seen as much issue on that front. And then, of course, with all puts and takes, there is the positive side. And I'm not -- I don't talk about competitors often, but it's a pretty big deal of the Broadcom announcement of acquiring VMware.

Yes, we can hit on that as well. So you have 2 sides to the business. You kind of alluded to this with your intro comments, the commercial side, the education side. The unit economics are different. The growth rates are different. Just maybe help folks understand that.

Yes, I'll jump in. So just as Dean described our business, there's the commercial side, which this quarter, we reported 53% growth on that side. Then there's the education side, which is about 16% growth. When you think about those, I think about the education side will continue along around that mid-teens, maybe even upper teens growth trajectory, that will be fueled by things like government funding for education. It will be fueled by our new safe Internet product and people wanting to be more secure. And then the commercial side, think of that as at least 2x of that. And that will be continued to be fueled by security and having this robust platform where we both have 2 sides of the coin, i.e., the management and the security side.

Yes. The one thing I'll just add on to that with those growth rates of commercial versus education is that 71% of our ARR comes from the commercial side. So when the faster side of your business growth is also the largest side of your business, that's generally a pretty good thing.

Yes, it's a good mix shift. So you alluded to the results, I think 40% organic growth, 17% cash flow margins. You guys run a really balanced business kind of profitable growth. Given all we talked about macro, any changes in the investment philosophy, the go-to-market strategy? Like are you doing anything different? I know you say you can't hire fast enough, but I'm sure you're also looking at other areas of the business as well.

Yes. Why don't we ham and egg this a little bit? I'll talk about specifically on the go-to-market piece and then maybe factor over into the rest of our business. The -- because we're not demand limited, we are going after filling quota-bearing rep roles. And the supporting infrastructure under them, we call that a pod. It is when we have a certain number of quota-bearing reps that we're hiring, and then all of the supporting infrastructure that is needed to make that quota-bearing rep productive. We are hiring those jobs as fast as we possibly can right now. There's as much market opportunity that we believe that we can. But we do so responsibly. We really believe in bringing people on board, training them, acclimating them to our culture and making absolutely certain that they understand our solution set well enough that they're properly positioning it for our customer base. And you can grow headcount too fast and end up with a whole bunch of people that aren't necessarily Jamf, which we don't say we work at Jamf. We are Jamf, and that's the type of culture we try and create. You want to talk more about that?

Yes. I'll just add the economics side, right? So we do take a balanced approach between growth and margin, right? And we're always looking at that and wanting to make sure we're investing in the places that are going to return the highest growth and the fastest growth. The areas -- we've already grown $200 million. I mean, who knows what the future looks like, but we're going to continue to look at things like scaling even further than what we've already done. And so we balance that growth and scalability here in the future.

Yes. Let's talk about the relationship with Apple. I think that's an important part of the story to understand. I mean there's kind of 3 facets to it. I don't know if technology partner is the right way to describe it, but there's technology alignment, right? And then there's the go-to-market alignment, and then there's customer dynamics. So touch on that.

It's multifaceted. And frankly, with the company the size of Apple, it has to be multifaceted. The most important thing to Jamf is to serve our customers well. Well, so therefore, the most important element of our relationship with Apple is the fact that we are customers of each other. We're obviously an Apple shop, but Apple is also a Jamf shop. All of the devices throughout corporate and Apple retail, all of that is kept up to date and secure with Apple or with Jamf technology. So that is a thriving relationship that we have with them. Then, of course, we have the product relationship where we say we innovate at the pace of Apple. So as an example, I'll just use it as a prop, my iPhone that I am running all of our security software and all of our management software on it in order to have both a private and secure and productive environment. But I'm running the iOS 16 beta right now, which doesn't come out for, say, a month. That's the level of readiness that we always are at with our development with Apple, that there's never a moment that Jamf customers send out a note to their users saying, "Don't upgrade to the latest operating system." We're always ready, and that's our development relationship. And then our go-to-market relationship, slightly different by market, but where Apple sells directly like in U.S. education, we're on their price list. They resell us. As a matter of fact, I believe, the last numbers I looked at, they were our largest reseller. They also sell to small business through Apple retail, and they were on our price list there, they sold us there. In the enterprise is actually where we probably have the closest partnership, but Apple doesn't take that on their paper. They actually sell through the CDWs, SHIs of the world. But the first thing you do, whether you're a Jamf rep or you're an Apple rep, is you find your counterpart in your territory and they typically go to market together.

Yes. Yes. That's super helpful. One of the hot topics that interest ebbs and flows, depending on which way the wind is blowing, is around kind of Apple's interest in this space, right? And like, are they going to pursue an enterprise IT strategy? And what would that mean for Jamf? Just talk a little bit about that and how you see them positioned.

Apple views that their position in the enterprise is to build the framework on which solutions are built and to provide salespeople to work with the resellers to go out and position the devices. Building the enterprise solutions themselves, they just don't view that they have a role in that. They want to foster innovation that exists in the market in order to do that. And do they have some level of basic management capability at the very small end of the market? Yes. But they have to. Because if a small business were to ask an Apple salesperson, how would I remotely lock this device, if the answer to that is you've got to go buy third-party software, they're just never going to buy the devices. So there has to be a level of some basic capability at the low end. Beyond that, they don't see that they have a position for innovating enterprise solutions at all, and they really do want to foster the innovation that exists within the market. So you'll see, we have our annual conference coming up here in September, where we'll have thousands of attendees, and Apple will be right there presenting with us during the keynote because they know that getting their latest tech adopted goes through Jamf.

Yes, yes. So you alluded to some competitive displacements. I think it was the first time I've heard you like talk about it on the Q2 call. It's I think just typically not been an area where you're focused. But there's been some changing dynamics in the industry. And maybe this bridges into a conversation around competition. But just help everyone understand what has happened and what it means for your business.

Yes. So I said that we're in management and security. Now management software, you typically buy 1 solution to be the device management solution, right? But security software, you can put together a lot of different security packages around any 1 given device. So in the management space -- so therefore, all of our security competitors are also security partners, right? But in the management space, anybody else in management is a competitor because you're only going to run 1 solution. And we haven't had that many competitors historically. And on the high end, we do have a dynamic where Microsoft is kind of a competitor, but they're more a partner of ours. But VMware has been our #1 competitor. Now 5, 6 years ago, our #1 and #2 competitors were VMware and MobileIron. And when MobileIron was acquired in 2020, we just stopped competing with them. The only time we see MobileIron is when we're -- our customer is deciding to leave MobileIron and coming in. Now that may sound negative, but the truth of the matter is that the Apple space is not a set it and forget it space. You've got to -- like I said earlier, you've got to stay up with the annual refreshes of Apple, so you can't under-invest in that. And when companies get consolidated, that typically is what happens. The announcement of a consolidator, I think it's fair to call them that, Broadcom, to acquire VMware. And then 2 weeks later, Apple had their WWDC event where they announced a whole bunch of new features. Our phone was ringing off the hook almost immediately of are we going to support those features. And within 30 days of the announcement, we had 4 wins of greater than 3,000 seats that were competitive takeaways. I can't remember in the last 7 years, I mean, 4 wins of that size that were competitive takeaways from 1 provider. And so I know that there's a level of fear out there. And we're happy to serve that market. But I do believe ultimately that this move will create perhaps the largest replacement market that Jamf has experienced since we've been in business.

Yes, that's exciting. Let's talk about security. You have referenced it several times. Just how did you amass the security portfolio? Like what was the time line here? And what do you think is just driving -- and talk about like the problem you're solving, right, and the momentum.

So we were in the management business from 2002 to 2018. And in 2018, as there was this mass transition from running Microsoft Active Directory on-premise, to starting to embrace cloud identity providers like Azra and Okta, Google, Ping, we thought what we really wanted to do was deliver the idea behind what syncing with active directory on-premise did, but do that with cloud identity providers and really just make that -- almost make the device the identity and your biometrics the way to authenticate and you're good to go. So we introduced a product called Jamf Connect in 2018, and that was our first step into security. And it is -- that 1 product has probably had the fastest 4-year start of any product that we've ever had in our history. So then as 2019 came in, we saw where Apple was likely going with the new M1 chip. And we knew that was going to be very disruptive to threat-hunting security providers on device. And so we developed out Jamf Protect, and we launched it just months before Apple introduced the M1 chip. And sure enough, the M1 chip did disrupt the security providers, and they just weren't ready. They were telling their customers, "Don't upgrade to the latest Apple hardware." And we weren't. And we -- so therefore, we got a very fast start. And that then launched us into the on-device threat-hunting business. And both those products have been tremendously successful. So last year in 2021, we thought we really need to take a big leap in the area of security, not only for the Mac, but are on mobile security, network security as well. And we acquired a company called Wandera who offered mobile threat defense, private access and data policy security solutions for Mac and mobile, and they had written to an Apple-first environment, which was rare in security. And so we were very interested in it. We launched that. And the result is that our security business at the time we went public was like $7 million of ARR, and now it's over $80 million of ARR. So it's had a really nice growth trajectory just in the last 2 years.

Yes. Maybe you could talk about how you are packaging and taking it all to market, right? You've introduced some bundles, I guess, for lack of a better term.

Want to grab that, Ian?

Sure. Yes. So on the commercial side, we've introduced different bundles. We've taken some Wandera functionality and put it into Protect. And we've actually done some price increases there on both Protect and our business plan. We've seen great success there. So as a stat there, Jamf commercial pro customers, we've seen 33% of those have more than one product. And then on the Jamf Now side, which is going for the SMB side, we've actually seen customers go from Jamf Now and adopt Jamf Fundamentals, and that's about a 16% adoption rate at this point. So we've seen some really good uptake on our bundling. And then one other thing, sorry, on the education side, we just released Safe Internet, and the phones are ringing for that one. So we definitely feel good about that as well.

Yes. How do you think about pricing power in the space? Do you get to a point where the willingness to pay X per device like hits a ceiling at some point. I guess, maybe not on the security side, right? I mean, they're going to continue to invest in security, but just how do you think about using price as a lever.

One of the things that Ian and I will frequently say is you've just never heard a Board of Directors say, "I think you're spending too much on cybersecurity." It just doesn't happen. So from a pricing perspective, maybe the most important thing to know about Jamf is that we took on the market of device management and security sort of in the opposite way that MobileIron and VMware and others did. They went immediately to where there was the most devices. And the most devices were BYOD iPhones, right? And -- but the problem there is that the pricing pressure is enormous and if somebody will do it for a nickel cheaper, they'll take a nickel cheaper. We didn't go to the simple. We went to the complex. So we went to the Mac. We went to trying to get in-classroom processes with iPads for education. We didn't just go to education that require passwords, we took on clinical communications in patient bedside. In airlines, we took in cockpit iPads. We took really complex workflows that at the end of the day, our customers have never seen anywhere else before. The result is that we don't get the same price compression that others see because nobody is coming in and introducing being able to do that. Up until about 2 years ago, we saw a little bit of -- we saw some compression in the education market, but that kind of stopped about 2 years ago. It settled in where it's at. On the commercial side, I don't think we've -- certainly haven't dropped price since I've been here in 7 years, and we do occasionally raise prices. In fact, Ian just mentioned that we raised the price of Jamf Protect just here in July as a result of adding more value. We're not into gouging, but we add more value, we'll also raise prices.

Yes, it's a good answer. Let's talk about the education deal in Taiwan. I think that was another interesting data point to come out of the Q2 call. Just the tailwinds that are driving that forward and kind of the opportunities you see potential full scope there.

The education market, you hate to say that there's a COVID beneficiaries to anything. But our education market, there was an increased buying during COVID because there's a lot of learning from home. But that wasn't something that just occurred in a moment of time. Actually, we described that as an awakening of government and education. Because what happened is teacher sent students home to learn and then realized they didn't have anything to learn with. They had no technology even to be able to connect the classes. The wealthy kids did, but the poor kids did not. And then they realized, "Oh, that's always been the case." So therefore, when we've been sending people home to do their homework, there has been an inherent advantage to every child of means. So therefore, governments have kind of stepped up here of late and said, we want to try and provide equitable access to technology. Germany had the digital program a couple of years ago, we won most of that business. Japan had the GIGA project in late 2020, 2021, we won most of that business. And a couple of months ago in Q2, Taiwan sort of mimicked what Japan did. And the great thing about those government deals is Apple has learned rather than going out and having every school just choose all the piece parts, why not just bundle something together, go out and say, "WE'RE going to market together." So there wasn't the option for Taiwan schools to choose Apple without choosing Jamf. The result of that was an overwhelming choice for both of us. About 80% of the schools that were given the choice chose Apple and Jamf together and it ended up being a really nice win that we think will be the on-ramp to a lot more business in Taiwan in the future, plus any other government deal that is out there, Apple and Jamf had proven now their going to market together is really healthy.

Yes. So we talked about balanced growth, right? And I think investors really appreciate that you can grow as fast as you are and deliver the operating leverage and the cash flow that you do. I'm going to play devil's advocate. Could this business grow faster if you took margins down?

Go ahead.

And I think Dean said it before, we want to bring people on in a responsible way. We want to balance growth with margin. And you got to ramp people up. And if you bring on too many at one time, you're not going to get those efficiencies. But we've got to be mindful of the margin at the same time. But we are reinvesting in this go-to-market engine. So we do see a lot of demand and opportunity there.

Yes. I've been finishing with kind of an open-ended question with all the presentations that we've done, which is just like, so 1 or 2 things that you think investors still underappreciate about the Jamf story. What would they be?

Yes. So I'll tell you the grand long-term plan, which we actually don't talk about a lot. I know we're out of time, I'll try and make this quick. But if you think about what Microsoft did back in the '90s and 2000s, they didn't just come out with Windows for the workplace. They also came out with configuration manager, SCCM. They gave a method for Windows to be implemented within the enterprise. And they used that strength then to expand into being more of an enterprise provider. Because Windows itself was dominant within the workplace. We wholeheartedly believe that by the end of this decade, Apple is going to be the dominant endpoint within the workplace. Windows is falling in share, Windows, not Microsoft, is falling in share significantly. Apple is growing in share significantly. And so therefore, whoever does the dominant endpoint the best is in the pole position to do the enterprise. And so there's a reason why, one, we can do the most with Apple, but we also think we're going to help Apple win the space. When that happens, our ability to expand into other enterprise solutions is tremendous. And so this isn't a be Apple only forever type of environment. It's to go through the door of Apple that is changing the enterprise so that we can also change it in other ways as we go into the future.

Yes. Yes. That's a great way to conclude. Thank you, Dean, Ian. I appreciate it. It's going to be fun to keep tabs on progress as we execute against this big vision.

Absolutely. Thanks, DJ. Thanks, everybody.

Thanks, DJ. Thank you.