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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, 2020

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 No  

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, the Registrant had 116,448,284 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, 2020 and December 31, 2019

3

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

4

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

5

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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

43

Item 4.

Controls and Procedures

44

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

45

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

46

Item 6.

Exhibits

46

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

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

3

Table of Contents

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, 

    

2020

    

2019

    

2020

    

2019

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 (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

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

 

20,202

 

16,612

 

42,484

 

31,888

Research and development

 

11,929

 

9,491

 

24,546

 

18,534

General and administrative

 

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, net

 

(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)

Net loss per share, basic and diluted

$

(0.00)

$

(0.07)

$

(0.08)

$

(0.16)

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

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

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JAMF HOLDING CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(unaudited)

Stock Class

Additional

Common

PaidIn

Accumulated

Stockholders’

  

Shares

  

Amount

  

Capital

  

Deficit

  

Equity

Three Months Ended June 30, 2020:

Balance, March 31, 2020

 

102,862,404

$

103

$

569,670

$

(73,271)

$

496,502

Issuance of common stock

 

 

 

 

 

Share‑based compensation

 

 

 

764

 

 

764

Net loss

 

 

 

 

(423)

 

(423)

Balance, June 30, 2020

 

102,862,404

$

103

$

570,434

$

(73,694)

$

496,843

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, 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

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

 

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”, “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.

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 of the first fiscal year (a) following the fifth anniversary of the completion of our offering, (b) in which our total annual gross revenue is at least $1.07 billion or (c) when 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.

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") 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 June 30, 2020, funds controlled by Vista owned approximately 89.5% of our outstanding common stock.

Unaudited Interim Consolidated Financial Information

The accompanying interim consolidated balance sheet as of June 30, 2020, 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 six months ended June 30, 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. 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, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 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 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 one operating segment and therefore we have one 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, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Revenue:

The Americas

$

49,558

$

36,537

$

97,879

$

70,521

Europe, the Middle East, India, and Africa

 

9,199

 

9,068

 

18,025

 

16,659

Asia Pacific

 

3,474

 

2,705

 

6,717

 

5,258

$

62,231

$

48,310

$

122,621

$

92,438

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”) for our initial public offering (“IPO”) dated as of July 21, 2020 and filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”). 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. 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)

Disaggregation of Revenue

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

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

SaaS subscription and support and maintenance

$

52,978

$

37,216

$

103,056

$

70,956

On‑premise subscription

 

5,770

 

4,048

 

10,310

 

7,089

Recurring revenue

 

58,748

 

41,264

 

113,366

 

78,045

Perpetual licenses

 

1,032

 

2,252

 

2,794

 

5,098

Professional services

 

2,451

 

4,794

 

6,461

 

9,295

Non‑recurring revenue

 

3,483

 

7,046

 

9,255

 

14,393

Total revenue

$

62,231

$

48,310

$

122,621

$

92,438

Contract Balances

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 were as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Balance, beginning of the period

$

145,735

$

111,255

$

140,710

$

100,662

Revenue earned

 

(49,562)

 

(42,277)

 

(97,285)

 

(76,884)

Deferral of revenue

 

61,565

 

48,941

 

114,313

 

94,141

Balance, end of the period

$

157,738

$

117,919

$

157,738

$

117,919

There were no significant changes to our contract assets and liabilities during the three and six months ended June 30, 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, 2020 and December 31, 2019, the Company had $170.2 million and $149.5 million, respectively, of remaining performance obligations, with 84% and 86%, respectively, expected to be recognized as revenue over the succeeding 12 months, and the remainder expected to be recognized over 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 on the consolidated balance sheet 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, 2020 and 2019 was $2.2 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 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 no impairment losses recorded during the three and six months ended June 30, 2020 and 2019.

For the three and six months ended June 30, 2020, the Company had two distributors that accounted for more than 10% of total net revenues. Total receivables related to these distributors were $19.3 million at June 30, 2020. For the three and six months ended June 30, 2019, the Company had one distributor that accounted for more than 10% of total net revenues. Total receivables related to this distributor were $6.0 million at December 31, 2019.

Recently issued accounting pronouncements not yet adopted

From time to time, new accounting pronouncements are issued by the 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. 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 Framework

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 June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain

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JAMF HOLDING CORP.

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 Company is currently evaluating the effect the standard will have on its consolidated financial statements.

Adoption of new accounting pronouncements

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

In March 2018, the FASB issued ASU No. 2018-15, Intangibles — Goodwill and Others — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred 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 incurred to develop or obtain internal-use software under ASC Subtopic 350-40, in order to determine which costs to capitalize 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 all arrangements. The Company adopted the new standard in the first quarter of fiscal year 2020. The adoption of 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 reporting 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 after

12

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

December 15, 2019, including interim periods within those periods, and early adoption is permitted. The Company adopted the new standard in the first quarter of fiscal year 2020. The adoption did not have an impact on the Company’s consolidated financial statements as the Company does not have any nonemployee share-based payment awards.

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. 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 value of cash and cash equivalents, accounts receivable and accounts payable approximate their fair value. The 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 analysis based on market rates for similar types 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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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The fair value of the separately identifiable intangible assets acquired, consisting of trademarks, customer relationships and developed technology, was estimated by applying an income approach. Under the income approach, an intangible asset’s 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 flows to their present value at market-based rates of return. The weighted-average economic life of the intangible assets acquired is 7.0 years. For more details on the intangible assets, see Note 5.

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 when the Company entered into that certain Amendment Agreement No. 1 to such Prior Credit Agreement, to complete the acquisition 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, the Company purchased all of the outstanding membership interests of Digita Security LLC (“Digita”). With this acquisition, Digita’s acquired technology will complement 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. The Company accounted for the acquisition by applying the acquisition method of accounting for business combinations in accordance with ASC Topic 805. The acquisition aggregate purchase consideration totaled $14.4 million which included contingent purchase consideration with an estimated fair value of $9.0 million and the remainder provided for with cash. Acquisition-related expenses were expensed as incurred. Goodwill in the amount of $1.7 million is deductible for income tax purposes.

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 was determined using a Monte Carlo simulation model, which uses Level 3 inputs for fair value measurements, including assumptions about probability of growth of subscription services and the related pricing of the services offered. During the three and six months ended

14

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

June 30, 2020, the fair value of the contingent consideration was decreased by $3.7 million, which was included in general and administrative expenses in the consolidated statement of operations. This adjustment reflects updated assumptions about the probability of change in control in light of our initial public offering. At June 30, 2020 and December 31, 2019, the contingent consideration was $5.5 million and $9.2 million, respectively, which was included in other liabilities in the consolidated balance sheet.

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, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Goodwill, beginning of period

$

539,818

$

529,145

$

539,818

$

501,145

Goodwill acquired

 

 

 

 

28,000

Goodwill, end of period

$

539,818

$

529,145

$

539,818

$

529,145

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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 

 

 

 

Average 

Accumulated 

Net Carrying 

 

Remaining 

Useful Life

Gross Value

Amortization

Value

 

Useful Life

(in thousands)

Trademarks

18 years

 

34,320

 

9,167

 

25,153

 

5.8 years

Customer relationships

212 years

 

214,320

 

37,564

 

176,756

 

9.7 years

Developed technology

5 years

 

53,560

 

20,419

 

33,141

 

3.2 years

Non‑competes

2 years

 

90

 

41

 

49

 

1.1 years

Balance, December 31, 2019

$

302,290

$

67,191

$

235,099

 

  

Trademarks

8 years

 

34,320

 

11,310

 

23,010

 

5.3 years

Customer relationships

212 years

 

214,320

 

46,711

 

167,609

 

9.2 years

Developed technology

5 years

 

53,560

 

25,775

 

27,785

 

2.7 years

Non‑competes

2 years

 

90

 

64

 

26

 

0.6 years

Balance, June 30, 2020

$

302,290

$

83,860

$

218,430

 

  

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

There were no impairments to goodwill or intangible assets recorded for the three and six months ended June 30, 2020 and 2019.

Note 6. 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

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 recorded no liabilities for contingencies recorded as of June 30, 2020 and December 31, 2019.

Note 7. Net Loss per Share

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, 

    

2020

    

2019

    

2020

    

2019

(in thousands, except share and per share data)

Numerator:

 

  

 

  

 

  

Net loss

$

(423)

$

(7,671)

$

(8,713)

$

(16,681)

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

Basic and diluted net loss per share

$

(0.00)

$

(0.07)

$

(0.08)

$

(0.16)

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, 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, 

    

2020

    

2019

    

2020

    

2019

Stock options outstanding

 

7,742,158

 

6,038,890

 

7,742,158

6,038,890

Unvested restricted stock units

 

36,520