Yahoo Finance Jamf Holding Corp. (NASDAQ:JAMF) Q1 2024 Earnings Call Transcript
Jamf Holding Corp. (NASDAQ:JAMF) Q1 2024 Earnings Call Transcript May 11, 2024
Jamf Holding Corp. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. My name is Rochelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Jamf's First Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Jennifer. Please go ahead.
Jennifer Gaumond: Good afternoon, and thank you for joining us on today's conference call to discuss Jamf's first quarter 2024 financial results. With me on today's call are John Strosahl, Chief Executive Officer, and Ian Goodkind, Chief Financial Officer. Before we begin, I'd like to remind you that shortly after the market closed today, we issued a press release announcing our first quarter financial results. We also published a Q1 earnings presentation, investor presentation and Excel file containing quarterly financial statements to assist with modeling. You may access this information on the Investor Relations section of jamf.com. Today's discussion may include forward-looking statements. Please refer to our most recent SEC reports, including our most recent annual report on Form 10-K, where you will see a discussion of factors that could cause actual results to differ materially from these statements.
I would also like to remind you that during the call, we will discuss some non-GAAP measures related to Jamf's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in our earnings release. Additionally, to ensure we can address as many analyst questions responsible during the call, we ask that you please limit your questions to one initial question and one follow-up. Now I'd like to turn the call over to John Strosahl. John?
John Strosahl: Thanks, Jen. Jamf started off the year strong, reaching the milestone of $600 million of total ARR. At the end of Q1, ARR grew 14% year-over-year to $602.4 million. We're delivering on the expectations we set for 2024. Both Q1 revenue and non-GAAP operating income exceeded the high end of our outlook. Q1 year-over-year revenue growth was 15% and non-GAAP operating income was $22.1 million, with non-GAAP operating income margin of 15%. This margin represents a 1,000 basis point improvement from Q1 of 2023. We ended Q1 with 75,900 customers and 32.8 million devices on our platform. of these customers, 41% run a Jamf management and security product. We continue to drive cross-sell with 31% year-over-year growth in Security ARR to $138 million or 23% of Jamf's total ARR.
Our largest industries, tech and K-12 remain muted [Technical Difficulty] device expansion. The remaining industries in our top five continue to see positive trends. We're also encouraged by growth in the PC market in Q1 after two years of decline. According to IDC, Q1 year-over-year worldwide PC shipments grew 1.5% to nearly 60 million units, representing a similar level of shipments to pre-pandemic. Apple saw the highest year-over-year growth in shipments of any company in Q1 at 14.6% and also increased its market share. IDC remains optimistic regarding PC sales in 2024 as companies begin refreshing PCs that were purchased during the pandemic. While we are encouraged by this Q1 data, our outlook for 2024 does not rely on a significant uplift in device expansion.
We continue to innovate and deliver solutions to help organizations succeed with Apple. In April, we held a special Jamf event to showcase a number of new offerings with a focus on compliance. IT and security teams are being asked to get more involved beyond traditional device management functions to help meet these various compliance standards across their Apple devices. Jamf is proud to deliver tools that help customers navigate the vast and varied compliance landscape. Product updates highlighted at the event include a customizable compliance dashboard in Jamf Protect, allowing admins to view an aggregate baseline score and detailed information to understand and remediate compliance issues, compliance editor tool for Jamf Pro for iOS that generates deployable configurations to make endpoints compliant with a chosen compliance benchmark, Jamf for Teams tool for Jamf bundled solutions, which offers customers new no-code automations and integrations to streamline management and security workflows while also providing seamless integration with Slack and Microsoft Teams to alert IT teams when devices fall out of compliance, privilege elevation feature that utilizes an organization's cloud identity provider and Jamf Connect to temporarily allow admin privileges for local Mac OS accounts based on valid user authentication and authorization.
We also recapped our recent announcement that support for Apple Vision Pro is now available across the entire Jamf platform. With Jamf Pro, organizations can enroll and streamline deployment of enterprise apps and settings for Apple Vision Pro. Jamf Connect allows Apple Vision Pro to securely access enterprise resources for any of the web and native apps that require secure identity-based access controls. Jamf Protect extends the same mobile threat defense, network protection and content filtering use cases to the Apple Vision Pro. We also announced that support for watchOS management is coming later this year, including enrollment and inventory display. We're excited about the opportunities that watchOS management provides, especially as it relates to desktop workflows across a number of industries.
Enabling these new device types is a testament to Jamf's commitment to simplifying Apple at work and giving users the ability to be productive however they work best. In addition to the spring event, we hosted another important event, our first Investor Day in mid-March. We outlined the next phase of Jamf's evolution, which is all about efficient scalability. If you haven't had a chance to review the events yet, I encourage you to do so. The replay and presentation can be found on our Investor Relations website. During the event, we highlighted our differentiated position in competitive moat, our large and growing addressable market, our strategic growth drivers and our financial expectations through 2026. I'd like to use the strategic growth drivers we discussed during this event as the framework for the remainder of my remarks, highlighting some of the specific successes we saw in Q1.
First, in Mac leadership, we continue to demonstrate how Jamf's Apple-first, Apple-best solutions to deliver the best outcomes for our customers. In Q1, a leading online travel company renewed with Jamf for three years. Key to this win was our ability to demonstrate how Jamf's solutions can help with the customer's current strategic initiative around process automation. We also delivered a long-term roadmap for expanding with Jamf, including Jamf Pro for iOS and Jamf Protect. Our ability to build multiple strong relationships with the customers at the management level was also beneficial, helping streamline the approval process. And our suggestion to utilize AWS marketplace to leverage their committed spend was a win-win, simplifying procurement for the customer and resulting in a timely renewal for Jamf.
We're excited about continued growth through the AWS marketplace as customers can use committed spend towards their Jamf contract like Netlify, a cloud platform for front-end teams to build, deploy and scale modern web applications. Netlify is now using Jamf with committed spend for AWS to manage its Apple devices and connect their end users to the resources they need. Second, with respect to expanding with mobile, we continue to see customers utilizing Jamf across their mobile fleets, especially for deskless workflows. In Q1, one leading specialty retailer expanded with Jamf beyond Mac by adding Jamf Pro for 15,000 iOS devices used across nearly 1,500 retail locations. This was a great win for Jamf against the legacy OEM provider, a testament to Jamf's continued commitment to innovating at the pace of Apple to securely manage multiple device types across multiple use cases.
We're strongly encouraged by our progress in the retail space, which represents one of our top five largest industries. Retail, along with financial services and professional services continue to see strong growth, helping balance the softness we are seeing in tech and K-12 education. Tech is seeing muted hiring and lower IT investments while K-12 experienced a bit of a COVID overhang with record device deployments in 2020 and 2021. The third growth driver, management and security, are what we refer to as delivering our trusted access vision is an area of opportunity we expect to become a larger part of our total ARR over time. Our ability to deliver both management and security on one platform is a key differentiator for Jamf. Both legacy UEM providers and Apple specific management providers lack the complete platform requiring customers to utilize a number of third-party vendors to deliver management, connection and protection capabilities.
Smaller organizations often don't have the bandwidth, budget or the desire to engage multiple third parties, making Jamf's trusted access platform an appealing solution. We continue to see an increased number of deals with both the management and a security component. We see this by continued strong growth of Jamf's bundled commercial solutions, which grew 63% year-over-year in Q1. And currently, 45% of Jamf's new customer commercial pipeline is made up of security opportunities. Additionally, when a customer consolidates management and security with Jamf, we see reduced churn compared to customers with just a management solution or just a security solution. In Q1, a precision medicine company became a Jamf business plan customer for their 1,200 devices.
This company chose to move away from the legacy UEM provider and chose Jamf due to the value of trusted access brings to their organization and the strength of our capabilities for a mixed device environment. The customer's device environment includes Mac, PCs, Chromebook and Android. Also in Q1, one of our largest airline customers, a mainline American carrier expanded beyond management, adding Jamf Connect and Jamf Protect to 15,000 other iOS devices, which are utilized globally. We were able to demonstrate our industry leadership in managing and securing mission-critical mobile use cases and remote work situations, which were key to this win. Our solutions allow the customer to have a defined practice for continuously securing mobile devices, something the customer only had previously for PCs. This success will serve as the blueprint for further expansion with customers in other areas of their business.
In Clarion Housing Group, the largest housing association in the United Kingdom with 125,000 properties across more than 170 local authorities, recently became a Jamf customer using Jamf Pro and Jamf's Connect for their Mac and iOS fleets. These three wins showcase the strength and leadership of Jamf's management and security platform, which is able to deliver the right solution for each organization, whether that is purchasing both management and security at the onset or expanding beyond management at the right time. And lastly, with respect to international expansion, Jamf continues to invest in strategic geographies where we're seeing growing adoption for Apple. Revenues outside of the US continue to grow at a faster rate than US revenues.
In Q1, we saw a number of international wins for our Jamf Executive Threat Protection product with government agencies in the Middle East and India. The win in India represented our first government agency win in the country. The agency has embarked on a journey to curb cybercrime and Jamf's Executive Threat Protection, along with other products will be used by forensic teams to investigate and for incident response. Jamf's Executive Threat Protection was chosen due to its ability to identify sophisticated digital threats and extend visibility into attacks that target high-value users. Wins like these help our footprint in these regions and offer a blueprint for similar organizations in the area to utilize Jamf. We've seen success with this strategy in the past in countries like Japan.
We'll continue to leverage the success in select geographies where we're seeing the most potential. I'll now turn it over to Ian to review our results and provide our Q2 and 2024 outlook.
Ian Goodkind: Thanks, John. We ended Q1 with year-over-year revenue growth of 15%, exceeding the high end of our revenue outlook by $2.1 million. Total ARR reached $602.4 million, representing year-over-year growth of 14%, exceeding expectations. We continue to believe that Jamf's commercial business and specifically commercial security will be a key growth driver, both now and in the future. The strategic core of Jamf's business, SaaS recurring revenue remained strong in Q1, growing 18%. Less strategic revenue sources like licenses, services and on-premise revenues continue to experience year-over-year declines but came in slightly better than expected. Our net retention rate decreased slightly as expected to 107% in Q1 when compared to Q4 2023.
The remainder of my remarks on margins, expense items and profitability will be on a non-GAAP basis. Our GAAP financial results, along with the reconciliation between GAAP and non-GAAP are found in our earnings release. Q1 non-GAAP gross profit margin was 81% and within our expectations. We continue to anticipate gross margins in the low 80% range and expect slight fluctuations each quarter. Non-GAAP operating income exceeded the high end of our Q4 outlook at $22.1 million or 15% margin due to cost-saving initiatives and increased revenues, representing an approximate 1,000 basis point improvement over Q1 2023. Our trailing 12-month unlevered free cash flow margin was 13% compared to 14% in the prior year. Our effective tax rate for Q1 was negative 5.4%, consistent with our expectations.
As a reminder, for our non-GAAP metrics, we use a domestic statutory rates for calculating tax impacts, which is currently 24%. Please note that we pay a negligible amount of cash taxes on a US federal basis and pay an immaterial amount of cash taxes outside the US. During our Investor Day, we outlined some key milestones that will help you track our progress against our goals. One, meet our quarterly financial outlook. In Q1, we exceeded the high end of both our revenue and non-GAAP operating income guidance ranges. Two, achieve at least 25% growth in security ARR. Q1 year-over-year growth of security ARR was 31%. Three, decreased general and administrative expense as a percentage of total revenue. Q1 non-GAAP G&A margin was 14%, an approximate 100 basis point reduction from Q4 2023.
Four, decreased sales and marketing expense as a percentage of total revenue. Q1 non-GAAP sales and marketing margin was 34%, an approximate 200 basis point reduction from Q4 2023. With respect to sales and marketing expense, given that we anticipate the largest portion of cost savings coming from this area, we are providing additional details on current efficiency and scalability initiatives. First, earlier this year, we adjusted our workforce with a focus on higher productivity. Second, we're adjusting our sales incentive structure to further drive cross-sell security and mobile and price capture. Third, we are enacting program to drive enhanced value from our channel partners. Fourth, we continue to focus on educating customers on the value we provide with our trusted access outcome.
And fifth, we are aligning resources to geographies with the highest growth potential like the Asia Pacific region. Now, turning to our outlook for Q2 and full year 2024. With respect to revenue growth, we expect continued pressure on device upsell through 2024. We will continue to focus on the strategic growth drivers as John outlined, building on the successes we achieved in Q1. We will invest in growth and scalability with a focus on scalable go-to-market organization, platform optimization and back office automation. Our scalability initiatives will set Jamf up for profitable growth in the future and return Jamf to the Rule of 40 as outlined at our Investor Day. Many of these initiatives are in process with some themed benefits in 2024 and others with benefits expected throughout the next few years.
Based on these factors, for the second quarter of 2024, we expect total revenue of $150.5 million to $152.5 million, representing year-over-year growth of 11% to 13%. Non-GAAP operating income of $21.5 million to $22.5 million, representing a non-GAAP operating income margin of 15% at the midpoint. Given our strong performance in Q1, we are increasing our expectations for the full year 2024. Total revenue of $618.5 million to $622.5 million, representing year-over-year growth of 11% at the midpoint. This reflects an increase of $3.5 million at the midpoint. Non-GAAP operating income of $92.5 million to $95.5 million, representing a non-GAAP operating income margin of 15% at the midpoint and an approximate 700 basis point improvement over fiscal year 2023.
This reflects an increase of $3 million at the midpoint. While we don't provide an outlook for ARR, we would expect to end fiscal year 2024 with ARR growth similar to full year revenue growth. With respect to unlevered free cash flows, for full year 2024, we expect unlevered free cash flow margin to be similar to non-GAAP operating income margin. We also provide estimates for amortization, stock-based compensation-related payroll taxes and other metrics to assist with modeling in the earnings presentation as part of the webcast and also posted on our Investor Relations website. With respect to the longer-term financial outlook we presented as part of our Investor Day, we remain committed to the goals we outlined during the event. And now, John and I will take your questions.
Operator?
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