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

Welcome to our next session. We kind of -- [ we started to catch late, ] but Dean, just one comment I have to make you, enjoy iPad.

Probably you have one...

By the way, it's a rogue iPad because it's my own one. But don't tell the IT guys. Let me start like we had that kind of big pandemic, Omicron, working from home, everyone has to adjust, et cetera. Like where are we now on that journey?

Yes. So first of all, thanks for having us. Sorry to coming here, just to touch late, multitasking obviously on the day, and thank you, everybody, for coming in and joining us as well. There's a lot of different points of view right now on the notion of whether employees should come back into the office or whether they should be allowed to stay home. I look at it from a macro perspective. And from a macro perspective, if you were to compare the outlook of employees working remotely back in February of 2020 versus today, it really doesn't matter. It's just massively more today than what -- not only it was in February 2020, then what anybody would have expected it to be today. So it's a new normal. There are -- it's some level of hybrid at almost every company that it exists. And you can see it when you sit on your either Zoom or Teams or web apps or whatever meaning it is, good half of the people that are on the meetings typically have got their bed in the background. So it's just the new normal that we're in.

And then the -- I mean, like I can see it in my industry, but you saw like with Twitter and all, et cetera, like you have that kind of more [ deposits, ] I guess, that own the real estate, they try to kind of get you back into the offer and try to change it. And I do see it a little bit like in terms of like I have more days in the office now, et cetera. Like how do you think how permanent some of the changes are? Do you think there's like somewhat more hybrid or like are we finding ourselves in the middle, how do you see it from your perspective?

I see most organizations be hybrid. I think that even those that are being a little bit more strict with coming back into the office, still have a greater working remotely policy than they did 3 years ago. So even those have a greater working remotely policy. From our perspective, it just frankly doesn't matter because even if people are coming back into the office, IT still doesn't want to go around from device to device to device to install software, set policies, secure the devices, they're still going to need a remote management security system, whether people are in the office or not.

Yes, yes, yes. Okay. And then is there a difference like we all kind of know the commercial works now, but like what's the situation on the education side? Like how is that kind of going to evolve?

Yes. No, that one was we did see a surge through the heart of the pandemic because of distance learning. It was -- overall I think the pandemic on Jamf was kind of a net neutral for every industry that there was sort of a slowdown in buying, then there was a speed up in buying which occurred within education. There was definitely a lot of device purchasing that occurred within education because all of us in schools realized that hey, the students went home to learn and a lot of the students don't have any technology to be able to engage in classes or work from their homes. And to that end, it involved a lot of device buying, but it also created something else. That realization that awakening that schools had that students were not able to learn from their home, well, guess what, that always existed. And unfortunately, those kids were going home, the kids that did not have technology in their home, and they were not able to do their homework the same way that the wealthier kids were. So what it did is it woke up governments around the world to say we actually have to create a more equitable environment for our students to be learning in, and it has involved a lot of government purchasing of devices in order to go. So it has had, even post heart of pandemic some device buying that occurred within Japan and Taiwan and Germany and New South Wales. But then now in addition to that, Jamf has launched in July our student safety solution, which all schools are required to have some sort of student safety solution in place to protect students from the dangers that can be presented by constant connectivity as well. And it was our most successful first quarter of launch that we've ever had in our 20-year history, and we believe that's because all the buying that occurred in the pandemic was almost panic-buying that they didn't really then build the right infrastructure around it and now we're able to take advantage of that by launching these new solutions.

Yes. Okay. And do you -- was there level of overbuying potentially like where you just kind of went like, oh, everyone had to and now you kind of have that a little bit.

Yes. We noticed that a little bit in Q3. The biggest renewal month in education are July, August, just prior to the school year starting. And this year, we did notice that there was some reconciliation on the renewals just because they did overbuy a little bit almost, forget about counting, there wasn't time to count, just buy the devices and arm the kids. We were fortunately able to counter that to some extent with the launching of our safe internet solution as well, which is why we still have a healthy growth that is occurring within education of a year after the heart of the pandemic, which at the time, the biggest question that we got when we were in the heart of all of that buying was, "oh my goodness, are you going to be able to sustain this a year later." We grew our ARR 15% in Q3 just within education. And I think had we said to people in the heart of all the panic buying that we would still grow that much a year after, I think everybody would have taken it, and we were pleased with that as well.

Yes. Yes. No, makes sense, yes. And then shifting gear a little bit, like on the Mac, you were always like kind of like the kind of vendor. iOS was a little bit more mixed, because like even the horizontal guys kind of were kind of pretty decent there or were playing in that market, like what do you see about this kind of understanding of like you want to have Mac iOS together, it's a better experience for everyone. Like where are we on that journey?

You're right. We have dominated Mac in the commercial space. We run 22 of the top 25 companies in the world for the Mac. We don't have as high a share on iOS. And when we really took a -- there's 3 reasons why I believe that Jamf is the future location for those iOS devices versus in the past some of the more horizontal providers. The #1 reason is that we're already there running their Macs. And so we don't even have to convince organizations to bring in a new solution or a new training. They already have the ability to do it. So it really comes down to is the iOS device managed and secured more like a Mac or is it more like an Android? And I would say that 5, 6 years ago, it was more like an Android because it's just standard MDM. Apple has so aligned Mac and iOS of cloud services and management capability and security capability that managing and securing an iOS device is much more like a Mac than it was 5 years ago, and we're starting to see organizations say, let's just move those devices over. The second big driver there will be what the consolidation we see are happening in the industry. MobileIron and Good Technology, they are no -- we don't compete against them for new business anymore. It's generally -- and I'm not taking a crack at them, it's just what happens when consolidation occurs. It's generally a replacement market. And there's another one out there, acquisition that's going to occur, and I think that's going to create an even larger replacement market for us. And then the third thing is, and this is often forgot, we all think of all of our devices as being built for personal productivity. But there's another type of device that's deployed out there and device deployed for all purpose, within education is for student learning, within healthcare for a patient bedside or clinical communications, within transportation, it's for the cockpit flight bag, within retailers for the point-of-sale system. Jamf is extraordinary at those industry workflows and very few cross-platform providers are really, really good at those built-for-purpose shared device workflows because they're very, very nuanced and that is something that we are excelling.

Yes. And I just wanted to go back to one point because like I used to be the guy that covered MobileIron that kind of was on good, et cetera. Like I mean like -- now that they're all private, et cetera, like how -- I mean, they can't give up on life, but like how does it kind of -- I do see it in the market as well in our field calls, there's like not that much going on like -- and sadly, that's probably going to happen to the next guy. So talk me through like how can someone kind of give your kind of big position away like...

Well, this is the uniqueness of Apple, okay? You can't fall behind an Apple, okay? If you're using Windows devices out there right now, I would bet a paycheck that the day that the next Windows operating system comes out, you don't upgrade it to it on that day. Same goes with an Android operating system as well. You have to wait for your -- Apple, boom, MacOS comes out, you upgrade. iOS comes out, you upgrade, iPads OS comes out. And every single June at WWDC, Apple announces new capabilities, frankly, varying further and further away from how Android and Windows does things. And every single fall, people are calling their management security provider to see whether that new capability from Apple is going to be supported. So after being consolidated, you might be able to last a year or 2. But as soon as you start falling behind the latest Apple capabilities, you are eventually going to become just a replacement market that's going to occur. Jamf is architected for and designed for innovating at the pace of Apple. And so our customers always know that: one, we will support the newest capability; and two, they'll never have to send out that e-mail to their employees saying, don't upgrade to the latest operating system.

Oh, I do get that.

But I imagine a few of you have received those before but not if you're a Jamf customer.

Yes, yes, yes. And on that note then, just how do we think about Microsoft in this kind of environment? Because like that's the other thing. We saw it in other markets like security, et cetera, they were just the typical Microsoft, like just good enough and then you see kind of more there. Like how do you see Microsoft? Is that like a competitor? Are they taking up the other part of the market? Like how do you think or how do you see...

It's a classic [competition] environment. We consider them our second most important partner and doing work with. What's interesting is this, if you were to look at the entire landscape of management providers, right now, the 2 fastest-growing management providers out there are Microsoft and Jamf. It's not any of the other UEMs that people used to talk about, it is Microsoft and Jamf. What do Microsoft and Jamf have in common? Actually, 2 things: one, they both combine management and security; and two, their first -- they're built first on a dominant ecosystem. Microsoft, even though they have cross-platform capabilities, let's face it, they are awesome at Windows, that is where they're major in. They have an ecosystem that they're built around of management and security. Jamf is the world's best at Apple. We're built around that ecosystem with management security. It shouldn't be a shocker to us that the 2 companies they have those 2 characteristics around an ecosystem with management security are the 2 that are still growing. And the good news for customers is we are integrated at the management level, at the connection identity level and at the security level, where all of our telemetry is shared within Microsoft tools, so that Microsoft can still be that single point of truth for CISOs and for CIOs, which is why we partner so well together.

So then the way in the ideal scenario for you, it would be -- there's a Microsoft world, there's a you world and you work together like nicely...

Yes, I will regularly say to customers, all you need is Jamf and Microsoft. Generally 90-plus percent of your devices in the workplace are going to be either Apple or Windows. And frankly, if you were to consolidate around those 2 providers, you're getting a greater level of consolidation than like 99% of the companies that are out there.

Yes, yes. Okay. Makes sense. And then I apologize for the next question, but I do still get it from investors, so I wanted to bring it up. And it's like Apple in the older days -- or Apple has like a tendency to say if someone gets big, oh, I don't -- in my ecosystem, I don't want that. And so then last year there was a lot of noise in [indiscernible] space when Apple came up with some easy capabilities. Like I think that has died down now. I haven't really seen a follow-up, et cetera. But like how do you see the last year was like obviously, you get from the investors, you got a lot of the noise like [indiscernible], but reality, like what has really played out in reality.

So again, at the highest level, Apple has never, in their nearly 50-year history, ever stated, claimed or shown any interest in being an enterprise software provider. They are a consumer-focused organization, whether it be from movies to TV to music to devices, that is their focus. They do have to build a framework that allows solution providers like Jamf to build on top of in order to provide enterprise solutions. And a year ago, at the very low end of the market, they provided some first-party MDM capability with Apple Business Essentials. And we knew that, that was coming. We have a good partnership with Apple in that regard. I said a year ago, it had 0 impact on our business. It's a year later, it has had 0 impact business. And in the coming years, it will also have a 0 impact on our business. Our relationship with Apple has -- is as strong as it's ever been from a partnership perspective and from a customer, obviously we're each other's customers. And Apple's commitment to us right now as a customer, is for a longer period of time with more devices and more products included than it's ever been at any time in our history. So we feel excellent about our partnership.

Okay. Perfect. Okay. That sounds really good. And then shifting gears a little bit. So last quarter, you called out macro a little bit as kind of like there were some -- there was a little bit of an impact, like maybe like kind of remind us like what you saw? And then I mean I've combined my next question, I'm sure you saw Ian can talk maybe, I'm sure you saw the reporting season that we saw last quarter from the off-cycle [indiscernible] they talked a little bit about October getting a little bit worse. Like what do you -- like what did you see? And has there been any changes?

Only because I haven't breathed very much since I've been up here. Ian, do you want to take...

Yes, sure. I mean the global economic, I think you go out to any press release, any communication from any company right now. We're all talking about it. You go out and say, "Hey, what are companies doing?" And me as a CFO, I'm doing the same thing like where can we minimize spend, where we can we cut things, right? Let's take a little bit longer on that approval. Let's take a little bit longer on that payment. We're seeing that everywhere. But for Jamf, the good news is like we're not just device focused anymore. We've got these cross-sell opportunities with security. That's a big growing part of our business. We've got the opportunity and -- something you asked earlier on the iOS side. We've got the BYOD solution, which has been a really good uptake for us as well and something that we're interested in the future, and they will help us gain some devices there on the ILS front, there's definitely opportunities. But we are seeing those macroeconomics. We haven't released any type of guidance for 2023 yet, like everyone else, we're being prudent in seeing what really the global economy looks like. You have seen our guidance for Q4, which does show we still have strong economics, and we believe our long-term thesis is still strong.

I mean like can you kind of remind us of the points you saw in Q3 in terms of what -- how did it play out? I remember pandemic was like low end kind of attrition, a little bit now -- like what are you seeing now? How does...

Yes. In Q3, I mean, what we saw, and I'll use NRR as our example, right, we saw kind of a 200 basis point downtake on that from 117 to 115, 100 basis points, so that was the education. That was a reconciliation really on the education side buyers, got a little excited, they didn't have time to count the number of devices they just bought during the pandemic. And now they're reconciling that. So that was a really short-term event. And then on the commercial side, what we saw is about that other 100 basis points, which really related to them is this muted growth at renewal. We're not actually seeing down, like people say, "Oh, we don't have the [ made ] devices." We're still seeing growth at renewal. It's just not as big as we've seen in the past. So those are the dynamics we're seeing, and we are getting the extra approval. Like everyone I just get 1 more approval from the next level in IT. And those are the things we're seeing still out there, similar to what we've said in the call.

Yes, yes. Okay. Okay, makes sense. And then I mean, the offsetting factor for you is that your product portfolio has kind of broadened quite a bit. Like maybe talk like where are we on that journey in terms of like now you have more security, you have more identity in there. Like how does that help you? And is that the end of the journey? Or how do you get ...

Sure. Do you want to go first?

Sure. Yes. So on the journey and security, I mean, it is just as you can see, it's a growing part of our portfolio. It represents 18% of our ARR. We have 12,500 customers, both on management and security. We expect that to continue to grow as part of our ARR in future. And with the ability we have 1 management product, currently, we have 5 security products, we'll be doing -- looking at doing some bundling in the future and making that a little bit easier to sell and we're very price competitive on the security side. So we definitely see some opportunities there. And then we also see on the identity side, you mentioned that specifically on the connect side, that's been definitely our strongest product. It's been our -- it was the first product we bought into -- in the identity side or security side and that's really been very successful for us as well.

Yes. And at the time that we IPO-ed of course, our security business was $5 million of ARR around that. And now, as Ian said, it's over 18%, which means it's over $90 million. That's just been 2.5 years. So we were much, much more dependent on device expansion at the time of our IPO for NRR and growth overall. And we have another option. I mean, clearly, slower device growth at renewal is going to impact our business, but thank goodness that we have other trajectories of growth that we did not have 2 years ago.

And how do you think about the long-term setup for the company between like device growth, which is kind of volumes versus like the other products, like how do you think that mix? Do you have like a number in mind where you would come out like -- or how does the shape of the company will look...

Not that we shared, but without a doubt device growth, will continue to be a growth factor for our business, driven really by 3 different things. One is the Mac as even in a down market, Mac is growing. It's the only laptop out there that is growing. In Q3, Mac shipments year-over-year, according to IDC, was 40% growth. It's really the only laptop that's doing that. So we have that as a trajectory. Two is what I already described that as Apple comes out with more and more for iOS that is very Mac-like, all of a sudden it makes more sense to have those iOS devices in your Mac system. That is going to be a trajectory of growth, including now with our capabilities around BYO, which we did a few several thousand device deals in Q3 for BYO, not only once we have won those a year ago, we wouldn't have competed for those a year ago. And then the third is we did announce at JNUC that with our safe Internet solution, we're going to expand that to Chromebook devices. So several of our security solutions like our private access solution and our safe Internet solution, actually run beyond Apple. So that's opened up a whole new set of devices that we're able to help secure as well. So for all those reasons, we expect the device count to continue to grow in the coming years as we're increasing our dollars per device because we're selling back security solutions into [indiscernible] customes.

Okay. Makes sense. I mean the last few minutes, I wanted to shift a little bit towards like profitability, cash flow, et cetera. You always were sorry to say like odd in the space because you're profitable and you're making cash and obviously, all these kind of boring things...

We like being odd. We think that's a good thing.

So how do you think about that trajectory in terms of like margins and cash now at the moment?

Yes. Yes. So I mean we're going to take the same approach we've taken, being prudent. We're going to balance both growth with profitability and really target the Rule of 40 and just to define that as revenue growth with unlevered free cash flow margins on a trailing 12 months. So we're going to continue to target those. You saw in the last 2 quarters, we did beat on profitability the last 2 quarters, which we were able to flow through to the full year. So we're already doing it. And our business is really think we've been using the word elastic where we've said, "Hey, you can just turn a few dials here or there and really generate more profitability. And that's where we're really focused on balancing those 2 factors, especially in the economy like we're in.

Yes. And have you -- have there been like -- is it at the moment like a little tinkering or have there been like real initiatives yet?

We've actually -- we're doing both. -- okay. We have some tinkering and then we have some really long-term initiatives that we're starting to focus on that will help build us for scale as we go forward.

Yes. Okay. And then like remind us, where is your cash debt position at the moment? And is there like given high interest rates, is there anything you need to consider.

Yes. I mean -- I always laugh about our debt position. We have a convertible note, which we used to fund the acquisition of Wandera, which was a transformational transaction that we needed. That's why we have all the products we do. We did take that out. It was that an -- interesting, I still laugh about it because we service that debt for less than $500,000 a year. It really -- we don't have interest, really doesn't impact our financials. We do have strong unlevered free cash flow, which help us build that strong financial position. And will help us be in a good position for any time those things mature and for future opportunities.

Yes. I mean, like just because there are not that many companies in like your position in terms of being cash flow rich and having a good cash position, et cetera. Like you always get the question from investors around oh, look, asset prices are down, look at all these kind of cool VC funded start-up companies, and they all look so cheap. And now you guys can go out [indiscernible]. Like how does it real life work.

I think that -- I wish the private companies right now recognize what was happening in the public market, but they all still think that their value is -- I suspect that that's going to normalize over time. With that said, as you know, we actually did just recently closed on an acquisition called ZecOps, which raises the level of security, functionality and capability we're able to provide on iOS devices, not only above what we've ever been able to do but above what anybody is able to do as an iOS -- mobile devices actually, in many ways, more difficult while they're very secure devices, they're more difficult to add additional security to because they are kind of more closed off than your typical laptop is going to be both MacOS and Windows. And so this was a very unique solution that allowed us to provide security solutions for iOS in the same manner that we already were for MacOS and that, say, CrowdStrike, does for Windows. So super unique. We did just close it. We're always going to keep an eye on potential other acquisitions that provide customer value. That is ultimately our barometer or how we measure the value of a potential acquisition, is on the customer value we can provide. So we will always be looking around. But will those prices come down, will that create more opportunity? I actually hope so.

Yes, yes. Okay. And then last question and then I'll let to let you go, of course, there is one of the factors for you is device growth. Like how does the -- how do the chain issues in China like impact you. Is that kind of something that could just surprise anyone and then 1 day week up there in terms of...

Well, most of the China supply chain issues have been around iPhone. And that is, one, even though there's more iPhones out there than there are iPads and Mac, most of our sales are actually on Mac and iPad and iPhones, frankly, we are just not limited based on supply chain because the market is so huge, and there's so much that we can take supply chain really doesn't matter. Where supply chain does matter to us a little bit on the Mac because we have such a dominant share, we're going to grow as the Mac grows. And we were in a supply constrained Mac world over the last year. And in Q3, it really looked like that started to break through with the 40% year-over-year growth. And then there's also been -- if you've been reading, there have been some more recent discounts that are offered on the Mac. That's a good sign to us because you simply would see discounts there unless they had the supply to be able to beat the potential demand. So we -- it looks like we're through it on the Mac, and that was the larger more impactful to us.

Perfect. Okay. That's a good summary. Thank you.

Thank you. Appreciate it.

Thank you, everybody. Thank you.

Thank you again.