jamf(JAMF) - 2021 Q4 - Annual Report

Part I: Business and Risk Factors This section details Jamf's business model, market position in Apple Enterprise Management, and the key risks impacting its operations and financial performance Business Overview Jamf is the global standard in Apple Enterprise Management, providing a cloud platform for managing and securing Apple devices for over 60,000 customers - Jamf is the standard in Apple Enterprise Management, with a cloud software platform for infrastructure and security. As of December 31, 2021, the company served over 60,000 customers managing 26.6 million devices across more than 100 countries[21][24] - On July 1, 2021, Jamf acquired Wandera, a leader in zero trust cloud security, to enhance its platform's capabilities in protecting devices, data, and applications for mobile workforces[27][363] - The company's diverse customer base includes 9 of the 10 largest Fortune 500 companies, 22 of the 25 most valuable brands, and 10 of the 10 largest U.S. banks[25][111] - Jamf Nation, the world's largest online community of Apple-focused IT professionals, serves as a key asset for customer support, feedback, and brand building[26][64] Industry Background and Trends Key industry trends driving Jamf's market include IT consumerization, increasing Apple device adoption, and accelerated digital transformation - Key industry trends driving Jamf's market include the consumerization of IT, where employees demand consumer-grade technology at work, and the increasing momentum of Apple devices in the enterprise[33][37] - According to IDC, macOS device penetration in U.S. enterprises (1,000+ employees) grew from 17% in 2019 to 23% in 2020. iPhones account for 49% of the smartphone installed base in U.S. enterprises[39] - The COVID-19 pandemic accelerated digital transformation, making remote work, distance learning, and telehealth workflows essential, thereby increasing demand for solutions that can manage and secure devices remotely[41][42] - Legacy and cross-platform management solutions are often limited as they do not fully leverage Apple's native capabilities, leading to a degraded user experience, higher support costs, and potential security vulnerabilities[44][45][46] Our Solution and Strengths Jamf's platform offers zero-IT-touch deployment, self-service apps, same-day OS support, and endpoint protection, demonstrating significant ROI - Jamf's platform provides key benefits including zero-IT-touch deployment, a customizable self-service app for end-users, same-day support for new Apple OS releases, automated application lifecycle management, and purpose-built endpoint protection for Apple[50][54] - A 2021 study commissioned by Jamf found that its solution could reduce time spent on device provisioning, ongoing management, and app management by 90%, leading to a potential 781% three-year ROI[53] - Jamf has a multi-faceted relationship with Apple, being a customer since 2010, a channel partner since 2011, and a member of Apple's Mobility Partner Program since 2014[56][61] - The Total Addressable Market (TAM) for Apple Enterprise Management was estimated at $12.2 billion in 2020, projected to grow to $23.4 billion by 2024. The Wandera acquisition added an estimated $6 billion to this TAM[58][59] Growth Strategy Jamf's growth strategy focuses on expanding sales to existing customers, increasing global presence, and extending technology leadership through R&D and acquisitions - A key growth strategy is increasing sales to the existing customer base of over 60,000. This "land and expand" model is evidenced by a dollar-based net retention rate exceeding 116% for each of the twelve fiscal quarters ended December 31, 2021[70] - The company plans to expand its global presence, noting that 34% of new subscriptions in FY2021 originated outside North America, up from 32% in the prior year[70] - Jamf intends to extend its technology leadership through R&D and acquisitions. Following the Wandera acquisition, it launched Jamf Private Access (ZTNA), Jamf Data Policy, and Jamf Threat Defense, expanding into cross-platform support for some solutions[68] - The company will continue to cultivate its partner ecosystem, including hundreds of integrations on the Jamf Marketplace, and deepen its go-to-market efforts with resellers, MSPs, and Apple[69][70] Products and Technology Jamf offers a comprehensive product portfolio, including Jamf Pro, Jamf Now, Jamf School, Jamf Connect, and Jamf Protect, with enhanced security solutions from the Wandera acquisition - Jamf's flagship product, Jamf Pro, offers robust Apple ecosystem management for complex IT environments and serves the largest portion of the customer base[72] - The product portfolio is tailored to different market segments: Jamf Now for SMBs, Jamf School for education, Jamf Connect for identity management, and Jamf Protect for Mac-specific endpoint security[74][75][82][85] - Following the Wandera acquisition, Jamf launched new products in 2021: Jamf Data Policy, Jamf Private Access (a ZTNA solution), and Jamf Threat Defense, expanding its security capabilities and offering cross-platform support for some solutions[79][84][91] - The technology platform is optimized for the cloud (primarily AWS), designed for global availability, scalability, and enterprise-grade security, holding SOC2 Type II and ISO27001 certifications[93][94][95][100] Sales, Marketing, and Customers Jamf employs a global, multi-faceted go-to-market strategy through direct sales, online self-service, and a network of over 200 channel partners - Jamf employs a global, multi-faceted go-to-market approach using a direct sales force, online self-service, and a network of over 200 channel partners[102][104] - Channel partners facilitated approximately 54% of bookings for the year ended December 31, 2021. Apple, as a key channel partner, facilitated approximately 6% of bookings[104][105] - As of December 31, 2021, the company had over 60,000 customers, with no single end customer representing more than 1% of Annual Recurring Revenue (ARR)[111][112] Competition Jamf primarily competes with large cross-platform enterprise providers like VMware, Microsoft, and IBM, focusing on user experience and Apple specialization - Jamf primarily competes with large cross-platform enterprise providers such as VMware, Microsoft, and IBM, which offer solutions not specialized for Apple[129] - Key competitive factors include user experience, breadth of product offerings, IT efficiency, total cost of ownership, reliability, and speed of support for new operating systems[130][132] Human Capital and Regulation Jamf had 2,212 employees as of December 31, 2021, with a 91% retention rate, and is subject to various data privacy regulations - As of December 31, 2021, Jamf had 2,212 employees, with 1,407 in the United States and 805 internationally. The voluntary employee retention rate was 91%[135] - The company is subject to various laws and regulations, particularly concerning data privacy and protection, such as the GDPR in Europe and the CCPA in California[138][140] Risk Factors The company faces risks from its reliance on the Apple ecosystem, intense competition, cybersecurity threats, and financial obligations including convertible notes - A primary risk is the company's dependence on the Apple ecosystem. Customer dissatisfaction with Apple, changes in Apple's features, or a slowdown in enterprise adoption of Apple products could negatively impact Jamf's results[157][159][160] - Competition from large cross-platform providers and the potential for Apple to compete more directly are significant risks. Apple's launch of Apple Business Essentials for SMBs is noted as a potential competitive development[163][202][204] - The company faces substantial risks related to cybersecurity events, potential failures or bugs in its products, and interruptions of its cloud services hosted by third parties like AWS[183][219][227] - As of December 31, 2021, Vista Equity Partners beneficially owned approximately 45.5% of common stock, giving it significant influence over corporate actions, board composition, and strategic decisions[312] - Risks related to indebtedness, including the ability to service debt and settle conversions of its 2026 Convertible Senior Notes, could adversely affect the business[287][291] Part II: Financial Information This section provides Jamf's detailed financial performance, including revenue growth, profitability, key business metrics, and liquidity, along with audited financial statements and internal control assessments Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Jamf's 2021 revenue grew 36% to $366.4 million, driven by subscription growth, but net loss increased due to higher operating expenses and the Wandera acquisition Key Business Metrics (as of Dec 31, 2021) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Number of Devices (millions) | 26.6 | 20.4 | 30% | | Annual Recurring Revenue (ARR) ($M) | $412.5 | $285.3 | 45% | | Dollar-Based Net Retention Rate | 120% | 117% | +3 p.p. | - The acquisition of Wandera was completed on July 1, 2021, for total consideration of $409.3 million, extending Jamf's leadership in Apple Enterprise Management and security[363][447] - The company issued $373.8 million of 0.125% Convertible Senior Notes due 2026, using the proceeds to repay a $250.0 million term loan taken for the Wandera acquisition and to fund capped call transactions[448][669] Results of Operations (2021 vs. 2020) Total revenue increased by 36% to $366.4 million, primarily from subscription growth, while net loss significantly widened due to increased operating expenses Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $366,388 | $269,132 | 36% | | Subscription Revenue | $344,243 | $248,879 | 38% | | Gross Profit | $276,031 | $208,124 | 33% | | Gross Margin | 75% | 77% | -2 p.p. | | Loss from Operations | $(76,202) | $(17,452) | 337% | | Net Loss | $(75,189) | $(24,082) | 212% | - Total revenue increased by $97.3 million (36%), driven by a $95.4 million (38%) increase in subscription revenue from device expansion, new customers, cross-selling, and the Wandera acquisition[409] - Gross margin decreased from 77% to 75% due to higher third-party hosting fees, increased amortization from the Wandera acquisition, and a change in revenue recognition for the Jamf Connect product[410][411] - Operating expenses increased by $126.7 million (56%), primarily due to higher employee compensation costs from increased headcount (including Wandera), increased marketing, public company costs, and a $7.0 million increase in acquisition-related earnout expense[412][413][414] Non-GAAP Financial Measures Non-GAAP Operating Income decreased to $20.5 million in 2021, with adjustments for amortization, stock-based compensation, and acquisition expenses Non-GAAP Financial Measures Reconciliation (in thousands) | Measure | 2021 | 2020 | | :--- | :--- | :--- | | Non-GAAP Gross Profit | $296,632 | $219,748 | | Non-GAAP Gross Profit Margin | 81% | 82% | | Non-GAAP Operating Income | $20,461 | $27,489 | | Non-GAAP Operating Income Margin | 6% | 10% | | Adjusted EBITDA | $26,218 | $32,763 | - Non-GAAP Operating Income decreased to $20.5 million in 2021 from $27.5 million in 2020. Key adjustments to GAAP operating loss include adding back amortization ($41.3 million), stock-based compensation ($35.8 million), and acquisition-related expenses ($6.4 million)[431] Liquidity and Capital Resources Jamf's liquidity as of December 31, 2021, included $177.2 million in cash and a $150.0 million revolving credit facility - As of December 31, 2021, principal sources of liquidity were $177.2 million in cash and cash equivalents and an available $150.0 million revolving credit facility[444][678] Consolidated Cash Flows Summary (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $65,165 | $52,801 | | Net cash used in investing activities | $(387,418) | $(6,876) | | Net cash provided by financing activities | $305,528 | $115,964 | - Net cash used in investing activities was $387.4 million, primarily due to the $349.7 million net cash paid for the Wandera acquisition[455] - Net cash from financing activities was $305.5 million, mainly from the $373.8 million proceeds from the convertible notes issuance, offset by the purchase of capped calls ($36.0 million) and payment of deferred consideration ($25.0 million)[457] Financial Statements and Supplementary Data This section presents Jamf's audited consolidated financial statements for 2021, 2020, and 2019, including an adverse auditor's opinion on internal controls Financial Statement Highlights (as of Dec 31, 2021, in thousands) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $177,150 | $194,868 | | Goodwill | $845,734 | $541,480 | | Total Assets | $1,480,420 | $1,074,285 | | Liabilities & Equity | | | | Deferred revenues (current) | $223,031 | $160,002 | | Convertible senior notes, net | $362,031 | $0 | | Total Liabilities | $741,994 | $263,271 | | Total Stockholders' Equity | $738,426 | $811,014 | - The auditor's report from Ernst & Young LLP expressed an adverse opinion on the company's internal control over financial reporting as of December 31, 2021, due to a material weakness in the commissions accounting process[492][508][509] - Note 5 details the acquisition of Wandera for $409.3 million, which resulted in the recognition of $310.4 million in goodwill and $102.1 million in intangible assets[623][627][628] - Note 9 describes the issuance of $373.8 million in 0.125% Convertible Senior Notes due 2026 and the concurrent purchase of capped call transactions for $36.0 million to reduce potential dilution[669][676] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were ineffective due to a material weakness in commissions accounting - Management identified a material weakness in internal control over financial reporting related to the commissions accounting process[733] - The weakness stemmed from a lack of effective controls over (i) communication of commission plan changes to accounting and (ii) the review and application of accounting guidance to commission plans. This resulted in misstatements where certain commissions were incorrectly capitalized[734][735] - Due to this material weakness, the CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of December 31, 2021[729][730] - A remediation plan is in progress, including hiring a third-party consultant to help standardize and automate commission processes, with new controls intended for implementation in 2022[736] Part III & IV: Other Information This section covers corporate governance, executive compensation, security ownership, and related party transactions, with details incorporated by reference from the Proxy Statement Corporate Governance and Other Matters This section incorporates corporate governance, executive compensation, security ownership, and related party transaction details from the 2022 Proxy Statement - Information required by Items 10 (Directors, Executive Officers and Corporate Governance), 11 (Executive Compensation), 12 (Security Ownership), 13 (Certain Relationships and Related Transactions), and 14 (Principal Accountant Fees and Services) is incorporated by reference from the company's 2022 Proxy Statement[742][744][745] - The company has adopted a Code of Ethics applicable to all employees, officers, and directors, which is available on its investor relations website[743] Exhibits and Financial Statement Schedules This section lists all exhibits filed with the 10-K, including key corporate and financial agreements and CEO/CFO certifications - A comprehensive list of exhibits filed with the report is provided, including key corporate and financial agreements[748] - Key filed exhibits include the Agreement and Plan of Merger for the Wandera acquisition (Exhibit 2.1), the Indenture for the 0.125% Convertible Senior Notes due 2026 (Exhibit 4.3), and the Jamf Holding Corp. Omnibus Incentive Plan (Exhibit 10.2)[749]