JAMF - NASDAQ

Ladies and gentlemen, thank you for joining us, and welcome to Jamf's second quarter earnings call. [Operator Instructions] I will now hand the conference over to Jennifer Gaumond, Vice President, Investor Relations. Please go ahead.

Good afternoon, and thank you for joining today's call to discuss Jamf's second quarter 2025 financial results. Joining me on today's call are John Strosahl, CEO; and David Rudow, CFO. Before we begin, a reminder that shortly after the market closed today, we issued a press release announcing our second quarter financial results. We also published our Q2 investor and earnings presentations, along with an 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 includes forward-looking statements, which involve risks and uncertainties that could cause actual results and trends to differ materially from our forecast. For more details, please refer to the risk factors and other information discussed in our most recent SEC reports, including our most recent annual report on Form 10-K. Jamf assumes no obligation to update forward-looking statements, which speak only as of the date they are made. We will also reference some non-GAAP measures related to Jamf's performance. Reconciliations to the nearest comparable GAAP measures are available in our earnings release. [Operator Instructions] Now I'll turn it over to John.

Thanks, Jen. We saw very strong results in Q2 with year-over-year revenue growth of 15% and non-GAAP operating income margin of 19%, exceeding the high end of our outlook for both metrics. Total ARR grew 14% year-over-year to $710 million, driven by growth in Security ARR from the addition of identity automation and the launch of our platform solutions. For the first time, we achieved over $700 million in total ARR, over $500 million of commercial ARR and over $200 million of Security ARR. Our platform strategy removes the barriers to Apple adoption by providing customers with our suite of security and management solutions in a single SKU. Each offering is tailored to specific buyer personas, leveraging Jamf's strong and long-tenured IT admin relationships. This enables Jamf to deliver across our 4 key growth vectors: security, mobile, international and channel. First, Jamf for Mobile. By investing in mobility, organizations can fundamentally change how they do business by enabling transformational workflows throughout their operations. Jamf has a proven track record of helping organizations to invest in a mobile- first strategy for both desktop and deskless users in multiple industries. By going beyond the mobility framework and providing comprehensive solutions and an extensive partner ecosystem, Jamf enables organizations to fully realize their digital transformation initiatives other vendors simply cannot provide. Mobile devices are at higher risk with internal research data showing 1 in 10 users click on a malicious phishing link. With Jamf for Mobile, we help IT and security teams confidently protect users, devices, data and applications without impacting the end user experience. This helps risk-intolerant teams feel comfortable with introducing mobile into more workflows. Jamf for Mobile also makes it easy for mobility teams to plan, deploy and scale mobile-first strategies and workflows. Layered capabilities provide controls for users, devices and applications. With our vast partner ecosystem for vertical-specific use cases, organizations can implement a fully baked solution to make their digital transformation a reality. With Jamf for Mobile creating tailored experiences based on the employee's role, organizations can provide the exact resource employees need at the moment of need. For example, in retail, 40% of employees share or go without a mobile device. Insufficient IT infrastructure, complexity of integration and technical issues are all highly cited reasons for not providing devices. The same challenge is also present in manufacturing, health care, hard hat industries and transportation. In Q2, a Middle Eastern airline purchased Jamf for Mobile for 10,000 iPads to be used as crew devices and electronic flight bags. Jamf was chosen over the 2 largest UEM vendors for this 4-year deal due to a number of factors, including protecting a rapidly scaling mobile fleet worldwide with a layered defense of network threat defense; secure DNS; real-time OS health with instant remediation and quarantine; feeding the airline's security operations center with actionable telemetry via native SIM integration delivering rich mobile-specific events; providing a granular data usage and roaming governance policies that cap spend without hindering operations; and combining all electronic flight bag critical controls into a single SKU, which is far simpler than piecemeal licensing offered by the competition. Helping make Jamf for Mobile even more robust, we recently announced Android enrollment support, which was available starting July 1. Jamf has long delivered cross-platform mobile security. Android devices have already been protected by our mobile threat defense; web protections like phishing, content filtering; and

Thanks, John. As a reminder, all non-revenue metrics I'll be discussing will be on a non-GAAP basis. We achieved strong results in Q2, exceeding the high end of both our revenue and non-GAAP operating income outlook. Year-over- year total revenue growth was 15% to $176.5 million, exceeding the high end of our guidance range by $7 million. This performance was primarily due to the timing of certain revenues that were recognized in the second quarter and solid results from Identity Automation. As a reminder, we closed the acquisition on April 1, so Q2 reflects a full quarter of Identity Automation results, which were better than expected. Total ARR grew 14% year-over-year to $710 million. Security bookings were strong, driving 40% year-over-year growth in Security ARR to $203 million. This was driven by both the inclusion of Identity Automation into our results and the launch of our platform solutions. Additionally, net new commercial ARR saw year-over-year growth. After viewing the increasing level of local currency billings that are made possible due to our system update last year, we are moving to a quarterly FX adjustment to ARR from our previous annual timing. This change will allow for better comparability with our revenue, RPO and operating income and will also result in a more moderate quarterly impact than waiting until Q1 to post the annual adjustment. The adjustment in Q2 for the first half was a less than 1% impact to total ARR balance. Recurring revenue grew 16% and represented 98% of total revenues. We saw significant growth acceleration in RPO with total RPO growing over 20% and long-term RPO growing nearly 40%. Excluding Identity Automation, we saw total RPO growth of nearly 15% and long-term growth of approximately 28%, showing the increasing level of commitment from customers as they continue to expand both the size and length of their Jamf contracts. Trailing 12-month net retention rate remained relatively flat to Q1 at 103%, and gross retention rates remained consistent with historical levels. Non-GAAP operating income was $33.5 million or a 19% margin, a 360 basis point improvement over Q2 2024. Sales and marketing as a percent of total revenue improved approximately 300 basis points compared to the prior year period, and G&A improved approximately 150 basis points. We remain committed to improving efficiencies across our business. Q2 adjusted EBITDA grew 40% to $35.3 million, representing a 20% margin. Trailing 12-month unlevered free cash flow surpassed $100 million for the first time, growing 24% to $102.9 million. This represents a 15.4% margin compared to a 13.8% margin in the prior year. We made good progress on collections from billings that were delayed due to our comprehensive systems update last year and still expect DSOs to return to normal levels over the next few quarters. From a cash perspective, we ended Q2 with $482 million compared to $222 million at the end of Q1. This increase in cash was driven primarily by the $400 million term loan facility we entered into in May, partially offset by the $175 million payment associated with the close of the Identity Automation acquisition on April 1. This term loan facility was entered into under the same terms as our revolving credit facility. We intend to use the proceeds to finance the $40 million deferred payment for the Identity Automation acquisition, to repurchase a portion of our convertible senior notes due 2026 and for general corporate purposes. Turning to our outlook for the third quarter and full year 2025. We remain committed to being a profitable growth company and will continue improving efficiencies and strategically investing for growth. This outlook reflects our belief in creating achievable model and is reflective of the recently announced strategic reinvestment plan and the current market conditions. For the third quarter 2025, we expect total revenue of $176 million to $178 million, representing year-over-year growth of 11% at the midpoint. Non-GAAP operating income of $41.5 million to $42.5 million, representing a non-GAAP operating margin of 24% and growth of 52% at the midpoint. For the full year 2025, we're raising our outlook. We now expect total revenue of $701 million to $704 million, representing year- over-year growth of 12% at the midpoint and an increase of $9.5 million from our prior outlook. Non-GAAP operating income of $153.5 million to $155.5 million, representing a non-GAAP operating margin of 22% at the midpoint and approximately 600 basis point improvement over fiscal year 2024. This also reflects an $8.5 million increase from our prior outlook and year-over-year growth of 50%. Additionally, given our strong margin profile, we continue to expect to generate unlevered free cash flow growth of at least 75% for the year. In closing, we remain committed to growth while driving incremental operating margin improvement. Our objective is to exit fiscal 2026 at a Rule of 40 run rate as defined as the sum of the year-over-year revenue growth plus adjusted EBITDA margin. I want to thank all our hard-working and dedicated employees for their continued excellent execution. Now we will take your questions. Operator?

Your first question comes from the line of Raimo Lenschow with Barclays.

Perfect. Can you hear me okay?

Yes, we can.

Perfect. The -- quick question. So the decision to support the broader ecosystem now is obviously very interesting. How quickly do you think that will drive results now that you do Android in terms of opening up like new sales -- new momentum around sales pitches, et cetera?

Yes. Raimo, it's John here. I'll take the question. Really, we developed this because at the behest of our customers, like we do with most things like security and others. And it's really -- there have been mobile installments where a portion of that has been on the Android side and the majority of it has been on the iOS side. And they've asked us, hey, we want to use your security products. So is there a way that we can enroll these Android devices so we can roll that out. And that's really the reason behind this. And so not only because -- because they've been requesting it, we've had some pretty good traction on that so far as we've gone back to those same customers and said, okay, now we can do this as of July 1. And so we've had a lot of interest in it and some really good uptake.

Yes. Okay. Okay. Perfect. And then one question for David. Like Identity Automation, you said it's going better. Like how much of revenue are we talking about now like that you think Q2 and as it's now part of the bigger group, like how should we think about the contribution here for the rest of the year?

Yes. So we've integrated that into the education business. And actually, the CEO of Identity Automation is actually now running the entire education group. So all the salespeople within education now have Identity Automation in their bag to sell, which is great. So we've seen good traction with that. We've had a couple of cross-sells, which is really good, and the pipeline is building around that. We talked about the upside in the quarter. Half of that was generated from Identity Automation, partially because we built a conservative model. It's a new acquisition. We had to get a good understanding of the business. And they also did outperform our expectations in the quarter. The other half is Jamf related, improved performance out of Jamf. And then we also had some partner-related business that was signed in Q1, but we recognized revenues in Q2, and that was the other reason for that upside in the quarter.

Your next question comes from the line of Samik Chatterjee with JPMorgan.

Maybe just starting with the strategic sort of action plan that you took related to resource allocation. I know it's sort of moving resources around to better align for growth. But since you're sort of reiterating your plan to exit the -- exit 2026 with the Rule of 40, just curious if sort of as you've taken a closer look at your cost profile, has your view changed in terms of how to meet the Rule of 40 by -- when you exit 2026 more in relation to sort of your 25% operating margin target that you have for that time period? And I have a follow-up.

Yes. So our strategic reinvestment plan that we put in place was really around kind of moving around resources to further support areas of growth of the business. What we found through our new data that we can review and analyze from the system update is that I think there's ways that we can further improve efficiencies in the small business side, still a very important channel for us. We're going to make investments in the channel. We will also invest in automation and AI. And then, in turn, we will also expand our enterprise sales and support team as well. And the channel will see investments around the world, too, because we've seen very good traction. We're still targeting a Rule of 40 exiting 2026, there's no change there. There will be some cost savings, but really, the efforts around this was to strategically realign the business to accelerate growth.

Okay. Okay. Got it. And then maybe just turning back to sort of the near-term drivers here. In relation to the fiscal 3Q guide here, you did mention this is sort of a less than normal seasonality from 2Q that you're guiding to from what I can see from -- relative to the last couple of years. And I think some of this is probably what you mentioned in terms of timing of revenue recognition in Q2. But maybe if you can just talk and help us sort of think through why this might be more -- closer to normal seasonality or what the magnitude of those timing impacts on Q2 were? Or are you seeing anything different from normal seasonality in relation to your Q3 guide?

Yes. No, I think if you remove those onetime revenue numbers from Q2, it would be more -- it would be kind of a more seasonal ramp into Q3. We have -- Identity Automation, it is a heavy season for them on education side in Q3. And so we will see -- we expect to see a little bit better improvement there, Identity Automation. And then Q4 on Identity Automation, they will have a little bit lighter, sequentially down revenue number for Q4 as well.

Next question comes from the line of Jake Roberge with William Blair.

Hello, could you hear me?

Yes, we can hear you.

This is Jacob

Yes, Jake, I'll take the question here. It's John. We've really been leaning into the channel, specifically domestically. And we have a majority of our business, as you mentioned, outside the U.S. already goes through the channel because we started with channel first. And in the U.S. here, really leaning into the channel. And part of this technical upgrade or systems upgrade that we've been working on not only gave us visibility into the company to show us where we can invest and where our growth is and things where we can really accelerate that growth, but it's also on the channel capability side. And we -- with now the fact that we have a channel partner portal that they can come in and register their own deals and create their own quotes without involving a salesperson at Jamf, a lot of the efficiencies that they get in addition to the new partner program that we've rolled out that gives higher incentives for deal registration and really helping us build the top of the funnel being channel first. Now over 2/3 of our business coming from the channel globally. Again, 80% of that coming from outside the U.S. and increasing pretty rapidly inside the U.S. So to answer your question, yes, we believe we can get to those levels worldwide that we have internationally, and we're continuing to do that to help leverage the growth, especially as it relates to some of our smaller customers or mid-market customers.

Got it. And then I just wanted to ask about Security. You've done a really good job with management and also in the education sector in the international market. Can you talk a little bit about demand for your security solutions there?

Yes, I can take that question as well. This is John. And as I mentioned earlier in Raimo's question, again, this was something that we had done at the behest of our customers. And so we continue to see increased demand for our security products. You can't have a secure device without having management and security together on that. And we've seen it in the results that we've had this quarter as well with substantial growth in Security. We continue to see our customers leaning into that, especially as it relates to mobile, and that's been one of our fastest-growing types of business. And we see that across our retail customers, across our transportation customers, professional services, even into manufacturing, all of those areas where the security -- those businesses that are working that deskless workflow understand that those endpoints need to be both managed and secured, and that's where we're getting a lot of good traction there as well.

Your next question comes from the line of Patrick Walravens with Citizens Bank.

This is [ Kincade ] on for Pat. Super excited to hear about this go-to-market shift, but I was wondering if you could highlight any specific changes in rep quotas or what you're trying to push people to sell through that?

Yes, I can take that, [ Kincade ]. This is John. As we look at what we're pushing the reps to sell, I guess, is the platform solutions that we have, which really blends management and security, whether it's a different persona, a customer buying for the Mac or a customer buying for the mobile. And those solutions really oriented toward that persona have done really well. And as we look at focusing our go-to-market efforts, as David mentioned, the small- to medium-sized customer base is significant for us, and we're going to continue to support that in a way that those customers want to be supported and also to lean more into the enterprise. And so as we invest in some of our sales resources and go-to-market resources on the enterprise side, really, we see a lot of growth there and very low churn. Our LTV to CAC is very good in that area, and we're going to continue to lean into it to exercise that muscle and generate accelerated growth.

Okay. There are no further questions at this time. I will turn the call back over to John Strosahl for closing remarks.

Well, thank you, everyone, for your time today. And we hope to see some of you at the upcoming conferences and our annual user conference, JNUC, which is early October. Have a great evening.