Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Datto Announces First Quarter 2021 Financial Results By: Datto Holding Corp. via Business Wire May 12, 2021 at 16:10 PM EDT 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/Contacts Media: Shoba V. 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Datto Announces First Quarter 2021 Financial Results By: Datto Holding Corp. via Business Wire May 12, 2021 at 16:10 PM EDT 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/Contacts Media: Shoba V. Lemoine communications@datto.com Investors: Ryan Burkart ir@datto.com
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/