Apple device management company, Jamf (NASDAQ:JAMF) announced better-than-expected results in the Q3 FY2022 quarter, with revenue up 30.2% year on year to $124.5 million. The company expects that next quarter's revenue would be around $129 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Jamf made a GAAP loss of $31.3 million, down on its loss of $30.3 million, in the same quarter last year.
Jamf (JAMF) Q3 FY2022 Highlights:
- Revenue: $124.5 million vs analyst estimates of $121.9 million (2.15% beat)
- EPS (non-GAAP): $0.04 vs analyst estimates of $0.03 ($0.01 beat)
- Revenue guidance for Q4 2022 is $129 million at the midpoint, below analyst estimates of $130 million
- Free cash flow of $43.7 million, up 137% from previous quarter
- Gross Margin (GAAP): 74.9%, down from 77.9% 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.
As you can see below, Jamf's revenue growth has been very strong over the last two years, growing from quarterly revenue of $70.5 million in Q3 FY2020, to $124.5 million.
And unsurprisingly, this was another great quarter for Jamf with revenue up 30.2% year on year. On top of that, revenue increased $8.91 million quarter on quarter, a very strong improvement on the $7.38 million increase in Q2 2022, and a sign of re-acceleration of growth.
Guidance for the next quarter indicates Jamf is expecting revenue to grow 24.2% year on year to $129 million, slowing down from the 36.1% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 22.3% over the next twelve months.
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 74.9% in Q3.
That means that for every $1 in revenue the company had $0.74 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite the recent drop this is still around the 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.
Cash Is King
If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Jamf's free cash flow came in at $43.7 million in Q3, up 76.6% year on year.
Jamf has generated $56.2 million in free cash flow over the last twelve months, a solid 12.4% of revenues. This strong FCF margin is a result of Jamf asset lite business model and provides it plenty of cash to invest in the business.
Key Takeaways from Jamf's Q3 Results
With a market capitalization of $2.55 billion Jamf is among smaller companies, but its more than $225.4 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
It was good to see Jamf deliver strong revenue growth this quarter. On the other hand, it was less good to see the pretty significant deterioration in gross margin and the revenue guidance for the next quarter slightly missed analysts' expectations. Overall, this quarter's results were not the best we've seen from Jamf. The company is flat on the results and currently trades at $20 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 would 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 twelve months is 4.4x, 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 it doesn't trade at an unreasonable price point.The Wall St analysts covering the company had a one year price target of $32.9 per share right before these results, implying that they saw upside in buying Jamf even in the short term.
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