Q4 2022 Jamf Holding Corp Earnings Call
Speaker 2: Thank you for standing by and welcome to the CHAMP Fourth Quarter 2022 Earnings Conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. To remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded.
Speaker 3: And now I'd like to introduce your host for today's program, Jill Humeneck, Vice President and Vice President of Relations. Please go ahead. Good afternoon and thank you for joining us on today's conference call to discuss JAM's fourth quarter and full year financial results. With me on today's call are Dean Hager, Chief Executive Officer, Ian Goodkind, Chief Financial Officer, and John Strozell, President and Chief Operating Officer. Before we begin, I'd like to remind you that shortly after the market closed today.
Speaker 3: we issued a press release announcing our fourth quarter and full year financial results. We also published a Q4 earnings presentation along with an updated investor presentation and Excel file containing quarterly financial statements to assist with modeling. You may access this information on the investor relations section of JAMF.com. Today's discussion may include forward-looking statements.
Speaker 3: Please refer to our most recent SEC report, including our most recent annual report on Form 10-K , where you will see a discussion of factors that could cause actual results to differ materially from these statements. I would also like to remind you that during the call, we will discuss some non-GAAP measures related to GAAP performance.
Speaker 3: You can find the reconciliation of those measures to the nearest comparable GAAP measures in our earnings release. Additionally, to ensure we can address as many analyst questions 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. Dean.
Speaker 4: Thank you, Jen, and thank you, everyone, for joining us. 2022 was a year of milestones for Jamf, as we continue to deliver outstanding solutions for our customers and fulfill our mission to help organizations succeed with Apple. We finished the year serving over 71,000 customers, helping them navigate the challenges and opportunities.
Speaker 4: in today's hybrid work world by protecting their organizations while empowering their people with the legendary Apple Consumer Simple user experience. We are pleased to report for the 11th consecutive quarter, Jamf again exceeded expectations in Q4 with year-over-year revenue growth of 26% resulting in full year 2022 revenue growth of 31%.
Speaker 4: We completed the year with 30 million paid devices on our platform, which is remarkable considering we celebrated reaching 20 million devices just two years ago. In 2022, Jamf also achieved the largest year-over-year map device growth in our history, for the first time achieving a net addition of over 1 million maps under management in just one year. During 2022, we significantly enhanced our market-leading platform
Speaker 4: GIMP success in Q4 and throughout 2022 is even more remarkable considering the difficult macro environment.
Speaker 4: We talked last quarter about device supply chain issues and the challenges we faced recruiting sales talent from earlier in the year.
Speaker 4: Additionally, in Q3, we highlighted that muted customer hiring expectations and layoffs resulted in lower device growth at renewal, which continued in Q4, normally JAM's highest quarter for commercial customer renewals. Fortunately, JAM is well positioned for market challenges.
Speaker 4: having historically approached growth responsibly and profitably. Last quarter, I explained that because of the challenging hiring environment through most of 2022, we chose to staff short of our new employee onboarding plans for the year. Jeff's prudent approach to compensation and hiring in 2022.
Speaker 4: along with additional targeted expense actions we took in Q4, led us to exceeding expectations for both non-GAAP operating income and unlevered free cash flow.
Speaker 4: expense actions we took in Q4 led us to exceeding expectations for both non-GAAP operating income and unlevered pre-cash flow. Additionally, we have a
Speaker 4: Due to our targeted recruiting late in 2022, we were able to achieve our year-end sales headcount goals. We expect these reps will ramp to full productivity in time to meet anticipated demand in the latter part of 2023. We were able to accomplish this balance of slower investment growth with targeted additions while still achieving 90% voluntary employee retention for the full year. We believe the cost measures we put in place, which Ian will provide more detail on later, combined with an expanded, differentiated product line and targeted growth in sales headcount, will help us achieve strong bottom line results.
Speaker 4: while positioning Jamf for future growth. Despite the challenges the market presents, in many ways, 2022 showed us that Jamf's market and company fundamentals are as strong as ever. Specifically, I would like to comment further on our view of the market, customer acquisition and retention, device growth, and cross-selling of our security solutions.
Speaker 4: First, I'll address the market. 2022 was not a good year for PC shipments, declining 17% compared to 2021, according to IDC. However, both Mac and iPad shipments grew in 2022, while iPhone grew in market share, overtaking Android in the United States.
Speaker 4: Specifically regarding the Mac, IDC reports show Mac has significantly outgrown the rest of the PC industry for the past three years, shipping 60% more Mac in 2022 than in 2019, while all other PCs only shipped 6% more over the same period. In 2022, Mac reached double-digit market share globally.
Speaker 4: for the first time, and according to Gartner, map shipments reached 17% market share in the United States in Q4, three points higher than prior year. The expanding map market share and continued innovation by Apple bodes well for JAM's total addressable market and long-term growth as we continue to set the standard for managing and securing math at work.
Speaker 4: Regarding customer acquisition and retention, in Q4, Jamf grew its install base by more than 2,000 customers, resulting in 11,000 active customers added for the full year. Jamf's overall gross and lost-only retention rate for the trailing 12 months at the end of 2022 remain above pre-pandemic levels and were approximately the same as the prior year.
Speaker 4: As typical in a challenging macro environment, churn is greatest at the low end of the market, in particular with solutions like Jamf Now, designed specifically for small businesses with the convenience of monthly renewals. Historically, the SMB market has been the quickest to react to market downturns, but also the quickest to rebound. From an ARR perspective, the small business market is Jamf's largest and fastest growing commercial segment, represented by companies with fewer than 1,000 employees.
Speaker 4: Additionally, Jamp's emerging MSP channel serves many small businesses and is growing faster than Jamp's direct roads to market. These customers, served by our MSP partners, are largely additive to Jamp's total of 71,000 customers. Jamp's customer loyalty at the high end of the market continues to be world-class, of Jamp's largest 100 customers, measured by ARR at the beginning of 2022.
Speaker 4: Although device count is negatively impacted during periods of slower employee growth.
Speaker 4: History tells us that device expansion typically rebounds quickly as market dynamics improve. Fortunately, JAM's business has transformed since going public in 2020, and now includes several other vectors of growth beyond device expansion.
Speaker 4: Jamf's collection of security products now constitute over $100 million of our ARR, equaling 49% growth year over year. The number of customers running both a Jamf management and security solution has grown to over 13,500, which is over 1,000 more customers than just one quarter of all. This helps drive positive improvements in the market.
Speaker 4: to Jamf's ARR per device, which as of 2.4 is now over $17, an increase of $3 in the past two years. Jamf's commitment to expand and enhance our platform through innovation, acquisitions, and partnerships is critical in the accomplishment of our mission to help organizations succeed with Apple and position Jamf for growth in 2023 and beyond. I'll now hand things over to John to highlight areas of Jamf's market momentum in Q4 wins.
Speaker 4: ARR per device, which as of 2-4 is now over $17, an increase of $3 in the past two years. Jamf's commitment to expand and enhance our platform through innovation, acquisitions, and partnerships is critical in the accomplishment of our mission to help organizations succeed with Apple and position Jamf for growth in 2023 and beyond. I'll now hand things over to John to highlight areas of Jamf's market momentum in Q4 wins. John .
Speaker 5: Thanks, Dean. In Q4, Jamf took significant strides in expanding our platform, partnering with industry influencers, and executing our strategy to manage and secure Apple at work. In November , we completed our acquisition of ZECOps. This new mobile security capability is extremely unique in the industry and will allow Jamf to identify sophisticated attacks that target high profile individuals who have access to the most sensitive organizational data. With this technology, Jamf aims to bring iOS security and visibility up to the standard we've already set the Jamf Protect for the Mac. We also continue to enhance our relationship with key industry influencing partners for both our managers.
Speaker 5: ISV Accelerate Program.
Speaker 5: As a result of this partnership, Jamf is included in the AWS Marketplace, AWS and Jamf sales teams collaborate to best serve customers, AWS sales teams are incentivized to sell Jamf products, and customers can use their AWS credits or committed annual spend to purchase Jamf products.
Speaker 5: One example of immediate benefit from Jamf's AWS Marketplace listing was with longtime Jamf customer, Allegiant Airlines. Allegiant utilizes Jamf for iOS devices in all parts of their flight operation and has more than doubled its iOS fleet over the past year. In Q4, the Jamf team partnered with AWS team to facilitate Allegiant's renewal, growth, and cloud migration using annual committed AWS spend, providing financial benefit for our joint customer and significantly streamlining the procurement process.
Speaker 5: As we look at the 2023, we are cautious given the market dynamics, but remain optimistic. Our total addressable market continues to expand and our customer loyalty and market leadership remains strong. I'd like to quickly highlight four areas that illustrates significant market leadership and continued opportunity. First, an education market team continues to be the market leader, now empowering an estimated 40 million students globally, serving eight of the top 10 school districts in the US, and some of the largest government education deployments around the world, including Japan, Taiwan, Germany, and Australia. In July of 2022, Jamf launched a brand new solution for schools, Jamf State Internet. Last quarter, we told you that Jamf State Internet was the most...
Speaker 5: successful product launch in Jamf's history, measured by sales in the first quarter of availability. Even though Q4 is not traditionally a buying quarter for schools, momentum of Jamf Safe Internet continues. In Q4, Jamf upsold customers in all major geographies with thousands of safe Internet seats. We finished 2022 with over 400 customers having selected Jamf Safe Internet in its first six months of availability. And now that we have extended Jamf Safe Internet support to also include Google Chromebooks, we are excited to reach customers at an accelerated rate and protect more students as we approach spring and schools prepare for the next academic year. Another market where Jamf is the clear leader is Mac at Work. Jamf currently serves 22 of the top 25 global brands and nine of the top ten largest companies. If Mac Market Share continues to expand as it did in 2022, we believe Jamf's leadership position and robust complement of management and security solutions will provide a substantial growth driver long into the future. As Dean stated earlier, Jamf continues to grow its Mac footprint, adding over 1 million Mac under management in 2022.
Speaker 5: One example of growth was long-time Jamf customer Cisco, who renewed their contract with Jamf in Q4, increasing their Mac seat count by 20%. According to Cisco, the key component of this growth has been user preference for Mac, with 59% of new employees choosing Mac. Expanding our Mac presence to also include iPad and iPhone management is Jamf's fastest growing segment by device count.
Speaker 5: In 2022, Jamf expanded our product support to provide unique value for both corporate and personally owned mobile devices. This, combined with market consolidation and the legacy mobile device management market, has created an emerging replacement market for Jamf. In Q4 alone, Jamf replaced 10 different customer implementations of at least 1,000 Apple devices for just one of our competitors. In nine of these 10 customers, the win was driven by both iPhone and iPad seats. One of Jamf's greatest strengths is our unique capability to support shared and one-to-one iPads and iPhones for the purpose of a history transformation. In healthcare, Jamf supports more than 1 million Apple devices.
Speaker 5: with five new wins in Q4 alone for at least 1,000 iPhones and iPads, supporting industry workflows like patient bedside, clinical communications, and home care. Another promising industry where Jamf is rapidly establishing market leadership is transportation. At JNUC in September , American Airlines shared their success using Jamf.
Speaker 5: Considering the size of the mobile market, the strength of Jamf's solution, and the disruption in the legacy unified device management market, we are bullish regarding Jamf's long-term growth trajectory as we anticipate more organizations will align their management and security requirements with an Apple First solution.
Speaker 5: The final opportunity to address is Jamf's combination of our industry-leading management solution with our emerging security products, which we believe uniquely positions Jamf to offer the only complete solution that ensures all work access from both corporate and personal Apple devices is trusted. Jamf's capability has been built over the past three years with organic development and several acquisitions.
Speaker 5: In total, Jamf has acquired less than $30 million of security ARR. Yet, as discussed earlier, Jamf's security ARR in Q4 has now reached over $100 million, growing year over year at 49%. We believe we are still in the early stages of growing our security solution and will only get stronger and more efficient as we achieve scale and continue to integrate our products into a single platform. A win that showcases our expanding total addressable market is with a global media company.
Speaker 5: This long-time Jamf Pro customer first expanded to our security solution in December of 2020, then to Jamf Business Plan in December of 2021. And in December of 2022, they expanded their Jamf Threat Prevention implementation from Apple only to also include their Microsoft Windows devices. Jamf's strength in Apple device management has set the stage for continued product cross-sell and up-sell opportunities that create greater customer value and device expansion for all types of Apple devices.
Speaker 2: and beyond. With that, I'll turn it over to Ian. Thanks, John . We ended Q4 with revenue growth of 26% year over year, resulting in fiscal year revenue growth of 31%. Total ARR surpassed the 500 million mark, growing 24% year over year to $512.5 million. We continue to see balanced growth across the many facets of our business, including management and security, commercial and education.
Speaker 2: major geographies, top commercial industries, channel and strategic partners, and size of enterprise, with many milestones along the way. As a reminder, our ARR is calculated using an exchange rate estimate for the fiscal year that is held constant throughout the year. If we were to report ARR in actual currency, we would be able to see the total number of
Speaker 2: the impact to 2022 would be immaterial. We saw a decline in total company net retention rate to 113% in Q4, primarily due to continued muted customer hiring expectations that are impacting device growth at renewal, as well as increased churn at the low end of the market. We believe these declines are temporary and are primarily driven by the difficult macro environment and we would expect this metric to increase as macro conditions improve. The remainder of my remarks on margins, expense items, and profitability will be on a non-GAAP basis. For GAAP financial results, along with the reconciliation between GAAP and non-GAAP .
Speaker 2: are found in the earnings release. Q4 non-GAAP gross profit margin was 82% and within our expectation. We continue to anticipate gross margins in the low 80% range and expect slight fluctuations each quarter. We improved non-GAAP operating margin in Q4 over the prior year, resulting in Q4 non-GAAP operating margin of 7% due to revenue outperformance and proactive cost containment initiatives.
Speaker 2: Our trailing 12 months unlevered free cash flow margin was 18%, which was flat to the prior year. This result exceeds the expectations we established in Q3, primarily driven by increased collections in Q4. Our annual effective tax rate is 0.2% consistent with our expectation. As a reminder, starting with Q1 2022 for non-GAAP metrics, we will use our domestic statutory rate for calculating tax impacts, which is currently 24%. We have included calculations using this updated methodology for current and prior periods in the Excel file containing our quarterly financial statements that has been posted to our IR website.
Speaker 2: Please note that we pay a negligible amount of cash taxes on a U.S. federal basis and pay an immaterial amount of cash taxes outside the U.S. Now turning to 2023. As we continue to navigate the difficult macro environment, we have taken a number of cost initiatives to ensure maximum flexibility and stability for our business in 2023.
Speaker 2: We slowed our hiring in all areas except sales in the second half of 2022 while accelerating sales onboarding to ensure we have enough fully ramped quota-bearing REPS to meet anticipated demand in the second half of 2023. These actions resulted in lower than expected headcount expense. Additionally, in Q4, we enacted other cost initiatives in categories such as travel and discretionary spend. As a result, these cost savings, when combined with a revenue outperformance, helped us exceed expectations for both non-GAAP operating income and unlevered free cash flow in Q4. Additionally, given we were prudent and therefore short of our hiring goals, we believe we are in a fortunate position compared to other technology companies that may have overhired and overspent in 2022.
Speaker 2: Now, for 2023, we are be more aggressive on headcount management given it's our largest expense by eliminating non-critical hiring and work, increasing focus on performance management and reviewing all back pills. As such, we anticipate ending 2023 with headcount at or below current levels. Outside of headcount, we are working with budget owners to identify and execute cost savings. We're reducing our facility footprint, evaluating all software spend, and ensuring we spend only on value added activities. These activities include investing projects that will further reduce our cost structure in the future and provide scalability and increase operational excellence.
Speaker 2: JAMF has historically operated in a prudent manner with respect to costs, so this is not new to us. Our philosophy of balanced growth and profitability has not changed, and we will continue to be judicious with our expense structure while reinvesting in areas with the highest expected return and continuing to drive strong, consistent cash flow generation. We remain committed to managing the business towards the rule of 40. With respect to our financial outlook for 2023, due to continued macroeconomic uncertainty, we remain cautious with our outlook. However, we believe the underlying fundamentals of our business remain intact and we expect continued demand for JAMF's innovative solutions. Our outlook assumes muted bookings growth.
Speaker 2: for the first six to nine months of the year due to macroeconomic conditions with improvements thereafter. We have also tightened our expectations around a beat and raise. We believe these factors, combined with cost containment measures as described, will help us deliver on our outlook. As such, our outlook for the first quarter and full year 2023 is as follows. For the first quarter of 2023, we expect total revenue in the range of $128.5 to $130.5 million, representing growth of 19 to 21 percent year over year. non-GAAP operating income in the range of $3 to $4 million.
Speaker 2: For the full year 2023, we expect total revenue in the range of $559 to $563 million, representing growth of 17% to 18% year over year. Non-Gap offering income in the range of $37.5 to $40.5 million. As we did in 2022, we anticipate non-Gap offering income margins throughout 2023 as we continue to pursue cost initiatives. Additionally, while we don't provide an ARR growth outlook, we anticipate our ARR growth rate and revenue growth rates will be similar in 2023. We provide estimates for amortization.
Speaker 2: stock-based compensation-related payroll taxes, and other metrics to assist with modeling in the earnings presentation as part of the webcast and also posted on our Investor Relations website. And now, Dean John and I will take your questions. Operator.
Speaker 2: Certainly, ladies and gentlemen, if you have a question at this time, simply press star one one on your telephone. One moment for our first question. And our first question comes from the line of Joshua Riley from Needham. Your question, please. Stay where the next one is.
Speaker 6: All right, thanks guys for taking my questions and I think the cushion and the top macro here. If you look at the macro, you know, maybe can we just more color on how much of a headwind is the slower customer expansions to growth this year? And can you just review in a typical year how much growth or bulkings is from expansions versus net new customers and how that might be different in 2023? Yeah, hey, thanks a lot for joining us Josh. Why don't you want to grab that one? Yeah, sure, Josh, good to hear from you.
Speaker 2: Yeah, the macro environment is impacting us really on both fronts, right, on customer expansion and new logos bookings. We allocate resources where demand is strongest. For example, we saw we had 2,000 new customers in Q4, and so we were able to allocate resources that way. So we were looking at the combined portfolio. We did factor these macroeconomics into our guidance for the first six to nine months, as we'd mentioned. And then in the fourth quarter of 2023, we have some increased bookings due to the returning of the economy. Long term, our fundamentals remain intact, and we expect our business to return as the economy returns. Thanks very much.
Speaker 6: I think if I remember correctly, you guys have a pretty strong pipeline of education renewal here in 2023. Will these be renewed as three-year deals again as they were in 2020? And how do you expect pricing to be relative to the original deal structure? Yeah, so thanks for the question. Yes, you have now.
Speaker 4: largest renewal quarters for education are Q2 and Q3. In the US, June is the end of the fiscal year. In education, of course, July being then beginning of the next fiscal year as such, a lot of our buying and education was concentrated around those two months. And as a result, those are pretty high renewal months. It is quite common when a renewal is due within education, that they may renew for three years. The reason for that is Apple will frequently provide leases to schools for devices for three years.
Speaker 4: And schools will just take the JAMP solution for the same three years for what their lease may be. So I would expect a normal buying pattern this upcoming year. The one advantage that we have this upcoming year is this will be the first education buying season that we have the JAMP safe internet solution, also now with support for Chromebook. So that's going to allow us to have a significant sellback and hopefully grow some of those renewals by adding another solution into the mix. Got it. Thanks guys.
Speaker 4: Thank you. Once again, if you have a question at this time, please press star 1 1 on your telephone. One moment for our next question. And our next question comes in the line of DJ Hines from Canaccord. Your question, please. Hey, guys. Dean, maybe I could just pick up on that last thread, which maybe is a two part question on safe internet. So the value prop there seems pretty obvious to me, right? But it is nearly a doubling of the base Jam school ASP, right? So I guess the question kind of gets that price sensitivity in the education space. I know it's super early, but like any observations on a catch rate that renewals and I guess the second part of that question is just with the expansion of Chromebook, like how material is that in terms of ham expansion for, you know, device count potential? Yeah, great question. And so first of all, just to give some specifics, you're right that when we add JAM safe internet into the mix, it's I'll call it about a 70% uplift on the price per device within education. However, we were priced or have been priced attractively for that market. We feel more about right price. Generally speaking, organizations, or schools are going out there and buying their device management from one provider and their.
Speaker 4: internet filtering or safe internet from another provider. So by getting it all from Jamf, it's actually advantageous to them financially. We mentioned in the first couple of quarters that there were 400 customers that selected it. That's mostly from our base. So we've done a good job going back and upselling them. And you can imagine when you launch a new solution, I mean, you start with no referenceability, no buzz. And so that builds over time. So us having some 400 new customers in the first six months, we're pleased with that. And we just announced Jamf Safe Internet, gosh, I think yesterday. And we have already, I'm already aware of a dozen or so sales of Jamf Safe Internet for Chromebook, which is what I meant by yesterday, has already been closed. So we're pretty optimistic for the potential of that. And as you know, Chromebook is actually by market share, the most frequently used devices in American schools. And so it's actually a pretty big uplift from a TAM perspective. Yeah, super helpful. The followup question, and it's something I got asked by investors, so I figured I'd just put it out to you, but when Okta's at work report came out, and this gets that competitive dynamics a bit, I got questions around.
Speaker 4: answer your specific question, since Jamf, you know, runs 22 of the top 25 global companies. Generally speaking, that means that Kanji and most competitors are going to attempt to come at Jamf from the lower end of the market. With that said, the SMB market, or really the S market of 1 to 1,000 employees..
Speaker 4: That commercially is actually JEMP's fastest growing segment right now. So we've been doing pretty well in that segment despite there being new competitors in the space. Yep, very helpful and very clear. Thank you. Thank you one moment for our next question. And our next question comes from the line of Rob Owens from Piper Sandler. Your question, please. Great. Good afternoon. Thanks for taking my questions. First off, just unpacking the Q1 guidance being down sequentially, I guess, even at the high end of the range. Help us understand what's embedded in there. Is that a function of some of the churn that you guys have been talking about or maybe the mix you saw here in fourth quarter with on-premise subscription? Just help us understand in a dominant subscription business why that might be down quarter over quarter. Thanks. Why don't I jump in here quick and I'll kick it off to Ian. Your second comment there, Rob, and thanks for the question because it allows us to provide some clarity. You're spot on there. It has more to do with the timings on some one-time revenue that with commercial markets on just kind of how Q4 plays out from a timing perspective with some large on-premise deals. And by the way, on-premise for JEMP means anything other than our JEMP cloud. So there are some fairly large JEMP customers.
Speaker 4: that run and I put in quick, you can see me there would be quotation marks saying on premise, which means they actually run in their own cloud, but we end up recognizing the revenue as on premise revenue. And that did affect Q4 versus Q1 a little bit. Ian, you want to chime in with any commentary on that? Yeah, that's right. I mean, it is really beyond primary. And remember, you know, from a seasonality perspective, our Q4 is what it sees in a high commercial perspective and Q1 is actually our lowest. So, but if you looked at just the recurring revenue piece alone, that excludes the on-prem, that is actually increasing. And so it really is some of that one time revenue that makes it or distorts that number. Great. As a follow up, have you seen any opportunity, shake loose from the VMware customer base or is that so much of wait and see that acquisition isn't done? And maybe something that's back half of this year for staff of next. Thanks. Excuse me. Yeah, I think that as the market and customers get clarity on what's going to happen there as that acquisition closes, I've been pretty open that I believe that's going to create quite a large replacement market opportunity for us. And we did site in our script, although we didn't call a competitor specifically, we cited out that with one organization. We had replaced 10 implementers. We had a lot of expectations in Q4 of greater than 1,000 devices. That's the organization we were referring to. And I think that type of opportunity will grow as we proceed through 2023. Thanks for the color. Thank you. One moment for our next question. And our next question comes from the line of Rainbow Lenschild from Barclays. Your question, please.
Speaker 4: Hey, thank you. If you think about the NOR number and slightly down-taking, you mentioned on the script that it's based on people not buying as much new seed expansions. What do you see on renewals? Is there also a case of down renewals happening and how long will that be ahead for you as you go through the year? And then I have one follow up. Yeah, I heard the bulk of your question, RIMO, until you got into renewals and you just blanked out there for a second. Could you repeat that? Oh, yeah. So I was just wondering if you see anything around the down renewals that people have less employees that there is like maybe on a renewal site that you have down renewals. And obviously that could be a headbench as to get your progress as different kind of cohort come up for a new world. Is there anything that you see in there? Or is it really just the new current customers not buying the expansions? Yeah, and so one of the things that we found and let's say that Jamf is actually very, very heavily used in the tech industry. And as you've seen, of course, tech has been rather active in the area of resource reductions of late. And a lot of the headline stories that you hear are from Jamf customers. Of course, just because we run most companies, within tech. But what we have found is because tech also hired really, really heavily before some of that, you know, some of that layoff activity, that to Jamf, it actually just looks like slower growth at renewal because they might have hired...
Speaker 4: A lot of people say from the beginning of the year, you know, up through September , and then even if they did do layoffs, their head count is still higher than it was at their last renewal. So, it isn't like it doesn't impact it, us, but it's rarely down. For us, it just looks like slower growth. Does that make sense? Yes. No, okay, it makes sense. And then if you think about the cost containment efforts that you have this year, like, can you talk a little bit about it, I think your margins are coming up by my mouth about 200 bits. Is that like given all the kind of noise you made around controlling cost, controlling projects, does he need to need it, a could be more room, but like, maybe I'm missing something here. Can you account on that please? Yeah, one, Ian and I will kind of ham and egg that a little bit. First of all, yes, you're right. We do have a margin expansion of, you know, nearly 200 basis points. And, you know, this has been a part of our long term plan. We had always planned on doing that. And just like Jamf has always said, we will grow our revenue responsibly. We will also grow our margins responsibly as well. Because we ultimately, if it wasn't clear in the prepared remarks, we believe that the market is actually very attractive. And actually getting more attractive for us. But we are in a short term window of a macroeconomic challenge. And of course, we will expand margins within that window. But we believe on the other side of that is going to be great opportunity. So we do not want to sacrifice continued market share expansion for the long term. Because of a short term macroeconomic challenge. Do you want to make more comments on that, Ian?
Speaker 2: Yeah, what I would add there too, just as a reminder, we talked about this in Q3 as well. You know, we said, you know, hey, we're not going to go and overpay and pay extensive talent. We actually did things, we commented on it earlier this year, so earlier in 2022. And so the way things are bode well for us as we go into 2023, you've heard we're taking a look at all our big costs and making sure that we can manage them appropriately. We're not going to do anything knee-jerk to damage our long-term business, but we are increasing profitability to around that 7% number compared to the prior year. So we are taking steps, we've already taken steps, and it's going to bode well for us long-term, and it'll help us achieve some of those long-term targets that we have out there. Okay, perfect. Thank you. Thank you one moment for our next question. And our next question comes from the line of Matt Hedberg from RBC. Your question, please. Great, guys. Thanks for taking my questions. You know, in 2022, it looked like the growth of both DeviceAds and ARPU slowed on a year on your basis. And it looks based on kind of revenue and what you said ARR should grow similar to revenue, maybe about 17%. It looks like both DeviceAds and ARPU growth could slow again in 2023. I guess I'm wondering between those two variables, DeviceAds and ARPU, which do you suspect will be the bigger driver of ARR growth in 2023? Yeah, Dean, I can go first and feel free to jump in. I mean, devices, you know, we've talked about where our major growth is, right? It's on upsell from additional devices. It's been on new logos, and it's really on the cross-sell. And on the device expansion, that's where we've seen the biggest impact. That's where we've factored in our guidance. But we have continued to see really good growth with new customers. Again, we have 2,000 here. And then on the security side, I just mentioned, we actually have 49% growth, right, year over year. And now that's up to 20% of our portfolio. We have 13,500 customers on it. So that actually is, we're starting to build the muscle there, and we're starting to gain momentum there. Yeah. And as I mentioned in my prepared remarks that, you know, our ARR per device has grown to $17 now. We expect that that's going to continue to expand, likely at a somewhat similar rate as it has been expanding. But as far as our device growth goes, of course, we'll continue to grow.
Speaker 7: you mentioned a lot of the macro impact here but maybe bifurcate between what you're seeing with Mac and iOS, iPadOS and any key differences there.
Speaker 4: Yeah, so the iOS market for us is more of an existing market that doesn't require the TAM to grow in order for us to grow. In other words, as you all know, we have a smaller share of the iOS market, so there's more available for us to take. As a matter of fact, in John's remarks where he talked about the 10 replacement deals that we had in 2.4, nine of those 10 deals were driven by iPad and iPhone. No, that wasn't because of the iPad and iPhone growth, that was because it was a replacement deal. The Mac is different because we run the majority of Macs that are out there. So our Mac growth...
Speaker 4: generally comes with Mac market growth. And so we mentioned specifically that growth in devices as another proof point to what I had commented on earlier regarding our, from our vantage point, we're seeing just Mac market share rise. So it's a little bit more about being the leader in Mac and seeing that TAM rise versus in iOS, you know, having lower market share and it being more replacement opportunities that we're winning. Does that make sense? Yeah, no, it's very helpful. Thank you. And then maybe just as a follow up on the security product portfolio, you know, helpful the, I guess, the catch rate there, right? Between 13,000 and 14,000 customers. What are you seeing in terms of dollar penetration within those customers, right? Like as you think about, you know, number of security dollars spent per dollar management spend, I'd be interested to get your thoughts there. And then are you still seeing security deals as mostly being expansion deals? Or are you starting to see maybe security led or bundled initial deals with those products? Yeah, I think that I'll answer the second part of that first. Because Jamf is so established in the management space, that continues to be the easiest area to land for us. And so therefore it is typically more of a organization looking at us for management and then expanding to security. And the way that we've priced our solution is if you go with...
Speaker 5: And our next question comes in line of Greg Mascowicz from the zoo. Your question, please. Okay. Thank you for taking the questions. Maybe I'll take the other side of RIMO's question on Margin's Dean. You mentioned or you mentioned that you expect 2023 have count at or below current levels. But can you speak a little more to your confidence level that JAMP is properly positioned to re-accelerate later in 2023 or in 2024 once the man does improve?
Speaker 4: Yeah, if you go back, thank you. I did the here from you Greg. You know, you can almost play a jam, last few earnings calls and each one builds on the net. If you go back a couple of quarters, we talked about the really tough employment market and getting enough of our quarter bearing reps on board. And how we specifically decided not to go out and overspend to bring QVRs on because we believe that the market we believe that the market was really getting skewed with two rapidly rising compensation plans for those reps. And we saw organizations overpaying for those. And we made that comment again in Q3, but we said we saw that the market was starting to, you know, be a little bit more attractive for employers later in the year. And we were going to take advantage at that time to bring sales reps. And we were going to have a couple of reps on board so that we could be prepared.
Speaker 4: by the beginning of this fiscal 2023 for the recovery that we talked about a little earlier that we expect could happen in Q4 of this year. And of course it takes six to nine months to properly wrap a rep up to full productivity. So we started the year with the reps that we need in order to be fully ramped nine months from now, yet we dial back spending everywhere else, which is why we were able to finish the year beating our pre-cash flow and our non-GAAPOI guidance. Okay, terrific. And then just as a follow-up and on another note, we heard that you recently implemented a price increase for Jamf Pro. Can you walk through the rationale for the increase and then also what has the reaction been to the spark from customers? Thanks. Yeah, so thanks. We have one of the things we're very proud of in 2022 is going into 2023, our competitiveness of our solutions are substantially better than entering into 2022 when they were excellent as well because we added a lot of new capability. Like for instance, app installers as part of app catalog. We just announced a really attractive new feature called remote access built right into Jamf Pro. And the last time we've done a significant price increase on Jamf Pro was back in 2016. So customers do expect it occasionally. And when they're getting much more value for the solution that they've purchased, it's something that they, you know.
Speaker 4: understand and move forward with. Thus far we haven't seen any significant blowback from it and customers are renewing in 2023 as we would have expected. Super helpful. Thank you, Dean. Thank you one moment for our next question. And our next question comes to the line of Koje Ikeda from Bank of America. Your question, please. Hey, Dean. Hey, Ian. Thanks for taking the question. I wanted to go back to a previous question and dig in a little bit more. And you actually mentioned it in the prepared remarks a couple of times too about anticipated growth in the latter part of 2023. I guess the question is, are you hearing it from customers too? And if you are, about this anticipated growth, maybe you could talk a little bit about a certain size of customer or certain specific type of customer, where customers are talking about, hey, get ready for the second half. And that's actually contributing to your kind of outlook of this anticipated growth later this year. Well, if you take a look at, for instance, I used an example earlier of just tech. Clearly, as we approach through the fall, there were a fair number of hiring freezes and resource reductions that occurred in tech. Well, for those of us that have been in tech for a lot of years, we know that tech is very elastic in terms of responding quickly to market changes. And so, lapping what happened this fall or a year later next year, we're going to be seeing a lot of growth
Speaker 2: I think most of those tech organizations, and as we speak to our customers, I think they're anticipating that they'll be in more of a normal hiring environment later in the year. Nobody can predict the future perfectly, which is why we say that we will both be ready with ramped reps should that employment market come back to a little bit more of a normal environment. But we will also be ready in managing our costs to deliver on the bottom lines that we're committed to even if that doesn't occur. Dean, maybe I just answer one other thing on there. I have one thing on the SMB side, right? We talked about our remarks too. Fastest to move and they've just been a little bit of volatility, but even anecdotally in the first quarter we've talked to some of our sales folks. They've talked about some customers already coming back from the sales department and coming back from the standpoint, hey, we tried something that we thought was cheaper, but we found it didn't have the functionality and we have to come back. We've had some of those discussions as well, but to Dean's point, we've built an elastic model where we'll be able to improve and improve hard throughout the year and deliver on those results throughout the year. Got it. Dean, Ian, thank you. That's super helpful. Just one follow-up here. I wanted to ask about free cashflow generation. I know you guys don't guide to it, you guys to operating margins, but when I look at the past two years, fiscal 22, operating margins of 5%, 17% free cashflow margins, 2021 operating margins of 6%.
Speaker 2: free cashable margins of 15% and you just guided to 7% operating margins. So just how should we be thinking about free cash regeneration in 2023? Anything we should be really thinking about that could alter that type of cadence. Yeah, yeah, thanks for the question. I think you're thinking about right, at OSF, our operating margin goes up. We would expect our unlever free cashable margin to go up at similar rates for 2023. But what I thought would be the key to this is the seasonality, right? Quarter one is typically our low mark, low water mark. And so you should have exactly what we have year in payments. We did have some increased collections this year, so that will impact you on. But you'll see that increase throughout the year similar to what we're discussing in gap operating income standpoint. Super clear. Thank you. And thanks guys. Thanks for taking the questions. Thank you. This does conclude the question and answer session of today's program. I'd like to turn the program back to Dean Haker for any further remarks. Hey, thank you very much. And thank you everybody for joining us today. We feel great at Jamf about completing a tough 2022 without standing top line and bottom line results. As we look forward to 2023, we believe that our products are stronger than when we entered in 2022. We believe our competitiveness is better.
Speaker 4: than when we entered 2022. We see opportunities that are very unique to 2023 in front of us and we plan to expand our profitability, continue to grow. And most important for our long-term future, continue to win market share. And that will put us in an excellent position to capitalize on an improving macroeconomic environment in the future when it comes back to us. So thank you very much, have a great evening and we appreciate your follow-up. Thank you, ladies and gentlemen, for your participation in today's conference. This does include the program. You may now disconnect. Good day. The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 11. Thanks for scoring.
Speaker 8: you