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

This is the 43rd year we've done this conference. So we couldn't do it without the management teams that support us and the clients that make this a great event. So thank you all for being here. We're delighted to have the Jam management team here with us. So we have outgoing CEO, Dean Hager, incoming CEO, John Strosahl. John's current title is President?

President COO.

President COO, head of markets probably a good way to think about it...

Development engineering product as well. Well, [indiscernible] not financing and HR, left the best for last.

CFO [indiscernible]. So we're going to do this as a fireside chat. I have a bunch of questions we can run through. But if there's anyone in the audience who has questions, please feel free to raise your hand and we can work them into the conversation. So just getting right into it, Dean or John, are the ones that demand the show. Let's do a quick 2-minute intro to kind of who Jamf is, what do you guys do? And then maybe you can bridge that into a Q2 conversation kind of high fuel coming out for the quarter.

Yes. So Jamf were founded in 2002, so just over 20 years old. Our purpose is to empower people by simplifying work. And we think the best way to do that is through using and leveraging Apple's consumer simple technology. And we were founded, like I said, in 2002, we're actually in education. So our founder Zach Halmstad -- it was basically out of necessity to simplify his work. He didn't want to have to get up and he was an IT administrator at the university, didn't want to have to get up and go and put all the applications on every device and make sure it was updated in those types of things. So he wrote a program to where he could do that remotely. And it did really well at the University of Wisconsin-Eau Claire where he started, and it just kind of expanded to their other universities wanted to use it as well. And then it turns out, it works great for commercial as well because companies, they can ship a MacBook or an Apple device to someone's home, and they can actually -- we call it Zero Touch and everything can be put on a machine and updated and things like that from afar. And then fast forward 20 years later, and we have over 73,000 customers and manage over 31 million Apple devices. And I don't know. What else do we have here?

Yes. I would just add, we also have $547.8 million of ARR. And so our strength is in the commercial side. We have over 70% of our ARR in commercial and over 20% now is in our security business, which we just started around the IPO time. So growing from basically 0 to well over $100 million in a 3-year period is a testament to what we do.

And nicely profitable, I would add as well which you can unpack the numbers. Let's talk a little bit about Q2, kind of what you guys saw from a demand environment perspective and maybe you can kind of unpack that commercial versus education? And then we can get into some of the details.

Yes, I can start, and you can talk about some of the specific numbers. I mean demand is strong. The demand for our product didn't go away at all. We are seeing very similar macroeconomic headwinds that the rest of the industry is seeing. We had, I would say, an early adoption in some specific industries, particularly tech in education. Education has always been a pillar in our organization. And of course, that really took off during COVID in all these school districts, not just in the U.S. but internationally as well, went one-to-one programs and we certainly were there to support that adoption, that accelerated adoption, if you will, in education. And tech, the same way. And we saw what happened in tech, during COVID a little bit of layoffs right at the beginning, but then we had the great resignation and tech just hired like crazy. Well, then come to the first half of this year, and we saw the kind of the whipsaw of that in the tech industry. And because we had that accelerated early adoption in tech and also in education, we're feeling the effects of that in this last quarter just like everybody else is, of course. But you look at PC year-over-year shipments, 6 consecutive quarters of decline in PC shipments, that's not going to continue forever. If you look at the past 4 quarters, 22% decline in PC shipments. MAC actually, in the past 4 quarters have increased 1%, not great, but it shows that it's taking market share. And that, too, will come back, especially in the tech industry. we've typically benefited from a device expansion. We have a land and expand strategy, so we'll go in. And then companies will add more Apple devices, and we're there to support that growth in addition to finding new logos and things. Of course, device expansion in the second quarter was a bit muted, both on the education side, given the early adoption. However, they did that in 2020, and now 2024, which is 4 years later, in the next year is the refresh cycle that everyone's anticipating. So we see that. We know tech is going to come back. We know PC shipments are not going to continue to go backwards year-over-year. And so we have -- we believe that, that will turn around fairly quickly. And that's just in 2 industries that we speak about tech and education. But because of that early adoption, also it became 47% of our business, which was awesome. However, what we're seeing now is that adoption happening in other industries, such as professional services, financial services, wholesale and retail. And those have had great growth. Q2 was our largest consumer quarter ever. And we -- and as Ian mentioned, we had great security take-up as well. In the absence of that device expansion, we were able to cross-sell our security products into our installed base, and we had a 37% year-over-year growth in our security business, which is now over 20% of our total revenue, and it's over $100 million of ARR and growing at 37%. If that -- if you look at that just as a security company by itself, it would be valued very well.

So that was what stood out for you on the quarter -- in the quarter, it was -- you have this pocket of tech where everyone is seeing weakness. Growth isn't great there. But the other -- the next 3 biggest verticals are growing very nicely, and you have to think the tech we were talking before we came in this like not to believe tech is going to come back is like making a bet against venture-backed [indiscernible]. Dean one for you. Let's just talk about the CEO transition, kind of why now? What are you planning on doing? Give us an update there? I know you have worked with John for a long, long time, so it should be pretty seamless, but just talk about that.

Yes. And as John mentioned, we've been working together for 8 years. And to be perfectly honest, it was always sort of part of the plan. I mean he and I have been chatting about this for a long time. My wife and I, who's actually here in Boston as well, this has been part of our life plan for a long time. And as a matter of fact, it was part of our life plan to transition roughly 3 years ago. However, it was right around that time that we just jointly made a decision that it was probably best to take Jamf public so that we could be there to innovate for our customers for the long term. And so as a result, I went home to my life and said that the plan is going to be delayed by about 3 years or so because I knew I needed to stay for a minimum of 3 years after an IPO, while we IPO-ed 3 years ago, on July. And so it's just been part of a long-term life plan for us. And fortunately, John and I, and of course, Ian, as well -- John and I especially though have had a long-term partnership. This has been part of the dialogue for some time. And as you found out in the little conversation we had ahead of time, I mean, John's been running everything in the organization directly has been reporting to him for more than the last year or so. It's about as smooth a transition to move on as it could be. I'm still going to serve on the Board of Directors. I continue to be a shareholder, of course. And one of the things I'm retiring to do is to work with schools and more technology to under-resourced students and schools around the world. And of course, we use Jamf to do that. So I'm essentially going to be a Jamf customer as well.

Yes. That's great. So you talked about some of the headwinds in the industry in terms of unit shipments and John is in the PC industry that Apple has been kind of relatively outperforming. Maybe talk about some of the innovation you're seeing happening at Apple and kind of how that gives you confidence that they will continue to gain share in the enterprise.

Yes. I can start off, and then maybe, Dean, you can add some color to that. Apple has continued to obviously dominate in education. And as they become more enterprise-friendly and some of the -- we looked at WWDC, for example, they had some enterprise features that the additives, the Apple TV, making it VPN access, making it for video conferencing, making the watch manageable, those are all things which can support hands-free workflow things we see everywhere you go, you see iPads in retail, the capability they use at their own retail store actually at Apple retail. Of course, that's supported with Jamf as they've mentioned. As is the rest of their organization. And so as they do develop those things, they're focused on the consumer. They want to make that consumer simple technology, which they're the best in the word. And what we do is we just take from that consumer simple technology from what to what the enterprise actually needs and wants, or not just enterprise but schools as well, and we just fill that gap. And we've been very successful at it. We work very closely with Apple in that regard, both from a -- I mentioned they're a customer of ours and which is awesome because then they have a vested interest in making sure we have the best technology because they use it themselves both in their corporate organization as well as in the retail organization. They're a go-to-market partner. They actually resell our product in education. And we work directly with them, overlaying our sales team so that the same sales reps can talk to each other have some consistency within those territories. And not just in the U.S., but globally as well. We go to market with them. We read about the Giga project and the Taiwan Ministry of Education. All of those, we are walking in the door with Apple. Many times, they brought us in the door. Sometimes we brought them in the door. When we're talking to them, because Apple has done the math, and we've done the math. When organizations use Jamf, they buy more Apple devices because it's easier to use and manage and secure now in the organization. And so that symbiotic relationship has really benefited us. And certainly, Apple as well, but certainly us because they're a much larger organization. So I mean, we continue to see again, not just in the U.S., but we work with them on go-to market outside the U.S. in areas that they're expanding into. On their last earnings call, they talked about their expansion into India and we've worked very closely with them on that. In fact, we've had consultants there contractors there for a number of years, and we've actually flipped that over to a legal entity. So those are Jamf employees. And we work very closely with Apple folks in India to do the same thing that we've done in Japan, in Latin America, in obviously, North America and then across Europe.

Yes [indiscernible] an advantage that you guys have in this space. One of the questions I get asked from investors occasionally is how much of Jamf's growth is driven by new device shipments versus existing Apple devices in the enterprise that maybe you aren't managing yet.

I can jump in on that one. So thinking about our TAM, it's about $35 billion. And when we look at that, when we look at Mac, for example, in the enterprise, that's probably where we're most penetrated, and that's still somewhere between 15% and 20%. When you look at any other industry, any other vertical, anywhere else, we're probably in single digits. So we have plenty of room. They could -- for example, on the iPhone, they could stop shipping tomorrow, and we would still have a long runway and a lot of devices to capture. On the Mac side, no one quarter impacts our shipments. And unless there was some prolonged event there, we would not see any impacts on the Mac side as well.

One of the things I'd add on there, as we talked about in our prepared remarks in the earnings how many competitive takeaways we had against one organization in particular. Well, those, of course, were all takeaways. Those weren't new devices. Those were all existing devices there that we're using an alternative solutions. So clearly, all of that market is available to us.

Yes. We can talk about that in more detail as well. The other question that I get that I'm sure you're sick of answering is just like what's the risk of Apple competing in the space, right, like they have this business essentials product, like where does that functionality end, where do you guys pick up like what are the risks that maybe they [indiscernible].

So this is my very last fireside chat but you guys like me to take those questions for the last time. I'm never going to answer those questions again. So we have been very clear all of the years of our existence. And it isn't like we know Apple a little bit. We've been doing this 21 years. We we're text message partners with Apple, right? We're well aware of what they're doing. They're well aware of what we are doing. WWDC, John talked about a little bit that they just held with new innovations could not have been better for Jamf. We are so excited to launch those innovations at JNUC coming up in September. And Apple will be there right side-by-side with us because they know we're going to be first with it and they know that we're the path to the enterprise for them. Apple has a very, very thin layer of first-party support, as does for just simplistic commands to be sent to a device, which they absolutely have to do otherwise in the small business space, everybody will choose Android. If somebody goes into an AT&T store and says, what happens if my mobile device gets lost, can I lock it? And if the AT&T rep says, on Android, you can on Apple, you've got to go buy third-party software they are going to buy Android, Apple knows this. So anything that will raise Apple's presence in business is good for us. And they have had first-party solutions to be able to do that since 2011. So this is not even new and they have stated themselves multiple times. They have no intention to compete in the space, and I can give you all sort of philosophical reasons why they will never get into security solutions. They will never get into enterprise solutions. I say that confidently. I can't recall a deal ever in our history, where some rep came in and said, we lost the deal to Apple. We, in no way, consider them a competitor or do we consider that they'll ever be in the competitive space. They build simple solutions for the individual, for the consumer, Apple focuses on the person, and they build frameworks that allow Jamf to build solutions to focus on the people. And that isn't broken. They are taking enterprise share like crazy. You look at the last 10 years versus Windows and Apple has been going nothing but up, and Windows share in the enterprise has been going nothing but down and they don't have to worry about any of the enterprise headaches. What's broken? And the final thing that I'll mention is that they also make -- I mean John talked about Apple growth, but it's more than that. We are the #1 distributor of App Store apps to organizations and Apple, as everybody well knows, gets a cut of that. And that contributes to Apple's high-valued services revenue. They have absolutely no vested interest, whatsoever, of shutting off that income that they have coming into the services revenue. So the partnership is strong. We're collaborating around JNUC coming up. They're still a customer as we are of theirs. I just don't ever see that potential happening. And if it does, let me just say that they will rank -- and I say this out of love Apple, they would rank so low on the competitive threats because of other competitors that we have and Apple's past experience or nonexperience in the enterprise.

Glad we finally give you a chance to get that [indiscernible]. Let's talk about the security portfolio a little bit. I mean you talked about 20% of ARR growing nicely. Just talk about what those products are, kind of what the strategy is there and why you're uniquely positioned in this market?

Yes. I can start with that, and one of you can add color to it. On the security space, we didn't just come up and decide one day to build a security product. We actually have Jamf Nation, which is the largest membership group of any Apple IT and expert organization. We've been -- because we've been doing it for so many years. We have our annual conference, and we're having it this year. And in Austin in September, we have every fall. And we bring together several thousand Apple IT experts and now adding security to that. And we asked them in 2018, every year, we have a meeting with them and we ask them, hey, what do you -- what do you think? And how can we help support you bring more Apple devices into your organization? And in 2018, they told us it just happened to be that year. They said, we really would like to have better trust of the device when it's accessing our corporate resources. And so based on that, we had already -- we had acquired them some technology, and we built some technology on top of that and we came out with our security product Jamf Protect. And in direct response to what our customers have asked for. And so we have -- you have on the device, both iOS and as well as on the Mac. You have the network security, so the Zero Touch network access, which is obviously super important especially in a remote working. People are walking around going in different places and working from home and to have that 0 trust is really important. So both on the network side as well as on the device side, to secure those Apple devices. And what we talk to our customers about is we were looking for -- they are looking for an outcome, which is called trusted access. And we've actually then gone ahead and branded that and have the breadth of our security both network and on device fold up into that trusted access so that when those IT and those organizations, IT administrators and CISOs know that when there's an iPhone out there or when there's a Mac out there and they're accessing it either from within the company or from outside the company, that, that device can be trusted and they can access the resources that we have. And the fact that you have management and security, which really sets us apart from our competitors because they'll either have only management or only security. The fact that we're the only Apple-specific management and security at scale. There's no other company that does that Apple specific. There are some smaller Apple management specific competitors, but they know where near the scale, and they don't have the security piece to go along with it. And you can't have a secure device unless you have a managed device because how are you going to make sure that everything is updated and remediate and do all the things that you need to do on the device once you know that there's a threat either there or about to come. So those 2 things really fit hand in glove, and it was at the request of our customers, which is one of the reasons why it's resonating so well and has such a great growth rate.

Yes. And maybe you can talk about kind of what you're seeing in terms of per device ASP trends. I think there was a stat you shared on the Q2 call that I can remember it was your second largest deal in tech was 0 new devices. It was just selling security in. So like how material of an uplift is it when you have a device under management, a new layer of security on top of this?

It's -- I mean it's obviously a significant uplift. Not only does it make the customer more sticky, but then we get the financial benefit as well. Our largest deal, we talked about a major brand that had bought us. It was actually a replacement. It bought us this past quarter was our enterprise plan, which includes both the security piece as well as the management piece. And that's a significant uplift to our per device.

Yes, just to add color. So when you think of Protect, think of that as $80 or so. And then you think of Connect is it like 50% of that and then Protect as 75% of that pricing. So you get that output.

You said Protect [indiscernible] $80 pro.

Pro. Yes, sorry.

And the other theme you guys talked about on the call was kind of this convergence of IT and Infosec inside the organization. And before it was a little bit more challenging, maybe you were selling device management and IT and security into Infosec now we're kind of -- it's becoming the same buyer, which going to take some friction out of our market motion?

Yes, that's a positive sign for us. Now in the SMB market, it's always been the same person. It's been the IT person has also secured the device as well as manage them. And we have great relationships with the IT groups we saw that in the mid-tier and above, that's when the InfoSec and IT organizations tend to bifurcate in the past. And so we've had to get those relationships. We've leveraged our great relationships in IT and had them give us warm handovers and things to the security organization and the InfoSec teams, but now we're seeing at the -- even in the enterprise, we're seeing those groups come together. And we're not sure is that just -- is that a trend because of cost purposes? Or is it really because they're fitting together? We believe it's because they're fitting together. That's why we develop the technology to do so. And as a result, we have that really strong installed base and reference point that the InfoSec team gets directly. And so we can actually access that one economic buyer versus having to kind of talk to a different economic buyer within the same organization. So that's a positive trend for us, and we expect it to continue.

One of the things that was so exciting in Q2 to me, we've always talked about that convergence started in SMB. But in Q2 alone, and we mentioned it on our earnings call, we had a 20,000-seat Jamf Protect license to a professional services company, a 10,000 Jamf Protect to a financial services company, a 15,000 Jamf Protect to an educator and then the large deal that we were talking about, that was our largest deal, which was in wholesale and retail industry. So like across all industries, we really started doing major enterprise deals of our security solution in addition to the SMB traction, which is a great sign for the future.

Yes. I want to talk a little bit about the go-to-market motion. You talked about kind of alignment with Apple. They're a great partner for you, but you guys also have some other exciting partnerships I think you talked about British Telecom on the carrier side earlier this year, but you have Microsoft and AWS and Okta a bunch of other partnerships like how do you feel like -- how do partners contribute, which of those kind of -- do you see the biggest opportunity with [indiscernible].

Yes absolutely. That could be a whole different additional fire fireside chat. As we continue to grow, and Ian mentioned, we're $300 million in ARR more than what we were when we went public. And as a result of that, we've got to really find some efficiencies and scale and we've been working on that, and we'll continue to work on it. One of the areas that we've done is really leveraging our strategic partnerships as well as our third-party channels. Now the carrier deals came primarily through the Wandera acquisition. They did a lot of that in carriers. And we've been able to leverage that and get on price books and things with -- obviously, with BT. I was down in Sydney several months ago, and we actually got on some of the major carriers down there, price list so that the sales people can see that when they're talking to their customers, they can offer that and include it in a quote when they otherwise wouldn't be able to. So that's really benefited us. Strategic partnerships like AWS, we're listed in the AWS marketplace. We're part of the ISV program. And that allows our customers and their customers to actually use AWS committed dollars to purchase Jamf products because we use AWS Cloud, and that provides them cycles on AWS. So their sales rep gets quota retirement and commission on that. and our sales reps do. And guess what happens when you put those 2 guys together, or gas as well, that they really go to market and sell all together. So we've seen some great deals that we wouldn't have otherwise gotten because especially in today's time, you've got some earmarked dollars for AWS spend, and we can use that to purchase their Jamf products and boom, we've got that. Plus it makes it easier to do because there's a process in place. Microsoft technology-wise, we have over a dozen integrations with them. We can put inventory into their endpoint manager. We put our security telemetry into Sentinel. We do a lot of things on the technology side. And the fact is they're the only other company that has an ecosystem specific solution at scale for the windows. So when you talk about Microsoft going to market with the Windows piece of it and we're going to market, and we do the same thing on the Apple side of it, there's no endpoint that we together can't cover. And so that makes a pretty powerful message to our customer base.

My timer clicking on 0. I want to give you Dean the last swing of the bat since this is your [indiscernible] conference. What do you think investors still underappreciate about Jamf.

Every thinks of us as -- still as the Apple management company, I mean that's our brand. And of course, we are the market leader in that space. But if you think about the reason we went into the security solutions, and again, it's not just -- we call it management security, but the security side has private access. It's the whole ZTNA access points, which might be something akin to a Zscaler of the world? And then we have the endpoint protection that might be akin to the CrowdStrike of the world. And then we have the management solution that might be akin to the VMwares of the world, the Workspace ones. Every single customer in order to achieve the trusted outcome access that John spoke of, has to integrate those 3 solutions. And that's the customer's responsibility. They have to do it or they can't possibly stop access from a device that has a vulnerability on it. Jamf is 1 of 2 companies on earth that provide that entire staff, integrated together to achieve the trusted access goal right out of the shoe. And it's us and Microsoft. That's it. And Microsoft does it from a Windows first perspective and Jamf does it from an apples perspective. Nobody else in the world does what we do, which is why we're closing some of the deals we are doing and why we have so much momentum in that space. We really are redefining the security market in the same way we redefined the management market so many years ago, and we expect the same kind of success.

Yes. At this very spot we leave it. Jamf team, John, Ian, Dean, thank you guys very much for being here, and look forward to keeping touch on progress.

Thank you.

Thanks.