Q3 2020 Jamf Holding Corp Earnings Call
[music].
Good day, ladies and gentlemen, thank you for standing by welcome to the third quarter 2020, JAMF earnings Conference call at this time.
To turn the conference over to Ms., Jennifer Goldman Ma'am, you may begin.
Good afternoon, and thank you for joining us on today's conference call to discuss Jam third quarter.
Our 2020 financial results.
With me on today's call are Dean Hager, Jim Chief Executive Officer, and Jill Putman, the company's Chief Financial Officer.
Before we begin I would like to remind you that shortly after the market close today, Jim issued a press release announcing its third quarter 2020 financial results.
Additionally, we published an updated investor presentation, you may access the press release and presentation on the Investor Relations section of Jam Dot Com.
Today's discussion may include forward looking statements.
Please refer to our most recently filed quarterly report on form 10-Q, and our IP.
Joe Prospectus dated July 21, 2020, where you will see a discussion of factors that could cause the company's 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 Gmps performance.
You can find the reconciliation.
Petion of those measures to the nearest comparable GAAP measures in our quarterly financial statements.
To ensure we can address as many analysts questions as possible 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 Dean Hager Deane.
Thank you Jennifer and thank you everyone for joining us on our third quarter earnings call.
World call today, I will share highlights from the quarter and then provide an update about the exciting momentum in our business.
Ill finish with a recap of our annual user conference before turning it over to Joe to review our third.
LIBOR financials.
While a challenging macroeconomic environment persists.
Tailwinds of Tele health distance learning and remote work in the third quarter offset economic headwinds and drove strong Jim sales growth and customer acquisition.
Total revenue in the third quarter grew too.
29% year over year to $70.4 million driven by recurring revenue growth of 40% year over year to $65.8 million now 93% of total revenue.
Annual recurring revenue or a R was 251 point.
Point $5 million growing 37% year over year.
Non-GAAP operating income was $12 million in the quarter or 17% of revenue. This was a half point decrease over the third quarter of 2019.
An unlevered free cash flow totaled 28 point.
Million dollars in the third quarter, representing an unlevered free cash flow margin of 40%. This compares with a margin of 33% for third quarter 2019.
Our strong third quarter results reflect the continuing trend of IP consumerization that fuels the growth of.
On the enterprise.
This trend where employees demand to use that work the technology. They already love at home has accelerated over the past six months.
Jim has responded by helping thousands of organizations around the globe implement remote work solutions as well as helping schools with.
Apple since learning and hospitals with their Keller health solutions.
James the value to customers and our business results continued to strengthen as these trends further route themselves into daily life, both in the short term and far into the future.
Despite the challenges of 2020 Jam spring.
Yes, these dedicated to our customer success and we have continued to invest in new features and enhancements that fulfill our mission to help.
Succeed with Apple.
As organizations work hard to provide a safe environment for their teams and customers technology plays an analogy.
He plays an important role across industries like retail transportation and healthcare.
Jim continues to support this effort and gain momentum with our innovative products such as Jim setup, and Jim reset that enables shared yet personalized usage of iPhone and iPad.
And but.
During the flow is specifically designed for hospitals Jeff's healthcare listener integrates with a hospital's electronic medical record system any lessons from messages like a patient discharge or transfer and automatically performs the desired remote command like wiping that device or associating.
The device with all of the connected things in a patient's new hospital them.
This work flow uses ipads to create a better and more engaged experience for the patient without requiring time or effort from the IP or hospital staff.
Jansa virtual visit solutions, which launched two weeks after.
For the COVID-19 outbreak allows patients to seamlessly and securely connect with doctors and their families through third party video meeting platform like Zoo and Microsoft team.
You see health in Colorado is just one hospital using all of these innovations.
In 2018.
And you see health began using jam to streamline their technology management and practices by offering an iPad each patient's bedside.
They utilized healthcare listener jumped setup and Jim reset to digitally sterilize the device between each patient and easily set it up.
For the next patient without the need for Ita assistance.
As virtual care needs Spike this quarter, you see health started using our virtual visits workflow and ramped up from less than 50 virtual visits a day to over 1500.
Both healthcare listener and.
And virtual visits have patents pending.
Also during this quarter JAMF advanced our relationship hospitals around the world by implementing clinical communication workflows since.
Cincinnati Children's hospital, the number three children's hospital in the U.S. selected jam for thousands of iPhone from.
Nurses to help optimize clinical communication and patient care and they also used our solution to deploy ipads to patient rooms for entertainment social connection and access to medical information directly from their epic electronic medical record system.
Additionally.
Cincinnati children's extended their GMP usage to Apple Tvs and patient growth.
Janse unique healthcare capabilities across the entire Apple ecosystem of products led to these hospitals choosing jail over legacy MDM solutions in order to succeed with their tele health.
For medical communications and patient bedside initiatives.
In the third quarter, Jim also experienced strong growth in the education market largely driven by a worldwide requirement for schools to be distance learning ready.
These programs are aided through government funding like the cares Act.
In the us the Giga project in Japan, and did Japan and Germany.
In Japan, JAMF Onboarded 56 school districts, which includes over 1000 schools in Q3 alone.
In the U.S. jump is the clear leader for Apple Enterprise management and education.
We serve 12 of the 15 largest school districts in the United States.
Eight of these schools have increased their seat count with Jeff since the COVID-19 outbreak.
Jim has been preparing schools for kids to learn from their homes for years, whether they knew it or not.
Our gym teacher App.
Abides educators with real time classroom remote control each student's Apple technology from any distance and our gym parent App allows parents to do the same.
Both these apps are designed to empower adults to help students avoid potential distractions and focus.
Up from their studies.
Since the pandemic began Jim has further advanced our solution, including new capabilities, such as teachers are virtually ringing the bell in order to easily start their video platform.
And allowing students to virtually raise their hand in order to gain further assistance from education.
Skaters, which is valuable for students learning at home or in a classroom setting.
Last month, we also launched Champ assessment, and an app that empowers schools to issue remotely proctored exams, where it's necessary to visually supervise students like with college placement exams.
Our other high stake testing something that was not previously possible on the I pad.
So why not a central High School district in New York use Jampa assessment this quarter to allow students to take the act you place or test a test that assists colleges and placing students in the right courses helping them.
Can you to build their future despite the uncertainty stemming from the pandemic.
Additionally, Champ is seeing strong interest for both Mac and iPad in higher education.
The Ohio State University has been providing ipads for every incoming freshmen since 2018.
As part of their digital flagship program.
In the third quarter of 2020, Ohio State conducted a survey that phone well over 90% of their students agreed that I pads are useful for academic purposes, and a valuable tool for their education.
Similarly, the University of.
Kentucky is in the second year of issuing I pad technology to first year students.
More than 11000 devices have been distributor as part of a wider smart campus strategy geared towards better leveraging technology in new and innovative ways.
In total over 300 units.
Diversities, our higher education customers have expanded their use of jam since the COVID-19 pandemic began.
We believe the strong Apple usage in universities further confirmed Janse research finding that over 70% of college students would prefer to use a Mac at work if.
If given the choice after graduation.
Speaking of using Apple at where the need to remotely and securely connect and empower employees working from their homes has continued to lead companies to choose Jan and grow their apple and specifically math usage. This.
This.
Trend, which was gaining popularity before the pandemic has been accelerated this year and we believe will continue into the future.
In the third quarter Jampa advanced workflows that improve the employee experience security and efficiency through jam connect and Jan protest.
Champ release.
New capabilities in Jan protest and announced a new version of Jam connect that make it easier to deploy and further streamline employee onboarding and authentication using single sign on as biometrics with password less access to the map.
Using face I'd from an iPhone.
These advancements led to approximately 700 customers choosing Jeff.
And approximately 200 customers choosing Jan protests, which was launched exactly one year ago today since the COVID-19 outbreak began.
In the third quarter, Upwork Everly and HSBC are all.
Examples of new Gen connect plans.
And examples of Jan protect wins include Gilead Sciences, Ada health and safety, but Sep, having already deployed Jeff protect to over 28000 math books. These.
These customers are part of a fast growing trend where organizations to leverage.
James entire Apple Enterprise management platform.
As part of our expansion initiatives Jamba is now offering a new user base pricing bundle called Champs business plan, which includes a gym pro Gen protect Jeff come at a cost of all Apple devices used by employees.
Jan business plan provides organizations with a complete solution that delivers a strong return on investment and lower support costs.
All of these new capabilities for showcased as we closed Q3, when we hosted approximately 20000 attendees at our virtual JAMF nation user conference.
Fund known as Jay now, which is 10 times our normal in person you conference attendance.
Jay knock us annually, the largest gathering of Apple IP admins globally, and we believe this year's Jay not was the largest gathering of Apple IP Adnan.
Anywhere ever.
This.
All year, we welcome to many first timers, who have not participated in previous conferences, plus an amazing 28% of attendees. This year were jammed prospects not customers, which supports the strong and growing demand we have seen for Apple enterprise management.
Jane provides a forum for calibre.
Aberration in this year was no different based on the communication threads during the event and chatter that we experienced post event.
On average a virtual Jane attendees spent more than 13 hours in the platform engaging and participating in Jan content.
Nine and 10 agreed that.
Additional 2020 met their expectations and plan to attend again, if virtual next year.
The theme of the conference was a year like no other and we showcased many of the platform enhancements I mentioned earlier that our powering the learn care and work anywhere trends along with customer.
And partner stories on how they were able to succeed during this time using Apple and Jeff.
Apple and Microsoft Representatives also joined US on stage again this year to talk about our important partnerships and what they bring to the Apple It and security community.
We have no.
First we are expanding our collaboration with Microsoft Enterprise mobility and security by launching iOS device compliance.
Through this offering which adds to our already robust partnership organizations are empowered to choose jam for Apple enterprise, including device compliance and security.
Our training for remote staff.
And Microsoft and plant manager for any other devices.
As trends like employ technology choice programs and continue to grow organizations need management tools that can adapt and shift to hybrid environments, while still giving the native and intend.
Minded and user experience.
As Jay noted, we also announced our acquisition of Mandato.
When does kenobi solutions are considered the leading solution in patch management for the Apple platform.
Built exclusively around Jam Kenobi, and Kenobi Pro managed software compliance.
The nacco as a major initiative and pain point for today's ITD teams.
We believe with jams resources, we can extend these capabilities and bring even greater value to organizations using the apple ecosystem through a complete application lifecycle management solution.
We closed.
Is this tuck in acquisition on October 15th.
As we look into the future. We are excited about the continued transformation of the enterprise as the Consumerization of IP results in more Apple devices empowering employees that work educating students in school and helping provide.
Care for patients in hospitals and at home.
While the events of 2020 have accelerated these trends. We believe we are still in the early innings of this transformation.
Going forward Jam commits to continue innovating at the pace of Apple supporting new operating systems and hardware on.
On the same day, it's released including the recently announced Mac line up based on the Apple M Chip and Apple's latest operating system Big surge, which became generally available today we.
We believe Mac will become increasingly the device of choice for many in the workplace Assps.
Really the newest generation of workers and that Jeff is best positioned to help organizations easily adopt and get the most out of this new technology overtime.
Unlike cross platform management and security solutions that are still struggling to fully support makeover Catalina, let alone Nacco ESPN.
Sir Jim is solely focused on Apple and for a decade has supported an extended Apple's latest innovations from the day they are available.
In closing we are excited to be a part of this movement and to support the continued growth in the large and growing Apple enterprise management market.
Now I would like to turn the call over to Jill to walk through our financial results and guidance Jeff.
Well.
Thanks, Dan and thanks, again to everyone for joining us today.
I'll start by discussing our third quarter results in detail before moving on to guidance.
As Dean mentioned, we had a very strong third quarter.
Total revenue for the third quarter was $70.4 million growing 29% year over year, reflecting strong growth across all of our subscription products.
Recurring revenue totaled $65.8 million in the third quarter, an increase of 40% year over year and account.
Counted for 93% of our total revenue versus 86% in the third quarter last year.
While nonrecurring revenue was $4.6 million.
Due to product mix shift, we saw a favorable impact from products that deliver in quarter recurring revenue as the education vertical and our Jeff can.
Net product outperformed our expectations.
They are as of September Thirtyth was $261.5 million, an increase of 37% year over year.
As a reminder, a our represents the annualized value of all subscription support and maintenance.
Contract as of the end of the period.
Our our mitigates fluctuations due to seasonality contract term and the sales mix of subscription or term based licenses versus SaaS.
Three primary drivers underpin the growth of our AMR.
First our consists.
Hi device expansion rates.
Second our strong new logo acquisition.
And third the Upselling and cross selling of products into our installed base.
We expect to continue benefiting from these trends going forward.
We believe our ability to grow the number of devices on our software platform is a key into.
Indicator of our growth and trajectory as.
As of the end of Q3, we had 18.6 million devices on our platform representing strong growth in both the education and commercial verticals and.
And across all major geographies as demand continues for organizations to remotely connect manage and protect their apple devices.
We have a history of attracting new customers and growing their annual spend with us overtime, which drives our high dollar based net retention rate.
We accomplish this by adding devices to our platform and expanding our customers adoption of our add on products.
Our dollar based net retention rate remains strong at 117.
10% for the trailing 12 months ended September 32020.
Before turning to expense items and profitability I would like to highlight that I will refer to non-GAAP results for my remaining remarks.
Our GAAP financial results, along with reconciliation between GAAP and non-GAAP are found in our earnings release.
Gross profit was $58.2 million up 35% year over year, while gross margin expanded four points to 83%.
We expect our gross margin to increase over time as compared to the weight rates, we delivered prior to the impact of Covance as recurring revenue because they are larger proportion.
No revenue and as an increase the average AMR per device.
Turning to operating expenses.
We remain focused on improving the leverage in our business, while balancing our investments for growth.
With the strength of our operating results year to date, we've been able to increase our investment throughout the organization by turning.
<unk> original 2020 hiring plan back on.
As a result to date, Jim has onboard a 250 new employees since the beginning of the year, which has been aided by leveraging Champs zero touch technology in the midst of the pandemic.
Total operating expense for Q3 was 46 point.
$3 million compared to $33.6 million in Q3 last year.
Year over year growth was driven primarily by continued investment in our global go to market strategy as well as investments in research and development as innovation in both our existing and new products and features remains a top priority.
For us.
In addition, beginning in the third quarter, we now have incremental expense related to being a public company.
As a reminder, we delayed some planned spending in Q2 due to coded and invested a portion of that expense savings this quarter.
The larger portion of that savings will be invested between now and the end of <unk>.
The year, resulting in an up tick in spending in the fourth quarter.
Our operating income in the quarter was $12 million compared to $9.6 million in Q3 last year.
Operating margin was 17% representing a half point decrease compared to the same period last year, reflecting investments required to be.
The company, partially offset by improved gross margin.
Our basic average share count was $113.2 million.
And our diluted average share count was $116.7 million for the quarter as compared to 102.8 million and 104.6.
Million, respectively in the third quarter of 2019.
Unlevered free cash flow was $28.2 million in Q3 compared to $17.9 million for Q3 2019.
Third quarter Unlevered free cash flow represents 40% of total revenue.
Up from 33% of.
Total revenue a year ago.
Our operating model of high growth and improving efficiency yields strong cash flow generation, which in the third quarter also benefited from seasonally strong billings in the education vertical which outpaced the increase in our operating cost investments.
Late in the quarter, we accelerated our hiring efforts.
And expect to make further investments in the fourth quarter.
Turning to the balance sheet we.
We ended the third quarter with $177.5 million in cash and cash equivalents.
And finally, we tend to guidance for the fourth quarter.
Our business is seeing some benefits from several trends emerging during this challenge.
Total time, including the proliferation of telehealth remote learning and the rise of a more permanent work from home movement.
At the same time, there is embedded uncertainty around the I.T. spending environment as renewal capital spending and new I.T. projects, a subject to more scrutiny across organizations everywhere.
Plunge.
In light of these dynamics and our strong performance in the third quarter, we are increasing our full year 2020 revenue and non-GAAP operating income expectations.
For the fourth quarter of 2020, we expect total revenue in the range of 70 million to $71 million representing.
Presenting growth of 23% to 25% year over year, and a 3.7% increase from previous implied guidance.
Non-GAAP operating income in the range of 1 million to $2 million.
For the full year 2020, we expect total revenue in the range of 263 million.
The $264 million, representing growth of 28% to 29% year over year, and a 2.9% increase from previous guidance.
Non-GAAP operating income in the range of 28.5 million to $29.5 million, reflecting the increase in operating expenses related.
It's accelerated hiring and reinvesting our over performance back into the business as discussed earlier.
For modeling purposes, we are providing the following information.
We expect an annual effective tax rate of 25%.
As a reminder, we use our statutory tax rate when calculating tax effects.
Non-GAAP adjustments, which is not materially different from our annual effective tax rate.
For calculating GAAP EPS, we expect basic weighted average shares outstanding to be approximately $116 million for the fourth quarter and $109 million for the full year 2020.
In closing we are very pleased.
Our performance in the third quarter and look forward to sharing our results in the quarters ahead.
With that Dan and I will take your questions operator.
Ladies and gentlemen, this you have a question my comment at this time. Please press Star then one on your telephone keypad.
If your question has been answered or you wish to remove yourself from the queue.
The press the pound.
Stated early enough.
Answer as many questions as possible, we ask that you. Please limit yourself to one question and one follow up.
Again, if you have a question or comment at this time. Please press Star then one on your telephone keypad.
Our first question or comment comes from the line of Sterling Auty from.
P. Morgan your line is open.
Yes, Thanks, Hi, guys I didn't realize you actually made comments I would have prepared some remarks for you.
[laughter].
Yes, maybe [laughter], but maybe just to get started let's talk about the education vertical in particular can you give us a sense of what was the mix.
Products that you saw most in demand you gave some anecdotal you know highlights, but what are you seeing in terms of the uptake in the product portfolio, specifically to education and can you give us a sense of what was the education mix as a percentage of either bookings or revenue whichever you feel comfortable given.
So what I'll do is all those comments a little bit about the products. Thanks Sterling by the way if the question for joining us on and then I'll kick it over to Joe for the mix so on products or you'll recall that our cross sell products of Jim protecting our jump can after the primary cross sell products, we have those today.
I'll have been mostly selling within commercial market. So therefore, the bookings that are occurring within education is either for the Jim Crow product or the jump school product and both in Q3, just performed extremely well.
As you know educated.
It's around the world have diverse needs and one of those solutions.
Seems to fit each customer's need are uniquely so both performed very very well our worldwide.
As far as the split of where the business comes from between commercial and education Sterling not too dissimilar to our run rates However, education.
Jason was a little bit a little bit heavier than a typical Q3 because of the kind of the tail end of some of the the cobot related distance learning spend but our revenues because revenues driven by the A.R.R. The revenue split continues to be in the range of 60% commercial 40% education.
Okay, all right great and then in terms of follow up how should we think about fiveg in the way that Apple is starting to incorporate them into their devices and as we think about am one ship and maybe a fiveg enabled I pad, how do you expect that to impact enterprise adoption and ultimately jump uptake.
Yes, very interesting question Sterling I for one would think that Fiveg is transformative and again different areas of the world. We're at a different spots in their maturity in that area and there are some areas of the world that frankly are.
There are no more keen on fiveg connectivity than Wi Fi connectivity and some spots and I think it has the potential especially within education to be very transformative.
As you know during the pandemic one of the big concerns has been our students Apple to get connected from their homes, we have seen.
An uptick of LT enabled ipads in those situations sold that educators could make sure that our students had connectivity from their home and again. These will be school issued I pads I think with the emergence of Fiveg you know on its way it could potentially be very transformative to.
Both education and in our commercial markets are to just have our connectivity all the time that that very very fast.
Makes sense. Thank you.
Thank you. Our next question or comment comes from the line of Rod Hall from Goldman Sachs. Your line is open.
Hi.
Hi, This is donkey on behalf of Rob. Thanks for taking my question and congrats on a solid result could you give us an update on your pipeline the demand trajectory, you're <unk> and based on your conversations with customers. How long do you expect the favorable environment to persist I have a follow up.
Yeah. Thank you for the question.
And so the question being about pipeline.
No. We are seeing a type of pipeline coverage that is very similar to what we would have expected to see had a pandemic not occurred we're very confident in our pipeline coverage and again from a total coverage perspective, it's about.
Not the same as what we would have expected and what we've experienced in the past as a matter of fact at this moment.
A little bit stronger than its been over say the course of the last six months or so.
The difference is a little bit of the mix we.
We see obviously a tremendous strength in education, so, it's a little bit stronger than.
I will.
But overall, it's about what we would expect and as we go forward. We don't have visibility to a time, where that's really changing again, what we've noticed more than anything as the pandemic has progressed or the time period has progressed.
Is the mix from a geography or industry might shift, but the overall value remains roughly about what we would have expected.
Very helpful. Color then for me John connect and protect or are you. Older. Then could you also give an update on your plans.
To target any other adjacent markets. Thank you.
Great. So on Jeff connect and Jan protect you are correct that they are designed today for macko asked and I would just say that it is within our strategic intent to be able to add access management.
Meant and identity capabilities and endpoint security capabilities eventually on the other Apple devices like iOS, an iPad or less I have nothing to announce in terms from a timing perspective, but strategically you are right in line of what we would intend to do going forward.
From a market perspective, there is a couple of ways of answering that one would be from a geographic standpoint, one of the markets that is emerging for us. This year has been Latin America, and we're very excited about its potential in the future. Although it's very young for us other markets that we.
Bunched into a few years ago like Japan are performing extraordinarily well, Japan was very much a highlight for us in Q3 when it comes to industries up it's going to be you know those industries, especially that remote workers supported that we're going to do extraordinarily well in.
Okay. And then also industries were iOS devices have a transformative ability to sit between customer and the provider in order one to keep people safe, but also just to have a more efficient workflow those are going to be the markets are going to divest and.
Alright, thanks, guys.
Thank you. Our next question or comment comes from the line or from Bob in Suri from William Blair. Your line is open.
Thank you Hey, Danny Joel Congrats nice nice job there I guess I wanted to talk a little bit on two things one is we obviously.
Great news about the progress of the vaccine.
But we've also seen cases spike in potential Lockdowns in Europe, certainly and then potentially in the us.
Some deals course deal cycles extend it and then obviously offset by some traction.
I'm not talking about a quarter, but as you look forward how are you thinking about the business given.
In that environment do you think that we end up going back to what happened in March.
March April may or do you think that actually we've sort of talked around that we understand how this works and we might be able to kind of see those pipelines just mentioned Deane. So thats you play out a little faster with less delays, how should we think about what youre youre thinking about and modeling for the future. So the strategically.
As you know so thanks, Bob one for your question and Boy I wish I could predict the future I wish I had that talent that pertains to the pandemic I'm not there you don't have overall, yeah, but I will remind you that one of the interesting things with JMP is you know I mean, we're really tracking on the year I a boat.
Where we would have predicted to be last January one we just ended up getting there a different way in this particular case diversity is our friend our diversity in industry and diversity in geography, so that even if there are certain areas of the business that are down others for a completely different.
Different reasons are up as we've mentioned before we see the same economic headwinds.
As do everyone else, but we've got these great tailwinds like Tele health and distance learning and work from home that have really benefited our business and going forward.
Frankly, I can you know look at areas.
As of the business that will strengthen when the pandemic passive.
And I will look at areas of the business that will strengthen our should the pandemic persist for a bit I think more than anything what we've noticed is that the pandemic has awakened industries to what is possible with technology.
And we think more than anything it has actually accelerated the adoption of work from home and industry transformation in such a way that once the headwinds persist. We believe the Tailwinds will will continue forward.
Yes, no no that's helpful. I think you're probably right there even though.
And not having the the pure crystal ball.
I wanted to touch a little bit around partners you have a great set of partners you've got resellers, you've got a whole bunch existing relationships, where you've engaged despite the current strip environment. I guess just on how you think about investing more there and what that could potentially be as a percent of revenue long term again.
Not not any necessarily guidance that sort of how you think that plays out over the next three to five years given there is so valuable and so well set up to sort of play this game as long as they understand especially including for example, the deeper relationship Microsoft So would love to understand how you think about that investments, you're making what that might be as a percentage of revenue. Thanks.
Sure, Thanks, again and either.
A couple of different ways to look at partners. Obviously, just channel partners is one of them. When it comes to just split on that maybe I'll kick that over to gel to make a few comments, but overall on partnerships of course, it's going to be part of our solution consideration every single piece of new value that we want to bring to our customers we are.
We're going to make a wise make a partner or buy decision and in many cases, we're going to be looking for in influential a partner that has an excellent solution that could accompany ours as matter of fact, if you go out to market place that Champ Dot com, you'll find that we have hundreds of integrate.
Gration.
With our development partners out there to bring greater value to our customers in.
In addition to those partnerships of course, we have the very you know.
Strategic partners and the two most notable there of course are going to be Apple and Microsoft on the Microsoft Front, if you were able to.
Into our J not conference at the end of September we announced some excellent new capabilities along with Microsoft for instance, iOS device compliance that allows customers to choose jam for Apple Enterprise management, and Microsoft for everything else and yet still experience all the comply.
Tunes checking that Microsoft has across their enterprise and the single pane of glass reporting on inventory that so many organizations want so we believe that almost all of the devices in an enterprise are either windows or Apple based and so by Microsoft and Jan working together, we just make things.
Things easier for the customer then on channels gel. If you want to make a few comments you have on so when we think about our indirect versus our direct business in outside of the U.S. already greater than 80% of our business comes to come to us through the channel on the Americas side. However, it's around 40% and you blend that all out to about a 50 50 split on a global basis.
And then if we think about the Americas, we definitely have some opportunity there and that is part of our strategy going forward to look for more opportunities for more more channel route and.
To the market.
Gotcha Gotcha Super helpful. Thanks, guys and really nice job appreciate.
Appreciate it thanks for fun.
Our next question or comment comes from the line of Brad.
Fields from Bank of America Securities. Your line is open.
Oh, Great Hey, Thanks, guys for taking my question I.
I wanted to ask one on the dollar based retention very healthy there and then 117 range has the mix of expansion.
Changed at all since you've seen the success here with connect and protect.
More towards kind of product add on in those two categories versus say device expansion any any comment you can make on just the balance of what's driving that between devices and add ons.
Yeah, Hey, Brad. Thanks as reminder, our net dollar based retention expand.
And devices and add on products and just specifically to address your question on add on products that connect and protect our protect is still two new into immaterial to have an impact connects if you think if you look back at our retention rate in a year and a half two years ago, we are in the 115%, 115% and when bringing connect on that nicely.
Pop up to the 117% run rate that we've been hovering at being able to maintain that thats kind of already that growth and lifted baked in at this point and then from here on will continue to see some uplift coming from protect as well.
Got it great and then wanted to ask about kind of early interest on some of the new vertical solutions you launched it.
If the Upfronts virtual visits and an assessments how are those tracking what's the what's the level of interest there and what might that due to ASP for customers. Thank you yeah sure Brad and just for those are workflows that we've launched in our existing solutions. So there are those are not.
Add back sales, but rather workflows.
That Weve released that we would get the traditional pricing for for instance, our Jamba pro product. So we shouldn't be thinking about those products as being you know add on sales, but rather part of the expanded device deployment to Joel's point most of our net retention is because the device deployment. So the more that we.
Those release workflows that encourage the greater device adoption, we end up growing with the customer because of that and all of those we launched virtual visit I believe it was right around the end of March. It was just very soon after the pandemic broke out we had our healthcare customers coming to us and saying they.
You did a simple process that would connect patients to either.
Caregivers or their families without the patients having to know how to do anything or set up each individual call. So we are able to get that out there relatively quick because of our.
Electronic medical record systems integration without.
T. staff ever having to help so dozens of hospitals within a matter of a month.
A month or so started looking at that solution beginning their implementations.
On the assessments out that isn't a free app that's available from the App store and that adoption.
It has not taken off quite as much as what you saw with virtual visits.
But it is really served a few customers extraordinarily well to be able to observe students take a test, especially for some of those college type about preparation test.
Great. Thanks, so much Deane yeah.
Thank you our next question.
Comes from the line of Raimo Lenschow from Barclays. Your line is open.
Hey, Thanks, and two questions.
Jill last quarter, you talked a little bit about the slightly slower expansion of seats in the commercial space can you talk.
A little bit towards what you saw this quarter and then.
Education fighting with that just the typical Q3, you think back to squander tetra or because of coal. When do you think there will be kind of a follow on or there will be an impact to Q4 and I'm a quarters as kind of people kind of coal is down again schools home again, its that transits just talk to that dynamic a little.
Thank you.
Hey, Mark Thanks for the question when it comes to our commercial device expansion Q3 looked very similar to Q2 with the exception of you had a little bit of a slower start to Q2 because of April.
Now as we think about our Q4 pipeline and what we're seeing we're actually starting to see.
But a little bit of an expansion opportunity there where there is some of those 80 budgets that were that were frozen or delayed or may be restricted in some capacity because of cash constraints starting to see some confidence don't backup and with our commercial customer base and so we're hoping to see a little bit of that of that free backup for.
Yeah, and then on the.
Hey, Raimo I'm on the education side, you are right that of course, the the buying season for education is very heavily weighted towards June and July which marks the fiscal year a move for educators in the United States and then also of course are preparing for.
The upcoming school year, and we saw those two months as being as strong as ever our this year, but the difference. This year was that the tail of the educate occasion buying season extended into September much more aggressively than it had before and there is a couple of reasons for that one.
Of which is simply the source for funding on those purchases often came through government programs and sometimes it just took a little bit of work in order to get that going we are seeing that that tail is extending even further.
Into Q4, which is a little bit unusual compared to past.
Orders as well.
I'm actually you believe.
But the next couple of quarters, we're going to see an unusual amount of education buying compared.
Two past seasons through the winter and I think there is a few reasons for that.
One is going to be because Jeff.
As more global than ever and education, and if you take a look obviously not all of them have the exact same buying season as we have here in the U.S. and we have some countries as I've already mentioned that are doing national deployments of technology to students and they're still in the very early stages of those deployment.
So we're anticipating that thats going to continue through beyond the normal education buying season and.
And in addition to that.
It's really interesting, but the pandemic has as I mentioned, a little bit earlier has almost awaken some industries the potential that technology can provide so.
While some schools had shared technology programs.
The what they've done just in some isolated cases with the pandemic is realize the potential of one to one technology for student.
For instance, the hand, raising capability that a student can do from home turns out that's pretty valuable in the classroom as.
Well in order to get more students speaking up that they need help so I think it's going to continue for a while I don't I think that we're going to see a lot.
More education buying as a percent of our overall buying this winter than we've seen in past winters.
Okay perfect Congrats from me as well.
Absolutely.
Thank you. Our next question or comment comes from the line of Matt Hedberg from RBC capital markets. Your line is open.
Hi, guys, congrats as well on the air our acceleration.
A little bit of a follow up to to wrangles question on on on the strength in education.
Our our school districts.
Voting.
Their contracts this year differently with obviously elevated levels of at home or gain as you suggest is it more a function like this could be the new normal in other words, even if kids aren't at home the use of iOS devices in school will sort of permanently be higher than maybe what it once was.
Therefore, maybe the contracts or are no different than you know maybe at elevated levels, but but you wouldn't necessarily expect that the kind of sort of come bring bring their seats down at say at some point.
As far as the contracting goes I think on a very common methods of contracting is actually along with a lease.
No arrangement that they might have from Apple for the devices themselves and it's very frequently actually that those leases are for a multiyear periods and then they'll buy jam.
To use with them for that same period of time, so that is somewhat common to history, but this.
See here, maybe we are even seeing it more than ever.
No I don't I don't think we'll ever see on a mass scale that schools go into reverse on the technology front I think now that they are leasing these devices for the next several years that is going to be something that.
Like I said earlier has awakened them to the potential and there are things that you can now think about an education of course, we want kids ultimately in the classroom, but even the classroom environment can be helped we actually call. It you know technology enabled active learning where students are just sitting through a lecture but.
Doing something its been proven that learning environments can be enhanced with that and I think more schools are going to realize that and then of course, Matt as you well know no. Even earlier. This week, we we might have had a snow day in Minnesota under normal circumstances, and who knows perhaps snow days will be a thing of the past.
[laughter].
I'm sure it any if there's a kid listening they probably don't like to hear that the.
Right.
And then as a follow up you mentioned in your prepared remarks, I think you said GM business plan, which to me sounds like.
You know a bundled offering of multiple products I'm. Just curious is that the right way to think about that in terms of trying.
Thats sell sort of more products through a bundle into the base and maybe make it easier to consume and price is that right when I think about that.
Yeah, we are seeing a just a terrific early demand for both jam connect and jam protect as I mentioned in my prepared remarks that just since the covert.
Outbreak over 700 customers have jumped connect our new to that solution over 200 customers of jam protect and this is the first year that we have the solution available. So what we're hearing from customers is they just they want it to be easier to work with us and to buy those solutions and renew those solutions. So we've come up with your right.
Bundled offer call Jeff business plan, we're putting Jeff pro Gen for TEP jump connect all together for all of the users of devices, whether it'd be just Mac or whether it be iOS as well on a usage based pricing offer super easy to buy super easy to renew.
Just based on head count.
Thats, great and relations and great opportunity to cross sell great. That's it from me. Thanks, guys. Congrats again, thank you.
Thank you. Our next question or comment comes from the line of Gregg Moskowitz from Mizuho. Your line is open.
Okay. Thank you very much hi.
Hi, guys congratulations.
Second quarter, and so a bit of a follow up to us to remove his question.
You added in total 1.4 million devices under management this quarter and I think thats the strongest.
Quarterly performance for camp that we've ever seen and I know that you don't of course this guy to come.
Incremental devices on their.
If any comment on a on a go forward basis, but it sounds like Dean that just a follow.
Following your comments, specifically around education, and and sort of the longer tail that exists. It sounds like you don't sort of look at any kind of cliff event. If you will where you are.
Might see now that we sort of exit this back to school period, you might see this.
Material degradation and incremental units it sounds like the demand drivers seem pretty solid for a little while that I just wanted to follow.
A follow up on that.
Yeah, Greg absolutely.
I do not see I do not see a what's happening right now as a pull forward or temporary.
Action I actually see.
It as more of an accelerator.
To what technology can be used for in the future and a lotta organizations are thinking I'm kinda differently about their spend I mean think about it. This way of course, we know the work.
I'm home and learn from home initiatives, our igniting some of this activity.
But some organizations are realizing hey, you know what we don't have to spend as much on travel as we pour starkly spent provided that people have excellent technology to where they don't have to travel or maybe we don't have to grow our facilities.
As fast as we did before provided that people have an excellent technology environment that is their office at home and then in many industries as I mentioned as well in order to be safe and stay open should whatever happens in the future put technology between.
Getting the customer and the consumer between the teacher and student between the patient and the doctor between the store retail.
Retailer and shopper.
You can go through industry by industry and realize how not only would that help keep people safe and help keep organizations.
We opened but it will actually make those organizations more efficient in the long run and I believe that what we've experienced in the last six months has really shown organizations that.
Okay. That's really helpful. Thanks thing that makes sense and then just as a follow up getting back to Jay now College.
By the way with one of the best Virtual conference introductions, I I've I've seen.
Okay.
I know the number of attendees as you talked that was much higher than usual, but of course, you know there is no physical interaction right and so I'm just curious if you've seen any change in top of funnel versus what you typically experience. After this if this after this event. Thanks.
Thanks, a lot Greg and I appreciate the compliment and we're so proud of what our marketing team put together.
Together, but it's really an entire company event I would remind you that the core purpose of JADAK has to be an educational event, where apple admins can collaborate and learn and this year was no different we didn't want to be a marketing event. We wanted it to be and education event. However, what we did discover is when you take cost and travel out of the equation.
Yeah, we're off to see exactly how many people really want to come to Jay not going as we mentioned it was approximately 20 20000 attendees 10 times, what typically is with 28% of them being prospects. So while it's an education event, yes, some people come to plan their future investments we've already seen lead.
And come out of it and we're expecting more of that activity because of the very large attendance that we had.
Terrific. Thank you.
Thank you. Our next question or comment comes from the line of David Hynes from Canaccord. Your line is open.
Hey, Dean and Joe.
Congrats on a nice quarter.
He maybe I could ask one about protect.
You noted a nice win with S&P like I think it's been a customer for a while so I guess I'm curious kind of what was the catalyst to get S&P to kind of act as an end to end take on protect what what's the early feedback been from them and then when you talk about 28000 protect.
License is is that just a a portion of their Mac basis, there's still an opportunity to grow there just kind of how are they thinking about the rollout.
Hey, David Thanks for joining thanks for the question. So two questions. There one is just about essay peas roll out and.
And yes, they have been pretty open.
That they are up to about 28000, Mac and that is there there Mac fleet, but S&P continues to grow with her mat fleet every year as do so many of our customers as Mac continues to grain popularity within the enterprise and especially with a apples announcements. This week, we do not.
See that going away anytime soon as a matter of fact, we see especially with the announcements this week and todays general availability of big Sir we think that that is going to continue to grow when it comes to feedback on for tap.
We have been there have been some really terrific testimonials that.
I've come and that I'm sure our marketing team will get busy on making sure that we make that information public but.
But the biggest thing that we've noted with our early installations is that our customers have been putting GMF protect their for their Max.
And almost.
Instantly finding things that they wish they would have known about those Max that the past security software that was let's face it predominantly windows focused simply didn't find natus, because we look specifically for map.
Exploits on where.
Other they behaviors or whether it be malware.
Because of our Apple specific focus on.
They are finding things on their Max that they wish they would have known ahead of time and the user experience is still excellent because we actually have in architected for Mac solution.
Yeah that makes sense and then maybe a follow up on the healthcare segment, which I don't think we've talked about yet just that the dynamics there I'm curious when.
When you land a customer in that segment do you do you tend to land more expanded in other words like is it a hospital system typically like Hey, we're an apple.
Organization. So you get a bunch of devices upfront or is there still that device penetration story that we might see kind of play out more in the enterprise market.
It's the latter is not go in and when all our devices all types on the very first day, because what it's a matter of fact almost.
More so in health care. It occurs over time, because it's very frequent that let's face it for for health care providers out there if they have Mac they are more than likely using JAMF already and so it won't be a step forward to say, hey, I have heard of what gmps doing either with clinical communication or patient.
Bedside or virtual visits I think I'd like to try that in a pilot.
And then they roll it out in a pilot after that they might roll it out to an entire ward after that maybe an entire hospital and then of course many in.
Greater healthcare networks I have many hospitals are under their management and so they'll roll.
Lot Hospital by hospital. So healthcare is very frequently a start smaller and just continue to grow industry.
Interesting okay, great. Thanks for the color.
Thank you. Our next question or comment comes from the line of Pat Walravens from JMP Securities. Your line is open.
Oh great.
Thank you and congratulations so one question for each of you. If that's okay. Dean first you know I enjoyed your conversation with Jeremy culture at JAMF nation and.
You know between between that and the fact, it's been six months since Apple bought sleep Smith I, just wonder if theres anything.
New that you've learned about their their thinking behind.
Great position I know, that's something that some investors were worried about.
Sure. Thanks, Pat now I'll pass on Oh, your thoughts on to our good friend Jeremy at Apple.
On.
The short answer is no there's really been nothing.
More significant that has happened around that.
At acquisition hasn't changed the competitive dynamic at all.
On the way that our viewpoint of it.
In the last earnings.
Earnings call and our viewpoint of it several months ago. When we first talked about it is the same as it is today that anything that increases apples usage.
On the enterprise is great news for jump, we don't really compete with that particular solution at all and that we believe it's ultimately going to be you.
Used in those talented individuals are going to be used at Apple just to continue to strengthen apples cloud services.
That Jeff will then album.
Just be able to leverage to build stronger solutions for our customers.
Perfect. Thank you and then Joe I know you very clearly have not guided to but I'm. Just wondering if there's any thoughts you would want to share with investors about.
I think they ought to think about when they when they look at that 2021.
Hey, Pat Thanks.
Good to talk to you and no clearly have not guided [laughter].
Yeah, but you know I think the thing we can think about as you know this is an unusually air so as we as we exit this year, we're going to have a different exit rate them and maybe would have had on our expense base.
But our revenues are right in line with where we're expecting them to be as we exited the year well continue to invest.
At rates that were very similar to kind of you think about pre coded expense investment levels I'm, particularly on a go to market energy and really put dollars, there and contained and faster to a rate very consistent with the prior periods in that we still have our early in our opportunity in the Pam answer that's got a lot of a lot of customers to go.
Grab and so we'll continue just to spend there and then also you know continuing to spend invested a similar rate in R&D as we continue to innovate on both of our existing and new technologies and then probably the only other the only thing that will be slightly different next year as of course will be our first year Ah first full year as a public company. So we'll have some.
Finally, mental spend in our DNA and back office functions there.
Okay, great. Thank you.
Okay.
Thank you.
Last question comes from the line of Rob Owens from Piper Sandler Your line is open Sir.
Great in under the wire. Thanks for taking my question guys.
Do you know sort of a little bit in some of your comments, but when Apple drops manger operating systems and hardware. Okay. It's what's been your performance your business historically, we see a step function associated with that or is this just driving more consumerization. So it was more of a longer term momentum opportunity.
Yeah, Thanks, a lot for.
The question and this is a big week.
It's actually a terrific wait for those Oh watch the Apple event earlier this week you know.
Not only is the new Mac operating system Big sur available today, but earlier this week Apple announced that you know probably the biggest.
Move with the Max that they've made in a very very long time.
Where the new math books with the M chip.
Our coming available and you know really of all the Apple Enterprise management providers that are out there only jam was here the last time Apple did something like this when they moved.
From the Powerpc chip back in 2005 to Intel and we helped organizations through that because you as you can imagine not every single Mac within an enterprise is going to move all on the same day for a map for a couple of years, you're going to have enterprises that have a mix of Intel Max.
And am one chip Max and nobody has a larger Mack inventory, then does jump and nobody can get to information on the Max better than Jeff and as a result, we're going to be able to help with policy management and security and those types of things.
For the next couple of years for.
Organizations and of course, the you know the the thing that really distinguishes Jan is that while there are companies out there right now so.
Saying, they're nervous about their customers upgrading to big sur JAMF is it as a matter of fact, there's jams all around the world today upgrading.
Exhort without concern because we just know that we're going to work with it.
In addition to that the same goes for the processor I get a little anecdotal story on that and just what kind of reflect.
Well why we tend to do well when these changes occur is I bought my math book Air with the M chip.
Five minutes after that Apple event was over I didn't need to call anybody and I T or anybody insecurity to find out whether it was okay or whether it would work within our organization I will get it within a couple of weeks delivered to my home Oh powering it up and I will enroll in management connection and protection that Jeff and I will be up and running with.
All my data from my prior Mac and with all access and security applied inside of 30 minutes, a mountainous the blip and nobody from my team will be involved and nobody from my T. will help me that is just a new world of enterprise operations that very few people exist in and the more organizations we can show.
So that kind of simplicity to the more Mac adoption with jampel grow within the enterprise.
Perfect and then regarding some of your earlier channel comments.
Our channel partners alter scale within the Apple ecosystem to truly drive channel leverage and if so what's it going to take on your.
Or is it more opportunistic on more of a onesie twosie basis. Thanks.
I mean were there is obviously some major channel partners out there because of course as you know in the enterprise Apple devices sell entirely through the channel and so those organizations a lot of times organizations.
Just want to have their management and security and access controls purchased right along with the devices and so they'll go on on one order form into these large resellers of course, we're also going to have.
Regional resellers around the world are going to market, but it's a mix.
In total.
Well, Jeff we've got hundreds of resellers that we work with but of course, we've got the top five or six that represent a very good chunk of the selling.
Thank you at this time I'd like to turn the conference back.
Mr. Dean Hager for any closing remarks.
Sure. Thanks, everybody for joining today, we really appreciate the questions I'm. So proud of what the jump team members have accomplished in Q3, and we look forward to continue to help organizations succeed with Apple and into the future no matter what the future holds.
I will now go out there and buy or new map book with the am one chip you wont regret it stay safe and be well. Thanks.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.
[music].
[music].
[music].
Good day, ladies and gentlemen, thank you for standing by welcome to.
<unk> third quarter 2000.
<unk> earnings Conference call.
[music] work to Miss Jennifer.
You may begin.
Good afternoon, and thank you for joining.
On today's conference call to discuss <unk> third quarter 2020 financial result.
With me on todays call are Dean Hager, Jim Chief Executive Officer, and Joe Putman, The company's Chief Financial Officer.
Before we begin I would like to remind you that shortly after the market close today, Jim issued a press.
Its release announcing its third quarter 2020 financial result.
Additionally, we published an updated investor presentation, you may access the press release and presentation on the Investor Relations section of jump Dot com.
Today's discussion may include forward looking statements.
Please refer to our most.
Most recently filed quarterly report on form 10-Q, and our IPO prospectus dated July 21 2020.
You will see a discussion of factors that could cause the company's 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 measure.
As related to Gmps performance.
You can find the reconciliation of those measures to the nearest comparable GAAP measures in our quarterly financial statements.
To ensure we can address as many analysts questions as possible 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 Dean Hager Deane.
Thank you Jennifer and thank you everyone for joining us on our third quarter earnings call.
Our call today, I will share highlights from the quarter and then provide an update about the exciting momentum in our business all finished with a recap.
Our annual user conference before turning it over to Joe to review, our third quarter financials.
While a challenging macroeconomic environment persist the tailwinds of Tele health distance warning and remote work in the third quarter offset economic headwinds and drove strong Jim sales grow.
Hello, and customer acquisition.
Total revenue in the third quarter grew 29% year over year to $70.4 million driven by recurring revenue growth of 40% year over year to $65.8 million now 93% of total revenue.
Annual recurring revenue or a R was $251.5 million growing 37% year over year.
Non-GAAP operating income was $12 million in the quarter were 17% of revenue.
This was a half point decrease over the third quarter of two.
29.
And Unlevered free cash flow totaled $28.2 million in the third quarter, representing an unlevered free cash flow margin of 40%.
This compares with a margin of 33% for third quarter 2019.
Our strong third quarter results reflect that.
Continuing trend of IP consumerization that fuels the growth of Apple in the enterprise.
This trend where employees demand to use that work the technology. They already love at home has accelerated over the past six months.
Jim has responded by helping thousands of organizations around the globe.
Implement remote work solutions as well as helping schools with distance learning and hospitals, what their tele health solutions.
James the value to customers and our business results continue to strengthen as these trends further route themselves into daily life. Both in the short term and are into.
Future.
Despite the challenges of 2020 Jam remains dedicated to our customer success and we have continued to invest in new features and enhancements that fulfill our mission to help us.
Succeed with Apple.
As organizations have worked hard to provide a safe.
The environment for their teams and customers technology plays an allergy plays an important role across industries like retail transportation and healthcare.
Jim continues to support this effort and gaining momentum with our innovative products, such as Jim setup, and Jim reset that enable shared.
And yet personalized usage of I phones, and I pad.
And for workflows, specifically designed for hospitals, Jeff's healthcare listener integrates with a hospital's electronic medical record system.
Lessons from messages like a patient discharge or transfer and automatically performs to that.
I heard remote command like wiping that device or associating the device with all of the connected.
Even a patient's new hospital them.
This work flow uses I pads to create a better and more engaged experience for the patient without requiring time or effort from the high tier hospital staff.
Jansa virtual visit solutions, which launched two weeks after the COVID-19 outbreak allows patients to seamlessly and securely connect with doctors and their families through third party video meeting platform like Zoo and Microsoft team.
You see health in Colorado is just one.
On hospital using all of these innovations.
In 2018, you see health began using jam to streamline their technology management and practices by offering an iPad each patient's bedside.
They utilized healthcare listener jumped setup and Jim reset to digitally.
Sterilize the device between each patient and easily set up for the next patient without the need for IP assessments.
As virtual care needs Spike this quarter, you see health started using our virtual visits workflow and ramped up from less than 50 virtual visits a day to.
To over 1500.
Both healthcare listener and virtual visits have patents pending.
Also during this quarter JAMF advanced our relationship hospitals around the world by implementing clinical communication workflows.
Cincinnati Children's hospital, the number three children's hospital.
Still in the U.S. selected jam for thousands of I phones for nurses to help optimize clinical communication and patient care and they also used our solution to deploy ipads to patient rooms for entertainment social connection and access to medical information directly from there at.
Epic electronic medical record system.
Additionally, Cincinnati children's extended their JAMF usage to Apple Tvs and patient groups.
Janse unique healthcare capabilities across the entire Apple ecosystem of products led to these hospitals choosing jam over legacy.
MDM solutions in order to succeed with their tele health clinical communication and patient bedside initiatives.
In the third quarter, Jim also experienced strong growth in the education market largely driven by a worldwide requirement for schools to be distance learning ready.
These programs are aided through government funding like the cares act in the U.S, The Giga project in Japan, and did Japan and Germany.
In Japan, JAMF Onboarded 56 school districts, which includes over 1000 schools in Q3 alone.
In the U.S.
Champ is the clear leader for Apple Enterprise management and education we.
We serve 12 of the 15 largest school districts in the United States.
Eight of these schools have increased their seat count with Jeff since the COVID-19 outbreak.
Jim has been preparing schools for kids to learn from their homes.
For years, whether they knew it or not.
Our gym teacher App provides educators with real time classroom or more control of each student's Apple technology from any distance and our gym parent App allows parents to do the same.
Both these apps are designed to empower adult.
Belts to help students avoid potential distractions and focus on their studies.
Since the pandemic began Jim has further advanced our solution, including new capabilities, such as teachers are virtually ringing the bell in order to easily start their video platform.
And allowing studer.
It has to virtually raise their hand in order to gain further assistance from educators, which is valuable for students learning at home or in a classroom setting.
Last month, we also launched jump assessment and an app that empowers schools to issue remotely proctored exams, where it's necessary to.
Visually supervise students like with college placement exams or other high Stakes testing something that was not previously possible on the I pad.
So why not a central High School district in New York use Gen assessment this quarter to allow students to take the act you place or test a test that assist.
Yes colleges in placing students in the right courses, helping them continue to build their future. Despite the uncertainty stemming from the pandemic.
Additionally, Champ is seeing strong interest for both Mac and iPad in higher education.
The Ohio State University has been providing.
Writing I pads for every incoming freshman since 2018 as part of their digital flagship program.
In the third quarter of 2020, Ohio State conducted a survey that found well over 90% of their students agreed that I pads are useful for academic purposes in a valuable.
Tool for their education.
Similarly, the University of Kentucky is in the second year of issuing I pad technology to first year students more than 11000 devices have been distributor as part of a wider smart campus strategy geared towards better leveraging technology in new.
Innovative ways.
In total over 300 universities, our higher education customers have expanded their use of jam since the COVID-19 pandemic began.
We believe the strong Apple usage in universities further confirmed Champs research finding that over said.
80% of college students would prefer to use a Mac at work if given the choice after graduation.
Speaking of using Apple at where the need to remotely and securely connect and empower employees working from their homes has continued to lead companies to choose Jan and grow there.
Apple and specifically now usage this.
This trend, which was gaining popularity before the pandemic has been accelerated this year and we believe will continue into the future.
In the third quarter Jampa advanced workflows that improves the employee experience security and if this.
Currency through Jam connect and Jan protect.
Champ release, new capabilities, and Jan protest and announced a new version of Jam connect that make it easier to deploy and further streamline employee onboarding and authentication using single sign on and biometrics with password list at.
Access to the Mac using phase IB from an iPhone.
These advancements led to approximately 700 customers choosing Jeff.
And approximately 200 customers choosing Jan protests, which was launched exactly one year ago today since the COVID-19 outbreak began.
In the.
Third quarter, Upwork Everly and HSBC are all examples of new Gen connect plans.
And examples of Jam protect wins include Gilead Sciences, Ada health and safety, but the Sep having already deployed Jasper test to over 28000 math books. These.
Customers are part of a fast growing trend where organizations leverage jams entire Apple enterprise management platform.
As part of our expansion initiatives Jamba is now offering a new user base pricing bundle called Champ business plan, which includes a gym pro Gen protect.
Just can't connect across all Apple devices used by employees.
Jan business plan provides organizations with a complete solution that delivers a strong return on investment and lower support costs.
All of these new capabilities for showcased as we closed Q3, when we hosted a profit.
In June 20000 attendees at our virtual JAMF Nation user conference also known as Jana.
Which is 10 times, our normal in person conference attendance.
Jay not because annually the largest gathering of Apple IP admins globally, and we believe this year's Jay not with the largest gathering.
During the Apple IP Adnan anywhere ever.
This year, we welcome to many first timers, who have not participated in previous conferences, plus an amazing 28% of attendees. This year were jammed prospects not customers, which supports the strong and growing demand we have see.
Revenue for Apple Enterprise management.
Jane up provides a forum for collaboration in this year was no different based on the communication threads during the event and chatter that we experienced post event.
On average virtual JADAK attendees spent more than 13 hours in the platform engaging.
Participating in Jan content.
Nine and 10 agreed that Jane up 2020 met their expectations and plan to attend again is virtual next year.
The theme of the conference was a year like no other and we showcased many of the platform enhancements I mentioned earlier that our power.
And being the learned care and work anywhere trends, along with customer and partner stories on how they were able to succeed during this time using Apple and Jeff.
Apple and Microsoft Representatives also joined US on stage again this year to talk about our important partnerships.
They bring to the Apple it and security community.
We announced we are expanding our collaboration with Microsoft Enterprise mobility insecurity by launching iOS device compliance through.
Through this offering which adds to our already robust partnership organizations are empowered.
Choose GM for Apple enterprise, including device compliance and security monitoring for remote staff.
And Microsoft endpoint manager for any other devices.
These trends like employ technology choice programs and continue to grow organizations need management tools that can adapt and shit.
Shifting to hybrid environments, while still giving the native and intended end user experience.
As Jay noted, we also announced our acquisition of Mandato.
When datas Kenobi solutions are considered the leading solution in patch management for the Apple platform.
Built exclusive.
Or two around Jam Kenobi, and Kenobi Pro managed software compliance on Nacco as a major initiative in pain point for today's IP teams.
We believe with Champs resources, we can extend these capabilities and bring even greater value to organizations using the apple ecosystem through.
We will complete application lifecycle management solution.
We closed this tuck in acquisition on October 15th.
As we look into the future. We are excited about the continued transformation of the enterprise as the Consumerization of Ita results in more Apple devices in ERP.
Powering employees at work.
Educating students in school and helping provide care for patients and hospitals and at home.
While the events of 2020 have accelerated these trends. We believe we are still in the early innings of this transformation.
Going forward, Jim commits to continue.
Moving at the pace of Apple supporting New operating systems and hardware on the same day, it's released including the recently announced Mac line up based on the Apple M Chip and Apple's latest operating system Big surge, which became generally available today.
We believe Mac will be.
Increasingly the device of choice for many in the workplace, especially the newest generation of workers and that Jan is best positioned to help organizations easily adopt and get the most out of this new technology overtime.
Unlike cross platform management and security solutions that are.
We're still struggling to fully support nacco West Catalina, let alone Nacco S. Big Sir Jim is solely focused on Apple and for a decade has supported an extended Apple's latest innovations from the day they are available.
In closing we are excited to be a part of this movement into.
Court the continued growth in the large and growing Apple enterprise management market.
Now I'd like to turn the call over to Jill to walk through our financial results and guidance Jeff.
Thanks, Dan and thanks, again to everyone for joining us today.
I'll start by discussing our third quarter results in detail.
So before moving onto guidance.
As Dean mentioned, we had a very strong third quarter total revenue for the third quarter was $70.4 million growing 29% year over year, reflecting strong growth across all of our subscription products.
Recurring revenue totaled 60 high.
Ill point $8 million in the third quarter, an increase of 40% year over year and accounted for 93% of our total revenue versus 86% in the third quarter last year, while nonrecurring revenue was $4.6 million.
Due to product mix shift this high favorable impact.
Hi from products that deliver in quarter recurring revenue as the education vertical and our gem connect product outperformed our expectations.
They are as of September thirtyth with $261.5 million.
An increase of 37% year over year.
As a reminder.
Minor AMR represents the annualized value of subscription support and maintenance contracts as of the end of the period.
Hey, our mitigate fluctuation due to seasonality contract term and the sales mix of subscription or term based licenses versus fast.
Three primary drivers underpin the growth of our IR.
First our consistent high device expansion rate.
Second our strong new logo acquisition.
And third the Upselling and cross selling of products into our installed base.
We expect to continue benefiting from these trends going forward.
We believe our ability to grow the number of devices on our software platform is a key indicator of our growth and trajectory as.
As of the end of Q3, we had 18.6 million devices on our platform representing strong growth in both the education and commercial verticals.
And across all major geographies as demand continues for Oregon.
In addition to remotely connect manage and protect their apple devices.
We have a history of attracting new customers and growing their annual spend with us overtime, which drives our high dollar base net retention rate.
We accomplished this by adding devices to our platform and expanding our customers adoption of our add on products.
Our dollar based net retention rate remains strong at 117% for the trailing 12 months ended September 32020.
Before turning to expense items and profitability I would like to highlight that I will refer to non-GAAP results for my remaining remarks.
Our GAAP financial results.
Along with the reconciliation between GAAP and non-GAAP are found in our earnings release.
Gross profit was $58.2 million up 35% year over year, while gross margin expanded four points to 83%.
We expect our gross margin to increase overtime as compared to the weight.
Rates, we delivered prior to the impact of cobot as recurring revenue because.
The larger proportion of revenue and as an increase the average AMR per device.
Turning to operating expenses.
We remain focused on improving the leverage in our business, while balancing our investments for growth.
With the strength of her.
Operating results year to date, we've been able to increase our investment throughout the organization by turning our original 2020 hiring plan back on.
As a result.
To date, Jim has onboard a 250 new employees since the beginning of the year, which has been aided by leveraging Champs zero touch technology.
The mix of the pandemic.
Total operating expense for Q3 was $46.3 million compared to $33.6 million in Q3 last year.
Year over year growth was driven primarily by continued investment in our global go to market strategy as well as investments in research and.
Development as innovation in both our existing and new products and features remains a top priority for us.
In addition, beginning in the third quarter, we now have incremental expense related to being a public company.
As a reminder, we delayed some planned spending in Q2 due to coded and invested a portion of that.
Net savings this quarter.
The larger portion of that savings will be invested between now and the end of the year, resulting in an uptick in spending in the fourth quarter.
Our operating income in the quarter was $12 million compared to $9.6 million in Q3 last year.
Operating margin was 17%.
We are presenting a half point decrease compared to the same period last year, reflecting investments required to be a public company, partially offset by improved gross margin.
Our basic average share count was $113.2 million.
And our diluted average share count was $116.7 million for the.
Quarter, as compared to 102.8 million and 104.6 million respectively in the third quarter of 2019.
Unlevered free cash flow was $28.2 million in Q3 compared to $17.9 million for Q3 2019.
Third.
Quarter Unlevered free cash flow represents 40% of total revenue up from 33% of total revenue a year ago.
Our operating model of high growth and improving efficiency yields strong cash flow generation, which in the third quarter also benefited from seasonally strong billings in the education vertical which outpaced.
Court increase in our operating cost investments.
Late in the quarter, we accelerated our hiring efforts and expect to make further investments in the fourth quarter.
Turning to the balance sheet we.
We ended the third quarter with $177.5 million in cash and cash equivalents.
And finally, we.
The guidance for the fourth quarter.
Our business is seeing some benefits from several trends emerging during these challenging times, including the proliferation of telehealth remote learning and the rise of a more permanent work from home movement.
At the same time, there is embedded uncertainty around the ITC spending environment as renewal.
Capital spending and new IP projects are subject to more scrutiny across organizations everywhere.
In light of these dynamics and our strong performance in the third quarter, we are increasing our full year 2020 revenue and non-GAAP operating income expectations.
For the fourth quarter of 2020.
We expect total revenue in the range of 70 million to $71 million, representing growth of 23% to 25% year over year, and a 3.7% increase from previous implied guidance.
Non-GAAP operating income in the range of 1 million to $2 million.
For the full.
Your 2020, we expect total revenue in the range of 263 million to $264 million, representing growth of 28% to 29% year over year, and a 2.9% increase from previous guidance.
Non-GAAP operating income in the range of 28.5 million.
<unk> to $29.5 million, reflecting the increase in operating expenses related to accelerated hiring and reinvesting our overperformance back into the business as discussed earlier.
For modeling purposes, we're providing the following information.
We expect an annual effective tax rate of 25%.
Sense.
As a reminder, we use our statutory tax rate when calculating tax effects of non-GAAP adjustments, which is not materially different from our annual effective tax rate.
For calculating GAAP EPS, we expect basic weighted average shares outstanding to be approximately $116 million for the fourth quarter and one.
$209 million for the full year 2020.
In closing, we're very pleased with our performance in the third quarter and look forward to sharing our results in the quarters ahead.
With that Dan and I will take your questions operator.
Operator.
Ladies and gentlemen, this you have a question or comment at this time, Please press star.
Then one on your telephone keypad if you're.
A question has been answered or you wish to remove yourself from the Q3 press the pound.
As stated early enough that the.
As for as many questions as possible. We ask that you. Please limit yourself to one question and one follow up.
Again, if you have a question or comment at this time. Please press Star then one on your telephone.
Uh huh.
Our first question or comment comes from the line of Sterling Auty from JP Morgan Your line is open.
Yes, Thanks, Hi, guys I didn't know I could actually make comments I would have prepared some remarks for you.
[laughter].
Yes, maybe [laughter] it maybe just to get started let.
Talk about the education vertical in particular can you give us a sense of what was the mix of products that you saw most in demand you gave some anecdotal highlights but what are you seeing in terms of the uptake in the product portfolio, specifically to education and can you give us a sense of what was the education.
Mix as a percentage of either bookings or revenue whichever you feel comfortable given.
Oh, what I'll do is I'll, just comment a little bit about the products things Sterling by the way if the question for joining us on and then I'll kick it over to Joe for the mix so on products or you'll recall that our cross sell products.
Jim protecting our jump can after the primary cross sell products. We have those to date have been mostly selling within commercial markets. So therefore, the bookings that are occurring within education is either for the jam payroll product or the Jam school product and both.
In Q3, just performed extremely well.
You know our educators around the world have diverse needs and one of those solutions.
It seems to fit each customer's need are uniquely so both performed very very well on a worldwide.
As far as the split of where the business comes.
Between commercial and education Sterling not too dissimilar to our run rates, However, education was a little bit lower.
A little bit heavier than a typical Q3 because of the kind of the tail end of some of the the cobot related.
Since learning spend but our revenues because revenues driven by the way are are the revenue split.
<unk> continues to be in the range of 60% commercial 40% education.
All right Great and then.
As a follow up.
Should we think about fiveg in the way that Apple is starting to incorporate them into their devices and as we think about am one ship it may be a fiveg enabled.
Hi, Pat how do you expect that to impact enterprise adoption and ultimately jump uptake.
Yes, very interesting question Sterling I for one think that Fiveg is transformative and again different areas of the world we're at a different spots.
In their maturity in that area and there are some areas of the world that frankly are more keen on fiveg connectivity than Wi Fi connectivity in some spots and I think it has the potential especially within education to be very transformative.
As you know during the pandemic one.
The big concerns has been our students are able to get connected from their homes. We have seen an uptick of LT enabled ipads in those situations sold that educators could make sure that our students had connectivity from their home and again. These will be school issued I pads I think with the emerging.
One of the Fiveg on its way on it.
It could potentially be very transformative to.
Both education and in commercial markets are to just have our connectivity all the time that that very very fast.
Makes sense. Thank you.
Thank you.
Our next question or comment comes from the line of Rod Hall from Goldman Sachs. Your line is open.
Hi, This is Doug.
Rob Thanks for taking my question and congrats on the solid results could you give us an update on your pipeline the demand trajectory <unk> and based on your conversations with customers how long do you expect.
Favorable environment to persist well follow up.
Yes. Thank you for the question so the question being about pipeline.
No. We are seeing a type of pipeline coverage that is very similar to what we would have expected to see had a pandemic not.
Thanks, Bert we're very confident in our pipeline coverage and again from a total coverage perspective, it's about the same as what we would have expected and what we've experienced in the past as a matter of fact at this moment I was a little bit stronger than its been over say the course of the last six months or so the.
The difference is a little bit of the mix.
<unk>, we see obviously a tremendous strength in education, so, it's a little bit stronger than normal, but overall, it's about what we would expect and as we go forward. We don't have visibility to a time, where that's really changing again, what we've noticed more than.
In anything as the pandemic has progressed or the time period is progressed is you know the mix from a geography or industry might shift, but the overall value remains roughly about what we would have expected.
Very helpful.
Hello.
Okay. Thanks, John connect and protect well I older. Then could you also give an update on your plans to target any other adjacent markets. Thank you.
Great. So on Jeff can happen Gen. Protect you are correct that they are designed today for macko asked and I would just.
Say that it is within our strategic intent to be able to add access management and our identity capabilities and endpoint security capabilities. Eventually on the other Apple devices like iOS, an iPad or less I have nothing to announce in terms from a timing perspective, but.
Strategically you are right in line of Oh, what we would intend to do going forward from a market perspective, there's a couple of ways of answering that one would be from a geographic standpoint, one of the markets that is emerging for us this year.
<unk> has been Latin.
America, and we're very excited about its potential in the future. Although it's very young for us other markets that we launched into a few years ago like Japan are performing extraordinarily well, Japan was very much a highlight for us in Q3, when it comes to industries.
It's going to be.
We you know those industries, especially that remote workers supported that we're going to do extraordinarily well in and then also our industry is were iOS devices have a transformative ability to sit between customer and the provider in order one to keep people say.
Safe, but also just to have a more efficient workflow those are going to be the markets are going to do best and.
Great. Thanks, guys.
Thank you. Our next question or comment comes from the line or from Bob in Surrey from William Blair. Your line is open.
Thank you Hey, Dan if you will.
Congrats nice nice job there I guess I wanted to talk a little bit on two things. One is we obviously had some great news about the progress of the vaccine.
But we've also seen cases spike in potential Lockdowns in Europe, certainly and then potentially in the us.
You've had some deals course deal cycles extend it and then obviously.
Offset by some traction.
I'm not talking about a quarter, but as you look forward. How are you thinking about the business given that environment do you think that we end up going back to what happened in.
March April may or do you think that actually we've sort of talked around that we understand how this works and we might be able to kind of see those pipelines just mentioned Deane so thats the plan.
Little faster with less delays, how should we think about what you're you're thinking about and modeling for the future. So the strategically yes.
So thanks, Bob and for your question and Boy I wish I could predict the future I wish I had that.
Pertains to the pandemic I'm not there you don't have.
Yeah, but I will remind you that.
One of the interesting things with JMP is I mean, we're really tracking on the year I a.
About where we would have predicted to be last January one we just ended up getting there a different way in this particular case diversity is our friend diversity in industry and diversity.
In geography, so that even if there are certain areas of the business that are down others for a completely different reasons are up as we've mentioned before we see the same economic headwinds as do everyone else, but we've got these great tailwinds like telehealth and distance learning and work from home that.
That really benefited our business and going forward.
Frankly, I can you know look at areas of the business that will strengthen when the pandemic passive and I will look at areas of the business that will strengthen us should the pandemic persist for a bit I think more than anything what we've noticed.
Is that the pandemic has awakened industries to what is possible with technology and we think more than anything it has actually accelerated the adoption of work from home and industry transformation in such a way that once the headwinds persist we believe the tailwind.
Wins will will continue forward.
Yeah, No. That's helpful. I think you're probably right there even despite not having the the pure crystal ball.
I love to talk a little bit around partners you have a great set of partners you got resellers, you've got a whole bunch existing relationships, where you've engaged despite the current strip environment.
I guess just on how you think about investing more there.
Back to potentially be as a percentage of revenue long term again, not not any necessarily guidance. That's sort of how you think that plays out over the next three to five years given that they are so valuable and so well set up to sort of play this game as long as they understand especially including for example, the deeper relationship with Microsoft So would love to understand.
So how you think about that investments, you're making what that might be as a percentage of revenue. Thanks.
Sure. Thanks, again, and it was a couple of different ways to look at partners. Obviously, just channel partners is one of.