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spk13: Thank you for standing by and welcome to the Jamf 4th Quarter 2023 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 the session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Jennifer Gaumont. Vice President, Investor Relations. Please go ahead.
spk21: Good afternoon, and thank you for joining us on today's conference call to discuss Jamf's fourth quarter and full year 2023 financial results. With me on today's call are John Stroffel, Chief Executive Officer, and Ian Goodkind, Chief Financial Officer. Before we begin, I'd like to remind you that shortly after the market closed today, we issued a press release announcing our fourth quarter and full year 2023 financial results. We also published a Q4 earnings presentation, investor presentation, and Excel file containing quarterly financial statements to assist with modeling. You may access this information on the investor relations section of Jamf.com. Today's discussion may include forward-looking statements. Please refer to our most recent SEC reports, including our most recent annual report on Form 10-K, where you will see a discussion of factors that could cause actual results to differ materially from these statements. I would also like to remind you that during the call, we will discuss some non-GAAP measures related to JANF 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 John.
spk09: Thanks, Jen. Jamf achieved strong results in Q4 to round out the year, exceeding expectations for the 15th consecutive quarter. Q4 year-over-year revenue growth was 16%, representing the first quarter of revenue growth acceleration since Q2 of 2021. This strong revenue growth led to our highest non-GAAP operating income quarter ever at $21.1 million, with a non-GAAP operating income margin of 14%. This represents a 700 basis points improvement from Q4 of 2022. Full-year revenue growth was 17% and ARR grew 15% year-over-year in 2023 to $588.6 million. Full-year non-GAAP operating income was $45.4 million, a 75% increase over 2022. This resulted in a full-year non-GAAP operating income margin of 8%, a 300 basis points improvement over 2022. We're especially proud of these strong results, as the past six quarters have seen muted growth in education and tech industries overall, along with slow PC growth. Q4 PC shipments declined nearly 3%, with max shipments seeing a decline of 18%. We remain optimistic regarding the potential for a 2024 PC refresh cycle, as predicted by IDC. However, our expectations for 2024 are not reliant on a significant uplift in device expansions. Longer term, we're still confident in our prediction that Apple technology will become the number one ecosystem in the enterprise due to continued user preference for Mac at work. We ended 2023 with 75,300 customers and 32.3 million devices on our platform. Of these customers, 41% run both Jamf management and a security product. This represents a significant increase due to the transition of our Jamf Now customers to Jamf Fundamentals. Jamf Fundamentals provides the most complete yet simple IT solution for small to medium-sized businesses to manage and protect their Apple ecosystem. Other highlights include a continued demand for Jamf's Apple-first security platform with 33% year-over-year growth in security ARR to $134 million, or 23% of Jamf's total ARR. Our strongest quarter ever for ARR added for Jamf Business Plan. Many of our largest sales had an upsell component, proving the value of our land and expand strategy. We continue to see positive trends across professional services, financial services, and retail, which are three of the top five industries we serve. And we also saw a strong quarter in healthcare. Our results were driven by strong performance across our strategic focus areas of MAC leadership, management and security, and MAC and mobile. In MAC leadership, we're seeing continued MAC growth in our customer base with customers like a leading fully integrated biopharmaceutical solutions organization. The company has been a Jamf customer for nine years, and after finding that their Mac platform required fewer support tickets and a lower total cost of ownership, decided to take the next step and scale out their Mac choice program with Jamf. The company expects to use over 5,000 Macs in the near future as a result of their upcoming refresh cycle. Moving to security, last week we released our Security 360 report that looks at real-world customer data, cutting-edge threat research, and noteworthy industry events to provide an overview of the evolving threat landscape. Among many striking data points, I wanted to highlight we are now tracking 300 malware families on the Mac operating system, 21 of those families being found in 2023. It is true that Apple builds one of the most secure out-of-the-box platforms on the market, but hackers are agnostic as to the platforms they target. Jamf is the only platform that delivers an Apple-first integrated management and security solution that meets the needs of the modern enterprise. Jamf enhances Apple's built-in security features by increasing visibility, prevention, controls, and remediation capabilities. We anticipate security to continue to become a larger part of our total ARR over time. Much of our success in security has been predicated on our ability to deliver both management and security on one platform. The success of Jamf's bundled solution is a testament to this, with ARR growth of bundled solutions outpacing most of Jamf's individual products. In Q4, over 44% of new customer pipeline generated was for security. Security products are also helping us to increase our win rates. When customers come to Jamf with security in mind, We win almost twice as often as we do when customers are looking at management alone. This was true in both Q3 and Q4, and we expect this trend to continue. We also see long-term management customers expanding with Jamf with security. In Q4, a European payments company added Jamf Protect to its 5,000 max as part of a three-year agreement. Given the company's exposure to PII and payment information, it has strict security and regulatory requirements. our team was able to demonstrate how data flows through the product in order to meet their complex needs and deliver the powerful insights and analytics of Jamf Protect. In addition to demand for complete management and security platforms, customers are also reorganizing their InfoSec and IT departments so they can manage and secure devices by technology ecosystem. This also allows end users to get the most from all of their devices while organizations can trust solutions built for the unique technology of their environment. Industry analysts like Omnia are recognizing Jamf for its mobile-first management and security, saying Omnia has seen Jamf become the primary UEM solution adopted by businesses that are well invested in the Apple ecosystem. Jamf was also early to market with capabilities to securely manage shared iOS devices. Jamf's management capabilities for iOS and iPad iOS extend well beyond basic device management including the ability to provision connectivity through eSIM and physical access tokens through key cards stored in digital wallets. This makes Jamf a strong choice for businesses looking to effectively manage and secure their Apple devices. A great example of Jamf's leadership in securely managing iOS devices is a Q4 win, Learning Care Group. Learning Care Group is the second largest full-profit child care provider in North America and a leader in early education. It operates over 1,000 schools across 38 states. Learning Care Group will be migrating their 20,000 iOS devices across its locations to Jamf. With Jamf, the company is easily able to manage its entire fleet as well as keep all of the native apps that teachers and children use at school up to date. We continue to see many industries, especially non-traditional tech industries, reach for Apple technology, then to Jamf to make that tech work for their organizations. As I stated earlier, we're seeing strong momentum in professional services, financial services, retail, and healthcare. One example is Sharp Healthcare. Sharp Healthcare is the leading health provider in San Diego and a trailblazer in healthcare innovation. Their mission is to be the best place to work, the best place to practice medicine, and the best place to receive care. One recent innovation is the deployment of more than 1,500 iPads to patient bedsides. providing access to their medical records, patient education, and entertainment. These iPads are powered by JAMS Healthcare Listener patented technology which receives patient admit, discharge, and transfer messages from the Epic Electronic Healthcare System. The technology can automatically trigger management tasks such as remote wipe and full device reset between patients to automatically personalize the experience for each patient while ensuring personal identifiable information and protected health information are secure. Another example of a company reaching for Jamf to power its unique industry-specific workflows is the longest-running airline in India. This customer chose Jamf Pro over their existing management solution and two competitive solutions to manage 5,000 iPads with future plans to implement additional products to achieve trusted access. Jamf continues to lead the way with continued innovation across our business. One recent Apple innovation that we are particularly excited about is Vision Pro and its potential for the enterprise. Recently, Apple highlighted a number of enterprises that are deploying Vision Pro. This month, we announced we are the first to market with support for Apple Vision Pro, adding this powerful new endpoint to our Apple's first security and access products, Jamf Protect and Jamf Connect. This means Jamf customers can now confidently explore new ways of working while maintaining security, performance, and privacy. Additionally, with the introduction of MDM support for Vision OS 1.1 Beta announced earlier this month by Apple, Vision Pro will soon include the key foundations for deploying and leveraging an enterprise-grade device at scale. Jamf will be working alongside Apple to support MDM in Vision Pro, and we are excited to continue to fill the gap between Apple's powerful technology and the security, identity, and management needs of the enterprise. As we look ahead to 2024, we will continue to execute our strategy. We are committed to simplifying work by helping organizations succeed with Apple and by doing so at the pace of Apple. To do that, we need to ensure we have a healthy company in service to our stakeholders over the long term. Our business has evolved both because of continued innovation in the space and because of the changing needs of our customers. Over the last few years, Jamf has been on a dedicated journey to align our workforce to meet the evolving needs of today's IT and security teams, while remaining a sustainable and profitable business. Over the last year, we've seen reduced customer budgets and muted hiring and layoffs into the technology space, which in turn has elongated sales cycles and decreased customer purchases of new devices. This has put pressure on our land and expand strategy. And in education, K-12 remains in a COVID overhang. These challenges in tech and K-12 will likely remain throughout 2024. On the flip side, we are seeing expansion in industries outside of these two, as I mentioned earlier. We are controlling what we can by transforming and adjusting our investments and resources consistent with our current growth rate. This involves a more rigorous approach than we've taken in the past. We will continue to invest in areas that further solidify Jamf's position as the leading platform for managing and securing Apple at work. We remain committed to innovating at the pace of Apple and enhancing our platform to deliver the best solution for our customers today and in the future. We're prioritizing investments in areas where we're seeing tremendous growth and opportunity, like security and AI, while reducing spend in areas not providing as fast or as high returns. We've also embarked on a number of scalability and efficiency efforts, including realigning our organizational structure to match our investment areas which resulted in a reduction in force we announced in January. These efforts span every area of our business and were subject to a rigorous process that involved each member of my management team. Ian will provide more detail on these scalability and efficiency efforts in a bit. As a result, we are anticipating achieving nearly 700 basis points of non-GAAP operating income margin expansion in 2024 when compared to 2023. We believe this is the right course of action to align Jamf's current revenue growth profile and establish a foundation for success in the future. With that, I'll now turn it over to Ian to review our results and give more color around our 2024 outlook.
spk19: Thanks, John. We ended Q4 with year-over-year revenue growth of 16% exceeding the high end of our revenue outlook by $1.6 million. This resulted in fiscal year-over-year revenue growth of 17%. Total ARR reached $588.6 million, representing year-over-year growth of 15%, exceeding expectations. For the first time since Q3 2022, we saw year-over-year new bookings growth, with Q4 representing one of our strongest quarters for commercial new bookings. This helped drive Q4 net new ARR of $22 million, resulting in Jamf's commercial ARR increasing to 74% of Jamf's total ARR and security ARR increasing to 23% of the total. These results benefited from the conversion of Jamf Now's customers to Jamf Fundamentals. We continue to believe that Jamf's commercial business, and specifically security, will be a key growth driver. Similar to Q2 and Q3, the strategic core of Jamf's business, SaaS recurring revenue, remains strong in Q4. Less strategic revenue sources like license, services, and on-premise revenues continue to experience year-over-year declines. Additionally, softness in Jamf's two largest industries, tech and K-12 education, remained while Jamf's next three largest industries, professional services, financial services, and wholesale and retail saw continued momentum. And in addition, healthcare saw momentum too. Our net retention rate remained flat at 108% in Q4 when compared to Q3. The remainder of my remarks on margins, expense items, and profitability will be on a non-GAAP basis. Our GAAP financial results, along with a reconciliation, between GAAP and non-GAAP are found in our earnings release. Q4 non-GAAP gross profit margin was 82% and within our expectations. We continue to anticipate gross margins in the low 80% range and expect slight fluctuations each quarter. Non-GAAP operating income exceeded the high end of our Q4 outlook at $21.1 million or 14% margin due to increased revenues representing a 700 basis point improvement over Q4 2022. For full year non-GAAP operating margin was 8% of 300 basis point increase over fiscal 2022 due to revenue outperformance and cost containment measures. Our trailing 12 months unlevered free cash flow margin was 10% compared to 18% in the prior year. It's important to note that year-over-year decrease in unlevered free cash flow is not indicative of lost customers, nor that customers are committing to shorter and lower dollar contracts with us. In fact, customers are growing with Jamf, just not paying their full contract value upfront. Additionally, the trailing 12-month unlevered free cash flow margin of 10% was slightly lower than expected, primarily related to a shift in customer payments during year-end. Our effective tax rate for Q4 was negative 7%, resulting in a full-year effective tax rate of negative 2.1%, with both rates consistent with our expectations. As a reminder, for non-GAAP metrics, we use our domestic statutory rate for calculating tax impacts, which is currently 24%. 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 our outlook for 2024. As John discussed, we are aligning investments and resources to match JAMS' current revenue growth profile with a focus on key investment areas scalability and efficiency initiative. Now is the right time to take these measures to set Jamf up for profitable growth in the future and return Jamf to the rule of 40. Some of the scalability and efficiency initiatives include adjusting the sales organization for current and expected growth levels, enhancing the customer journey to make it easier to do business with us, enhancing channel relationships through stronger programs and automation, reducing reliance on field sales, investing in process improvement and automation in sales and marketing and general administrative, leveraging leadership talent and create more efficient organizational structures, and optimizing our global footprint, aligning to where our customers need us most. Most of these initiatives are in process, with some seeing benefits in 2024 and others with benefits expected throughout the next few years. With respect to revenue growth, given the subscription nature of our business, softness in device upsell in 2023 will impact our 2024 revenue growth rate. We expect continued pressure on device upsell through 2024. Based on these factors, for the first quarter of 2024, we expect Total revenue of $148 to $150 million, representing year-over-year growth of 12 to 13%. Non-GAAP operating income of $19 to $20 million, representing a non-GAAP operating income margin of 13% at the midpoint. For the full year 2024, total revenue of $614.5 to $619.5 million, representing year-over-year growth of 10% at the midpoint. Non-GAAP operating income of $89 to $93 million, representing a non-GAAP operating income margin of 15% at the midpoint and a nearly 700 basis point improvement over fiscal year 2023. While we don't provide an outlook for ARR, we would expect to end fiscal year 2024 with ARR growth similar to full-year revenue growth. With respect to unlevered free cash flows for full-year 2024, we expect unlevered free cash flow margin to be similar to non-GAAP operating income margin. We also provide estimates for amortization, stock-based compensation and 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. As we look beyond 2024, we remain committed to JANF achieving the Rule of 40. Using our historical calculation method of revenue growth and unlevered free cash flow margin, we anticipate approaching the Rule of 40 by the end of 2025. We plan to exceed the Rule of 40 in 2026. We look forward to sharing more regarding our plans through 2026 as part of our Investor Day on March 13, 2024 at NASDAQ in New York. If you would like to attend in person or virtually and have yet to register, please reach out to InvestorEvents at Champs.com. And now, John and I will take your questions. Operator?
spk13: Certainly. And as a reminder, ladies and gentlemen, please limit yourselves to one question and one follow-up. You may get back in the queue as time allows. One moment for our first question. And our first question comes from the line of Joshua Riley from Needham & Company. Your question, please.
spk16: All right. Thanks for taking my questions. Starting off on the macro here, you know, tech obviously remains a headwind. maybe some color, were the Q4 renewals consistent with your expectations entering the quarter? And then overall, was tech incrementally weaker than what you expected entering the quarter as well?
spk09: Hey, Josh. Yeah, this is John. For the Q4 renewals, no, that was in line with what we had expected, hadn't anticipated, and we're pretty happy with the Q4 performance, especially as it ended the year. And as far as the tech, you know, weakness, You know, we just haven't seen the hiring resume in tech yet. We anticipate that's going to come along with IDC and everyone else, but we haven't seen it yet. And we also haven't contemplated it in our guidance either.
spk16: Got it. That's helpful. And then just one follow-up. If you look at the guidance for 2024, can you just help us understand, are you also assuming more conservative assumptions around new customer activity as well? And are you planning for more contract renewals with device downsell in these assumptions. Thank you.
spk19: Yeah, thanks, Josh. We build our guidance using that bottoms-up approach. And in 2024, we're factoring in the same muted economics that we saw in 2023. Also impacting our revenue growth rates in 2024 is the reduced upsell in 2023 because we are a high recurring revenue business. And as we just talked about or you alluded to, You know 46% of our ar does come from information communication, I attack, which has the customer reduced customer hiring practices. And edu still has the covert overhang on the new logo specifically we are factoring in assumptions similar to 2023. In addition, on the less strategic choppy revenue sources, we have those factor in a slightly lower level than what we saw in 2023. But we are focused on those things we can control. We're focused on the cross-sell opportunities. We're focused on security and selling into mobile. And the things we haven't factored in is if the upsell returns, that would be something that would drive that number higher in the form of customers hiring more employees. It would come back in the form of more refresh programs within 2024 and choice programs with that in the commercial side and on the education side. And then the replacement market being even stronger than we've anticipated.
spk16: Got it. Very helpful. Thank you, guys.
spk13: Thank you. One moment for our next question. And our next question comes from the line of Rob Owens from Piper. Your question, please.
spk12: Great. Thanks for taking my question. And I guess just around some of those dynamics, you stated net retention rate of 108%, which I believe was flat quarter over quarter. First part, can you just remind us of the calculation of that, if that's point in time versus trailing 12 months? And second, as we contemplate 2024, what are expectations there, given some of the turnover issues I think we're seeing in high tech and not seeing the upsell that you were likely in the last couple of years? Thanks.
spk19: Hey, Rob, I'll jump in on that question. So you're correct that our net retention rate didn't change from Q3 to Q4, remained at 108. And as a reminder to your question, it is based on a trailing 12-month measure. What we are looking forward to, based on the guidance that we just provided, is that the net retention rate will trickle down throughout the year by about 100 basis points per quarter. But we do believe that actually bottoms out at the end of the year and stabilizes from our cross-sell efforts. As the MAC returns and as we get better and better, which we already have gotten really good at selling security, those will go well and we'll accelerate that number upward.
spk13: Thank you much. Thank you. One moment for our next question. And our next question comes from the line of Greg Moskowitz from Mizzou. Your question, please.
spk14: Hey, thank you for taking the questions. Good afternoon, guys. I guess first question, can you expand on your latest thoughts on PC and Mac refresh activity in 2024? I think we all have seen what IDC is saying. I'm wondering if you have any additional perspective from your conversation with customers. And then also, you know, what sort of assumptions around refresh are baked into this revenue guide for the full year?
spk09: Hey, Greg, I'll take the first part of that question, and then Ian can expand on expectations. You know, with respect to the PC refresh, you know, and speaking with our customers, they're just being prudent in their expense management as well. And they're just looking out into the out years, looking at what their hiring practices are. And they're just, you know, they're not – we're not seeing a great anticipation of hiring kicking in at least in the first part of 2020. We don't know who's going to hire in the back year. But, again, we're seeing – budget management we're seeing platform consolidation and that's kind of how we set our guidance accordingly in 24.
spk19: I don't know Ian you've got some more yeah what I'll add on that refresh program within 2024 we are factoring the same economics we saw in 2023 so we saw that lack of upseller device expansion in 2023 so we're factoring in that same muted upsell at renewal. But if that comes back, we see that as a good opportunity for us as choice programs come into play. We do note in that IDC article and other places and other checks that we've heard is an opportunity next year for a refresh cycle. So that is something we think could be a tailwind for us next year.
spk14: Perfect. Thanks, Ian. Just as a follow-up, you mentioned, John, that you saw a benefit from Jamf Now conversions to Jamf Fundamentals. Are you able to put a finer point perhaps on how this is impacting the business today as well as how it may help in 2024 and beyond? Thank you.
spk09: Yeah, I can certainly speak to what the customer is seeing from the benefit and then Ian can follow up with some numbers if needed. You know, really we've seen a tremendous value, our customers have seen a tremendous value with the security and the management being part of the same product. In fact, You know, when we go to market with security and management, we went almost twice as many times as we just are talking about security on its own. And we also have a greater stickiness when those customer using are using both our management and security products together. And so this was really something our customers had asked for with respect to the security side. And so we wanted to we wanted to make sure that we had that bundled solution for those customers. And there's been a great benefit. We've done that a few months ago, and we haven't really seen any negative pushback or attrition from that as a result. So we're getting good feedback from our customers.
spk19: Yeah, I would just add some number points that out of the net new AR of $22 million, the impact was about $6 million. We haven't seen any material changes in churn there, so customers are loving it and accepting it. And we are seeing success in our other bundles. And just to quote two other stats there, One, we see 79% growth year over year when combining both our business plan and enterprise plan. And in the fourth quarter alone, Jamf business plan had its most successful quarter in the form of net new ARR. Very helpful. Thank you, guys.
spk13: Thank you. One moment for our next question. And our next question. It comes from the line of DJ Hines from Canaccord Genuity. Your question, please.
spk06: Hey, guys. This is Ryan. I'm for DJ. So I just wanted to double-click on some of the go-to-market motions you're building out, I guess particularly the self-directed and the partner-led motions we've spoken about before. Can you just elaborate on any traction you're seeing there? I guess like when we start to see any of that progress reflected in S&M as we progress through 2025.
spk09: Okay, Ryan, this is John here. So I've got two parts to that question. One is how the go-to-market has been optimized through self-directed and the other is through our partner. We would classify that as our third-party channel as well as our strategic partnerships. And with respect to the first one, the self-directed, that's really what the investments that we have done in our systems to gain some efficiencies there that we'll see primarily toward the back half of the year. And those are things like the partner portal, when partners can come in and actually put data directly into the portal and make their own quotes. It's also buying product from within the product, whether that's additional seats on a renewal or additional products from within our product. And those are all things that we're putting into place from a technological investment. With respect to our third party channel, we've actually increased the amount of business going through that third party channel. on a global basis. We've always run primarily channel-led outside the U.S., and in the U.S. that's becoming even more so, in fact, increasing in its percentage there, and we're going to continue to do that. Some of the optimizations that we've done in our go-to-market teams just early even this year are really focused on that, leveraging more in the channel, which we've talked about for some time, and that's actually coming to fruition, and we're seeing that in the percentage of our business going through our channel partners.
spk06: Okay, awesome. Great to hear. And then I guess just a quick follow-up. I know you have your investor day coming up in a couple of weeks, but when you talk about meeting rule of 40 by the end of 2025 and exceeding it in 2026, can you help me think about what are your expectations there between the balance of growth and profitability?
spk19: Yeah, I can talk to that at the end. So we would expect our revenue to be a higher growth rate in 25 and 26 than what we see in 2024 for all the reasons of the tailwinds that we mentioned that we haven't factored into 2024. With 2025 and 2026 profitability, we would expect that to expand as well. As we talked about, we have certain initiatives to make the customer journey easier. We have certain back office automation, and both of those will provide benefits in 25 and 26. And as last reminder I make here is you'll hear more specifics on that at our investor day on March 13th at NASDAQ in New York. Okay, awesome. Thanks, guys. Appreciate the time.
spk26: Thank you. One moment for our next question. And our next question. comes from the line of Jake Roberts from William Blair.
spk13: Your question, please.
spk02: Hey, thanks for taking the questions. I know it's hard to predict when hiring really starts to ramp more meaningfully, but as you look into 2024, should we expect the headwinds in tech and education to trough this year, or is that a dynamic that we'll still have to kind of deal with and work through in 2025 as you work through some of the longer renewal cycles from potentially larger tech customers and education customers? Just curious. how those renewal cycles are shaping up heading into next year.
spk09: Yeah, Jake, this is John. You know, we, along with a lot of the market, had anticipated the tech hiring to resume in 2023 or the back half of 23, but we didn't see that. And so, you know, really taking that into consideration, we wanted to have a balanced approach going into our 2024 guidance, which is what we see here. So, We're going to continue to run a balanced growth profile with investing in growth as well while maintaining profitability in the meantime.
spk19: One thing I'd add, as we look at our, let's say, top five industries, so we talked about tech and education. We are actually continuing strength in the next three industries, so professional services, financial services, retail, and wholesale industries. those have provided a really good strength and growth rate for us and we're really excited about the opportunities in those segments and the last thing i mentioned here is as we've talked about non-tech leading forward industries have really been looking at the deathless use of our products and that has been a success story for us as well okay very helpful and then uh really nice growth in the security suite this quarter
spk02: Now that you're hitting a more meaningful scale there, how should we think about a durable growth rate in that segment? And then just kind of on the other side of that coin, do you expect to see similar headwinds in the security business in 2024 as you see on the device management side, or could that actually be more insulated heading into next year?
spk19: Yeah, on the security side, look, we have a business that grew 33% year over year and now represents 23% of our total ARR. We continue to think that's a really strong focus point for us, that we've allocated resources that way, and we think that can continue to be a very strong growth rate in the future. I would say that we are going to provide more details around that at our investor day, but what we are seeing, and it goes back to our bundles discussion before, When we are combining management and security, it has been a very successful win rate, and we actually are seeing customers stay a little bit more sticky and are happier when we combine those products together.
spk09: And, Jake, I'll just add to that as well. I mean, you know, speaking to our customers, they're certainly not investing less in security. And as our customers will come back to us and talk about, you know, Apple-specific functionality that we have, And that's really been a benefit. And when you combine that with the management piece, not only can you identify the threat, but you can also do something about it and actually deploy that. That's really what we've seen. So we're continuing to be optimistic about the management and security piece together and how that resonates with our customer base.
spk26: Sounds great. Thanks for taking the questions. Thank you. One moment for our next question. And our next question comes from the line.
spk13: I'm Matt Hedberg from RBC. Your question, please.
spk07: Great, guys. Thanks for taking my questions. You know, John, have you noticed anything competitively, you know, maybe an increased pipeline or anything of that from VMware AirWatch, you know, just kind of given the ongoing, you know, acquisition there by Broadcom and just sort of wondering competitively, is anything there maybe improving a bit?
spk09: yeah thanks matt it certainly has um you know we've been working on this for for quite a while and you know while we we're really optimistic about that replacement opportunity it's not going to happen all at once just given those customers have multi-year contracts and and we're real tied into that customer base and so when those renewals come up we're certainly you know showing the advantage of not only management and security together but then an apple led and apple focused um ecosystem support and that again is resonating with our customer base so we you know we continue to remain optimistic about that. And now with the recent events that just have transpired over the last few days, we were even just as, if not even more optimistic about it. Got it. That's great.
spk07: And then there was a lot of good commentary on, you know, specifically what you guys are doing to maybe offset some of the tougher spending that you're seeing out there, device ads, headcount growth, et cetera. But, you know, I still, you know, reflect on the opportunity. It still seems like such a greenfield opportunity. just as it stands. You know, are there things from, you know, either strategic marketing or targeting, you know, greenfield accounts through like ROI-based selling that can drive, you know, sort of above, jump growth above market trends, maybe from, you know, just trying to go after what feels like a really, really greenfield opportunity still?
spk09: Yeah. Yeah. There's all of the above. I mean, we're certainly doing all the account-based, we're doing all the analytics and making sure that we target the accounts that, you know, that are available. And, You know, with just what we mentioned earlier, just with the, you know, with budgets being rather muted this year in anticipation of, you know, tech hiring and the refresh cycle and education, I mean, we're certainly poised for that. We've done a lot of the market research and, you know, we're just, we've had some elongated sales cycles like many of us in the industry have. But again, you know, the opportunity is there. We've got great win rates, especially when we put management and security together. We're just going to keep doubling down on on those things that have been successful and open up new areas where they become available. And the replacement market is just one. Ian mentioned earlier about the deskless workflows and industry workflows that we're seeing with all the other additional devices that are coming out from Apple and the ones that are out now just being put into process in a lot of different functions and in ways that we hadn't anticipated before. And that's also something that we're really focused on and working with our channel partners to really optimize and take advantage of that opportunity. Great. Thanks a lot, John.
spk13: Thank you. One moment for our next question. And our next question comes from the line of Raymond Linschow from Barclays. Your question, please.
spk15: Hey, this is Isaac on for IMO. Thanks for taking the question. John, you've talked about enterprise being a bit more resilient than SMB over the last couple of quarters. And I was wondering if there was anything to call out here, whether, you know, to the benefit of enterprise again or the weakness of SMB.
spk09: You know, yeah, thanks, Isaac. You know, we've seen when we talk about the volatility in the SMB. you know, as a market's uncertain, do you have small businesses that can, you know, can go out of business or get bought, or there's a lot of reasons for them, that volatility, that have nothing to do with the products that you're using necessarily. So we've seen some there, but I don't think any more than the industry on average. You know, we have two-thirds of our business is volume-based, is small to medium-sized, but we have a good chunk of that business in enterprise, and we've seen We've seen the scalability that we provide over doing this for over 20 years alongside Apple that has really, really resonated with our customers. In fact, when we get into that enterprise, the higher we get up, generally the less competition we have, especially as it relates to the Apple ecosystem. So there are good benefits in the enterprise. We saw Q4 finish strong. We saw companies that had budget at the end of the quarter that went ahead and pulled the trigger on that. And we've seen some good progress earlier this year, even with the enterprise groups.
spk15: Great. That's really helpful. And then one for Ian. On cash flow, you talked again about the shift from upfront to annual billings. Was the level there similar to last quarter? Should we think about that being a bit more predominant now in the customer base. And then, you know, as we look into FY24, should we expect that shift to move back to upfront towards the end of the year?
spk19: Yeah, just to clarify a couple of things there. So when comparing 23 to 22, the primary driver was that shift in multi-year being from that used to be paid upfront to annually paid. That was the primary driver within the quarter itself. We actually saw customers just defer payments to basically January of 24. So it was just a timing issue, not indicative of our business, neither of those are. As we roll forward, I would say operating income or margin is the bigger driver of our unlevered free cash flows as we move forward. And we just raised our operating income about 700 basis points. And we've said the unlevered free cash flow is going to be about consistent with that. And that has factored in all the changes in customer payment behaviors.
spk26: All right, great. Thank you. Thank you. One moment for our next question.
spk13: And our next question comes from the line of Chad Bennett from Craig Callum. Your question, please.
spk03: Great. Thanks for taking my questions and fitting me in. So just in terms of how we should think about device growth and ARR per device relative to your revenue growth guidance. Is there any type of correlation there and how should we think about those two metrics?
spk19: Yeah, I would call your attention back to our growth algorithm. We have new logos, we have upsell, right, device expansion, and we have cross-sell. And we are going to continue to focus on those things that we can control. which is cross-sell specifically. We are factoring in the same upsell, muted upsell at renewal, but we are definitely focused on the successes we've had and seeing customers see the value in both management and security. That is where we're going to drive, and it's specifically in the bundles because we think that's what drives the most customer value.
spk03: And then maybe one quick follow-up for John, just kind of follow-up on the competitive side question, I guess, a couple questions ago. Just specific to the endpoint security market and Protect, and obviously, you know, that product's still growing nicely. Just kind of, is there any kind of, you know, new revelations there just competitively now that you're, you know, another quarter and year into that product and into that endpoint security market that you'd like to share?
spk09: Yeah, I mean, you're right. Protect has done really well, and we're very happy about it. In fact, in security in general, 44% of our pipeline was security, and so we're really seeing it get traction there. With Protect, we continue to add functionality to it. We're going to continue to add more pieces of security as our customers request that. And, yeah, I mean, that's pretty much all we have to do with Protect. It's done well. our reps are becoming even more well-versed in selling that, especially as it relates to in conjunction with security. And we're going to continue to double down on that. Got it. Thanks much.
spk13: Thank you. One moment for our next question. And our next question comes from the line of Pat Walravens from SysGMP. Your question, please. Oh, great. Thank you.
spk11: I mean, John, usually companies guide revenue below where expectations are, you know, after they've had a disappointing bookings or renewal quarter. But in your case, it sounds like bookings and renewals in Q4 were actually pretty good. So when did you guys decide it was time to, you know, increase the profitability to align with the current growth profile, as you worded in the press release?
spk09: Yeah. Thanks, Pat. Um, good question. No, we, we, um, we understand that. And what we're really trying to do is have a balanced approach to profitability and growth going into 2024. And as I mentioned earlier, we, as the rest of the, of the market expected that return to come in mid, even to late 25 or 23. And that didn't happen. And so we're just trying to be judicious in our, in our approach and our guidance in 24, as, as Ian mentioned, there are things that could impact that in 2024. The tech hiring could resume. We expect that there's going to be an EDU refresh, but we haven't anticipated that in our guidance because the market hasn't behaved like we thought it was going to in 23, and so we're just making sure that we're doing the right thing for the business and our customers long-term, and that's making sure that we're optimized for efficiency and scalability as we go into 24. And But we are well poised to be able to scale up when those growth vectors continue or start to resume. And we're watching that very, very closely.
spk08: So we're on point. Okay, great. Thank you.
spk26: Thank you. One moment for our next question. And our next question comes from the line of Koji Akita from Bank of America Securities.
spk13: Your question, please.
spk04: yeah hey guys thanks for taking the questions um just a couple from me here first one maybe a question for john or ian you know what do you view as the most attractive levers to drive upside to growth in 2024. um i'll take that one koji um so our most attractive levers um you know we have many of them we really do i mean that certainly um
spk09: the replacement market, you know, absence of the tech hiring resuming and the EDU refresh and those, those things we've already talked about. But, but certainly the replacement market as, as it becomes more apparent. And again, the events of the last few days have continued our optimism in that as, as we really lean into those customers and show the value of management and security together, especially at scale and focused on, on Apple first and Apple best. So those are, Those are the areas that we really see. International is a great opportunity for us. We saw some softness in international in the middle of the year in 23. We saw that pick up toward the end of the year. We continue to see that at the beginning of this year. So as Apple mentioned on their earnings call that they've had some success internationally as well. We work very closely with Apple outside the US and in the US, but certainly outside the US. And so we're continuing to leverage that as we expand internationally. So those would be some of the biggest areas. And then I guess to wrap it up would be security. I mean, every device can have one device management product on it, but every device can have five or six or more security products on it. And IT and InfoSec teams generally do that. They want belt and suspenders on security. And then when we offer something that's Apple specific, along with the management piece, that again is a good opportunity and really a lever to increase.
spk04: Yeah, got it. No, that's super helpful. And maybe following up to Pat's question, you know, just, booking sound good. So what sort of triggers are you looking for as maybe a signal that it's time to invest at a greater rate than what the plan is currently set for?
spk09: You know, we've seen close ratios while sales cycles have been elongated. We've seen close ratios maintained pretty similar. We measure our go-to-market organization very with a very disciplined and rigorous approach. Our cadence is very, very tight on that. And so we can get those leading indicators and shift accordingly. So we know if that sales cycle is starting to drop. We know if that conversion rate is starting to go higher. We know if the ASPs of each one of those deals in the pipeline are starting to raise. Any one of those indicators are going to lead us to really lean in to that and to invest in that growth. And also geographically, you know, to the extent that we've seen international continue to to take the momentum up, we're going to look at that and invest in that area as well.
spk19: I would just add one thing on our operating income guidance there at a midpoint of 15%. We are committed, to John's point, we have optimized our organization and made it so we can continue to commit to that 15% margin.
spk18: Thanks, guys. Thanks for taking the questions.
spk13: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Jennifer Gamon for any further remarks.
spk21: Thanks, Jonathan. Thank you again for joining us today. We hope to see you at our Investor Day on March 13th in New York. If you'd like to attend in person, please reach out to InvestorEvents at Jamf.com. Thank you.
spk13: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program.
spk26: You may now disconnect. Good day. Thank you. Thank you. Thank you. Thank you.
spk13: Thank you for standing by and welcome to the jammed fourth quarter 2023 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 the session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Jennifer Gaumont. Vice President, Investor Relations. Please go ahead.
spk21: Good afternoon, and thank you for joining us on today's conference call to discuss CHAMP's fourth quarter and full year 2023 financial results. With me on today's call are John Stroffel, Chief Executive Officer, and Ian Goodkind, Chief Financial Officer. Before we begin, I'd like to remind you that shortly after the market closed today, we issued a press release announcing our fourth quarter and full year 2023 financial results. We also published a Q4 earnings presentation, investor presentation, and Excel file containing quarterly financial statements to assist with modeling. You may access this information on the investor relations section of Jamf.com. Today's discussion may include forward-looking statements. Please refer to our most recent SEC reports, including our most recent annual report on Form 10-K, where you will see a discussion of factors that could cause actual results to differ materially from these statements. I would also like to remind you that during the call, we will discuss some non-GAAP measures related to JANF 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 John.
spk09: Thanks, Jen. Jamf achieved strong results in Q4 to round out the year, exceeding expectations for the 15th consecutive quarter. Q4 year-over-year revenue growth was 16%, representing the first quarter of revenue growth acceleration since Q2 of 2021. This strong revenue growth led to our highest non-GAAP operating income quarter ever at $21.1 million, with a non-GAAP operating income margin of 14%. This represents a 700 basis points improvement from Q4 of 2022. Full-year revenue growth was 17% and ARR grew 15% year-over-year in 2023 to $588.6 million. Full-year non-GAAP operating income was $45.4 million, a 75% increase over 2022. This resulted in a full-year non-GAAP operating income margin of 8%, a 300 basis points improvement over 2022. We're especially proud of these strong results, as the past six quarters have seen muted growth in education and tech industries overall, along with slow PC growth. Q4 PC shipments declined nearly 3%, with max shipments seeing a decline of 18%. We remain optimistic regarding the potential for a 2024 PC refresh cycle, as predicted by IDC. However, our expectations for 2024 are not reliant on a significant uplift in device expansions. Longer term, we're still confident in our prediction that Apple technology will become the number one ecosystem in the enterprise due to continued user preference for Mac at work. We ended 2023 with 75,300 customers and 32.3 million devices on our platform. Of these customers, 41% run both Jamf management and a security product. This represents a significant increase due to the transition of our Jamf Now customers to Jamf Fundamentals. Jamf Fundamentals provides the most complete yet simple IT solution for small to medium-sized businesses to manage and protect their Apple ecosystem. Other highlights include a continued demand for Jamf's Apple-first security platform with 33% year-over-year growth in security ARR to $134 million, or 23% of Jamf's total ARR. Our strongest quarter ever for ARR added for Jamf Business Plan. Many of our largest sales had an upsell component, proving the value of our land and expand strategy. We continue to see positive trends across professional services, financial services, and retail, which are three of the top five industries we serve. And we also saw a strong quarter in healthcare. Our results were driven by strong performance across our strategic focus areas of MAC leadership, management and security, and MAC and mobile. In MAC leadership, we're seeing continued MAC growth in our customer base with customers like a leading fully integrated biopharmaceutical solutions organization. The company has been a Jamf customer for nine years, and after finding that their Mac platform required fewer support tickets and a lower total cost of ownership, decided to take the next step and scale out their Mac choice program with Jamf. The company expects to use over 5,000 Macs in the near future as a result of their upcoming refresh cycle. Moving to security, last week we released our Security 360 report that looks at real-world customer data, cutting-edge threat research, and noteworthy industry events to provide an overview of the evolving threat landscape. Among many striking data points, I wanted to highlight we are now tracking 300 malware families on the MAC operating system, 21 of those families being found in 2023. It is true that Apple builds one of the most secure out-of-the-box platforms on the market, but hackers are agnostic as to the platforms they target. Jamf is the only platform that delivers an Apple-first integrated management and security solution that meets the needs of the modern enterprise. Jamf enhances Apple's built-in security features by increasing visibility, prevention, controls, and remediation capabilities. We anticipate security to continue to become a larger part of our total ARR over time. Much of our success in security has been predicated on our ability to deliver both management and security on one platform. The success of Jamf's bundled solution is a testament to this, with ARR growth of bundled solutions outpacing most of Jamf's individual products. In Q4, over 44% of new customer pipeline generated was for security. Security products are also helping us to increase our win rates. When customers come to Jamf with security in mind, We win almost twice as often as we do when customers are looking at management alone. This was true in both Q3 and Q4, and we expect this trend to continue. We also see long-term management customers expanding with Jamf with security. In Q4, a European payments company added Jamf Protect to its 5,000 max as part of a three-year agreement. Given the company's exposure to PII and payment information, it has strict security and regulatory requirements. our team was able to demonstrate how data flows through the product in order to meet their complex needs and deliver the powerful insights and analytics of Jamf Protect. In addition to demand for complete management and security platforms, customers are also reorganizing their InfoSec and IT departments so they can manage and secure devices by technology ecosystem. This also allows end users to get the most from all of their devices while organizations can trust solutions built for the unique technology of their environment. Industry analysts like Omnia are recognizing Jamf for its mobile-first management and security, saying Omnia has seen Jamf become the primary UEM solution adopted by businesses that are well-invested in the Apple ecosystem. Jamf was also early to market with capabilities to securely manage shared iOS devices. Jamf's management capabilities for iOS and iPad iOS extend well beyond basic device management. including the ability to provision connectivity through eSIM and physical access tokens through key cards stored in digital wallets. This makes Jamf a strong choice for businesses looking to effectively manage and secure their Apple devices. A great example of Jamf's leadership in securely managing iOS devices is a Q4 win, Learning Care Group. Learning Care Group is the second largest for-profit child care provider in North America and a leader in early education. It operates over 1,000 schools across 38 states. Learning Care Group will be migrating their 20,000 iOS devices across its locations to Jamf. With Jamf, the company is easily able to manage its entire fleet as well as keep all of the native apps that teachers and children use at school up to date. We continue to see many industries, especially non-traditional tech industries, reach for Apple technology, then to Jamf to make that tech work for their organizations. As I stated earlier, we're seeing strong momentum in professional services, financial services, retail, and healthcare. One example is Sharp Healthcare. Sharp Healthcare is the leading health provider in San Diego and a trailblazer in healthcare innovation. Their mission is to be the best place to work, the best place to practice medicine, and the best place to receive care. One recent innovation is the deployment of more than 1,500 iPads to patient bedsides. providing access to their medical records, patient education, and entertainment. These iPads are powered by JAMS Healthcare Listener patented technology which receives patient admin, discharge, and transfer messages from the Epic Electronic Healthcare System. The technology can automatically trigger management tasks such as remote wipe and full device reset between patients to automatically personalize the experience for each patient while ensuring personal identifiable information and protected health information are secure. Another example of a company reaching for Jamf to power its unique industry-specific workflows is the longest-running airline in India. This customer chose Jamf Pro over their existing management solution and two competitive solutions to manage 5,000 iPads with future plans to implement additional products to achieve trusted access. Jamf continues to lead the way with continued innovation across our business. One recent Apple innovation that we are particularly excited about is Vision Pro and its potential for the enterprise. Recently, Apple highlighted a number of enterprises that are deploying Vision Pro. This month, we announced we are the first to market with support for Apple Vision Pro, adding this powerful new endpoint to our Apple's first security and access products, Jamf Protect and Jamf Connect. This means Jamf customers can now confidently explore new ways of working while maintaining security, performance, and privacy. Additionally, with the introduction of MDM support for Vision OS 1.1 Beta announced earlier this month by Apple, Vision Pro will soon include the key foundations for deploying and leveraging an enterprise-grade device at scale. Jamf will be working alongside Apple to support MDM in Vision Pro, and we are excited to continue to fill the gap between Apple's powerful technology and the security, identity, and management needs of the enterprise. As we look ahead to 2024, we will continue to execute our strategy. We are committed to simplifying work by helping organizations succeed with Apple and by doing so at the pace of Apple. To do that, we need to ensure we have a healthy company in service to our stakeholders over the long term. Our business has evolved both because of continued innovation in the space and because of the changing needs of our customers. Over the last few years, Jamf has been on a dedicated journey to align our workforce to meet the evolving needs of today's IT and security teams, while remaining a sustainable and profitable business. Over the last year, we've seen reduced customer budgets and muted hiring and layoffs into the technology space, which in turn has elongated failed cycles and decreased customer purchases of new devices. This has put pressure on our land and expand strategy. And in education, K-12 remains in a COVID overhang. These challenges in tech and K-12 will likely remain throughout 2024. On the flip side, we are seeing expansion in industries outside of these two, as I mentioned earlier. We are controlling what we can by transforming and adjusting our investments and resources consistent with our current growth rate. This involves a more rigorous approach than we've taken in the past. We will continue to invest in areas that further solidify Jamf's position as the leading platform for managing and securing Apple at work. We remain committed to innovating at the pace of Apple and enhancing our platform to deliver the best solution for our customers today and in the future. We're prioritizing investments in areas where we're seeing tremendous growth and opportunity, like security and AI, while reducing spend in areas not providing as fast or as high returns. We've also embarked on a number of scalability and efficiency efforts, including realigning our organizational structure to match our investment areas which resulted in a reduction in force we announced in January. These efforts span every area of our business and were subject to a rigorous process that involved each member of my management team. Ian will provide more detail on these scalability and efficiency efforts in a bit. As a result, we are anticipating achieving nearly 700 basis points of non-GAAP operating income margin expansion in 2024 when compared to 2023. We believe this is the right course of action to align Jamf's current revenue growth profile and establish a foundation for success in the future. With that, I'll now turn it over to Ian to review our results and give more color around our 2024 outlook.
spk19: Thanks, John. We ended Q4 with year-over-year revenue growth of 16% exceeding the high end of our revenue outlook by $1.6 million. This resulted in fiscal year-over-year revenue growth of 17%. Total ARR reached $588.6 million, representing year-over-year growth of 15% exceeding expectations. For the first time since Q3 2022, we saw year-over-year new bookings growth, with Q4 representing one of our strongest quarters for commercial new bookings. This helped drive Q4 net new ARR of $22 million, resulting in Jamf's commercial ARR increasing to 74% of Jamf's total ARR and security ARR increasing to 23% of the total. These results benefited from the conversion of Jamf Now's customers to Jamf Fundamentals. We continue to believe that Jamf's commercial business, and specifically security, will be a key growth driver. Similar to Q2 and Q3, the strategic core of Jamf's business, SaaS recurring revenue, remains strong in Q4. Less strategic revenue sources like license, services, and on-premise revenues continue to experience year-over-year declines. Additionally, softness in Jamf's two largest industries, tech and K-12 education, remained, while Jamf's next three largest industries, professional services, financial services, and wholesale and retail saw continued momentum. And in addition, healthcare saw momentum too. Our net retention rate remained flat at 108% in Q4 when compared to Q3. The remainder of my remarks on margins, expense items, and profitability will be on a non-GAAP basis. Our GAAP financial results, along with a reconciliation, between GAAP and non-GAAP are found in our earnings release. Q4 non-GAAP gross profit margin was 82% and within our expectations. We continue to anticipate gross margins in the low 80% range and expect slight fluctuations each quarter. Non-GAAP operating income exceeded the high end of our Q4 outlook at $21.1 million or 14% margin due to increased revenues representing a 700 basis point improvement over Q4 2022. For full year non-GAAP operating margin was 8% of 300 basis point increase over fiscal 2022 due to revenue outperformance and cost containment measures. Our trailing 12 months unlevered free cash flow margin was 10% compared to 18% in the prior year. It's important to note that year-over-year decrease in unlevered free cash flow is not indicative of lost customers, nor that customers are committing to shorter and lower dollar contracts with us. In fact, customers are growing with Jamf, just not paying their full contract value up front. Additionally, the trailing 12-month unlevered free cash flow margin of 10% was slightly lower than expected, primarily related to a shift in customer payments during year end. Our effective tax rate for Q4 was negative 7%, resulting in a full year effective tax rate of negative 2.1%, with both rates consistent with our expectations. As a reminder, for non-GAAP metrics, we use our domestic statutory rate for calculating tax impacts, which is currently 24%. Please note that we pay a negligible amount of cash taxes on a US federal basis and pay an immaterial amount of cash taxes outside the US. Now, turning to our outlook for 2024. As John discussed, we are aligning investments and resources to match JAMS current revenue growth profile with a focus on key investment areas scalability and efficiency initiative. Now is the right time to take these measures to set Jamf up for profitable growth in the future and return Jamf to the rule of 40. Some of the scalability and efficiency initiatives include adjusting the sales organization for current and expected growth levels, enhancing the customer journey to make it easier to do business with us, enhancing channel relationships through stronger programs and automation, reducing reliance on field sales, investing in process improvement and automation in sales and marketing and general administrative, leveraging leadership talent and create more efficient organizational structures, and optimizing our global footprint, aligning to where our customers need us most. Most of these initiatives are in process, with some seeing benefits in 2024 and others with benefits expected throughout the next few years. With respect to revenue growth, given the subscription nature of our business, softness in device upsell in 2023 will impact our 2024 revenue growth rate. We expect continued pressure on device upsell through 2024. Based on these factors, for the first quarter of 2024, we expect total revenue of 148 to 150 million dollars representing year-over-year growth of 12 to 13 percent non-gap operating income of 19 to 20 million dollars representing a non-gap operating income margin of 13 percent at the midpoint for the full year 2024 total revenue of 614.5 to 619.5 million dollars representing year-over-year growth of 10% at the midpoint. Non-GAAP operating income of $89 to $93 million, representing a non-GAAP operating income margin of 15% at the midpoint and a nearly 700 basis point improvement over fiscal year 2023. While we don't provide an outlook for ARR, we would expect to end fiscal year 2024 with ARR growth similar to full-year revenue growth. With respect to unlevered free cash flows for full-year 2024, we expect unlevered free cash flow margin to be similar to non-GAAP operating income margin. We also provide estimates for amortization, stock-based compensation and 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. As we look beyond 2024, we remain committed to JANF achieving the Rule of 40. Using our historical calculation method of revenue growth and unlevered free cash flow margin, we anticipate approaching the Rule of 40 by the end of 2025. We plan to exceed the Rule of 40 in 2026. We look forward to sharing more regarding our plans through 2026 as part of our Investor Day on March 13, 2024, at NASDAQ in New York. If you would like to attend in person or virtually and have yet to register, please reach out to InvestorEvents at Champs.com. And now, John and I will take your questions. Operator?
spk13: Certainly. And as a reminder, ladies and gentlemen, please limit yourselves to one question and one follow-up. You may get back in the queue as time allows. One moment for our first question. And our first question comes from the line of Joshua Riley from Needham & Company. Your question, please.
spk16: All right. Thanks for taking my questions. Starting off on the macro here, you know, tech obviously remains a headwind. maybe some color, were the Q4 renewals consistent with your expectations entering the quarter? And then overall, was tech incrementally weaker than what you expected entering the quarter as well?
spk09: Hey, Josh. Yeah, this is John. For the Q4 renewals, no, that was in line with what we had expected, hadn't anticipated, and we're pretty happy with the Q4 performance, especially as it ended the year. And as far as the tech, you know, weakness, You know, we just haven't seen the hiring resume in tech yet. We anticipate that's going to come along with IDC and everyone else, but we haven't seen it yet. And we also haven't contemplated it in our guidance either.
spk16: Got it. That's helpful. And then just one follow-up. If you look at the guidance for 2024, can you just help us understand, are you also assuming more conservative assumptions around new customer activity as well? And are you planning for more contract renewals with device downsell in these assumptions. Thank you.
spk19: Yeah, thanks, Josh. We build our guidance using that bottoms-up approach. And in 2024, we're factoring in the same muted economics that we saw in 2023. Also impacting our revenue growth rates in 2024 is the reduced upsell in 2023 because we are a high recurring revenue business. And as we just talked about or you alluded to, You know 46% of our ar does come from information communication, I attack, which has the customer reduced customer hiring practices. And edu still has the covert overhang on the new logo specifically we are factoring in assumptions similar to 2023. In addition, on the less strategic choppy revenue sources, we have those factor in a slightly lower level than what we saw in 2023. But we are focused on those things we can control. We're focused on the cross-sell opportunities. We're focused on security and selling into mobile. And the things we haven't factored in is if the upsell returns, that would be something that would drive that number higher in the form of customers hiring more employees. It would come back in the form of more refresh programs within 2024 and choice programs with that in the commercial side and on the education side. And then the replacement market being even stronger than we've anticipated.
spk16: Got it. Very helpful. Thank you, guys.
spk13: Thank you. One moment for our next question. And our next question comes from the line of Rob Owens from Piper. Your question, please.
spk12: Great. Thanks for taking my question. And I guess just around some of those dynamics, you stated net retention rate of 108%, which I believe was flat quarter over quarter. First part, can you just remind us of the calculation of that, if that's point in time versus trailing 12 months? And second, as we contemplate 2024, what are expectations there, given some of the turnover issues I think we're seeing in high tech and not seeing the upsell that you were likely in the last couple of years? Thanks.
spk19: Hey, Rob, I'll jump in on that question. So you're correct that our net retention rate didn't change from Q3 to Q4, remained at 108. And as a reminder to your question, it is based on a trailing 12-month measure. What we are looking forward to based on the guidance that we just provided is that the net retention rate will trickle down throughout the year by about 100 basis points per quarter. But we do believe that actually bottoms out at the end of the year and stabilizes from our cross-sell efforts and As the MAC returns and as we get better and better, which we already have gotten really good at selling security, those will go well and we'll accelerate that number upward.
spk13: Thank you much. Thank you. One moment for our next question.
spk26: And our next question comes from the line of Greg Moskowitz from Mizzou.
spk13: Your question, please.
spk14: Hey, thank you for taking the questions. Good afternoon, guys. I guess first question, can you expand on your latest thoughts on PC and Mac refresh activity in 2024? I think we all have seen what IDC is saying. I'm wondering if you have any additional perspective from your conversation with customers. And then also, you know, what sort of assumptions around refresh are baked into this revenue guide for the full year?
spk09: Hey, Greg, I'll take the first part of that question, and then Ian can expand on expectations. You know, with respect to the PC refresh, you know, and speaking with our customers, they're just being prudent in their expense management as well. And they're just looking out into the out years, looking at what their hiring practices are. And they're just, you know, they're not, we're not seeing a great anticipation of hiring kicking in at least at first part of 2020. But again, we're seeing improvements. budget management we're seeing platform consolidation and that's kind of how we set our guidance accordingly in 24.
spk19: I don't know Ian you've got some more yeah what I'll add on that refresh program within 2024 we are factoring the same economics we saw in 2023 so we saw that lack of upsell or device expansion in 2023 so we're factoring in that same muted upsell at renewal. But if that comes back, we see that as a good opportunity for us as choice programs come into play. We do note in that IDC article and other places and other checks that we've heard is an opportunity next year for a refresh cycle. So that is something we think could be a tailwind for us next year.
spk14: Perfect. Thanks, Ian. Just as a follow-up, you mentioned, John, that you saw a benefit from Jamf Now conversions to Jamf Fundamentals. Are you able to put a finer point perhaps on how this is impacting the business today as well as how it may help in 2024 and beyond? Thank you.
spk09: Yeah, I can certainly speak to what the customer is seeing from the benefit and then Ian can follow up with some numbers if needed. You know, really we've seen a tremendous value, our customers have seen a tremendous value with the security and the management being part of the same product. In fact, You know, when we go to market with security and management, we went almost twice as many times as if we just are talking about security on its own. And we also have a greater stickiness when those customers are using both our management and security products together. And so this was really something our customers had asked for with respect to the security side. And so we wanted to make sure that we had that bundled solution for those customers together. And there's been a great benefit. We've done that a few months ago, and we haven't really seen any negative pushback or attrition from that as a result. So we're getting good feedback from our customers.
spk19: Yeah, I would just add some number points that out of the net new AR of $22 million, the impact was about $6 million. We haven't seen any material changes in churn there, so customers are loving it and accepting it. And we are seeing success in our other bundles. And just to quote two other stats there, One, we see 79% growth year over year when combining both our business plan and enterprise plan. And in the fourth quarter alone, Jamf business plan had its most successful quarter in the form of net new ARR. Very helpful. Thank you, guys.
spk13: Thank you. One moment for our next question. And our next question. It comes from the line of DJ Hines from Canaccord Genuity. Your question, please.
spk06: Hey, guys. This is Ryan. I'm for DJ. So I just wanted to double-click on some of the go-to-market motions you're building out, I guess particularly the self-directed and the partner-led motions we've spoken about before. Can you just elaborate on any traction you're seeing there? I guess like when we start to see any of that progress reflected in S&M as we progress through 2021.
spk09: Okay, Ryan, this is John here. So I've got two parts to that question. One is how the go-to-market has been optimized through Self-Directed and the other is through our partner. We would classify that as our third-party channel as well as our strategic partnerships. And with respect to the first one, the Self-Directed, that's really what the investments that we have done in our systems to gain some efficiencies there that we'll see primarily toward the back half of the year. And those are things like the partner portal, when partners can come in and actually put data directly into the portal and make their own quotes. It's also buying product from within the product, whether that's additional seats on a renewal or additional products from within our product. And those are all things that we're putting into place from a technological investment. With respect to our third-party channel, we've actually increased the amount of business going through that third-party channel significantly. on a global basis. We've always run primarily channel-led outside the U.S., and in the U.S. that's becoming even more so, in fact, increasing in its percentage there, and we're going to continue to do that. Some of the optimizations that we've done in our go-to-market teams just early even this year are really focused on that, leveraging more in the channel, which we've talked about for some time, and that's actually coming to fruition, and we're seeing that in the percentage of our business going through our channel partners.
spk06: Okay, awesome. Great to hear. And then I guess just a quick follow-up. I know you have your investor day coming up in a couple of weeks, but when you talk about meeting rule of 40 by the end of 2025 and exceeding it in 2026, can you help me think about what are your expectations there between the balance of growth and profitability?
spk19: Yeah, I can talk to that at the end. So we would expect our revenue to be a higher growth rate in 25 and 26 than what we see in 2024 for all the reasons of the tailwinds that we mentioned that we haven't factored into 2024. With 2025 and 2026 profitability, we would expect that to expand as well. As we talked about, we have certain initiatives to make the customer journey easier. We have certain back office automation, and both of those will provide benefits in 25 and 26. And as last reminder I make here is you'll hear more specifics on that at our investor day on March 13th at NASDAQ in New York. Okay, awesome. Thanks, guys. Appreciate the time.
spk26: Thank you. One moment for our next question. And our next question. comes from the line of Jake Roberts from William Blair.
spk13: Your question, please.
spk02: Hey, thanks for taking the questions. I know it's hard to predict when hiring really starts to ramp more meaningfully, but as you look into 2024, should we expect the headwinds in tech and education to trough this year? Or is that a dynamic that we'll still have to kind of deal with and work through in 2025 as you work through some of the longer renewal cycles from potentially larger tech customers and education customers? Just curious. how those renewal cycles are shaping up heading into next year.
spk09: Yeah, Jake, this is John. You know, we, along with a lot of the market, had anticipated the tech hiring to resume in 2023 or the back half of 23, but we didn't see that. And so, you know, really taking that into consideration, we wanted to have a balanced approach going into our 2024 guidance, which is what we see here. So, You know, we're going to continue to run a balanced growth profile with investing in growth as well while maintaining profitability in the meantime.
spk19: One thing I'd add, as we look at our, let's say, top five industries, so we talked about tech and education. We are actually continuing to strengthen the next three pieces or industries, so professional services, financial services, retail, and wholesale industries. those have provided a really good strength and growth rate for us and we're really excited about the opportunities in those segments and the last thing i mentioned here is as we've talked about non-tech leading forward industries have really been looking at the deathless use of our products and that has been a success story for us as well okay very helpful and then uh really nice girls in the security suite this quarter
spk02: Now that you're hitting a more meaningful scale there, how should we think about a durable growth rate in that segment? And then just kind of on the other side of the coin, do you expect to see similar headwinds in the security business in 2024 as you see on the device management side? Or could that actually be more insulated heading into next year?
spk19: Yeah, on the security side, look, we have a business that grew 33% year over year and now represents 23% of our total ARR. We continue to think that's a really strong focus point for us, that we've allocated resources that way, and we think that can continue to be a very strong growth rate in the future. I would say that we are going to provide more details around that at our investor day, but what we are seeing, and it goes back to our bundles discussion before, When we are combining management and security, it has been a very successful win rate. And we actually are seeing customers stay a little bit more sticky and are happier when we combine those products together.
spk09: And Jake, I'll just add to that as well. I mean, you know, speaking to our customers, they're certainly not investing less in security. And as our customers will come back to us and talk about, you know, Apple specific functionality that we have, And that's really been a benefit. And when you combine that with the management piece, not only can you identify the threat, but you can also do something about it and actually deploy that. That's really what we've seen. So we're continuing to be optimistic about the management and security piece together and how that resonates with our customer base.
spk02: Sounds great. Thanks for taking the questions.
spk26: Thank you. One moment for our next question. And our next question comes from the line.
spk13: I'm Matt Hedberg from RBC. Your question, please.
spk07: Great, guys. Thanks for taking my questions. You know, John, have you noticed anything competitively, you know, maybe an increased pipeline or anything of that from VMware AirWatch, you know, just kind of given the ongoing, you know, acquisition there by Broadcom and just sort of wondering competitively, is anything there maybe improving a bit?
spk09: Yeah, thanks, Matt. It certainly has. You know, we've been working on this for quite a while. And, you know, while we we're really optimistic about that replacement opportunity, it's not going to happen all at once, just given those customers have multi year contracts, and, and we're real tied into that customer base. And so when those renewals come up, we're certainly, you know, showing the advantage of not only management and security together, but then an Apple led and Apple focused ecosystem support. And that, again, is resonating with our customer base. So we know we continue to remain optimistic about that. And now with the recent events that just have transpired over the last few days, we were even just as, if not even more optimistic about it.
spk07: Got it. That's great. And then there was a lot of good commentary on, you know, specifically what you guys are doing to maybe offset some of the tougher spending that you're seeing out there, device ads, headcount growth, et cetera. But, you know, I still, you know, reflect on the opportunity. It still seems like such a greenfield opportunity. um you just as it stands you know are there things from you know either strategic marketing or targeting you know greenfield accounts through like roi-based selling that can drive you know sort of above a group jump growth above market trends uh maybe from you know just trying to go after what feels like a really really greenfield opportunity still yeah yeah there's uh all of the above i mean we're certainly doing all the account base we're doing all the analytics and and making sure that we target the accounts that you know that are available and
spk09: You know, with just what we mentioned earlier, just with the, you know, with budgets being rather muted this year in anticipation of, you know, tech hiring and the refresh cycle and education, I mean, we're certainly poised for that. We've done a lot of the market research and, you know, we're just, we've had some elongated sales cycles like many of us in the industry have. But again, you know, the opportunity is there. We've got great win rates, especially when we put management and security together. We're just going to keep doubling down on on those things that have been successful and open up new areas where they become available. And the replacement market is just one. Ian mentioned earlier about the deskless workflows and industry workflows that we're seeing with all the other additional devices that are coming out from Apple and the ones that are out now just being put into process in a lot of different functions and in ways that we hadn't anticipated before. And that's also something that we're really focused on and working with our channel partners to really optimize and take advantage of that opportunity. Great. Thanks a lot, John.
spk13: Thank you. One moment for our next question. And our next question comes from the line of Raymond Linschow from Barclays. Your question, please.
spk15: Hey, this is Isaac on for RIMO. Thanks for taking the question. John, you've talked about enterprise being a bit more resilient than SMB over the last couple of quarters. And I was wondering if there was anything to call out here, whether, you know, to the benefit of enterprise again or the weakness of SMB. You know, yeah, thanks, Isaac.
spk09: You know, we've seen when we talk about the volatility in the SMB. you know, as a market's uncertain, do you have small businesses that can, you know, can go out of business or get bought? Or there's a lot of reasons for them, that volatility, that have nothing to do with the products that you're using necessarily. So we've seen some there, but I don't think any more than the industry on average. You know, we have two-thirds of our business is volume-based, is small to medium-sized, but we have a good chunk of that business in enterprise. And we've seen we've seen the scalability that we provide over doing this for over 20 years alongside Apple that has really, really resonated with our customers. In fact, when we get into that enterprise, the higher we get up, generally the less competition we have, especially as it relates to the Apple ecosystem. So the good benefits in the enterprise We saw Q4 finish strong. We saw companies that had budget at the end of the quarter that went ahead and pulled the trigger on that. And we've seen some good progress earlier this year, even with the enterprise groups.
spk15: Great. That's really helpful. And then one for Ian. On cash flow, you talked again about the shift from upfront to annual billings. Was the level there similar to last quarter? Should we think about that being a bit more predominant now in the customer base? And then, you know, as we look into FY24, should we expect that shift to move back to upfront towards the end of the year?
spk19: Yeah, just to clarify a couple things there. So when comparing 23 to 22, the primary driver was that shift in multi-year being from that used to be paid upfront to annually paid. That was the primary driver within the quarter itself. We actually saw customers just defer payments to basically January of 24. So it was just a timing issue, not indicative of our business, neither of those are. As we roll forward, I would say operating income or margin is the bigger driver of our unlevered free cash flows as we move forward. And we just raised our operating income about 700 basis points. And we've said that unlevered free cash flow is going to be about consistent with that. And that has factored in all the changes in customer payment behaviors.
spk16: All right, great. Thank you.
spk26: Thank you. One moment for our next question. And our next question comes from the line of Chad Bennett from Craig Callum.
spk13: Your question, please.
spk03: Great. Thanks for taking my questions and fitting me in. So just in terms of how we should think about device growth and ARR per device relative to your revenue growth guidance. Is there any type of, you know, correlation there in how should we think about those two metrics?
spk19: Yeah, I would call your attention back to our growth algorithm. We have new logos. We have upsell, right, device expansion. And we have cross-sell. And we are going to continue to focus on those things that we can control. which is cross-sell specifically. We are factoring in the same upsell, muted upsell at renewal, but we are definitely focused on the successes we've had and seeing customers see the value in both management and security. That is where we're going to drive, and it's specifically in the bundles because we think that's what drives the most customer value.
spk03: And then maybe one quick follow-up for John, just kind of follow-up on the competitive side question, I guess, a couple questions ago. Just specific to the endpoint security market and Protect, and obviously, you know, that product's still growing nicely. Just kind of, is there any kind of, you know, new revelations there just competitively now that you're, you know, another quarter and year into that product and into that endpoint security market that you'd like to share?
spk09: Yeah, I mean, you're right. Protect has done really well, and we're very happy about it. In fact, in security in general, 44% of our pipeline was security, and so we're really seeing it get traction there. You know, with Protect, we continue to add functionality to it. We're going to continue to add more pieces of security as our customers request that. And, yeah, I mean, that's pretty much all we have to do with Protect. It's done well. our reps are becoming even more well-versed in selling that, especially as it relates to in conjunction with security. And we're going to continue to double down on that. Got it. Thanks much.
spk13: Thank you. One moment for our next question. And our next question comes from the line of Pat Walravens from SysGMP. Your question, please. Oh, great.
spk11: Thank you. I mean, John, usually companies guide revenue below where expectations are, you know, after they've had a disappointing bookings or renewal quarter. But in your case, it sounds like bookings and renewals in Q4 were actually pretty good. So when did you guys decide it was time to, you know, increase the profitability to align with the current growth profile, as you worded in the press release? Yeah.
spk09: Thanks, Pat. Um, good question. No, we, we, um, we understand that. And what we're really trying to do is have a balanced approach to profitability and growth going into 2024. And as I mentioned earlier, we, as the rest of the, of the market expected that return to come in mid, even till late 25 or 23. And that didn't happen. And so we're just trying to be judicious in our, in our approach and our guidance in 24, as, as Ian mentioned, there are things that could impact that in 2024. The tech hiring could resume. We expect that there's going to be an EDU refresh, but we haven't anticipated that in our guidance because the market hasn't behaved like we thought it was going to in 23, and so we're just making sure that we're doing the right thing for the business and our customers long-term, and that's making sure that we're optimized for efficiency and scalability as we go into 24. But we are well-poised to be able to scale up, when those growth vectors continue or start to resume. And we're watching that very, very closely.
spk08: So we're on point. Okay, great. Thank you.
spk26: Thank you. One moment for our next question.
spk13: And our next question comes from the line of Koji Aikida from Bank of America Securities. Your question, please.
spk04: Yeah. Hey, guys. Thanks for taking the questions. a couple from me here. First one, maybe a question for John or Ian. You know, what do you view as the most attractive levers to drive upside to growth in 2024?
spk09: I'll take that one, Koji. So our most attractive levers, you know, we have many of them. We really do. I mean, certainly the replacement market, you know, absence of the tech hiring resuming and the EDU refresh and those things we've already talked about. But certainly the replacement market as it becomes more apparent. And again, the events of the last few days have continued our optimism in that as we really lean into those customers and show the value of management and security together, especially at scale and focused on Apple first and Apple best. So those are Those are the areas that we really see. International is a great opportunity for us. We saw some softness in international in the middle of the year in 23. We saw that pick up toward the end of the year. We continue to see that at the beginning of this year. So as Apple mentioned on their earnings call that they've had some success internationally as well. We work very closely with Apple outside the U.S. and in the U.S., but certainly outside the U.S. And so we're continuing to leverage that as we expand internationally. So those would be some of the biggest areas. And then I guess to wrap it up would be security. I mean, every device can have one device management product on it, but every device can have five or six or more security products on it. And IT and InfoSec teams generally do that. They want belt and suspenders on security. And then when we offer something that's Apple specific, along with the management piece, that again is a good opportunity and really a lever to increase.
spk04: Yeah, got it. No, that's super helpful. And maybe following up to Pat's question, you know, just, booking sound good. So what sort of triggers are you looking for as maybe a signal that it's time to invest at a greater rate than what the plan is currently set for?
spk09: You know, we've seen close ratios, while sales cycles have been elongated, we've seen close ratios maintained pretty similar. We measure our go to market organization very with a very disciplined and rigorous approach. Our cadence is very, very tight on that. And so we can get those leading indicators and shift accordingly. So we know if that sales cycle is starting to drop. We know if that conversion rate is starting to go higher. We know if the ASPs of each one of those deals in the pipeline are starting to raise. Any one of those indicators are going to lead us to really lean in to that and to invest in that growth. And also geographically, you know, to the extent that we've seen international continue to to take the momentum up, we're going to look at that and invest in that area as well.
spk19: I would just add one thing on our operating income guidance there at a midpoint of 15%. We are committed, to John's point, we have optimized our organization and made it so we can continue to commit to that 15% margin.
spk18: Thanks, guys. Thanks for taking the questions.
spk13: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Jennifer Gamon for any further remarks.
spk21: Thanks, Jonathan. Thank you again for joining us today. We hope to see you at our Investor Day on March 13th in New York. If you'd like to attend in person, please reach out to InvestorEvents at Jamf.com. Thank you.
spk13: 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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