Software developer Jamf Holding Corp. (NASDAQ:JAMF) recently reported on its 2020 fourth-quarter earnings and some of its data showed Apple (NASDAQ:AAPL) continues to pick up market share at the enterprise level. Jamf's 2021 outlook is pretty good too, as its healthcare and education software end-markets are growing quickly.
If you're betting on Apple services as a top growth motif, this small software platform for iPads, iPhones, and Macs is worth your investing attention.
Digital transformation continues into 2021
Jamf operates a software platform for businesses and organizations to manage their Apple devices. The company was a hot IPO stock last summer, but shares have since moderated and were even caught up in the recent rout among high-growth tech stocks.
Image source: Getty Images.
But that isn't to say Jamf has done poorly. On the contrary, revenue increased 32% year over year in 2020 to nearly $270 million, almost all of it in the form of recurring subscription revenue to its cloud-based platform for touchless iOS device setup, management, and security. Jamf is also a highly profitable firm, generating free cash flow of $66.2 million last year (a free cash flow profit margin of 25%).
And after using cash generated from its IPO to clean up its balance sheet, Jamf ended 2020 with $195 million in cash and equivalents and no debt.
The outlook for 2021 indicates this company's momentum is set to continue. Jamf expects revenue to be $330 million to $336 million -- up 23% from 2020 at the midpoint. A few things are driving this expectation.
For one thing, Jamf customers tend to increase their spending with the software manager over time (dollar-based net retention was 117% last year, implying existing customers spent 17% more than the year prior). And second, Apple devices are increasingly being put to use at the enterprise level. Management cited an IDC report on the last earnings call that found 23% of U.S.-based enterprises with more than 1,000 employees used Mac, up from just 17% in 2019.
Put another way, as large organizations continue to digitally transform their operations, Apple devices are increasingly becoming a part of the equation.
Deepening Apple's reach in the enterprise
Having ended 2020 with just 20.4 million Apple devices under management, there's no shortage of opportunity for Jamf (Apple has said its total devices in use worldwide are about 1.65 billion). And as Jamf CFO Jill Putman told me in a recent conversation, the success Apple has had in personal computing continues to boil over into the business world as consumers are influencing which devices get purchased and used by their employers.
This trend accelerated during the pandemic as remote work has gone mainstream. And now that the gears of digital transformation are turning, they aren't going to suddenly go backward as effects of the pandemic ease.
Putman explained a few use cases to me. Schools around the globe have been using funds to get devices into the hands of students. As classrooms open up again, those devices will remain in use. And Jamf is being adopted as a device and app management tool as teachers tighten up their new tech-enhanced education curricula.
Something similar is occurring in healthcare. An iPad, for example, can act as the central hub for a nurse monitoring a patient -- handling everything from medical records to displaying vitals. Once the patient is discharged, though, the device needs to be reset to protect patient records and personal information. Putman explained that nurses can reset the device with a few simple steps using Jamf, easily setting the room up for the next patient and easing the burden for behind-the-scenes IT teams.
Similar capabilities can be had in other industries, and as Putman told me, there's often a delay from the time an organization purchases its Apple devices to when Jamf gets involved in the device management process. Jamf is enjoying some spillover from new device purchases last year and continuing efforts this year as Apple wins a greater share of the market at the enterprise level.
Far from being worried that businesses will abandon their new digital efforts as the economy recovers, I agree with Putman's view that new digital tools will only continue to be put to use in the years ahead.
After the fourth-quarter report, Jamf stock trades for 12 times 2021 expected sales, and profitability is quickly rising as the software outfit reaches a more efficient operating scale. If you think services and business use is a top reason to own Apple, Jamf stock deserves your serious consideration too.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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