First quarter subscription revenue grew 17
percent year-over-year to $135.6 million ARR grew 15 percent
year-over-year to $572.5 million
Datto Holding Corp. (Datto) (NYSE: MSP), the leading global
provider of cloud-based software and security solutions
purpose-built for delivery by managed service providers (MSPs),
today announced its financial results for the first-quarter ended
March 31, 2021.
“Our first quarter results represented a great start to the
year,” said Tim Weller, Datto’s Chief Executive Officer. “We
delivered subscription revenue growth of 17% year over year, added
300 net new partners during the quarter and drove another
sequential increase in ARR growth, so the business continues to
accelerate. Looking ahead to the rest of 2021, we remain focused on
our investments in cloud and security as we give our MSP partners
the ability to secure SMB digital assets in a hybrid cloud world no
matter where the data and applications live. We see good momentum
across the product suite and we are well positioned to capitalize
on the large and growing market opportunity ahead of us.”
First Quarter 2021 Financial Results
(In Millions)
Q1 2021
Q1 2020
Y/Y Change
Subscription Revenue(1)
$135.6
$116.0
17%
Total Revenue(1)
$144.9
$124.7
16%
ARR(2)
$572.5
$498.4
15%
Gross Margin
73%
70%
+341 bps
Net Income
$15.3
$1.4
1030%
Adjusted EBITDA(3)
$46.9
$25.0
88%
Net Cash Provided by Operating
Activities
$35.2
$(1.3)
NM
Free Cash Flow(3)
$24.5
$(15.2)
NM
1
Subscription Revenue and Total Revenue
include benefits from favorable foreign exchange rates of
approximately 3%.
2
Annual run-rate revenue (ARR) is the
annualized value of all subscription agreements as of the end of a
period. We calculate ARR by multiplying the monthly run-rate
revenue for the last month of a period by 12.
3
A reconciliation of GAAP to non-GAAP
financial measures is provided in the financial statement tables
included in this press release. An explanation of these measures is
also included under the heading “Non-GAAP Financial Measures.”
Recent Highlights
- Ended the quarter with more than 17,300 MSP partners, a net
increase of 300 in the quarter.
- Expanded MSPs contributing over $100,000 ARR to 1,150 up from
1,000 at March 31, 2020.
- Launched Datto Commerce in North America. By simplifying how
MSPs quote, sell and procure, Datto Commerce improves operational
efficiency and productivity for MSPs.
- Hosted our fourth MSP Tech Day, with a focus on cyber
resilience. The event delivered a deep dive into cybersecurity,
business continuity, and incident response to help MSPs and their
small and medium business (SMB) clients protect against growing
cyber threats.
- Announced the findings of a commissioned study by Forrester
highlighting that Datto’s integrated solutions yielded an average
return on investment (ROI) of 256% within a three year period for
MSPs, with the platform paying for itself in less than six
months.
- Recognized as a Strategic, high-performance RMM/PSA vendor by
Canalys in their recent RMM/PSA vendor Point of View report.
- Closed the acquisition of BitDam, an Israel-based cyber
security company that protects SMBs against ransomware, malware,
and phishing threats. BitDam’s elite team and leading cyber threat
detection technology significantly enhance Datto’s cyber resilience
solutions.
Second Quarter and Full Year 2021 Financial Outlook
Datto is providing the following guidance for the first quarter
and full-year 2021:
Q2 2021 Outlook
FY 2021 Outlook
Revenue
$146 - $148 million
$594 - $600 million
Adjusted EBITDA
$34 - $35 million
$134 - $138 million
Datto First Quarter 2021 Results Conference Call
When: Wednesday, May 12, 2021
Time: 5:00 pm ET Conference ID: 1110219 Live
Call: 1-833-312-1358 (US/Canada Toll-Free) or 1-236-712-2458
(International) Replay: 1-800-585-8367 (US/Canada Toll-Free)
or 1- 416-621-4642 (International) (The replay will be available
approximately two hours after the completion of the live call until
11:59 pm ET on May 19, 2021) Webcast: https://investors.datto.com
About Datto
As the world’s leading provider of cloud-based software and
security solutions purpose-built for delivery by managed service
providers (MSPs), Datto believes there is no limit to what small
and medium businesses (SMBs) can achieve with the right
technology.
Datto’s proven Unified Continuity, Networking, and Business
Management solutions drive cyber resilience, efficiency, and growth
for MSPs. Delivered via an integrated platform, Datto’s solutions
help its global ecosystem of MSP partners serve over one million
businesses around the world. From proactive dynamic detection and
prevention to fast, flexible recovery from cyber incidents, Datto’s
solutions defend against costly downtime and data loss in servers,
virtual machines, cloud applications, or anywhere data resides.
Since its founding in 2007, Datto has won numerous awards for
its product excellence, superior technical support, rapid growth,
and for fostering an outstanding workplace. With headquarters in
Norwalk, Connecticut, Datto has global offices in Australia,
Canada, China, Denmark, Germany, Israel, the Netherlands,
Singapore, and the United Kingdom.
Learn more at datto.com.
Forward-Looking Statements
This press release contains forward-looking statements that
reflect Datto’s current expectations and projections with respect
to, among other things, its financial condition, results of
operations, plans, objectives, future performance, and business.
These statements may be preceded by, followed by or include the
words ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘project,’’
‘‘plan,’’ ‘‘intend,’’ ‘‘believe,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’
‘‘can have,’’ ‘‘likely’’ and the negatives thereof and other words
and terms of similar meaning. Further information on potential
factors that could affect our results is included in our Annual
Report on Form 10-K.
Forward-looking statements include all statements that are not
historical facts. Such forward-looking statements are subject to
various risks and uncertainties. Accordingly, there are or will be
important factors that could cause actual outcomes or results to
differ materially from those indicated in these statements.
There is no assurance that any forward-looking statements will
materialize. You are cautioned not to place undue reliance on
forward-looking statements, which reflect expectations only as of
this date. Datto undertakes no obligation to publicly update or
review any forward-looking statement, whether as a result of new
information, future developments or otherwise.
Non-GAAP Financial Measures
In addition to our results determined in accordance with
generally accepted accounting principles in the United States
(“GAAP”), we believe that the non-GAAP financial measures of
Non-GAAP Subscription Cost of Revenue, Non-GAAP Device Cost of
Revenue, Non-GAAP Professional Services and Other Cost of Revenue,
Non-GAAP Depreciation and Amortization in Cost of Revenue, Non-GAAP
Cost of Revenue, Non-GAAP Gross Profit, Non-GAAP Sales and
Marketing expense, Non-GAAP Research and Development expense,
Non-GAAP General and Administrative expense, Non-GAAP Depreciation
and Amortization in Operating Expenses, Non-GAAP Operating
Expenses, Non-GAAP Income from Operations, Non-GAAP Net Income and
Non-GAAP Net Income Per Share, Adjusted EBITDA, and Free Cash Flow
are useful in evaluating our operating performance. Certain of
these measures exclude interest and other (income) expense, net,
loss on extinguishment of debt, depreciation and amortization,
stock-based compensation expense, restructuring expense and
transaction related and other expense. In addition, for Non-GAAP
Net Income we utilize a non-GAAP tax rate of 25%, which we believe
reflects our normalized effective tax rate. We believe that
non-GAAP financial information, when taken collectively, may be
helpful to investors because it provides consistency and
comparability with past financial performance and assists in
comparisons with other companies, some of which use similar
non-GAAP financial information to supplement their GAAP results.
The non-GAAP financial information is presented for supplemental
informational purposes only, and should not be considered a
substitute for financial information presented in accordance with
GAAP, and may be different from similarly-titled non-GAAP measures
used by other companies.
Reconciliation tables of the most directly comparable GAAP
financial measures to the non-GAAP financial measures used in this
press release are included with the financial tables at the end of
this press release.
Datto is not providing a quantitative reconciliation of
forward-looking guidance of Adjusted EBITDA to its most directly
comparable GAAP measure because certain items are out of Datto’s
control or cannot be reasonably predicted, as the items are
uncertain, depend on various factors, and could have a material
impact on GAAP reported results for the guidance period.
Accordingly, a reconciliation for forward-looking Adjusted EBITDA
is not available without unreasonable effort.
For more information about Datto, including supplemental
financial information, please visit the investor relations website
at investors.datto.com.
DATTO HOLDING CORP.
Condensed Consolidated
Statements of Operations
(in thousands, except share
and per share amounts)
(unaudited)
Three Months Ended March
31,
2021
2020
Revenue:
Subscription
$
135,590
$
115,995
Device
8,385
8,081
Professional services and other
934
587
Total revenue
144,909
124,663
Cost of revenue:
Subscription
20,930
21,766
Device
9,498
9,117
Professional services and other
1,502
1,538
Depreciation and amortization
6,625
4,994
Total cost of revenue
38,555
37,415
Gross profit
106,354
87,248
Operating expenses:
Sales and marketing
31,926
31,957
Research and development
22,474
16,733
General and administrative
24,621
21,784
Depreciation and amortization
6,570
6,917
Total operating expenses
85,591
77,391
Income from operations
20,763
9,857
Other expense:
Interest expense
102
9,006
Other (income) expense, net
(19)
1,329
Total other expense
83
10,335
Income (loss) before income taxes
20,680
(478)
(Provision for) benefit from income
taxes
(5,394)
1,831
Net income
$
15,286
$
1,353
Net income per share attributable to
common stockholders:
Basic
$
0.09
$
0.01
Diluted
$
0.09
$
0.01
Weighted-average shares used in computing
net income per share:
Basic
161,066,404
135,386,420
Diluted
164,734,402
136,268,713
DATTO HOLDING CORP.
Condensed Consolidated Balance
Sheets
(in thousands)
(unaudited)
March 31,
December 31,
2021
2020
ASSETS
Current assets
Cash and cash equivalents
$
147,819
$
168,877
Restricted cash
1,375
1,536
Accounts receivable, net
12,920
13,946
Inventory
19,332
13,811
Prepaid expenses and other current
assets
32,089
28,316
Total current assets
213,535
226,486
Property and equipment, net
95,408
91,876
Operating lease assets
33,881
—
Goodwill
1,143,796
1,120,954
Intangible assets, net
308,711
287,395
Other assets
70,582
66,560
Total assets
$
1,865,913
$
1,793,271
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities
Accounts payable
$
10,425
$
7,574
Accrued expenses and other current
liabilities
48,845
39,461
Deferred revenue
21,838
23,763
Total current liabilities
81,108
70,798
Deferred revenue, noncurrent
3,423
3,322
Deferred income taxes
27,895
18,947
Operating lease liabilities,
noncurrent
35,303
—
Other long-term liabilities
3,814
11,736
Total liabilities
151,543
104,803
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock
161
161
Additional paid-in capital
1,767,015
1,755,387
Treasury stock
(3,621)
(3,621)
Accumulated deficit
(49,940)
(65,226)
Accumulated other comprehensive income
755
1,767
Total stockholders’ equity
1,714,370
1,688,468
Total liabilities and stockholders’
equity
$
1,865,913
$
1,793,271
DATTO HOLDING CORP.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended March
31,
2021
2020
OPERATING ACTIVITIES
Net income
$
15,286
$
1,353
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation
7,461
6,334
Amortization of acquired intangible
assets
5,734
5,577
Amortization of debt issuance costs
84
421
Reserve for inventory obsolescence
36
—
Non-cash operating lease expense
1,870
—
Stock-based compensation
11,511
1,914
Provision for bad debt
1,211
799
Deferred income taxes
4,717
(2,895)
Unrealized foreign exchange
(626)
1,938
Changes in operating assets and
liabilities:
Accounts receivable
(160)
(3,129)
Inventory
(5,559)
(7,010)
Prepaid expenses and other current
assets
(3,820)
(4,256)
Other assets
(4,083)
(584)
Accounts payable, accrued expenses and
other
3,535
(2,563)
Deferred revenue
(2,030)
824
Net cash provided by (used in) operating
activities
35,167
(1,277)
INVESTING ACTIVITIES
Purchase of property and equipment
(10,681)
(13,920)
Acquisition of business, net of cash
acquired
(45,486)
—
Net cash used in investing activities
(56,167)
(13,920)
FINANCING ACTIVITIES
Proceeds from debt
—
32,100
Repayments of debt and capital leases
(28)
(1,578)
Capitalized transaction costs
(414)
(724)
Proceeds from stock option exercises
177
2,500
Net cash (used in) provided by financing
activities
(265)
32,298
Effect of exchange rate changes on
cash
46
(1,022)
Net increase (decrease) in cash
(21,219)
16,079
Cash and cash equivalents and restricted
cash, beginning of year
170,413
29,066
Cash and cash equivalents and restricted
cash, end of period
$
149,194
$
45,145
Reconciliation of cash and restricted
cash:
Cash
$
147,819
$
43,836
Restricted cash
$
1,375
$
1,309
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for income taxes
$
226
$
31
Cash paid for interest
$
—
$
8,523
NON-CASH INVESTING AND FINANCING
ACTIVITIES
Purchase of property and equipment
included in accounts payable
$
271
$
487
Unpaid initial public offering costs in
total current liabilities
$
270
$
2,034
DATTO HOLDING CORP.
Non-GAAP Condensed
Consolidated Statements of Operations
(in thousands, except share
and per share amounts)
(unaudited)
Three Months Ended March
31,
2021
2020
Revenue:
Subscription
$
135,590
$
115,995
Device
8,385
8,081
Professional services and other
934
587
Total revenue
144,909
124,663
Cost of revenue:
Subscription
19,702
21,746
Device
9,436
9,117
Professional services and other
1,399
1,538
Depreciation and amortization
5,313
3,819
Total cost of revenue
35,850
36,220
Gross profit
109,059
88,443
Operating expenses:
Sales and marketing
29,631
31,313
Research and development
17,600
16,423
General and administrative
20,233
19,543
Depreciation and amortization
2,148
2,515
Total operating expenses
69,612
69,794
Income from operations
39,447
18,649
Other expense:
Interest expense
102
9,006
Other (income) expense, net
(19)
1,329
Total other expense
83
10,335
Income before income taxes
39,364
8,314
Provision for income taxes
(9,841)
(2,079)
Net income
$
29,523
$
6,235
Net income per share attributable to
common stockholders:
Basic
$
0.18
$
0.05
Diluted
$
0.18
$
0.05
Weighted-average shares used in computing
net income per share:
Basic
161,066,404
135,386,420
Diluted
164,734,402
136,268,713
DATTO HOLDING CORP.
GAAP to Non-GAAP
Reconciliations and Calculation of Other Key Metrics
(in thousands, except
percentages and share and per share amounts)
(unaudited)
Three Months Ended March
31,
2021
2020
Non-GAAP Subscription Cost of
Revenue
GAAP subscription cost of revenue
$
20,930
$
21,766
Stock-based compensation expense
(1,228)
(20)
Non-GAAP subscription cost of revenue
$
19,702
$
21,746
Non-GAAP Device Cost of Revenue
GAAP device cost of revenue
$
9,498
$
9,117
Stock-based compensation expense
(62)
—
Non-GAAP device gross cost of revenue
$
9,436
$
9,117
Non-GAAP Professional Services and
Other Cost of Revenue
GAAP professional services and other cost
of revenue
$
1,502
$
1,538
Stock-based compensation expense
(103)
—
Non-GAAP professional services and other
cost of revenue
$
1,399
$
1,538
Non-GAAP Depreciation and Amortization
in Cost of Revenue
GAAP depreciation and amortization in cost
of revenue
$
6,625
$
4,994
Amortization of acquired intangible
assets
(1,312)
(1,175)
Non-GAAP depreciation and amortization in
cost of revenue
$
5,313
$
3,819
Non-GAAP Cost of Revenue
GAAP cost of revenue
$
38,555
$
37,415
Amortization of acquired intangible
assets
(1,312)
(1,175)
Stock-based compensation expense
(1,393)
(20)
Non-GAAP cost of revenue
$
35,850
$
36,220
Non-GAAP Gross Profit
GAAP gross profit
$
106,354
$
87,248
Amortization of acquired intangible
assets
1,312
1,175
Stock-based compensation expense
1,393
20
Non-GAAP gross profit
$
109,059
$
88,443
Non-GAAP gross margin
75.3
%
70.9
%
DATTO HOLDING CORP.
GAAP to Non-GAAP
Reconciliations and Calculation of Other Key Metrics
(in thousands, except
percentages and share and per share amounts)
(unaudited)
Three Months Ended March
31,
2021
2020
Non-GAAP Sales and Marketing
GAAP sales and marketing expense
$
31,926
$
31,957
Stock-based compensation expense
(2,295)
(644)
Non-GAAP sales and marketing expense
$
29,631
$
31,313
Non-GAAP sales and marketing as a % of
revenue
20.4
%
25.1
%
Non-GAAP Research and
Development
GAAP research and development expense
$
22,474
$
16,733
Stock-based compensation expense
(4,874)
(310)
Non-GAAP research and development
expense
$
17,600
$
16,423
Non-GAAP research and development as a %
of revenue
12.1
%
13.2
%
Non-GAAP General and
Administrative
GAAP general and administrative
expense
$
24,621
$
21,784
Stock-based compensation expense
(2,949)
(940)
Transaction related and other expense
(1,439)
(1,301)
Non-GAAP general and administrative
expense
$
20,233
$
19,543
Non-GAAP general and administrative as a %
of revenue
14.0
%
15.7
%
Non-GAAP Depreciation and Amortization
in Operating Expenses
GAAP depreciation and amortization in
operating expenses
$
6,570
$
6,917
Amortization of acquired intangible
assets
(4,422)
(4,402)
Non-GAAP depreciation and amortization in
operating expense
$
2,148
$
2,515
Non-GAAP depreciation and amortization in
operating expense as a % of revenue
1.5
%
2.0
%
Non-GAAP Operating Expenses
GAAP operating expenses
$
85,591
$
77,391
Amortization of acquired intangible
assets
(4,422)
(4,402)
Stock-based compensation expense
(10,118)
(1,894)
Transaction related and other expense
(1,439)
(1,301)
Non-GAAP operating expenses
$
69,612
$
69,794
Non-GAAP operating expenses as a % of
revenue
48.0
%
56.0
%
Non-GAAP Income From Operations
GAAP income from operations
$
20,763
$
9,857
Amortization of acquired intangible
assets
5,734
5,577
Stock-based compensation expense
11,511
1,914
Transaction related and other expense
1,439
1,301
Non-GAAP income from operations
$
39,447
$
18,649
Non-GAAP operating margin
27.2
%
15.0
%
DATTO HOLDING CORP.
GAAP to Non-GAAP
Reconciliations and Calculation of Other Key Metrics
(in thousands, except
percentages and share and per share amounts)
(unaudited)
Three Months Ended March
31,
2021
2020
Non-GAAP Net Income and Net Income Per
Share
GAAP net income
$
15,286
$
1,353
GAAP provision for (benefit from) income
taxes
5,394
(1,831)
GAAP income (loss) before income taxes
20,680
(478)
Amortization of acquired intangible
assets
5,734
5,577
Stock-based compensation expense
11,511
1,914
Transaction related and other expense
1,439
1,301
Non-GAAP provision for income taxes
(9,841)
(2,079)
Non-GAAP net income
$
29,523
$
6,235
Non-GAAP net income per share attributable
to common shareholders:
Basic
$
0.18
$
0.05
Diluted
$
0.18
$
0.05
Weighted-Average Shares used in
computing Non-GAAP Net Income per Share:
GAAP and Non-GAAP weighted-average shares
used in computing net income per share, basic
161,066,404
135,386,420
GAAP and Non-GAAP weighted-average shares
used in computing net income per share, diluted
164,734,402
136,268,713
Adjusted EBITDA
GAAP net income
$
15,286
$
1,353
Interest and other expense, net
83
10,335
Depreciation and amortization
13,195
11,911
Provision for (benefit from) income
tax
5,394
(1,831)
Stock-based compensation expense
11,511
1,914
Transaction related and other expense
1,439
1,301
Adjusted EBITDA
$
46,908
$
24,983
Adjusted EBITDA margin
32.4
%
20.0
%
Free Cash Flow
GAAP net cash provided by operating
activities
$
35,167
$
(1,277)
Less: Purchases of property and
equipment
(10,681)
(13,920)
Free cash flow
$
24,486
$
(15,197)
MSP-F
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210512005921/en/
Media: Shoba V. Lemoine communications@datto.com
Investors: Ryan Burkart ir@datto.com
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