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

So I guess we're ready to kick this thing of. You guys are here in the right spot for our fireside conversation today with Jamf. Today, we have a couple of very special guests with us. We have David Rudow, CFO; Jennifer Gaumond, Investor Relations. And yes, thank you, guys so much for making the time.

Yes. Thank you very much.

Thanks for having us.

Intimate gathering. And if there's any questions, interrupt if you need to. Yes, please. If anyone wants to raise their hand, we'd love to hear your voice too. But I kind of wanted to kick it off maybe for those in the audience that might be a little bit newer to the story or kind of revisiting. I kind of wanted to ask about Jamf past, present and future and kind of just would you guys be able to give a brief background of maybe the problems that Jamf solved in the past, kind of where the roots are and as well as kind of heading into the present and future, what sort of problems you might be able to solve going forward, maybe in light of security adoption, the Android announcement and the Identity Automation acquisition.

Perfect. Yes. So Jamf is about a 22-, 23-year-old company now. We were started back in Eau Claire, Wisconsin of all places. And we originally started out managing education devices, right, Macs on the education side. Through the years, the company grew and then we started to expand into commercial side, about 25% of our ARR right now is education. And we expanded into commercial. We did the Wandera acquisition in 2021, if I'm not mistaken. And that pushed us into the security space, too. So when we went public security was a small part of ARR. Now it sits at about $160 million of ARR, so nice growth there. We continue to expand globally. We sell in about 120 different countries around the world. We mainly sell through the channel. Internationally, about 85% of revenues are sold through the channel internationally and about 55% in the U.S. We have created over the last quarter a platform solution where we can sell in we call it Jamf for Mac, Jamf for mobile, Jamf for K-12, where it's a combined management product and security in the same bundle platform that we're selling now, and then we are coming out with a new SKU for the SMB space as well. We closed the Identity Automation acquisition on April 1, which puts our first entrance into identity automation -- identity management and that product manages, we call it a dynamic identity management. And originally, it started in schools. And so you think about how a student progresses through their life as a student. I'm in the first grade, I'm with teacher A, maybe teacher B, I need this access. So this would tag the identity to that student and then it can access apps, websites, everything else, I wouldn't have to carry a password either. And then each quarter, each semester that changes. So that's why it's the dynamic piece of that. And then it will carry them through their entire school year. It's for students, teachers, substitute teachers, parents that sit in on the education side as well. And so originally, we sell into the education space, they have a small health care piece, too. And so we do have the ability to sell that into our 40,000 education customers around the world. And so we're actively working now to get that out training and update the channel through this busy season, which is Q2 and Q3 in the Northern Hemisphere, and we're also making investments in the channel and training for the Southern Hemisphere, which busy season should be Q4, Q1 of the coming period. And then we did announce through Bloomberg, they came out with a story that we're supporting Android for mobile. And we've been supporting Android devices on the security side, but we haven't been able to manage them. So this product is for mixed-use environments. A lot of our customers have Apple iOS devices and some Android. So this gives us the ability to have one tool that our customers will use, so we can manage and secure Android devices as well as the iOS devices that we support in the field, too. I think that's it.

Makes sense. And that comment on mixed device environments. I kind of want to dig into that. Obviously, Jamf comes first of mind when selecting the device for managing the Apple ecosystem. But can you kind of talk about how that leadership position helps position yourselves when you're selling to enterprise and schools with mixed device environments? And has there been any change in that competitive dynamic there?

I'll take that one. So I would say there hasn't really been a change in the dynamic. For the most part, every situation that we sell into is a mixed environment. So that's always been the case for us. And the way that we go about that is really selling on the value proposition of managing and securing your Apple devices in the best way. It is a Jamf proposition. And we are more than happy to feed. So it's really about providing what we believe is the best solution for those specific devices.

Perfect. Perfect. I kind wanted to ask a question on pipeline. Kind of currently in your sales pipeline which products and use cases are kind of driving the most interest? And how do you maybe see that evolving over the medium term? Are there any sort of trends to kind of call out there?

Yes, we've been going to market with like a ala carte menu of products. So we sell management, we sell protect, we sell connect. And what we found is as we sell more and more of the combined products into our customers is they have much better -- much lower churn and more adoption. The more that you sell them, the more they deploy the lower churn rate is. and we would sell into the IT department and the security department. And so what we did is we came out with these platform solutions and integrating the 2 together because you really -- it is collapsing so that you need to manage and secure at the same time, securely manages what we call it. And so what we've done is offer that solution. And so we're seeing a lot of the pipeline built on the platform, so Jamf for Mac, Jamf for mobile and Jamf for K-12. And we still sell ala carte if they want it, but most of the discussions around the platform solutions that we're selling. Now Identity Automation is also coming into it now since we acquired them, and so that's part of the pipeline build as well. And the mobile to mobile, I think, is a very big opportunity. It's still early days. There's a lot of deskless solutions that are coming out there. You think about transportation, health care, professional services, you go to retail now, too, like when was the last time he actually sat in front of a POS terminal, right? There's iPhones, there's iPads that are being used to sell things. So I think the world is changing to more mobile solutions in the enterprise and with all these different verticals. And we're seeing a lot of activity there, too.

Makes sense. I wanted to ask on guidance, right? So macro has obviously been very dynamic over the past couple of months and not asking for an update on kind of the demand environment currently, although if you guys want to provide it...

I would love to, I mean do an 8-K, so...

But would you be able to talk about what you were seeing when you formulated guidance and kind of what was factored in, in terms of the demand environment and maybe what could drive upside or downside to that?

Sure. Yes. So as we were preparing for Q4 call and giving guidance for 2025, January, there are a bunch of layoffs that happened. We saw layoffs. Now it wasn't a meaningful number. But I think what that told us is it's still an uncertain environment overall. Last year, there's still uncertainty, there's still a lot of signatures that go through. Q4 was strong from a budget flush perspective. But we saw in Q1, it didn't flow through. So we believe in building an achievable model. I think the beat and race story is relevant for any public company out there. And so that's in the back of our minds as we set the guidance for the year. When we reported Q1, we beat -- we were at the high end of the guidance range. And what we're seeing in the market did not justify lowering numbers further. We saw a handful of deals slipped. There were a couple of cancellations of deals, 3 cancellation of deals in North America, a couple of slip deals. Europe saw a couple of slip deals, too. But it wasn't meaningful enough and these are deals that slipped specifically because of tariffs that were mentioned in the sales process. We didn't think at that point, it required us to lower numbers. So we did just maintained the full year, so we didn't flow through the upside in Q1. April came and went and April was more or less in line with expectations. But I think there still is a lot of certainty out there in the marketplace. We've not seen hiring come back in strength. Our biggest vertical is technology. We've seen a lot of growth in technology over the years, but hiring has been slower there. And so that's in the back of our mind as we gave the guidance for the year, and we rolled in Identity Automation as well into the numbers too in Q1.

Makes sense. I wanted to ask on NRR, which has been 104 for a couple of quarters in a row now. I wanted to ask what in-quarter NRR kind of look like? Has it stabilized? Has it kind of improved? And kind of maybe if there are kind of pockets of healthier NRR in the business mix?

We really look at it on a TTM basis. And so we're seeing that stabilization. We talked about on our Q4 call how we do expect things to kind of level out around the 104-ish area. And that's really due to the fact that the security business has now grown to be a size to support that. And then we expect it to increase from here. I think a lot of that will depend on, obviously, continued penetration of security, the platform solutions certainly assist in that. And I think the upside of how that to accelerate quicker would really be a boost in the hiring environment to kind of bring out that kind of upsell of devices to accelerate that.

Yes. That makes sense. I wanted to ask to -- so as you mentioned, Identity Automation, the acquisition was closed April 1, purchase price of $216 million, of which $40 million was deferred consideration. What are kind of the milestones for the deferred part of that purchase price?

Yes. So the deferred part of the purchase price is just time-based. We -- in the negotiation process, we -- for capital management from our standpoint, we pushed for a piece that was sold that will be paid later in the cycle, in the period of the time frame. And I will touch on that. So we did a TL -- I don't know if you get the question, but I'll answer it now. So we just signed a TLA 2 weeks ago now, $400 million. It's attached to our line of credit that we had in place, $175 million that is not pulled right now. And so part of that money will fund the $40 million for Identity Automation. We also have our convert will go current in September of this year, and it matures in 2026 in September. And so part of the cash will also be used to buy down some of that convert position as well. And then the balance will sit on the balance sheet.

Okay. That makes sense. I wanted to ask to just how you see Identity Automation and maybe stepping back, the kind of different parts of the growth algorithm. How do those all tie together kind of over the medium term in terms of Mac and OS device management, security and Identity Automation for all those.

Yes. So I think management is a more mature market. In the U.S., it's more mature. Internationally, we still see a lot of opportunity where there's higher growth. Security is our growth engine, right, because it's a newer product where we see strong growth in the U.S. and international. It grew at 17% last quarter and 17% in Q4 of last year. Identity Automation will be a separate SKU. And so we aim to sell that into our installed base within the education space around the world. We are seeing a benefit from Identity Automation. They're actually taking us into their customers now, too. So on day 2 of the -- since we closed the deal, we actually sold a deal into one of their customers. We do have overlapping customers. They have like 500, we overlap with 250. And so we have seen a lot of interest, and there is some deals in the pipeline as well for us to sell into the Identity Automation space. We also with the Android support within mobile, I think that will help us with win rates because there are some customers that might not want to have multiple tools to support Android and Apple. This way, we can support Android and Apple at the same time. It's a matter of now we can finally enroll them and secure the devices.

Makes sense. I wanted to ask one kind of just about refresh cycles. So it's been called out that some customers in large verticals like tech and K-12 are kind of seeing elongated device refresh cycles. What are some of the drivers of that hesitation to buy new devices for these customers, in particular and how long can they kind of sweat those devices?

I think really, we're in an environment, right? And I think David would say the same thing as everyone is looking at their cost structure and their spend and looking for ways to minimize cost creep, right, and asking about every single expense, doing zero-based budgeting, things like that. And so I think what we see as organizations and one of the benefits of Apple devices is they do have a longer life. And so I think what we're seeing is elongated life of those devices within those organizations. And for us, really when someone goes for a refresh from Apple to Apple, that's, for the most part, a net 0 for us if you're keeping the same product set. But where we see the opportunity is when those devices are refreshed, could we add more of our products onto that device? And then also, can we take share from other platforms. And so I think what we're going to see when refresh happens, so I think it's going to be much more staggered than we've seen in the past kind of with COVID, right, massive device deployments happening in 2020 and 2021, both on the education and the commercial side? I think you're going to see it come in, in just smaller waves. As companies see like, well, this device, I always talk about a kids device getting banged around in a backpack now for 5 years. It's got to be nearing end-of-life, but are companies in school districts being more surgical and just doing them device by device or smaller chunks of devices at a time.

I wanted to ask to -- last quarter, you guys called out strength in financial services as well as professional services, retail. Could you talk maybe a little bit more granularly about how that growth broke out between device growth from using cross-sells as well with mobile.

We've seen a lot of nice mobile traction on the financial services side and others. We've seen -- I think in Q1, there was some activity on the platform solution sales, too, for Jamf for Mac. But it really is kind of the new logos and mobile that are causing higher growth rates within the financial services vertical specifically.

And for retail, I would say it's really on the mobile side, right? So really shared devices within the retail sector at the point-of-sale side, dressing room management, a lot of things related to retail.

Makes sense. Makes sense. I wanted to dive a little bit deeper into the new SKUs Jamf for Mac, Jamf for K-12. Could you talk maybe about how those sales processes and the buyer might be different for those or maybe the same? And do you expect many customers to switch to those SKUs and maybe if there's a pricing impact?

Yes. So the way to think about the platform solutions is really tailoring a solution set for -- to leverage the strong relationships we have within an organization, and those generally sit within the IT department. We've been around for 20-plus years. And we've had very strong relationships with IT admins in organizations as well as in schools, right? We've really built an industry around it if you look at Jamf Nation, right, really increasing the standards, doing certifications, things like that for that community. And so it offers a way for us to enter with Jamf products with a strong relationship and then build from there. And that's not to say we don't still go after on the CISO side when we're selling in the security products, but it really helps us enter in where those relationships are the strongest and where we think we can leverage them the most.

I wanted to ask, too, on the international opportunity. Maybe just given the success of the enhanced partner program internationally, how do you view the long-term potential for Jamf in international markets? And is there any sort of Mac versus PC adoption trends that kind of differ from the U.S. or maybe iOS is growing faster in those markets?

Yes, we've seen very good traction internationally within education and on the commercial side, too. APAC has been very strong for us. That's a very strong region for us. EMEA is a very -- it's a big region for us as well. We have a very good financial services exposure there, too. I think the growth that we're seeing is being driven by the management -- kind of our core management product, the security add-on and mobile, again, is a big area for us too as we look out towards the future. And in turn, we would expect that as we push on the channel more, channel is about 85% internationally. It's a natural motion. There's regions that we still are -- we need to go into. There's new regions that we can enter into, and we will do that with the partner channel. And as we rolled out our new systems update last summer, we do have the ability for partners to go out and actually register deals, get pricing information quote as well. And so as the channel expands, we would expect them to start bringing more deals in that. So registered deals, we've seen a very nice uptick. It's from a small base, but that should be an enhancer of growth as well internationally, and we're seeing that in the U.S. as well.

Makes sense.

No, I was just going to add, we really prioritize specific regions on where we see Apple adoption accelerating because there are some areas like India, for example, that has that doesn't have Apple penetration near as where you see it in, say, the U.S. or in EMEA -- well, in Europe, I should say. And so how do we prioritize to capitalize on the opportunities where we see Apple adoption growing.

Makes sense. I kind of wanted to ask, is international -- does the mix of business kind of look similar to the U.S. by product or kind of by education or by vertical.

Very similar. Yes, very similar.

In education, we are seeing countrywide deals on there, too. So we sold a number of countries where they're deploying devices across the entire country in phases and so we've been able to win those deals and expand with the countries as they do that on the education side.

Perfect. Perfect. I wanted to ask too about margin expansion and kind of that side of the story. So operating margin guidance of 21% this year, 5 points higher than last year, but that's also kind of burdened by integration costs for the identity automation, FX changes. What's kind of a more normalized cadence of margin expansion? What levers are kind of available to pool there? And is there any sort of how would a potential reacceleration in the demand environment impact maybe that cadence?

Yes. So we have expanded margins by 1,100 basis points over the last 2 years. We're looking for another 500 basis points this year. And really, what we're driving towards is exiting this calendar fiscal '26 Q4 at a Rule of 40 run rate. We've been able to drop more incremental revenue or margin on the incremental revenues every single year. We've been doing a good job of controlling cost. We've been managing headcount well I think as we look out towards the planning season for next year, we're going to do zero-based budgeting, really digging out with the new system we deployed, we can now look at more detail on vendors. We have access to all the contracts. Like we can do a lot more in terms of streamlining the business from a G&A perspective and from us non-comp side, too. And so we'll be looking for that in the future. But really, what we're looking towards is that rule of 40 exiting Q4 of next year.

Makes sense. And then I guess I wanted to ask you about pricing kind of just given the delta between the commercial and education sides of the business and as well between Mac and iOS. Do you think over time, pricing there could converge especially as iOS is increasingly important in a lot of areas like transportation, retail, construction? And what's kind of the overall philosophy on pricing increases in general?

Yes, I think we've been slow to raise prices. We did a price increase on Jamf for what, 2 years ago, something like that. I think our new platform products, we have another bundled product, too, that has an annual price increase embedded too. We add a lot of functionality for customers. And we look to -- I mean, have a reasonable price increase. So when you buy the new platforms, there is an embedded price increase in there every year. It's reasonable. But I know we see price increases all the time from our vendors. And some are small, some are bigger. I think if you are a core product, you'll absorb those. But I still think we offer a ton of value for our products, what we provide our customers at a relatively low price in the market right now.

Yes. That makes sense. I wanted to ask you on capital allocation. As you currently see it, what are kind of the biggest priorities for Jamf?

Yes. So we have $400 million from the term loan. We had cash on the balance sheet post, we had $222 million at the end of Q1, we paid down $175 million. So we had a balance left. We built cash from there. We're going to pay down some of the convert. We will pay the $40 million to Identity Automation and then we'll leave the rest sitting on the balance sheet for flexibility.

Okay. Perfect. Perfect. And then if, let's say, the demand environment did kind of pick up. What sort of incremental investments would be like the most attractive, the most pressing, whether it's S&M, R&D and kind of...

Yes, I think we could -- we'll probably spend more in channel. I think channel you would see in the U.S. and international I think we have a good level of quota-bearing reps right now. I think we have a good -- probably more marketing, right? I think you push more to the marketing channel. Other than that, probably it adds some to R&D to accelerate some of the development of certain products. But that's pretty much like on the G&A side, I think there's still probably we're at a decent level relative to the comparables in terms of cost to revenue percentages. But I don't think we would have to add a lot to stimulate that growth.

Yes. Okay. Perfect. All right, great. I appreciate it. Thank you very much. I'd like to turn it over to the audience. Anyone have a question here's your chance. No. Well, thank you, guys, so much.

Thank you very much. Appreciate it.

Thanks so much.

Okay. Great.