Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to

Commission File Number: 001-39399

Graphic

JAMF HOLDING CORP.

(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

82-3031543
(I.R.S. Employer
Identification No.)

100 Washington Ave S, Suite 1100

Minneapolis, MN 55401
(Address of principal executive offices)

(612605-6625

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $0.001 par value per share

JAMF

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☐ YesNo ☒ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer☐

Non-accelerated filer 

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No ☒

On August 26, 2020,May 7, 2021, the Registrant had 116,448,284117,725,132 shares of common stock, $0.001 par value, outstanding.

Table of Contents

Jamf Holding Corp.

INDEX

PAGE

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

3

Consolidated Balance Sheets as of June 30, 2020March 31, 2021 and December 31, 20192020

3

Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and Six Months ended June 30, 2020 and 2019

4

Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and Six Months ended June 30, 2020 and 2019

5

Consolidated Statements of Cash Flows for the SixThree Months Ended June 30,March 31, 2021 and 2020 and 2019

6

Notes to Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

4342

Item 4.

Controls and Procedures

4442

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

4543

Item 1A.

Risk Factors

4543

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 3.

Defaults Upon Senior Securities

45

Item 4.

Mine Safety Disclosures

45

Item 5.

Other Information

4645

Item 6.

Exhibits

46

Signatures

47

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

JAMF HOLDING CORP.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

    

June 30, 2020

    

December 31, 2019

(unaudited)

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

38,424

$

32,433

Trade accounts receivable, net

 

53,275

 

46,513

Income taxes receivable

 

554

 

14

Deferred contract costs

 

7,270

 

5,553

Prepaid expenses

 

10,880

 

10,935

Other current assets

 

6,314

 

3,133

Total current assets

 

116,717

 

98,581

Equipment and leasehold improvements, net

 

11,494

 

12,477

Goodwill

 

539,818

 

539,818

Other intangible assets, net

 

218,430

 

235,099

Deferred contract costs

 

20,334

 

16,234

Other assets

 

2,557

 

2,599

Total assets

$

909,350

$

904,808

Liabilities and stockholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

3,909

$

3,684

Accrued liabilities

 

26,099

 

26,927

Income taxes payable

 

1,081

 

819

Deferred revenues

 

130,309

 

120,089

Total current liabilities

 

161,398

 

151,519

Deferred revenues, noncurrent

 

27,429

 

20,621

Deferred tax liability

 

14,913

 

18,133

Debt

 

201,891

 

201,319

Other liabilities

 

6,876

 

9,338

Total liabilities

 

412,507

 

400,930

Commitments and contingencies

 

  

 

  

Stockholders’ equity:

 

  

 

  

Common stock, $0.001 par value, 132,000,000 shares authorized, 102,862,404 and 102,843,612 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

 

103

 

103

Additional paid‑in capital

 

570,434

 

568,756

Accumulated deficit

 

(73,694)

 

(64,981)

Total stockholders’ equity

 

496,843

 

503,878

Total liabilities and stockholders’ equity

$

909,350

$

904,808

    

March 31, 2021

    

December 31, 2020

(unaudited)

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

196,190

$

194,868

Trade accounts receivable, net of allowances of $603 and $530 at March 31, 2021 and December 31, 2020, respectively

75,882

 

69,056

Income taxes receivable

 

632

 

632

Deferred contract costs

 

11,155

 

9,959

Prepaid expenses

 

15,009

 

13,283

Other current assets

 

2,325

 

1,113

Total current assets

 

301,193

 

288,911

Equipment and leasehold improvements, net

 

16,965

 

12,755

Goodwill

 

541,850

 

541,480

Other intangible assets, net

 

197,504

 

202,878

Deferred contract costs

 

28,774

 

26,770

Other assets

 

28,898

 

5,359

Total assets

$

1,115,184

$

1,078,153

Liabilities and stockholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

5,744

$

6,967

Accrued liabilities

 

28,131

 

31,574

Income taxes payable

 

1,153

 

713

Deferred revenues

 

167,868

 

160,443

Total current liabilities

 

202,896

 

199,697

Deferred revenues, noncurrent

 

53,711

 

45,507

Deferred tax liability, net

 

5,475

 

6,422

Other liabilities

 

33,839

 

11,046

Total liabilities

 

295,921

 

262,672

Commitments and contingencies (Note 8)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Preferred stock, $0.001 par value, 50,000,000 shares authorized at March 31, 2021 and December 31, 2020; no shares issued and outstanding at March 31, 2021 and December 31, 2020

Common stock, $0.001 par value, 500,000,000 shares authorized at March 31, 2021 and December 31, 2020; 117,705,895 and 116,992,472 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

118

 

117

Additional paid‑in capital

909,966

 

903,116

Accumulated deficit

 

(90,821)

 

(87,752)

Total stockholders’ equity

 

819,263

 

815,481

Total liabilities and stockholders’ equity

$

1,115,184

$

1,078,153

The accompanying notes are an integral part of these consolidated financial statements.

3

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JAMF HOLDING CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Three Months Ended March 31, 

    

2020

    

2019

    

2020

    

2019

    

2021

    

2020

Revenue:

 

  

 

  

 

  

 

  

 

  

 

  

Subscription

$

52,978

$

37,216

$

103,056

$

70,956

$

74,923

$

54,618

Services

 

2,451

4,794

6,461

9,295

4,003

4,010

License

 

6,802

6,300

13,104

12,187

2,242

1,762

Total revenue

 

62,231

 

48,310

 

122,621

 

92,438

 

81,168

 

60,390

Cost of revenue:

 

  

 

  

 

  

 

  

 

  

 

  

Cost of subscription (exclusive of amortization shown below)

 

8,762

 

7,423

 

18,010

 

14,380

Cost of services (exclusive of amortization shown below)

 

2,207

 

3,549

 

5,293

 

7,192

Cost of subscription (exclusive of amortization expense shown below)

 

12,014

 

9,248

Cost of services (exclusive of amortization expense shown below)

 

2,465

 

3,086

Amortization expense

 

2,678

 

2,513

 

5,355

 

4,954

 

2,777

 

2,677

Total cost of revenue

 

13,647

 

13,485

 

28,658

 

26,526

 

17,256

 

15,011

Gross profit

 

48,584

 

34,825

 

93,963

 

65,912

 

63,912

 

45,379

Operating expenses:

 

  

 

  

 

  

 

  

 

  

 

  

Sales and marketing

 

20,202

 

16,612

 

42,484

 

31,888

 

29,332

 

22,282

Research and development

 

11,929

 

9,491

 

24,546

 

18,534

 

15,626

 

12,617

General and administrative

 

6,603

 

7,534

 

17,892

 

14,797

 

16,105

 

11,289

Amortization expense

 

5,634

 

5,626

 

11,308

 

11,259

 

5,627

 

5,674

Total operating expenses

 

44,368

 

39,263

 

96,230

 

76,478

 

66,690

 

51,862

Income (loss) from operations

 

4,216

 

(4,438)

 

(2,267)

 

(10,566)

Loss from operations

 

(2,778)

 

(6,483)

Interest expense, net

 

(4,690)

 

(5,481)

 

(9,468)

 

(10,952)

 

(55)

 

(4,778)

Foreign currency transaction loss

 

(13)

 

(197)

 

(317)

 

(450)

 

(171)

 

(304)

Other income, net

 

36

 

55

 

91

 

110

 

 

55

Loss before income tax benefit

 

(451)

 

(10,061)

 

(11,961)

 

(21,858)

Income tax benefit

 

28

 

2,390

 

3,248

 

5,177

Loss before income tax (provision) benefit

 

(3,004)

 

(11,510)

Income tax (provision) benefit

 

(65)

 

3,220

Net loss

$

(423)

$

(7,671)

$

(8,713)

$

(16,681)

$

(3,069)

$

(8,290)

Net loss per share, basic and diluted

$

(0.00)

$

(0.07)

$

(0.08)

$

(0.16)

$

(0.03)

$

(0.08)

Weighted‑average shares used to compute net loss per share, basic and diluted

 

102,862,404

 

102,709,405

 

102,861,475

 

102,694,756

Weighted-average shares used to compute net loss per share, basic and diluted

 

117,386,322

 

102,860,545

The accompanying notes are an integral part of these consolidated financial statements.

4

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JAMF HOLDING CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(unaudited)

Stock Class

Additional

Stock Class

Additional

 

Common

PaidIn

Accumulated

Stockholders’

Common

PaidIn

Accumulated

Stockholders’

 

  

Shares

  

Amount

  

Capital

  

Deficit

  

Equity

  

Shares

  

Amount

  

Capital

  

Deficit

  

Equity

 

Three Months Ended June 30, 2020:

Three Months Ended March 31, 2021:

Balance, March 31, 2020

 

102,862,404

$

103

$

569,670

$

(73,271)

$

496,502

Issuance of common stock

 

 

 

 

 

Share‑based compensation

 

 

 

764

 

 

764

Balance, December 31, 2020

116,992,472

$

117

$

903,116

$

(87,752)

$

815,481

Exercise of stock options

713,423

1

4,018

4,019

Share-based compensation

2,832

2,832

Net loss

 

 

 

 

(423)

 

(423)

(3,069)

(3,069)

Balance, June 30, 2020

 

102,862,404

$

103

$

570,434

$

(73,694)

$

496,843

Balance, March 31, 2021

 

117,705,895

$

118

$

909,966

$

(90,821)

$

819,263

Three Months Ended June 30, 2019:

Balance, March 31, 2019

102,692,784

$

103

$

566,177

$

(41,391)

$

524,889

Issuance of common stock

76,540

422

422

Share‑based compensation

649

649

Net loss

(7,671)

(7,671)

Balance, June 30, 2019

102,769,324

$

103

$

567,248

$

(49,062)

$

518,289

Six Months Ended June 30,March 31, 2020:

Balance, December 31, 2019

 

102,843,612

$

103

$

568,756

$

(64,981)

$

503,878

Issuance of common stock

 

18,792

 

 

103

 

 

103

Share‑based compensation

 

 

 

1,575

 

 

1,575

Net loss

 

 

 

 

(8,713)

 

(8,713)

Balance, June 30, 2020

 

102,862,404

$

103

$

570,434

$

(73,694)

$

496,843

Six Months Ended June 30, 2019:

Balance, December 31, 2018

102,649,701

$

103

$

565,372

$

(32,381)

$

533,094

Issuance of common stock

119,623

658

658

Share‑based compensation

1,218

1,218

Net loss

(16,681)

(16,681)

Balance, June 30, 2019

102,769,324

$

103

$

567,248

$

(49,062)

$

518,289

Balance, December 31, 2019

102,843,612

$

103

$

568,756

$

(64,981)

$

503,878

Exercise of stock options

18,792

103

103

Share-based compensation

811

811

Net loss

(8,290)

(8,290)

Balance, March 31, 2020

102,862,404

$

103

$

569,670

$

(73,271)

$

496,502

The accompanying notes are an integral part of these consolidated financial statements.

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JAMF HOLDING CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Six Months Ended

June 30, 

    

2020

    

2019

    

Cash flows from operating activities

Net loss

$

(8,713)

$

(16,681)

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

 

  

 

  

Depreciation and amortization expense

 

19,002

 

18,085

Amortization of deferred contract costs

 

4,218

 

2,795

Amortization of debt issuance costs

 

571

 

571

Provision for bad debt expense and returns

 

812

 

Loss (gain) on disposal of equipment and leasehold improvements

 

12

 

(7)

Share‑based compensation

 

1,575

 

1,218

Deferred taxes

 

(3,217)

 

(5,407)

Adjustment to contingent consideration

 

(3,700)

 

Changes in operating assets and liabilities:

 

 

Trade accounts receivable

 

(7,374)

 

(10,637)

Income tax receivable/payable

 

(278)

 

(226)

Prepaid expenses and other assets

 

429

 

(2,663)

Deferred contract costs

 

(10,035)

 

(8,701)

Accounts payable

 

258

 

(1,437)

Accrued liabilities

 

(2,371)

 

(828)

Deferred revenue

 

17,028

 

14,207

Other liabilities

 

1,240

 

(8)

Net cash provided by (used in) operating activities

 

9,457

 

(9,719)

Cash flows from investing activities

 

  

 

  

Acquisition, net of cash acquired

 

 

(35,306)

Purchases of equipment and leasehold improvements

 

(1,366)

 

(3,319)

Net cash used in investing activities

 

(1,366)

 

(38,625)

Cash flows from financing activities

 

  

 

  

Proceeds from credit agreements

 

 

40,000

Debt issuance costs

 

 

(1,550)

Cash paid for offering costs

 

(2,203)

 

Proceeds from the exercise of stock options

 

103

 

656

Net cash provided by (used in) financing activities

 

(2,100)

 

39,106

Net increase (decrease) in cash

 

5,991

 

(9,238)

Cash, beginning of period

 

32,433

 

39,240

Cash, end of period

$

38,424

$

30,002

Supplemental disclosures of cash flow information:

 

  

 

  

Cash paid for interest

$

9,262

$

10,568

Cash paid for income taxes, net of refunds

 

411

 

451

Offering costs, accrued but not yet paid

 

2,865

 

Three Months Ended March 31,

    

2021

    

2020

Cash flows from operating activities

Net loss

$

(3,069)

$

(8,290)

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

 

  

 

  

Depreciation and amortization expense

 

9,784

 

9,586

Amortization of deferred contract costs

 

3,296

 

2,090

Amortization of debt issuance costs

 

69

 

279

Non-cash lease expense

1,267

 

Provision for bad debt expense and returns

 

159

 

240

Share‑based compensation

 

2,832

 

811

Deferred tax benefit

 

(758)

 

(2,564)

Adjustment to contingent consideration

 

300

 

Other

62

 

10

Changes in operating assets and liabilities:

 

 

Trade accounts receivable

 

(7,066)

 

220

Income tax receivable/payable

 

463

 

(789)

Prepaid expenses and other assets

 

(3,317)

 

(2,255)

Deferred contract costs

 

(6,496)

 

(4,788)

Accounts payable

 

(1,191)

 

(1,989)

Accrued liabilities

 

(7,694)

 

(4,928)

Deferred revenue

 

15,472

 

5,025

Other liabilities

 

(90)

 

(13)

Net cash provided by (used in) operating activities

 

4,023

 

(7,355)

Cash flows from investing activities

 

  

 

  

Acquisition, net of cash acquired

 

(3,041)

 

Purchases of equipment and leasehold improvements

 

(3,290)

 

(1,039)

Proceeds from sale of equipment and leasehold improvements

12

 

Net cash used in investing activities

 

(6,319)

 

(1,039)

Cash flows from financing activities

 

  

 

  

Cash paid for offering costs

 

 

(1,465)

Proceeds from the exercise of stock options

 

4,019

 

103

Net cash provided by (used in) financing activities

 

4,019

 

(1,362)

Effect of exchange rate changes on cash and cash equivalents

(401)

Net increase (decrease) in cash and cash equivalents

 

1,322

 

(9,756)

Cash and cash equivalents, beginning of period

 

194,868

 

32,433

Cash and cash equivalents, end of period

$

196,190

$

22,677

Supplemental disclosures of cash flow information:

 

  

 

  

Cash paid for interest

$

3

$

4,734

Cash paid for income taxes, net of refunds

 

351

 

216

Offering costs accrued but not paid

 

 

2,378

Operating lease assets obtained in exchange for operating lease liabilities

 

(19)

 

The accompanying notes are an integral part of these consolidated financial statements.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Basis of presentation and description of business

Description of business

Jamf Holding Corp. and its wholly owned subsidiaries, collectively, are referred to as the “Company”, “we”,“Company,” “we,” “us” or “our.” We are the standard in Apple Enterprise Management, and our cloud software platform is the only vertically-focused Apple infrastructure and security platform of scale in the world. We help organizations connect, manage and protect Apple products, apps and corporate resources in the cloud without ever having to touch the devices. With our products, Apple devices can be deployed to employees brand new in the shrink-wrapped box, automatically set up and personalized at first power-on and continuously administered throughout the life of the device. Our customers are located throughout the world.

Vista Equity Partners acquisition

On November 13, 2017, Vista Equity Partners (“Vista”) acquired a majority share of all the issued and outstanding shares of the Company at the purchase price of $733.8 million (the “Vista Acquisition”). As of March 31, 2021, funds controlled by Vista owned approximately 61.9% of our outstanding common stock. As a result, we are a “controlled company” under NASDAQ Global Select Market (“NASDAQ”) corporate governance rules.

Emerging growth company status

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies.

We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest of (i) the last day offor the first five fiscal year (a) following the fifth anniversary ofyears after the completion of our initial public offering (b) in which(“IPO”), unless one of the following occurs: (i) our total annual gross revenue is at least $1.07 billion, (ii) we have issued more than $1.0 billion in non-convertible debt securities during the prior three year period, or (c) when(iii) we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.30.

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include all adjustments necessary for the fair presentation of the consolidated financial position, results of operations, and cash flows of the Company.

Vista Equity Partners acquisition

On November 13, 2017, Vista Equity Partners ("Vista") acquiredCertain reclassifications of prior period amounts have been made to conform to the current presentation. In the fourth quarter of 2020, the Company reclassified on-premise subscription revenue from license revenue to subscription revenue in the consolidated statements of operations on a majority share of allretroactive basis. The amount reclassified for the issuedthree months ended March 31, 2020 was $4.5 million. The revised presentation is consistent with our disaggregated revenue disclosure and outstanding sharesis more consistent with how investors and other users of the financial statements evaluate overall subscription revenue. The reclassification had no impact on total revenue.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

In 2020, the Company atreclassified cash paid for offering costs of $1.5 million during the purchase pricethree months ended March 31, 2020 from operating activities to financing activities in the consolidated statements of $733.8 million (the "Vista Acquisition"). Ascash flows as a result of June 30, 2020, funds controlled by Vista owned approximately 89.5%the completion of our outstanding common stock.IPO in July 2020. The impact of the reclassification was not material to current or prior period financial statements.

Unaudited Interim Consolidated Financial Information

The accompanying interim consolidated balance sheet as of June 30, 2020,March 31, 2021, the consolidated statements of operations, and of stockholders’ equity for the three and six months ended June 30, 2020 and 2019 and the consolidated statements of cash flows for the sixthree months ended June 30,March 31, 2021 and 2020 and 2019 and the related footnote disclosures are unaudited. These unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in management’s opinion, include all adjustments necessary for the fair presentation of the consolidated financial position, results of operations, and cash flows of the Company. All adjustments made were of a normal recurring nature. The results for

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

the three and six months ended June 30, 2020March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 20202021 or for any future period.

Use of estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the reporting date, and the reported amounts of revenues and expenses during the reporting period. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future and include, but are not limited to, revenue recognition, stock-based compensation, commissions, goodwill and accounting for income taxes. Actual results could differ from those estimates.

Segment and Geographic Informationgeographic information

Our chief operating decision maker (“CODM”) is our Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources. We operate our business as 1 operating segment and therefore we have 1 reportable segment.

Revenue by geographic region as determined based on the end user customer address was as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Three Months Ended March 31,

    

2020

    

2019

    

2020

    

2019

    

2021

    

2020

(in thousands)

(in thousands)

Revenue:

The Americas

$

49,558

$

36,537

$

97,879

$

70,521

$

61,258

$

47,026

Europe, the Middle East, India, and Africa

 

9,199

 

9,068

 

18,025

 

16,659

 

14,523

 

10,121

Asia Pacific

 

3,474

 

2,705

 

6,717

 

5,258

 

5,387

 

3,243

$

62,231

$

48,310

$

122,621

$

92,438

$

81,168

$

60,390

Note 2. Summary of significant accounting policies

The Company’s significant accounting policies are discussed in Note 2 to the consolidated financial statements included in our final prospectus (the “IPO Prospectus”)the Company’s Annual Report on Form 10-K for our initial public offering (“IPO”) datedthe year ended December 31, 2020. Except for the accounting policies for leases that were updated as a result of July 21, 2020 and filed withadopting the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”). Therenew accounting standard, there have been no significant changes to these policies that have had a material impact on the Company’s consolidated financial statements and related notes for the three and six months ended June 30, 2020.March 31, 2021. The following describes the impact of certain policies.

Deferred offering costs

Offering costs are capitalized and consist of fees incurred in connection with the sale of common stock in our IPO and include legal, accounting, printing, and other IPO-related costs. The balance of deferred offering costs included within other current assets at June 30, 2020 and December 31, 2019 was $5.8 million and $2.3 million, respectively. Upon completion of our IPO, these deferred costs were reclassified to stockholders’ equity and recorded against the proceeds from the offering. During the three and six months ended June 30, 2020, we paid offering costs of $0.7 million and $2.2 million, respectively.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Share-based compensation

The Company applies the provisions of ASC Topic 718, Compensation — Stock Compensation (“ASC 718”), in its accounting and reporting for stock-based compensation. ASC 718 requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. All service-based options outstanding under the Company’s option plans have exercise prices equal to the fair value of the Company’s stock on the grant date. The fair value of these service options is determined using the Black-Scholes option pricing model. The estimated fair value of service-based awards is recognized as compensation expense over the applicable vesting period. All awards expire after 10 years. The fair value of each grant of service options was determined by the Company using the methods and assumptions discussed below. Each of these inputs is subjective and generally requires judgment to determine.

Compensation cost for restricted stock units is determined based on the fair market value of the Company’s stock at the date of the grant. Stock-based compensation expense is generally recognized over the required service period. Forfeitures are accounted for when they occur.

The Company also grants performance-based awards to certain executives that vest and become exercisable when Vista Equity Partners’, our equity sponsor (“Vista”) realized cash return on its investment in the Company equals or exceeds $1.515 billion upon a change in control of the Company (“Termination Event”). The terms of the agreement do not specify a performance period for the occurrence of the Termination Event. The contractual term of the awards is 10 years. These options are also referred to as return target options. The Company uses a Modified Black-Scholes option pricing model which uses Level 3 inputs for fair value measurement.

In conjunction with the IPO, the vesting conditions of the performance-based awards were modified to also vest following an IPO and registration and sale of shares by Vista whereby Vista still must achieve a cash return on its equity investment in the Company equaling or exceeding $1.515 billion. In accordance with ASC 718, we calculated the fair value of these options on the modification date. The value of these options increased from $13.8 million prior to modification to $33.0 million on the date of modification as of June 30, 2020. As the awards are not currently considered probable of meeting vesting requirements no expense has been recognized, and the timing of any future expense recognition is unknown.

Revenue recognition

The Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and follows a five-step model to determine the appropriate amount of revenue to be recognized in accordance with ASC 606.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Revenue recognition

The Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and follows a five-step model to determine the appropriate amount of revenue to be recognized in accordance with ASC 606.

Disaggregation of Revenue

The Company separates revenue into recurringsubscription and non-recurringnon-subscription categories to disaggregate those revenues that are one-time in natureterm-based and renewable from those that are term-based and renewable.one-time in nature. Revenue from recurringsubscription and non-recurringnon-subscription contractual arrangements are as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Three Months Ended March 31,

    

2020

    

2019

    

2020

    

2019

    

2021

    

2020

(in thousands)

(in thousands)

SaaS subscription and support and maintenance

$

52,978

$

37,216

$

103,056

$

70,956

$

66,669

$

50,078

On‑premise subscription

 

5,770

 

4,048

 

10,310

 

7,089

 

8,254

 

4,540

Recurring revenue

 

58,748

 

41,264

 

113,366

 

78,045

Subscription revenue

 

74,923

 

54,618

Professional services

 

4,003

 

4,010

Perpetual licenses

 

1,032

 

2,252

 

2,794

 

5,098

 

2,242

 

1,762

Professional services

 

2,451

 

4,794

 

6,461

 

9,295

Non‑recurring revenue

 

3,483

 

7,046

 

9,255

 

14,393

Non‑subscription revenue

 

6,245

 

5,772

Total revenue

$

62,231

$

48,310

$

122,621

$

92,438

$

81,168

$

60,390

Contract Balances

If revenue is recognized in advance of the right to invoice, a contract asset is recorded. The balances of contract assets were $1.2 million and $0.9 million as of March 31, 2021 and December 31, 2020, respectively.

Contract liabilities consist of customer billings in advance of revenue being recognized. The Company invoices its customers for subscription, support and maintenance and services in advance.

Changes in contract liabilities, including revenue earned during the period from the beginning contract liability balance and new deferrals of revenue during the period, were as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Three Months Ended March 31,

    

2020

    

2019

    

2020

    

2019

    

2021

    

2020

(in thousands)

(in thousands)

Balance, beginning of the period

$

145,735

$

111,255

$

140,710

$

100,662

$

205,950

$

140,710

Revenue earned

 

(49,562)

 

(42,277)

 

(97,285)

 

(76,884)

 

(60,925)

 

(47,723)

Deferral of revenue

 

61,565

 

48,941

 

114,313

 

94,141

 

76,554

 

52,748

Balance, end of the period

$

157,738

$

117,919

$

157,738

$

117,919

$

221,579

$

145,735

There were no significant changes to our contract assets and liabilities during the three and six months ended June 30,March 31, 2021 and 2020 and 2019 outside of our sales activities.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and noncancelable amounts to be invoiced. As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the Company had $170.2$243.1 million and $149.5$224.5 million, respectively, of remaining performance

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

obligations, with 84%78% and 86%80%, respectively, expected to be recognized as revenue over the succeeding 12 months, and the remainder expected to be recognized over the overthree the three years thereafter.

Deferred Contract Costs

Sales commissions as well as associated payroll taxes and retirement plan contributions (together, contract costs) that are incremental to the acquisition of customer contracts are capitalized using a portfolio approach as deferred contract costs onin the consolidated balance sheetsheets when the period of benefit is determined to be greater than one year.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Total amortization of contract costs for the three months ended June 30,March 31, 2021 and 2020 and 2019 was $2.2$3.3 million and $1.5 million, respectively. Total amortization of contract costs for the six months ended June 30, 2020 and 2019 was $4.2 million and $2.8$2.1 million, respectively.

The Company periodically reviews these deferred costs to determine whether events or changes in circumstances have occurred that could affect the period of benefit of these deferred contract costs. There were 0 impairment losses recorded during the three and six months ended June 30, 2020March 31, 2021 and 2019.2020.

Concentration of Credit Risk

For the three and six months ended June 30,March 31, 2021, the Company had 1 distributor that accounted for more than 10% of total net revenues. Total receivables related to this distributor were $17.3 million as of March 31, 2021. For the three months ended March 31, 2020, the Company had 2 distributors that accounted for more than 10% of total net revenues. Total receivables related to these distributors were $19.3$19.8 million at June 30,as of December 31, 2020. For the three and six months ended June 30, 2019, the Company had 1 distributor that

No single end customer accounted for more than 10% of total net revenues. Total receivables related to this distributor were $6.0 million at Decemberrevenue for the three months ended March 31, 2019.2021 and 2020.

Recently issued accounting pronouncements not yet adopted

From time to time, new accounting pronouncements are issued by the FASB,Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Financial Instruments — Credit Losses

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which introduces a model based on expected losses to estimate credit losses for most financial assets and certain other instruments. In November 2019, the FASB issued ASU No. 2019-10 Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”). The update allows the extension of the initial effective date for entities which have not yet adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The standard is effective for annual reporting periods beginning after December 15, 2022, with early adoption permitted for annual reporting periods beginning after December 15, 2018.permitted. Entities will apply the standard’s provisions by recording a cumulative-effect adjustment to retained earnings. The Company has not yet adopted ASU 2016-13 and is currently evaluating the effect the standard will have on its consolidated financial statements.

Fair Value Measurement — Disclosure FrameworkReference Rate Reform

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which amends ASC Topic 820, Fair Value Measurements. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The effective date is the first quarter of fiscal year 2021, with early adoption permitted for the removed disclosures and delayed adoption permitted until fiscal year 2021 for the new disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company has not yet adopted ASU 2018-13 and is currently evaluating the effect the standard will have on its consolidated financial statements.

Leases

In February 2016, the FASB issued ASU 2016-02. The update requires lessees to put most leases on their balance sheets while recognizing expenses on their income statements in a manner similar to current GAAP. The guidance also eliminates current real estate-specific provisions for all entities. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. In JuneMarch 2020, the FASB issued ASU No. 2020-05,2020-04, Revenue from ContractsReference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides entities with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certaintemporary

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Entities.The update defers the initial effective date of ASU 2016-02 by one year for private companies and private not-for-profits. For these entities the effective date is for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted, and the modified retrospective method is to be applied. The Company is currently assessing the timing and impact of adopting the updated provisions.

Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies certain aspects of the current guidance to improve consistent application among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021 and interim periods within annual periods beginning after December 15, 2022. Early adoption is permitted. The method of adoption varies for the provisions in the update. The Company is currently evaluating the effect the standard will have on its consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides entities with temporary optional financial reporting alternatives to ease the potential burden in accounting for reference rate reform and includes a provision that allows entities to account for a modified contract as a continuation of an existing contract. ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022. The Companyadoption of this standard is currently evaluatingnot expected to have a material impact on the effect the standard will have on itsCompany’s consolidated financial statements.

Adoption of new accounting pronouncements

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service ContractLeases

In March 2018,February 2016, the FASB issued ASU No. 2018-15,2016-02, Intangibles — GoodwillLeases(Topic 842) to increase transparency and Others — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurredcomparability among organizations related to their leasing arrangements. The update requires lessees to recognize most leases on their balance sheets, with the exception of short-term leases if a policy election is made, while recognizing lease expense on their income statements in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurredmanner similar to develop or obtain internal-use software under ASC Subtopic 350-40, in ordercurrent GAAP. The guidance also requires entities to determine which costs to capitalizedisclose key quantitative and recognize as an asset. ASU 2018-15 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019, and can be applied either prospectively to implementation costs incurred after the date of adoption or retrospectively to allqualitative information about its leasing arrangements. The Company adopted the new lease standard inon January 1, 2021 using the first quarter of fiscal year 2020. The adoption ofoptional transition method to the standard did not have an impact on the Company’s consolidated financial statements as the Company does not have any of these arrangements.

Improvements to Nonemployee Share-Based Payment Accounting

In June 2018, the FASB issued ASU No. 2018-07, Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), with an intent to reduce cost and complexity and to improve financial reportingmodified retrospective approach. Under this transition provision, results for share-based payments issued to nonemployees. The amendments in ASU 2018-07 provide for the simplification of the measurement of share-based payment transactions for acquiring goods and services from nonemployees. Currently, the accounting requirements for nonemployee and employee share-based payment transactions are significantly different. This standard expands the scope of ASC Topic 718 to include share-based payments issued to nonemployees for goods or services, aligning the accounting for share-based payments to nonemployees and employees. ASU 2018-07 is effective for annual reporting periods beginning afteron January 1, 2021 are presented under ASC Topic 842, Leases (“ASC 842”) while prior period amounts continue to be reported and disclosed in accordance with the Company’s historical accounting treatment under ASC Topic 840, Leases (“ASC 840”).

To reduce the burden of adoption and ongoing compliance with ASC 842, a number of practical expedients and policy elections are available under the new guidance. The Company elected the “package of practical expedients” permitted under the transition guidance, which among other things, did not require reassessment of whether contracts entered into prior to adoption are or contain leases, and allowed carryforward of the historical lease classification for existing leases. The Company has not elected to adopt the “hindsight” practical expedient, and therefore measured the right-of-use (“ROU”) asset and lease liability using the remaining portion of the lease term at adoption on January 1, 2021.

The Company made an accounting policy election under ASC 842 not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. For all other leases, the Company recognizes ROU assets and lease liabilities based on the present value of lease payments over the lease term at the commencement date of the lease (or January 1, 2021 for existing leases upon the adoption of ASC 842). The ROU assets also include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by any lease incentives.

Future lease payments may include fixed rent escalation clauses or payments that depend on an index (such as the consumer price index). Subsequent changes to an index and other periodic market-rate adjustments to base rent are recorded in variable lease expense in the period incurred.

The Company has made an accounting policy election to account for lease and non-lease components in its contracts as a single lease component for all asset classes. The non-lease components typically represent additional services transferred to the Company, such as common area maintenance for real estate, which are variable in nature and recorded in variable lease expense in the period incurred.

The Company uses its incremental borrowing rate to determine the present value of lease payments as the Company’s leases do not have a readily determinable implicit discount rate. The incremental borrowing rate is the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term and amount in a similar economic environment. Judgement is applied in assessing factors such as Company specific credit risk, lease term, nature and quality of the underlying collateral, currency and economic environment in determining the incremental borrowing rate to apply to each lease.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Upon adoption, the Company recorded ROU assets and lease liabilities of approximately $25.0 million and $28.6 million, respectively, related to the Company’s operating leases. The adoption of the new lease standard did not materially impact our consolidated statements of operations or consolidated statements of cash flows. See Note 6 for more information.

Debt with Conversion and Other Options and Contracts in Entity’s Own Equity

In August 2020, the FASB issued ASU No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Among other changes, the standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. As a result, entities will account for a convertible debt instrument wholly as debt unless the instrument contains features that require bifurcation as a derivative in accordance with ASC Topic 815, Derivatives and Hedging, or a convertible debt instrument was issued at a substantial premium. In addition, the amendments also require the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share. The standard is effective for fiscal years beginning after December 15, 2019,2021, including interim periods within those periods, and earlyfiscal years. Early adoption is permitted. The Company early adopted the new standard inon January 1, 2021. The adoption of the first quarter of fiscal year 2020. The adoptionstandard did not have ana material impact on the Company’s consolidated financial statements as the Company does not have any nonemployee share-based payment awards.statements.

Note 3. Financial instruments fair value

We report financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis in accordance with ASC Topic 820.820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

ASC 820 also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP established a hierarchy framework to classify the fair value based on the observability of significant inputs to the measurement. The levels of the fair value hierarchy are as follows:

Level 1: Fair value is determined using an unadjusted quoted price in an active market for identical assets or liabilities.

Level 2: Fair value is estimated using inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.

Level 3: Fair value is estimated using unobservable inputs that are significant to the fair value of the assets or liabilities.

The carrying valueCompany invests in money market funds and U.S. Treasuries with original or remaining maturities at the time of cashpurchase of three months or less, which are measured and cash equivalents, accounts receivable and accounts payable approximate their fair value. Therecorded at fair value of our debt at June 30, 2020 and December 31, 2019 was $203.4 million and $203.1 million, respectively (Level 2). The carrying value of our debt as of both June 30, 2020 and December 31, 2019 was $205.0 million. The fair value of our debt was determined using discounted cash flow analysison a recurring basis. Money market funds are valued based on quoted market rates for similar typesprices in active markets and classified within Level 1 of borrowings.

Note 4. Acquisitions

ZuluDesk B.V.

On February 1, 2019, the Company purchased all of the outstanding membership units of ZuluDesk B.V. whose products are designed to offer a cost-effective mobile device management system for today’s modern digital classroom. ZuluDesk B.V’s software complement the Company’s existing product offerings. The Company accounted for the acquisition by applying the acquisition method of accounting for business combinations in accordance with ASC Topic 805. The final aggregate purchase price was approximately $38.6 million. This acquisition was funded by term debt, and borrowings under a revolving line of credit. The goodwill represents the excess of the purchase consideration over the fair value of the underlying net identifiable assets. The goodwill recognized in this acquisition is primarily attributable to the offerings in mobile device management of ZuluDesk B.V. and its assembled workforce. The goodwill is not deductible for income tax purposes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

hierarchy. U.S. Treasuries include treasury bills that generally mature within 30 days and are classified within Level 1 of the fair value hierarchy. The fair value of the separately identifiable intangible assets acquired, consistingthese financial instruments were as follows:

March 31, 2021

Level 1

Level 2

Level 3

 

Total

(in thousands)

Cash equivalents:

Money market funds

$

150,006

$

$

 

$

150,006

Total cash equivalents

$

150,006

$

$

 

$

150,006

December 31, 2020

Level 1

Level 2

Level 3

 

Total

(in thousands)

Cash equivalents:

Money market funds

$

100,000

$

$

 

$

100,000

U.S. Treasuries

25,000

 

25,000

Total cash equivalents

$

125,000

$

$

 

$

125,000

The carrying value of trademarks, customer relationshipsaccounts receivable and developed technology, was estimated by applying an income approach. Under the income approach, an intangible asset’saccounts payable approximate their fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. Indications of value are developed by discounting future net cash flowsdue to their present value at market-based rates of return. The weighted-average economic life ofshort maturities and are excluded from the intangible assets acquired is 7.0 years. For more details on the intangible assets, see tables above.

Note 5.4. Acquisitions

Acquisition-related expenses were expensed as incurred and totaled $0.9 million for the three and six months ended June 30, 2019. These expenses were recognized as acquisition costs in general and administrative expenses. ZuluDesk B.V. contributed revenue and net loss of $1.0 million and $0.3 million, respectively, during the three months ended June 30, 2019, excluding the effects of the acquisition and integration costs. ZuluDesk B.V. contributed revenue and net loss of $1.5 million and $0.5 million, respectively, during the six months ended June 30, 2019, excluding the effects of the acquisition and integration costs. The Company used its then-existing term loan facility (the “Term Loan Facility”) of $175.0 million with a maturity date of November 13, 2022 under its secured credit agreement entered into November 13, 2017 (the “Prior Credit Agreement”), which was increased to $205.0 million on January 30, 2019 whencmdReporter

On February 26, 2021, the Company entered into thatan asset purchase agreement with cmdSecurity Inc. (“cmdSecurity”) to acquire certain Amendment Agreement No. 1 to such Prior Credit Agreement, to complete the acquisitioncmdSecurity assets, including cmdReporter, a suite of security and approximately $0.5 million of debt issuances costs were capitalized as a reduction in Debt on the balance sheet. These costs are amortized over the course of the debt agreements.

The Company allocated the net purchase consideration to the net assets acquired, including finite-lived intangible assets, based on their respective fair values at the time of the acquisition as follows (in thousands):

    

Assets acquired:

 

  

Cash

$

3,325

Other current assets

 

1,306

Long‑term assets

 

154

Liabilities assumed:

 

  

Accounts payable and accrued liabilities

 

(419)

Deferred revenue

 

(3,050)

Deferred tax liability

 

(2,996)

Intangible assets acquired

 

12,310

Goodwill

 

28,000

Total purchase consideration

$

38,630

Digita Security LLC

On July 26, 2019,compliance tools purpose-built for macOS. With cmdReporter, the Company purchased allwill further extend the security capabilities of the outstanding membership interests of Digita Security LLC (“Digita”). With this acquisition, Digita’s acquired technology will complementits expansive Apple Enterprise Management platform. cmdSecurity’s software complements the Company’s existing Apple management, authentication and account management solutions with a security offering to provide a more robust suite of capabilities and service offerings in the Apple enterprise market.product offerings. The Company accounted for the acquisition by applying the acquisition method of accounting for business combinations in accordance with ASC Topic 805.805, Business Combinations (“ASC 805”). The acquisitionfinal aggregate purchase price was approximately $3.4 million. This acquisition was funded by the Company’s cash on hand and includes future contingent consideration totaled $14.4 million which included contingentdue to the sellers. The goodwill represents the excess of the purchase consideration with an estimatedover the fair value of $9.0 millionthe underlying net identifiable assets. The goodwill recognized in this acquisition is primarily attributable to the cmdSecurity assembled workforce and the remainder provided for with cash. Acquisition-related expenses were expensed as incurred. Goodwill in the amount of $1.7 million iswas not material. The acquired intangible assets and goodwill are deductible for income tax purposes.

At the time of the acquisition, the contingent consideration was valued at $0.4 million, which was based on the acquired business signing new business or renewing acquired contracts during the 90 days following the close of the acquisition. The estimated fair value of these contingent payments is determined using projected contract wins, which uses Level 3 inputs for fair value measurements, including assumptions about the probability of closing contracts based on their current stage in the sales process.

Substantially all of the purchase price consideration related to the fair value of the acquired separately identifiable intangibles assets, which related to acquired developed technology and in-process research and development (“IPR&D”). The fair value of the identifiable intangible assets was estimated using the replacement cost method, whereby the components of the acquired intangibles were reviewed to determine the cumulative cost of development for each component, inclusive of a developer’s profit and an entrepreneurial incentive. The cumulative cost of development was not discounted to account for obsolescence factor as the replacement cost accounted for present day development. The developed technology will be amortized over its estimated weighted-average useful life, which was determined to be

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

5.0 years. The IPR&D is an indefinite lived intangible asset that is not amortized, but will be evaluated at least annually for impairment. For more details on the intangible assets, see Note 5.

Acquisition-related expenses were expensed as incurred and totaled $0.1 million for the three months ended March 31, 2021. These expenses were recognized as acquisition costs in general and administrative expenses in the consolidated statement of operations.

The Company allocated the net purchase consideration to the net assets acquired based on their respective fair values at the time of the acquisition as follows (in thousands):

Cash consideration

$

3,041

Contingent consideration

 

359

Final aggregate purchase price

$

3,400

Intangible assets acquired:

 

Developed technology

$

2,630

IPR&D

 

400

Goodwill

 

370

Total purchase consideration

$

3,400

Digita Security LLC

In 2019, the Company recorded contingent consideration in connection with its purchase of the outstanding membership interests of Digita. The maximum contingent consideration is $15.0 million if the acquired business achieves certain revenue milestones by December 31, 2022. The estimated fair value of these contingent payments wasis determined using a Monte Carlo simulation model, which uses Level 3 inputs for fair value measurements, including assumptions about the probability of growth of subscription services and the related pricing of the services offered. During the three and six months ended

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

June 30, 2020, March 31, 2021, the fair value of the contingent consideration was decreasedincreased by $3.7$0.3 million, which was includedreflected in general and administrative expenses in the consolidated statement of operations. ThisThe adjustment for the three months ended March 31, 2021 primarily reflects an increase in the liability due to updated assumptions about the probabilitymarket assumptions. As of change in control in light of our initial public offering. At June 30, 2020March 31, 2021 and December 31, 2019,2020, the fair value of the contingent consideration was $5.5$8.5 million and $9.2$8.2 million, respectively, which wasis included in other liabilities in the consolidated balance sheet.sheets.

In addition, the terms of the purchase agreement provide for additional future payments to the Digita shareholders in the amount of up to $5.0 million if certain key employees continue their employment with the Company through December 31, 2020, which will be recognized as a compensation expense in our consolidated statement of operations. The Company paid and recognized as expense $1.6 million and $3.2 million during the three and six months ended June 30, 2020.

The fair value of the acquired developed technology was estimated by discounting future net cash flows to their present value at market-based rates of return (income approach). The estimated useful life of the acquired developed technology is estimated to be 5 years. For more details on the Company’s intangible assets, see Note 5, Goodwill and other intangible assets. Pro forma results of operations for this acquisition were not presented as the effects were not material to our financial results.

The following table summarizes the fair value of consideration transferred and the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

    

Assets acquired:

 

  

Cash

$

512

Other current assets

 

1

Long‑term assets

 

12

Liabilities assumed:

 

  

Accounts payable and accrued liabilities

 

(119)

Intangible assets acquired

 

3,300

Goodwill

 

10,673

Total purchase consideration

$

14,379

Note 5. Goodwill and other intangible assets

The change in the carrying amount of goodwill is as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Three Months Ended March 31,

    

2020

    

2019

    

2020

    

2019

    

2021

    

2020

(in thousands)

(in thousands)

Goodwill, beginning of period

$

539,818

$

529,145

$

539,818

$

501,145

$

541,480

$

539,818

Goodwill acquired

 

 

 

 

28,000

 

370

 

Goodwill, end of period

$

539,818

$

529,145

$

539,818

$

529,145

$

541,850

$

539,818

1514

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The gross carrying amount and accumulated amortization of intangible assets other than goodwill are as follows:

    

    

    

    

    

Weighted 

    

    

    

    

    

Weighted 

 

 

 

Average 

 

 

 

Average 

Accumulated 

Net Carrying 

 

Remaining 

Accumulated 

Net Carrying 

 

Remaining 

Useful Life

Gross Value

Amortization

Value

 

Useful Life

Useful Life

Gross Value

Amortization

Value

 

Useful Life

(in thousands)

(in thousands)

Trademarks

1‑8 years

 

34,320

 

9,167

 

25,153

 

5.8 years

8 years

$

34,320

$

13,454

$

20,866

 

4.8 years

Customer relationships

2‑12 years

 

214,320

 

37,564

 

176,756

 

9.7 years

2 - 12 years

 

214,428

 

55,810

 

158,618

 

8.7 years

Developed technology

5 years

 

53,560

 

20,419

 

33,141

 

3.2 years

5 years

 

54,563

 

31,173

 

23,390

 

2.3 years

Non‑competes

2 years

 

90

 

41

 

49

 

1.1 years

2 years

 

90

 

86

 

4

 

0.1 years

Balance, December 31, 2019

$

302,290

$

67,191

$

235,099

 

  

Balance, December 31, 2020

$

303,401

$

100,523

$

202,878

 

  

Trademarks

8 years

 

34,320

 

11,310

 

23,010

 

5.3 years

8 years

$

34,300

$

14,506

$

19,794

 

4.6 years

Customer relationships

2‑12 years

 

214,320

 

46,711

 

167,609

 

9.2 years

2 - 12 years

 

214,408

 

60,342

 

154,066

 

8.5 years

Developed technology

5 years

 

53,560

 

25,775

 

27,785

 

2.7 years

5 years

 

57,193

 

33,949

 

23,244

 

2.4 years

Non‑competes

2 years

 

90

 

64

 

26

 

0.6 years

2 years

 

90

 

90

 

 

Balance, June 30, 2020

$

302,290

$

83,860

$

218,430

 

  

In-process research and development

Indefinite

 

400

 

 

400

Balance, March 31, 2021

$

306,391

$

108,887

$

197,504

 

  

Amortization expense was $8.3$8.4 million and $8.1 million for both the three months ended June 30, 2020March 31, 2021 and 2019, respectively. Amortization expense was $16.7 million and $16.2 million for the six months ended June 30, 2020 and 2019, respectively.2020.

Therewere 0 impairments to goodwill or intangible assets recorded for the three and six months ended June 30, 2020March 31, 2021 and 2019.2020.

Note 6. Leases

The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations. Under ASC 842, a contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company also considers whether its service arrangements include the right to control the use of an asset. See Note 2 for more information on the Company’s accounting policies for leases.

The Company leases office facilities and vehicles under operating lease agreements that have initial terms ranging from 1 to 9 years. Some leases include one or more options to renew, generally at our sole discretion, with renewal terms that can extend the lease term up to 10 years. In addition, certain leases contain termination options, where the rights to terminate are held by either the Company, the lessor, or both parties. These options to extend or terminate a lease are included in the lease terms when it is reasonably certain that the Company will exercise that option. The Company’s leases generally do not contain any material restrictive covenants or residual value guarantees. The Company also leases office equipment under a finance lease agreement with a term of 4 years. The Company’s finance lease was not material to the consolidated financial statements as of March 31, 2021.

15

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Supplemental balance sheet information related to the Company’s operating leases is as follows:

Leases

Balance Sheet Classification

March 31, 2021

(in thousands)

Assets

Operating lease assets

Other assets

$

23,868

Liabilities

Operating lease liabilities - current

Accrued liabilities

$

4,870

Operating lease liabilities - non-current

Other liabilities

23,184

Total operating lease liabilities

$

28,054

The weighted-average remaining term of the Company’s operating leases was 6.5 years as of March 31, 2021. The weighted-average discount rate used to measure the present value of the operating lease liabilities was 3.5% as of March 31, 2021.

The components of lease expense were as follows:

Three Months Ended

    

March 31, 2021

(in thousands)

Operating lease cost

$

1,514

Short-term lease cost

 

52

Variable lease cost

 

439

Total lease expense

$

2,005

Operating lease cost is recognized on a straight-line basis over the lease term. The Company leases certain office facilities with a related party, including the office space in Eau Claire, Wisconsin. Operating lease cost with related parties was $0.3 million for the three months ended March 31, 2021.

Total rent expense, including the Company’s share of the lessors’ operating expenses, was $1.4 million for the three months ended March 31, 2020. Rent expense with related parties, including the Company’s share of the lessors’ operating expenses, was $0.3 million for the three months ended March 31, 2020.

For the three months ended March 31, 2021, operating cash flows included $1.2 million of cash paid for operating lease liabilities.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Maturities of the Company’s operating lease liabilities as of March 31, 2021 were as follows:

Operating Leases

(in thousands)

Years ending December 31:

2021 (remaining nine months)

$

4,326

2022

5,407

2023

5,331

2024

4,589

2025

2,519

Thereafter

9,482

Total lease payments

31,654

Less: imputed interest

3,600

Total present value of lease liabilities

$

28,054

Note 7. Debt

On July 27, 2020, the Company entered into a new secured credit agreement (the “New Credit Agreement”) for an initial revolving credit facility of $150.0 million (the “New Revolving Credit Facility”), which may be increased or decreased under specific circumstances, with a $25.0 million letter of credit sublimit and a $50.0 million alternative currency sublimit. In addition, the New Credit Agreement provides for the ability of the Company to request incremental term loan facilities in a minimum amount of $5.0 million for each facility. The maturity date of the New Credit Agreement is July 27, 2025. The New Credit Agreement contains customary representations and warranties, affirmative covenants, reporting obligations, negative covenants and events of default. We were in compliance with such covenants as of both March 31, 2021 and December 31, 2020. As of both March 31, 2021 and December 31, 2020, we had $1.0 million of letters of credit outstanding under our New Revolving Credit Facility. In the third quarter of 2020, the Company recorded debt issuance costs of $1.3 million, which are amortized to interest expense over the term of the New Credit Agreement. As of both March 31, 2021 and December 31, 2020, debt issuance costs of $1.1 million were included in other assets in the consolidated balance sheets.

Note 6.8. Commitments and Contingencies

Operating Leases

The Company leases office facilities and office equipment under operating leases that expire at various dates through February 2030. The office facility leases require annual base rent, plus real estate taxes, utilities, insurance and maintenance costs. Total rent expense, including the Company’s share of the lessors’ operating expenses, was $1.3 million and $1.1 million for the three months ended June 30, 2020 and 2019, respectively, and $2.7 million and $2.0 million for the six months ended June 30, 2020 and 2019, respectively. Certain of these leases are with a related party. Rent expense with related parties, including the Company’s share of the lessors’ operating expenses, was $0.3 million and $0.2 million for the three months ended June 30, 2020 and 2019, respectively, and $0.5 million and $0.4 million for the six months ended June 30, 2020 and 2019, respectively.

Hosting Services and Other Support Software Agreements

The Company has various contractual agreements for hosting services and other support software. In March 2020, the Company entered into a new contractual agreement with an unrelated party for hosting services. As of June 30, 2020, future payments related to this contract are $4.3 million for the remainder of 2020, $9.3 million in 2021, $12.0 million in 2022 and $3.2 million in 2023.

contingencies

Contingencies

From time to time, the Company may be subject to various claims, charges and litigation. The Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably

16

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

estimated. The Company maintains insurance to cover certain actions and believes that resolution of such claims, charges, or litigation will not have a material impact on the Company’s financial position, results of operations, or liquidity. The Company has recordedhad 0 liabilities for contingencies recorded as of June 30, 2020March 31, 2021 and December 31, 2019.2020.

17

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 7.9. Net Lossloss per Shareshare

The following table sets forth the computation of basic and diluted net loss per share:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Three Months Ended March 31,

    

2020

    

2019

    

2020

    

2019

    

2021

    

2020

(in thousands, except share and per

(in thousands, except share and per share data)

share amounts)

Numerator:

 

  

 

  

 

  

 

Net loss

$

(423)

$

(7,671)

$

(8,713)

$

(16,681)

$

(3,069)

$

(8,290)

Denominator:

 

  

 

  

 

  

 

 

  

 

Weighted‑average shares used to compute net loss per share, basic and diluted

 

102,862,404

 

102,709,405

 

102,861,475

 

102,694,756

 

117,386,322

 

102,860,545

Basic and diluted net loss per share

$

(0.00)

$

(0.07)

$

(0.08)

$

(0.16)

$

(0.03)

$

(0.08)

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period. Because we have reported a net loss for the three and six months ended June 30,March 31, 2021 and 2020, and 2019, the number of shares used to calculate diluted net loss per common share is the same as the number of shares used to calculate basic net loss per common share because the potentially dilutive shares would have been antidilutive if included in the calculation.

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Three Months Ended March 31,

    

2020

    

2019

    

2020

    

2019

    

2021

    

2020

Stock options outstanding

 

7,742,158

 

6,038,890

 

7,742,158

6,038,890

 

6,521,067

7,742,158

Unvested restricted stock units

 

36,520

 

25,520

 

36,520

25,520

 

1,374,401

36,520

Total potentially dilutive securities

 

7,778,678

 

6,064,410

 

7,778,678

6,064,410

Total potential dilutive securities

 

7,895,468

7,778,678

Note 8. Long-term incentive plan

In 2018, the Company established a long-term incentive plan for certain employees. Under the plan, the employees will receive cash payments upon achievement of the same conditions of the Company’s return target options discussed previously. In conjunction with the IPO, the conditions of the long-term incentive plan were modified to also vest following an IPO and registration and sale of shares by Vista whereby Vista still must achieve a cash return on its equity investment in the Company equaling or exceeding $1.515 billion. The Company has established a pool of $7.0 million to provide these cash payments to employees. As of June 30, 2020, the Company had executed individual agreements with employees to pay $7.0 million upon achievement of the plan conditions. As of December 31, 2019, the Company had executed individual agreements with employees to pay $5.9 million upon achievement of the plan conditions. Consistent with the return target options, as of June 30, 2020 and December 31, 2019, 0 expense or liability has been recognized as the conditions for payment have not occurred.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 9.10. Share-based compensation

On July 21, 2020, the Company adopted the Jamf Holding Corp. Omnibus Incentive Plan (the “2020 Plan”). The 2020 Plan provides for grants of (i) stock options, (ii) stock appreciation rights, (iii) restricted shares, (iv) performance awards, (v) other share-based awards and (vi) other cash-based awards to eligible employees, non-employee directors and consultants of the Company. We initially reserved 14,800,000 shares of our common stock for issuance under the 2020 Plan. The total number of shares reserved for issuance under the 2020 Plan increases on January 1st of each of the first 10 calendar years during the term of the 2020 Plan by the lesser of: (i) a number of shares of our common stock equal to 4% of the total number of shares of our common stock outstanding on December 31st of the preceding calendar year or (ii) a number of shares of our common stock as determined by our board of directors. The maximum number of shares of common stock available for issuance under the 2020 Plan was 19,479,699 shares as of January 1, 2021. As of March 31, 2021, 18,105,298 shares of common stock are reserved for additional grants under the 2020 Plan.

The 2017 Stock Option Plan (“2017 Option Plan”) became effective November 13, 2017 upon the approval of the board of directors and, servesprior to the adoption of the 2020 Plan, served as the umbrella plan for the Company’s stock-based and cash-based incentive compensation program for its officers and other eligible employees. The aggregate number of shares of common stock that may be issued under the 2017 Option Plan may not exceed 8,470,000 shares. At June 30, 2020,As of March 31, 2021, 128,928 shares of common stock are reserved for additional grants under the 2017 Option Plan. All stock options granted by the Company were at an exercise price at or above the estimated fair market value of the Company’s common stock as of the grant date. NaN options were granted during the sixthree months ended June 30, 2020.

The table below summarizes return target options activity for the six months ended June 30, 2020:

Weighted 

Weighted 

Average 

Aggregate 

Average 

Remaining 

Intrinsic 

Exercise 

Contractual 

Value 

    

Options

    

Price

    

Term (Years)

    

(in thousands)

Outstanding, December 31, 2019

 

3,687,664

$

6.75

 

8.8

$

29,908

Granted

 

 

 

 

Exercised

 

 

 

 

Forfeitures

 

 

 

 

Outstanding, June 30, 2020

 

3,687,664

$

6.75

 

8.3

$

39,644

Options exercisable at June 30, 2020

 

$

 

$

Vested or expected to vest at June 30, 2020

 

$

 

$

There was approximately $33.0 million of unrecognized compensation expense related to these return target options at June 30, 2020.

Restricted stock unit (“RSU”) activity for the six months ended June 30, 2020 is as follows:

Per Unit 

    

Units

    

Fair Value

Outstanding, December 31, 2019

 

36,520

$

12.60

Granted

 

 

Restrictions lapsed

 

 

Forfeited

 

 

Outstanding, June 30, 2020

 

36,520

$

12.60

RSUs vest 100% on the one-year anniversary of the date of the grant. The estimated compensation cost of each RSU, which is equal to the fair value of the award on the date of grant, is recognized on a straight-line basis over the vesting period. At June 30, 2020, there was $0.2 million of total unrecognized compensation cost related to unvested restricted stock and that cost is expected to be recognized in the year.March 31, 2021.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The table below summarizes return target options activity for the three months ended March 31, 2021:

Weighted-

Weighted-

Average

Aggregate

Average

Remaining

Intrinsic

Exercise

Contractual

Value

    

Options

    

Price

    

Term (Years)

    

(in thousands)

Outstanding, December 31, 2020

3,687,664

$

6.75

7.8

$

85,444

Granted

0

Exercised

Forfeitures

Outstanding, March 31, 2021

 

3,687,664

$

6.75

 

7.5

$

105,358

Options exercisable at March 31, 2021

 

$

 

$

Vested or expected to vest at March 31, 2021

 

$

 

$

There was approximately $33.0 million of unrecognized compensation expense related to these return target options as of March 31, 2021. The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the optionholders had all optionholders exercised their options.

Restricted stock unit (“RSU”) activity for the three months ended March 31, 2021 was as follows:

    

    

    

Per Unit

Units

Fair Value

Outstanding, December 31, 2020

 

1,293,107

$

26.34

Granted

 

88,764

 

37.37

Restrictions lapsed

 

 

Forfeited

 

(7,470)

 

26.00

Outstanding, March 31, 2021

 

1,374,401

$

27.05

RSUs under the 2020 Plan vest ratably over four years. RSUs under the 2017 Option Plan vest 100% on the one-year anniversary of the date of the grant. The estimated compensation cost of each RSU, which is equal to the fair value of the award on the date of grant, is recognized on a straight-line basis over the vesting period. There was $31.3 million of total unrecognized compensation cost related to unvested restricted stock that is expected to be recognized over a weighted-average period of 3.4 years as of March 31, 2021.

The table below summarizes the service-based option activity for the sixthree months ended June 30, 2020:March 31, 2021:

Weighted 

Weighted 

Weighted 

Average 

Aggregate

Weighted 

Average 

Aggregate

Average 

Remaining

 Intrinsic 

Average 

Remaining

 Intrinsic 

Exercise 

Contractual 

Value 

Exercise 

Contractual 

Value 

    

Options

    

Price

    

Term (Years)

    

(in thousands)

    

Options

    

Price

    

Term (Years)

    

(in thousands)

Outstanding, December 31, 2019

 

4,073,286

$

5.65

 

8.1

$

37,520

Outstanding, December 31, 2020

3,546,826

$

5.65

7.1

$

86,098

Granted

 

 

 

 

Exercised

 

(18,792)

 

5.49

 

 

60

(713,423)

5.63

21,328

Forfeitures

 

 

 

 

Outstanding, June 30, 2020

 

4,054,494

$

5.65

 

7.6

$

48,044

Options exercisable at June 30, 2020

 

2,150,893

$

5.50

 

7.5

$

25,806

Vested or expected to vest at June 30, 2020

 

4,054,494

$

5.65

 

7.6

$

48,044

Outstanding, March 31, 2021

 

2,833,403

$

5.65

 

6.8

$

84,072

Options exercisable at March 31, 2021

 

1,790,693

$

5.50

 

6.7

$

53,395

Vested or expected to vest at March 31, 2021

 

2,833,403

$

5.65

 

6.8

$

84,072

The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the optionholders had all optionholders exercised their options on the last date of the period. The total fair value of service-based options vested during the six months ended June 30, 2020 was $0.6 million.

The Company recognized stock-based compensation expense for service-based stock options as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Cost of revenues:

 

  

 

  

 

  

Subscription

$

38

$

55

$

76

$

118

Services

 

 

 

 

Sales and marketing

 

111

 

143

 

222

 

236

Research and development

 

141

 

95

 

298

 

185

General and administrative

 

474

 

356

 

979

 

679

$

764

$

649

$

1,575

$

1,218

There was $4.6 million of unrecognized compensation expense related to service-based stock options that is expected to be recognized over a weighted-average period of 2.1 years at June 30, 2020.

Note 10. Income taxes

The Company’s effective tax rates for the three months ended June 30, 2020 and 2019 were 6.2% and 23.8%, respectively. The effective tax rate for the three months ended June 30, 2020 was impacted by $108 thousand of discrete income tax expense primarily due to the finalization of the net operating loss carryback changes related to the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The Company’s effective tax rates for the six months ended June 30, 2020 and 2019 were 27.2% and 23.7%, respectively. The effective tax rate for the six months ended June 30, 2020 was higher than the prior year period due to the impact of the net operating loss carryback and interest limitation changes related to the CARES Act, and a change in valuation allowance on foreign deferred tax assets related to a merger of subsidiaries. The effective tax rate for the six months ended June 30, 2020 was impacted by $210 thousand of discrete income tax benefit primarily due to the impact of the net operating loss carryback and interest limitation changes related to the CARES Act.

On March 27, 2020, the CARES Act was signed into law. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of social security taxes, the creation of certain refundable employee retention credits, and technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property. The Company anticipates it will benefit from the prior and future utilization of net operating losses and interest deductions. Beginning with pay dates on and after April 17, 2020, the Company has elected to defer the employer-paid portion of social security taxes.

value of service-based options vested during the three months ended March 31, 2021 was $0.7 million. There was $2.7 million of unrecognized compensation expense related to service-based options that is expected to be recognized over a weighted-average period of 1.5 years as of March 31, 2021.

The Company recognized stock-based compensation expense as follows:

Three Months Ended March 31,

    

2021

    

2020

(in thousands)

Cost of revenue:

 

  

Subscription

$

324

$

38

Services

 

77

 

Sales and marketing

 

842

 

111

Research and development

 

778

 

157

General and administrative

 

811

 

505

$

2,832

$

811

Note 11. Income taxes

The Company’s effective tax rates for the three months ended March 31, 2021 and 2020 were (2.2)% and 28.0%, respectively. The effective tax rate for the three months ended March 31, 2021 was lower than the prior year period due to Section 162(m) of the Internal Revenue Code, stock option activity and the domestic valuation allowance. The effective tax rate for the three months ended March 31, 2021 differs from the statutory rate primarily as a result of the domestic valuation allowance. The effective tax rate for the three months ended March 31, 2021 was impacted by less than $0.1 million of discrete income tax expense. The Company’s annual effective tax rates for the three months ended March 31, 2021 and 2020 were (0.5)% and 25.2%, respectively.

Note 11.12. Related-party transactions

The Company made pledges to the JAMFJamf Nation Global Foundation (“JNGF”) of $0.1 million for both the three and six months ended June 30, 2019.March 31, 2021. The Company did not make any pledges to the JNGF for the three and six months ended June 30,March 31, 2020. As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the Company’sCompany accrued liabilities$0.4 million and $0.9 million, respectively, related to JNGF pledges, were $0.6 million and $1.0 million, respectively, which are included in accrued expenses onliabilities in the consolidated balance sheet.

sheets. The Company has an ongoing lease agreement for office space in Eau Claire, Wisconsin with an entity in which a related party is a minority owner. See Note 6 for further discussion of this lease agreement. The Company may engage in transactions in the ordinary course of business with other companies whose directors or officers may also serve as directors or officers for the Company. The Company carries out these transactions on customary terms.

Vista is a U.S.-based investment firm that controls the funds which own a majority of the Company. The Company has paid for consulting services and other expenses related to services provided by Vista and Vista affiliates. The total expenses incurred by the Company for these services with Vista were less than $0.1 million and $0.3$0.2 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $0.3 million and $0.6 million for the six months ended June 30, 2020 and 2019, respectively. The Company had less than $0.1 million in accounts payable related to these expenses at June 30, 2020. The Company had no amounts in accounts payable related to these expenses atas of both March 31, 2021 and December 31, 2019.2020.

The Company also has revenue arrangements with Vista affiliates. The Company recognized revenue related to these arrangements of $0.3$0.2 million and $0.2$0.3 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $0.6 million and $0.4 million for the six months ended June 30, 2020 and 2019, respectively. The Company had $0.2 million in accounts receivable related to these agreements at June 30, 2020. The Company had no amountsas of March 31, 2021 and $0.3 million in accounts receivable related to these agreements atas of December 31, 2019.2020.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

In addition, the Company pays for services with Vista affiliates in the normal course of business. The total expenses incurred by the Company for services with Vista affiliates were $0.2 million and $0.1 million for both the three months ended June 30,March 31, 2021 and 2020, and 2019 and $0.3 million for both the six months ended June 30, 2020 and 2019.respectively. The Company had less than $0.1 million in accounts payable related to these expenses at June 30, 2020. The Company had no amountsas of March 31, 2021 and $0.1 million in accounts payable related to these expenses atas of December 31, 2019.2020.

Prior to its termination and repayment in full on July 27, 2020, the Company had thewas party to a term loan facility (the “Prior Term Loan FacilityLoan”) and pursuant to the Company’s Prior Credit Agreement, a $15 million revolving credit facility with a maturity date of November 13, 2022 (the “Prior Revolving Credit Facility”) with a consortium of lenders for a principal amount of $205.0 million and principal committed amount of $15.0 million, respectively. At both June 30, 2020 and December 31, 2019, affiliates of Vista held $34.9 million of the Term Loan Facility and there were no amounts drawn on the Prior Revolving Credit Facility. During the three months ended June 30,March 31, 2020, and 2019, affiliates of Vista were paid $0.8 million and $1.0 million, respectively, in interest on the portion of the Prior Term Loan Facility held by them. During the six months ended June 30, 2020 and 2019, affiliates of Vista were paid $1.6 million and $2.0 million, respectively, in interest on the portion of the Term Loan Facility held by them.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Note 12.13. Subsequent eventsevent

On July 10, 2020,May 11, 2021, the Company effectedannounced that it has signed a 110-for-1 stock split of its common stock. The par valuedefinitive agreement (the “Merger Agreement”) to acquire Wandera, Inc. (“Wandera”), a leader in zero trust cloud security and access for mobile devices. Under the terms of the common stock was not adjusted as a resultMerger Agreement, Jamf will acquire Wandera for total cash consideration of the stock split. Accordingly, all share$400.0 million subject to customary adjustments, including working capital, indebtedness, closing cash on hand and per share amounts for all periods presentedtransaction expenses. The total consideration consists of an initial payment of $350.0 million at close and deferred consideration of $50.0 million to be paid in the accompanying consolidated financial statements$25.0 million increments on October 1, 2021 and notes thereto have been adjusted retrospectively, where applicable, to reflect this stock split.

On July 21, 2020, the Company adopted the Jamf Holding Corp. Omnibus Incentive Plan (the “2020 Plan”)December 15, 2021. The 2020 Plan provides for grants of (i) stock options, (ii) stock appreciation rights, (iii) restricted shares, (iv) performance awards, (v) other share-based awards and (vi) other cash-based awardstransaction is expected to eligible employees, non-employee directors and consultants of the Company. The maximum number of shares of common stock available for issuance under the 2020 Plan is 14,800,000 shares.

On July 24, 2020, the Company closed its IPO through which it issued and sold 13,500,000 shares of common stock at a price per share of $26.00. The Company received aggregate proceeds of approximately $319.0 million from the IPO, after deducting the underwriting discount and offering expenses payable by us. Upon completion of the IPO, authorized capital stock consists of 500,000,000 shares of common stock, par value $0.001 per share, and 50,000,000 shares of undesignated preferred stock, par value $0.001 per share. Immediately after our IPO, funds controlled by our equity sponsor Vista own approximately 72.9% of our outstanding common stock. As a result, we are a "controlled company" under NASDAQ corporate governance rules. Upon closing of the IPO, the Company repaid $205.0 million of the principal amount of the Term Loan Facility and paid $3.4 million of accrued interest and $2.0 million of prepayment penalty. The Company also wrote off $3.2 million of remaining debt issuance costs upon repayment of the debt. The Company recorded a loss on debt extinguishment of $5.2 million for the prepayment penalty and write off of debt issuance costs inclose during the third quarter of 2020.

In addition, in conjunction with the closing of the IPO, our Board granted awards under the 2020 Plan to certain of our employees, representing an aggregate of 1,256,538 shares of common stock.

On July 27, 2020, the Company entered into a new secured credit agreement (the “New Credit Agreement”) for an initial revolving credit facility of $150 million (the “New Revolving Credit Facility”), which may be increased or decreased under specific circumstances, with a $25 million letter of credit sublimit and a $50 million alternative currency sublimit. In addition, the New Credit Agreement provides for the ability of the Company to request incremental term loan facilities, in a minimum amount of $5 million for each facility. Borrowings under the New Credit Agreement mature on July 27, 2025. The New Credit Agreement contains customary representations and warranties, affirmative covenants, reporting obligations, negative covenants and events of default. In the third quarter of 2020, the Company recorded debt issuance costs of $1.2 million related2021, subject to the New Credit Agreement. There have been no borrowings against the New Credit Agreement.satisfaction of customary closing conditions, including required U.S. regulatory approvals.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate", "estimate", "expect", "project", "plan", "intend", "believe", "may", "will", "should", "can have", "likely"“anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, growth rates and financial results or our plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

the ability of Jamf and Wandera to close the announced transaction;
the ability of Jamf to realize the potential benefits of the acquisition of Wandera;
the possibility that the closing of the transaction may be delayed;
other risks related to Jamf’s integration of Wandera’s business, team, and technology;
the impact on our operations and financial condition from the effects of the current COVID-19 pandemic;
the potential impact of customer dissatisfaction with Apple or other negative events affecting Apple services and devices, and failure of enterprises to adopt Apple products;
the potentially adverse impact of changes in features and functionality by Apple on our engineering focus or product development efforts;
changes in our continued relationship with Apple;
the fact that we are not party to any exclusive agreements or arrangements with Apple;
our reliance, in part, on channel partners for the sale and distribution of our products;
risks associated with cyber-security events;
the impact of reputational harm if users perceive our products as the cause of device failure;
our ability to successfully develop new products or materially enhance current products through our research and development efforts;
our ability to continue to attract new customers;
our ability to retain our current customers;
our ability to sell additional functionality to our current customers;
our ability to meet service-level commitments under our subscription agreements;
our ability to correctly estimate market opportunity and forecast market growth;

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risks associated with failing to continue our recent growth rates;
our dependence on one of our products for a substantial portion of our revenue;
our ability to scale our business and manage our expenses;

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our ability to change our pricing models, if necessary to compete successfully;
the impact of delays or outages of our cloud services from any disruptions, capacity limitations or interferences of third-party data centers that host our cloud services, including Amazon Web Services or AWS;(“AWS”);
our ability to maintain, enhance and protect our brand;
our ability to maintain our corporate culture;
the ability of Jamf Nation to thrive and grow as we expand our business;
the potential impact of inaccurate, incomplete or misleading content that is posted on Jamf Nation;
our ability to offer high-quality support;
risks and uncertainties associated with potential acquisitions and divestitures, including, but not limited to, disruptions to ongoing operations; diversions of management from day-to-day responsibilities; adverse impacts on our financial condition; failure of an acquired business to further our strategy; uncertainty of synergies; personnel issues; resulting lawsuits and issues unidentified in diligence processes;
our ability to predict and respond to rapidly evolving technological trends and our customers' changing needs;
our ability to compete with existing and new companies;
the impact of adverse general and industry-specific economic and market conditions;
the impact of reductions in IT spending;
our ability to attract and retain highly qualified personnel;
risks associated with competitive challenges faced by our customers;
the impact of our often long and unpredictable sales cycle;
our ability to develop and expand our marketing and sales capabilities;
the risks associated with sales to new and existing enterprise customers;
the risks associated with free trials and other inbound, lead-generation sales strategies;
the risks associated with indemnity provisions in our contracts;
our management team’s limited experience managing a public company;
the impact of any catastrophic events;

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the impact of global economic conditions;
risks associated with cyber-security events;
the impact of real or perceived errors, failures or bugs in our products;
the impact of interruptions or performance problems associated with our technology or infrastructure;
our ability to attract and retain highly qualified personnel;
risks associated with competitive challenges faced by our customers;
the impact of statutory and regulatory determinations on our offeringsgeneral disruptions to governmental entities;data transmission;
risks associated with stringent and changing privacy laws, regulations and standards, and information security policies and contractual obligations related to data privacy and security;
the impact of any catastrophic events;risks associated with intellectual property infringement, misappropriation or other claims;
our reliance on third-party software and intellectual property licenses;
our ability to obtain, protect, enforce and maintain our intellectual property and proprietary rights;
the risks associated with our financial results or difficultyuse of open source software in predicting our financial results due to our revenue recognition;products; and
other factors disclosed in the section entitled "Risk Factors"“Risk Factors” and elsewhere in our IPO prospectusAnnual Report on Form 10-K and this Quarterly Report on Form 10-Q.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual

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results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under "Risk Factors"“Risk Factors” and "Management's“Management's Discussion and Analysis of Financial Condition and Results of Operations"Operations” in our Annual Report on Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this prospectus.Quarterly Report on Form 10-Q. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this prospectus in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

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Item 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and the related notes in the IPO Prospectus.our Annual Report on Form 10-K. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and in the IPO Prospectus,our Annual Report on Form 10-K, particularly in the sections entitled “Risk Factors” and “Forward-Looking Statements”.Statements.”

Overview

We are the standard in Apple Enterprise Management, and our cloud software platform is the only vertically-focused Apple infrastructure and security platform of scale in the world. We help organizations, including businesses, hospitals, schools and government agencies, connect, manage and protect Apple products, apps and corporate resources in the cloud without ever having to touch the devices. With Jamf’s software, Apple devices can be deployed to employees brand new in the shrink-wrapped box, set up automatically and personalized at first power-on and administered continuously throughout the life of the device.

Jamf was founded in 2002, around the same time that Apple was leading an industry transformation. Apple transformed the way people access and utilize technology through its focus on creating a superior consumer experience. With the release of revolutionary products like the Mac, iPod, iPhone and iPad, Apple built the world’s most valuable brand and became ubiquitous in everyday life.

We have built our company through a singular focus on being the primary solution for Apple in the enterprise. Through our long-standing relationship with Apple, we have accumulated significant Apple technical experience and expertise that give us the ability to fully and quickly leverage and extend the capabilities of Apple products, OSsoperating systems and services. This expertise enables us to fully support new innovations and OSoperating system releases the moment they are made available by Apple. This focus has allowed us to create a best-in-class user experience for Apple in the enterprise.

We sell our SaaS solutions via a subscription model, through a direct sales force, online and indirectly via our channel partners, including Apple. Our multi-dimensional go-to-market model and cloud-deployed offering enable us to reach all organizations around the world, large and small, with our software solutions. As a result, we continue to see rapid growth and expansion of our customer base as Apple continues to gain momentum in the enterprise.

On May 11, 2021, we announced the acquisition of Wandera, a leader in zero trust cloud security and access for mobile devices, extending our leadership in Apple Enterprise Management. See Note 13 for further information on the acquisition. Until close, the companies will continue to operate independently. We currently intend to finance the acquisition with a combination of cash on hand and debt financing.

Response to COVID-19

With social distancing measures having been implemented to curtail the spread of COVID-19, we enacted a robust business continuity plan, including a global work-from-home policy for all of our employees. We believe our internal cloud-first technology platforms have allowed for a seamless transition to a remote working environment without any material impacts to our business, highlighting the resilience of our business model. Our product portfolio and platform has enabled our commercial customers to continue with their efforts to work remotely, our K-12 and higher-education customers to deliver distance learning and our health-care customers to provide quality care via a telehealth model, a solution that was conceptualized and released during the current pandemic. We believe that a

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business like ours is well-suited to navigate the current environment in which customers are focused on effectively conducting business remotely, while the underlying demand for our core products remains relatively unchanged.

The extent to which the COVID-19 pandemic affects our business will depend on future developments in the United States and around the world, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions required to contain and treat it, among others. Although the ultimate impact of the COVID-19 pandemic on our business and financial results remains

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uncertain, a continued and prolonged public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, operating results and financial condition. See "Risk“Risk Factors — Risks Relating to Our Business — The COVID-19 pandemic could materially adversely affect our business, operating results, financial condition and prospects"prospects” included in our IPO ProspectusPart II, Item 1A in this Quarterly Report on Form 10-Q for additional information.

Key Factors Affecting Our Performance

Our historical financial performance has been, and we expect our financial performance in the future to be, driven by our ability to:

Attract new customers. Our ability to attract new customers is dependent upon a number of factors, including the effectiveness of our pricing and solutions, the features and pricing of our competitors' offerings, the effectiveness of our marketing efforts, the effectiveness of our channel partners in selling, marketing and deploying our software solutions and the growth of the market for Apple devices and services for SMBs and enterprises. Sustaining our growth requires continued adoption of our platform by new customers. We intend to continue to invest in building brand awareness as we further penetrate our addressable markets. We intend to expand our customer base by continuing to make significant and targeted investments in our direct sales and marketing to attract new customers and to drive broader awareness of our software solutions. 

Expand within our customer base. Our ability to increase revenue within our existing customer base is dependent upon a number of factors, including their satisfaction with our software solutions and support, the features and pricing of our competitors’ offerings and our ability to effectively enhance our platform by developing new products and features and addressing additional use cases. Often our customers will begin with a small deployment and then later expand their usage more broadly within the enterprise as they realize the benefits of our platform. We believe that our "land“land and expand"expand” business model allows us to efficiently increase revenue from our existing customer base. We intend to continue to invest in enhancing awareness of our software solutions, creating additional use cases, and developing more products, features, and functionality, which we believe are important factors to expand usage of our software solutions by our existing customer base. We believe our ability to retain and expand usage of our software solutions by our existing customer base is evidenced by our dollar-based net retention rate.

Sustain product innovation and technology leadership. Our success is dependent on our ability to sustain product innovation and technology leadership in order to maintain our competitive advantage. We believe that we have built a highly differentiated platform and we intend to further extend the adoption of our platform through additional innovation. While sales of subscriptions to our Jamf Pro product account for most of our revenue, we intend to continue to invest in building additional products, features and functionality that expand our capabilities and facilitate the extension of our platform to new use cases. Our future success is dependent on our ability to successfully develop, market and sell additional products to both new and existing customers. For example, in 2018, we introduced Jamf Connect to provide users with a seamless connection to corporate resources using a single identity and in 2019 we introduced Jamf Protect to extend Apple's security and privacy model to enterprise teams by creating unprecedented visibility into MacOS fleets through customized remote monitoring and threat detection and prevention.

Continue investment in growth. Our ability to effectively invest for growth is dependent upon a number of factors, including our ability to offset anticipated increases in operating expenses with revenue growth, our ability to spend our research and development budget efficiently or effectively on compelling innovation and technologies, our ability to accurately predict costs and our ability to maintain our corporate culture as our headcount expands. We plan to continue investing in our business so we can capitalize on our market opportunity. We intend to grow our sales team to target expansion within our midmarket and enterprise customers and to attract new customers. We expect to continue to

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make focused investments in marketing to drive brand awareness and enhance the effectiveness of our customer acquisition model. We also intend to continue to add headcount to our research and development team to develop new and improved products, features and functionality. Although these investments may increase our operating expenses and, as a result, adversely affect our operating results in the near term, we believe they will contribute to our long-term growth.

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Continue international expansion. Our international growth in any region will depend on our ability to effectively implement our business processes and go-to-market strategy, our ability to adapt to market or cultural differences, the general competitive landscape, our ability to invest in our sales and marketing channels, the maturity and growth trajectory of Apple devices and services by region and our brand awareness and perception. We plan to continue making investments in our international sales and marketing channels to take advantage of this market opportunity while refining our go-to-market approach based on local market dynamics. While we believe global demand for our platform will increase as international market awareness of Jamf grows, our ability to conduct our operations internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems (including with respect to data transfer and privacy), alternative dispute systems and commercial markets. In addition, global demand for our platform and the growth of our international operations is dependent upon the rate of market adoption of Apple products in international markets.

Enhance our offerings via our partner network. Our success is dependent not only on our independent efforts to innovate, scale and reach more customers directly but also on the success of our partners to continue to gain share in the enterprise. With a focus on the user and being the bridge between critical technologies — with Apple and Microsoft as two examples — we feel we can help other market participants deliver more to enterprise users with the power of Jamf. We will continue to invest in the relationships with our existing, critical partners, nurture and develop new relationships and do so globally. We will continue to invest in developing "plus one"“plus one” solutions and workflows that help tie our software solutions together with those delivered by others.

Key Business Metrics

In addition to our GAAP financial information, we review several operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.

Number of Devices

We believe our ability to grow the number of devices on our software platform provides a key indicator of the growth of our business and our future business opportunities. We define a device at the end of any particular period as a device owned by a customer, owningwhich device has at least one Jamf product pursuant to an active subscription or support and maintenance agreement or that has a reasonable probability of renewal. We define a customer at the end of any particular period as an entity with at least one active subscription or support and maintenance agreement as of the measurement date or that has a reasonable probability of renewal. A single organization with separate subsidiaries, segments or divisions that use our platform may represent multiple customers as we treat each entity, subsidiary, segment or division that is invoiced separately as a single customer. In cases where customers subscribe to our platform through our channel partners, each end customer is counted separately. A single customer may have multiple Jamf products on a single device, but we still would only count that as one device. 

The number of devices was 17.221.8 million and 14.516.3 million as of June 30,March 31, 2021 and 2020, and 2019, respectively, representing a 19%34% year-over-year growth rate. In the second quarter of 2020, we sawWe have seen particular strength in the growth rate of devices in the healthcare and education verticals, as COVID-19 has accelerated the demand for organizations to connect remotely, manage, and protect their Apple devices.

Annual Recurring Revenue

ARRAnnual Recurring Revenue (“ARR”) represents the annualized value of all subscription and support and maintenance contracts as of the end of the period. ARR mitigates fluctuations due to seasonality, contract term and the

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sales mix of subscriptions for term-based licenses and SaaS. ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

Our ARR was $241.0$308.0 million and $177.1$224.9 million as of June 30,March 31, 2021 and 2020, and 2019, respectively, which is an increase of 36%37% year-over-year. The growth in our ARR is primarily driven by our high device expansion rates, our new logo acquisition and the upselling and cross selling opportunities forof products into our installed base.

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Dollar-Based Net Retention Rate

To further illustrate the “land and expand” economics of our customer relationships, we examine the rate at which our customers increase their subscriptions for our software solutions. Our dollar-based net retention rate measures our ability to increase revenue across our existing customer base through expanded use of our software solutions, offset by customers whose subscription contracts with us are not renewed or renew at a lower amount.

We calculate dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period end or (“Prior Period ARR.ARR”). We then calculate the ARR from these same customers as of the current period end or (“Current Period ARR.ARR”). Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the dollar-based net retention rate.

Our dollar-based net retention rates were 117% and 120% for the trailing twelve months ended June 30,March 31, 2021 and 2020, and 2019, respectively. Our high dollar-based net retention rates are primarily attributable to an expansion of devices. We believe our ability to cross-sell our new solutions to our installed base, particularly Jamf Connect and Jamf Protect, will continue to support our high dollar-based net retention rates.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe the non-GAAP measures of Non-GAAP Gross Profit, Non-GAAP Gross Profit Margin, Non-GAAP Operating Income, Non-GAAP Operating Income Margin, Non-GAAP Net Income and Adjusted EBITDA are useful in evaluating our operating performance. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

Non-GAAP Gross Profit

Non-GAAP Gross Profit is aand Non-GAAP Gross Profit Margin are supplemental measuremeasures of operating performance that isare not prepared in accordance with GAAP and that doesdo not represent, and should not be considered as, an alternativealternatives to gross profit or gross profit margin, as determined in accordance with GAAP. We define Non-GAAP Gross Profit as gross profit, adjusted for stock-based compensation expense and amortization expense. We define Non-GAAP Gross Profit Margin as Non-GAAP Gross Profit as a percentage of total revenue.

We use Non-GAAP Gross Profit and Non-GAAP Gross Profit Margin to understand and evaluate our core operating performance and trends and to prepare and approve our annual budget. We believe Non-GAAP Gross Profit is aand Non-GAAP Gross Profit Margin are useful measuremeasures to us and to our investors to assist in evaluating our core

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operating performance because it provides consistency and direct comparability with our past financial performance and between fiscal periods, as the metric eliminates the effects of variability of stock-based compensation expense and amortization of acquired developed technology, which are non-cash expenses that may fluctuate for reasons unrelated to overall operating performance. While the amortization expense of acquired developed technology is excluded from Non-GAAP Gross Profit, the revenue related to acquired developed technology is reflected in Non-GAAP Gross Profit as these assets contribute to our revenue generation.

Non-GAAP Gross Profit hasand Non-GAAP Gross Profit Margin have limitations as an analytical tool,tools, and you should not consider itthem in isolation, or as a substitutesubstitutes for analysis of our results as reported under GAAP. Because of these limitations, Non-GAAP Gross Profit and Non-GAAP Gross Profit Margin should not be considered as a replacementreplacements for gross profit or gross profit margin, as determined by GAAP, or as a measuremeasures of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes.

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A reconciliation of Non-GAAP Gross Profit to gross profit, the most directly comparable GAAP measure, is as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Gross profit

$

48,584

$

34,825

$

93,963

$

65,912

Amortization expense

 

2,678

 

2,513

 

5,355

 

4,954

Stock-based compensation

 

38

 

55

 

76

 

118

Non-GAAP Gross Profit

$

51,300

$

37,393

$

99,394

$

70,984

Non-GAAP Gross Profit Margin

82

%

77

%

81

%

77

%

Three Months Ended March 31,

    

2021

    

2020

 

(in thousands)

Gross profit

$

63,912

$

45,379

Amortization expense

 

2,777

 

2,677

Stock-based compensation

 

401

 

38

Non-GAAP Gross Profit

$

67,090

$

48,094

Non-GAAP Gross Profit Margin

83

%

80

%

Non-GAAP Operating Income

Non-GAAP Operating Income is aand Non-GAAP Operating Income Margin are supplemental measuremeasures of operating performance that isare not prepared in accordance with GAAP and that doesdo not represent, and should not be considered as, an alternativealternatives to operating loss or operating loss margin, as determined in accordance with GAAP. We define Non-GAAP Operating Income as operating loss, adjusted for amortization, stock-based compensation, amortization, acquisition-related expense, acquisition-related earnout, payroll taxes related to stock-based compensation and acquisition-related earnout.costs associated with our secondary offerings. In the first quarter of 2021, we began excluding payroll taxes related to stock-based compensation from our non-GAAP measures as these expenses are tied to the exercise or vesting of underlying equity awards and the price of our common stock at the time of vesting or exercise. As a result, these taxes may vary in any particular period independent of the financial and operating performance of our business. Payroll taxes related to stock-based compensation were not material prior to the first quarter of 2021. We define Non-GAAP Operating Income Margin as Non-GAAP Operating Income as a percentage of total revenue.

We use Non-GAAP Operating Income and Non-GAAP Operating Income Margin to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short-term and long-term operating plans. We believe that Non-GAAP Operating Income facilitatesand Non-GAAP Operating Income Margin facilitate comparison of our operating performance on a consistent basis between periods, and when viewed in combination with our results prepared in accordance with GAAP, helpshelp provide a broader picture of factors and trends affecting our results of operations. While the amortization expense of acquired trademarks, customer relationships, and developed technology is excluded from Non-GAAP Operating Income, the revenue related to acquired trademarks, customer relationships, and developed technology is reflected in Non-GAAP Operating Income as these assets contribute to our revenue generation.

Non-GAAP Operating Income hasand Non-GAAP Operating Income Margin have limitations as an analytical tool,tools, and you should not consider itthem in isolation, or as a substitutesubstitutes for analysis of our results as reported under GAAP. Because of these limitations, Non-GAAP Operating Income and Non-GAAP Operating Income Margin should not be considered as a replacementreplacements for operating loss or operating loss margin, as determined by GAAP, or as a measuremeasures of our

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profitability. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes.

A reconciliation of Non-GAAP Operating Income to operating loss, the most directly comparable GAAP measure, is as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Operating income (loss)

$

4,216

$

(4,438)

$

(2,267)

$

(10,566)

Stock-based compensation

 

764

 

649

 

1,575

 

1,218

Acquisition-related expense

 

1,636

 

 

3,236

 

904

Amortization expense

 

8,312

 

8,139

 

16,663

 

16,213

Acquisition-related earnout

 

(3,700)

 

 

(3,700)

 

Non-GAAP Operating Income

$

11,228

$

4,350

$

15,507

$

7,769

Non-GAAP Operating Income Margin

18

%

9

%

13

%

8

%

Three Months Ended March 31,

    

2021

    

2020

 

(in thousands)

Operating loss

$

(2,778)

$

(6,483)

Amortization expense

 

8,404

 

8,351

Stock-based compensation

 

2,832

 

811

Acquisition-related expense

 

110

 

1,600

Acquisition-related earnout

 

300

 

Payroll taxes related to stock-based compensation

395

Non-GAAP Operating Income

$

9,263

$

4,279

Non-GAAP Operating Income Margin

11

%

7

%

Non-GAAP Net Income (Loss)

Non-GAAP Net Income (Loss) is a supplemental measure of operating performance that is not prepared in accordance with GAAP and that does not represent, and should not be considered as, an alternative to net loss, as determined in accordance with GAAP. We define Non-GAAP Net Income (Loss) as net loss, adjusted for amortization, stock-based compensation,

29

foreign currency transaction loss, Tableloss on extinguishment of Contentsdebt,

amortization, acquisition-related expense, acquisition-related earnout, foreign currency transaction loss,costs associated with our secondary offerings, payroll taxes related to stock-based compensation, discrete tax items and provision (benefit) for income taxes.

We use Non-GAAP Net Income (Loss) to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short-term and long-term operating plans. We believe that Non-GAAP Net Income (Loss) facilitates comparison of our operating performance on a consistent basis between periods, and when viewed in combination with our results prepared in accordance with GAAP, helps provide a broader picture of factors and trends affecting our results of operations. While the amortization expense of acquired trademarks, customer relationships, and developed technology is excluded from Non-GAAP Net Income (Loss), the revenue related to acquired trademarks, customer relationships, and developed technology is reflected in Non-GAAP Net Income (Loss) as these assets contribute to our revenue generation.

Non-GAAP Net Income (Loss) has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, Non-GAAP Net Income (Loss) should not be considered as a replacement for net loss, as determined by GAAP, or as a measure of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes.

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A reconciliation of Non-GAAP Net Income (Loss) to net loss, the most directly comparable GAAP measure, is as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Net loss

$

(423)

$

(7,671)

$

(8,713)

$

(16,681)

Stock-based compensation

 

764

 

649

 

1,575

 

1,218

Acquistion-related expense

 

1,636

 

 

3,236

 

904

Amortization expense

8,312

8,139

16,663

16,213

Acquisition-related earnout

(3,700)

(3,700)

Foreign currency transaction loss

13

197

317

450

Discrete tax items

 

108

 

5

 

(210)

 

24

Benefit for income taxes(1)

 

(1,716)

 

(2,195)

 

(4,420)

 

(4,589)

Non-GAAP Net Income (Loss)

$

4,994

$

(876)

$

4,748

$

(2,461)

Three Months Ended March 31,

    

2021

    

2020

 

(in thousands)

Net loss

$

(3,069)

$

(8,290)

Amortization expense

8,404

8,351

Stock-based compensation

 

2,832

 

811

Foreign currency transaction loss

171

304

Acquisition-related expense

 

110

 

1,600

Acquisition-related earnout

300

Payroll taxes related to stock-based compensation

395

Discrete tax items

 

49

 

(318)

Provision (benefit) for income taxes(1)

 

66

 

(2,703)

Non-GAAP Net Income (Loss)

$

9,258

$

(245)

(1) TheIn the first quarter of 2020, the related tax effects of the adjustments to Non-GAAP Net Income (Loss) were calculated using the respective statutory tax ratesrate for applicable jurisdictions, which iswas not materially different from our annual effective tax rate for full year 2020 of approximately 25%. In the first quarter of 2021, our annual effective tax rate was impacted by changes in the domestic valuation allowance. Therefore, we used the annual effective tax rate of (0.5)% in the first quarter of 2021 as this rate was materially different than our statutory rate.

Adjusted EBITDA

Adjusted EBITDA is a supplemental measure of operating performance that is not prepared in accordance with GAAP and that does not represent, and should not be considered as, an alternative to net loss, as determined in accordance with GAAP. We define Adjusted EBITDA as net loss, adjusted for interest expense, net, benefitprovision (benefit) for income taxes, depreciation and amortization, stock-based compensation, foreign currency transaction loss, loss on extinguishment of debt, acquisition-related expense, acquisition-related earnout, costs associated with our secondary offerings and foreign currency transaction loss.payroll taxes related to stock-based compensation.

We use Adjusted EBITDA to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short-term and long-term operating plans. We believe that Adjusted EBITDA facilitates comparison of our operating performance on a consistent basis between periods, and when viewed in combination with our results prepared in accordance with GAAP, helps provide a broader picture of factors and trends affecting our results of operations.

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Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, Adjusted EBITDA should not be considered as a replacement for net loss, as determined by GAAP, or as a measure of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes.

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A reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP measure, is as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Net loss

$

(423)

$

(7,671)

$

(8,713)

$

(16,681)

Interest expense, net

4,690

5,481

9,468

10,952

Benefit for income taxes

(28)

(2,390)

(3,248)

(5,177)

Depreciation expense

1,104

999

2,339

1,872

Amortization expense

8,312

8,139

16,663

16,213

Stock-based compensation

 

764

 

649

 

1,575

 

1,218

Acquisition-related expense

 

1,636

 

 

3,236

 

904

Acquisition-related earnout

 

(3,700)

 

 

(3,700)

 

Foreign currency transaction loss

 

13

 

197

 

317

 

450

Adjusted EBITDA

$

12,368

$

5,404

$

17,937

$

9,751

Three Months Ended March 31,

    

2021

    

2020

 

(in thousands)

Net loss

$

(3,069)

$

(8,290)

Interest expense, net

55

4,778

Provision (benefit) for income taxes

65

(3,220)

Depreciation expense

1,380

1,235

Amortization expense

8,404

8,351

Stock-based compensation

 

2,832

 

811

Foreign currency transaction loss

 

171

 

304

Acquisition-related expense

 

110

 

1,600

Acquisition-related earnout

 

300

 

Payroll taxes related to stock-based compensation

395

 

Adjusted EBITDA

$

10,643

$

5,569

Components of Results of Operations

Revenues

We recognize revenue under ASC 606 when or as performance obligations are satisfied. We derive revenue primarily from sales of SaaS subscriptions and support and maintenance contracts, and to a lesser extent, sales of on-premise subscriptions and perpetual licenses and services.

Subscription. Subscription revenue consists of sales of SaaS subscriptions and support and maintenance contracts. We sell our software solutions primarily with a one-year contract term. We typically invoice SaaS subscription fees and support and maintenance fees annually in advance and recognize revenue ratably over the term of the applicable agreement, provided that all other revenue recognition criteria have been satisfied. In the fourth quarter of 2020, we reclassified the license portion of on-premise subscription revenue from license revenue to subscription revenue in the consolidated statements of operations on a retroactive basis. See “—additional information in “Note 1 — Basis of Presentation and Description of Business” to the consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The license portion of on-premise subscription revenue is recognized upfront, assuming all revenue recognition criteria are satisfied. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” in our IPO ProspectusAnnual Report on Form 10-K for more information. We expect subscription revenuesrevenue to increase over time as we expand our customer base because sales to new customers are expected to be primarily SaaS subscriptions.

License. License revenue consists of revenue from on-premise perpetual licenses and the license portion of on-premise subscriptions of our Jamf Pro product sold primarily to existing customers. We recognize all license revenue upfront, assuming all revenue recognition criteria are satisfied. We expect license revenuesrevenue to decrease because sales to new customers are primarily cloud-based subscription arrangements and therefore reflected in subscription revenue.

Services. Services revenues consist primarily of professional services provided to our customers to configure and optimize the use of our software solutions, as well as training services related to the operation of our software solutions. Our services are priced on a fixed fee basis and generally invoiced in advance of the service being delivered. Revenue is recognized as the services are performed. We expect services revenues to decrease as a percentage of total revenue as the demand for our services is not expected to grow at the same rate as the demand for our subscription solutions.

Cost of Revenues

Cost of subscription. Cost of subscription revenue consists primarily of employee compensation costs for employees associated with supporting our subscription and support and maintenance arrangements, our customer success

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function, and third-party hosting fees related to our cloud services. Employee compensation and related costs include cash compensation and benefits to employees and associated overhead costs. We expect cost of subscription revenue to increase in absolute dollars, but to remain relatively consistent as a percentage of subscription revenue, relative to the extent of the growth of our business.

Cost of services. Cost of services revenue consists primarily of employee compensation costs directly associated with delivery of professional services and training, costs of third-party integrators and other associated overhead costs. We expect cost of services revenue to decrease in absolute dollars relative to the decrease of our services business.

Gross Profit and Gross Margin

Gross profit, or revenue less cost of revenue, has been and will continue to be affected by various factors, including the mix of cloud-based subscription customers, the costs associated with supporting our cloud solution, the extent to which we expand our customer support team and the extent to which we can increase the efficiency of our technology and infrastructure though technological improvements. We expect our gross profit to increase in absolute dollars. We expect our gross margin to increase over time as compared to the rates we delivered prior to the impact of COVID, as recurring revenue becomes a larger proportion of revenue, and as we increase average ARR per device.

Operating Expenses

Sales and Marketing. Sales and marketing expenses consist primarily of employee compensation costs, sales commissions, costs of general marketing and promotional activities, travel-related expenses and allocated overhead. Sales commissions earned by our sales force are deferred and amortized over the period of benefit, which is estimated to be 5 years. We expect our sales and marketing expenses to increase on an absolute dollar basis as we expand our sales personnel and marketing efforts.

Research and development. Research and development expenses consist primarily of personnel costs and allocated overhead. We will continue to invest in innovation so that we can offer our customers new solutions and enhance our existing solutions. See “Business — Research and Development” in our IPO ProspectusAnnual Report on Form 10-K for more information. We expect such investment to increase on an absolute dollar basis as our business grows.

General and Administrative. General and administrative expenses consist primarily of employee compensation costs for corporate personnel, such as those in our executive, human resource, facilities, accounting and finance, legal and compliance, and information technology departments. In addition, general and administrative expenses include acquisition-related expenses which primarily consist of third-party expenses, such as legal and accounting fees, and adjustments to contingent consideration. General and administrative expenses also include costs incurred in secondary offerings. We expect our general and administrative expenses to increase on a dollar basis as our business grows, particularly as we continue to invest in technology infrastructure and expand our operations globally. Also, we expect to incur additional general and administrative expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and increased expenses for insurance, investor relations and accounting expenses.

Amortization. Amortization expense primarily consists of amortization of acquired trademarks, customer relationships and developed technology.

Interest Expense, Net

Interest expense, net consists primarily of interest payments on our outstanding borrowings under our Credit Facilitiescredit facilities as well as the amortization of associated deferred financing costs. See “— Liquidity“Liquidity and Capital Resources — Credit Facilities”.Facilities.”

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Foreign Currency Transaction LossGain (Loss)

Our reporting currency is the U.S. dollar. The functional currency of all our international operations is the U.S. dollar. The assets, liabilities, revenues and expenses of our foreign operations are remeasured in accordance with ASC Topic 830, Foreign Currency Matters. Remeasurement adjustments are recorded as foreign currency transaction gains (losses) in the consolidated statement of operations.

Income Tax (Provision) Benefit

Income tax (provision) benefit consists primarily of income taxes related to U.S. federal and state income taxes and income taxes in foreign jurisdictions in which we conduct business.

Other Income

Other income consists primarily of sublease rental income. The sublease was terminated in the second quarter of 2020.

Results of Operations

The following table sets forth our consolidated statements of operations data for the periods indicated:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Consolidated Statement of Operations Data:

 

  

 

  

 

  

Revenue:

 

  

 

  

 

  

Subscription

$

52,978

$

37,216

$

103,056

$

70,956

Services

 

2,451

 

4,794

 

6,461

 

9,295

License

 

6,802

 

6,300

 

13,104

 

12,187

Total revenue

 

62,231

 

48,310

 

122,621

 

92,438

Cost of revenue:

 

  

 

  

 

  

 

Cost of subscription(1)(2) (exclusive of amortization expense shown below)

 

8,762

 

7,423

 

18,010

 

14,380

Cost of services(1)(2) (exclusive of amortization expense shown below)

 

2,207

 

3,549

 

5,293

 

7,192

Amortization expense

 

2,678

 

2,513

 

5,355

 

4,954

Total cost of revenue

 

13,647

 

13,485

 

28,658

 

26,526

Gross profit

 

48,584

 

34,825

 

93,963

 

65,912

Operating expenses:

 

  

 

  

 

  

 

Sales and marketing(1)(2)

 

20,202

 

16,612

 

42,484

 

31,888

Research and development(1)(2)

 

11,929

 

9,491

 

24,546

 

18,534

General and administrative(1)(2)(3)

 

6,603

 

7,534

 

17,892

 

14,797

Amortization expense

 

5,634

 

5,626

 

11,308

 

11,259

Total operating expenses

 

44,368

 

39,263

 

96,230

 

76,478

Income (loss) from operations

 

4,216

 

(4,438)

 

(2,267)

 

(10,566)

Interest expense

 

(4,690)

 

(5,481)

 

(9,468)

 

(10,952)

Foreign currency transaction loss

 

(13)

 

(197)

 

(317)

 

(450)

Other income, net

 

36

 

55

 

91

 

110

Loss before income tax benefit

 

(451)

 

(10,061)

 

(11,961)

 

(21,858)

Income tax benefit

 

28

 

2,390

 

3,248

 

5,177

Net loss

$

(423)

$

(7,671)

$

(8,713)

$

(16,681)

Three Months Ended March 31,

    

2021

    

2020

(in thousands)

Consolidated Statement of Operations Data:

 

  

Revenue:

 

  

Subscription

$

74,923

$

54,618

Services

 

4,003

 

4,010

License

 

2,242

 

1,762

Total revenue

 

81,168

 

60,390

Cost of revenue:

 

  

 

Cost of subscription(1)(2) (exclusive of amortization expense shown below)

 

12,014

 

9,248

Cost of services(1)(2) (exclusive of amortization expense shown below)

 

2,465

 

3,086

Amortization expense

 

2,777

 

2,677

Total cost of revenue

 

17,256

 

15,011

Gross profit

 

63,912

 

45,379

Operating expenses:

 

  

 

Sales and marketing(1)(2)

 

29,332

 

22,282

Research and development(1)(2)

 

15,626

 

12,617

General and administrative(1)(2)(3)

 

16,105

 

11,289

Amortization expense

 

5,627

 

5,674

Total operating expenses

 

66,690

 

51,862

Loss from operations

 

(2,778)

 

(6,483)

Interest expense, net

 

(55)

 

(4,778)

Foreign currency transaction loss

 

(171)

 

(304)

Other income, net

 

 

55

Loss before income tax (provision) benefit

 

(3,004)

 

(11,510)

Income tax (provision) benefit

 

(65)

 

3,220

Net loss

$

(3,069)

$

(8,290)

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(1)Includes stock-based compensation as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Three Months Ended March 31,

    

2020

    

2019

    

2020

    

2019

    

2021

    

2020

(in thousands)

(in thousands)

Cost of Revenue:

 

  

 

  

 

  

Cost of revenue:

 

  

Subscription

$

38

$

55

$

76

$

118

$

324

$

38

Services

 

 

 

 

 

77

 

Sales and marketing

 

111

 

143

 

222

 

236

 

842

 

111

Research and development

 

141

 

95

 

298

 

185

 

778

 

157

General and administrative

 

474

 

356

 

979

 

679

 

811

 

505

$

764

$

649

$

1,575

$

1,218

$

2,832

$

811

(2)Includes depreciation expense as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Three Months Ended March 31,

    

2020

    

2019

    

2020

    

2019

    

2021

    

2020

(in thousands)

(in thousands)

Cost of revenue:

 

  

 

  

 

  

 

  

Subscription

$

227

$

214

$

465

$

397

$

263

$

238

Services

 

47

 

62

 

100

 

121

 

43

 

53

Sales and marketing

 

438

 

404

 

932

 

734

 

574

 

494

Research and development

 

260

 

263

 

552

 

490

 

305

 

292

General and administrative

 

132

 

56

 

288

 

130

 

195

 

156

$

1,104

$

999

$

2,337

$

1,872

$

1,380

$

1,233

(3)Includes acquisition-related expense as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Three Months Ended March 31, 

    

2020

    

2019

    

2020

    

2019

    

2021

    

2020

(in thousands)

(in thousands)

General and administrative

$

1,636

$

$

3,236

$

904

$

110

$

1,600

General and administrative also includes a Digita earnout benefitexpense of $3.7$0.3 million for the three and six months ended June 30, 2020.March 31, 2021.

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The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenue for the periods indicated:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

2019

 

(as a percentage of total revenue)

Consolidated Statement of Operations Data:

 

  

 

  

 

  

Revenue:

 

  

 

  

 

  

Subscription

 

85

%  

77

%  

84

%  

77

%

Services

 

4

10

5

10

License

 

11

13

11

13

Total revenue

 

100

100

100

100

Cost of revenue:

 

  

  

  

Cost of subscription (exclusive of amortization expense shown below)

 

14

15

15

16

Cost of services (exclusive of amortization expense shown below)

 

4

7

4

8

Amortization expense

 

4

5

4

5

Total cost of revenue

 

22

28

23

29

Gross profit

 

78

72

77

71

Operating expenses:

 

  

  

  

Sales and marketing

 

32

34

35

34

Research and development

 

19

20

20

20

General and administrative

 

11

16

15

16

Amortization expense

 

9

12

9

12

Total operating expenses

 

71

81

78

83

Income (loss) from operations

 

7

(9)

(2)

(11)

Interest expense

 

(8)

(11)

(8)

(12)

Foreign currency transaction loss

 

0

0

0

0

Other income, net

 

0

0

0

0

Loss before income tax benefit

 

(1)

(20)

(9)

(23)

Income tax benefit

 

0

5

3

6

Net loss

 

(1)

%  

(15)

%  

(7)

%  

(17)

%

Three Months Ended March 31,

    

2021

2020

    

(as a percentage of total revenue)

Consolidated Statement of Operations Data:

 

  

 

Revenue:

 

  

 

Subscription

 

92

%  

90

%  

Services

 

5

7

License

 

3

3

Total revenue

 

100

100

Cost of revenue:

 

  

Cost of subscription (exclusive of amortization expense shown below)

 

15

15

Cost of services (exclusive of amortization expense shown below)

 

3

5

Amortization expense

 

3

5

Total cost of revenue

 

21

25

Gross profit

 

79

75

Operating expenses:

 

  

Sales and marketing

 

36

37

Research and development

 

19

21

General and administrative

 

20

19

Amortization expense

 

7

9

Total operating expenses

 

82

86

Loss from operations

 

(3)

(11)

Interest expense, net

 

(7)

Foreign currency transaction loss

 

(1)

(1)

Other income, net

 

Loss before income tax (provision) benefit

 

(4)

(19)

Income tax (provision) benefit

 

5

Net loss

 

(4)

%  

(14)

%  

Comparison of the Three and Six Months Ended June 30,March 31, 2021 and 2020 and 2019

Revenue

Three months ended June 30, 

Change

Six months ended June 30, 

Change

 

    

2020

    

2019

    

$

    

 

    

2020

    

2019

    

$

    

 

(dollars in thousands)

SaaS subscription and support and maintenance

$

52,978

$

37,216

$

15,762

 

42

%

$

103,056

$

70,956

$

32,100

 

45

%

On‑premise subscription

 

5,770

 

4,048

 

1,722

 

43

 

10,310

 

7,089

 

3,221

 

45

Recurring revenue

 

58,748

 

41,264

 

17,484

 

42

 

113,366

 

78,045

 

35,321

 

45

Perpetual license

 

1,032

 

2,252

 

(1,220)

 

(54)

 

2,794

 

5,098

 

(2,304)

 

(45)

Professional services

 

2,451

 

4,794

 

(2,343)

 

(49)

 

6,461

 

9,295

 

(2,834)

 

(30)

Non‑recurring revenue

 

3,483

 

7,046

 

(3,563)

 

(51)

 

9,255

 

14,393

 

(5,138)

 

(36)

Total revenue

$

62,231

$

48,310

$

13,921

 

29

%

$

122,621

$

92,438

$

30,183

 

33

%

Three Months Ended March 31,

Change

 

    

2021

    

2020

    

$

    

 

(in thousands, except percentages)

SaaS subscription and support and maintenance

$

66,669

$

50,078

$

16,591

 

33

%

On‑premise subscription

 

8,254

 

4,540

 

3,714

 

82

Subscription revenue

 

74,923

 

54,618

 

20,305

 

37

Professional services

 

4,003

 

4,010

 

(7)

 

(0)

Perpetual licenses

 

2,242

 

1,762

 

480

 

27

Non‑subscription revenue

 

6,245

 

5,772

 

473

 

8

Total revenue

$

81,168

$

60,390

$

20,778

 

34

%

Total revenue increased by $13.9$20.8 million, or 29%34%, for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019.March 31, 2020. Overall revenue increased as a result of higher subscription revenue partially offset by lower services and license revenue. RecurringSubscription revenue accounted for 94%92% of total revenue for the three months ended June 30, 2020March 31, 2021 compared to 85%90% for the three months ended June 30, 2019.March 31, 2020. The increase in subscription revenue was driven by device expansion, the addition of new customers and cross-selling. Services revenue has decreased as COVID-19 impacted our in-person trainings, and our product enhancements have reduced the reliance our customers need to

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place on our services in order to utilize our products. License revenue decreased as a result ofincreased due to additional licenses for an existing customer, partially offset by shifting customers to our SaaS model as opposed to on-premise perpetual licenses.

Total revenue increased by $30.2 million, or 33%, for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. Overall revenue increased as a result36

Table of higher subscription revenue partially offset by lower services and license revenue. Recurring revenue accounted for 92% of total revenue for the six months ended June 30, 2020 compared to 84% for the six months ended June 30, 2019. The increase in subscription revenue was driven by device expansion, the addition of new customers and cross-selling. Services revenue has decreased as COVID-19 impacted our in-person trainings, and our product enhancements have reduced the reliance our customers need to place on our services in order to utilize our products. License revenue decreased as a result of shifting customers to our SaaS model as opposed to on-premise, perpetual licenses.Contents

Cost of Revenue and Gross Margin

Three months ended June 30, 

Change

 

Six months ended June 30, 

Change

 

2020

2019

$

 

2020

2019

$

 

(dollars in thousands)

Cost of revenue:

 

  

 

  

 

  

  

 

  

 

  

 

  

  

Cost of subscription (exclusive of amortization shown below)

$

8,762

$

7,423

$

1,339

18

%

$

18,010

$

14,380

$

3,630

25

%

Cost of services (exclusive of amortization show below)

 

2,207

 

3,549

 

(1,342)

(38)

 

5,293

 

7,192

 

(1,899)

(26)

Amortization expense

 

2,678

 

2,513

 

165

7

 

5,355

 

4,954

 

401

8

Total cost of revenue

$

13,647

$

13,485

$

162

1

%

$

28,658

$

26,526

$

2,132

8

%

Gross margin:

 

  

 

  

 

  

  

 

  

 

  

 

  

  

Subscription (exclusive of amortization)

 

85

%  

 

82

%  

 

  

  

 

84

%  

 

82

%  

 

  

  

Services (exclusive of amortization)

 

37

%  

 

50

%  

 

  

  

 

43

%  

 

50

%  

 

  

  

Total gross margin

 

78

%  

 

72

%  

 

  

  

 

77

%  

 

71

%  

 

  

  

Three Months Ended March 31,

Change

 

    

2021

2020

$

    

 

(in thousands, except percentages)

Cost of revenue:

 

  

 

  

 

  

  

Cost of subscription (exclusive of amortization expense shown below)

$

12,014

$

9,248

$

2,766

30

%

Cost of services (exclusive of amortization expense show below)

 

2,465

 

3,086

 

(621)

(20)

Amortization expense

 

2,777

 

2,677

 

100

4

Total cost of revenue

$

17,256

$

15,011

$

2,245

15

%

Gross margin

 

79

%  

 

75

%  

 

  

  

Cost of revenue increased by $0.2$2.2 million, or 1%15%, for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019 primarily reflecting an increase in cost of subscription revenue offset by lower services cost of revenue. Subscription cost of revenue increased $1.3 million due to an increase of $1.0 million in employee compensation costs related to higher headcount to support the growth in our subscription customer base and an increase of $0.3 million in third party hosting fees as we increased capacity to support our growth. Cost of services revenue decreased $1.3 million as a result of lower services revenue.

Cost of revenue increased by $2.1 million, or 8%, for the six months ended June 30,March 31, 2020 compared to the six months ended June 30, 2019 driven by an increase in cost of subscription revenue, and amortization expense partially offset by lower services cost of services revenue. Subscription costCost of subscription revenue increased $3.6$2.8 million, or 30%, primarily due to an increase of $2.1$1.5 million in employee compensation costs related to higher headcount to support the growth in our subscription customer base, an increase of $1.0$1.2 million in third party hosting fees as we increased capacity to support our growth and an increase ofa $0.3 million increase in computer hardware and software costs to support the growth of the business. Amortization expense increased $0.4 million due to intangibles added to our balance sheet as the result of acquisitions occurring in 2019.stock-based compensation expense. Cost of services revenuesrevenue decreased $1.9$0.6 million as a resultprimarily due to lower travel-related costs and costs of lower services revenue.third-party integrators.

Our subscriptionTotal gross margin was 85%79% and 75% for the three months ended June 30,March 31, 2021 and 2020, compared to 82% for the three months ended June 30, 2019. Our subscription gross margin was 84% for the six months ended June 30, 2020 compared to 82% for the six months ended June 30, 2019. The improvement in subscription gross margin for the three and six months ended June 30, 2020 compared to the prior year periods was due to the growth in subscription revenue outpacing the growth in the support and hosting costs required to deliver our subscription solution.

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Services gross margin was 37% for the three months ended June 30, 2020 compared to 50% for the three months ended June 30, 2019. Services gross margin was 43% for the six months ended June 30, 2020 compared to 50% for the six months ended June 30, 2019. The decrease in services gross margin for the three and six months ended June 30, 2020 compared to the prior year periods primarily reflected a larger decrease in services revenues than services costs due to the cancellation of in-person trainings as a result of COVID-19.

Total gross margin was 78% and 72% for the three months ended June 30, 2020 and 2019, respectively, and 77% and 71% for the six months ended June 30, 2020 and 2019, respectively, as our revenue expanded faster than the costs required to deliver the revenue.

Operating Expenses

Three months ended June 30, 

Change

 

Six months ended June 30, 

Change

 

    

2020

    

2019

    

$

    

 

    

2020

    

2019

    

$

    

 

(dollars in thousands)

Operating expenses:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Sales and marketing

$

20,202

$

16,612

$

3,590

 

22

%

$

42,484

$

31,888

$

10,596

 

33

%

Research and development

 

11,929

 

9,491

 

2,438

 

26

 

24,546

 

18,534

 

6,012

 

32

General and administrative

 

6,603

 

7,534

 

(931)

 

(12)

 

17,892

 

14,797

 

3,095

 

21

Amortization expense

 

5,634

 

5,626

 

8

 

0

 

11,308

 

11,259

 

49

 

0

Operating expenses

$

44,368

$

39,263

$

5,105

 

13

%

$

96,230

$

76,478

$

19,752

 

26

%

Three Months Ended March 31,

Change

 

    

2021

    

2020

    

$

    

 

(in thousands, except percentages)

Operating expenses:

 

  

 

  

 

  

 

  

Sales and marketing

$

29,332

$

22,282

$

7,050

 

32

%

Research and development

 

15,626

 

12,617

 

3,009

 

24

General and administrative

 

16,105

 

11,289

 

4,816

 

43

Amortization expense

 

5,627

 

5,674

 

(47)

 

(1)

Operating expenses

$

66,690

$

51,862

$

14,828

 

29

%

Sales and Marketing. Sales and marketing expenses increased by $3.6$7.1 million, or 22%32%, for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019.March 31, 2020. The increase was primarily due to an increase of $4.1$5.5 million in employee compensation costs related todriven by headcount growth, anda $1.4 million increase in marketing costs, an increase of $0.3 million in computer hardware and software costs to support the growth of the business and a $0.7 million increase in stock-based compensation expense reflecting the IPO grant, partially offset by a $1.0 million decrease in travel-related expenses reflecting less travel due to COVID-19.

Sales and marketing expenses increased by $10.6 million, or 33%, for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. The increase was primarily due to an increase of $8.9 million in employee compensation costs related to headcount growth and an increase of $1.1 million in computer hardware and software costs to support the growth of the business, partially offset by a $0.4$1.2 million decrease in travel-related expenses reflecting less travel due to COVID-19. Marketing costs increased by $0.6 million primarily due to increases in demand generation programs, advertising, and brand awareness campaigns focused on new customerscustomer acquisition.

Research and Development. Research and development expenses increased by $2.4$3.0 million, or 26%24%, for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019.March 31, 2020. The increase was primarily due to an increase of $2.1 million in employee compensation costs due to higher headcount, and an increase of $0.3$0.7 million in outside services.services and a $0.6 million increase in stock-based compensation expense reflecting the IPO grant, partially offset by a $0.4 million decrease in travel-related expenses reflecting less travel due to COVID-19.

ResearchGeneral and developmentAdministrative. General and administrative expenses increased by $6.0$4.8 million, or 32%43%, for the sixthree months ended June 30, 2020March 31, 2021 compared to the sixthree months ended June 30, 2019.March 31, 2020. The increase was primarily

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due to an increase of $4.6$2.8 million in employee compensation costs due todriven by higher headcount to support our continued growth, $2.0 million in additional expenses as a result of operating as a public company, an increase of $0.6 million in outside services and an increase of $0.5$0.9 million in computer hardware and software costs to support the growth of the business.

Generalbusiness, a $0.3 million increase in stock-based compensation expense and Administrative. General and administrative expenses decreased by $0.9a $0.3 million or 12%, for the three months ended June 30, 2020 compared to the three months ended June 30, 2019. The decrease was primarily due to a $3.7 million reductionincrease to contingent consideration, and a $1.1 million decrease in consulting services related to process improvements. The decrease was partially offset by an increase of $1.7a $1.5 million in employee compensation costs primarily related to higher headcount to support our continued growth and transition to becoming a public company, an increase of $1.6 milliondecrease in acquisition-related expenses and a $0.5 million increase in allowance for bad debt.

General and administrative expenses increased by $3.1 million, or 21%, for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. The increase was primarily due to an increase of $4.0 million in

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employee compensation costs primarily related to higher headcount to support our continued growth and transition to becoming a public company, a $2.3 million increase in acquisition-related expenses, a $0.8 million increase in allowance for bad debt and returns and an increase of $0.4 million in travel costs which slowed in the second quarter due to COVID-19, partially offset by a $3.7 million reduction to contingent consideration and a $1.4$1.1 million decrease in consulting services relatedtravel-related expenses reflecting less travel due to process improvements. COVID-19. The remainder of the cost increase is primarily related to costs to support the growth in business and headcount of approximately $0.7 million.headcount.

Interest Expense, Net

Three months ended June 30, 

Change

 

Six months ended June 30, 

Change

 

    

2020

    

2019

    

$

    

 

    

2020

    

2019

    

$

    

 

(dollars in thousands)

Interest expense, net

$

4,690

$

5,481

$

(791)

 

(14)

%

$

9,468

$

10,952

$

(1,484)

 

(14)

%

Three Months Ended March 31,

Change

 

    

2021

    

2020

    

$

    

 

(in thousands, except percentages)

Interest expense, net

$

55

$

4,778

$

(4,723)

 

(99)

%

Interest expense, net decreased by $0.8$4.7 million, or 14%99%, for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019. The decrease was driven by a lower interest rate inMarch 31, 2020 reflecting the second quarterrepayment of 2020 compared to the second quarter of 2019, as well as a lower average debt balance.

Interest expense, net decreased by $1.5 million, or 14%, for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 driven by a lower interest rate, as well as a lower average debt balance.Prior Term Loan Facility.

Foreign Currency Transaction Loss

Three months ended June 30, 

Change

 

Six months ended June 30, 

Change

 

    

2020

    

2019

    

$

    

 

    

2020

    

2019

    

$

    

 

(dollars in thousands)

Foreign currency transaction loss

$

13

$

197

$

(184)

 

(93)

%

$

317

$

450

$

(133)

 

(30)

%

Three Months Ended March 31,

Change

 

    

2021

    

2020

    

$

    

 

(in thousands, except percentages)

Foreign currency transaction loss

$

171

$

304

$

(133)

 

(44)

%

Foreign currency transaction loss decreased by $0.2$0.1 million, or 93%44%, for the three months ended June 30, 2020March 31, 2021 compared to the three months ended June 30, 2019. Foreign currency transactionMarch 31, 2020. The decrease in the loss decreasedwas driven by $0.1 million, or 30%, fora favorable impact from the six months ended June 30, 2020remeasurement of monetary assets and liabilities denominated in Euros and Australian dollars compared to the six months ended June 30, 2019. The loss was driven primarily by the weakening of the U.S. dollar relative to the Euro on significant Euro denominated intercompany loans that were utilized to fund the acquisition of ZuluDesk.prior year period.

Other Income, Net

Three months ended June 30, 

Change

 

Six months ended June 30, 

Change

 

    

2020

    

2019

    

$

    

 

    

2020

    

2019

    

$

    

 

(dollars in thousands)

Other income, net

$

36

$

55

$

(19)

 

(35)

%

$

91

$

110

$

(19)

 

(17)

%

Three Months Ended March 31,

Change

 

    

2021

    

2020

    

$

    

 

(in thousands, except percentages)

Other income, net

$

$

55

$

(55)

 

(100)

%

Other income, net decreased by $0.1 million, or 100%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The decrease in Other income, net was due to the termination of our sublease in the second quarter of 2020.

Income Tax (Provision) Benefit

Three months ended June 30, 

Change

 

Six months ended June 30, 

Change

 

    

2020

    

2019

    

$

    

 

    

2020

    

2019

    

$

    

 

(dollars in thousands)

Income tax benefit

$

28

$

2,390

$

(2,362)

 

(99)

%

$

3,248

$

5,177

$

(1,929)

 

(37)

%

Three Months Ended March 31,

Change

 

    

2021

    

2020

    

$

    

 

(in thousands, except percentages)

Income tax (provision) benefit

$

(65)

$

3,220

$

(3,285)

 

NM

Income tax (provision) benefit was $28 thousand$(0.1) million and $2.4$3.2 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively. The effective tax rates for the three months ended June 30,March 31, 2021 and 2020 were (2.2)% and 2019 were 6.2% and 23.8%28.0%, respectively. The key components of the Company’s income tax benefit primarily consist of state and federal income taxes, federal research and development credits, and Global Intangible Low-Taxed Income provisions. The effective tax rate for the three months ended June 30, 2020March 31, 2021 was impacted by $108 thousand of discrete income tax expense primarilylower than the prior year period due to the finalizationSection 162(m) of the net operating loss carryback changes related toInternal Revenue Code, stock option activity and the CARES Act. The Company’s annual effective tax rates for the three months ended June 30, 2020 and 2019 were 25.4% and 23.8%, respectively.domestic valuation allowance.

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Income tax benefit was $3.2 million and $5.2 million for the six months ended June 30, 2020 and 2019, respectively. The effective tax rates for the six months ended June 30, 2020 and 2019 were 27.2% and 23.7%, respectively. The key components of the Company’s income tax benefit primarily consist of state and federal income taxes, federal research and development credits, and Global Intangible Low-Taxed Income provisions. Theannual effective tax rate for the sixthree months ended June 30,March 31, 2021 and 2020 was higher than the prior year period due to the impact of the net operating loss carryback(0.5)% and interest limitation changes related to the CARES Act, and a change in valuation allowance on foreign deferred tax assets related to a merger of subsidiaries. The effective tax rate for the six months ended June 30, 2020 was impacted by $210 thousand of discrete income tax benefit primarily due to the impact of the net operating loss carryback and interest limitation changes related to the CARES Act.25.2%, respectively.

Liquidity and Capital Resources

General

As of June 30, 2020,March 31, 2021, our principal sources of liquidity were cash and cash equivalents totaling $38.4$196.2 million, which were held for working capital purposes, as well as the available balance of our PriorNew Revolving Credit Facility, described further below.in Note 7 to our Consolidated Financial Statements. Our cash equivalents when held, are comprised of money market funds.funds and/or U.S. Treasuries with original or remaining maturities at the time of purchase of three months or less. Our positive cash flows from operations enable us to make continued investments in supporting the growth of our business. We expect that our operating cash flows, in addition to our cash and cash equivalents, will enable us to continue to make such investments in the future.

On July 24, 2020,May 5, 2021, we closed our IPO throughentered into a commitment letter (the “Commitment Letter”) with JPMorgan Chase Bank, N.A. and other commitment parties thereto (the “Commitment Parties”), pursuant to which, we issuedsubject to the terms and sold 13,500,000 shares of common stock atconditions set forth therein, the Commitment Parties have committed to provide a price per share of $26.00. We received364-day term loan facility in an aggregate proceeds of approximately $319.0 million from the IPO, after deducting the underwriting discount and offering expenses payable by us. Upon closing of the IPO, the Company repaid $205.0 million of the principal amount of up to $250.0 million, on substantially the Term Loan Facilitysame terms and paid $3.4 million of accrued interest and $2.0 million of prepayment penalty.conditions as the New Credit Agreement. The Company also wrote off $3.2 million of remaining debt issuance costs upon repaymentfunding of the debt. The Company recorded a lossterm loan facility provided for by the Commitment Letter is contingent on debt extinguishmentthe satisfaction of $5.2 million forcustomary conditions, including the prepayment penaltyexecution and write offdelivery of debt issuance costsdefinitive documentation with respect to the term loan facility in accordance with the terms set forth in the third quarter of 2020.Commitment Letter.

We believe our cash and cash equivalents, our New Revolving Credit Facility and cash provided by sales of our software solutions and services will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and services offerings, and the continuing market acceptance of our products. In the future, we may enter into arrangementsuse cash to acquire or invest in complementary businesses, services and technologies, including intellectual property rights.

We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies, this could reduce our ability to compete successfully and harm our results of operations.

A majority of our customers pay in advance for subscriptions and support and maintenance contracts, a portion of which is recorded as deferred revenue. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is later recognized as revenue in accordance with our revenue recognition policy. As of June 30, 2020,March 31, 2021, we had deferred revenue of $157.7$221.6 million, of which $130.3$167.9 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.

Credit Facilities

On November 13, 2017, we entered into a Credit Agreement with a syndicate of lenders, comprised of the $175.0 million Term Loan Facility and the $15.0 million Prior Revolving Credit Facility, in each case with a maturity date of November 13, 2022. Pursuant to the Amendment Agreement No. 1, dated as of January 30, 2019, the Term Loan Facility was increased to $205.0 million. As of June 30, 2020, we had $205.0 million and no borrowings outstanding

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under our Term Loan Facility and Prior Revolving Credit Facility, respectively, and $1.2 million of letters of credit outstanding under our Prior Revolving Credit Facility.

Borrowings under the Prior Credit Agreement bore interest at a rate per annum, at the borrower’s option, equal to an applicable margin, plus, (a) for alternate base rate borrowings, the highest of (i) the rate last quoted by The Wall Street Journal as the “prime rate” in the United States, (ii) the Federal Funds Rate in effect on such day plus 1/2 of 1.00% and (iii) the Adjusted LIBO Rate for a one month interest period on such day plus 1.00% and (b) for eurodollar borrowings, the Adjusted LIBO Rate determined by the greater of (i) the LIBO Rate for the relevant interest period divided by 1 minus the statutory reserves (if any) and (ii) 1.00%.

The applicable margin for borrowings under the Prior Credit Agreement was (a)(1) prior to June 30, 2020 and (2) on or after June 30, 2020 (so long as the total leverage ratio is greater than 6.00 to 1.00), (i) 7.00% for alternate base rate borrowings and (ii) 8.00% for eurodollar borrowings and (b) on or after June 30, 2020 (so long as the total leverage ratio is less than or equal to 6.00 to 1.00), subject to step downs to (i) 5.50% for alternate base rate borrowings and (ii) 6.50% for eurodollar borrowings. The total leverage ratio was determined in accordance with the terms of the Prior Credit Agreement.

The contract interest rate on the Term Loan Facility was 8.00% per annum as of June 30, 2020. The effective interest rate was 8.70% per annum as of June 30, 2020. The effective interest rate was higher than the contract rate due to amortization of debt issuance costs related to the Term Loan Facility. The Term Loan Facility did not require periodic principal payments.

As of June 30, 2020, the interest rate for the Prior Revolving Credit Facility was 7% per annum. As of June 30, 2020, the Company had used $1.2 million as collateral for office space letters of credit, which is an off-balance sheet arrangement. The borrower was also required to pay a commitment fee on the average daily undrawn portion of the Prior Revolving Credit Facility of 0.50% per annum, and a letter of credit participation fee equal to the applicable margin for eurodollar revolving loans on the actual daily amount of the letter of credit exposure.

The Prior Credit Agreement contained customary representations and warranties, affirmative covenants, reporting obligations, negative covenants and events of default.

On July 27, 2020, we entered into a new secured Credit Agreement for an initial revolving credit facility of $150 million, which may be increased or decreased under specific circumstances, with a $25 million letter of credit sublimit and a $50 million alternative currency sublimit. In addition, the New Credit Agreement provides for the ability of the Company to request incremental term loan facilities, in a minimum amount of $5 million for each facility. Borrowings under the New Credit Agreement mature on July 27, 2025. The New Credit Agreement contains customary representations and warranties, affirmative covenants, reporting obligations, negative covenants and events of default. In the third quarter of 2020, the Company recorded debt issuance costs of $1.2 million related to the New Credit Agreement. There have been no borrowings against the New Credit Agreement.

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Cash Flows

The following table presents a summary of our consolidated cash flows from operating, investing and financing activities:

Six Months Ended

June 30, 

    

2020

    

2019

(in thousands)

Net cash provided by (used in) operating activities

$

9,457

$

(9,719)

Net cash used in investing activities

 

(1,366)

 

(38,625)

Net cash provided by (used in) financing activities

 

(2,100)

 

39,106

Net increase (decrease) in cash and cash equivalents

 

5,991

 

(9,238)

Cash and cash equivalents at beginning of period

 

32,433

 

39,240

Cash and cash equivalents at end of period

$

38,424

$

30,002

Cash paid for interest

$

9,262

$

10,568

Cash paid for purchases of equipment and leasehold improvements

 

1,366

 

3,319

Three Months Ended March 31,

    

2021

    

2020

(in thousands)

Net cash provided by (used in) operating activities

$

4,023

$

(7,355)

Net cash used in investing activities

 

(6,319)

 

(1,039)

Net cash provided by (used in) financing activities

 

4,019

 

(1,362)

Effect of exchange rate changes on cash and cash equivalents

(401)

Net increase (decrease) in cash and cash equivalents

 

1,322

 

(9,756)

Cash and cash equivalents at beginning of period

 

194,868

 

32,433

Cash and cash equivalents at end of period

$

196,190

$

22,677

Cash paid for interest

$

3

$

4,734

Cash paid for purchases of equipment and leasehold improvements

 

3,290

 

1,039

Operating Activities

Our largest source of operating cash is cash collections from our customers for subscriptions. Our primary use of cash from operating activities is for employee-related expenditures, marketing expenses and third-party hosting costs.

For the sixthree months ended June 30, 2020,March 31, 2021, net cash provided by operating activities was $9.5$4.0 million reflecting our net loss of $8.7$3.1 million, adjusted for non-cash charges of $19.3$17.3 million and net cash outflows of $1.1$10.2 million from changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of property and equipment and intangible assets, amortization of deferred contract costs, non-cash lease expense, share-based compensation and a $0.3 million adjustment to our Digita earnout, partially offset by the deferred tax benefit. The primary drivers of net cash outflows from changes in operating assets and liabilities included a $7.1 million increase in trade accounts receivable due to higher sales and the timing of cash receipts from our customers, a $6.5 million increase in deferred contract costs due to an increase in capitalized contract costs, a $3.3 million increase in prepaid expenses and other assets and an $8.9 million decrease in accounts payable and accrued liabilities due to the timing of cash disbursements. These changes were partially offset by a $15.5 million increase in deferred revenue due to the upfront billing for a majority of our subscriptions.

For the three months ended March 31, 2020, net cash used in operating activities was $7.4 million reflecting our net loss of $8.3 million, adjusted for non-cash charges of $10.5 million and net cash outflows of $9.5 million from changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of property and equipment and intangible assets, amortization of deferred contract costs, amortization of debt issuance costs provision for bad debt expense and returns and share-based compensation, partially offset by deferred taxes and a $3.7 million adjustment to our Digita earnout. The primary drivers of net cash outflows from changes in operating assets and liabilities included an increase in deferred contract costs of $10.0 million, an increase in trade accounts receivable of $7.4 million, and a decrease in accounts payable and accrued liabilities of $2.1 million, partially offset by a $17.0 million increase in deferred revenue and a $1.2 million increase in other liabilities.

For the six months ended June 30, 2019, net cash used in operating activities was $9.7 million reflecting our net loss of $16.7 million, adjusted for non-cash charges of $17.3 million and net cash outflows of $10.3 million from changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization of property and equipment and intangible assets, amortization of deferred contract costs, amortization of debt issuance costs, provision for bad debt expense and returns and share-based compensation, partially offset by deferred taxes. The primary drivers of net cash outflows from changes in operating assets and liabilities included an increase in accounts receivable of $10.6 million, an increase in deferred contract costs of $8.7$4.8 million, an increase in prepaid expenses and other assets of $2.7$2.3 million and a decrease in accounts payable and accrued liabilities of $2.3$6.9 million, partially offset by a $14.2$5.0 million increase in deferred revenue.

Investing Activities

During the sixthree months ended June 30,March 31, 2021, net cash used in investing activities was $6.3 million driven by purchases of $3.3 million in equipment and leasehold improvements primarily reflecting updates to office space and hardware and software and the acquisition of cmdReporter of $3.0 million.

During the three months ended March 31, 2020, net cash used in investing activities was $1.4$1.0 million due todriven by purchases of equipment and leasehold improvements to support our higher headcount with additional office space and hardware and software.

During the six months ended June 30, 2019, net cash used in investing activities was $38.6 million driven by the acquisition of ZuluDesk of $35.3 million, net of cash acquired, and purchases of $3.3 million in equipment and leasehold improvements to support our higher headcount with additional office space and hardware and software.

Financing Activities

Net cash used in financing activities of $2.1 million during the six months ended June 30, 2020 was due to cash paid for offering costs, partially offset by proceeds from the exercise of stock options.

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Financing Activities

Net cash provided by financing activities of $39.1$4.0 million during the sixthree months ended June 30, 2019March 31, 2021 was primarily due to increased borrowings on our Credit Facilitiesproceeds from the exercise of $40.0stock options.

Net cash used in financing activities of $1.4 million forduring the ZuluDesk acquisition.three months ended March 31, 2020 was due to the payment of offering costs of $1.5 million, partially offset by $0.1 million of proceeds from the exercise of stock options.

Contractual Obligations and Commitments

OurAs of March 31, 2021, our principal commitments consist of obligations under operating leases for office space and repayments of long-term debt and the respective interest expense.space. In “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” included in our IPO Prospectus,Annual Report on Form 10-K, we disclosed our total contractual obligations as of December 31, 2019 and a new contractual agreement for hosting services entered into in March 2020. In connection with the closing of the IPO on July 24, 2020, we repaid $205.0 million of the principal amount of our Term Loan Facility using the proceeds from the IPO. Outside of the above and routine transactions made in the ordinary course of business, there have been no material changes to the contractual obligations as disclosed in our IPO Prospectus.Annual Report on Form 10-K.

Indemnification Agreements

In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, channel partners, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us or from intellectual property infringement, misappropriation or other violation claims made by third parties. See “Risk Factors — We have indemnity provisions under our contracts with our customers, channel partners and other third parties, which could have a material adverse effect on our business” in our IPO Prospectus.Annual Report on Form 10-K. In addition, in connection with the completion of our IPO, we have entered into indemnification agreements with our directors and certain executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our consolidated balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.

Off-Balance Sheet Arrangements

As of June 30, 2020, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structure finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes.

JOBS Act

We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act. For as long as we are an “emerging growth company”,company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”,companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.

The JOBS Act also permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use the extended transition period for complying with new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that comply with such new or revised accounting standards on a non-delayed basis.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements. The preparation of our financial statements in accordance with GAAP requires us to make estimates

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and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates, impacting our reported results of operations and financial condition.

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Except for the accounting policies for leases that were updated as a result of adopting the new accounting standard, there have been no material changes to our critical accounting policies and estimates disclosed in our IPO Prospectus.Annual Report on Form 10-K. For more information, refer to “Note 2 — Summary of Significant Accounting Policies” to the consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

For a description of our recently adopted accounting pronouncements and recently issued accounting standards not yet adopted, see “Note 2 — Summary of Significant Accounting Policies” to the consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.

Foreign Currency Exchange Risk

The functional currency of our foreign subsidiaries is the U.S. dollar. Most of our sales are denominated in U.S. dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the U.S., Poland, and the Netherlands. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments. During the three and six months ended June 30,March 31, 2021 and 2020, a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our consolidated financial statements.

Interest Rate Risk

Our primary market risk exposure is changing Eurodollar-based interest rates. Interest rate risk is highly sensitive due to many factors, including E.U. and U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.

The contract interest rate on the Term Loan Facility was 8.00% per annum as of June 30, 2020. The effective interest rate was 8.70% per annum as of June 30, 2020. The effective interest rate was higher than the contract rate due to amortization of debt issuance costs related to the Term Loan Facility. The Term Loan Facility does not require periodic principal payments.

At June 30, 2020, we had total outstanding debt of $205.0 million and no borrowings outstanding under our Term Loan Facility and Prior Revolving Credit Facility, respectively. Based on the amounts outstanding, a 100-basis point increase or decrease in market interest rates over a twelve-month period would result in a change to interest expense of $2.1 million on an annual basis.

See “— Liquidity and Capital Resources — Credit Facilities” for more information with respect to the calculation of interest rates under our Credit Facilities.

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Impact of Inflation

While inflation may impact our net revenue and costs of revenue, we believe the effects of inflation, if any, on our results of operations and financial condition have not been significant. However, there can be no assurance that our results of operations and financial condition will not be materially impacted by inflation in the future.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a–15(e) and Rule 15d–15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of June 30, 2020,March 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control

There have been no changes in internal control over financial reporting during the quarter ended June 30, 2020March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition.

Item 1A. Risk Factors

ThereThis quarterly report should be read in conjunction with the risk factors included in our Annual Report on Form 10-K. Except for the risk factors set forth below that are new or contain changes to the similarly titled risk factors included in our Annual Report on Form 10-K, there have been no material changes to the risk factors disclosed in Part 1, Item 1A. Risk Factors1A “Risk Factors” in our Annual Report on Form 10-K.

Risks Related to the Proposed Acquisition of Wandera

Our ability to complete the acquisition of Wandera is subject to various closing conditions, approvals from governmental authorities, which may impose conditions that could adversely affect us or cause the acquisition not to be completed.

On May 11, 2021, we entered into the Merger Agreement for the acquisition of Wandera, a leader in zero trust cloud security and access for mobile devices. The acquisition is subject to a number of customary conditions to closing as specified in the Merger Agreement. These closing conditions include, among others, the receipt of required approvals under U.S. competition laws, and the absence of governmental or other legal restraints or prohibitions preventing the consummation of the acquisition. No assurance can be given that the required regulatory approvals will be obtained or that the required conditions to closing will be satisfied, and, if all required consents and approvals are obtained and the required conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals. Any delay in completing the acquisition could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that we and Wandera expect to achieve if the acquisition is successfully completed within its expected time frame. Additionally, either we or Wandera may terminate the Merger Agreement under certain circumstances, including, among other reasons, if the acquisition is not completed by August 3, 2021.

We can provide no assurance that the various closing conditions will be satisfied and that the necessary approvals will be obtained, or that any required conditions will not materially adversely affect the combined company following the acquisition. In addition, we can provide no assurance that these conditions will not result in the abandonment or delay of the acquisition. The occurrence of any of these events individually or in combination could have a material adverse effect on our results of operations and the trading price of our IPO Prospectus.common stock.

The termination of the Merger Agreement could negatively impact our business.

If the acquisition is not completed for any reason, our ongoing business may be adversely affected and, without realizing any of the expected benefits of having completed the acquisition, we would be subject to a number of risks, including the following:

we may experience negative reactions from the financial markets, including negative impacts on our stock price;
we may experience negative reactions from our customers, suppliers, distributors and employees;
we will be required to pay our costs relating to the acquisition, such as legal, advisory, and accounting costs and associated fees and expenses, whether or not the acquisition is completed;

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we could be subject to time-consuming and costly litigation related to the acquisition; and
matters relating to the acquisition (including integration planning) require substantial commitments of time and resources by our management, which could otherwise have been devoted to day-to-day operations or to other opportunities that may have been beneficial to our business.

Whether or not the acquisition is completed, the announcement and pendency of the acquisition could cause disruptions in our and Wandera’s business, which could have an adverse effect on our business and financial results.

Whether or not the acquisition is completed, the announcement and pendency of the acquisition could cause disruptions in our and Wandera’s business. Specifically:

disruptions to ongoing operations;
retaining and motivating key Wandera personnel;
declining employee morale and retention issues affecting Wandera employees, which may result from changes in management, reporting relationships, or other changes to employment relationships;
maintaining good relationships with customers or business partners of Wandera or our own customers as a result of the acquisition announcement, any uncertainty regarding completion of the acquisition, and any integration of operations; and
the attention of our and Wandera’s management may be directed toward the completion of the acquisition.

We have diverted significant management resources in an effort to complete the acquisition. If the acquisition is not completed, we will have incurred significant costs, including the diversion of management resources, for which we will have received little or no benefit.

We will incur significant acquisition-related costs in connection with the Wandera acquisition, and we could incur substantial expenses related to the integration of Wandera.

We have incurred and expect to incur a number of non-recurring costs associated with combining the operations of the two companies, as well as transaction fees and other costs related to the acquisition. These costs and expenses include fees paid to financial, legal and accounting advisors, potential employment-related costs, filing fees, and other related charges. We will need to pay some of these costs regardless of whether the acquisition is completed.

We will also incur integration costs in connection with the acquisition. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the acquisition and the integration of Wandera’s business. Although we expect that the elimination of duplicative costs, strategic benefits, and additional income, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and acquisition-related costs over time, any net benefit may not be achieved in the near term or at all. We will bear many of these costs even if the acquisition is not completed. While we have assumed that certain expenses would be incurred in connection with the acquisition and the other transactions contemplated by the Merger Agreement, there are many factors beyond our control that could affect the total amount or the timing of the integration and implementation expenses.

Integrating Wandera’s business may be more difficult, costly or time-consuming than expected and we may fail to realize the anticipated benefits of the acquisition, which may adversely affect our business results and negatively affect the value of our common stock.

The success of the acquisition will depend on, among other things our ability to integrate Wandera’s businesses in a manner that facilitates growth opportunities and realizes expected cost savings. We may encounter difficulties in integrating our and Wandera’s businesses and realizing the anticipated benefits of the acquisition. We must achieve

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anticipated post-closing growth and cost savings without adversely affecting current revenues and investments in future growth. If we are not able to successfully achieve these objectives, the anticipated benefits of the acquisition may not be realized fully, or at all, or may take longer to realize than expected.

The acquisition involves the combination of two companies which currently operate, and until the completion of the acquisition will continue to operate, as independent companies. There can be no assurances that our respective businesses can be integrated successfully. It is possible that the integration process could result in the loss of key employees from both companies, the loss of customers, the disruption of our, Wandera’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. We will be required to devote management attention and resources to business integration efforts, and prior to the acquisition, management attention and resources will be required to plan for such integration. Potential difficulties we may encounter in the integration process include the following:

lost sales and customers as a result of certain of our and/or Wandera’s customers deciding not to do business with us post-close;
differences in customer and vendor composition, sales cycles, and other business dissimilarities;
integrating personnel from the two companies while maintaining focus on providing consistent, high-quality products and services, especially in the COVID-19 environment;
potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the acquisition; and
our and/or Wandera’s performance shortfalls as a result of the diversion of management’s attention caused by completing the acquisition and integrating the companies’ operations.

Any of these factors could result in us failing to realize the anticipated benefits of the acquisition, on the expected timeline or at all. An inability to realize the full extent of the anticipated benefits of the acquisition and the other transactions contemplated by the Merger Agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and our operating results, which may adversely affect the value of our common stock.

In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. Actual growth and cost savings, if achieved, may be lower than what we expect and may take longer to achieve than anticipated. If we are not able to adequately address integration challenges, we may be unable to successfully integrate their operations or realize the anticipated benefits of such integration.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

There were no unregistered sales of equity securities during the three months ended June 30, 2020.

Use of Proceeds from Initial Public Offering of Common Stock

On July 24, 2020, we closed our IPO in which we sold 13,500,000 shares of common stock at a public offering price of $26.00 per share. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to the Company’s registration statement on Form S-1 (File No. 333-239535), as amended (the “Initial Registration Statement”), which was declared effective by the SEC on July 21, 2020 and the Company’s registration statement on Form S-1 (File No. 333- 239991) filed on July 21, 2020 pursuant to Rule 462(b) under the Securities Act (the “462(b) Registration Statement”, and together with the Initial Registration Statement, the “Registration Statements”). The representatives of the several underwriters of the IPO were Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, BofA Securities, Inc. and Barclays Capital Inc. The offering commenced on July 21, 2020 and did not terminate before all of the securities registered in the registration statement were sold.

We raised approximately $319.0 million in net proceeds after deducting underwriting discounts and commissions of $24.7 million and offering expenses of $7.3 million. There was no material change in the use of the IPO proceeds as described in the IPO Prospectus. On July 27, 2020, the net proceeds from the IPO were used to repay $205.0 million of our Term Loan Facility, together with $3.4 million of accrued interest and $2.0 million of prepayment penalty.

In connection with our entry into the Term Loan Facility, affiliates of Vista collectively acquired $45.0 million of term loans under the Term Loan Facility and immediately prior to the repayment on July 27, 2020, affiliates of Vista collectively owned $34.9 million of the Term Loan Facility. Accordingly, Vista received $34.9 million of the net proceeds from the IPO in connection with the repayment of $205.0 million of the Term Loan Facility.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

On September 1, 2020, the Company entered into an amended and restated director nomination agreement (the “Amended and Restated Director Nomination Agreement”), by and among the Company and the other signatories thereto. The Amended and Restated Director Nomination Agreement amended and restated the director nomination agreement entered into on July 24, 2020 in connection with the Company’s IPO.

None.

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Item 6. Exhibits

The following is a list of all exhibits filed or furnished as part of this report:

Exhibit
Number

    

Description

3.1

Second Amended and Restated Certificate of Incorporation of Jamf Holding Corp., dated July 24, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on July 27, 2020).

3.22.1

AmendedAgreement and Restated BylawsPlan of JamfMerger, dated as of May 5, 2021, by and among JAMF Holding Corp., dated July 24, 2020 (incorporated by reference to the Company’s Exhibit 3.2 to the Company’s Form 8-KJAMF Software, LLC, White Wolf Merger Sub, Inc., Wandera, Inc., and Shareholder Representative Services LLC, filed on July 27, 2020).

4.1

Registration Rights Agreement, dated July 24, 2020, by and among the Company and the other signatories party thereto (incorporated by reference to the Company’s Exhibit 4.1 to the Company’s Form 8-K filed on July 27, 2020).herewith.

10.1

FormFirst Amendment, dated as of IndemnificationApril 22, 2021, to the Letter Agreement between JAMF Holdings, Inc. and Dean Hager (incorporated by reference to Exhibit 10.13 to Jamf Holding Corp.’s Registration Statementthe Company’s Current Report on Form S-18-K filed with the Securities and Exchange CommissionSEC on June 29, 2020)April 26, 2021).

10.2+10.2

Jamf Holding Corp. Omnibus Incentive PlanFirst Amendment, dated as of April 22, 2021, to the Letter Agreement between JAMF Holdings, Inc. and Jill Putman (incorporated by reference to Exhibit 10.1 to Jamf Holding Corp.’s Registration Statementthe Company’s Current Report on Form S-88-K filed with the Securities and Exchange CommissionSEC on July 24, 2020)April 26, 2021).

10.3+10.3

Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 (No. 333-239535), filed with the Commission on June 29, 2020).

10.4+

Form of Restricted Shares Award Agreement (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (No. 333-239535), filed with the Commission on June 29, 2020).

10.5+

Form of Stock Appreciation Rights Award Agreement (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 (No. 333-239535), filed with the Commission on June 29, 2020).

10.6+

Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 (No. 333-239535), filed with the Commission on June 29, 2020).

10.7+

Amended and Restated Jamf Holding Corp 2017 Stock Option Plan (incorporated by reference to Exhibit 10.6 to Jamf Holding Corp.’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on July 24, 2020).

10.8+

Form of Amended and Restated Jamf Holding Corp. Stock Option Plan Grant Agreement (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 (No. 333-239535), filed with the Commission on June 29, 2020).

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10.9

Credit Agreement,First Amendment, dated as of July 27, 2020, by and amongApril 22, 2021, to the Letter Agreement between JAMF Holdings, Inc., as borrower, Juno Intermediate, Inc., as a guarantor, Juno Parent, LLC, as a guarantor, the other loan parties thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agentJohn Strosahl (incorporated by reference to the Company’s Exhibit 10.1 to the Company’sCurrent Report on Form 8-K filed with the SEC on July 29, 2020)April 26, 2021).

10.10

Amended and Restated Director Nomination Agreement, dated September 1, 2020, by and among the Company and the signatories party thereto, filed herewith.

31.1

Certification of the Chief Executive Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31.2

Certification of the Chief Financial Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1*

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, filed herewith.

32.2*

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, filed herewith.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

+ Indicates a management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    

Jamf Holding Corp. (Registrant)

Date:     September 2, 2020May 11, 2021

By:

/s/ Jill PutmanIan Goodkind

Jill PutmanIan Goodkind

Chief FinancialAccounting Officer


(Principal FinancialAccounting Officer)

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