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MobileIron (NASDAQ:MOBL)
Q1 2019 Earnings Call
April 25, 2019 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the MobileIron first-quarter fiscal year 2019 financial results conference call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator instructions] I would now like to turn the conference over to Erik Bylin.

Please go ahead.

Erik Bylin -- Investor Relations

Thank you, Christine. Good afternoon, and welcome to MobileIron's first-quarter 2019 financial results conference call. Joining us from the company are Simon Biddiscombe, CEO; and Scott Hill, CFO. The format of the call will be remarks by Simon, then Scott will provide details on the financials.

We will then have time for questions. If you have not received a copy of today's press release, please to go to MobileIron's investor relations website at investors.mobileiron.com. Today's conference call contains forward-looking statements that involved risks and uncertainties, including statements regarding MobileIron's revenue, operating expenses, GAAP and non-GAAP financial metrics, product releases, projections, and trends. All of these forward-looking statements are subject to a number of risks, uncertainties, and assumptions.

Actual results could differ materially from the statements made on this call. Please see the risk factors section of our SEC filings. All statements made on the call today are as of today. We assume no obligation and do not currently intend to update any such forward-looking statements.

If this call is reviewed after today, the information presented during this call may not be current or accurate. With regard to non-GAAP financial metrics, while we believe them to be helpful in understanding MobileIron's financial performance, they're not meant to be considered in isolation or as a substitute for comparable GAAP metrics. They should be only read in conjunction with MobileIron's consolidated financial statements prepared in accordance with GAAP. The reconciliation of the non-GAAP financial metrics to the GAAP metrics can be found in our press release and on the investor relations page of our website.

Unless otherwise stated, results shared today will be non-GAAP. At this time, I would now like to turn the call over to Simon. Please go ahead.

Simon Biddiscombe -- Chief Executive Officer

Thank you, Erik, and good afternoon. In my remarks today, I will provide a brief commentary on our first-quarter financial performance, give a preview of our forthcoming innovation, and then share some recent successes. First, let me review our financial highlights. In Q1, we saw continued robust growth in ARR, up 18 percent year over year.

I am pleased to see the organizational changes we made coming into the year drive greater focus on building a recurring revenue base, and increased traction with cloud and subscription solutions. We delivered $48.1 million of revenue, up 10% from last year, which gives us two quarters in a row of double-digit revenue growth for the first time in two years. This is another strong sign we have passed an inflection point on the path to accelerating our growth. Last quarter, I explained how MobileIron is perfectly positioned to capitalize on the shifting security paradigm of zero trust.

Modern IT environments are being driven by a change in how people work, and the security architecture must respond. IT organizations used to have locked-down corporate-issued PCs, accessing company data over company networks. Now they have to guard against employees using their own phones and tablets over unsecured public networks to access company data in third-party cloud services. The IT environment has evolved into a zero-trust state.

Five years ago, this was not even a security afterthought, and today MobileIron has the most comprehensive security suite to address this new threat landscape. Our mobile-centric approach to zero trust enables four critical capabilities using existing MobileIron technologies. Firstly, the ability to provision any device for a user with the appropriate apps and policies, using MobileIron UEM; second, the ability to grant real-time access to cloud services based on full context of the user, the app, location, time, etc. using MobileIron access; third, the ability to protect data at rest and in motion by containerizing and eliminating threats in the device using MobileIron UEM and MobileIron threat defense together; and finally, the ability to enforce security policies using all of our products.

However, we can do more. With our footprint of capabilities on the endpoint, combined with elegant engineering, we can bolster our security value to IT while providing a significantly improved experience for the user. With the mobile device's unique ability to authenticate its user through biometrics, the mobile device can become the user's identity and access to the enterprise. Compared to a username and password, this is not only an infinitely more secure means to validate a user, but it's effortless.

Passwords frustrate users. They've been proven time and again to be the weakest link in the IT chain of security, and therefore, an extremely common entry point for cyberattacks. By eliminating passwords, the threat of data breaches from easily compromised credentials completely disappears. This is the beauty of MobileIron's revolutionary zero sign-on solution.

With our UEM footprint on the endpoint, we can leverage a user's biometrics from a mobile device to enable completely password-less authentication while using zero-trust security. At our user conference next month, we will unveil how we are going to make mobile devices your identity and access for the enterprise. With mobile as your ID, we will be able to provide password-less access to applications from any device, mobile, PC, or Macs. This will remove the need for all passwords across all IT endpoints and services.

Alongside the innovation that keeps MobileIron the thought leader in security, we continue our strong execution of the engineering and customer-facing imperatives that keep us revered with our customers. In Q1, we became the first UEM vendor to be validated by the U.S. Government's common criteria MDM rrotection profile Version 3. In an industry accolade, in April, Gartner named us customer's choice for the UEM market, which means we were voted by customers as the best unified endpoint management tool.

This is the second year in a row we received this recognition, and we're the only leader in the Gartner UEM Magic Quadrant to achieve this. And, for the second year in a row, we attained certification from the prestigious Service Capability & Performance Standards for our customer support. We continue to be the only UEM vendor to achieve this certification. When I say MobileIron has the best product, it is because the team at MobileIron executes so well in delivering a world-class product and service for our customers, that we are regularly the only UEM vendor to receive these types of accolades.

And with that, I'd like to tell you about some notable customer wins in the most recent quarter. For Continental Automotive, one of Europe's largest manufacturers of tires for cars, trucks, and agricultural vehicles, protection of their workforce is paramount. Founded in 1871, clearly Continental is no stranger to changing times and has committed to addressing a zero-trust IT environment. With locations across six continents and customers and users in 60 countries, this global company, 240,000 employees strong, turned to MobileIron for added peace of mind in securing their employees' mobile devices, email, and applications.

I'm honored by their continued trust in MobileIron and pleased that Continental shares our commitment to providing the best solution for each and every one of their customers and markets. I'm excited to share that MobileIron's reach in the financial markets continues to deepen. During the quarter, we won business with a leading European bank, one of the world's most long-standing and innovative banks with well over 100,000 employees. With millions of customers across both their retail and corporate banking divisions, this customer takes the security of their clients seriously, so I'm not surprised they have chosen MobileIron.

With this win, we have displaced one of our well-known competitors through the strength of our core UEM solution, coupled with our integrated threat defense offering. Adept at adjusting to change, this large bank has clearly chosen MobileIron because we are the best security choice for a changing threat environment. MobileIron's success with new products continues with an important win with a large Italian oil and gas company. This large multinational company's dedication to creating value throughout their vast operations has propelled them to such levels of success, and I am honored that they have chosen to add our MTD solution to further secure this goal.

Our shared focus on innovation, efficiency, and operational excellence aligns us perfectly, and they can rest assured in the security of their mobile devices of their global workforce. And I'm thrilled to share that we continue to strengthen our team in 2019 with the addition of Leslie Strech to MobileIron's board of directors. Leslie is currently the CEO of Medallia and was previously the CEO of Calllidus. His experience driving SaaS and cloud transitions will further strengthen MobileIron's position in the market and create long-term value for the company and for our investors.

And with that, I'll turn it over to Scott. Scott?

Scott Hill -- Chief Financial Officer

Thank you, Simon, and good afternoon. Today we will discuss non-GAAP financial measures, unless otherwise noted. Our press release, Form 8-K, and website, investors.mobileiron.com, provide a reconciliation of GAAP to non-GAAP financial results. Revenue in the first quarter was $48.1 million, up 10% year over year, our second quarter in a row of double-digit revenue growth.

As we have shared, customers are increasingly demanding our subscription solutions, and we are eager to embrace this trend, as it delivers a higher lifetime value and greater revenue predictability for MobileIron. Last quarter, we introduced ARR as a metric, with the standard software definition as shared in our Q4 press release. We ended the first quarter with ARR of $167.2 million, up 18% year over year, and on plan to achieve our guidance of 20% growth for the year. Looking into the composition of our ARR highlights how well our subscription business is performing.

Our subscription ARR was $100.4 million, up 29% year over year, and our maintenance ARR was $66.8 million, up 3% from last year. Our renewal rate remains about 90%. While MobileIron is focused on driving recurring revenue growth, our history as a perpetual business has created a large maintenance stream. As our customers look to adopt cloud and subscription models, we have an opportunity to move them from maintenance to subscription.

We are eager to help them through this conversion, but to date, only about 5% of our maintenance seats have undertaken this transition. In Q1, we are again very pleased with the results delivered by our access and threat defense products. Over the last year, these products have been ramping very well, as we have sold them into our large install base and they are solid contributors to the growth of cloud ARR. These products provide considerable differentiation versus our competitors and increase our stickiness with our customers.

We believe threat defense could be purchased by all of our customers, and access could be purchased by roughly 80% of our install base. That said, the penetration of these products is in the mid-single-digit percentage of our large UEM install base, so we have a considerable runway to execute on this growth driver. In addition, I would like to point out that we are seeing the effect of improvements in the North American sales organization, and its revenue growth in Q1 is the highest it has been in five quarters. Gross margin in the first quarter was 82%, and operating expenses were $45.5 million, both right on guidance.

MobileIron reported an operating loss of $6.2 million, or $0.06 per share. Moving to the balance sheet, we ended the quarter with $107 million in cash and short-term investments and have no debt. In the first quarter, cash generated by operations was $7.8 million. We spent $3.6 million repurchasing shares in the quarter, with an average price of $4.87.

Unearned revenue was $102.9 million at the end of March, up 27% from $80.9 million a year ago. Now I will share our guidance. For the second quarter of 2019, our guidance is as follows. We are projecting a revenue range of 49 to $52 million, for growth of 6% to 13% year over year.

We expect non-GAAP gross margin to be approximately 82%. We expect non-GAAP operating expenses to be about $46 million. Our full-year guidance remains unchanged and is as follows. We expect revenue to be in the range of 205 to $215 million, for growth of 6% to 11%.

We expect ARR to grow approximately 20% by year end. We expect to generate non-GAAP operating profit. And with that, we can open up the line for questions. 

Questions and Answers:

Operator

[Operator instructions] Your first question comes from the line of Scott Searle from ROTH. Your line is open.

Scott Searle -- ROTH Capital Partners -- Analyst

Good afternoon. Nice quarter. Thanks for taking my question. Just to get a little bit more color in terms of the business outlook, the mix, when you're looking at your cloud business into the second quarter and for the year, what are the thoughts in terms of how that progresses? Also, perpetual continues to be on a decline.

I think, Simon, in the past you've talked about some stabilization on that front. Could you just give us some color on that front? And also, on the U.S. sales, it looks like you finally stabilized that. It sounds like this isn't a one-quarter anomaly.

Can you kind of give us some idea what the outlook might be for that over the course of 2019?

Scott Hill -- Chief Financial Officer

Yeah, thanks, Scott. Let me step in here on the revenue outlook and the revenue trends. So we've seen the trends over the last few quarters of solid growth in our cloud business, and that's continued in Q1 with 37% growth year over year. The on-prem subscription business grew 13% year over year.

The maintenance grew 6%, and then the perpetual license declined, as it has been, 17%. So as we look to the future, we expect those trends to continue because they're obviously fundamental in terms of the drivers from the business and what we're getting from our customers.

Simon Biddiscombe -- Chief Executive Officer

I think the part that I would reinforce there, Scott, is that as we're seeing this growth now with cloud business, and as we're seeing the growth in the subscription business as well, none of that to date is really being driven by customers who are transitioning from our on-prem platform to our cloud platform, or from traditional perpetual license and maintenance agreements to subscription agreements, as Scott said in his prepared remarks. It's probably about 5% of the total install base that has been through that kind of transition to date, so that opportunity is still all ahead of us. And I think most of it actually comes in 2020 and beyond. There's a lot of work going on right now to help customers on their journey to cloud and to help customers on their journey to subscription as part of that as well.

If something's changed dramatically over the course of the last year to two years, there's a much greater propensity, even on the part of our European customers today, to be demanding cloud solutions. So, clearly, we're going to continue to see the cloud solutions line, which includes the new products, don't forget, and would also include things like Mac OS that are available on cloud platforms continue to grow far better than the other lines in the business at this point. North America -- go ahead, and then I'll answer your --

Scott Searle -- ROTH Capital Partners -- Analyst

No, no, I was just going to say North America, please, and then I had a couple of quick follow-ups.

Simon Biddiscombe -- Chief Executive Officer

Sure, so North America, I'm actually pleased with the progress that we've made. Greg Randolph, who is our head of sales, made some changes across that organization in the fourth quarter, and coming into the year, I was optimistic that the changes were going to benefit us the way that they did. There's still work to be done. Make no mistake, we can still do better.

And the European business has always been an extraordinarily strong performer for us. We've got to get the North American business performing the way the European business does. But make no mistake, it was a step in the right direction in Q1, and as Scott said in his prepared remarks, that was the best rated growth we'd seen in about five quarters. So, certainly the changes that Greg has made to people, the changes he's made to process are certainly beginning to bear the fruits that we expected.

Scott Searle -- ROTH Capital Partners -- Analyst

Great. And if I could, one clarification and two quick follow-ups. Scott, in terms of guidance for the year and operating profit, just to clarify, is that for the year or is that for the fourth quarter, exiting with positive operating profit? And then, in terms of access and mobile threat, you'd been giving some billings numbers. I'm not sure if I heard that on the call, but it sounds like you continue to make progress on that front.

I'd love to hear any updated numbers if you've got them. And then, lastly, zero trust, Simon, it sounds like things are starting to really accelerate in terms of the ability to use your solutions in a multitude of new environments that we really hadn't talked about in the past. When do we start to see the initial contributions from that? Is that 2020, or do we start to see some of that later this year? Thank you.

Simon Biddiscombe -- Chief Executive Officer

So, I'll do the last question first. I think people have underappreciated the value of MobileIron's endpoint solution for years and years and years. And the establishment of a footprint across a fleet of mobile devices, and what you can do with that, continues to expand. So beyond the zero-trust conversation, when you start to think about zero sign-on, which I touched on in my prepared remarks and which we'll be talking about extensively over the course of the coming months, quarters, and years, you have to be on the endpoint to be able to do the types of things that MobileIron is going to be doing as you move forward.

And I think people are beginning to understand, to your point, the criticality of actually having a client on the device itself as it relates to being able to deliver the security framework that IT professionals are demanding at this point in time. So I'll let it go back to Scott on your question about access and threat.

Scott Hill -- Chief Financial Officer

Yeah, and also your question on operating profits. So, the operating profit guidance we gave was for the full year, not just the exit on Q4. So, hopefully, that clarifies that. And then, in terms of the performance of the access and mobile threat products, yes, they continue to perform well.

We still have expectations that the penetration is going to grow over the course of the year, and we're on track for that.

Simon Biddiscombe -- Chief Executive Officer

Yeah, the reason we didn't give you the numbers, Scott, is that they're just extraordinary, right, because there would have been a very low base a year ago and the numbers would have looked absurdly large in terms of the rate of growth of ARR or the rate of growth of revenues as well.

Scott Searle -- ROTH Capital Partners -- Analyst

Extraordinary. Good. Thanks, guys.

Operator

Your next question comes from the line of Michael Turits from Raymond James. Your line is open.

Robert Majek -- Raymond James -- Analyst

This is actually Robert Majek on for Michael today. You touched on it in a prior question, but can you just talk more about the plan to convert the existing on-premise install base to the cloud product, how the initial customer feedback has been so far especially around pricing, and what drives the material inflection in 2020?

Simon Biddiscombe -- Chief Executive Officer

So, let me first say we have no desire to force a customer one direction or another, OK? So, there's a very large part of our install base -- obviously, you can see it in the maintenance stream -- that is an on-prem solution at this point in time, and I'm not trying to jam a customer into one solution or another solution. I want customers to continue to buy technology from MobileIron that solves for the use cases that they're trying to solve for. Now, that said, there's a natural pull by our customers toward cloud-based deployments at this point in time, OK? So if you're an existing customer and you're looking at MobileIron's cloud capability versus MobileIron's on-prem capability, typically what you're looking at is the following: No.1, the actual cloud platform itself. Does it give you the feature set and functionality that you need for your specific set of use cases? And I've got great confidence that that is the case.

We've solved for essentially every use case that somebody may have had on core in the cloud platform at this point in time. So that's part No. 1. Part No.

2 is you're going to be looking for migration tools. What tools are we going to be making available to you to take a device off the on-prem platform and move it to the cloud platform? Third thing you might want is migration services. We have a set of SKUs that are available that help customers through that migration journey. Then you need enablement-type things, right? So you're going to be looking at, what's the ROI? What is my ROI as a customer associated with being on the cloud platform as opposed to being on the on-prem platform and so on? And then, for us on the inside, if you will, it's all about partner enablement, it's about sales enablement, it's about SKUs and the bundles and so on.

So I don't want to give you the impression that we're trying to force customers. That's not the case for one second. Customers are naturally moving in this direction at this point in time, and we're there to support them as they go on that journey.

Robert Majek -- Raymond James -- Analyst

That's helpful, and perhaps just one more from me. You've announced a number of partnerships over the past few quarters, and it makes sense leveraging the core product. Can you just tell us more about the broad strategic plan for further partnerships and help us understand what other areas you might be focused on?

Simon Biddiscombe -- Chief Executive Officer

So there's two ways to think about that, OK? There's technology partnerships, and then there's go-to-market partnerships, OK? We are always looking for ways to monetize our install base, OK? So as our customers demand greater feature set and functionality from us, some of the ways that we're able to enable those technologies is through technology partnerships, right? So if you think about what we've done with mobile threat, as an example, where there's a technology partner who is responsible for the R&D associated with the product and so on, those types of solutions we will continue to bring to market as we move forward. And there's a handful of things that we're looking at very specifically today that our customers are demanding from us as incremental feature sets and functionality that we can deliver through technology partnerships. It's not stuff that we have to, nor is it stuff we should develop our self at this point in time. On the other side, there's the go-to-market partnerships, right? So when you look at some of the things we've announced with people like Lenovo, some of the things we've announced with people like McAfee and so on, there's clearly opportunity for others to be able to take advantage of our technology.

We announced one with a company called NetMotion just earlier this quarter, and the deal with NetMotion is very specifically targeted at a part of the new first responder network that's being developed here in the U.S. that takes advantage of one specific technology that NetMotion has, when combined with our UEM platform, to give a far more robust offering to those customers. So we're always looking at both go-to-market partnerships and technology partnerships, and there will be more and more every quarter as we move forward.

Robert Majek -- Raymond James -- Analyst

That's helpful, thanks.

Simon Biddiscombe -- Chief Executive Officer

Thanks, Robert.

Operator

Your next question comes from the line of Raimo Lenschow from Barclays. Your line is open.

Raimo Lenschow -- Barclays -- Analyst

Hey, thanks for taking my question, and hey, good progress on the cloud side. Simon, can you talk a little bit, and that was kind of one of the themes from the speakers before me, like if you look at your install base and the big maintenance base you have, besides customers making the choice, is there anything you guys can do to help people to get on the cloud journey when renewals come up, etc.? And can you maybe remind me as well if your maintenance, is that annual that it needs to get negotiated, or is it automatic renewal until something happens? Thank you.

Simon Biddiscombe -- Chief Executive Officer

So I think the journey -- us helping a customer through the transition from an on-prem platform to a cloud platform is primarily predicated on what I talked about earlier. Do we have the right tools? Do we have the right services available to them and so on? Could we force customers in that direction? Yes, we could, but it's not something that we think is the right thing to do for our customers yet. We may decide it is the right thing to do at some point in the future, but it's certainly not something that we've decided is the right thing to do at this point in time. But for the vast majority of customers, if you think about the lifecycle of a device, you've got kind of a two-year lifecycle for most devices that our enterprise customers have on our platforms and so on.

So there are ways where you can even just naturally migrate the device from the on-prem platform to the cloud platform over the course of a couple of years as every employee receives a new device. You just move it from one to the other, and two years later, you've naturally completed the journey as people have brought new devices onto the platform and so on. So we've got some ways that we can solve this challenge with customers, Raimo, that are different than other companies who've had to go through these types of transitions, and we can make it far less painful -- or not painless, that's the wrong way to say it, but far less painful than other types of technologies that have gone from on-prem to cloud transitions and so on.

Scott Hill -- Chief Financial Officer

Just to follow up on the second part of your question about the maintenance contracts, the vast majority are annual, so that does provide an opportunity for us to intersect when a customer is going to be making a journey to cloud.

Raimo Lenschow -- Barclays -- Analyst

OK, perfect, and then one last follow-up from me. If you look at -- we do see on the cost side at the investments, that you know, you kind of keep investing in growth, which is a good thing. Can you just kind of double click a little bit on that again, like where are we on that journey and what are the priorities there?

Scott Hill -- Chief Financial Officer

Yeah, so our cost this quarter and our guidance, implied guidance for next quarter, we have a relatively, you know, heavy first half. We have a lot of, you know, marketing events and things like that that we have in the first half, and we would expect costs in the second half to come down a bit. We are now, relative to last year, what I would consider more at full staff, so that has been one of the drivers in terms of the increase in costs this quarter over last quarter. And, you know, the areas of investment have been product and go-to-market, both of those areas in terms of new features and offerings that we have, and then reaching out to the market in a new way with our zero-trust message.

Raimo Lenschow -- Barclays -- Analyst

OK. OK. Thank you.

Operator

Your next question comes from the line of Meta Marshall from Morgan Stanley. Your line is open.

Meta Marshall -- Morgan Stanley -- Analyst

Thanks. First, I wanted to -- I know the new product is now, or you're going to make some announcements kind of on this mobile ID product. But just, you know, would this be an incremental product? Is this additional, or is it like a feature? And I guess, is it something that you guys have developed, or is it something that you will be using a technology partnership for? Then I have one other question.

Simon Biddiscombe -- Chief Executive Officer

So it's a -- make no mistake, this is a new product, but it leverages critical components of the UEM platform and of access as well. But as we take this to market, Meta, it's going to be a new product with new technology, significant new technology, that has been under development for an extended period of time. There are components of the new technology that will be secured through partnership. There are some things that we shouldn't do ourselves.

And there are components of the new technology that are development that is ongoing here at MobileIron. So it's a combination of the two, and it will result in an entirely new set of product SKUs and revenue streams as we move forward.

Meta Marshall -- Morgan Stanley -- Analyst

Got it, and then maybe, you know, you mentioned kind of having a pretty large competitive replacement in the quarter. Just what are you seeing as far as kind of discounting or aggressiveness of competitors in the marketplace?

Simon Biddiscombe -- Chief Executive Officer

Yeah, look, so actually, I didn't make reference to who it was, but I talked about the large European financial institution. It was actually BNP Paribas where we were able to replace one of our traditional competitors, let's say. ASPs held up. ASPs were very stable in the period.

I think when we look across our customer base, Meta, it's the high end of enterprise, government, highly regulated industries and so on, and they value what we bring to bear. And while price is always part of the thought process, for most of our customers, it's not the first part in the thought process. The first part in the thought process is typically, is this the most secure solution that I can deploy? If I'm the infrastructure buyer, or if I fund those organization, the first question I'm asking myself is, have I solved for this security challenge? And MobileIron has always been able to win based on having the most robust and secure offering in the market in that regard. So at some point, price does hit the decision framework, obviously, but for most of our customers, it's not No.

1. And as I said, ASPs have held up very nicely over the course of time, and I wouldn't characterize the environment being dramatically different across our customer base.

Meta Marshall -- Morgan Stanley -- Analyst

Thank you.

Operator

Your next question comes from the line of Robert Breza from Northland Capital. Your line is open.

Robert Breza -- Northland Capital -- Analyst

Hi. Thanks for taking my question. Most of my question was asked during the call, but I just wanted to follow up on a prior question as it related to the -- or the response related to the operating margin expansion and headcount capacity. I want to make sure I heard correctly.

We should not expect any more headcount hiring throughout the year, and costs should come down the second half. Is that correct?

Scott Hill -- Chief Financial Officer

In general, yes. I wouldn't say there's going to be no hiring; I'm just saying that our total staffing will be relatively stable over the course of the year and that we will have a natural -- our opex will come down naturally because we do not have as many large events and other things taking place in the second half that we do in the first half on the go-to-market front.

Robert Breza -- Northland Capital -- Analyst

OK, great, and Simon, as you think about the new products, and maybe as I piggyback on the prior question, and you were very clear stating it is a new product per se. What kind of product uplift would you expect, not only from AKA that product, but as you think about some of the newer products and you talked about hitting the inflection point with two quarters of double-digit growth, and obviously new products are helping to drive that, how should we think about new products, maybe as a percentage of total bookings, to drive future 2020 business?

Simon Biddiscombe -- Chief Executive Officer

So on the last earnings call, what Scott said was he expected the new products, and that's, for purposes of that very specific conversation, make it threat and access, not the new products associated with zero sign-on at this point in time. But what Scott said on the last call was we expected ARR for those new products, by the end of the year, to be roughly --

Scott Hill -- Chief Financial Officer

Yeah, it was actually the penetration.

Simon Biddiscombe -- Chief Executive Officer

Penetration, I'm sorry.

Scott Hill -- Chief Financial Officer

So if you think about this, the way we look at it, we have an install base of seats of UEM that have been, you know, sold and built up over the last 10 years, and that is the audience for the new products in terms of our focus for upselling those products into that. We started the year at about roughly 5% on a seat penetration. We expect over the course of the year we'll end up kind of in the mid-teens kind of -- in the teens area. And we, you know, this quarter, we're on track for that.

A new product, the new product of zero sign-on, would be similar in that sense. We would start, you know, obviously with a relatively low as we go into 2020, and then look to build that over the course of the year. I don't think we have any more specific plans or anything we can disclose yet, but that's the general framework.

Simon Biddiscombe -- Chief Executive Officer

I think that sits very nicely on top of an EMM business, Rob, that continues to grow in the double digits, right? Make no mistake, our EMM business is continuing to grow in the double digits and we're very pleased with the progress that we're seeing with regard to EMM ARR at this point in time, so it's moving in the right way.

Robert Breza -- Northland Capital -- Analyst

Absolutely. Thank you very much.

Operator

There are no further questions at this time. Simon, I turn the call back over to you.

Simon Biddiscombe -- Chief Executive Officer

Well thank you everyone for joining us today. I'm pleased to see the progress MobileIron is making to strengthen our place in the market and accelerate recurring revenue growth. I remain convinced that MobileIron has the best suite of products to address the zero-trust environment, and our innovation will continue to extend that advantage. I look forward to updating you through the rest of 2019 on our progress and successes, and with that, we can close the call.

Thank you.

Operator

[Operator signoff]

Duration: 37 minutes

Call Participants:

Erik Bylin -- Investor Relations

Simon Biddiscombe -- Chief Executive Officer

Scott Hill -- Chief Financial Officer

Scott Searle -- ROTH Capital Partners -- Analyst

Robert Majek -- Raymond James -- Analyst

Raimo Lenschow -- Barclays -- Analyst

Meta Marshall -- Morgan Stanley -- Analyst

Robert Breza -- Northland Capital -- Analyst

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10 stocks we like better than MobileIron
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David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and MobileIron wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 1, 2019