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

Great. Okay. Good morning. Let me kick it off here, I am Samik Chatterjee, the analyst covering Jamf and starting off the conference on day 1 here, we have the pleasure of hosting John Strosahl, who's the CEO; and David Rudow, CFO of Jamf. Thank you both for attending the conference and participating. We appreciate your time coming to the conference.

What we're going to do, and this is not specific to Jamf, but we're going to -- in companies we talk to over the next 2 days, we're going to ask everyone this question about the macro since in our view, that's what the most pertinent question for investors at this point. So maybe I'll sort of phrase it this way. You have a lot of conversations with your customers on an ongoing basis. And based on the feedback you're getting from them, how concerned should investors be that we are sort of potentially going into a recession in the back half of the year, or there's a significant slowdown that we are about to see in the back half of this year?

Well, I can take the first part of that, and David certainly feel free to chime in. I guess, certainly, we should probably be forecasting the economy to the economist, but I can certainly talk about what we're seeing from our customers and that is just caution really. I mean we've seen some elongated sales cycles, not indifferent than it was in Q4, and we see that continuing into Q1. Caution around some more approval levels, uncertainty, I don't think the demand has gone away. In fact, I think that there is even maybe some more pent-up demand because there's been this caution for a while. But it's certainly something that weighs on our customers. And if they pause hiring or if they pause other things, procurement, those are things that can impact the entire customer base, not just ours of course.

Yes. I think in terms of what we saw in Q1, it was kind of a normal quarter, right? It was -- Q4 was very strong. I think there was quite a bit of budget flush that happened. We were looking for any follow-through into Q1 from that strength in Q4, and there wasn't any. It was a good quarter. We kind of ended well for the quarter. And then when you look at April's results, it kind of was more or less okay. There's no clear indication that there's any additional hurdles to closing a deal. It's kind of what John said earlier, like last year, Q1 through Q2 is kind of have signatures you need and everything else. So there's no real change to that. And we'll see what the balance of the year brings out, right? We're looking at a pipeline build. We talked to the sales team all the time. Is there caution, yes, I mean, we saw a couple of deals slip in Q1. Nothing that was meaningful in North America. Europe was okay. And then APAC is very strong still. So we're watching, I think, the guidance update that we gave kind of just maintaining our guidance, I think it just -- I think it's prudent just to be conservative right now.

And then no tariffs are not a direct impact on you, but there's a lot of conversation, particularly when it comes to PCs, but seeing some level of pull forward, you support those devices at the enterprise. Are you seeing any of that happen? Or I know you talked about elongated sales cycles, a couple of deals pushing out, but are you seeing a pull-in at the same time at the device level that might be sort of then a bit more visible to you as you support those devices?

I haven't seen the pull in. I've seen usually refresh cycles will happen after the life cycle of a product. We've seen some of those be elongated because of the uncertainty. And then a lot of times, the device counts will go up in organizations due to the hiring plans that they have. And we've seen, especially in a couple of our industries tech being one of them, K-12 being another, where we've seen some of that elongated sales or elongated refresh cycles, just given the uncertainty and if they're not, at least in the commercial side, if they're not planning on hiring people, then -- and then they'll hold on to what they have. But again, that can't last forever. And when I talked a little bit about some of the pent-up demand, we're seeing some of that as those refresh cycles elongate. We're seeing that demand doesn't go away. It's just being pushed out a little bit given the uncertainty.

Okay. So maybe let's dive back into some of the commentary that you had on the last earnings call. And I'm just looking back at the last couple of quarters, you were cautious about hiring in the tech sector vertical itself a couple of quarters ago, but you've been seeing strong momentum when it comes to like financial services. Just maybe take us through what your pipeline looks like by customer vertical. And where are you seeing sort of areas of strength versus weakness relative to maybe what your expectations were 90 to 180 days ago?

Sure. Do you want to?

Yes, I'll run through. Yes. So for Q1, we saw strength in health care, financial services. We saw strength in APAC. APAC has been very strong for us. EMEA, South, Central Europe and then also U.K., Ireland saw strength in Americas were weaker as we talked about. We saw good new logo growth though in Q1, which is different than what we've seen in the past. The upsells were less, probably a little bit less than we anticipated, which has been kind of the ongoing issue with us over the last couple of years really as -- the good news is like the downsells have slowed. It's just the upsells is what we're waiting to see as whether they add additional heads or whether they expand their Mac programs inside the enterprise, that's what we look for on the upsell side.

Just maybe talk broader about hiring trends across all these verticals because as you mentioned, that's a good driver that you haven't really seen kick in for the last couple of years now. So like how -- what are you seeing right now? Is there sort of any vertical that you're seeing sort of hiring trends are improving materially?

Yes. I think as we mentioned, the financial services, professional services and retail are areas that are doing really well, and we're seeing hiring in those areas. We've seen a bit of a, again, a cautious, but a cautious optimism in tech. So there's been -- we did see some layoffs in January, and I think we took that in consideration when we guided for Q1 and how we performed in Q1. And we've seen that not be as high as it was in January, but not really go -- be steady state, a little bit less than January, but steady state if we look at tech layoffs and hiring plans in the tech space. But in the retail, professional services and transportation, especially, those are areas that are hiring and for a variety of reasons, expanding, especially their mobile footprint that's been a benefit to us, especially in retail.

Okay. So maybe just let's do a comparison, like you've run this business over a longer period of time and have much greater visibility on how it's tracked relative to investors. Past downturns or slowdowns in the macro, how have Jamf customers typically responded? And you obviously have a very high subscription model at this point. You've rolled off some of the licensing as well. So how do you think the company is overall positioned right now relative to maybe even prior slowdowns that you've gone through?

Yes. As far as the slowdowns, we've been around for over 2 decades. And so we've had to navigate a couple of them in the past. And I think if you look at it from a higher level, the products that we provide and the solutions that we provide our customers, especially when it comes to management and security of their devices and their endpoints, and it's not -- you can't have management a secure device without it also being managed. So the two of them really going together is really important. It's not a nice to have. So those companies need to protect and manage those endpoints. And when you look at the overall IT spend, we're not a huge chunk of that. So we're a smaller percentage of the IT spend in an area that is a necessary need to have. So those two things combined, I think, have led us not see as choppy as some other companies may see with respect to potential slowdowns or headwinds. I don't know, David, do you have...

Yes. And we do track like everybody else is probably the layoff tracker, I forget which one we use. But we looked at it. January, there was a bit of a spike. It hasn't been that bad, and then there was again a spike. I think it was in April, but there was 1 or 2 companies that laid off a large amount of people in the tech sector. So we watch that stuff. It kind of comes and goes. But where we'd see something if layoffs did happen and there is a renewal, you end up seeing, oh, we're going to need to lower our seat count. We haven't seen like a big increase in that yet, though.

Okay. Let's dive into the product portfolio a bit. And maybe we should have -- I should have done this earlier, like for any new investors to Jamf, maybe just outline the big pieces of the portfolio. You mentioned management and security, but just help us think about the portfolio as it stands today and separating out how it looks for an enterprise versus education?

Sure, sure. Well, we've really listened to our customers and oriented our solutions around the specific buyer or persona that is going to acquire our solution. And so when we look at that across the Board, we certainly have K-12. They have a -- we have a management and security solution that's really oriented around the K-12, which is a bit different than it may be for commercial, different buying motion, different solution that we would have with respect to network security and mostly mobile devices, which is particularly what they use in education. So we've got the K-12. And then we have the Mac for enterprise and the mobile for enterprise. Now they have a very similar buyer motion between those enterprise procurement organizations. And many times, though, within an enterprise, there'll be two separate buyers for that. Sometimes they're the same, but many times, they're separate. Someone handles the mobile devices and someone else may handle the laptops. And so in order to orient a solution that's specific to that mobile buyer in the organization that includes both management and security, again, at the behest of our customers, it really allows us to go in there and leverage the strength and the brand that we have in the IT device management side of it, and then extend that out through the security capabilities that our customers are asking for without going in and spurring up another sales motion in a security part of the organization. We can really go in through the IT, deploy that out and show and demonstrate the capacity of the management and security working together. Same thing would be for the Mac.

Got it. Maybe just taking that forward, you did have an announcement on Friday in terms of extending these capabilities on Android.

Yes.

So maybe flesh that out for us a bit in terms of like you obviously sort of the history of the company is in iOS. You have differentiated your solution when it comes to iOS relative to your competitors. So what's the strategic thinking in expanding to Android? And how do you create differentiation the same way that you've done on iOS?

Yes. And just let us state for the record that our focus on Apple has not wavered at all, and we're continuing down that path and making it Apple first and Apple best. And the only reason to include some capabilities here to enroll and then deploy an application on an Android device is again at the behest of our customers. Many times, we will -- companies will have a mobile fleet and a vast majority of it will be iOS, and they will have some Android devices, but not being able to deploy our security products, our customers want to deploy those security products on the Android device as well, but they may not have a methodology to do that, or they would have to go through another work stream to do that. So what we've done is really listen to our customers and created a work stream, a workflow that they can deploy those products, our products across their entire fleet, including sometimes of which are Android, but that's really our focus here was an answer to our customers' request to do that.

Okay. And just the second part of that, I mean, you've clearly put a lot of R&D into the iOS differentiation, but what does the Android announcement mean from an investment standpoint? Is the investment really in front of us? Do you now have to go and incrementally spend quite a bit to develop that same level of differentiation on that front?

Not at all. Not at all. We have some, like I said, some capabilities to deploy, particularly our security products on those devices. And we have that capability now that we intend on releasing here very shortly within the next couple of months. And so it's run proof of concept and things are in motion for that. So there's not a massive R&D spend or effort that we have to do going forward in that at all.

And should investors largely think of this as the primary initial customer base you're going after is the one that's already adopted the iOS solution, and they are sharing it on the Android front.

That's correct. It provides a means to an end to secure the entire mobile fleet of our customers.

Okay. Sorry, the last follow-up on this is, I mean, do you see yourself in very quick order going and sort of looking at deals that are only Android without any iOS competition?

That is not our intention. No, we're not throwing our hat in the ring to be a general UEM competitor that we would. We simply did this at the request of our customers, the ability to deploy those products on some of their fleet, which may also be Android.

Okay. Great. Maybe then talk about the competitive landscape. How does it look today? And particularly, you have a large competitor like Microsoft in the space, how do you manage to or navigate the competitive dynamics with that large competitor as well?

Yes. Well, a couple of things. The competitive landscape hasn't really changed. It's been pretty consistent. We hear some noise kind of ebbs and flows a little bit, especially on the smaller Apple-specific subscale competitor side. On the enterprise, you mentioned Microsoft. I don't know many software companies that don't have something that in some way, Microsoft also does. They do quite a number of things. But you must remember that Microsoft is one of our most closest partners. And we have over a dozen integrations with Microsoft into Defender into Sentinel. We were on the Azure marketplace. We use Azure as one of our cloud solutions as well. So there's a lot of touch points within Microsoft that we work very closely with Microsoft, and we'll continue to do so.

Okay. We've seen price increases across the industry, particularly with some of your competitors. So maybe can you talk about what your pricing strategy is? And how are you sort of evaluating price increases versus sort of price elasticity for demand?

Yes. I can answer and then maybe you've got some color on that. We never have been the lowest cost provider because we don't feel that we need to be. We really sell the value of our solution, our end-to-end capability, especially now with management and security together and being Apple native for those devices. So we haven't found it necessary to really be the low-cost provider. We offer a very good value for the price. And we do have, in many of our agreements, an annual price increase that happens. And that's something that we haven't done before, but now we are doing it because we see that not only is the market in general moving that way, but it helps continue to fund the investment in our products to continue to make them the right ones for our customers.

Yes. And we do add quite a bit of functionality built into year every year as we continue to develop on each and every product. There is quite a bit of additional functionality that we feel that we can charge for with the customers. If you look at the platform solutions, there's an embedded price increase that goes there. Business plan has embedded price increase. So we will look to get the value that we're developing for our customers and that they're seeing great benefit for in their environments.

Okay. Can you just walk us through how Jamf differentiates its marketing and sales strategy when it comes to Jamf for Mac versus the Jamf Business Plan? What are the specific customer segments targeted by each offering?

Yes, I can take a swing at that one. So Jamf Business Plan, remember, it's a user-based license and it encovers both mobile and Mac together. And the Mac for the enterprise is just the Mac, and it's focused on larger customers, and it's also device-based. So we have that differentiation. The Business Plan is really oriented toward the small-to-medium-sized business that kind of wants everything into one. So they have the mobile, they have the Mac, they have the management, they have security. It's user base, so they can use many devices. And that really helps accommodate a smaller, more dynamic SMB business, where the Mac for enterprise is management security for the Mac at scale with some premium services and cloud capabilities around that. That's really oriented toward the enterprise.

Okay. And I mean you envision it as Mac one is for enterprise, the Jamf Business Plan is for SMB, but are you seeing customers choose that way? Or are you seeing any interest from enterprises to have the business plan as well?

We have. We actually call it the enterprise plan. We don't generally talk about it as much as like the business plan because those are very specific cases where we work with certain enterprises based on that type of solution or licensing model, I guess, you would say. But primarily, it's the SMB on the business plan and the Mac for enterprise on the high end.

Yes. And we just released those SKUs, Mac for mobile, Mac for -- Jamf for Mac at the beginning of March. So we saw -- it's early days. Yes. And there's a lot of interest. We actually closed a bunch of deals in that. And then Mac for mobile launched April 1. So it's very early days, but like the initial traction and feedback has been great.

Yes. They've landed some deals already with that, which is exciting.

Moving to security and maybe just help us think about how do you envision the evolution of the security product road map, particularly in light of the acquisition of Identity Automation, how you thinking overall, how critical security is?

Yes. Well, I think first, it's important to note that we didn't wake up one day and think, "oh, we should go do security." Our customers had asked us, hey, we would expand our Apple footprint if we felt better about these devices accessing our corporate resources. So that's when we started looking at build, buy and partner security solutions, so that we had something to offer them. And we have both on device, the Mobile Threat Defense, on-device and Jamf Protect as well as network security as well. And so we have that span, but there are still areas that we can continue to expand in our security footprint. Interestingly enough, Identity Automation came to us. We had a go-to-market partnership prior to the acquisition, and we have had for a few years, and we've had a lot of good traction. In fact, of the 500 customers that Identity Automation has, half of them are shared customers with Jamf. So we knew that that solution had traction in going to market together and the fact that we can then work with Identity Automation, and they sold with the exception of 1 or 2 deals maybe outside the United States, everything is in the U.S., but we have 40,000 education customers many of which are outside the U.S. and growing at a faster pace than inside the U.S. And so it's a natural extension to take Identity Automation, continue the traction we've had in the U.S. because we still have a lot of runway there, but then also pretty much greenfield outside the U.S. and help them expand. And you remember, for our education customers, and we have entire countries that have standardized on our product and being able to extend that in the Identity Automation footprint into those customers, I think, is really exciting. And if you just think about all the different aspects to security, one of them, of course, is you need to identify the person and Identity Automation really focuses on the person as opposed to the device and also in the context that person is in. And so it started off using in education. They've expanded a bit to health care, but we see a lot of opportunity in this deskless workflows that we've been talking about at retail with all these mobile devices, where there's a similar framework or structure and how those employees may go from context to context and need different provisioning based on the context that they're in. So if you're a student and you're in fifth grade and you are in honors class here, but not over here and then you graduate to sixth grade, it can give you different provisioning's based on that. And if you think about a retail environment where you have a person that's at a certain store and they may be an individual contributor, but then the second shift, they'll go and be a manager at another location, they have different provisioning, but it's the same person. So those are areas that we believe we can extend Identity Automation, the great work that they've done in education, we believe we can extend that out into the commercial areas.

I mean this feels like it could really bolster your overall relevance to anything outside of the tech vertical, which is traditionally where you've been strong anywhere where this deskless workflow kind of position becomes stronger.

Absolutely. One of the fastest areas that we've seen grown is in the mobile space and specifically around this deskless workflow. If you think of airlines and in the cockpit, it's iPads, not flight books anymore. It's behind the cockpit and above the wing. It's flight attendants carrying the mobile device under the wing, its maintenance workers using iPads as opposed to the big manuals and finding out where things are. All of that has gone to deskless and every one of those endpoints need to be both managed and secured. And to the extent that, that context for that employee changes, Identity Automation can help even make that easier.

Okay. You had the partnership with Identity Automation before the acquisition. I mean were they also doing stand-alone sales without any necessary partnership? Like is your plan to continue on that front as well, selling Identity Automation stand-alone?

We're going to service our customers. And if they just need that solution, then we will certainly allow them to buy that solution. But many of them prefer to use because the solutions work so well together that they buy them together. And we'll offer pricing and offerings and things like that, that's commensurate with that.

Yes. And we do have a sale -- there is a distinct sales force for Identity Automation, and we're expanding that. We talked about some additional investments that we're making in Q2 and this year because we are seeing great traction and the opportunity to sell is international versus mainly in that 95%, 98% of their customers are in the U.S. They have a couple of customers in Norway, too. So we're making investments there. We're seeing the interest. And I know like if you think about cross-sell within our base, our sales team is excited about it as well, and they're ramping up for this busy season, but also in the Southern Hemisphere as well.

Okay. That's actually a good segue because I wanted to ask you to walk through how you're thinking about the international opportunity long-term. I know at the Investor Day, there was a focus on the international opportunity. Maybe just outline how do you see the international opportunity, particularly when you compare to your presence in the U.S., how do you think about the opportunity there?

Yes. Well, we continue to grow outside the U.S. at a faster pace than inside the U.S. And there's a reason for that. One is, and you would probably know this better than anyone, most -- if you look at Apple's financial statement, much of their revenue, more than half comes from outside the U.S. So you can assume that there's a very healthy, in fact, bigger installed base than inside the U.S. And so we can really address that. And we've been doing so with our local presence in all of those different markets. So we continue to work very closely with Apple, not just in the U.S., but in Japan, in Europe, in Asia Pacific. We meet with the leaders of those regions regularly. In fact, whenever time I go to Japan, I have dinner with the head of Apple Japan, and we talk about things that are going on in the market. So very close working relationships across the globe in partnership to help expand not only their installed base, but then ours as well.

And we -- sorry.

No, no, go ahead.

And we are making more investments, too. So channel represents about 80-ish percent of revenues international. In the U.S., it's about 50%, 55% for the average is about 60% globally. And so we're making additional investments. We hired a new channel lead out of London, Mark. He's a great guy. And he's kind of restructured the team, instituted some best practices across the entire organization. We're seeing more partner adds, and we're also seeing partners bring in deals, so we call it deal registration. But we have our new system that we deployed last summer. One of the -- some of the functionality is that we can now allow partners to register deals, get collateral. Quoting is coming. I think it's partially available now. But the idea is allow the channel to bring us deals too. We've done a great job internationally. We are working very hard in the U.S., too, and we've seen good traction on that side. So I'd say a portion of the revenue growth that we'll see is from the channel involvement to every -- internationally, especially.

Got it. Okay. Maybe just taking that into how it translates into investor models, I think the natural conclusion would be your growth in international markets should continue to outpace your growth in the U.S. over time.

That's our expectation. We've seen stronger growth. You think about Asia Pacific, we've seen tremendous amounts of growth there. And a lot of it is, in some cases, greenfield, too. The U.S., most have a solution unless you look at SMB that are starting. But on the enterprise, there's a solution out there that we can go seek to replace. But international, we're seeing great traction for some greenfield, and there's also a replacement market as well. But yes, we're seeing -- APAC is very strong. And then EMEA is the biggest international contributor, and we're seeing good traction there as well. And the partner channel is really helpful on that, too.

Got it. What are the puts and takes in terms of the solution sale in the U.S. versus internationally? Because when I compare it to some of the other companies we cover, there's sometimes a lower ASP or the same solution set is the customer doesn't go for the entire solution set. There may be bits and pieces that they choose to opt. I mean just the dynamics in terms of how the sales and marketing works overall tends to be sometimes different. Like what do you see on the product portfolio side that's different in international versus U.S. markets?

Yes. I mean there -- as you well know, not all of the international is the same. They're very distinct and different. One of the advantages of being geographically diverse as we are that some markets do better during some conditions, and I've never seen all of them rise and all of them fall at the same time, like APAC will go up a little bit. Europe will be down, but then the U.S. will be up. So it helps diversify that revenue stream, certainly. But with respect to the products, we don't see a big difference outside the U.S. There are certain pockets in maybe Central Europe and maybe the Mac hasn't caught on as much at that point in time. But iOS has done really, really well. And so we'll see more iOS than Mac in that market. But then in another market, it will be just the opposite because there's less iOS footprint right now expanding, but less right now and more of a Mac installed base. It really depends on the market, but we're seeing a lot of mobile growth outside the U.S.

Okay. You did introduce billing in international or local currencies. I mean, what was the driver there, firstly, what was the driver behind taking that decision to introduce that?

Maybe you want to.

Yes. I think it makes us more competitive. There are some deals where it's almost required to bill in local currencies. And so I think it will improve our win rates. I think we're -- you want to solve any of the negatives that a customer might have, whether it's a new deal or a renewal, if currency is an issue, we have that flexibility now. The system we rolled out Oracle now supports multiple currencies. And so as we sign new deals, there's an option to bill in local currencies. And upon renewal, there's an option too. We've seen some traction, obviously. It's -- we just released the Oracle in August. So there's some traction, but it should end up with better win rates at the end of the day.

Okay. Got it. How does that impact -- I mean, for investors, how does that impact the currency exposure on the top line versus the cost? And when do you get to parity on that front?

Yes, I think it's going to be a while. I think on the top line, we're seeing minimal benefit on the revenue side now. But we are seeing higher costs. We talked about on the earnings call, about 25% of our expenses are international. We have minimal offset in the U.K. and some in EMEA. But we expect about a $2 million to $3 million headwind on the OpEx side this year. And as we start billing more in local currencies, that will offset. I think it's going to take a while though. If you think about all that, we have 76,000 customers. As we enter new ones, they can move to the local currency billing. And then as customers renew, then they would also see if they have a choice, they would also then bill in local currencies to us. So I think it would take a while for that to be at parity between the revenues and the expenses.

Actually, I was going to go back to the last question was going on, on the international versus the U.S. Is the competitive landscape very different? And like do you see a different set of competitors? And does it actually become incrementally easier from a competitive standpoint in the international markets, given maybe some of the big sort of U.S. software companies are less present there?

Yes. But again, it's -- the different markets are different. In Japan, for example, you may have some lower-level competitors that are Japanese companies that you wouldn't see in Europe, for example. Again, nothing across the Board that's any significantly different, especially at the enterprise level. But sometimes at the smaller level, there'll be maybe some local indigenous competitors, but we haven't really seen that be a big headwind. It's pretty consistent with the competition that we see in the U.S., especially at the enterprise level and in varying degrees in Europe, depending on the maturity of that other company in market. We're pretty mature internationally. There's areas that we can expand, but I think we're in most of the geos that we need to be in. And then it's more a fact of how much do we invest in that area versus this area based on the demand that we see.

Okay. Let me just do a quick check if anyone in the room has a question.

[indiscernible] checking in with capital allocation priorities. Yes. So post the most recent acquisition and just given the stock year-to-date, any change in kind of your, I don't know, capital allocation stack rank between M&A, share repurchases, dealing with the convertible? Or are you just trying to build cash on the balance sheet at this point?

Yes. So we had about $222 million at the end of the quarter. We spent $175 million on April 1 when we closed the transaction. We've built a little bit of cash since then, and we will generate additional cash throughout the year. We do have a convert that goes current $375 million in September. It matures September '26. So we're actively working on a solution for the convert right now. Obviously, where the stock is at, it's probably not ideal from a dilution standpoint and a volume standpoint to do a convert. So we're looking at any and all options around that. I think it's important to understand like the idea would be the convert because I think it's a lot more affordable from an interest perspective. But at the same time, whatever solution we have, it's not a convert has to be flexible. So if the market comes back and our stock is at a level that makes sense, we would do a convert at some point. So those are the plans. I think the benefit is we continue to expand margins. We continue to generate additional cash, and that will continue out through this year and next year.

Maybe I have two for you, and primarily, this is on the financial side. But maybe let's start with the near-term guidance that you issued. What is sort of the assumption behind contribution from Identity Automation, both in terms of revenue, but also accretion on the margin front? And how much of -- like how do you -- how should we think about upside risk to that embed in there?

Yes. So when we gave guidance last week, week before, last week, it was $15 million we expect for Identity Automation for the 3 quarters. Now they have a seasonal cadence to the revenues. Q3 and Q4 are the strongest. They do -- and there's some different pieces of revenue. They do go-to-market with a cloud solution. They've done that over the last couple of years. But we have some bigger customers, existing customers that renew based on a perpetual model, they charge term for it. But those are the deals that we recognize almost a good portion of it immediately, and then we have a piece that's subscription maintenance that recognized over a 12-month period, too. And so you'll see a spike in Q3, that's the high point. Q4 will be down, and then Q1 and Q2 are low points if you're building on an annual model to that. What we talked about, too, is on the top line growth is accretive to Jamf. And then also on the bottom line, on an annualized basis this year and for the 3 quarters, they'll be accretive on operating margin as well.

And how do we think about upside risk to it? What are you admitting relative to?

Yes. So like -- I mean, any time you do an acquisition, you always -- I mean, you do the modeling, you know the company, you've talked to them for months, you talk to the sales teams, but you never really know like, okay, here's the number. We always -- even with the Jamf organic, we issue an achievable model, right? And so as we get to understand the cadence of Identity Automation and how accurate they are to the forecasting, I think it's still a conservative model, but we'll get to know them better over time and tighten up the guidance around that, too. But I think it's important when you do an acquisition, you can hit the numbers.

Okay. Last one from my side. I mean the Rule of 40 objective is something that you've outlined to hit by year-end 2026. What are the strategies or sort of what is -- what are you doing to make sure that stays on track relative to all the volatility in the macro aside? And how do you think about balancing growth and profitability to get to that target?

Yes. So as we talked and I think we introduced it last quarter, Rule of 40, we expect to exit run rate 2026. So Q4 run rate should be -- we're targeting Rule of 40. I think, obviously, we prefer growth over margin expansion. So we prioritize growth for our investments. We're making investments in the channel, products on the sales side. We are also doing, I think, a good job of really smartly investing for that growth right now. We've increased, I think quarter-over-quarter, there was 800 basis points improvement in sales and marketing. We've increased margins 1,100 basis points over the last 2 years. So we are continuing to really optimize the business and run it better and more efficiently. But the definite priority is growth. Like we're going to -- there's always a trade-off, right? And what's the timing of the trade-off. And we're mindful of that as we do our work internally and talk to the team across the world. The priority is growth.

I'll wrap it up there. But thank you both for coming to the conference, and thank you to the audience as well.

Thank you.

Thank you.

Appreciate it. Thank you.