Q2 2023 Jamf Holding Corp Earnings Call
Thank you for standing by and welcome to the <unk> second quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone to remove your.
Our self from the queue simply press star one again.
Today's program is being recorded now I'd like to introduce your host for today's program, Jennifer Gaumond, Vice President Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us on today's conference call to discuss Champ second quarter financial results with me on today's call are Dean Hager, Chief Executive Officer, Ian Good kind, Chief Financial Officer, and John Stewart, President and Chief operating Officer before we begin I'd like to remind you that shortly after the market close today, we issued a press release.
Announcing our second quarter financial results. We also published the Q2 earnings presentation, along with an updated investor presentation, an excel file containing quarterly financial statements to assist with modeling you may access this information on the Investor Relations section of <unk> Dot com.
Today's discussion May include forward looking statements. Please refer to our most recent SEC reports, including our most recent annual report on Form 10-K, where you will see a discussion of factors that could cause actual results to differ materially from these statements.
I would also like to remind you that during the call. We will discuss some non-GAAP measures related to Gm's performance you can find the reconciliation of those measures to the nearest comparable GAAP measures in our earnings release.
Additionally to ensure we can address as many analyst questions 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.
Thank you Jen and thank you everyone for joining us <unk> delivered strong results again in Q2 with year over year revenue growth of 17% and non-GAAP operating margin of 4%.
Our argue 18% year over year in Q2 to $547 8 million.
We continue to see strong new bookings and customer retention as demand for <unk> management and security solutions to grow even during this current period of muted hiring device expansion.
Our vision of delivering organizations trusted access, which combines management connection and protection into a single powerful easy to use platform is resonating with our customers.
Q2, we saw this manifest in our largest commercial bookings quarter ever our strongest quarter, yet for organic security <unk> added.
40% of new <unk> added came from our security solutions, representing 21% of <unk> total air.
As well as 22% of <unk> total customer base utilizing both a security and management solution.
We ended Q2, adding 1000 customers and 500000 devices on our platform since Q1, resulting in more than 73500 active customers running jam on $31 3 million devices.
We're pleased with the rate at which we continue to add both net customers and devices to our substantial base, thus gaining market share over alternative providers, even in a challenging selling environment.
During the last few quarters. The technology industry has faced macroeconomic challenges GM has not been immune to these challenges, especially considering that the information and communication market, which includes Tac represents champs largest industry measured by now.
Now larger and faster growing than Jeff K 12 education market. This is in large part driven by the popularity of Apple Mac in the tech sector.
Jack served seven of the top 10 technology companies in the world, including several companies to run over 100000.
More than any other solution provider.
Despite what we believe is a temporary slowdown of device expansion in the tech sector jumped continues to see strong industry growth largely driven by the adoption of our security solutions. As an example, gm's largest Q2 wins in the tech sector did not include any additional device.
Mrs, but rather over 10000 Champ protect seats purchased for their map fleet to replace a lot of specialized cross platform security solution.
In other industries with lower penetration of map, we are seeing positive trends.
Second largest commercial industry professional services is also one of its fastest growing.
<unk> manages map for nine of the top 10 consulting companies in the World in Q2, we renewed two of the largest five consulting companies, adding a combined 6000 Max seats growing their total to 30000 map.
Seven years ago. These two organizations combined deployed fewer than 1000 now representing nearly a 50 times Mac expansion over that period.
Jeff third largest commercial market is financial services, where we manage mapper teed up 15 largest banks in the United States, Although gm's market penetration is substantial there.
Mac penetration in financial services organizations is lower than in most other industries, but we are also witnessing trends that make this industry one of Jim's fastest growing.
In Q2, Jaffrey, new two of the top five banks in the United States drawing their mat fleet by 5000 devices to a combined total of 13500, representing a 58% match expansion in just one year.
We believe momentum in the professional services and financial services markets reflect the growing popularity of map, but also the impact of Jets, Matt Security solutions.
<unk> largest Q2 win in the global consulting market included 20000, Jeff protect seats for one customer.
Jeff's largest Q2 win in the financial services market included 10000, Jeff protect suites building unmatched inherent excellent built in security with a specialized enterprise security solution from June <unk>.
In addition to efficiently managing map has opened the door for organizations to expand map faster, reaching more employees, who have expressed their preference to use Mac at work.
We believe user preference coupled with jams management security solutions have been the key drivers for mass market share growth.
According to IDC, the overall PC market declined over 13% year over year in Q2, representing the sixth consecutive quarter of contraction.
However was the only PC to show growth in Q2 growing 10% year over year.
When looking at the data over the trailing four quarters, although muted in this economic environment Max shipments still grew 1% compared to a PC industry that declined 22%.
For the past three years Mac has shown consistent growth much faster than the rest of the PC industry.
IDC is forecasting a return to growth for industry PC shipments towards the end of this year and continuing into 2020 for as much of the installed base, which was purchased at the beginning of the pandemic is reaching time for a refresh we believe both Mac and iPad, which have grown in market share over the past four.
<unk> will play a significant role in the replacement cycle driven by employee choice continued consumers Asian by hybrid work and hardware innovation from Apple like the new 15 inch Macbook air with Apple Silicon, making the price performance ratio for them that much more attractive.
Versus alternative Pcs.
While demand for Apple is a key tailwind for Gill there are other dynamics that give us confidence in <unk> ability to continue to perform not only in the current environment, but over the long term.
We've talked about consolidation of legacy unified management vendors, which open up opportunities for Jim <unk>.
John will provide you more details on the traction we're seeing a little bit.
We are also seeing a growing number of organizations consolidating their apple Mac and mobile teams together as Apple continues to differentiate their management and security frameworks versus other platforms.
And we are seeing a growing number of organizations consolidating their intelsat and it departments, thereby bringing together the key decision makers for both <unk> management and security solutions.
<unk> is well positioned to benefit from all this consolidation with strong relationships and it departments and developing relationships and references at the C suite level.
The only way to ensure trusted access within an enterprise is to combine threat identification and prevention access policies and governance and device automation your remediation into a single integrated solution.
In most cases these products are provided by different vendors and must be integrated by the customer jumps a vertical approach of building the entire solution designed for a fast growing enterprise ecosystem is proving to achieve our customers' desired outcome.
Champs management and security solutions delivered as an integrator platform reduces exposure and risk for organization and increases automation to achieve the goals of both.
In April we've seen this come to life over the last few quarters, which John Wasson highlights.
When it comes to innovation jmp's busy adopting and expanding upon the Apple innovation showcased at this year's worldwide developer conference or Ww DC in June .
We believe many of the advancements highlighted represent not only the future of work, but the future of computing and Jeff will take these advancements the final mile to ensure enterprise and education customers can use them to better achieve their mission.
Three primary innovation categories I'd like to highlight from Ww DC are one expansion of apples enterprise platform.
The convergence of management security and identity and three a unique differentiated approach to the enterprise FERC.
First the expansion of Apple's enterprise platform.
One of the reasons, we believe Apple will be the endpoint leader in the enterprise is because the iPhone is already the leading enterprise mobile phone.
Pat is the leading tablet and the map as we've already highlighted is the fastest growing computer.
But it doesn't stop there more enterprise features are arriving for TV OS specifically video conferencing and secure VPN access while not often highlighted Champ manages over 300000, Apple Tvs today and growing rapidly.
Also at Ww DC Apple introduced for the first time, Apple Watch management and security capabilities opening the door for secure mobile hands free workflows in the future.
And of course, we can't leave out vision pro although not yet available has tremendous potential one capable of adopting apples management and security framework.
<unk> is the only provider offering a competitive enterprise device to put in front of every use case and keeps pace with Apple to ensure secure workflows are ready at the same time as new device capabilities.
But devices or early part of the overall platform.
With advances in managed Apple Ids Federated with more cloud identity providers. The introduction of account driven device enrollment and advancing past keys for work Apple continues their focus on the individual while empowering organizations like <unk> to build differentiated enterprise solutions.
Convergence of apples management security and identity framework is consistent with <unk> approach to provide a single platform designed to achieve a trusted access outcome for customers reducing costs in three ways. One on the original software purchase versus buying from three different vendors.
Two on integrating solutions together to achieve the desired outcome and re on recovering from potential failure when the desired outcome is not achieved.
At Ww DC, we saw Apple continuing to take a specialized and differentiated approach to the enterprise versus other ecosystem may.
Major strategic shifts like declared a management and device attestation Turner previous processes upside down instead of a server centric approach to device management security Apple processes start natively on the device by self identifying status and inventory.
Likewise, instead of management providers, creating their own enrollment portals Apple enrollment starts automatically on the device at startup, whereas initiated from general settings.
All of these capabilities reduce the potential for security vulnerabilities and attacks, while simplifying the user experience.
These features also necessitate a specific focus on the entire Apple ecosystem. As these capabilities are Apple only and require same day availability from management and security providers, most notably Jack.
We're excited by all the great innovations that Apple has lined up and look forward to bringing value to our customers as we help them succeed with Apple.
I'll now hand things over to John to highlight additional areas of Gm's momentum in Q2 wins.
John .
Thanks, Dave.
It took advantage of some great opportunities this quarter to bring <unk> to new customers and expand our relationships with long time customers. This spring and summer we hosted <unk> nationwide events, all over the world, where Champ admins come together to share the best practices and learn to maximize the power of Jamie.
These events are a great way for us to learn what our customers love about Champ and what we can do to help them succeed with Apple across Europe , Asia, Australia, and New Zealand over 'twenty 100 customers and prospects attended <unk> nationwide. It was great to connect with cancellation of in person. During these events it was <unk>.
Evidenced the companies across different geographies and industries are embracing our vision of trusted access by emerging device management identity management and endpoint security on Gm's Apple first platform organizations can ensure only authorized users are granted access an enrolled devices provide a secure connection to corporate.
Absent data and deliver comprehensive modern security to defend against an evolving threat landscape.
Perhaps the best Q2 example of our trusted access vision coming to life is with one of the world's most valuable brands.
As you know 22 of the top 25 global brands used channel pro to manage their Mac. One of these brands has been utilizing Champ pro MTF connect for its 22000 corporate map, while using a competitive legacy OEM vendor for 85000 devices across retail corporate and Iot use case.
<unk> created a vision for trusted access across their entire fleet, resulting in the brand upgrading to our enterprise business plan for their corporate Mac and adopting iOS trusted access.
In total Jeff replaced the legacy OEM vendor for management as well as to placing a number of security vendors by consolidating all of these solutions with Tam the brand simplify this deployment and reduced <unk> spend.
We believe that this deployment will help provide a blueprint for other customers looking to streamline their deployment and protect the organization using gm's trusted access platform.
A key tenant of trusted access to security security continues to be top of mind for Ceos, especially as the rise of AI lowered the barrier for advanced cyber threats Makin iOS users need Apple first protection and an easy way to deploy these solutions.
We continue to gain traction in the security space with Q2, representing Champs biggest security quarter ever from a new <unk> added perspective.
Top three wins included a management component, but security was the driver of the new bookings for each.
Often JMP security opportunities are the result of a disruptive customer of that day.
Dean mentioned, one example earlier, citing that our largest Q2 when the tech industry was for more than 10000 seats of Gm's protect replacing a cross platform non specialized security solution.
Another customer a product review website experienced disruption after a cyber attack successfully infiltrated the company's servers through a non apple laptop. This experience led to a decision to replace all non Apple laptops with Mac growing their GM contract for 1000 Mac to over 5000 liter.
Leadership felt that the organization's data with safer with Apple and GM.
As Dean mentioned, 22% of Champs total customer base is utilizing both the security and management solution.
We're seeing an increase in customers purchasing multiple Champ solutions at the onset of the contracts instead of starting with just a Champ management solution or just a Champ security solutions.
This is especially true in the small business market, which is jumps largest and fastest growing market where organizations are looking for a single vendor to provide both our management and security solution needs.
A great example of this is one of our health care customers, who as a provider of high Tech speech generative devices curriculum and services, helping individuals with disabilities. The companys hardware pairs with ipads and the company was having issues updating applications managing Apple <unk> and blocking users from accessing specific.
Content campus able to provide a solution for the company's 2000 ipads with <unk> pro and.
And GMP protect so they could continue their mission to help individuals with disabilities lift fulfilling lives.
We're not only seeing demand for bundled solutions in the small business market, but across all sizes of organizations.
Another Great example of bundled solutions with a multibillion dollar cyber security and firewall provider, which expanded its relationship with jumped to over 12000, Apple devices using <unk> pro and <unk> connect are happy to see a trusted name it security and trust Champ with the management and verification of its Apple devices.
This just goes to show how Champ integrate so well with so many different partners.
Customers are also taking advantage of our complete bundles like Champ business plan and Jeff Enterprise plan in fact year over year.
For example, user based bundles has grown over 100% and new <unk>.
These bundles was second only to the new <unk> added from our flagship product Champ probe.
It's worth noting that selling user based bundles like GM business plan did not immediately add to Jeff's device count what Jeff sells device space seats. The devices are immediately added to Gm's total device count however, with selling user based bundles devices are only included in our total after the devices, but activated by the customer.
As the user based bundles represent a higher portion of our sales we should expect more lag between when contracts begin in the customer devices are incorporated into Champs total as one example for the replacement. When we described earlier that included 85000 iOS devices, because they were purchased as part of a user based bundle.
Only about half of the anticipated total number of devices are included in our $31 3 million device total.
Speaking of replacement seats as we have highlighted in the past few quarters consolidation in the legacy unified endpoint management or <unk>.
Market has created a robust replacement market for both new and existing customers versus one OEM provider, Jeff not only replace 85000 iOS seats. It just one customer but also replace over 40000 devices across another 20 wins.
Given the uncertainty in the market around the OEM vendors combined with Champs unmatched solution portfolio. We expect this robust replacement market will continue.
It would not be Q2 without mentioning the education space.
Q2 represents a tough comparable due to the Taiwan Ministry of education deal that happened last year. So growth is muted. However, we had a great number of wins that provide us with optimism for the second half of the education buying season.
The best experience for students teachers and leadership.
A unique and important customer, adding Q2 is the ministry of education, and the environment of Ukraine as part of the state of the future of your creative campaign, where gas partnered with Apple.
And the state authorities have you created to restore schoolchildren access to education together, we distributed 5000 ipads with <unk> Pro and Jim Safe Internet to children, who may have been split between buildings and locations because of the effects of a word to crater.
Another interesting use cases with Mesa community College Mesa provides each student with an iPad as part of their student success initiatives when the state of Arizona band because of Tech talk on all state owned devices. Our sales team was able to work with prospects across Arizona, including basic community College in a very short timeframe to deliver.
Safe Internet with Mesa contracting with Champ over 15000 licenses.
While still in its early stages, we're delighted with the success of GFS safe Internet in its first year, we recently announced support for both Google Chromebooks and Windows devices and are working on making improvements to the offering including making jfc's internet available in more countries with in country server locations, providing us with a roadmap for the future.
<unk>.
We look forward to what Q3 brings as we finished out the education season with that now I'll turn it over to Ian.
Thanks, John we ended Q2 with revenue growth of 17% year over year exceeding the midpoint of our outlook SaaS recurring revenue the strategic core of <unk> business remained strong.
Strategic revenue sources like license services and on premise revenues were lower than anticipated as Dean mentioned, we had the strongest commercial bookings quarter ever growth in the education market continues to be impacted by the investments and deployment made in 2020.
Quarter over quarter ACB growth in the U S outpaced rest of the world as geographies outside the U S were more impacted by economic conditions.
Total <unk> grew 18% year over year to $547 $8 million exceeding expectation as we have seen stabilization in the U S and in certain industries.
Needed customer hiring expectations continue across most of the economy, but perhaps most acutely in information and communication.
Education K through 12 remains in the cobot overhang. These entities are chance two largest and combined represent 47% of chance total.
Sure.
Historically information and communication, which is led by Tech has been one of our fastest growing industries with the 33% three year CAGR, but the tech industry has been hit harder than most other industries over the last year slowing hiring and also experiencing most layoffs.
Media device expansion has caused year over year growth to come down to only slightly higher than jams total growth.
<unk> the tech market loves Mack is receptive to Mac, and mobile and management and security from Jam, even more fortunate is that we believe the slowdown in tech is temporary when tack returned to normal hiring it will positively impact Champ rapidly.
K 12 schools rush to implement one to one program during the pandemic to support distance learning.
Such there is very little device expansion right now, causing single digit year over year.
Our growth learning jams total <unk> growth, we anticipate improvements from current levels, but more importantly over time, we believe our commercial growth rates will outpace K through 12 growth rates, resulting in Keith you 12, having less of an impact on our overall results.
As we have mentioned before diversity is our friend and James next three largest industries professional services financial services and wholesale and retail represented 24% of Champs total AAR and collectively have a three year CAGR and year over year <unk> growth of over 40%.
This momentum combined with anticipated return of tech hiring will help return Champ to higher growth.
As anticipated we saw a decline in total company net retention rate to 109% in Q2 due to the impact of five consecutive quarters of muted customer hiring that effects device growth at renewal. We believe this decline is primarily driven by the difficult macro environment and we would expect the NR.
Our metric to increase as the economy improves.
The remainder of my remarks on margins expense items and profitability will be on non-GAAP basis.
Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP are found in our earnings release.
Q2, non-GAAP gross profit margin was 82% and within our expectations. We continue to anticipate gross margin in the low 80% range and expect slight fluctuations each quarter.
non-GAAP operating margin exceeded the high end of our outlook in Q2 at $5 8 million or 4% due to the impact of cost initiatives. One example of this is in the first half of the year, we lowered our onboard head count by more than 100 Ftes from the peak.
Our trailing 12 month Unlevered free cash flow margin was 13% compared to 11% in the prior year.
Our effective tax rate for Q2 is negative three 2% consistent with our expectations as a reminder, for our non-GAAP metrics, we use our domestic statutory rate for calculating tax impacts which is currently 24%. Please note that we paid a negligible amount of cash taxes on a U S. <unk>.
Federal basis, and pay an immaterial amount of cash taxes outside the U S.
Now turning to our outlook for the rest of the year.
We believe the underlying fundamentals of our business remain intact, and we expect continued demand for Champs innovative solutions.
Especially excited about the traction we're seeing with customers adopting our vision of <unk>.
Also Dean and John mentioned, we are well positioned to benefit from industry tailwind from the adoption of Apple and the enterprise increased organizational focus on security and customers' desire to consolidate on a single platform.
We continue to execute cost initiatives, while balancing investment for efficiency and scalability in both customer facing operation and back office functions, our cost initiatives span all business, including areas such as head count hosting facilities software and other one time costs. We will continue to focus on these initiatives further.
Remainder of the year.
Strategic revenue areas of our business license services and on premise revenues are challenging to model in Q2 declined to represent only 6% of <unk> total revenue.
Part of this decline is reflective of our multiyear strategy to bring both license and on premise revenues down to near zero.
Both license revenue and on premise subscriptions are driven almost exclusively by longtime Champ pro customers, who have not yet converted to SaaS cloud contract. The primary way of this revenue growth is through expanding devices on their current on premise implementation as we have explained in today's environment.
Device expansion has slowed substantially as a result, these less strategic choppy sources of revenue come down even faster than <unk> anticipated and in Q2 declined 25% year over year. The largest decline we've seen from these revenue sources in our history.
And we're holding the range for non-GAAP operating income and 41% to $43 million.
We continue to expect margin expansion as we finish out the year and expect to exit 2023, with a Q4 non-GAAP operating income margin percentage in the low teens.
And while we don't provide an outlook for Unlevered free cash flow margin. We anticipate Q3 margin similar to Q2 and full year 2023, Unlevered free cash flow margins similar to 2022.
We also provide estimates for amortization stock based compensation and related payroll taxes and other metrics to assist with modeling and 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.
Certainly one moment for our first question.
And our first question comes from the line of Matt Stotler from William Blair. Your question. Please.
Thank you for taking the questions maybe just wanted to start off on the guidance update so very clear commentary on where you're seeing weakness.
And the tech end markets.
I guess first part would be I guess, what's most incremental there right is that the deals are getting pushed out as the contractions are.
More than you expected or the duration of those contracts are more unexpected and then as you think about what's implied for that core recurring SaaS piece and your updated guidance, how does that compare to what that core recurring SaaS assumption was in last quarter's guidance. So I'm just trying to get how much was SaaS and how much was other nonstrategic business.
Yes, I'll take that good to hear from me Matt.
A couple of things to talk about there as we talked about it was predominantly driven by less strategic choppy revenue stream like on Prem license and services, we saw those come down within the quarter by 25%.
And then let's just dive into each of those a little bit.
Well actually let's start with license on the license those are predominantly driven by added devices and what we've seen there.
The muted economic those arent there.
On the on Prem at Pollo, if something similar.
And then on the services, we've actually enabled our.
Partners to actually be able to provide those services and so that number is getting driven more on those partners and we're okay with that and those are the things we factored in the second half of the guidance.
Would add on there too is that on the education front that was something that was lower than we expected in Q2, and we've factored that education piece into the second half what we've thought about what we noticed in Q2, we actually had our highest.
Commercial bookings quarter ever and so we've seen some positive signs there.
We were also 40% of our net new <unk> came from security. So some positivity there and those are all the things we've factored in into the second half of the year.
Got it that's helpful and maybe just as a follow up.
You guys have.
There are a number of.
Key partner relationships, you typically discuss Microsoft being what it is you got a couple announced during the quarter.
Relative to Microsoft and AWS specifically.
Just get an update on the momentum you're seeing with those relationships in this environment and how those are taking shape.
Yes, Matt This is John I'll take that question.
The AWS partnership has been fantastic in fact, it's exceeded my expectations.
With the capability to use AWS committed funds toward purchasing products has really been a benefit not just to the salespeople on the AWS side in the <unk> side, but also to the customers. If they are earmark those dollars for AWS, they've they've used them in many cases to buy the products and because there was already a set process.
Place its made it much more expedient to process those orders and deliver the products and we continue to integrate with Microsoft and a number of ways and go to market.
Given the fact that they are vertically focused on the windows environment, and we're vertically focused on on the Apple ecosystem together, we cover all endpoints and Thats really been a benefit to the partnership.
Very helpful. 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. Thanks for taking my question I also wanted to hit a little bit on the guidance just the shape of the back half and understand the pressure on license and services and how thats impacting the model, but you do have.
If I can do the math right math is hard and so there'll be mapped today, but.
If I do the math on the fourth quarter. There is the acceleration in revenue so what's baked into that expectation versus I guess, the the pretty significant deceleration youre seeing relative to Q3.
Yes.
So the question Rob So on that we just mentioned in the commentary where commercial was little bit starting than we had anticipated here in the quarter. When we look at things like pipeline and our security building.
We're definitely seeing I'll tell you just like positivity, there, where we've come down and where we saw the impact.
Impact is still at the Covid overhang on the education and if you think about seasonally Q3 is more of an education quarter. In Q4 is more of a commercial quarter until I think that's the dynamic youre seeing in your mouth.
Great and then second for me can you comment on gross retention rates and what you're seeing there.
Yeah, Yeah. So when you look at <unk> and gross retention and even loss retention. So net retention has come down we talked about that last quarter from the standpoint of it.
I would continue to come down we thought the economics would impact us.
Have continued to be on the upsell piece when you look at growth and loss retention that still that 1% to 2% within the pre pandemic level, but what I would tell you is we do think that retention will just continue to come down but not as much as the thing coming down we think that's actually going to level out.
Our security sales have been strong which for that cross sell motion stabilizes the net retention and we feel good and we're seeing just we saw just a tick uptick.
Better in our loss logo, just a tick matter and so we're excited about that and he said.
Know that theres less churn.
Great. Thanks.
Sure.
Thank you one moment for our next question.
And our next question comes from the line of Matthew Hedberg from RBC capital markets. Your question. Please.
Great. Thanks, guys, Ian maybe sticking with you.
<unk>, obviously, but I'm wondering with the dynamics that you talked about him revenue.
Services and sort of you're kind of on Prem license piece is there any different way, we should think about the <unk> impact this year.
Vis vis sort of your revenue comments.
Yeah, Yeah, great question.
<unk> is an interesting one we stared at this well before the call. Even then when you look at our revenue guidance. We have brought that down that is again like we said predominantly driven by those.
Less strategic choppy revenues that make our business a little less predictable, but when you I'll say plug the math in your models and look at the recurring line piece Youll see that growth rate's, a little bit higher than the total growth rate and I think that's the number you should be using to factor in for your Q3, and I think it would be just slightly less than that for Q4.
Got it that's super helpful. Thanks, Ian and then.
40% of net new era with some security this quarter, which continues to tick higher I'm curious on some of these larger.
Sort of.
Enterprise deals.
Is is security, becoming even a bigger part of that land motion and also it's obviously been a big part of the upsell, but kind of curious of customers on the enterprise side, especially on the big deal side.
You almost have a security first initiative.
Yes, Matt This is John I'll take that one thanks for the question. It certainly is and in fact, our three largest deals in this last quarter, where security driven there was a managed management component, but there were security driven deals and the major brand that we spoke about our largest win in the quarter.
Was.
Obviously, the same thing with our enterprise agreement.
Agreement and we've seen particular security strength and bundling opportunities for our SMB market and given the fact that we're a volume business here, we've seen a lot of traction with with the bundled solution.
And certainly because of the security strength there.
Thank you very much.
Thank you one moment for our next question.
Yes.
And our next question comes from the line of Josh Reilly from Needham <unk> Company. Your question. Please.
Hi, everyone. This is Michael on for Josh today, Thanks for taking my question.
Just a couple quick ones for me I was wondering how we should be thinking about the impact from price increases in early 'twenty 2023.
To drive our growth for the year versus not device expansion. Thank you.
Yeah. Thanks, Michael for the question Yeah. What we did is just as a reminder, we actually had a 10% increase on Champ pro for commercial customers only not on education.
What I can tell you is as we go out for the sales process.
Obviously, there's a question, but you know customers recognize we haven't had a price increase in a while and so we are seeing we're not seeing any type of increased churn just.
Continuing negotiations, we go and we think it's being well accepted and again, we've delivered functionality that justified.
That price increase and that is factored into the way we talked about the.
And what it should look like for me then.
Awesome. Thank you.
Then one question, we often get is kind of on the importance of new device sales to drive the business I guess, what's your takeaway on the current cycle.
That are kind of new device sales more important or maybe less important to the overall growth rate than what you've previously realized thanks.
Yeah.
Thanks for that question too.
Yeah, I think what we've always said is look we grow by new logos. We go by device expansion and we grow by cross selling our entire platform and what you saw in this quarter is that we grew our plant four or <unk> by a lot of that cross sell opportunity. We saw for example, we saw.
Our bundles would be the second largest net new or add in the quarter, you're up sub bundles being I'll call. It 100% growth over last year. So you saw a lot of that and with those bundles just as a reminder.
I always come obviously with devices and the other piece is when there is more of a user program. The devices, we don't actually count those devices until they get enrolled and so not all as we.
We decided that in our prepared remarks that some of those devices hadn't even been lower than some of our large customers. So we're excited this is another growth trajectory for us and adds to our future growth of our business.
Thank you one moment for our next question.
Raimo <unk> from Barclays. Your question. Please hey, thank you.
It could be speak too.
About the current environment is there are like obviously, it's tough and tech education as well as the hangover. So.
Like in the situation that we just have to wait it out and Thats kind of the right way to think about it with kind of obviously some upsell that's what I'm, hoping in the meantime.
Yeah.
Can jump in there I mean so.
Talked a little bit about our growth drivers. We are we have 47% of our a R. Both in tech and in K through 12 hours.
Our growth is going to come on the commercial side and so as tech does return we've seen the most layoffs and impact there from a device perspective as that returns growth will return, but what you are seeing in the meantime, you are seeing our ability to grow.
Other ways through security and I also just wanted to take a minute here just to correct something I said earlier on some of the industry is just something I didn't quite say right. We do see great strength in our professional services or financial services and retail and on a three year CAGR, we see 40% that wasn't true on the one year. So I just want to correct that statement, but we are still seeing.
Really good strength and that is actually stronger than what we've seen in fact until I see it a lot of diversity is our friend different parts of our business. It will come to fruition at different times and are impacted and so I think that once that macro turns well all the cylinders firing and I think this business is going to go well.
Okay perfect. Thank you and then.
If you think about you mentioned security and it's kind of hopefully a good try.
Over for you at the moment is there any like.
A natural level at the moment, it's 40% of term left.
Where do you think it's leveling out or do you think that.
You will skew more and more in that direction, given like where the market is growing as well. Thank you.
Yeah, a good question.
You know you can have and we've said this multiple times maybe to start out. This way you can have one management tool on each device, but you didn't multiple security and right now we're at 22% of our customers are on security. So there's a lot of opportunity for us to continue to grow in this area I'm really excited though what we're seeing when we look out at our.
Right.
We've seen.
More request around around security, we noted in our script and her in her prepared remarks that professional services again. There. There was 10000 seats of protect we noted them in financial services are similar and so in the industries. We're just seeing a lot of really good security.
You know building and then even in the SMB side, we see the bundles like we talked about earlier with the 100% growth year over year. So I do think and John talked about the fact that we are leading with certain security sales now too. So I think these are all really good opportunities for us as we go.
And.
Yes.
Raimo I'll I'll add to that and the fact that.
Only 22% of our companies our customers right now are using both the management and security piece that could be that could be 100% that would be our goal would be to get to that point and to really keep continue to cross sell because management management security are really they they go together I mean, you can't have you can't have a secure device without it being managed and so the fact that they are there.
Consistent with one another that that's something that our that our salespeople and our channel partners are certainly bring it to the market.
Okay perfect. Thank you.
Thank you one moment for our next question.
Okay.
And just as a reminder, if you have a question. Please press star one one our next question comes from the line of Gregg Moskowitz from Mizuho. Your question. Please.
Hey, Thank you for taking the questions good afternoon guys.
Ice management IRR to set decelerated, a little more this quarter and it looks like it's now may be growing somewhere in the neighborhood of low teens, how much of this would you attribute to the slowdown of device expansion in the tech vertical as opposed to other factors.
Also how are you generally thinking about growth management IRR going forward.
Yeah. Thanks for the question, Yes, I mean.
Couple of things on the management, if you're just looking at the management growth rate that does include education and what I'll say is you know education was one that was definitely we definitely saw COVID-19 overhang like we talked about that we're factoring in our outlook that does have an impact on our guidance and not to the extent have been on.
Or less strategic revenues, but we definitely see that and so that that number I think youre looking at is maybe a little you're perceiving it a little differently, because we have really strong commercial bookings.
So if you think about kind of the just the commercial versus the education that that fly through the Python as big I think what you'd see is that we're going to continue to have good growth rates within commercial and the growth rates in the education side are going to be muted a little bit, but we're excited again like we talked about commercial is going to be the big growth driver of business in the future.
And we have you know while we have the the headwinds today of the macroeconomics, we have a lot of great tailwind.
Mac growth in the enterprise.
The replacement market us getting better at selling security refresh cycle potentially come up including the choice program. Those all bode well for us for the long term and will help support management and growth in security growth.
Okay. Thank you and then I wanted to also ask about safe Internet because I think this is the first time actually that you've entered or truly enter into higher education season, with the new products I know that as you just pointed out you had in the education vertical is seeing some headwinds today, but I'd love to hear a little bit just on kind of how the attach rate of the internet has been.
Tracking so far relative to your expectations. Thanks.
Alright, Yeah. Great question, you know when we look at say jam the Internet, we compare it to any other security products that we had started and when we look at that it's actually having the same trends growth trends that we're excited about it.
And we've seen we've cited some opportunities within our script about James Samford save the Internet with <unk>.
Schools wanting to ban certain social media, there's some opportunity there. So so we are excited about that we also know the same as other theory products as we released the first version and other versions we have.
Our new versions, we're taking we always take customer feedback and we enhance our product and we think that will help it continue to grow.
Yeah, and I'll, just add to that Greg.
With with safe Internet as we've had great success coming out of the gate with that.
We'll continue to get more success as we take those some of those server locations in that and to different to some different markets in order to give a local service and localization for those products, particularly outside the U S.
Alright fantastic. Thank you.
Thank you one moment for our next question.
And our next question comes from the line of Nick <unk> from Craig Hallum. Your question. Please.
Hi, This is Nick on for Chad.
Thanks for taking my questions. So with the device ads down sequentially in <unk> and even more so year over year, just any color you can provide on how much of that was education relative to last year and then how we should be thinking about both overall device ads and <unk> for device growth in the second half.
Yeah, Nick Thanks for the question a good question astute question.
In the education market, we definitely you know I can't say it enough. It was definitely a COVID-19 overhang and definitely a period, where we would have expected more device growth and we didn't and we're factoring then leased in the third quarter and in our guidance.
You know what I would say on the commercial side, though it's.
We talked about earlier, we have so many different ways to increase our value with customers and that may be in more devices I think when those industries return like Tac, you'll definitely see devices come back in that to increase.
What we're seeing in those other industries professional services financial services wholesale and retail that's happening now and I kind of think about it from the fact that tech is a leader in the market. They have really embraced the consumer innovation in my T idea their leader and we're seeing these other markets kind of catch up which will awful yield and.
It will strengthen over time.
That's for you or a per device.
We had an 8% increase in our pool or ESP or whichever acronym you want to use.
But there we saw that I would look at historical I think we've had a range from 4% to 10%. When you look at historically and we're right where we're towards the top end I would say, we would continue to think that.
We're going to be somewhere in that same range as we roll forward for the rest of the year I think we will have additional devices to as we get into the commercial so Q4, when we get into commercial we'll see more device expansion.
And we also sorry.
Sorry.
Nick I'll just.
I'll just add onto that is.
Is that we did have we are lapping obviously last Q2 with the Taiwan Ministry of education, and so that was a massive education deal that.
That impacted us and so it's going to impact our comparable for this quarter.
Right.
And then just following up on one of the previous questions about the Q4 implied guide.
Can you just talk about how big of a renewal quarter Q4 is for your technology customer base and sort of what your expectations and visibility into those renewals are.
Yeah, Nick Thanks for the question.
It is a larger quarter for us where.
Where are we what we have been seeing and I I've hinted at this a couple of times in the pipeline we're getting calls.
Now for Q3 and Q4 on the commercial side.
Saying, Hey, we're kind of curious and want to learn more about some of the additional products you have them, whether it ranges from Champ connect to jam protect even or.
Our jam executive threat protection. So we're getting a lot of calls right now and a lot of pipeline generated I'd say, we were excited here our pipeline looks and so we have some visibility to that and we feel good in the things we're seeing from our customers would support the guidance and outlook that we have provided.
Got it thanks for taking the questions.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Dean Hager for any further remarks.
Thanks, and thanks for joining everyone.
I've been a bit uncharacteristically quiet on this call as I thought you'd want to hear from John .
As you all know this is my last Jeff earnings call as I will be.
Retiring at the end of the month are staying on the <unk> Board and as I've mentioned before our remaining through work that I do our customer and a shareholder.
Appreciated working with all of you over the past three years that Jim has been public.
Even more so.
Last eight years have been the highlight of my 34 year career in technology.
People have jump have selflessly served each other or our customers and the communities in which they live beyond any team I've ever worked with.
Over the past eight years, we've profitably grown jumped by over $500 million.
Pretty possible market circumstance jam.
<unk> has redefined the device management and security marketplace. We've provided the opportunity for thousands of new jam employees to advance their careers and work with people they love.
But perhaps most significantly there are an estimated 50 million people out there young and all around the world who are using our computing device that they loved to perform their absolute best and they're doing it simply safely and securely thanks to the people and products of Jam.
We are here to simplify their work they do and this team led by John and Ian.
Has the greater talent technology and market opportunity than ever before in <unk> history, I'm, absolutely confident that <unk> best days are in front of us.
Thanks very much.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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