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

Everybody, thanks for joining us. My name is Koji Ikeda. I am one of the software analysts here at BofA on the enterprise software team. I am super, super thrilled here to have Jamf for a fireside chat. We have 3 members of the executive team here. So thank you very, very much for coming. We have John Strosahl, who is going to be the -- he is currently the President COO, but soon to be CEO, when Dean Hager, the CEO will be retiring later this year, and then we also have Ian Goodkind, CFO. So thanks so much for joining us, guys. Since Dean, this is your -- I guess it is your last fireside chat. Let's start with you. Give us the brief overview of Jamf, what do you guys do? And yes, what is the opportunity you're addressing?

All right. Well, first of all, thank you, Koji, for having us, and thanks, everybody, for appreciate it. Jamf's purpose is to simplify work. Just to paint a picture of what that means. You all more than likely purchase consumer technology in your life. And when you do it, you bring it home, you turn it on and you're pretty much able to get it working yourself and it accomplishes the objectives of why you bought it. You don't hire an IT team to come over and help you set it up. You're able to do it on your own. That is not how work works. As I'm looking around at some of the laptops that are sitting on the desk, more than likely you had somebody from IT load up what needs to be on that, secure it, restrict a whole bunch of things from happening. And at the end of the day, it doesn't exactly work like the consumer technology you either have bought or wish you could buy. But it is how there is no reason that work can't be consumer simple. With Jamf, we focus on you being able to buy that exact same device or have it issued to you. Go home, out of the shrink wrap, power it up, have it power on and be set up automatically, IT never touches it, all the apps that you needed or on it, it's protected without you necessarily noticing that it's protected. You don't have to VPN, you just have access to everything that you need. It just works. That's the way work should work. And if your objective is to make work consumer simple, what is the best technology you can imagine to really embrace. Our answer to that is Apple. Apple is the best, simplest consumer technology. So if your objective is to make work consumer simple, Apple technology the right technology to embrace. But we're not partnered only with Apple. We have a lot of great friends. Microsoft is probably our second most important partner. We're part of the Microsoft information security association and we work fabulously together with over a dozen integrations between us. AWS is a terrific partner. Okta is a terrific partner. Google is a terrific partner. Jamf brings together the best in the enterprise to offer our product to the market and our product is we manage and secure Apple network. And management means device management, it means application management, security means identity and access and endpoint protection. And we bring all that together in a consumer simple fashion, so that people love the technology they use and organizations trust it. And that's really the holy grail of technology in a workplace. The result of all of that is that we've grown to over 72,000 customers, run it with over 10,000 added in the last year. We run on over 30 million devices. We have -- in our most recent quarter, we reported $526.5 million of ARR, which is actually up over $300 million versus just 3 years ago when we went public. And of that $300 million add, $100 million of that have come from our new security solutions, which is a business that basically didn't exist when we IPO-ed, and that security business is now growing over 40% year-over-year. Every quarter that we've been public -- for 3 years that we've been public, we have beat expectations that we set out there. And every quarter since we've been public as measured by trailing 12 months revenue growth and trailing 12 months, unlevered free cash flow, we have achieved rule of 40. So that kind of focuses has paid high dividends.

Got it. No, thank you for that. I'm asking every management team a couple of standardized questions. One on the macro, kind of one on AI, big topic conversation recently. So on the macro front, demand environment. Here we are in June 2023. How does it feel June 2023, on a comparative basis of January 2023 and then maybe a year ago, does demand feel the same? Does it feel different? Are customers thinking about consuming Jamf maybe differently than 6 months ago or a year ago?

Yes, I can take the macroeconomic question. So yes, it's interesting for our guidance this year, we did actually to level set that piece. We did factor in the muted economics that we saw in the last half of the year. From a customer perspective, we hear some customers that were on the front end of that. You look at an economy slowdown. There's different parts of the industries that get hit at different times. So you have some customers saying, hey, we're through that. You have some customers starting it. So it just depends, and we're so diversified in our business, remember no customer represents more than 1% of our ARR. So we're so diversified that we have a lot of good stabilizers in our business. But when the macroeconomics return you should expect us to accelerate. So we're seeing a lot of diversity out there, and we're -- again, we have over 72,000 customers for 30 million devices and that's worldwide. And so we see the different things in different geographies at different times. But definitely, we factored our -- leased our guidance today the macroeconomics for this.

I got a follow-up for you there. You kind of mentioned you have a lot of good visibility in different types of verticals. Maybe some color on verticals that you've seen kind of gone through let's call it, optimization, right? And then maybe some verticals where you haven't seen it or maybe likely will not see any sort of optimization out there?

Yes. Interestingly enough, tech is one that I think we've all seen in the news. You've seen the announcements of workforce reductions, optimization whatever terminology you want to give. You look at historical ones, the fast-moving market to have that hit first like tech. You see banking industry, unfortunately, is going in the next round, you see big discretionary spend and then you see retail, that's kind of the way we -- if you go back and look at the history books, that's what you see these economic slowdown. When we talk to our customers, hey, we've seen tech, we're through it. They never just lay off people, right? They're not doing it just for, hey, we just need to reduce our headcount. They're just saying, we want to right size and invest in those other areas. So they're automatically hiring right back, right? And so I think that's an area that we're excited about in the future because a lot of those happen, we think, in Q4. So that would have been the low point as that comes up this next year. I think that will be an important industry and is our largest ARR vertical is the tech sector. We call it information just by -- that's tech. But I think in others, you just -- you see diversity. Transportation has been great for us. Health care has been great for us. Professional services has been great for us. inServ, I know everyone in here I'm looking around, I see it's still a lot of PC, but it's actually been a strong industry. HSBC was up in our stage. So we're seeing a lot of traction in various areas.

Got it. Got it. And then on the AI front, I wanted to ask you the degenerative AI question 3 different ways. So the first way is how does Jamf think about leveraging AI and GenAI into your offerings? And maybe a little bit more specifically, how does the security complement AI?

Those are actually great questions. So I'm going to break generative AI into 2 buckets. One bucket is just internal efficiency, being able to use generative AI to do things faster and simpler. Team is already on that, almost every company is already on that. So I'm going to focus on where you're asking, which is the customer value side of things. And I really see 2 primary pieces of value for customers. One is to present things in a human readable form. For instance, if you have a mountain of data that you're sitting on. Like for instance, if you were -- a company is 21 years old, you run on over 30 million devices, have a ton of security information on those devices and have 15 years of all IT experts discussing on your Jamf Nation website, how to do things with Apple and the enterprise, you're sitting at a mountain of data. Companies sitting on that mountain of useful data are in the prime position to take advantage of generative AI because you point questions to that mountain of data and you present it to the user in a human understandable form that can come in the form of how would I do something within the enterprise, but it also will come specifically on your security question is, we can train people on how to go in and look at the security events that are occurring and what to look for or we can point AI at it and come back and tell the user what's actually happening. And I think we've already got prototypes of that working. You actually saw a Jamf partner, CrowdStrike announced just last week that they've done something similar. So everybody in security is kind of looking at that same thing. How do you make all that data humanly consumable? By the way, the Holy Grail on the other side is rather than just bring the information to me. Now automate what I need to do about it. And that's where it's going to come to having APIs within your system. I'll also give you an example. Any Apple device that has received a rapid security response from Apple that has not applied the patch in the last 24 hours, I want to block from my network. That's actually a lot of work to go do that. Now with Jamf it's fairly simple. But it's not just intuitive. You got to know what you're doing. Unless you have a generative AI system where you can actually type out what I just said, and it will come back with the set of APIs that you need to do it. That's ultimately where we can take it.

Okay. Okay. Okay. And the second part question, the second part of generative AI and AI is what does it do to the end market that you're serving? Is it making them kind of pause and try and digest what does it mean? Does it not do anything at all? I mean what does it mean for you?

I haven't seen any pause related to generative AI. I think there's a lot of prototypes out there. There are some questions, but in general, again, I think the way the market looks at it is whoever owns the data from which the intelligence should come, they're in a great position. And Jamf fortunately, has more data on enterprise usage of Apple devices than Apple has. So there's nobody on the planet that has more data on enterprise uses of Apple devices. We're in a great position to help share that intelligence in an intelligent way. Whatever, great moment. Yes.

And then maybe a question for Ian on the monetization front of AI and generative AI features and products for Jamf. Do you plan on integrating them within existing offerings and it just becomes available within the price? Is it, hey, you only get this with the premium SKU? Or does it create new SKUs that you're able to sell?

Yes. Hopefully, you can hear me better. I heard the mic wasn't working so well. But yes, it's an interesting question. I think we're pretty early in the game to really go that direction. But whenever we add value, we're always evaluating, it'll probably adjust our price. So I think as we look at that, as Dean's examples become kind of more real, I'll say it, will you have the opportunities to evaluate our price at that point.

Okay. Okay. Okay. And the Jamf platform has rapidly evolved over the past few years. You've added security, you added a bunch of products. I mean you go to your website, you look at pricing. There's all sorts of pricing leverage. So maybe for those that don't know Jamf all that well from a platform. Can you talk about all the different types of offerings and how the platform has really changed over the past 2 years?

Yes, I can take that one. Back in 2018, every year, we have a user group discussion, and we talk to our customers. And we ask them, we're really doing well, we've got a great installed base in the device management. And what else could we do? What's your pain point and they talk to us about security and how we could evolve the security within the Apple ecosystem. It's becoming a bigger target. It's a more high-value target given that more enterprises and companies are using the Apple ecosystem. And so based on that, we did a combination of both inorganic and also just organic, developing our security platform and adding it on to the device management, whether it's Zero Trust Network Access, ZTNA, whether it's identification, connectivity, whether it's endpoint management, whether it's app life cycle management, all of these things coalesce around making that device a secured device, which is what our customers were asking for. You can't have a secure device unless you have a managed device because that's what deploys the security capabilities. And that's really resonated with our customers. And we're still building that motion to understand exactly how to -- we've got it into market. We're getting good traction there. And we're just learning how to double down on that, and we'll continue to do that.

Okay. Okay. In security, security is a big focus of the platform, now 20% of ARR. Why has the business had such a strong focus in security? What is it about security that's so important for Jamf?

Well, like I mentioned, I mean, it was our customers first request or their most frequent request. And because of that, we want to, of course, meet them where they are and that's really what's driven that. And it's also driven the success that we've had. Dean mentioned, we've grown the security business $100 million in ARR since we did our IPO. And that's based on the fact that we're continuing to listen to those customers. We're delivering what they want. We're learning those sales motions and how to bring that to market in a very efficient way.

Okay. Okay. And you've mentioned in the past, security offerings can often replace 3, 4, 5 solutions at times. I mean what are you replacing kind of category-wise? And why do these customers decide to choose Jamf? And maybe just kind of digging into that customer mindset, what does that trigger that all in a sense that like, oh, gosh, we got too much stuff, now we need to consolidate. What's going on in there?

Well, there's a lot of aspects of security. I mentioned before, endpoint security on the device for one. Zero Trust Network Access, that's another one. The app life cycle management. All of these things can be done. In fact, we had a deal we announced in our quarterly earnings release for the last quarter that we had an enterprise agreement, enterprise plan agreement that replace 5 different incumbents. And they represented all of those different categories. And what we found and our customers have found that if they use something that has been written specifically to work together, not only is there a price advantage. We haven't typically sold on price. We've had the greatest value, and we've learned how to sell value well. We've taken that into security, but with security, when we bundle those things together, our customers can recognize pricing advantage. And every CFO is doing exactly what Ian is doing, which is the right thing. Which is, is there a way we can have one line item? Is there a way we can cut back on some of these things at this point right now. This is something we absolutely need today. And by consolidating those, we've seen price advantages plus functionality advantages, as it relates to the Apple ecosystem. There's other companies out there that provide those capabilities across different environments, but only one that does it specifically to the Apple, deeply with Apple, it is made natively to integrate and work together.

When you think about the competitive landscape, I mean, how do you guys think about it? There's definitely security vendors out there that can do what Jamf does, I mean you replace a bunch of them out there for -- when you're selling the security products out there. But how do you bucket the competition? Who do you see out there? How do you think about it? You don't have to give me company names, but just how do you think about the competition broadly?

Well, we see 2 different types of competition generally in the market. On the SMB side, focusing on the S side of that, we've seen companies that have basically followed our playbook, which they've written specifically for Apple. They're much, much earlier in their journey and we have that 15, 21-year now experience where we have that traction that we've built up. And we've got that knowledge base. That's a huge -- it's a great moat for us to have, if you will. So we see them on the smaller end, very Apple-specific, but they will come in, talk about price specifically, ease of use, but that ease of use comes at a great cost of capability and scalability that we found. And then we have -- on the higher end, we have companies that tend to try to do all the different platforms. So the cross-platform, UEM, if you will. And we've also found that they don't have that deep capability that we offer in the Apple ecosystem.

Wanted to ask you a couple of questions on levers for growth. When we think about the vast use of Apple systems within the enterprise. And there's a lot of PCs out there, too. I mean you guys have a lot of ARR, $526 million, but there's a lot more devices to go. So how do you think about go to market maybe specifically from a big picture perspective but then also a little bit more granular from here's the MAC opportunity, and here's the PC opportunity?

We have that front pin of device management. And from that, we can extend. And the biggest area of extension is in security. We've talked about in many of our meetings that every device can have one device management product on it. But every device can have 5 or 6 different security products on it. So we see an absolute opportunity for cross-sell within the existing user base and then upsell as well. In the current macro environment, we have seen as many other companies, again, because they all have Ian's that's doing the right thing, do we need this right now? Is this something that we can hold off? And we've seen customers typically in the past have bought ahead when they buy their initial product or their initial license, they'll buy -- they know that they have open racks. They know that they're going to expand their devices, so they bought ahead. We've also seen them do that at renewal. And we have seen that muted lately, just given the macroeconomic. Now that's not going to continue forever, but as it is now. We see that there's an opportunity when that device expansion comes back, we've used this opportunity to really learn how to sell security into those customers because the device expansion hasn't been as it has been in the past. We brought in an overlay team that knows how to sell into the security market. That's been doing it for years. And they -- that's not a forever solution. That's a near-term solution to teach the territory managers how to fish and how to make sure that they're offering that security product into those customers that we hadn't had in the past. So that's one of the biggest areas of expansion that I see is really using the leverage of our existing installed base, our 72,000 customers and really moving that into the security space and then taking advantage of the device expansion when it comes back. And Apple is growing in the enterprise as well. So we have that as a third variable that can increase our TAM.

I'll just throw a fourth on that as well, and that is the fact that our customer base is growing. Forget about growing within our customers of the 72,000 customers, as I mentioned, over 10,000 have been added in the last year, net, so after attrition. So we're continuing to win logos extraordinarily fast. And then as John mentioned, we have several avenues for growth within that.

I think what's interesting about Jamf or maybe a misconception, and we've talked about this past, but I think it's important to address here is that we think about Jamf, we think about Apple, we'll just use Apple, as an example. I have an Apple Mac book, I have a phone and maybe I have an iPads, so every -- iPad, so every person might have 3 devices, but it's an attached to a person. And I think that's a bit of a misconception because there's lots of devices out there. Maybe you go into a hospital there's a computer sitting there that's not assigned to a person, but it's assigned to a room, right? So how should we be thinking about other avenues of where devices are. There's lots of devices that maybe are underrepresented by...

The way we describe -- that was very well stated, the way we describe it is it's a device built for a person or a purpose. If it's built for a person, you're right, it's the general productivity devices that we all use, in general everybody carries about 2.5 devices. Everybody got a computer, everybody has got a phone. I mean guaranteed, you got 2. And then some might have an iPad. And oh, by the way, just this week, Apple Watches have become manageable. So our TAM expanded from that perspective, which is wonderful. But then you got devices that are built for a purpose. What does that mean? How many have you been into a retail store and the point-of-sale system is an iPad. I mean that is actually the most common point-of-sale system these days, where you go into a hospital and the nurses that are walking around with iPhones, it's actually not their personal iPhone. That is an iPhone they're using for clinical communications and for HIPAA-compliant, it can't be their personal iPhone. They hand it off to the next nurse when their shift is over. Within a cockpit, pilot is now walking with an iPad that is their flight plan. It's no longer a paper document. It's on the iPad. And you can imagine the unique use cases that you have there, where airlines actually tell us, we want him to have connectivity -- or her to have connectivity so that they can have the flight plan. But because they travel so much, we want them to use the iPad for entertainment but we don't want them to do unless they're in WiFi because we don't want to pay for the cell streaming, but they absolutely can't do it, thankfully, if they're in the cockpit, right? So you've got a really unique workflow in there for those devices built for a purpose. And that's a whole another way to grow devices. And Apple's announcement this week with the Vision Pro, those are going to be devices for a purpose as well, starting with health care, in my view.

When you think about the TAM, we'll call it, the person TAM versus the purpose TAM, which one do you think becomes bigger over time?

Probably the person TAM. But I'll tell you on the Mac devices are almost higher always for person, almost always. There's a few purpose-driven Macs. But iPads, Apple TVs, iPhones, Apple Watches, Vision Pro eventually, there's going to be a lot of purposeful deployments there. And when you look at all of our top iOS deals every quarter, over half of them are actually devices deployed for a purpose, not just personal productivity. One of the reasons for that is because we hold price very, very well on those devices because they're getting measurable business value from it. So we really don't get into a big price debate.

Since you brought up the -- I think they're called the Vision Pro, the new goggles that Apple has. It has a new OS on there. And I know you guys are very close to Apple. So how do we think about the Vision Pro as potential new growth lever. And where I'm going with this is it's $3,500. It feels like it could be more corporate usage first, which would require some sort of management? I mean, is this a potential growth lever for you guys?

You've never seen Apple ever announce a new device and go to the work use cases before going to the home use cases. So that ought to tell you something about their vision with the Vision Pro. And don't get hung up on the price too much. The first mobile phone was the size of your forearm and $4,000. So it changes over time. But Apple has, up until this week has had 4 manageable devices. The MacOS, iOS, iPad OS and TV OS. This week, they added Watch OS to that. So that's what I mean by our TAM expanded. Sometime in the next couple of years, I bet you have Vision OS added to that as well. They definitely have their eye on enterprise use cases with the Vision Pro.

Got it. Got it. Okay. How do we think about innovation from here? Where are you investing for growth? Where are some of the kind future aspects, road map, product development? I mean, how do you continue to drive growth from here?

I mean it's a combination of our own vision. We are constantly launching capability that we are unaware that anybody else has. Like we had an enforceable conditional access that we launched this spring that we think brings Zero Trust to a whole new level, having nothing to do with anything that Apple launched. But then you have weeks like this week with WWDC. Our teams are going to be maxed supporting all of the stuff that got announced this week. And our competitors, frankly, are all rolling their eyes going on my word. We have to support all that stuff. And they'll pick and choose 2 or 3 things that they think are going to be the biggest newsmakers and they hope that they guessed right and there are going to miss 4 or 5 different things that they really needed to support but they didn't understand the market very well. That is something that happens every year. This is a really big year for us actually.

When we think about WWDC and all the announcements, and you just mentioned, there was a lot of good stuff coming out of there. I didn't tune into it, maybe give me the 1 or 2, 3 things that we should really be paying attention to that.

To me the biggest thing is, again, the now 5 manageable devices with a 6 to come. But in addition to that, Apple announced their intention with identity, in that they intend on all work devices, not BYO devices that you should have a personal Apple ID and a professional managed Apple ID that, of course, that workflow needs to be managed by companies like Jamf. And between that combination, we can ensure you have a trusted device and a trusted identity to overall have trusted access within the organization, but you've got to do both. And if you're just thinking about it from a device perspective, you're actually missing half a Apple story. Apple has been very vocal that they believe that management, endpoint security and identity and access management are all converging. Well, Jamf is the company that's converging those things. Almost any large identity and access provider you can think of doesn't have management or endpoint protection and vice versa. Jamf brings all those 3 things together.

Got it. Dean, as we wrap up your last fireside chat. I want to ask you one last question. You've got a couple of more months here as CEO before you hand off the reins to John. What do you want to accomplish in the last few months? And what is giving you the confidence that it's -- now it's maybe it's time to step away and hand off the reins to John?

Well, for all practical purposes, John has those reins right now, and it's actually been, frankly, holding on to them for the last couple of years here. The first most important thing at all is just to continue to execute, execute really, really well this summer, achieve our objectives, embrace, bridge this technology, all this exciting technology that came out this week. I can't keep my hands off, that's enough. I'd love to take a look at that. But I think probably more than anything in the last couple of weeks other than -- or last couple of months other than execution is just connecting with the team. I have grown to love this team over the years. And if I didn't love my wife and kids more, I'd be staying. But the confidence comes from just watching. John's got skills I wish I had. One of our biggest areas of expansion is outside the U.S. and I've said many times that John has forgotten more about international business than I will ever know. And so that is the reason why I'm retiring because I have such confidence in Ian and John and the rest of the executive team to be able to continue to bring -- I feel fortunate to be able to stay on the Board and also feel fortunate to stay as a customer. So I'll have -- and a shareholder, all of our front row seat to Jamf's continued success in the future.

Awesome. Guys. We're out of time. Thank you so much for doing this. Really, really appreciate it. Thanks guys.

Thank you.