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

Thanks for being here. We've got Jamf here today. We've got Dean Hager, CEO, Here we go. John Strosahl, President and COO and incoming CEO; and Ian Goodkind, CFO. Start by saying my name is Matt Stotler. I'm the analyst here to cover Jamf, for a post of disclosures, please visit our website at williamblair.com.

Maybe Dean will have to start off just a couple of minutes overview for Jamf, those who are maybe new to the story, a little history on the company, what do you do, what customers do you serve and what problems you're trying to solve?

Sure thing. First of all, thanks, everybody, for joining us. Appreciate you all being here. Jamf was founded in 2002. So we're 21 years old, and our purpose is to simplify work and just to kind of illustrate -- what I mean by that is, as a consumer, you go out and you buy your technology, you bring it home. You don't have a team of people working on it with you. You just fire it up and you generally can figure out how to use that in your home. Work technology is typically not that way. Most of you probably had an IT person, slave over whatever device that you use at work, adding restrictions, adding things that make your overall experience fairly unpleasant. It should be that way. Work should be consumer simple. Get your device straight out of the shrink wrap, power it up and as it's powering up, it automatically sets itself up just as your consumer device was -- would be completely secure with all of the accesses that you need. You don't have to enter a password to access your work technology because you have biometrics right on the device, it just works. Our purpose is to make the workplace consumer simple. Now the way that we do that is we provide product that manages and secures Apple at work. Our focus being on Apple, and I'll explain that in just a bit, after all, if you're going to focus on making the workplace consumers simple, it makes sense to embrace consumer simple technology and nobody offers more popular and simpler technology for the home than does Apple. Managing and securing Apple at work, let me break that down a little bit. Management means both device management, also application management. Security means identity and access management and also endpoint protection. And Jamf is the only solution provider in the world that provides all of those device application, identity and endpoint security solutions from one provider with a specific focus on Apple. That focus has not only allowed us to create immense differentiation within the market, but also it has allowed us to build our company with an immense amount of efficiency. And also, we have won some very powerful friends. We've been partnered with Apple, as I mentioned, for 21 years, but we also have deep co-development partnerships with AWS, Okta, Google and Microsoft. We are the only company that I'm aware of at our most recent event or Jamf Nation or [ JNAT ], is what we call it, on 1 stage, we had executives from Apple, Okta, AWS, Google and Microsoft, all speaking about their partnership with Jamf, which is very, very unique. All of this together has resulted in a company now with over 72,000 customers. We went public in July 2020. We have over 72,000 customers. Over 10,000 of those customers were added just in the last year. We run on more than 30 million Apple devices, which is a deeper control and deeper inventory of Apple devices than any provider in the world. We have over $526 million of ARR as of our most recent quarter, which is exactly 3 years after we went public and over $300 million of additional ARR since we went public. We went public with $224 million of ARR. All of that $526 million of ARR, $106 million of it is from our new line of security products, which at the time we went public, was just $6 million of ARR. So we've built that business almost entirely from scratch, just in 3 years already to over $100 million. And our most recent quarter year-over-year growth was over 40% of those solutions. We have beat our guide and expectations every single quarter since we've been public. And when measuring -- trailing 12 months of revenue growth, and trailing 12 months of unlevered free cash flow, we have achieved at least the rule of 40 every single quarter since we've been public as well. So -- we are poised to not only continue to succeed in the short term. But especially as you look at some of the Apple announcement that just came out yesterday at WWDC, we are poised to be an enterprise leader for the next decade.

Right. Yes. I appreciate that. And yes, obviously, you mentioned part of the company, the IPO and how much you've accomplished. There will be a CEO transition in September. Congratulations on the early retirement. John will be coming in. Obviously, you've been in leadership positions in Jamf for quite a while. We'd love to just get your perspective as you look forward to -- what are the key factors that will drive continued success here with Jamf going forward?

Yes. Well, Dean and I -- we worked on the strategy together with the rest of the executive team. We worked together for almost 8 years, and it's a good strategy. So we're going to continue that. We're going to continue to execute on that strategy. We've got some great opportunity ahead of us with respect to security. We -- the other thing that we need to do is when we execute on that strategy, continue to develop for the scale that we're going to need to get to the next level. And the most important thing is to not break the culture that got us here.

Got it. Okay. I mean you mentioned the relationship to Apple. We'll love to just dig into that a little bit more. Obviously, multiple facets to that. So dig into each of those. And then maybe discuss a little bit what the advantages of that partnership, that close relationship when it comes to the market?

You want to grab that, John?

Yes. Our relationship with Apple obviously goes back since the beginning of pretty much of our company, they became a customer in 2010. We have several facets that we work with Apple on the go-to-market side, for example. So we partner very closely with them. They are a channel partner on education -- on the education side, we partner with them on the enterprise side, working with them on territory reviews. We have account executives that are paired up on those territories. They work very, very closely. They're also a technical partner. So all of our products that we develop are done so with Apple in mind and when Apple innovates, we celebrate because that generally creates some space for us to actually do something that's going to benefit our customers. And so there's a lot of facets to that relationship. It's very strong. Dean and I were just out in Cupertino for a CIO conference for largest education districts in the country. They brought them in and because they behave very much like an enterprise customer and the way they deploy their devices. They wanted to talk to us and some of our customers, and it was -- just shows the depth of the relationship that we have there.

And what were some of the takeaways from yesterday that stood out to the team? What are you excited for?

I don't know if you noticed, but Tim's speech was like directly where we were standing a few weeks ago. But if you don't know what Matt is referring to is every year, Apple has WWDC. It's the big event that they announced all of their new products. The headliner yesterday was the new Apple Vision Pro, which I will remind everybody is a release one. It will evolve over time. Some have talked about it's still a little bit bulky. And I have just been smiling and calling -- for all those that are old enough to remember, the first mobile phone was about the size of your forearm and cost $4,000. So yesterday was a shift in the technology landscape for how we will work one day. And the thing that was maybe most profound yesterday is an Apple's never done this. I would ask everybody to recall on every Apple device that's ever been launched. They go immediately to all of the personal use cases at home. Yesterday, they didn't. They introduced the Vision Pro, and then they said, let's see the Vision pro at work and they went into all of the work use cases. And only after that, did they say and how would Vision Pro be used at home. This is a focus on how work will be done in the future that Apple has never had before. And it bodes very, very well for Jamf because it will become another device that will be manageable and needs to be secured in the workplace, in a uniquely Apple way. Additionally, even for things like the Apple TV, Apple came out with enterprise use cases yesterday, video conferencing. What wasn't announce but was in the documentation is now VPN support with the Apple TV. So they're trying to make the Apple TV an enterprise device. Now of course, we've already known, it has been. Jamf manages over 300,000 Apple TVs alone of that 30 million device. And I don't know anybody that manages really any -- and then big news yesterday that we've been predicting for years is the Apple Watch now as manageable as well. And so that just grew our TAM overnight with new Apple devices and new use cases. And for those of you wondering, my goodness, what would be an example use case within the enterprise for the Apple Watch, we'll just think about any profession where you need to work with your hands, but also need notifications in a moment. It is the perfect device for health care. But yet, we couldn't use it for healthcare for that purpose up until today because the way you mute your Apple Watch is simply by covering it. And if notifications are urgent. You can't have the user with the ability to mute it that simply. You have to be able to restrict the muting of notifications otherwise, it doesn't apply. Now as it applies. So yesterday was a very, very exciting day for Apple. Very, very exciting day for Jamf.

Yes, for sure. I think one thing, obviously, to note there is that Jamf supports all Apple operating systems, all devices. The largest opportunities there, obviously, are Mac OS, iOS. Historically, you've talked about those -- characterize those differently, right? Mac OS is more of an opportunity on [ COM ], whereas iOS is more of gaining share in an existing opportunity. There's more penetration of iPhones in the enterprise. How would you think about the relative opportunities there, where we're at in terms of penetration for Mac OS and then how that impacts your approach to market going forward?

And so for clarity, for everybody, Apple currently has 4 operating systems that are categorized as manageable operating systems, MacOS, iPadOS, iOS, TV OS. Jamf is the only company I'm aware of that [indiscernible] manages all 4 of those. Yesterday, they added WatchOS to it, and you better believe that my prediction is that Vision OS will be add to that as well. The iOS and iPadOS space is just so -- especially the iOS base is so large that Apple would not need to sell another iPhone for Jamf to grow in that space for many, many, many years. And there are a lot of unmanaged devices still in unsecured devices in the MacOS, iPadOS, TVOS space. So our growth there is going to be a combination of taking those unmanaged or undermanaged devices. But the other piece of that is that we're going to see substantial market growth within that space. So MacOS specifically, is the fastest-growing laptop in the workplace. Yesterday, Apple called the MacBook Air, the world's most popular laptop, and it is gaining share on Windows every single year. And yesterday, Apple announced a new coming 15-inch MacBook Air with the new silicon processor. And from a price performance battery life perspective, it is flat out the best 15-inch laptop that exists. And with the demographic changes at work, I call them the iPod babies, the ones that were born after the invention of the iPod, they're all entering the workforce right now, and they've never known a world of Windows dominance. In fact, they don't know where the start button is because they've been using Apple all their lives. The workplace dynamics of what kind of devices are used are going to change dramatically in the next 10 years.

And in terms of kind of near-term dynamics, obviously, there's a lot of volatility caused by the macro at this point. Maybe touch on what Jamf sensitivity is to overall Apple device shipments? And then how the role of continued share gains of MacOS maybe provides a counterpoint to that, maybe put some takes in and what you're kind of seeing in this environment here?

So we always say don't tie our quarterly results to Apple's quarter results ever. We're just not that sensitive to any given quarter. We would be more responsive to trends that occur over a period of time. So one of the reasons why our growth has been so extraordinary in the Mac space, especially is because Mac market share over the last 3 years has expanded more than any computer in existence. MAC was about 6.6% share of the 2019 shipments and about 11% share worldwide of the 2022 shipments. That's -- almost a doubling of market share in just a 3-year period. In 2022, Mac shipped 60% more unit than in 2019, 60% more. All non-Mac computers shipped 6% more. So 10x what non-Mac computers grew. However, the last 6 months have been brutal for all PC shipments. As a matter of fact, the last 6 months has suffered the most significant year-over-year decline in PC shipments in recorded history and Mac has not been immune to that. So there has definitely been a slowdown in shipments that we believe will turn in 2024 because the surge in PC buying really started in the pandemic. Well, there's going to be a replacement cycle that's coming up in 2024. So we think this is very short lived. But without a doubt, Jamf and literally every other technology company in existence has noticed in the macro that there's just fewer endpoints being added out there right now. But fortunately, we believe that to be temporary.

Right, right. And Jeff has -- I mean you started as an education-centric provider. If you look back 15-plus years to obviously expand quite a bit from an end market perspective. Also, you mentioned from a product perspective, how are you seeing the near-term impact on the different facets of the business are the relative areas of strength or relative various weakness to call out?

Do you guys -- I've been talking a lot. Overall market strength, education versus commercial markets?

Yes. I mean education, we were certainly the beneficiary of some government funding not just in the U.S. with the CARES Act, but also in Germany with [ Digipac ], in Japan with the Giga project. And recently in last Q2, we announced the Taiwan Ministry of Education. We really took advantage of that. We've deployed a lot of devices out there. And there's still more to go, and they're still rolling some of those out. But what that provides is a great installed base for us then to come back with our security products. And not just in the U.S. but again, internationally, they're required to protect their students from things on the Internet that they can get into. And so because we have safe Internet that provides a great fertile ground for us to go and expand. And that's just one of our many security products. Security products since last quarter that we announced is 15,000 customers have both -- have both management and security on it. And we think that there's a tremendous expansive opportunity there. Primarily because every device, whether it's an iPhone or MAC have 1 device management product on it, but each one of those devices can have an unlimited number of security products and many do, especially -- if you talk to any InfoSec or CISO, there are a lot about a belt and suspenders. And so we've taken advantage of that both on the network security side as well as on the on-device security side. So we have some great opportunities, not just from a product expansion but also from a geographical and a vertical perspective.

Right. Got you. I would like to double-click on the security piece a little bit. Obviously, you mentioned it has grown pretty impressively since the IPO to over $100 million ARR at this point. We'll just double-click on what's been driving that success? And as you think forward, how does that expand Jamf's wallet share potential in the enterprise?

Well, as you mentioned, our security has grown incredibly. Dean said when we went public 3 years ago, we were about $6 million in security ARR, and that's -- we've increased that over $100 million since that point in time. And with also the headwinds on the device expansion that Dean mentioned, but is temporary based on the macroeconomics. We have seen and used that opportunity to really go back into our installed base and start offering some of the security products that we hadn't had before. And that's one of the reasons why we've seen a great upward movement in that and we do believe that also when that device expansion comes back, that's when we're not only going to have the ability to put device management on those devices, those new devices. But now we've got the muscle, memory and how to do the security as well and there's some pent-up demand. Because generally, we have seen companies buy forward when they either have a new customer or they'll do growth at renewal. In the lack of the device expansion or the headwinds there of -- we really expect that to come back and kind of get that knee in the curve just based on the fact that there's going to be device expansion, and we have now security and device management and there's pent-up demand. So we really hope to see that move in the right direction.

Right. Right. I think one -- maybe one important thing to touch on would be the relationship with some of the security software providers out there, right? And exactly how you overlap or collaboration with those -- Okta specifically, you mentioned as a partner. I think may be helpful to go over that a little bit.

Yes, sure. So yes, all identity providers are nothing, but partnership and collaborative. There's no competition there at all. The work that we do with Okta, the work we do with Google, the work we do with Microsoft on identity, work we do with Bing. We create an environment there where their identity is actually used for more than I think they ever even imagined. We're able to manage access on the devices themselves based on the Cloud identity and again in a completely password-less environment just a super seamless experience. And so our relationship with all identity providers are very, very strong. When it comes to endpoint protection, you get into a little bit of the competition in that our interests are to actually protect the device and the user themselves. We do not, for instance, we don't offer a SIM that would be a consolidation of all of the security logging across the entire enterprise. We use other solutions. Microsoft Sentinel, for instance, so our partnership with Microsoft Sentinel is entirely collaborative with no competition. But our relationship with Microsoft Defender would be more of a competition type of environment. So the relationship we generally have with the security providers is we will log everything we find to whatever enterprise solution that they log to as well. And we let the CrowdStrike and encourage the CrowdStrike and the Microsoft to actually be that base to the [ CECL ], but we make sure that the Apple end point and the Apple users are secure, and we make sure to share that data with those security providers. Additionally, almost all of the security providers, you can think of -- there's two things in common as well with Jamf. One is they're most likely a Jamf customer. I was taking a look one day, I mean, like north of 70% of most of the names that you can think of in security are also a Jamf customer. Additionally, on the map, the way that most security companies deploy their solution is actually using our flagship product, Jamf Pro, so we're kind of the distribution channel for those solutions to get out to the devices. And you can imagine the advantage that, that gives us because rather than packaging up some third-party solution, you can go into Jamf Pro and simply click the little box that says Ad security and Jamf Securities, automatically.

Right. Right. And so obviously, we talked a lot about security. What else from a forward development standpoint, what else is top of mind for you in terms of continuing to add value for customers or expand wallet share?

Well, obviously, yesterday was a big day, we want to make sure to bring value, enterprise value to every type of Apple device and ultimately create an ecosystem at work in the same way that Apple has things like Air Play and Air Drop and all of those things that are common across Apple devices. We do the same thing at the enterprise level. We give the IT team who manages and secures it, a commonality amongst those devices and we give the user a commonality from an experience on those devices as well. So continue to come up with those enterprise use cases and making all of that technology just work in the enterprise. Additionally, of course, with the emerging Generative AI opens up all kinds of potential out there. One would be just our internal work being efficient -- and by the way, that's not on the common. That's happening today. I mean everybody is [indiscernible] whether it be you're writing a document or whether you're writing test cases. Of course, we're always mindful of the security vulnerabilities that come with that. So we have our set of policies for use and not use of it, but there are a lot of efficiency plays. But there's also a lot of customer value that comes as well. Specifically in the area, two areas. One is consumable intelligence explaining things to users in a manner as a human being would rather than saying, here's a whole bunch of data. And the companies who are going to be able to best do that are those that are sitting on the best data. And I already mentioned, we've been doing this for 21 years. We have over 72,000 customers. We have over 30 million devices. And we have run the website for the last 15 years called Jamf Nation, that is the most popular website for how-to items for anybody that's administering Apple within the enterprise. All of that data becomes data on which we can learn and provide human beings with human answers. And then, of course, the next step beyond that will be instead of asking, how do I. You simply say, now please go do this, which is a set of automations. And you can imagine what the future holds there. Instead of creating policies to do something, if you could actually type in -- if any Apple device receives a rapid security response from Apple and the user has not applied the fix within a 24-hour period, they should be blocked from the network. And just type in that and then set the APIs that would all be available through Jamf to do that automatically. That's what the future is.

The only thing I'd add to that is that for the near-term growth is our international footprint, our global footprint. We've grown very rapidly in the U.S., but we've grown faster outside the U.S., and that's by design. We've invested accordingly over half of Apple's installed base is outside the U.S. And so -- we've really expanded there, again, on purpose and to take advantage of that addressable market that we haven't tapped.

Got you. And maybe that's a good lead into the partner conversation, especially with the recent expansion of your relationship with [ BT ]. Obviously, Apple is close partner, but outside of Apple, you featured a number of kind of marquee relationships AWS, Microsoft and BT, I think, is the most recent one that you've featured. How are you leveraging partners outside of Apple. How is that playing to your go-to-market and market penetration strategy?

Yes. Very specifically, I mean we're really focused on that -- to again, to build that scalability. We've got a great direct sales force. About half of our business goes to the channel today, a vast majority of it outside the U.S., but inside the U.S., were by design, expanding that. And with not just third-party partners, your CDWs, your SHIs in conjunction with Apple because they use those same partners on the enterprise side. But also our strategic partners like AWS, for example, part of our AWS partnership allows our salespeople and their salespeople to sell Jamf products. And many times, if you do a multiyear contract -- when you do a multiyear contract with AWS, they'll require some committed spend in the out years, while we've been able to use those committed spend dollars that are designated for AWS to buy Jamf products because Jamf products used AWS cloud. So their reps will retire quota based on that. They'll get paid commission. Our reps do as well and the process is set up such that those companies are already used to buying through that protocol. And so it's very easy for them to say, we have some economic headwinds right now. We probably wouldn't do this right away. But since we've already committed those dollars, we'll purchase that product with AWS commit and we'll do it very seamlessly through the protocol that they've already established over years with AWS. So it's been a great partnership. And because we use them as the back end on the Cloud, they benefit from that as well. That's just one example.

Yes, absolutely. Okay. We've got a couple of minutes left, so maybe I'll throw one to Ian, and I want to -- so you've been undertaking some cost structure improvement initiatives in 2023. You talked a little bit about those in the past couple of calls. Let's just go over kind of what you're doing there, the thoughts on structural margin impact going forward, the time line there? And then how you think about the forward trajectory?

Yes. thanks for that, and I'll take the question here. So short term, yes, we've been focused like other software companies. We've been focused on our footprint, our facility footprint, we've been focused on software costs, and we've been focused on headcount. And what we've done since our last call, we announced that we had reduced our head by 60 people. That was just really through natural attrition. We focus on backfills, we focused on hiring only in those areas that are going to drive the highest return and performance management. And all those things together, that's where we've been able to make some progress there. I think on the software side, what I'd say there, too, is we've been looking at all our large software contracts, I'm doing whatever other CFO is doing and say, hey, do we really need all those seats? Can we be scalable? Do we need both these products and really pushing on those types of things. And definitely making some progress there. And then last, looking at the facility footprint, I think, more to come later this year on that. But with all those things, we did raise our guidance this last quarter. And so are showing more profitability this year. What I would say longer term, we do have some longer-term initiatives. We're focused on our customer journey. So looking at partner portal programs, looking at our back office and being more automated, more scalable. So all those things bode well. We haven't given guidance for 2024, but I would expect us to continue to improve profitability as we go.

All right. I think we'll leave it there. Thank you very much for being here. Thank you, everyone, for showing up. To anyone who wants to attend the breakout. We're upstairs in Alder in 10 minutes.