#009 - Jamf
Jamf helps companies manage corporate Apple devices such as laptops, desktops, phones, and more. Jamf is riding Apple's coattails.
Jamf - (NASDAQ: JAMF)
Jamf helps companies manage corporate Apple devices such as laptops, desktops, phones, and more. Jamf is riding Apple's coattails. Let’s jump in.
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Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.
Industry Overview
Jamf competes in the mobile device management (MDM) and enterprise mobility management industries (EMM). Jamf has a small number of competitors like Apple’s Profile Manager and Mosyle. One notable point is that Apple uses Jamf instead of its own in-house product. I wouldn’t be surprised if Apple has tried or will try to acquire Jamf. At the same time, I’m not sure if Apple (a $1tn+ company) will try to go after this industry. I believe Jamf has a good set of competitive advantages that will ward off competition and Apple.
What is mobile device management and enterprise mobility management? These terms are about securing the information and data on employees’ corporate or personal devices. If I’m using a corporate device, my employer is most likely using some software to make sure no information gets hacked into or stolen.
In the simplest terms, Jamf helps to protect its customers’ information and manage devices remotely. Jamf focuses on Apple devices. That’s their specialty. Other companies offer similar services but focus on providing that one service across Windows and Apple devices where as Jamf focuses on providing many services to only Apple devices. An image below will give better detail.
Business Overview
Founded in 2002 by Zach Halmstad, Christopher Thon, and Chip Pearson, Jamf provides mobile device management software to its customers. The current CEO, Dean Hager, took over in 2015 and replaced Halmstad and Pearson. Vista Equity Partners acquired a majority of Jamf’s shares in December 2017 and still holds a majority stake today.
Jamf helps its customers manage Apple devices, products, or other Apple-related software/hardware. Employers that manage these resources want employees to have a secure Apple device that can be tracked and managed remotely.
At the end of Q3 (September 2020), Jamf had more than 43,000 customers with more than 18.6 million Apple devices. Jamf relies on a typical SaaS model to collect revenue. Jamf has customers ranging from Apple itself to 7 of the top 10 Fortune 500 technology companies, 24 of the 25 most valuable brands, and the 10 largest U.S. banks.
Products
Many of Jamf’s products match the same services as other public tech companies. For example, Crowdstrike provides Endpoint Protection, but Jamf Protect provides these same services but specific to Apple devices. Jamf continues to add new product offerings and expand into different industries.
Jamf has 5 main products, Jamf Connect, Jamf Pro, Jamf Now, Jamf School, and Jamf Protect. The image above provides a good comparison between Jamf’s offerings for the Apple vertical and the horizontal providers. I won’t be going into detail on these specific horizontal use cases. Jamf’s bread and butter is Jamf Pro, which accounted for 78% of total revenue in 2019.
Why would customers choose Jamf over Crowdstrike, Okta, or other horizontal providers? Jamf provides solutions specific to Apple devices rather than trying to solve problems for both Apple and Windows devices. For example, Apple devices have different security risks and weaknesses than Windows laptops so a horizontal solution such as Crowdstrike may not be the best solution for a company looking to manage a fleet of Apple devices. These solutions are managed remotely.
Total Addressable Market
Management states the global total addressable market for Apple Enterprise Management is $10.3 billion. Different independent research firms believe that this industry will also grow to $23.4 billion by 2024.
Although I like to gauge the TAM from different sources, anyone can google this information and find it out. There is no “edge” in investing like this. The way I’d think about this is what percentage of enterprise customers and their employees will have Apple devices that may need to be managed through Jamf. For example, will employees have an iPhone dedicated only to work? What about a laptop or a desktop computer? Throw in an iPad? Now, what’s the realistic average number of Apple devices for employees multiplied by the average cost per device to get an estimate of the TAM. Where else can Jamf expand? Into schools? Check. But what’s next. I’m not sure but I bet there’s some room for growth out there.
Secondly, although the number of Apple devices in businesses may be small today, what will this look like in the future? Will more companies be giving their employees an option between Apple and Windows? Jamf’s management team believes so. Are more people fans of Apple or Windows devices?
So although you may initially say that Windows will always be the main OS, this chart says otherwise (Link - Q3 Investor Presentation on page 6). If you’re in finance, you may never use an Apple device simply due to your reliance on Excel and other finance shortcuts, but other industries may not have this reliance on Windows computers.
Competitive Advantages
I believe Jamf has a number of competitive advantages.
Jamf Nation
Jamf Nation is the largest online community of Apple IT administrators in the world. There are more than 100,000+ members. If a customer has a question, they can visit Jamf Nation and search to find an answer or ask the question themselves. This is basically a subreddit specific to Apple IT administrators looking for answers.
The scale of this community gives Jamf a competitive advantage because when competitors’ customers have questions, they won’t have such a large community of people that can help them answer questions.
Jamf Marketplace
Jamf Marketplace allows customers to integrate with other tools and extend the reach of Jamf’s platform. As Jamf grows in size and develops relationships with more companies and grows the list of integrations, smaller companies will be unable to match the number of integrations that Jamf Marketplace offers.
Economies of Scale
Jamf was founded in 2002 and since then has focused on providing a suite of solutions specific to Apple devices. No other company has come close, including Apple. As the leading company providing solutions for companies with Apple devices, Jamf has developed products built on its focus on Apple. This expertise of Apple spans the suite of products and gives Jamf a competitive advantage through economies of scale. Competitors are unable to replicate Jamf’s offerings in a timely manner. Jamf sells software. Software is a “build once, sell twice” type of product, meaning it gives Jamf incremental margin for each customer and Apple device it captures.
As Jamf grows in size, it will build products faster than smaller companies. Jamf will bundle different products into one offering to competitors at a lower price which will keep competition away. For example, wrapping together Jamf Connect, Jamf Pro, and Jamf Now for a hypothetical $20 per Apple device meanwhile a smaller company can only offer the equivalent of Jamf Pro for $15 per Apple device. This obviously makes Jamf’s proposition more appealing. Although costs aren’t everything, Jamf does benefit from its size giving it a possible advantage in the quality column.
Financials
Another tech company with strong growth. Let’s check out the numbers.
2019:
Total revenue = $204 million
Subscription revenue = $159 million
Subscription revenue growth = 59%
Subscription gross profit margin = 80%
GAAP EBIT margin = -10%
Annual recurring revenue = $209 million
Dollar-based net retention rate = 118%
2018:
Total revenue = $147 million
Subscription revenue = $100 million
Subscription gross profit margin = 76%
GAAP EBIT margin = -20%
Annual recurring revenue = $142 million
Dollar-based net retention rate = 117%
Jamf doesn’t give financial numbers before December 2018. The most attractive part of Jamf is the subscription revenue that grew more than 59% from 2018 to 2019. This comes with high gross margins and depending on your outlook is likely to continue growing for some time.
Jamf has yet to release its 2020 annual earnings, but it expects total revenue of $263 million for the year ended December 2020.
What’s Interesting
Undervalued relative to other high growth tech companies?
Jamf has a market cap of ~$3.9 billion at the time of writing this. Considering Jamf expects total revenue of $263 million and assuming it grows ~30% to $340 million. $3.9 billion / $340 million = 11.5x P/S multiple. Although valuation isn’t this easy (I wish it was) this seems rather cheap relative to other tech companies.
This shouldn’t be a basis for your investment though, but what makes Jamf relatively undervalued to its peers?
Riding Apple’s tailcoats.
Apple is one of if not the strongest brand in the world. Everyone knows Apple. Jamf is helping businesses manage Apple devices safely, securely, and remotely. Jamf can ride Apple’s tailcoats and become a much larger company.
As businesses bring Apple devices into the work environment, Jamf will stand to benefit as the leading company that helps to manage these devices.
Future Questions
Do more enterprise customers offer employees the choice of Apple devices?
As someone in finance, I rely on a Windows computer mostly for excel and other shortcuts, but are other industries as reliant on Windows? Oftentimes I prefer using an Apple device for the sleekness and the connection with other Apple products like Airpods, my iPhone, and much more, but can Apple extend beyond consumer products into enterprise products? I’m sure they have to some degree, but how common are Apple devices in the workplace and will they become more common/less common/or the same frequency?
What about Apple?
The biggest risk to Jamf is arguably their relationship/competition with Apple. Apple has similar in-house products that are competitors to Jamf, but Apple hasn’t seen much success with this. Apple relies on Jamf for its own employees.
Does Apple try to compete with Jamf more head-on and build out the offerings to become more competitive? I’m not sure, but this is a small market relative to the size of Apple, and not sure if it’s worth Apple going after. Apple has its hands in a number of different industries like health and fitness, music and podcasts, and now Apple chips.
Conclusion
Jamf looks to be a great company that may benefit from Apple’s success. It will be interesting to see where Jamf is in 3+ years. I think this will be a successful company and given its small size ($3.9 billion), I can see this company being a multi-bagger one day.
There are still some key questions that need to be answered and my goal is only to provide you with a shallow dive that touches on the basic background of Jamf and any key questions that you may need to have in mind when doing your own research.
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