Apple device management company, Jamf (NASDAQ:JAMF) reported results in line with analysts' expectations in Q2 FY2023, with revenue up 16.8% year on year to $135.1 million. However, next quarter's revenue guidance of $140 million was less impressive, coming in 2.16% below analysts' estimates. Jamf made a GAAP loss of $36.2 million, improving from its loss of $63.1 million in the same quarter last year.
Jamf (JAMF) Q2 FY2023 Highlights:
- Revenue: $135.1 million vs analyst estimates of $134.6 million (small beat)
- EPS (non-GAAP): $0.05 vs analyst estimates of $0.04 (38.9% beat)
- Revenue Guidance for Q3 2023 is $140 million at the midpoint, below analyst estimates of $143.1 million
- The company reconfirmed revenue guidance for the full year of $556.5 million at the midpoint
- Free Cash Flow of $10.9 million is up from -$25.9 million in the previous quarter
- Gross Margin (GAAP): 77.1%, down from 79.2% in the 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.
The whole purpose of software is to automate tasks to increase productivity. Today, innovative new software techniques, often involving AI and machine learning, are finally allowing automation that has graduated from simple one- or two-step workflows to more complex processes integral to enterprises. The result is surging demand for modern automation software.
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.
Sales Growth
As you can see below, Jamf's revenue growth has been strong over the last two years, growing from $86.2 million in Q2 FY2021 to $135.1 million this quarter.
This quarter, Jamf's quarterly revenue was once again up 16.8% year on year. We can see that Jamf's revenue increased by $2.88 million quarter on quarter, which is a solid improvement from the $1.89 million increase in Q1 2023. Shareholders should applaud the acceleration of growth.
Next quarter's guidance suggests that Jamf is expecting revenue to grow 12.4% year on year to $140 million, slowing down from the 30.3% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results announcement, the analysts covering the company were expecting sales to grow 16.3% over the next 12 months.
Profitability
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's left after paying for servers, licenses, technical support, and other necessary running expenses, was 77.1% in Q2.
That means that for every $1 in revenue the company had $0.77 left to spend on developing new products, sales and marketing, and general administrative overhead. Despite the recent drop, Jamf still has an excellent gross margin that allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity.
Cash Is King
If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Jamf's free cash flow came in at $10.9 million in Q2, down 40.8% year on year.
Jamf has generated $53.8 million in free cash flow over the last 12 months, a solid 10.7% of revenue. This strong FCF margin stems from its asset-lite business model, giving it optionality and plenty of cash to reinvest in its business.
Key Takeaways from Jamf's Q2 Results
Sporting a market capitalization of $2.49 billion, Jamf is among smaller companies, but its more than $211.5 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.
We struggled to find many strong positives in these results. Jamf's revenue guidance missed Wall Street's expectations and free cashflow reduced year on year. Overall, this was a mixed quarter for Jamf. The company is down 5.19% on the results and currently trades at $18.8 per share.
Is Now The Time?
Jamf may have had a bad quarter, but investors should also consider its valuation and business qualities when assessing the investment opportunity. We think Jamf is a solid business. We'd expect growth rates to moderate from here, but its revenue growth has been strong over the last two years. On top of that, its impressive gross margins are indicative of excellent business economics and its strong free cash flow generation gives it re-investment options.
Jamf's price to sales ratio based on the next 12 months is 4.1x, suggesting that the market is expecting more steady growth, relative to the hottest tech stocks. There are definitely 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.
Wall Street analysts covering the company had a one year price target of $26.3 per share right before these results, implying that they saw upside in buying Jamf even in the short term.To get the best start with StockStory check out our most recent Stock picks, and then sign up to our earnings alerts by adding companies to your watchlist here. We typically have the quarterly earnings results analyzed within seconds of the data being released, and especially for the companies reporting pre-market, this often gives investors the chance to react to the results before the market has fully absorbed the information.