Jamf Holding: Above-Expectations Earnings Overshadowed By Mixed Guidance (NASDAQ:JAMF)

Elevator Pitch

Jamf Holding Corp. (NASDAQ:JAMF) stock is rated as a Hold.

Previously, I evaluated Jamf’s financial performance for the third quarter of the prior year with my November 9, 2023 initiation article. I draw attention to JAMF’s latest quarterly results and its outlook in the current write-up.

Jamf’s Q4 2023 earnings surpassed expectations, but I view its fiscal 2024 guidance as mixed. The company sees itself registering higher operating margins accompanied by a more moderate pace of revenue expansion. This explains why I have chosen to downgrade the stock’s rating to a Hold after its results’ announcement.

JAMF Recorded A Decent +9% EPS Beat For Q4

Jamf disclosed its Q4 2023 financial result with a press release published on February 27, 2024, after the market closed. The company’s actual performance for the most recent quarter turned out to be better than what the analysts had anticipated.

Non-GAAP adjusted EPS for JAMF jumped by +117% YoY and +63% QoQ to $0.13 in the final quarter of 2023, which was +9% (source: S&P Capital IQ) above the sell side’s consensus bottom-line estimate. The company also delivered a +1% top-line beat, with its revenue growing by +6% QoQ and +16% YoY to $150.6 million in the latest quarter.

The company indicated at its fourth quarter earnings call that its Q4 2023 revenue growth was boosted by the “conversion of Jamf Now customers to Jamf Fundamentals”, as an increasing number of clients want both “security and management” to be “part of the same product.”

A Comparison Of Jamf Now And Jamf Fundamentals

On the other hand, Jamf highlighted the company’s “diligent cost management” in its Q4 2023 earnings release, which was a key contributor to its improved profitability for the recent quarter. The normalized operating margin for JAMF expanded by +732 basis points YoY and +530 basis points QoQ to 13.99% for Q4 2023, and this was +47 basis points ahead of the market’s consensus operating margin estimate of 13.52% as per S&P Capital IQ data.

To sum things up, both the company’s top line and bottom line for Q4 2023 were above expectations. However, JAMF’s outlook is murky, taking into account its management guidance for the new fiscal year outlined in the next section.

But Jamf’s Fiscal 2024 Financial Guidance Is Mixed

JAMF’s financial prospects are mixed, as evidenced by the company’s FY 2024 financial guidance.

In specific terms, the company anticipates that its revenue will expand by +10% from $561 million in fiscal 2023 to $617 million for FY 2024 as per the mid-point of its guidance. This was -4% lower than the market’s consensus top-line projection of $641 million, as per data obtained from S&P Capital IQ. Also, this suggests that JAMF will suffer from substantial revenue growth deceleration this year, as the company increased its top line by a superior +17% last year.

On the flip side, the mid-point of Jamf’s fiscal 2024 normalized operating profit guidance was $91 million, which is equivalent to an operating margin of around 15% for the current year vis-à-vis its 8% FY 2023 operating margin. In comparison, the Wall Street’s consensus FY 2024 non-GAAP adjusted operating margin forecast was 10.6% (source: S&P Capital IQ).

The company emphasized at its latest Q4 results briefing that it will “have a balanced approach to profitability and growth” this year. JAMF’s decision to trade off a slower pace of top-line growth for a meaningful profit margin expansion is a key reason for its mixed guidance.

Adopt A Wait-And-See Approach For Now

It is encouraging to see that JAMF has delivered a reasonably strong earnings beat in Q4 2023 and guided for a further improvement in its profitability. However, it is still disappointing that Jamf is anticipating such a meaningful moderation in its sales growth.

A +7 percentage points expansion in operating margin for FY 2024 is likely to be offset by a -7 percentage points slowdown in revenue growth this year, as per Jamf’s guidance. Therefore, it is reasonable to refer to the company’s prospects as mixed.

But it is worth mentioning that Jamf’s comments at the recent fourth quarter earnings call that “we would expect our revenue to be a higher growth rate in ’25 and ’26” as compared to 2024 with “more specifics” disclosed at “our Investor Day.” The company’s 2024 Investor Day is scheduled on Wednesday, March 13.

My view is that investors should take a wait-and-see approach for now until the company shares its specific plans to drive top-line expansion in FY 2025 and FY 2026. If and when JAMF discloses tangible strategies to deliver a faster pace of top-line expansion for the following two years at the Investor Day, the medium-term prospects for the company can then be reassessed. As it stands now, Jamf’s latest FY 2024 guidance justifies a Neutral view.

Closing Thoughts

A Hold rating for JAMF is warranted. Jamf’s outlook is mixed, as the company expects to register top-line growth deceleration and profitability improvement for the current year. The company’s Investor Day might either provide more clues regarding JAMF’s intermediate-term revenue prospects or be a non-event in terms of offering new information that changes the stock’s risk-reward. I am of the view that Jamf deserves a Hold rating for now, taking into account its near term outlook as seen with its guidance.