SEC Filing | Jamf

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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 September 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

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)

(612) 605-6625

(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 November 4, 2020, the Registrant had 116,596,385 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 September 30, 2020 and December 31, 2019	3

	Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2020 and 2019	4

	Consolidated Statements of Stockholders’ Equity for the Three and Nine Months ended September 30, 2020 and 2019	5

	Consolidated Statements of Cash Flows for the Nine Months Ended September 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	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	46

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 3.	Defaults Upon Senior Securities	49

Item 4.	Mine Safety Disclosures	49

Item 5.	Other Information	49

Item 6.	Exhibits	49

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

JAMF HOLDING CORP.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	September 30, 2020		December 31, 2019
		(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	177,457	$	32,433
Trade accounts receivable, net of allowances of $513 and $200 at September 30, 2020 and December 31, 2019, respectively		64,151		46,513
Income taxes receivable		672		14
Deferred contract costs		8,528		5,553
Prepaid expenses		16,565		10,935
Other current assets		764		3,133
Total current assets		268,137		98,581
Equipment and leasehold improvements, net		10,934		12,477
Goodwill		539,818		539,818
Other intangible assets, net		210,120		235,099
Deferred contract costs		23,433		16,234
Other assets		2,842		2,599
Total assets	$	1,055,284	$	904,808
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,672	$	3,684
Accrued liabilities		21,521		26,927
Income taxes payable		1,294		819
Deferred revenues		151,532		120,089
Total current liabilities		181,019		151,519
Deferred revenues, noncurrent		36,706		20,621
Deferred tax liability		12,774		18,133
Debt		—		201,319
Other liabilities		9,399		9,338
Total liabilities		239,898		400,930
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 50,000,000 and no shares authorized at September 30, 2020 and December 31, 2019, respectively; no shares issued and outstanding at September 30, 2020 and December 31, 2019		—		—
Common stock, $0.001 par value, 500,000,000 and 132,000,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; 116,463,284 and 102,843,612 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		117		103
Additional paid‑in capital		894,056		568,756
Accumulated deficit		(78,787)		(64,981)
Total stockholders’ equity		815,386		503,878
Total liabilities and stockholders’ equity	$	1,055,284	$	904,808

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

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JAMF HOLDING CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenue:
Subscription	$	57,933	$	41,916	$	160,989	$	112,872
Services		3,605		5,234		10,066		14,529
License		8,866		7,418		21,970		19,605
Total revenue		70,404		54,568		193,025		147,006
Cost of revenue:
Cost of subscription (exclusive of amortization shown below)		10,117		8,045		28,127		22,425
Cost of services (exclusive of amortization shown below)		2,443		3,397		7,736		10,589
Amortization expense		2,679		2,634		8,034		7,588
Total cost of revenue		15,239		14,076		43,897		40,602
Gross profit		55,165		40,492		149,128		106,404
Operating expenses:
Sales and marketing		23,251		16,962		65,735		48,850
Research and development		12,736		10,919		37,282		29,453
General and administrative		13,921		6,779		31,813		21,576
Amortization expense		5,633		5,627		16,941		16,886
Total operating expenses		55,541		40,287		151,771		116,765
Income (loss) from operations		(376)		205		(2,643)		(10,361)
Interest expense, net		(1,207)		(5,473)		(10,675)		(16,425)
Loss on extinguishment of debt		(5,213)		—		(5,213)		—
Foreign currency transaction loss		(154)		(861)		(471)		(1,311)
Other income, net		—		55		91		165
Loss before income tax benefit		(6,950)		(6,074)		(18,911)		(27,932)
Income tax benefit		1,857		1,404		5,105		6,581
Net loss	$	(5,093)	$	(4,670)	$	(13,806)	$	(21,351)
Net loss per share, basic and diluted	$	(0.04)	$	(0.05)	$	(0.13)	$	(0.21)
Weighted‑average shares used to compute net loss per share, basic and diluted		113,203,074		102,791,023		106,333,836		102,727,198

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			Paid‑In		Accumulated		Stockholders’
	Shares	Amount		Capital		Deficit		Equity
Three Months Ended September 30, 2020:

Balance, June 30, 2020	102,862,404	$	103	$	570,434	$	(73,694)	$	496,843
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions and offering costs	13,500,000		14		318,979		—		318,993
Private placement	85,880		—		2,233		—		2,233
Exercise of stock options	15,000		—		82		—		82
Share‑based compensation	—		—		2,328		—		2,328
Net loss	—		—		—		(5,093)		(5,093)
Balance, September 30, 2020	116,463,284	$	117	$	894,056	$	(78,787)	$	815,386

Three Months Ended September 30, 2019:


Balance, June 30, 2019	102,769,324	$	103	$	567,248	$	(49,062)	$	518,289
Exercise of stock options	29,976		—		164		—		164
Share‑based compensation	—		—		598		—		598
Net loss	—		—		—		(4,670)		(4,670)
Balance, September 30, 2019	102,799,300	$	103	$	568,010	$	(53,732)	$	514,381

Nine Months Ended September 30, 2020:


Balance, December 31, 2019	102,843,612	$	103	$	568,756	$	(64,981)	$	503,878
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions and offering costs	13,500,000		14		318,979		—		318,993
Private placement	85,880		—		2,233		—		2,233
Exercise of stock options	33,792		—		185		—		185
Share‑based compensation	—		—		3,903		—		3,903
Net loss	—		—		—		(13,806)		(13,806)
Balance, September 30, 2020	116,463,284	$	117	$	894,056	$	(78,787)	$	815,386

Nine Months Ended September 30, 2019:


Balance, December 31, 2018	102,649,701	$	103	$	565,372	$	(32,381)	$	533,094
Exercise of stock options	149,599		—		822		—		822
Share‑based compensation	—		—		1,816		—		1,816
Net loss	—		—		—		(21,351)		(21,351)
Balance, September 30, 2019	102,799,300	$	103	$	568,010	$	(53,732)	$	514,381

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)


	Nine Months Ended
	September 30,
	2020		2019
Cash flows from operating activities
Net loss	$	(13,806)	$	(21,351)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization expense		28,378		27,437
Amortization of deferred contract costs		6,705		4,463
Amortization of debt issuance costs		700		843
Provision for bad debt expense and returns		894		—
Loss (gain) on disposal of equipment and leasehold improvements		(23)		(11)
Loss on extinguishment of debt		5,213		—
Share‑based compensation		3,903		1,816
Deferred taxes		(5,357)		(6,867)
Adjustment to contingent consideration		(3,100)		—
Changes in operating assets and liabilities:
Trade accounts receivable		(18,332)		(13,046)
Income tax receivable/payable		(183)		(246)
Prepaid expenses and other assets		(4,699)		(4,888)
Deferred contract costs		(16,879)		(12,684)
Accounts payable		3,145		(836)
Accrued liabilities		(4,207)		1,151
Deferred revenue		47,528		29,597
Other liabilities		3,161		(11)
Net cash provided by operating activities		33,041		5,367
Cash flows from investing activities
Acquisition, net of cash acquired		—		(40,173)
Purchases of equipment and leasehold improvements		(1,836)		(6,164)
Net cash used in investing activities		(1,836)		(46,337)
Cash flows from financing activities
Proceeds from debt		—		40,000
Debt issuance costs		(1,264)		(1,550)
Payment of debt		(205,000)		(4,750)
Payment of debt extinguishment costs		(2,050)		—
Proceeds from initial public offering, net of underwriting discounts and commissions		326,316		—
Cash paid for offering costs		(6,601)		—
Proceeds from private placement		2,233		—
Proceeds from the exercise of stock options		185		820
Net cash provided by financing activities		113,819		34,520
Net increase (decrease) in cash		145,024		(6,450)
Cash, beginning of period		32,433		39,240
Cash, end of period	$	177,457	$	32,790
Supplemental disclosures of cash flow information:
Cash paid for interest	$	12,647	$	15,785
Cash paid for income taxes, net of refunds		703		511

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.

Initial public offering

On July 24, 2020, the Company closed its initial public offering (“IPO”) through which it issued and sold 13,500,000 shares of common stock at a price per share to the public of $26.00 (the “IPO Price”). In connection with the IPO, the Company raised approximately $319.0 million after deducting the underwriting discount and commissions of $24.7 million and offering expenses of $7.3 million. Upon completion of the IPO, authorized capital stock consisted 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.

Concurrently with the Company’s IPO, the Company issued and sold 85,880 shares of its common stock in a private placement to certain of its named executive officers, certain of its other employees and its independent directors at the IPO Price for aggregate consideration of approximately $2.2 million.

Upon closing of the IPO, the Company repaid $205.0 million of the principal amount of its then existing Term Loan Facility (the “Prior 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 in the third quarter of 2020.

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 September 30, 2020, funds controlled by Vista own approximately 72.9% 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.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

We will remain an emerging growth company for the first five fiscal years after the completion of our 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 (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.

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.

Unaudited Interim Consolidated Financial Information

The accompanying interim consolidated balance sheet as of September 30, 2020, the consolidated statements of operations and of stockholders’ equity for the three and nine months ended September 30, 2020 and 2019 and the consolidated statements of cash flows for the nine months ended September 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. All adjustments made were of a normal recurring nature. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any future period.

Subsequent events

The Company evaluated events or transactions that occurred after the balance sheet date for potential recognition or disclosure through the date the financial statements were issued. No subsequent events or transactions were identified.

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.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands)
Revenue:
The Americas	$	54,631	$	42,459	$	149,806	$	112,980
Europe, the Middle East, India, and Africa		11,754		9,313		32,483		25,972
Asia Pacific		4,019		2,796		10,736		8,054
	$	70,404	$	54,568	$	193,025	$	147,006

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”) 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 nine months ended September 30, 2020. The following describes the impact of certain policies.

Stock split

On July 10, 2020, the Company effected a 110-for-1 stock split of its common stock. The par value of the common stock was not adjusted as a result of the stock split. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retrospectively, where applicable, to reflect this stock split.

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 as of December 31, 2019 was $2.3 million. During the three and nine months ended September 30, 2020, we incurred $1.5 million and $5.0 million, respectively, of deferred offering costs. Upon completion of our IPO, the total amount of $7.3 million of deferred offering costs was reclassified to stockholders’ equity and recorded against the proceeds from the offering. Therefore, we had no deferred offering costs included within other current assets as of September 30, 2020.

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. There were no service option grants during the nine months ended September 30, 2020.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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’s 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 provided that Vista achieves 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 on the date of modification was $33.0 million 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.

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				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands)
SaaS subscription and support and maintenance	$	57,933	$	41,916	$	160,989	$	112,872
On‑premise subscription		7,849		5,135		18,159		12,224
Recurring revenue		65,782		47,051		179,148		125,096
Perpetual licenses		1,017		2,283		3,811		7,381
Professional services		3,605		5,234		10,066		14,529
Non‑recurring revenue		4,622		7,517		13,877		21,910
Total revenue	$	70,404	$	54,568	$	193,025	$	147,006

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.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands)
Balance, beginning of the period	$	157,738	$	117,919	$	140,710	$	100,662
Revenue earned		(50,038)		(39,261)		(147,324)		(116,145)
Deferral of revenue		80,538		54,651		194,852		148,792
Balance, end of the period	$	188,238	$	133,309	$	188,238	$	133,309

There were no significant changes to our contract assets and liabilities during the three and nine months ended September 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 September 30, 2020 and December 31, 2019, the Company had $199.1 million and $149.5 million, respectively, of remaining performance obligations, with 82% 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.

Total amortization of contract costs for the three months ended September 30, 2020 and 2019 was $2.5 million and $1.7 million, respectively. Total amortization of contract costs for the nine months ended September 30, 2020 and 2019 was $6.7 million and $4.5 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 nine months ended September 30, 2020 and 2019.

For the three and nine months ended September 30, 2020, the Company had two distributors that accounted for more than 10% of total net revenues. Total receivables related to these distributors were $15.2 million at September 30, 2020. For the three and nine months ended September 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 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.

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JAMF HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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.

Leases

In February 2016, the FASB issued ASU 2016-02 to increase transparency and comparability 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 manner similar to current GAAP. The guidance also requires entities to disclose key quantitative and qualitative information about its leasing arrangements. The Company expects to adopt the new lease standard on January 1, 2021 using the optional transition method to the modified retrospective approach. The Company has formed an implementation team, commenced identification of our lease population, and selected new software to manage the lease portfolio and perform the accounting required under the new lease standard. The Company is still assessing the impact of adoption of the new lease standard on the 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

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. The Company early adopted the standard in the third quarter of 2020. The adoption of the standard did not have a material impact on the Company’s 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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 of ASU 2018-13 is the first quarter of fiscal year 2020. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

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 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:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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 as of December 31, 2019 was $203.1 million (Level 2). The carrying value of our debt as of 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. Upon closing of the IPO, we repaid the principal amount of our outstanding debt and had no debt outstanding as of September 30, 2020.

Note 4. Acquisitions

ZuluDesk B.V.

On February 1, 2019, the Company purchased all of the outstanding membership units of ZuluDesk B.V. (“ZuluDesk”) whose products are designed to offer a cost-effective mobile device management system for today’s modern digital classroom. ZuluDesk’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 and its assembled workforce. The goodwill is not deductible for income tax purposes.

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 nil and $0.9 million for the three and nine months ended September 30, 2019, respectively. These expenses were recognized as acquisition costs in general and administrative expenses. ZuluDesk contributed revenue and net income of $1.4 million and less than $0.1 million, respectively, during the three months ended September 30, 2019, excluding the effects of the acquisition and integration costs. ZuluDesk contributed revenue and net loss of $2.9 million and $0.5 million, respectively, during the nine months ended September 30, 2019, excluding the effects of the acquisition and integration costs. The Company used borrowings under the Prior Term Loan Facility to complete the acquisition. The Prior Term Loan Facility provided for borrowings of $175.0 million with a maturity date of November 13, 2022 under the Company’s 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 and approximately $0.5 million of debt issuances costs were capitalized as a reduction in Debt on the balance sheet in connection with such increase.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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 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. 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 is 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 nine months ended September 30, 2020, the fair value of the contingent consideration was increased by $0.6 million and decreased by $3.1 million, respectively, which is included in general and administrative expenses in the consolidated statement of operations. The adjustment for the three months ended September 30, 2020 primarily reflects updated assumptions about probability of growth of subscription services. The adjustment for the nine months ended September 30, 2020 primarily reflects updated assumptions about the probability of change in control in light of our IPO, as well as updated assumptions about probability of growth of subscription services. At September 30, 2020 and December 31, 2019, the fair value of the contingent consideration was $6.1 million and $9.2 million, respectively, which is 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 is recognized as a compensation expense in our consolidated statement of operations. The Company recognized as expense $0.9 million and $4.1 million during the three and nine months ended September 30, 2020, respectively.

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. Pro forma results of operations for this acquisition were not presented as the effects were not material to our financial results.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019

	(in thousands)
Goodwill, beginning of period	$	539,818	$	529,145	$	539,818	$	501,145
Goodwill acquired		—		10,673		—		38,673
Goodwill, end of period	$	539,818	$	539,818	$	539,818	$	539,818

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	1‑8 years	$	34,320	$	9,167	$	25,153	5.8 years
Customer relationships	2‑12 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	$	12,383	$	21,937	5.1 years
Customer relationships	2‑12 years		214,320		51,259		163,061	9.0 years
Developed technology	5 years		53,560