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

Owens with Piper Sandler. I'm pleased to welcome you to our Growth Frontier's Tech and Consumer Conference here in Nashville, year 1. So thank you all for attending. Our first presenting company this morning is Jamf. And with me from the company is Dean Hager, the CEO; and Ian Goodkind the CFO. Thank you for coming to Nashville. Let's kick it off by talking about the Apple relationship and what that means, first of all. What that means from a technology standpoint, what that means to the customer I'd like to dive in a little bit more in and around now.

[indiscernible] Apple is not more difficult to work with. We've been doing it for 20 years. Now I didn't say they're not difficult to work with but they're not more difficult to work with. And I mean that affectionately for Apple, Apple is Apple and partnering with Apple is an art. And one of the reasons that it's actually sometimes a challenge to partner with Apple is because they're so focused on the individual. And we are focused on the organization. Sometimes we'll say that as Apple is focused on the person and Jamf is focused on the people. That is actually the only reason really why sometimes it's a challenge because we'll bring in the needs to the organization and we have to innovate on top of Apple's innovation. But in no way is Apple more difficult to partner with today than they were in almost every way. They're easier to partner with today than they were say, 10, 15 years ago. And Jamf for now 2 decades has come out with same-day support. It is an absolute imperative in the Apple ecosystem to support Apple's innovations at the same day that they come out which almost nobody does, which is one of Jamf's differentiators. I would ask the audience that they've ever received a note from their employers saying don't upgrade to the latest operating system because we IP are not ready yet. And I see a couple of smiles and I know that's the case. Jamf customers just don't do that. In my back pocket here I've got the iPhone that is running IOS 16 that came out yesterday. I've been running it for over a month which means I was running the beta. That's how early on Jamf is ready for Apple innovations when they come out. And it's very important to that ecosystem. It's important to Apple, Jamf and most importantly our customers. But we do it the same way today that we've done it for years and years.

And what have you seen at the ABE, Apple Business Essentials?

Nothing. Exactly what we suggested that we [indiscernible] Apple Business Essentials was Apple's latest very small business-focused basic management capability which is something that they had since 2011. 2011 they had a configuration manager. Apple has to have a first-party method of doing simple things like locking a device and finding a device and wiping a device because [indiscernible] if a small business were to walk into AT&T store, T-Mobile and say, "I'm trying to decide what types of devices to buy for my employees, Windows, Android or Apple?" And the salesperson would say, well, with Windows and Android you can lock the device if you ever lose it. With Apple, you have to buy third-party software to lock the device if you ever lose it, you can't have that. So they have to have some first-party ability to be able to do that which is what ABE is. But it is in no way considered by us at all a competitor of what we do, and Apple showed no indication of that. As a matter of fact because there was a little bit of market confusion on that, Apple came out almost immediately after the announcement that we have no intention of competing with Jamf. They're an important partner to us.

So talk a little bit about competition because this space has been well funded out over the last couple of years. So there's a couple of copycat companies out there. Their web page is exactly like yours and almost changes the day after yours as I noticed. So maybe you can dive into what you're seeing from a competitive standpoint? Is that impacting pricing yet for your services?

First of all, we expect thank you cards at some point in time for the funding that these organizations got because our IPO was very successful. We've had a run of just very consistent growth now to over 67,000 customers, $466 million of ARR, over 40% growth in the most recent quarter on ARR, 34% revenue growth. So if you come along and you're a company and you say, hey, we do what Jamf does, you're going to get the interest of folks because we've been as successful as we have been. There's a couple of both organizations. And to be complementary to them, we think they actually have a pretty good strategy. And the reason we think they have a pretty good strategy is because they're mimicking our strategy. And we think that the management and security space is going to focus more on ecosystems in the future. There's going to be and there is Windows specialists. There's going to be mobile and Mac specialists and organizations are best served by using those organizations that are very, very good at that ecosystem. So on the low end of the market, you do see some start-ups in that area but they're starting to reach a point that it's going to start to get a little bit more difficult for them. Because as you well know tough to scale and they're going to be facing some of those issues right now. We feel challenged by them because small companies innovate fast and we just challenge ourselves to innovate faster. We call it innovating at the pace of Apple. But on the high side of the market we have a great opportunity in that the unified endpoint management companies. That market is kind of consolidating because the experiment of one unified endpoint management system has not gone according to the 2012 promise.

And why is that exactly?

Back to what I was saying earlier about specialization required unified endpoint management providers build a set of middleware, which is how they accomplish the things that they accomplish on those devices, which as a result means that they can't be same day ready with all their capability. Because there's no way to forward fit all of that middleware every single time a new Apple release comes out. We support native Apple capabilities that have forward compatibility. And as a result, we're same day ready all the time with an experience that serves the organization well. And why that's relevant not only from a user experience perspective but from a security perspective. We all know that one of the best ways to fight off [indiscernible] is by keeping all of your software updated. So since when does it become strategically wise to say delay your software updates because a security provider isn't ready for it yet. That is actually making you less secure. Jamf is to come along and say all your upgrade costs will go away because your users just stay upgraded all the time. And it's going to shut the door on any security vulnerabilities from old software.

Maybe you could talk about the security market relative to Apple. I mean back in the day everybody said [indiscernible] completely secure. But I think we know that's not necessarily the case. So where is the market? And how is it not being served or addressed by a lot of those traditional vendors that I've covered for you.

[indiscernible] a little bit. I'm going to talk kind of [indiscernible] concept about the market [indiscernible] just sort of the opportunity side. One of the things that for a long time everybody thought that the most unique thing about Jamf is that we're so focused on the Apple ecosystem. And that is true. But as you just mentioned there's now some others that are also focused on the Apple ecosystem. What is the most unique thing about Jamf today is that we have brought together management and security to be 2 sides of the same client. So you can imagine what good is it to find out about security vulnerabilities without the ability to act on those security vulnerabilities. And one is done with security threat hunting software and the other is done with management software. They go together like peanut butter and jelly. I mean they've belong together because you can deliver an entire solution. There's only a couple of companies in the world that even attempted to bring together management and security software. And Jamf does that around the Mac, Apple and mobile ecosystem in a way that's really unprecedented. And then it creates tons of market opportunities.

Absolutely. So if you think about our products on the management side, the company is only going to buy one management product. But we have 5 different security products. We started with both Jamf's Connect and Protect and now we ended the Wandera portfolio which gives us 5 products to sell to the market. And right now if you look at our stats which we released this quarter that said 33% of Jamf's customers have more than one product. Maybe that's just 2 products. So there's a lot of opportunity to cross-sell there. And you'll see in our ARR last quarter it was 17% of our ARR has increased to 18%. So there's a lot of great opportunity in the security side.

And focusing a little bit more on the numbers and momentum, pandemic-related changes telehealth, remote work, remote education, all big drivers of business momentum in drivers of Jamf. As we sit here, what do you think the next big legs of growth are for you? Obviously, you've got more products. You mentioned the stat of about one-third but maybe only 2 products in there. So as we look at the next 3 to 5 years, what are the biggest drivers of growth in your opinion?

I mean it is on the security side. So just stepping back for a few staff on Quarter 2, we had 53% growth in the commercial side of the business. We had 16% growth on the education side. We had more net new ARR within the quarter and we had more a higher growth rate in ARR compared to Q4 and Q1 of last year. So we've seen some great opportunity on the commercial side. We do price at a 5x on the commercial side compared to education, the fastest-growing part of our business. And then even on the education side, we've come to market just recently with the new product, Safe Internet which is our first security product on the education side which will help us grow there as well. So those are some of the areas we see opportunity.

When the larger component of your business are commercial business which is over 70% of our business is the faster-growing segment of the business, over 50% year-over-year growth. That bodes pretty well for what's going to be your driver going forward. And the one thing there's a couple I'll call it 3 macro things that are going to drive growth going in the future. One is the popularity of our security products and the increased need of security products in the industry. 2 is going to be the consolidation that's occurring in the management space. And I'm just going to say it even though typically don't talk about competitors by name all that often. The VMware acquisition is just flat out is going to create a tremendous replacement market opportunity for Jamf. And I'm going to go into the reasons why at least that's going to be the case. And then post pandemic whether you're a believer in coming back into the office or your people are still going to go to work. The thing that is undoubted that no one will argue is that we are going to have a more remote workforce than we've ever had before and what we thought we were going to have just 3 years ago. So the truth of the matter is that IT and Infosec teams need to do their job knowing that they will never see the devices that they support, ever. They don't buy them and it comes into inventory and they prepare them out. That doesn't happen anymore. You buy in a drop ship straight to the employee and the IT person that supports that will never see that device. Tools to make that popular or possible are going to become more and more popular in [indiscernible].

I mean that was one of the first demos you showed us on the IPO. Maybe you can talk about that. How long it takes to provision either an iOS device or an laptop?

During our IPO process when we brought together the analyst community kind of introducing to Jamf, they all gave them all a shrink raft box of an Apple device [indiscernible] iPad. We gave everybody and we said to experience Jamf just your consumer unwrap this box powered on for the very first time and it just automatically set itself up on power up to be what they needed for that day including the ability to take notes on the session that we are taking, they powered up for purpose. And that's one of the things that Jamf's is able to do with our combination of management and security products. We used to 3 years ago, how we're up straight to where it was fit for use whatever the use was going to be. But now with our security products we powered up the first time. It's not only fit for use but it's completely secure with an always-on VPN, anti-malware, antiphishing, all of the requirements that you would need to have that device immediately access network resources without IT or Infosec being concerned about it.

And it's not just the beginning power up. It's the life cycle of the device. You can set a profile policies. You can do so many to app installers. You can do all these things and actually just never touch that device to a life of device which is important for a company.

We doubt the deployment that you experienced zero touch deployment 5, 6 years ago. But the reality is it becomes zero touch forever. Again, IT is never going to see the device. So all threat hunting, all security mitigation, all software updates, everything the IT no longer has access to that physical device that could be anywhere in the world. It also allows you to then create an IT team that's more efficient because you don't necessarily need somebody that is in IT in each office and we do it all from a centralized location. You have to be able to do it on mobile.

So my next question to [indiscernible] correlation versus causation. Throughout the pandemic, Apple's numbers were absolutely off the chart in the beginning. And it was really easy to plot Jamf's growth against Apple's growth whether that was for computers or whether that was for iOS devices. There run in the supply chain issues. You start to get a little nervous, Jamf's numbers are still off the chart. So relative to deployment and deployment cycles, how important is Apple's numbers effectively. When are you touching their customer? Is there a critical mass point where customers say, "Hey, this is where we need it versus kind of that incremental unit as we look at shipments?" It's clearly when everything is going up into the right they were pretty well correlated. When there is tick down you kept going up to the right, they were completely uncorrelated.

Apple has been very open. The reason why they're ticked down a little bit has everything to do with supply not demand. My read is that the demand for Apple has never been higher. And over the years that's going to continue especially with the innovations like the M1 and M2. I love our friends at Microsoft but you pour Windows using people. You got Mac guy back there. This is [indiscernible]. But the innovations that are coming out with the price performance of these machines, they're just unmatched right now. And it's going to continue to create greater popularity for Apple in the enterprise for the decade to come. The supply concerns that they have right now, I'll say on the commercial market side which is again the larger and faster-growing segments of our business, very little quarter-over-quarter impact. And the reason is that the Apple fleet out there is so large and Jamf still has such a small overall percentage of that. And much of it is Greenfield, much of it is on maybe an older management or security system that is not tuned to Apple. We consider that entire [indiscernible] Greenfield either unmanaged and secured or under managed and secured. And so Apple's quarter-over-quarter results have almost no impact on that business whatsoever. On the education side, you will occasionally have a school who is buying their devices at the same time that they're buying their management solution because they're rolling out a K4 program or something like that. And if there's a delay in those devices which has occurred recently it will never cancel the Jamf deal. It will simply delay the Jamf deal by a little bit. But overall I would say, pay attention to the long-term macro trends of the things that are driving Apple like the demographics of the workplace, the unbelievable hardware innovations they have going on and the consumerization of IT. And the short-term quarter-by-quarter results have less impact on our business.

Are you seeing any movement in the financial services market [indiscernible] If you look around a few iOS devices which I guarantee are noncorporate issued. And we have one back in the back.

It's a great point as I speak with people in the financial services industry I will frequently say, this market is the least indicative of what's happening out there in the broader market because of the Bloomberg app and because of Excel. Those 2 apps have caused for a slower growth of Mac specifically within the financial services market. However, it is only a matter of time. There are other markets where Apple has just become the standard. If you go out to any tech company and go into any conference all you're going to see in there is Apple devices. So generally speaking, the mass market is moving pretty rapidly towards Apple Financial Services slower. However, it's going to be a matter of time.

And maybe you can refresh for us what you said around the macro on the last quarter and how that's trending at this point relative to your opportunity?

Yes. And I should also mention that in the financial services like all top 10 U.S. banks are Jamf customers. So we have by far the greatest market share within the financial services community. It's just the percentage of the users within the organizations that are running on, for instance, maps are a lower percentage than in other industries. That's going to go well over time. On the macro front, we've been asked frequently about how insulated are we compared to perhaps some other providers than other providers are seeing. And generally speaking, it's really nice to be in an industry one where your software is needed, not wanted. You absolutely have to have a secure environment. You absolutely have to support a mobile workforce. So it's nice when your needed, not wanted. It's nice when you have rapid ROI and you are probably sold and you're not one of the top 10 expenses for IT which you all know how it works out there. CIOs will put together those top expenses and they'll go after those first. We generally don't see that as much. And then diversity is also our friend. Industry diversity where in our most recent announcement we said that all top 10 of our commercial industries are growing greater than 30%. All of our major geographies are growing greater than 30%. And all of our products are growing greater than 25%. So we really are diverse, really nicely diverse across the world. So that has insulated us a little bit as well. Still, we did provide a guidance that was a bit more cautious than normal. And the reason why we did that is I would just simply say how does everybody feel about the economy in October? I think almost everybody in the room would say, I don't know. Well, neither do we. And everybody is sort of guessing of what it's going to be. So in that kind of environment it is prudent to be a little bit more cautious in your guidance. However, our investment for growth because we don't consider ourselves market limited at all. We are continuing to invest in growth in particular in the go-to-market front as we have for many years.

It was announced in late May that Broadcom is buying VMware. VMware was at one point in time the market leader in mobile device management. Microsoft has since taken over VMware as the market leader but in terms of number of devices and size of business VMware is widely considered kind of #2 in the space. And one of the things that's really interesting about supporting the Apple ecosystem as I mentioned earlier is you have to innovate at the pace of Apple. So if you just look at Broadcom's history and what they've typically done from an investment perspective when they've acquired, I would say there are lingering questions about whether VMware will keep up that kind of investment that would be required to properly support Apple. And in past consolidations like this that we've seen with companies like MobileIron and Good Technology, it just created a big opportunity for us. And this one could be the biggest, yes. They had acquired a company called AirWatch back in 2013. And yes, there's a pretty big base out there still and we will serve those organizations.

It's actually 18%. Now it's 17% last quarter. We've been debating it internally but I mean at those growth rates again we have one management product and we have 5 security products to sell. We do see that increasing quite a bit over time. It's hard to gauge exactly but you're definitely going to see that continue to go. I mean we did grow 1 full percentage point in the quarter. So I mean yes it's a good nonanswer but it's going to grow significantly.

Thank you very much.