Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Datto Announces Second Quarter 2021 Financial Results By: Datto Holding Corp. via Business Wire August 11, 2021 at 16:10 PM EDT Second quarter subscription revenue grew 21 percent year-over-year to $141.7 million ARR grew 18 percent year-over-year to $597.9 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 second quarter ended June 30, 2021. “Our second quarter results mark one of the strongest quarters in our history and are a clear indication of the power of the MSP model,” said Tim Weller, Datto’s Chief Executive Officer. “Our subscription revenue growth accelerated to 21% year-over-year and we added 500 net new partners in the quarter, both representing new highs since the onset of the pandemic in early 2020. Looking ahead, we continue to see strong momentum across our business and are excited about the new product launches in cloud and security planned for the second half of 2021. We remain well positioned to capitalize on the large opportunity to help our MSP partners manage, protect, and connect their SMB clients’ data in an increasingly digital world.” Second Quarter 2021 Financial Results (In Millions) Q2 2021 Q2 2020 Y/Y Change Subscription Revenue(1) $141.7 $117.6 21% Total Revenue(1) $151.6 $124.5 22% ARR(2) $597.9 $506.8 18% Gross Margin 72% 73% -89 bps Non-GAAP Gross Margin(3) 74% 74% 10 bps Net Income $16.9 $8.8 93% Adjusted EBITDA(3) $44.9 $38.9 16% Net Cash Provided by Operating Activities $31.9 $25.3 26% Free Cash Flow(3) $22.2 $17.2 29% 1 Subscription and Total Revenues Y/Y percentage change includes benefits from favorable foreign exchange rates of approximately 4%. 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 17,800 MSP partners, a net sequential increase of 500 in the quarter, up from an increase of 300 in the previous quarter. Expanded the number of MSPs contributing over $100,000 ARR to 1,250, up from 1,000 at June 30, 2020. Increased the number of endpoints enabled with Datto RMM Ransomware Detection to over one million globally, nearly doubling the number since May 2021. Hosted a Partner Security Forum attended by over two thousand MSP Partners focused on security best practices. Announced that DattoCon21 will be held October 11-13, 2021. The three day event will feature world-class speakers and sessions designed to help MSPs grow. Reintroduced Virtual SIRIS, a software-only version of Datto’s industry-leading continuity solution that provides MSPs with the flexibility to meet the diverse data protection requirements of their small and medium business (SMB) clients with fully integrated software running on their existing virtual machines. Third Quarter and Full Year 2021 Financial Outlook Datto is providing the following guidance for the third quarter and full-year 2021: Q3 2021 Outlook FY 2021 Outlook Revenue $153 - $155 million $608 - $612 million Adjusted EBITDA $32 - $33 million $151 - $154 million Datto Second Quarter 2021 Results Conference Call When: Wednesday, August 11, 2021 Time: 5:00 pm ET Conference ID: 9731029 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) 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue: Subscription $ 141,743 $ 117,600 $ 277,333 $ 233,595 Device 9,025 6,053 17,410 14,134 Professional services and other 834 810 1,768 1,397 Total revenue 151,602 124,463 296,511 249,126 Cost of revenue: Subscription 21,638 20,105 42,568 41,871 Device 11,124 7,258 20,622 16,375 Professional services and other 1,549 1,529 3,051 3,067 Depreciation and amortization 8,598 5,226 15,223 10,220 Total cost of revenue 42,909 34,118 81,464 71,533 Gross profit 108,693 90,345 215,047 177,593 Operating expenses: Sales and marketing 32,135 27,162 64,061 59,119 Research and development 27,344 16,010 49,818 32,743 General and administrative 26,485 20,172 51,106 41,956 Depreciation and amortization 6,453 6,863 13,023 13,780 Total operating expenses 92,417 70,207 178,008 147,598 Income from operations 16,276 20,138 37,039 29,995 Other expense: Interest expense 175 7,519 277 16,525 Other income, net (95) (1,744) (114) (415) Total other expense 80 5,775 163 16,110 Income before income taxes 16,196 14,363 36,876 13,885 Benefit from (provision for) income taxes 720 (5,596) (4,674) (3,765) Net income $ 16,916 $ 8,767 $ 32,202 $ 10,120 Net income per share attributable to common stockholders: Basic $ 0.10 $ 0.06 $ 0.20 $ 0.07 Diluted $ 0.10 $ 0.06 $ 0.20 $ 0.07 Weighted-average shares used in computing net income per share: Basic 161,466,852 135,548,740 161,267,734 135,468,029 Diluted 165,452,865 136,159,449 165,094,740 136,214,530 DATTO HOLDING CORP. Condensed Consolidated Balance Sheets (in thousands) (unaudited) June 30, December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 178,605 $ 168,877 Restricted cash 1,360 1,536 Accounts receivable, net 11,198 13,946 Inventory 26,773 13,811 Prepaid expenses and other current assets 33,312 28,316 Total current assets 251,248 226,486 Property and equipment, net 97,649 91,876 Operating lease assets 31,909 — Goodwill 1,144,327 1,120,954 Intangible assets, net 302,217 287,395 Other assets 77,812 66,560 Total assets $ 1,905,162 $ 1,793,271 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 13,508 $ 7,574 Accrued expenses and other current liabilities 45,357 39,461 Deferred revenue 22,323 23,763 Total current liabilities 81,188 70,798 Deferred revenue, noncurrent 2,956 3,322 Deferred income taxes 29,346 18,947 Operating lease liabilities, noncurrent 33,146 — Other long-term liabilities 4,050 11,736 Total liabilities 150,686 104,803 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock 162 161 Additional paid-in capital 1,788,843 1,755,387 Treasury stock (3,621) (3,621) Accumulated deficit (33,024) (65,226) Accumulated other comprehensive income 2,116 1,767 Total stockholders’ equity 1,754,476 1,688,468 Total liabilities and stockholders’ equity $ 1,905,162 $ 1,793,271 DATTO HOLDING CORP. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2021 2020 OPERATING ACTIVITIES Net income $ 32,202 $ 10,120 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 15,389 12,846 Amortization of acquired intangible assets 12,857 11,154 Amortization of debt issuance costs 169 841 Reserve for inventory obsolescence 51 89 Non-cash operating lease expense 3,850 — Stock-based compensation 23,752 3,772 Provision for bad debt 2,343 4,280 Deferred income taxes 3,570 2,771 Unrealized foreign exchange (331) 551 Changes in operating assets and liabilities: Accounts receivable 444 (1,155) Inventory (13,023) (11,617) Prepaid expenses and other current assets (4,034) (762) Other assets (11,381) (2,759) Accounts payable, accrued expenses and other 3,272 (4,520) Deferred revenue (2,033) (1,636) Net cash provided by operating activities 67,097 23,975 INVESTING ACTIVITIES Purchase of property and equipment (20,438) (22,000) Acquisition of business, net of cash acquired (45,486) — Net cash used in investing activities (65,924) (22,000) FINANCING ACTIVITIES Proceeds from debt — 32,100 Repayments of debt and capital leases (46) (3,029) Capitalized transaction costs (414) (942) Proceeds from stock option exercises 8,765 2,500 Net cash provided by financing activities 8,305 30,629 Effect of exchange rate changes on cash 74 (676) Net increase in cash 9,552 31,928 Cash and cash equivalents and restricted cash, beginning of year 170,413 29,066 Cash and cash equivalents and restricted cash, end of period $ 179,965 $ 60,994 Reconciliation of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 178,605 $ 59,550 Restricted cash $ 1,360 $ 1,444 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes $ 1,150 $ 88 Cash paid for interest $ — $ 15,704 NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of property and equipment included in accounts payable $ 708 $ 729 Unpaid initial public offering costs in total current liabilities $ — $ 1,589 DATTO HOLDING CORP. Non-GAAP Condensed Consolidated Statements of Operations (in thousands, except share and per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue: Subscription $ 141,743 $ 117,600 $ 277,333 $ 233,595 Device 9,025 6,053 17,410 14,134 Professional services and other 834 810 1,768 1,397 Total revenue 151,602 124,463 296,511 249,126 Cost of revenue: Subscription 20,753 19,622 40,455 41,368 Device 11,079 7,258 20,515 16,375 Professional services and other 1,486 1,390 2,885 2,928 Depreciation and amortization 5,898 4,051 11,211 7,870 Total cost of revenue 39,216 32,321 75,066 68,541 Gross profit 112,386 92,142 221,445 180,585 Operating expenses: Sales and marketing 30,293 24,591 59,924 55,904 Research and development 20,286 14,750 37,886 31,173 General and administrative 22,777 17,984 43,010 37,527 Depreciation and amortization 2,030 2,461 4,178 4,976 Total operating expenses 75,386 59,786 144,998 129,580 Income from operations 37,000 32,356 76,447 51,005 Other expense: Interest expense 175 7,519 277 16,525 Other income, net (95) (1,744) (114) (415) Total other expense 80 5,775 163 16,110 Income before income taxes 36,920 26,581 76,284 34,895 Provision for income taxes (9,230) (6,645) (19,071) (8,724) Net income $ 27,690 $ 19,936 $ 57,213 $ 26,171 Net income per share attributable to common stockholders: Basic $ 0.17 $ 0.15 $ 0.35 $ 0.19 Diluted $ 0.17 $ 0.15 $ 0.35 $ 0.19 Weighted-average shares used in computing net income per share: Basic 161,466,852 135,548,740 161,267,734 135,468,029 Diluted 165,452,865 136,159,449 165,094,740 136,214,530 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Non-GAAP Subscription Cost of Revenue GAAP subscription cost of revenue $ 21,638 $ 20,105 $ 42,568 $ 41,871 Stock-based compensation expense (885) (21) (2,113) (41) Restructuring expense — (462) — (462) Non-GAAP subscription cost of revenue $ 20,753 $ 19,622 $ 40,455 $ 41,368 Non-GAAP Device Cost of Revenue GAAP device cost of revenue $ 11,124 $ 7,258 $ 20,622 $ 16,375 Stock-based compensation expense (45) — (107) — Non-GAAP device gross cost of revenue $ 11,079 $ 7,258 $ 20,515 $ 16,375 Non-GAAP Professional Services and Other Cost of Revenue GAAP professional services and other cost of revenue $ 1,549 $ 1,529 $ 3,051 $ 3,067 Stock-based compensation expense (63) — (166) — Restructuring expense — (139) — (139) Non-GAAP professional services and other cost of revenue $ 1,486 $ 1,390 $ 2,885 $ 2,928 Non-GAAP Depreciation and Amortization in Cost of Revenue GAAP depreciation and amortization in cost of revenue $ 8,598 $ 5,226 $ 15,223 $ 10,220 Amortization of acquired intangible assets (2,700) (1,175) (4,012) (2,350) Non-GAAP depreciation and amortization in cost of revenue $ 5,898 $ 4,051 $ 11,211 $ 7,870 Non-GAAP Cost of Revenue GAAP cost of revenue $ 42,909 $ 34,118 $ 81,464 $ 71,533 Amortization of acquired intangible assets (2,700) (1,175) (4,012) (2,350) Stock-based compensation expense (993) (21) (2,386) (41) Restructuring expense — (601) — (601) Non-GAAP cost of revenue $ 39,216 $ 32,321 $ 75,066 $ 68,541 Non-GAAP Gross Profit GAAP gross profit $ 108,693 $ 90,345 $ 215,047 $ 177,593 Amortization of acquired intangible assets 2,700 1,175 4,012 2,350 Stock-based compensation expense 993 21 2,386 41 Restructuring expense — 601 — 601 Non-GAAP gross profit $ 112,386 $ 92,142 $ 221,445 $ 180,585 Non-GAAP gross margin 74.1 % 74.0 % 74.7 % 72.5 % 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Non-GAAP Sales and Marketing GAAP sales and marketing expense $ 32,135 $ 27,162 $ 64,061 $ 59,119 Stock-based compensation expense (1,842) (635) (4,137) (1,279) Restructuring expense — (1,936) — (1,936) Non-GAAP sales and marketing expense $ 30,293 $ 24,591 $ 59,924 $ 55,904 Non-GAAP sales and marketing as a % of revenue 20.0 % 19.8 % 20.2 % 22.4 % Non-GAAP Research and Development GAAP research and development expense $ 27,344 $ 16,010 $ 49,818 $ 32,743 Stock-based compensation expense (7,058) (311) (11,932) (621) Restructuring expense — (949) — (949) Non-GAAP research and development expense $ 20,286 $ 14,750 $ 37,886 $ 31,173 Non-GAAP research and development as a % of revenue 13.4 % 11.9 % 12.8 % 12.5 % Non-GAAP General and Administrative GAAP general and administrative expense $ 26,485 $ 20,172 $ 51,106 $ 41,956 Stock-based compensation expense (2,348) (891) (5,297) (1,831) Restructuring expense — (364) — (364) Transaction related and other expense (1,360) (933) (2,799) (2,234) Non-GAAP general and administrative expense $ 22,777 $ 17,984 $ 43,010 $ 37,527 Non-GAAP general and administrative as a % of revenue 15.0 % 14.4 % 14.5 % 15.1 % Non-GAAP Depreciation and Amortization in Operating Expenses GAAP depreciation and amortization in operating expenses $ 6,453 $ 6,863 $ 13,023 $ 13,780 Amortization of acquired intangible assets (4,423) (4,402) (8,845) (8,804) Non-GAAP depreciation and amortization in operating expense $ 2,030 $ 2,461 $ 4,178 $ 4,976 Non-GAAP depreciation and amortization in operating expense as a % of revenue 1.3 % 2.0 % 1.4 % 2.0 % Non-GAAP Operating Expenses GAAP operating expenses $ 92,417 $ 70,207 $ 178,008 $ 147,598 Amortization of acquired intangible assets (4,423) (4,402) (8,845) (8,804) Stock-based compensation expense (11,248) (1,837) (21,366) (3,731) Restructuring expense — (3,249) — (3,249) Transaction related and other expense (1,360) (933) (2,799) (2,234) Non-GAAP operating expenses $ 75,386 $ 59,786 $ 144,998 $ 129,580 Non-GAAP operating expenses as a % of revenue 49.7 % 48.0 % 48.9 % 52.0 % Non-GAAP Income From Operations GAAP income from operations $ 16,276 $ 20,138 $ 37,039 $ 29,995 Amortization of acquired intangible assets 7,123 5,577 12,857 11,154 Stock-based compensation expense 12,241 1,858 23,752 3,772 Restructuring expense — 3,850 — 3,850 Transaction related and other expense 1,360 933 2,799 2,234 Non-GAAP income from operations $ 37,000 $ 32,356 $ 76,447 $ 51,005 Non-GAAP operating margin 24.4 % 26.0 % 25.8 % 20.5 % 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Non-GAAP Net Income and Net Income Per Share GAAP net income $ 16,916 $ 8,767 $ 32,202 $ 10,120 GAAP provision for (benefit from) income taxes (720) 5,596 4,674 3,765 GAAP income before income taxes 16,196 14,363 36,876 13,885 Amortization of acquired intangible assets 7,123 5,577 12,857 11,154 Stock-based compensation expense 12,241 1,858 23,752 3,772 Restructuring expense — 3,850 — 3,850 Transaction related and other expense 1,360 933 2,799 2,234 Non-GAAP provision for income taxes (9,230) (6,645) (19,071) (8,724) Non-GAAP net income $ 27,690 $ 19,936 $ 57,213 $ 26,171 Non-GAAP net income per share attributable to common shareholders: Basic $ 0.17 $ 0.15 $ 0.35 $ 0.19 Diluted $ 0.17 $ 0.15 $ 0.35 $ 0.19 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 161,466,852 135,548,740 161,267,734 135,468,029 GAAP and Non-GAAP weighted-average shares used in computing net income per share, diluted 165,452,865 136,159,449 165,094,740 136,214,530 Adjusted EBITDA GAAP net income $ 16,916 $ 8,767 $ 32,202 $ 10,120 Interest and other expense, net 80 5,775 163 16,110 Depreciation and amortization 15,051 12,089 28,246 24,000 (Benefit from) provision for income tax (720) 5,596 4,674 3,765 Stock-based compensation expense 12,241 1,858 23,752 3,772 Restructuring expense — 3,850 — 3,850 Transaction related and other expense 1,360 933 2,799 2,234 Adjusted EBITDA $ 44,928 $ 38,868 $ 91,836 $ 63,851 Adjusted EBITDA margin 29.6 % 31.2 % 31.0 % 25.6 % Free Cash Flow GAAP net cash provided by operating activities $ 31,930 $ 25,252 $ 67,097 $ 23,975 Less: Purchases of property and equipment (9,757) (8,080) (20,438) (22,000) Free cash flow $ 22,173 $ 17,172 $ 46,659 $ 1,975 MSP-F View source version on businesswire.com: https://www.businesswire.com/news/home/20210811005815/en/Contacts Media Contact: Shoba V. 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Datto Announces Second Quarter 2021 Financial Results By: Datto Holding Corp. via Business Wire August 11, 2021 at 16:10 PM EDT Second quarter subscription revenue grew 21 percent year-over-year to $141.7 million ARR grew 18 percent year-over-year to $597.9 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 second quarter ended June 30, 2021. “Our second quarter results mark one of the strongest quarters in our history and are a clear indication of the power of the MSP model,” said Tim Weller, Datto’s Chief Executive Officer. “Our subscription revenue growth accelerated to 21% year-over-year and we added 500 net new partners in the quarter, both representing new highs since the onset of the pandemic in early 2020. Looking ahead, we continue to see strong momentum across our business and are excited about the new product launches in cloud and security planned for the second half of 2021. We remain well positioned to capitalize on the large opportunity to help our MSP partners manage, protect, and connect their SMB clients’ data in an increasingly digital world.” Second Quarter 2021 Financial Results (In Millions) Q2 2021 Q2 2020 Y/Y Change Subscription Revenue(1) $141.7 $117.6 21% Total Revenue(1) $151.6 $124.5 22% ARR(2) $597.9 $506.8 18% Gross Margin 72% 73% -89 bps Non-GAAP Gross Margin(3) 74% 74% 10 bps Net Income $16.9 $8.8 93% Adjusted EBITDA(3) $44.9 $38.9 16% Net Cash Provided by Operating Activities $31.9 $25.3 26% Free Cash Flow(3) $22.2 $17.2 29% 1 Subscription and Total Revenues Y/Y percentage change includes benefits from favorable foreign exchange rates of approximately 4%. 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 17,800 MSP partners, a net sequential increase of 500 in the quarter, up from an increase of 300 in the previous quarter. Expanded the number of MSPs contributing over $100,000 ARR to 1,250, up from 1,000 at June 30, 2020. Increased the number of endpoints enabled with Datto RMM Ransomware Detection to over one million globally, nearly doubling the number since May 2021. Hosted a Partner Security Forum attended by over two thousand MSP Partners focused on security best practices. Announced that DattoCon21 will be held October 11-13, 2021. The three day event will feature world-class speakers and sessions designed to help MSPs grow. Reintroduced Virtual SIRIS, a software-only version of Datto’s industry-leading continuity solution that provides MSPs with the flexibility to meet the diverse data protection requirements of their small and medium business (SMB) clients with fully integrated software running on their existing virtual machines. Third Quarter and Full Year 2021 Financial Outlook Datto is providing the following guidance for the third quarter and full-year 2021: Q3 2021 Outlook FY 2021 Outlook Revenue $153 - $155 million $608 - $612 million Adjusted EBITDA $32 - $33 million $151 - $154 million Datto Second Quarter 2021 Results Conference Call When: Wednesday, August 11, 2021 Time: 5:00 pm ET Conference ID: 9731029 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) 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue: Subscription $ 141,743 $ 117,600 $ 277,333 $ 233,595 Device 9,025 6,053 17,410 14,134 Professional services and other 834 810 1,768 1,397 Total revenue 151,602 124,463 296,511 249,126 Cost of revenue: Subscription 21,638 20,105 42,568 41,871 Device 11,124 7,258 20,622 16,375 Professional services and other 1,549 1,529 3,051 3,067 Depreciation and amortization 8,598 5,226 15,223 10,220 Total cost of revenue 42,909 34,118 81,464 71,533 Gross profit 108,693 90,345 215,047 177,593 Operating expenses: Sales and marketing 32,135 27,162 64,061 59,119 Research and development 27,344 16,010 49,818 32,743 General and administrative 26,485 20,172 51,106 41,956 Depreciation and amortization 6,453 6,863 13,023 13,780 Total operating expenses 92,417 70,207 178,008 147,598 Income from operations 16,276 20,138 37,039 29,995 Other expense: Interest expense 175 7,519 277 16,525 Other income, net (95) (1,744) (114) (415) Total other expense 80 5,775 163 16,110 Income before income taxes 16,196 14,363 36,876 13,885 Benefit from (provision for) income taxes 720 (5,596) (4,674) (3,765) Net income $ 16,916 $ 8,767 $ 32,202 $ 10,120 Net income per share attributable to common stockholders: Basic $ 0.10 $ 0.06 $ 0.20 $ 0.07 Diluted $ 0.10 $ 0.06 $ 0.20 $ 0.07 Weighted-average shares used in computing net income per share: Basic 161,466,852 135,548,740 161,267,734 135,468,029 Diluted 165,452,865 136,159,449 165,094,740 136,214,530 DATTO HOLDING CORP. Condensed Consolidated Balance Sheets (in thousands) (unaudited) June 30, December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 178,605 $ 168,877 Restricted cash 1,360 1,536 Accounts receivable, net 11,198 13,946 Inventory 26,773 13,811 Prepaid expenses and other current assets 33,312 28,316 Total current assets 251,248 226,486 Property and equipment, net 97,649 91,876 Operating lease assets 31,909 — Goodwill 1,144,327 1,120,954 Intangible assets, net 302,217 287,395 Other assets 77,812 66,560 Total assets $ 1,905,162 $ 1,793,271 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 13,508 $ 7,574 Accrued expenses and other current liabilities 45,357 39,461 Deferred revenue 22,323 23,763 Total current liabilities 81,188 70,798 Deferred revenue, noncurrent 2,956 3,322 Deferred income taxes 29,346 18,947 Operating lease liabilities, noncurrent 33,146 — Other long-term liabilities 4,050 11,736 Total liabilities 150,686 104,803 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock 162 161 Additional paid-in capital 1,788,843 1,755,387 Treasury stock (3,621) (3,621) Accumulated deficit (33,024) (65,226) Accumulated other comprehensive income 2,116 1,767 Total stockholders’ equity 1,754,476 1,688,468 Total liabilities and stockholders’ equity $ 1,905,162 $ 1,793,271 DATTO HOLDING CORP. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2021 2020 OPERATING ACTIVITIES Net income $ 32,202 $ 10,120 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 15,389 12,846 Amortization of acquired intangible assets 12,857 11,154 Amortization of debt issuance costs 169 841 Reserve for inventory obsolescence 51 89 Non-cash operating lease expense 3,850 — Stock-based compensation 23,752 3,772 Provision for bad debt 2,343 4,280 Deferred income taxes 3,570 2,771 Unrealized foreign exchange (331) 551 Changes in operating assets and liabilities: Accounts receivable 444 (1,155) Inventory (13,023) (11,617) Prepaid expenses and other current assets (4,034) (762) Other assets (11,381) (2,759) Accounts payable, accrued expenses and other 3,272 (4,520) Deferred revenue (2,033) (1,636) Net cash provided by operating activities 67,097 23,975 INVESTING ACTIVITIES Purchase of property and equipment (20,438) (22,000) Acquisition of business, net of cash acquired (45,486) — Net cash used in investing activities (65,924) (22,000) FINANCING ACTIVITIES Proceeds from debt — 32,100 Repayments of debt and capital leases (46) (3,029) Capitalized transaction costs (414) (942) Proceeds from stock option exercises 8,765 2,500 Net cash provided by financing activities 8,305 30,629 Effect of exchange rate changes on cash 74 (676) Net increase in cash 9,552 31,928 Cash and cash equivalents and restricted cash, beginning of year 170,413 29,066 Cash and cash equivalents and restricted cash, end of period $ 179,965 $ 60,994 Reconciliation of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 178,605 $ 59,550 Restricted cash $ 1,360 $ 1,444 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes $ 1,150 $ 88 Cash paid for interest $ — $ 15,704 NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of property and equipment included in accounts payable $ 708 $ 729 Unpaid initial public offering costs in total current liabilities $ — $ 1,589 DATTO HOLDING CORP. Non-GAAP Condensed Consolidated Statements of Operations (in thousands, except share and per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue: Subscription $ 141,743 $ 117,600 $ 277,333 $ 233,595 Device 9,025 6,053 17,410 14,134 Professional services and other 834 810 1,768 1,397 Total revenue 151,602 124,463 296,511 249,126 Cost of revenue: Subscription 20,753 19,622 40,455 41,368 Device 11,079 7,258 20,515 16,375 Professional services and other 1,486 1,390 2,885 2,928 Depreciation and amortization 5,898 4,051 11,211 7,870 Total cost of revenue 39,216 32,321 75,066 68,541 Gross profit 112,386 92,142 221,445 180,585 Operating expenses: Sales and marketing 30,293 24,591 59,924 55,904 Research and development 20,286 14,750 37,886 31,173 General and administrative 22,777 17,984 43,010 37,527 Depreciation and amortization 2,030 2,461 4,178 4,976 Total operating expenses 75,386 59,786 144,998 129,580 Income from operations 37,000 32,356 76,447 51,005 Other expense: Interest expense 175 7,519 277 16,525 Other income, net (95) (1,744) (114) (415) Total other expense 80 5,775 163 16,110 Income before income taxes 36,920 26,581 76,284 34,895 Provision for income taxes (9,230) (6,645) (19,071) (8,724) Net income $ 27,690 $ 19,936 $ 57,213 $ 26,171 Net income per share attributable to common stockholders: Basic $ 0.17 $ 0.15 $ 0.35 $ 0.19 Diluted $ 0.17 $ 0.15 $ 0.35 $ 0.19 Weighted-average shares used in computing net income per share: Basic 161,466,852 135,548,740 161,267,734 135,468,029 Diluted 165,452,865 136,159,449 165,094,740 136,214,530 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Non-GAAP Subscription Cost of Revenue GAAP subscription cost of revenue $ 21,638 $ 20,105 $ 42,568 $ 41,871 Stock-based compensation expense (885) (21) (2,113) (41) Restructuring expense — (462) — (462) Non-GAAP subscription cost of revenue $ 20,753 $ 19,622 $ 40,455 $ 41,368 Non-GAAP Device Cost of Revenue GAAP device cost of revenue $ 11,124 $ 7,258 $ 20,622 $ 16,375 Stock-based compensation expense (45) — (107) — Non-GAAP device gross cost of revenue $ 11,079 $ 7,258 $ 20,515 $ 16,375 Non-GAAP Professional Services and Other Cost of Revenue GAAP professional services and other cost of revenue $ 1,549 $ 1,529 $ 3,051 $ 3,067 Stock-based compensation expense (63) — (166) — Restructuring expense — (139) — (139) Non-GAAP professional services and other cost of revenue $ 1,486 $ 1,390 $ 2,885 $ 2,928 Non-GAAP Depreciation and Amortization in Cost of Revenue GAAP depreciation and amortization in cost of revenue $ 8,598 $ 5,226 $ 15,223 $ 10,220 Amortization of acquired intangible assets (2,700) (1,175) (4,012) (2,350) Non-GAAP depreciation and amortization in cost of revenue $ 5,898 $ 4,051 $ 11,211 $ 7,870 Non-GAAP Cost of Revenue GAAP cost of revenue $ 42,909 $ 34,118 $ 81,464 $ 71,533 Amortization of acquired intangible assets (2,700) (1,175) (4,012) (2,350) Stock-based compensation expense (993) (21) (2,386) (41) Restructuring expense — (601) — (601) Non-GAAP cost of revenue $ 39,216 $ 32,321 $ 75,066 $ 68,541 Non-GAAP Gross Profit GAAP gross profit $ 108,693 $ 90,345 $ 215,047 $ 177,593 Amortization of acquired intangible assets 2,700 1,175 4,012 2,350 Stock-based compensation expense 993 21 2,386 41 Restructuring expense — 601 — 601 Non-GAAP gross profit $ 112,386 $ 92,142 $ 221,445 $ 180,585 Non-GAAP gross margin 74.1 % 74.0 % 74.7 % 72.5 % 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Non-GAAP Sales and Marketing GAAP sales and marketing expense $ 32,135 $ 27,162 $ 64,061 $ 59,119 Stock-based compensation expense (1,842) (635) (4,137) (1,279) Restructuring expense — (1,936) — (1,936) Non-GAAP sales and marketing expense $ 30,293 $ 24,591 $ 59,924 $ 55,904 Non-GAAP sales and marketing as a % of revenue 20.0 % 19.8 % 20.2 % 22.4 % Non-GAAP Research and Development GAAP research and development expense $ 27,344 $ 16,010 $ 49,818 $ 32,743 Stock-based compensation expense (7,058) (311) (11,932) (621) Restructuring expense — (949) — (949) Non-GAAP research and development expense $ 20,286 $ 14,750 $ 37,886 $ 31,173 Non-GAAP research and development as a % of revenue 13.4 % 11.9 % 12.8 % 12.5 % Non-GAAP General and Administrative GAAP general and administrative expense $ 26,485 $ 20,172 $ 51,106 $ 41,956 Stock-based compensation expense (2,348) (891) (5,297) (1,831) Restructuring expense — (364) — (364) Transaction related and other expense (1,360) (933) (2,799) (2,234) Non-GAAP general and administrative expense $ 22,777 $ 17,984 $ 43,010 $ 37,527 Non-GAAP general and administrative as a % of revenue 15.0 % 14.4 % 14.5 % 15.1 % Non-GAAP Depreciation and Amortization in Operating Expenses GAAP depreciation and amortization in operating expenses $ 6,453 $ 6,863 $ 13,023 $ 13,780 Amortization of acquired intangible assets (4,423) (4,402) (8,845) (8,804) Non-GAAP depreciation and amortization in operating expense $ 2,030 $ 2,461 $ 4,178 $ 4,976 Non-GAAP depreciation and amortization in operating expense as a % of revenue 1.3 % 2.0 % 1.4 % 2.0 % Non-GAAP Operating Expenses GAAP operating expenses $ 92,417 $ 70,207 $ 178,008 $ 147,598 Amortization of acquired intangible assets (4,423) (4,402) (8,845) (8,804) Stock-based compensation expense (11,248) (1,837) (21,366) (3,731) Restructuring expense — (3,249) — (3,249) Transaction related and other expense (1,360) (933) (2,799) (2,234) Non-GAAP operating expenses $ 75,386 $ 59,786 $ 144,998 $ 129,580 Non-GAAP operating expenses as a % of revenue 49.7 % 48.0 % 48.9 % 52.0 % Non-GAAP Income From Operations GAAP income from operations $ 16,276 $ 20,138 $ 37,039 $ 29,995 Amortization of acquired intangible assets 7,123 5,577 12,857 11,154 Stock-based compensation expense 12,241 1,858 23,752 3,772 Restructuring expense — 3,850 — 3,850 Transaction related and other expense 1,360 933 2,799 2,234 Non-GAAP income from operations $ 37,000 $ 32,356 $ 76,447 $ 51,005 Non-GAAP operating margin 24.4 % 26.0 % 25.8 % 20.5 % 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Non-GAAP Net Income and Net Income Per Share GAAP net income $ 16,916 $ 8,767 $ 32,202 $ 10,120 GAAP provision for (benefit from) income taxes (720) 5,596 4,674 3,765 GAAP income before income taxes 16,196 14,363 36,876 13,885 Amortization of acquired intangible assets 7,123 5,577 12,857 11,154 Stock-based compensation expense 12,241 1,858 23,752 3,772 Restructuring expense — 3,850 — 3,850 Transaction related and other expense 1,360 933 2,799 2,234 Non-GAAP provision for income taxes (9,230) (6,645) (19,071) (8,724) Non-GAAP net income $ 27,690 $ 19,936 $ 57,213 $ 26,171 Non-GAAP net income per share attributable to common shareholders: Basic $ 0.17 $ 0.15 $ 0.35 $ 0.19 Diluted $ 0.17 $ 0.15 $ 0.35 $ 0.19 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 161,466,852 135,548,740 161,267,734 135,468,029 GAAP and Non-GAAP weighted-average shares used in computing net income per share, diluted 165,452,865 136,159,449 165,094,740 136,214,530 Adjusted EBITDA GAAP net income $ 16,916 $ 8,767 $ 32,202 $ 10,120 Interest and other expense, net 80 5,775 163 16,110 Depreciation and amortization 15,051 12,089 28,246 24,000 (Benefit from) provision for income tax (720) 5,596 4,674 3,765 Stock-based compensation expense 12,241 1,858 23,752 3,772 Restructuring expense — 3,850 — 3,850 Transaction related and other expense 1,360 933 2,799 2,234 Adjusted EBITDA $ 44,928 $ 38,868 $ 91,836 $ 63,851 Adjusted EBITDA margin 29.6 % 31.2 % 31.0 % 25.6 % Free Cash Flow GAAP net cash provided by operating activities $ 31,930 $ 25,252 $ 67,097 $ 23,975 Less: Purchases of property and equipment (9,757) (8,080) (20,438) (22,000) Free cash flow $ 22,173 $ 17,172 $ 46,659 $ 1,975 MSP-F View source version on businesswire.com: https://www.businesswire.com/news/home/20210811005815/en/Contacts Media Contact: Shoba V. Lemoine communications@datto.com Investor Contact: Ryan Burkart ir@datto.com
Second quarter subscription revenue grew 21 percent year-over-year to $141.7 million ARR grew 18 percent year-over-year to $597.9 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 second quarter ended June 30, 2021. “Our second quarter results mark one of the strongest quarters in our history and are a clear indication of the power of the MSP model,” said Tim Weller, Datto’s Chief Executive Officer. “Our subscription revenue growth accelerated to 21% year-over-year and we added 500 net new partners in the quarter, both representing new highs since the onset of the pandemic in early 2020. Looking ahead, we continue to see strong momentum across our business and are excited about the new product launches in cloud and security planned for the second half of 2021. We remain well positioned to capitalize on the large opportunity to help our MSP partners manage, protect, and connect their SMB clients’ data in an increasingly digital world.” Second Quarter 2021 Financial Results (In Millions) Q2 2021 Q2 2020 Y/Y Change Subscription Revenue(1) $141.7 $117.6 21% Total Revenue(1) $151.6 $124.5 22% ARR(2) $597.9 $506.8 18% Gross Margin 72% 73% -89 bps Non-GAAP Gross Margin(3) 74% 74% 10 bps Net Income $16.9 $8.8 93% Adjusted EBITDA(3) $44.9 $38.9 16% Net Cash Provided by Operating Activities $31.9 $25.3 26% Free Cash Flow(3) $22.2 $17.2 29% 1 Subscription and Total Revenues Y/Y percentage change includes benefits from favorable foreign exchange rates of approximately 4%. 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 17,800 MSP partners, a net sequential increase of 500 in the quarter, up from an increase of 300 in the previous quarter. Expanded the number of MSPs contributing over $100,000 ARR to 1,250, up from 1,000 at June 30, 2020. Increased the number of endpoints enabled with Datto RMM Ransomware Detection to over one million globally, nearly doubling the number since May 2021. Hosted a Partner Security Forum attended by over two thousand MSP Partners focused on security best practices. Announced that DattoCon21 will be held October 11-13, 2021. The three day event will feature world-class speakers and sessions designed to help MSPs grow. Reintroduced Virtual SIRIS, a software-only version of Datto’s industry-leading continuity solution that provides MSPs with the flexibility to meet the diverse data protection requirements of their small and medium business (SMB) clients with fully integrated software running on their existing virtual machines. Third Quarter and Full Year 2021 Financial Outlook Datto is providing the following guidance for the third quarter and full-year 2021: Q3 2021 Outlook FY 2021 Outlook Revenue $153 - $155 million $608 - $612 million Adjusted EBITDA $32 - $33 million $151 - $154 million Datto Second Quarter 2021 Results Conference Call When: Wednesday, August 11, 2021 Time: 5:00 pm ET Conference ID: 9731029 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) 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue: Subscription $ 141,743 $ 117,600 $ 277,333 $ 233,595 Device 9,025 6,053 17,410 14,134 Professional services and other 834 810 1,768 1,397 Total revenue 151,602 124,463 296,511 249,126 Cost of revenue: Subscription 21,638 20,105 42,568 41,871 Device 11,124 7,258 20,622 16,375 Professional services and other 1,549 1,529 3,051 3,067 Depreciation and amortization 8,598 5,226 15,223 10,220 Total cost of revenue 42,909 34,118 81,464 71,533 Gross profit 108,693 90,345 215,047 177,593 Operating expenses: Sales and marketing 32,135 27,162 64,061 59,119 Research and development 27,344 16,010 49,818 32,743 General and administrative 26,485 20,172 51,106 41,956 Depreciation and amortization 6,453 6,863 13,023 13,780 Total operating expenses 92,417 70,207 178,008 147,598 Income from operations 16,276 20,138 37,039 29,995 Other expense: Interest expense 175 7,519 277 16,525 Other income, net (95) (1,744) (114) (415) Total other expense 80 5,775 163 16,110 Income before income taxes 16,196 14,363 36,876 13,885 Benefit from (provision for) income taxes 720 (5,596) (4,674) (3,765) Net income $ 16,916 $ 8,767 $ 32,202 $ 10,120 Net income per share attributable to common stockholders: Basic $ 0.10 $ 0.06 $ 0.20 $ 0.07 Diluted $ 0.10 $ 0.06 $ 0.20 $ 0.07 Weighted-average shares used in computing net income per share: Basic 161,466,852 135,548,740 161,267,734 135,468,029 Diluted 165,452,865 136,159,449 165,094,740 136,214,530 DATTO HOLDING CORP. Condensed Consolidated Balance Sheets (in thousands) (unaudited) June 30, December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 178,605 $ 168,877 Restricted cash 1,360 1,536 Accounts receivable, net 11,198 13,946 Inventory 26,773 13,811 Prepaid expenses and other current assets 33,312 28,316 Total current assets 251,248 226,486 Property and equipment, net 97,649 91,876 Operating lease assets 31,909 — Goodwill 1,144,327 1,120,954 Intangible assets, net 302,217 287,395 Other assets 77,812 66,560 Total assets $ 1,905,162 $ 1,793,271 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 13,508 $ 7,574 Accrued expenses and other current liabilities 45,357 39,461 Deferred revenue 22,323 23,763 Total current liabilities 81,188 70,798 Deferred revenue, noncurrent 2,956 3,322 Deferred income taxes 29,346 18,947 Operating lease liabilities, noncurrent 33,146 — Other long-term liabilities 4,050 11,736 Total liabilities 150,686 104,803 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock 162 161 Additional paid-in capital 1,788,843 1,755,387 Treasury stock (3,621) (3,621) Accumulated deficit (33,024) (65,226) Accumulated other comprehensive income 2,116 1,767 Total stockholders’ equity 1,754,476 1,688,468 Total liabilities and stockholders’ equity $ 1,905,162 $ 1,793,271 DATTO HOLDING CORP. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, 2021 2020 OPERATING ACTIVITIES Net income $ 32,202 $ 10,120 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 15,389 12,846 Amortization of acquired intangible assets 12,857 11,154 Amortization of debt issuance costs 169 841 Reserve for inventory obsolescence 51 89 Non-cash operating lease expense 3,850 — Stock-based compensation 23,752 3,772 Provision for bad debt 2,343 4,280 Deferred income taxes 3,570 2,771 Unrealized foreign exchange (331) 551 Changes in operating assets and liabilities: Accounts receivable 444 (1,155) Inventory (13,023) (11,617) Prepaid expenses and other current assets (4,034) (762) Other assets (11,381) (2,759) Accounts payable, accrued expenses and other 3,272 (4,520) Deferred revenue (2,033) (1,636) Net cash provided by operating activities 67,097 23,975 INVESTING ACTIVITIES Purchase of property and equipment (20,438) (22,000) Acquisition of business, net of cash acquired (45,486) — Net cash used in investing activities (65,924) (22,000) FINANCING ACTIVITIES Proceeds from debt — 32,100 Repayments of debt and capital leases (46) (3,029) Capitalized transaction costs (414) (942) Proceeds from stock option exercises 8,765 2,500 Net cash provided by financing activities 8,305 30,629 Effect of exchange rate changes on cash 74 (676) Net increase in cash 9,552 31,928 Cash and cash equivalents and restricted cash, beginning of year 170,413 29,066 Cash and cash equivalents and restricted cash, end of period $ 179,965 $ 60,994 Reconciliation of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 178,605 $ 59,550 Restricted cash $ 1,360 $ 1,444 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes $ 1,150 $ 88 Cash paid for interest $ — $ 15,704 NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of property and equipment included in accounts payable $ 708 $ 729 Unpaid initial public offering costs in total current liabilities $ — $ 1,589 DATTO HOLDING CORP. Non-GAAP Condensed Consolidated Statements of Operations (in thousands, except share and per share amounts) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue: Subscription $ 141,743 $ 117,600 $ 277,333 $ 233,595 Device 9,025 6,053 17,410 14,134 Professional services and other 834 810 1,768 1,397 Total revenue 151,602 124,463 296,511 249,126 Cost of revenue: Subscription 20,753 19,622 40,455 41,368 Device 11,079 7,258 20,515 16,375 Professional services and other 1,486 1,390 2,885 2,928 Depreciation and amortization 5,898 4,051 11,211 7,870 Total cost of revenue 39,216 32,321 75,066 68,541 Gross profit 112,386 92,142 221,445 180,585 Operating expenses: Sales and marketing 30,293 24,591 59,924 55,904 Research and development 20,286 14,750 37,886 31,173 General and administrative 22,777 17,984 43,010 37,527 Depreciation and amortization 2,030 2,461 4,178 4,976 Total operating expenses 75,386 59,786 144,998 129,580 Income from operations 37,000 32,356 76,447 51,005 Other expense: Interest expense 175 7,519 277 16,525 Other income, net (95) (1,744) (114) (415) Total other expense 80 5,775 163 16,110 Income before income taxes 36,920 26,581 76,284 34,895 Provision for income taxes (9,230) (6,645) (19,071) (8,724) Net income $ 27,690 $ 19,936 $ 57,213 $ 26,171 Net income per share attributable to common stockholders: Basic $ 0.17 $ 0.15 $ 0.35 $ 0.19 Diluted $ 0.17 $ 0.15 $ 0.35 $ 0.19 Weighted-average shares used in computing net income per share: Basic 161,466,852 135,548,740 161,267,734 135,468,029 Diluted 165,452,865 136,159,449 165,094,740 136,214,530 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Non-GAAP Subscription Cost of Revenue GAAP subscription cost of revenue $ 21,638 $ 20,105 $ 42,568 $ 41,871 Stock-based compensation expense (885) (21) (2,113) (41) Restructuring expense — (462) — (462) Non-GAAP subscription cost of revenue $ 20,753 $ 19,622 $ 40,455 $ 41,368 Non-GAAP Device Cost of Revenue GAAP device cost of revenue $ 11,124 $ 7,258 $ 20,622 $ 16,375 Stock-based compensation expense (45) — (107) — Non-GAAP device gross cost of revenue $ 11,079 $ 7,258 $ 20,515 $ 16,375 Non-GAAP Professional Services and Other Cost of Revenue GAAP professional services and other cost of revenue $ 1,549 $ 1,529 $ 3,051 $ 3,067 Stock-based compensation expense (63) — (166) — Restructuring expense — (139) — (139) Non-GAAP professional services and other cost of revenue $ 1,486 $ 1,390 $ 2,885 $ 2,928 Non-GAAP Depreciation and Amortization in Cost of Revenue GAAP depreciation and amortization in cost of revenue $ 8,598 $ 5,226 $ 15,223 $ 10,220 Amortization of acquired intangible assets (2,700) (1,175) (4,012) (2,350) Non-GAAP depreciation and amortization in cost of revenue $ 5,898 $ 4,051 $ 11,211 $ 7,870 Non-GAAP Cost of Revenue GAAP cost of revenue $ 42,909 $ 34,118 $ 81,464 $ 71,533 Amortization of acquired intangible assets (2,700) (1,175) (4,012) (2,350) Stock-based compensation expense (993) (21) (2,386) (41) Restructuring expense — (601) — (601) Non-GAAP cost of revenue $ 39,216 $ 32,321 $ 75,066 $ 68,541 Non-GAAP Gross Profit GAAP gross profit $ 108,693 $ 90,345 $ 215,047 $ 177,593 Amortization of acquired intangible assets 2,700 1,175 4,012 2,350 Stock-based compensation expense 993 21 2,386 41 Restructuring expense — 601 — 601 Non-GAAP gross profit $ 112,386 $ 92,142 $ 221,445 $ 180,585 Non-GAAP gross margin 74.1 % 74.0 % 74.7 % 72.5 % 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Non-GAAP Sales and Marketing GAAP sales and marketing expense $ 32,135 $ 27,162 $ 64,061 $ 59,119 Stock-based compensation expense (1,842) (635) (4,137) (1,279) Restructuring expense — (1,936) — (1,936) Non-GAAP sales and marketing expense $ 30,293 $ 24,591 $ 59,924 $ 55,904 Non-GAAP sales and marketing as a % of revenue 20.0 % 19.8 % 20.2 % 22.4 % Non-GAAP Research and Development GAAP research and development expense $ 27,344 $ 16,010 $ 49,818 $ 32,743 Stock-based compensation expense (7,058) (311) (11,932) (621) Restructuring expense — (949) — (949) Non-GAAP research and development expense $ 20,286 $ 14,750 $ 37,886 $ 31,173 Non-GAAP research and development as a % of revenue 13.4 % 11.9 % 12.8 % 12.5 % Non-GAAP General and Administrative GAAP general and administrative expense $ 26,485 $ 20,172 $ 51,106 $ 41,956 Stock-based compensation expense (2,348) (891) (5,297) (1,831) Restructuring expense — (364) — (364) Transaction related and other expense (1,360) (933) (2,799) (2,234) Non-GAAP general and administrative expense $ 22,777 $ 17,984 $ 43,010 $ 37,527 Non-GAAP general and administrative as a % of revenue 15.0 % 14.4 % 14.5 % 15.1 % Non-GAAP Depreciation and Amortization in Operating Expenses GAAP depreciation and amortization in operating expenses $ 6,453 $ 6,863 $ 13,023 $ 13,780 Amortization of acquired intangible assets (4,423) (4,402) (8,845) (8,804) Non-GAAP depreciation and amortization in operating expense $ 2,030 $ 2,461 $ 4,178 $ 4,976 Non-GAAP depreciation and amortization in operating expense as a % of revenue 1.3 % 2.0 % 1.4 % 2.0 % Non-GAAP Operating Expenses GAAP operating expenses $ 92,417 $ 70,207 $ 178,008 $ 147,598 Amortization of acquired intangible assets (4,423) (4,402) (8,845) (8,804) Stock-based compensation expense (11,248) (1,837) (21,366) (3,731) Restructuring expense — (3,249) — (3,249) Transaction related and other expense (1,360) (933) (2,799) (2,234) Non-GAAP operating expenses $ 75,386 $ 59,786 $ 144,998 $ 129,580 Non-GAAP operating expenses as a % of revenue 49.7 % 48.0 % 48.9 % 52.0 % Non-GAAP Income From Operations GAAP income from operations $ 16,276 $ 20,138 $ 37,039 $ 29,995 Amortization of acquired intangible assets 7,123 5,577 12,857 11,154 Stock-based compensation expense 12,241 1,858 23,752 3,772 Restructuring expense — 3,850 — 3,850 Transaction related and other expense 1,360 933 2,799 2,234 Non-GAAP income from operations $ 37,000 $ 32,356 $ 76,447 $ 51,005 Non-GAAP operating margin 24.4 % 26.0 % 25.8 % 20.5 % 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Non-GAAP Net Income and Net Income Per Share GAAP net income $ 16,916 $ 8,767 $ 32,202 $ 10,120 GAAP provision for (benefit from) income taxes (720) 5,596 4,674 3,765 GAAP income before income taxes 16,196 14,363 36,876 13,885 Amortization of acquired intangible assets 7,123 5,577 12,857 11,154 Stock-based compensation expense 12,241 1,858 23,752 3,772 Restructuring expense — 3,850 — 3,850 Transaction related and other expense 1,360 933 2,799 2,234 Non-GAAP provision for income taxes (9,230) (6,645) (19,071) (8,724) Non-GAAP net income $ 27,690 $ 19,936 $ 57,213 $ 26,171 Non-GAAP net income per share attributable to common shareholders: Basic $ 0.17 $ 0.15 $ 0.35 $ 0.19 Diluted $ 0.17 $ 0.15 $ 0.35 $ 0.19 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 161,466,852 135,548,740 161,267,734 135,468,029 GAAP and Non-GAAP weighted-average shares used in computing net income per share, diluted 165,452,865 136,159,449 165,094,740 136,214,530 Adjusted EBITDA GAAP net income $ 16,916 $ 8,767 $ 32,202 $ 10,120 Interest and other expense, net 80 5,775 163 16,110 Depreciation and amortization 15,051 12,089 28,246 24,000 (Benefit from) provision for income tax (720) 5,596 4,674 3,765 Stock-based compensation expense 12,241 1,858 23,752 3,772 Restructuring expense — 3,850 — 3,850 Transaction related and other expense 1,360 933 2,799 2,234 Adjusted EBITDA $ 44,928 $ 38,868 $ 91,836 $ 63,851 Adjusted EBITDA margin 29.6 % 31.2 % 31.0 % 25.6 % Free Cash Flow GAAP net cash provided by operating activities $ 31,930 $ 25,252 $ 67,097 $ 23,975 Less: Purchases of property and equipment (9,757) (8,080) (20,438) (22,000) Free cash flow $ 22,173 $ 17,172 $ 46,659 $ 1,975 MSP-F View source version on businesswire.com: https://www.businesswire.com/news/home/20210811005815/en/
