Apple device management company, Jamf (NASDAQ:JAMF) reported Q3 FY2021 results beating Wall St's expectations, with revenue up 35.8% year on year to $95.6 million. Guidance for next quarter's revenue was $100 million at the midpoint, which is 1.19% above the analyst consensus. Jamf made a GAAP loss of $30.3 million, down on its loss of $5.09 million, in the same quarter last year.
Jamf (JAMF) Q3 FY2021 Highlights:
- Revenue: $95.6 million vs analyst estimates of $93.7 million (2.01% beat)
- EPS (non-GAAP): $0.01 vs analyst estimates of $0.01
- Revenue guidance for Q4 2021 is $100 million at the midpoint, above analyst estimates of $98.8 million
- Gross Margin (GAAP): 72.3%, down from 78.3% same quarter last year
Founded in 2002 by Zach Halmstad and Chip Pearson, right around the time when Apple began to dominate the personal computing market, Jamf (NASDAQ:JAMF) provides software for companies to manage Apple devices such as Macs, iPads, and iPhones.
Apple is known for making user-friendly computing devices and it is not surprising that the demand for its products has grown over the years. As their adoption became widespread across the business and education world, so did the need to manage these devices at scale. Keeping hundreds and thousands of devices up-to-date, with all the necessary apps installed and required level of security enforced can be really time consuming, and if it was to be done manually it would require a large number of IT technicians.
Jamf’s software provides the IT department with an online dashboard where they can see the status of every device, and remotely install updates, apps and security fixes. By providing the tools to make the process of managing Apple products simple and easy, Jamf drives productivity within organizations and also frees up more IT resources that could be deployed to tackle more important problems.
For example, when a public school needed to shift to remote learning, Jamf helped to deploy thousands of iPads and Macs to its students. Instead of the school’s IT team spending weeks manually setting up every device, using Jamf they were able to create a software package and automatically install it on every device within a few hours. It connected students without access to the internet to WiFi hotspots provided by the school, installed remote collaboration apps and provided the students with access to learning materials, ensuring that they were able to continue learning remotely without an interruption.
As remote collaboration becomes mainstream due to COVID and enterprise digital transformation, more organizations are expected to depend on remote management software that makes it easy for IT admins to manage the increasing number of hardware devices.
Jamf competes with cross-platform enterprise providers such as VMware (NYSE:VMW) or Microsoft’s Intune (NASDAQ:MSFT) and smaller companies like Addigy and Kandji. Apple is also showing interest in the device management space via its Business Essentials offering targeted at small and medium sized businesses.
As you can see below, Jamf's revenue growth has been very strong over the last year, growing from quarterly revenue of $70.4 million, to $95.6 million.
And unsurprisingly, this was another great quarter for Jamf with revenue up 35.8% year on year. On top of that, revenue increased $9.38 million quarter on quarter, a very strong improvement on the $5.07 million increase in Q2 2021, and a sign of re-acceleration of growth.
Analysts covering the company are expecting the revenues to grow 25.1% over the next twelve months, although estimates are likely to change post earnings.
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Jamf's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 72.3% in Q3.
That means that for every $1 in revenue the company had $0.72 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite it going down over the last year, this is still around the lower average of what we typically see in SaaS businesses. Gross margin has a major impact on a company’s ability to invest in developing new products and sales & marketing, which may ultimately determine the winner in a competitive market so it is important to track.
Key Takeaways from Jamf's Q3 Results
With a market capitalization of $5.17 billion Jamf is among smaller companies, but its more than $227.1 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
We enjoyed seeing Jamf’s impressive revenue growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 4.19% on the results and currently trades at $43 per share.
Is Now The Time?
When considering Jamf, investors should take into account its valuation and business qualities, as well as what happened in the latest quarter. We think Jamf is a good business. Its revenue growth has been strong. On top of that, its bountiful generation of free cash flow empowers it to invest in growth initiatives, and its efficient customer acquisition is better than many similar companies.
Jamf's price to sales ratio based on the next twelve months is 11.5x, suggesting that the market is expecting more moderate growth, relative to the hottest tech stocks. There is definitely a lot of things to like about Jamf and looking at the tech landscape right now, it seems that the company trades at a pretty interesting price point, although it is to be seen what Apple's new offering will mean for Jamf's business.
The Wall St analysts covering the company had a one year price target of $49.6 per share right before these results, implying that they saw upside in buying Jamf even in the short term.
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