Q4 2023 Jamf Holding Corp Earnings Call
Participants
Jennifer Gaumond; IR; Jamf Holding Corp
John Strosahl; CEO & Director; Jamf Holding Corp.
Ian Goodkind; Chief Financial Officer; Jamf Holding Corp
Joshua Reilly; Analyst; Needham & Company, LLC
Rob Owens; Analyst; Piper Sandler
Gregg Moskowitz; Analyst; Mizuho Securities USA LLC
Jake Roberge; Analyst; William Blair
Matthew Hedberg; Analyst; RBC Capital Markets
Chad Bennett; Analyst; Craig Hallum
Pat Walravens; Analyst; JMP Securities
Koji Ikeda; Analyst; Bank of America
Presentation
Operator
Thank you for standing by and welcome to the Jamf fourth-quarter 2023 earnings conference call. (Operator Instructions)
As a reminder, today's program is being recorded.
And now I'd like to introduce your host for today's program, Jennifer Gaumond, Vice President, Investor Relations. Please go ahead.
Jennifer Gaumond
Good afternoon, and thank you for joining us on today's conference call to discuss Jamf's fourth-quarter and full-year 2023 financial results. With me on today's call are John Strosahl, Chief Executive Officer; and Ian Goodkind, Chief Financial Officer.
Before we begin, I'd like to remind you that shortly after the market closed today, we issued a press release announcing our fourth-quarter and full-year 2023 financial results. We also published the Q4 earnings presentation, investor presentation, and Excel file containing quarterly financial statements to assist with modeling. You may access this information on the Investor Relations section of jamf.com.
Today's discussion may include forward-looking statements. Please refer to our most recent SEC reports, including our most recent annual report on Form 10-K where you will see a discussion of factors that could cause actual results to differ materially from these statements.
I would also like to remind you that during the call, we will discuss some non-GAAP measures related to Jamf's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in our earnings release.
Additionally, to ensure we can address as many analyst questions as possible during the call, we ask that you please limit your questions to one initial question and one follow-up.
Now I'd like to turn the call over to John.
John Strosahl
Thanks, Jen. Jamf achieved strong results in Q4 to round out the year, exceeding expectations for the 15th consecutive quarter. Q4 year-over-year revenue growth was 16%, representing the first quarter of revenue growth acceleration since Q2 of 2021.
This strong revenue growth led to our highest non-GAAP operating income quarter ever at $21.1 million, with a non-GAAP operating income margin of 14%. This represents a 700 basis points improvement from Q4 of 2022.
Full-year revenue growth was 17%. ARR grew 15% year over year in 2023 to $588.6 million. Full-year non-GAAP operating income was $45.4 million, a 75% increase over 2022. This resulted in a full-year non-GAAP operating income margins of 8%, a 300 basis points improvement over 2022.
We're especially proud of these strong results as the past six quarters have seen muted growth in the education and tech industries overall, along with slow PC growth. Q4 PC shipments declined nearly 3% with Mac shipment seeing a decline of 18%.
We remain optimistic regarding the potential for a 2024 PC refresh cycle as predicted by IDC. However, our expectations for 2024 are not reliant on a significant uplift in device expansion. Longer term, we're still count in our prediction that Apple technology will become the number-one ecosystem in the enterprise due to continued user preference for Mac at work.
We ended 2023 with 75,300 customers and 32.3 million devices on our platform. Of these customers, 41% run both Jamf management and security product. This represents a significant increase due to the transition of our Jamf Now customers to Jamf Fundamentals. Jamf Fundamentals provides the most complete yet simple IT solution for small- to medium-sized businesses to manage and protect their Apple ecosystem.
Other highlights include continued demand for Jamf's Apple-first security platform with 33% year-over-year growth in security ARR to $134 million or 23% of Jamf's total ARR, our strongest quarter ever for ARR added for Jamf business plan. Many of our largest sales had an upsell component, proving the value of our land-and-expand strategy.
We continue to see positive trends across professional services, financial services, and retail, which are three of the top five industries we serve. And we also saw a strong quarter in healthcare.
Our results were driven by strong performance across our strategic focus areas of Mac leadership, management and security, and Mac and mobile. In Mac leadership, we're seeing continued Mac growth in our customer base with customers like a leading fully integrated biopharmaceutical solutions organization.
The company has been a Jamf customer for nine years. And after finding that their Mac platform required fewer support tickets and a lower total cost of ownership, decided to take the next step and scale out their Mac choice program with Jamf. The company expects to use over 5,000 Macs in the near future as a result of their upcoming refresh cycle.
Moving to the security. Last week, we released our Security 360 report that looks at real-world customer data, cutting-edge threat research, and noteworthy industry events to provide an overview of the evolving threat landscape. Among many striking data points I wanted to highlight, we are now tracking 300 malware families on the Mac operating system. 21 of those families being found in 2023.
It is true that Apple builds one of the most secure out-of-the-box platforms on the market basket. Hackers are agnostic as to the platforms they target. Jamf is the only platform that delivers an Apple-first integrated management and security solution that meets the needs of the modern enterprise.
Jamf enhances Apple's built-in security features by increasing visibility, prevention, controls, and remediation capabilities. We anticipate security to continue to become a larger part of our total ARR over time.
Much of our success in security has been predicated on our ability to deliver both management and security on one platform. The success of Jamf's bundled solution is a testament to this, with ARR growth of bundled solutions outpacing most of Jamf's individual products.
In Q4, over 44% of new customer pipeline generated was for security. Security products are also helping us to increase our win rates. When customers come to Jamf with security in mind, we win almost twice as often as we do when customers are looking at management alone. This was true in both Q3 and Q4 and we expect this trend to continue.
We also see long-term management customers expanding with Jamf with security. In Q4, a European payments company added Jamf Protect with 5,000 Macs as part of a three-year agreement. Given the company's exposure to PII and payment information, it has strict security and regulatory requirements. Our team was able to demonstrate how data flows through the product in order to meet their complex needs and deliver the powerful insights and analytics of Jamf Protect.
In addition to demand for complete management and security platforms, customers are also reorganizing their [influence]-second IT departments so they can manage and secure devices by technology ecosystem. This also allows end users to get the most from all of their devices while organizations can trust solutions built for the unique technology of their environment.
Industry analysts like Omnia are recognizing Jamf for its mobile-first management and security, saying Omnia has seen Jamf become the primary UEM solutions adopted by businesses that are well invested in the Apple ecosystem.
Jamf was also early to market with capabilities to securely manage shared IOS devices. Jamf's management capabilities for IOS and iPad IOS extend well beyond basic device management, including the ability to provision connectivity through e-Sim and physical access tokens through key card stored in digital wallets.
This makes Jamf a strong choice for businesses looking to effectively manage and secure their Apple devices. A great example of Jamf's leadership in securely managing IOS devices in the Q4 win, Learning Care Group. Learning Care Group is the second largest for-profit child care provider in North America and a leader in early education. It operates over 1,000 schools across 38 states.
Learning Care Group will be migrating their 20,000 IOS devices across its locations to Jamf. With Jamf, the company is easily able to manage its entire fleet as well as keep all of the native apps that teachers and children use at school up to date.
We continue to see many industries, especially nontraditional tech industries, reach for Apple technology, then to Jamf to make that tech work for their organization. As I stated earlier, we're seeing strong momentum in professional services, financial services, retail, and healthcare.
One example is Sharp HealthCare. Sharp HealthCare is the leading health provider in San Diego and a trailblazer in healthcare innovation. Their mission is to be the best place to work, the best place to practice medicine, and the best place to receive care.
One recent innovation is the deployment of more than 1,500 iPads to patient bedside, providing access to their medical records, patient education, and entertainment. These iPads are powered by Jamf's healthcare listener, patented technology, which receives patient admit, discharge, and transfer messages from the epic electronic healthcare system.
The technology can automatically trigger management tasks such as remote wipe and full device reset between patients to automatically personalize the experience for each patient, while ensuring personal identifiable information and protected health information are secure.
Another example of a company reaching for Jamf to power its unique industry specific workflows is the longest running airline in India. This customer chose Jamf Pro over their existing management solution and two competitive solutions to manage 5,000 iPads with future plans to implement additional products to achieve trusted access.
Jamf continues to lead the way with continued innovation across our business. One recent Apple innovation that we are particularly excited about is Vision Pro and its potential for the enterprise. Recently, Apple highlighted a number of enterprises that are deploying Vision Pro.
This month, we announced we are the first to market with support for Apple Vision Pro, adding this powerful new endpoint to our Apple-first security and access products, Jamf Protect and Jamf Connect. This means Jamf customers can now confidently explore new ways of working while maintaining security, performance, and privacy.
Additionally, with the introduction of MDM support for Vision OS 1.1 beta announced earlier this month by Apple, Vision Pro will soon include the key foundations for deploying and leveraging an enterprise-grade device at scale. Jamf will be working alongside Apple to support MDM in Vision Pro and we are excited to continue to fill the gap between Apple's powerful technology and the security, identity, and management needs of the enterprise.
As we look ahead into 2024, we will continue to execute our strategy. We are committed to simplify work by helping organizations succeed with Apple, and by doing so, at the pace of Apple. To do that, we need to ensure we have a healthy company in service to our stakeholders over the long term.
Our business has evolved both because of continued innovation in this space and because of the changing needs of our customers. Over the last few years, Jamf has been on a dedicated journey to align our workforce to meet the evolving needs of today's IT and security teams while remaining sustainable and profitable business.
Over the last year, we've seen reduced customer budgets and muted hiring and layoffs in the technology space, which in turn to the elongated sales cycles and decreased customer purchases of new devices. This has put pressure on our land-and-expand strategy. And in education K through 12 remains in a COVID overhang. These challenges in tech and K through 12 will likely remain throughout 2024.
On the flip side, we are seeing expansion in industries outside of these two as I mentioned earlier. We are controlling what we can by transforming and adjusting our investments in resources consistent with our current growth rate. This involves a more rigorous approach that we've taken in the past.
We will continue to invest in areas that further solidify Jamf's position as the leading platform for managing and securing Apple at work. We remain committed to innovating at the pace of Apple and enhancing our platform to deliver the best solution for our customers today and in the future.
We're prioritizing investments in areas where we're seeing tremendous growth and opportunity like security and AI, while reducing spend in areas not providing as fast or as high returns. We've also embarked on a number of scalability and efficiency efforts, including realigning our organizational structure to match our investment areas, which resulted in a reduction in force we announced in January.
These efforts span every area of our business, and we're subject to a rigorous process that involves each member of my management team. Ian will provide more detail on the scalability and efficiency efforts in a bit.
As a result, we are anticipating achieving nearly 700 basis points of non-GAAP operating income margin expansion in 2024 when compared to 2023. We believe this is the right course of action to align Jamf's current revenue growth profile and establish a foundation for success in the future.
With that, I'll now turn it over to Ian to review our results and give more color around our 2024 outlook.
Ian Goodkind
Thanks, John. We ended Q4 with year-over-year revenue growth of 16%, exceeding the high end of our revenue outlook by $1.6 million. This resulted in fiscal year-over-year revenue growth of 17%.
Total ARR reached $588.6 million, representing year-over-year growth of 15% exceeding expectations. For the first time since Q3 2022, we saw year-over-year new bookings growth with Q4 representing one of our strongest quarters for commercial new bookings.
This helped drive Q4 net new ARR of $22 million, resulting in Jamf's commercial ARR increasing to 74% of Jamf's total ARR and security ARR increasing to 23% of the total. These results benefited from the conversion of Jamf Now customers to Jamf Fundamentals. We continue to believe that Jamf's commercial business, and specifically security, will be a key growth driver.
Similar to Q2 and Q3, the strategic core of Jamf's business, SaaS recurring revenue, remained strong in Q4. Less strategic revenue sources like license, services, and on-premise revenues continued to experience year-over-year declines.
Additionally, softness in Jamf's two largest industries, tech and K through 12 education, remained; while Jamf's next three largest industries, professional services, financial services and wholesale and retail saw continued momentum. And in addition, healthcare saw a momentum, too.
Our net retention rate remained flat at 108% in Q4 when compared to Q3. The remainder of my remarks on margins, expense items, and profitability will be on a non-GAAP basis. Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP, are found in our earnings release.
Q4 non-GAAP gross profit margin was 82% and within our expectations. We continue to anticipate gross margins in the low-80% range and expect slight fluctuations each quarter. Non-GAAP operating income exceeded the high end of our Q4 outlook at $21.1 million or 14% margin due to increased revenues, representing a 700 basis point improvement over Q4 2022.
For full year, non-GAAP operating margin was 8%, a 300 basis point increase over fiscal 2022 due to revenue outperformance and cost containment measures. Our trailing 12-months unlevered free cash flow margin was 10% compared to 18% in the prior year. It's important to note that year-over-year decrease in unlevered free cash flow is not indicative of lost customers nor that customers are committing shorter and lower dollar contracts with us. In fact, customers are growing with Jamf just not paying their full contract value upfront.
Additionally, the trailing 12 months unlevered free cash flow margin of 10% was slightly lower than expected, primarily related to a shift in customer payments during year end. Our effective tax rate for Q4 was negative 7%, resulting in a full-year effective tax rate of negative 2.1%, with both rates consistent with our expectations.
As a reminder, for non-GAAP metrics, we use our domestic statutory rates for calculating tax impacts, which is currently 24%. Please note that we pay a negligible amount of cash taxes on a US federal basis and pay an immaterial amount of cash taxes outside the US.
Now turning to our outlook for 2024. As John discussed, we are aligning investments and resources to match Jamf's current revenue growth profile with a focus on key investment areas and scalability and efficiency initiatives. Now is the right time to take these measures to set Jamf up for profitable growth in the future.
Some of the scalability and efficiency initiatives include: adjusting the sales organization for current and expected growth levels; enhancing the customer journey to make it easier to do business with us; enhancing channel relationships through stronger programs and automation, reducing reliance on field sales; investing in process improvement and automation in sales and marketing and general and administrative; leveraging leadership talent and create more efficient organizational structures; and optimizing our global footprint, aligning to where our customers need us most.
Most of these initiatives are in process with some seeing benefits in 2024 and others with benefits expected throughout the next few years.
With respect to revenue growth, given the subscription nature of our business, softness in device upsell in 2023 will impact our 2024 revenue growth rate. We expect continued pressure on device upsell through 2024.
Based on these factors, for the first quarter of 2024, we expect total revenue of $148 million to $150 million, representing year-over-year growth of 12% to 13%. Non-GAAP operating income of $19 million to $20 million, representing a non-GAAP operating income margin of 13% at the midpoint.
For the full-year 2024, total revenue of $614.5 to $619 million, representing year-over-year growth of 10% at the midpoint. Non-GAAP operating income of $89 million to $93 million, representing a non-GAAP operating income margin of 15% at midpoint and a nearly 700 basis point improvement over fiscal year 2023.
While we don't provide an outlook for ARR, we would expect to end fiscal year 2024 with ARR growth similar to full-year revenue growth. With respect to unlevered free cash flow for full-year 2024, we expect unlevered free cash flow margin to be similar to non-GAAP operating income margin.
We also provide estimates for amortization, stock-based compensation, and related payroll taxes, and other metrics to assist with modeling in the earnings presentation as part of the webcast and also posted on our Investor Relations website.
As we look beyond 2024, we remain committed to Jamf achieving the Rule of 40. Using our historical calculation method of revenue growth and unlevered free cash flow margin, we anticipate approaching the Rule of 40 by the end of 2025. We plan to exceed the Rule of 40 in 2026.
We look forward to sharing more regarding our plans through 2026 as part of our Investor Day on March 13, 2024, at Nasdaq in New York. If you would like to attend in person or virtually and have yet to register, please reach out to investorevents@jamf.com.
And now John and I will take your questions. Operator?
Question and Answer Session
Operator
(Operator Instructions)
Joshua Reilly, Needham & Company.
Joshua Reilly
All right. Thanks for taking my questions. Starting off on the macro here. Tech obviously remains a headwind. Maybe some color, were the Q4 renewal consistent with your expectations entering the quarter? And then overall with tech incrementally weaker than what you expected entering the quarter as well?
John Strosahl
Hey, Josh, this is John. As part of Q4 renewals, no, that was in line with what we had expected, hadn't anticipated. And we're pretty happy with the Q4 performance, especially as it ended the year.
And as far as the tax weakness, we just haven't seen the hiring resume in tech yet. We anticipate that's going to come along with IDC and everyone else, but we haven't seen it yet. And we also haven't contemplated in our guidance either.
Joshua Reilly
Got it. That's helpful. And then just one follow-up. If you look at the guidance for 2024, can you just help us understand, are you also assuming working on a conservative assumption around new customer activity as well? And are you planning for more contracts or renewals with device down-sell in these assumptions? Thank you.
John Strosahl
Yeah. Thanks, Josh. We build our guidance using a bottoms-up approach. And in 2024, we're factoring in the same muted economics that we saw in 2023. Also, impacting our revenue growth rates in 2024 is the reduced upsell in 2023 because we are a high recurring revenue business.
And as we just talked about or you alluded to, 46% of our ARR does come from information communication, i.e., tech, which has the reduced customer hiring practices. And EDU still have the COVID overhang.
On the new logos specifically, we are factoring in assumptions similar to 2023. In addition, on the less strategic choppy revenue sources, we have those factor in a slightly lower level than what we saw in 2023.
But we are focused on all things we can control. We're focused on the cross-sell opportunities. We're focus on security and selling into mobile. And the thing we haven't factored in is if the upsell return, that would be something that would drive that number higher in the form of customers, hiring more employees. It would come back in the form of more refresh programs within 2024 and choice programs with that (inaudible) and on the education side and then the replacement market being even stronger than we've anticipated.
Joshua Reilly
Got it. Very helpful. Thank you, guys.
Operator
Rob Owens, Piper.
Rob Owens
Great. Thanks for taking my question. And I guess just around some of those dynamics, you stated net retention rate of 108%, which I believe was flat quarter over quarter. First part, can you just remind us of the calculation of that at that point in time versus trailing 12 months?
And second, as we contemplate 2024, what are your expectations there given some of the turnover issues? I think we're seeing in high-tech and not seeing the upsell that you were likely in the last couple of years. Thanks.
Ian Goodkind
Hey, Rob, I'll jump in on that question. So you're correct that our net retention rates didn't change from Q3 to Q4. Remain that one way. And as a reminder to your question, it is based on a trailing 12-month measure.
What we are looking forward to based on the guidance that we just provided is that the net retention rate will trickle down throughout the year by about 100 basis points per quarter. But we do believe that actually bottoms out at the end of the year and stabilizes from our cross-sell efforts. And as the macro turn, then as we get better and better, which we are, we have gotten really good at selling security, those will go well and will accelerate that number upward.
Rob Owens
Thank you much.
Operator
Gregg Moskowitz, Mizuho.
Gregg Moskowitz
Hey, thank you for taking the questions. Good afternoon, guys. I guess first question, can you expand on your latest thoughts on PC and Mac refresh activity in 2024?
I think we all have seen what IDC is saying. I'm wondering if you have any additional perspective from your conversations with customers. And then also what sort of assumptions around refresh are baked into this revenue guide for the full year?
John Strosahl
Hey, Greg, I'll take the first part of that question and then Ian can expand on expectations. With respect to the PC refresh and speaking with our customers, they're just being prudent in their expense management as well. And they're just looking out into the out years, looking at what their hiring practices are. And they're just -- they're not -- we're not seeing a great anticipation (technical difficulty) But again, we're seeing the budget management. We're seeing on platform consolidation, and that's kind of how we set our guidance accordingly in '24.
Ian, do you got something more?
Ian Goodkind
Yes. What I'll add on that refresh program within 2024, we are factoring the same economics we saw in 2023. So we saw that lack of upsell of device expansion in 2023. So we're factoring in that same muted upsell at renewal.
But if that comes back, we see that as a good opportunity for us as choice programs come into play. We do note in that IDC article and other places and other checks that we've heard is an opportunity next year for refresh cycle. So that is something we think could be a tailwind for us next year.
Gregg Moskowitz
Perfect. Thanks, Ian. Just as a follow-up, you mentioned, John, that you saw benefit from Jamf Now conversions to Jamf Fundamentals. Are you able to put a finer point perhaps on how this is impacting the business today as well as how it may help in 2024 and beyond? Thank you.
John Strosahl
Yes, I can certainly speak to what the customer is seeing from the benefit. And then Ian can follow up with some with some numbers, if needed. You know, really we've seen a tremendous value. Our customers have seen a tremendous value with the security and the management being part of the same product. In fact, when we go to market with security and management, we win almost twice as many times as we just are talking about security on its own.
And we also have a greater stickiness when those customers are using our using both our management and security products together. And so this was really something our customers have asked for with respect to the security side. And so we wanted to make sure that we had that bundled solution for those customers. And there's been a great benefit.
We've done that a few months ago. And we haven't really seen any negative pushback or attrition from that as a result. So we're getting good feedback from our customers.
Ian Goodkind
Yes, I would just add some number of points to that. Out of the net new ARR of $22 million, the impact was about $6 million. We haven't seen any material changes in churn there. So customers are loving it and accepting it. And we are seeing success in our other bundles.
And just to quote to other stats there, one, we see 79% growth year over year when combining both our business plan and enterprise plan. And in the fourth quarter alone, Jamf business plan had the most successful quarter in the form of net new ARR.
Gregg Moskowitz
Very helpful. Thank you, guys.
Operator
DJ Hynes, Canaccord Genuity.
Hey, guys, this is Ryan on for DJ. So I just wanted to double click on some of the go-to-market motions you're building out, I guess, particularly the self-directed and the partner-led motions we've spoken about before. Can you just elaborate on any traction you're seeing there? And I guess, like when we'd start to see any of that progress reflected in S&M as we progress through 2024?
John Strosahl
Okay, Ryan, this is John here. So I've got two parts of that question. One is how the go-to-market has been optimized through self-directed; and the other is through our partner. We would classify that as our third-party channel as well as our strategic partnerships.
And with respect to the first one, the self-directed, that's really what the investment opportunity or investments that we have done in our systems to gain some efficiencies there that we'll see primarily toward the back half of the year.
And those are things like the partner portal. When partners can come in and actually put data directly into the portal and make their own quotes. It's also buying product from within the product, whether that's additional seats on their renewal or additional products from within our product. And those are all things that we're putting into place from a technological investment.
With respect to our third-party channel, we've actually increased the amount of business going through that third-party channel on a global basis. We've always run primarily channel led outside the US and in the US, that's becoming even more so, and in fact, increasing in its percentage there.
And we're going to continue to do that. Some of the optimizations that we've done in our go-to-market teams just early even this year are really focused on that, leveraging more in the channel, which we've talked about for some time. And that's actually coming to fruition. And we're seeing that in the percentage of our business going through our channel partners.
Okay. Awesome. Great to hear. And then I guess just a quick follow-up. I know you have your Investor Day coming up in a couple of weeks. But when you talk about meeting the Rule of 40 by the end of 2025 and exceeding it in 2026, can you help me think about like what are your expectations there between the balance of growth and profitability?
Ian Goodkind
Yes, I can talk to that. So we would expect our revenue to be a higher growth rate in '25 and '26 than what we see in 2024 for all the reasons of the tailwinds that we mentioned that we haven't factored into 2024. With 2025 and 2026 profitability, we would expect that to expand as well.
As we talked about, we have certain initiatives to make the customer journey easier. We have certain back-office automation, and both those will provide benefits in '25 and '26. And as a last reminder I make here is you'll hear more specifics on that at our Investor Day on March 13 at Nasdaq in New York.
Okay. Awesome. Thanks. Appreciate the time.
Operator
Jake Roberge, William Blair.
Jake Roberge
Hey. Thanks for taking the questions. I know it's hard to predict when hiring really starts to ramp more meaningfully. But as you look into 2024, should we expect the headwinds in tech and education to trough this year? Or does that dynamic that we'll still have to kind of deal with and work through in 2025 as you work through some of the longer renewal cycles from potentially larger tech customers and education customers? Just curious how those renewal cycles are shaping up heading into next year.
John Strosahl
Yes, Jake. This is John. We, along with a lot of the market, had anticipated the tech hiring to resume in 2023 or the back half of '23. But we didn't see that. And so really taking that into consideration, we wanted to have a balanced approach going into our 2024 guidance, which is what we see here.
So we're going to continue to run a balanced growth profile with investing in growth as well while maintaining profitability in the meantime.
Ian Goodkind
One thing I'd add, as we look at our, let's say, top five industries, so we talked about tech and education, we are actually seeing continued strength in the next three pieces or industries. So professional services, financial services, and retail and wholesale. And those have provided a really good strength and growth rate for us. And we're really excited about the opportunities in those segments.
And the last thing I'd mention here is as we've talked about non-tech leading important industries have really been looking at that flip use of our products, and that has been a success story for us as well.
Jake Roberge
Okay. Very helpful. And then really nice growth in the security suite this quarter. Now that you're hitting a more meaningful scale there, how should we think about a durable growth rate in that segment?
And then just kind of on the other side of that coin, do you expect to see similar headwinds in the security business in 2024 as you see on the device management side? Or could that actually be more insulated heading into next year?
Ian Goodkind
Yes. On the security side, look, we have a business that grew 33% year over year. It now represents 23% of our total ARR. We continue to think that's a really strong focus point for us that we've allocated resources that way. And we think that can continue to be a very strong rate -- growth rate in the future.
I would say that we are going to provide more details around that at our Investor Day. But what we are seeing and it goes back to our bundles discussion before, when we are combining management and security, it has been a very successful win rate. And we actually are seeing customers stay a little bit more sticky and are happier when we combine those products together.
John Strosahl
And Jake, I'll just add to that as well. I mean speaking to our customers, they're certainly not investing less in security. And as our customers will come back to us and talk about Apple's specific functionality that we have, that's really been a benefit.
And when you combine that with the management piece, not only can you identify the threat, but you can also do something about it and actually deploy that, that's really what we've seen. So we're continuing to be optimistic about the management and security piece together and how that resonates with our customer base.
Jake Roberge
Sounds great. Thank you for taking the questions.
Operator
Matt Hedberg, RBC.
Matthew Hedberg
Great, guys. Thanks for taking my questions. John, have you noticed anything competitively, maybe an increased pipeline or anything of that from VM or AirWatch, just kind of given the ongoing acquisition there by Broadcom? And just sort of want to competitively, is there anything there maybe improving a bit?
John Strosahl
Yes. Thanks, Matt. It certainly has. We've been working on this for quite a while. And while we are really optimistic about that replacement opportunity, it's not going to happen all at once, just given those customers have multiyear contracts. And we're really tied into that customer base.
And so when those renewals come up, we're certainly showing the advantage of not only the management security together, but then an Apple-led and Apple-focused ecosystem support. And that again, is resonating with our customer base. So we continue to remain optimistic about that. And now with the recent events that have transpired over the last few days, we were even just as, if not even more optimistic about it.
Matthew Hedberg
Got it. And that's great. There's a lot of good commentary specifically what you guys are doing to maybe offset some of the tougher spending that you're seeing, other device adds, headcount growth, et cetera. But I still reflect on the opportunity still seems like such a greenfield opportunity as it stands.
Are there things from either strategic marketing or targeting greenfield accounts through like ROI-based selling that can drive sort of up above Jamf growth above market trends? Maybe from -- just trying to go after what feels like a really, really greenfield opportunity still?
John Strosahl
Yes, there's all of the above. I mean, we're certainly doing all the account base. We're doing all the analytics and making sure that we target the accounts that are available. And with what we mentioned earlier, just with budgets being a rather muted this year in anticipation of tech hiring and the refresh cycle in education, we're certainly poised for that.
We've done a lot of the market research, and we've had some elongated sales cycles like many of us in the industry have. But again, the opportunity is there. We've got great win rates, especially when we put management and security together. We'll just keep doubling down on those things that have been successful and open up new areas where they become available. And the replacement market is just one.
Ian mentioned earlier about the desk lists workflows and industry workflows that we're seeing with all the other additional devices that are coming out from Apple and the ones that are out now just being put into process in a lot of different functions in ways that we hadn't anticipated before. And that's also something that we're really focused on and working with our channel partners to really optimize and take advantage of that opportunity.
Matthew Hedberg
Great. Thanks.
Operator
Raimo Lenschow, Barclays.
Hey, this is Isaac on for Raimo. Thanks for taking the question. John, you've talked about enterprise being a bit more resilient than SMB over the last couple of quarters. And I was wondering if there was anything to call out here, whether to the benefit of enterprise again or the weakness of SMB.
John Strosahl
Yes, thanks, Isaac. We've seen -- when we talk about the volatility in the SMB, as markets uncertainty, you have small businesses that can go out of business or get bought. There a lot of reasons for them, that volatility to have nothing to do with the products that they're using necessarily. So we've seen some there, but I don't think any more than the industry on average.
We have -- two-thirds of our business is volume base, small-to-medium size. But we have a good chunk of that business and enterprise. And we've seen the scalability that we provide over -- doing this for over 20 years alongside Apple that has really, really resonated with our customers.
In fact, when we get into the enterprise, the higher we get up, generally the less competition we have, especially as it relates to the Apple -- as it relates to the Apple ecosystem. So they're good benefits in the enterprise.
We saw Q4 finished strong. We saw companies that had budget the end of the quarter that went ahead and pulled the trigger on that. And we've seen some good progress earlier this year, even with the enterprise groups.
Great. That's really helpful. And then one for Ian. On cash flow, you talked again about the shift from upfront to annual billings. Was the level there similar to last quarter? Should we think about that being a bit more predominant now in the customer base? And then as we look into FY24, should we expect that shift to move back to upfront or to the end of the year?
Ian Goodkind
Yes. Just to clarify a couple of things there. So when comparing '23 to '22, the primary driver was that shift in multiyear being -- that used to be paid upfront to annually paid. That was the primary driver. Within the quarter itself, we actually saw our customers just defer payments to basically January of '24. So it was just a timing issue, not indicative of our business. Neither of those are.
As we roll forward, I would say operating income or margin is the bigger driver of our unlevered free cash flows as we move forward. And we just raised our operating income about 700 basis points. And we've said that unlevered free cash flow is going to be about consistent with that. And that has factored in all the changes in customer payment behaviors.
All right, great. Thank you.
Operator
Chad Bennett, Craig Hallum.
Chad Bennett
Great. Thanks for taking my questions and fitting me in. So Ian maybe, just in terms of how we should think about both device growth and ARR per device relative to your revenue growth guidance, is there any type of correlation there? And how should we think about those two metrics?
Ian Goodkind
Yes. I would call your attention back to our growth algorithm. We have new logos. We have upsell, device expansion, and we have cross-sell. And we are going to continue to focus on those things that we can control, which is cross-sell specifically.
We are factoring in the same upsell, muted upsells at renewal. But we are definitely focused on the successes we've had and seeing customers see the value in both management and security. That is where we're going to drive, and specifically, in the bundles because we think that's what drives the most customer value.
Chad Bennett
And then maybe one quick follow-up for John. Just kind of a follow-up on the competitive question, I guess, a couple of questions ago. Just specific to the endpoint security market and protect. And obviously that product is still growing nicely. Is there any kind of new revelations there just competitively now that you're another quarter and year into that product and into that endpoint security market that you'd like to share?
John Strosahl
Yes. I mean, you're right, Protect has done really well and we're very happy about that. In fact, in security in general, 44% of our pipeline was security. So we're really seeing to get traction there.
With Protect, we continue to add functionality to it. We're going to continue to add more pieces of security as our customers' requests that. And yes, I mean, that's pretty much all we have to do with Protect. It's done well. Our reps are becoming even more well versed in selling that, especially as it relates to in conjunction with security. And we're going to continue to double down on that.
Chad Bennett
Got it. Thanks much.
Operator
Pat Walravens, JMP.
Pat Walravens
Great. Thank you. I think, John, usually companies guide revenue below where expectations are after they've had a disappointing bookings or a renewal quarter. But in your case, it sounds like bookings and renewals in Q4 were actually pretty good. So when did you guys decide it was time to increase the profitability to align with the current growth profile, as you worded it in the press release?
John Strosahl
Thanks, Pat. Good question. No. We understand that. And what we're really trying to do is have a balanced approach to profitability and growth going into 2024. And as I mentioned earlier, we, as the rest of the market, expected that returned to come in mid even until late '25 -- or '23, and that didn't happen. So we're just trying to be judicious in our approach in our guidance in '24.
As Ian mentioned, there are things that could impact that in 2024. The tech hiring could resume. We expect that there's going to be an EDU refresh. But we haven't anticipated that in our guidance because the market hasn't behaved like we thought it was going to in '23.
And so we're just making sure that we're doing the right thing for the business and our customers long term. And that's making sure that we're optimized for efficiency and scalability as we go into '24. But we are well placed to be able to scale up when those growth vectors continue or start to resume. And we're watching that very, very closely. So we're on point.
Pat Walravens
Okay, great. Thank you.
Operator
Koji Ikeda, Bank of America Securities.
Koji Ikeda
Yes. Hey, guys. Thanks for taking the questions. There's a couple from me here. First one, maybe a question for John or Ian. What do you view as the most attractive levers to drive upside to growth in 2024?
John Strosahl
Yes. I'll take that one, Koji. So our most attractive levers, we have many of them. We really do. I mean, certainly the replacement market. Absence of the tech hiring resuming and the ED refresh and those things we've already talked about, but certainly the replacement market as it becomes more apparent. And again, the events of the last few days have continued our optimism in that as we really lean into those customers and show the value of management and security together, especially at scale and focused on Apple first and Apple best. So those are the areas that we really see.
International is a great opportunity for us. We saw some softness in international in the middle of the year in '23. We saw that tick up towards the end of the year. We continue to see that at the beginning of this year.
So as Apple mentioned on their earnings call that they've had some success internationally as well. We work very closely with Apple outside the US and in the US but certainly outside the US. And so we're continuing to leverage that as we expand internationally. So those would be some of the biggest areas.
And then I guess to wrap it up would be security. I mean, every device can have one device management product on it. But every device can have five or six or more security products on it. And IT and infosec teams generally do that. They want belt and suspenders on security. And then when we offer something that's Apple specific along with the management fees, that gives us a good opportunity and really a lever to increase.
Koji Ikeda
Yes. Got it. That's super helpful. And maybe following up to Pat's question, just booking sounds good. So what sort of triggers are you looking for as maybe a signal that it's time to invest at a greater rate than what the plan is currently set for?
John Strosahl
We've seen close ratios while sales cycles have been elongated. We've seen close ratios maintained pretty similar. We measure our go-to-market organization with a very disciplined and rigorous approach. Our cadence is very, very tight on that.
And so we can get those leading indicators and shift accordingly. So we know that sales cycle is starting to drop. We know if that conversion rate is starting to go higher. We know when the ASPs of each one of those deals in the pipeline are starting to raise. Any one of those indicators are going to lead us to really lean in to that and to invest in that growth. And also geographically, to the extent that we've seen international continue to take the momentum up, we're going to look at that and invest in that area as well.
Ian Goodkind
I would just add one thing on our operating income guidance there at a midpoint of 15%, we are committed. To John's point, we have optimized our organization and made it so we can commit -- continue to commit to that 15%.
Koji Ikeda
Thanks, guys. Thanks for taking the questions.
Operator
Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Jennifer Gaumond for any further remarks.
Jennifer Gaumond
Thanks, Jonathan, and thank you again for joining us today. We hope to see you at our Investor Day on March 13 in New York. If you'd like to attend in person, please reach out to investorevents@jamf.com. Thank you.
Operator
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect.
