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 Fourth Quarter and Full Year 2021 Financial Results By: Datto Holding Corp. via Business Wire February 23, 2022 at 16:10 PM EST Fourth quarter subscription revenue grew 19 percent year-over-year to $153.2 million ARR grew 21 percent year-over-year to $658.4 million Datto Holding Corp. (Datto) (NYSE: MSP), the leading global provider of security and cloud-based software solutions purpose-built for Managed Service Providers (MSPs), today announced its financial results for the fourth quarter and full year ended December 31, 2021. “We finished 2021 on a strong note with another quarter of accelerating growth,” said Tim Weller, Datto’s Chief Executive Officer. “The fourth quarter capped an exceptional year for Datto and our MSP partners. We exceeded all of our targets in our first full year as a public company and launched several new, highly differentiated products that help our MSP partners better secure digital assets on behalf of their SMB clients. MSPs now find themselves squarely in the security business, and Datto is right there with them. We further solidified Datto’s leading position in security solutions with the early 2022 acquisition of cybersecurity firm Infocyte. 2022 is shaping up to be another exciting year for Datto as we continue to help our MSP partners on their security journey with our new products ramping and more on the way.” Fourth Quarter and Full Year 2021 Financial Results (In Millions) Q4 2021 Q4 2020 Y/Y Change FY 2021 FY 2020 Y/Y Change Subscription Revenue(1) $153.2 $129.0 19% $577.3 $485.3 19% Total Revenue(1) $164.3 $139.0 18% $618.7 $518.8 19% ARR(2) $658.4 $542.8 21% $658.4 $542.8 21% Gross Margin 70% 69% 88 bps 71% 71% 45 bps Non-GAAP Gross Margin(3) 72% 74% (108 bps) 74% 73% 74 bps Net Income $5.7 $(7.2) N/M $51.4 $22.5 129% Adjusted EBITDA(3) $39.8 $40.8 (3)% $175.4 $150.5 17% Net Cash Provided by Operating Activities $26.3 $34.6 (24)% $125.4 $108.7 15% Free Cash Flow(3) $11.2 $22.7 (51)% $78.1 $68.2 15% 1 Subscription and Total Revenue Y/Y percentage change includes benefits from favorable foreign exchange rates of approximately 25 basis points for the fourth quarter and 200 basis points for the full year. 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 18,500 MSP partners, a net increase of 1,500 (+9%) from the previous year. Ended the quarter with average ARR per MSP of approximately $35,600, an increase of approximately $3,600 (+11%) from the previous year. Expanded the number of MSPs contributing over $100,000 ARR to 1,400, a 27% increase from 1,100 at December 31, 2020. Acquired cybersecurity company Infocyte, an innovator in Endpoint Detection and Response (EDR) technologies and Managed Detection and Response (MDR) services. The Infocyte team and technology augment Datto’s capabilities within the critical Protect, Detect, and Respond stages of the NIST security framework, and add to the Company’s rapidly expanding set of MSP-delivered security offerings. Released a tool for MSPs to combat the Apache Log4j vulnerability. This endpoint assessment software works with any Remote Monitoring and Management (RMM) solution and can uniquely enumerate potentially vulnerable systems, detect intrusion attempts, and inoculate Windows systems against Log4j attacks. In support of Datto’s growth strategy and commitment to the DACH region (Germany, Austria, and Switzerland), the Company announced a partnership with Infinigate, a leading Value-Added Distributor of cybersecurity solutions in Europe. Infinigate has a large customer base in DACH and will strengthen our sales efforts in the region and help attract new MSPs to Datto through a proven selling model. Announced that Brooke Cunningham has joined the Company as Datto’s Chief Marketing Officer and Emily Tabak Epstein has joined as General Counsel. First Quarter and Full Year 2022 Financial Outlook Datto is providing the following guidance for the first quarter and full-year 2022: (In Millions) Q1 2022 Outlook FY 2022 Outlook Total Revenue (1) $168 - $169 $720 - $726 Y/Y growth as reported 16% - 17% 16% - 17% Y/Y growth constant currency 17% - 18% 18% - 19% Subscription Revenue (1) $158 - $159 $676 - $682 Y/Y growth as reported 17% - 17% 17% - 18% Y/Y growth constant currency 18% - 19% 18% - 19% Adjusted EBITDA $37 - $38 $163 - $168 Adjusted EBITDA margin 22% 23% 1 Subscription and Total Revenue guidance include foreign exchange rate assumptions which reduce Y/Y growth rates by approximately 150 basis points for the first quarter and 130 basis points for the full year and which are excluded in the constant currency growth rates. Datto Fourth Quarter and Full-Year 2021 Results Conference Call When: Wednesday, February 23, 2022 Time: 5:00 pm ET Conference ID: 8751783 Live Call: 1-888-660-6179 (US/Canada Toll-Free) or 1-929-203-1946 (International) Replay: 1-800-770-2030 (US/Canada Toll-Free) or 1-647-362-9199 (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 leading global provider of security and cloud-based software solutions purpose-built for 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, Endpoint Management, 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Revenue: Subscription $ 153,224 $ 128,978 $ 577,321 $ 485,326 Device 10,180 9,104 37,832 30,202 Professional services and other 850 910 3,504 3,257 Total revenue 164,254 138,992 618,657 518,785 Cost of revenue: Subscription 24,818 23,677 90,162 84,463 Device 13,863 11,143 47,415 37,607 Professional services and other 1,538 1,845 6,059 6,244 Depreciation and amortization 8,917 6,144 32,712 21,890 Total cost of revenue 49,136 42,809 176,348 150,204 Gross profit 115,118 96,183 442,309 368,581 Operating expenses: Sales and marketing 40,023 31,962 139,257 115,790 Research and development 31,209 30,932 107,899 78,932 General and administrative 27,570 26,279 106,478 85,668 Depreciation and amortization 6,917 6,623 26,471 27,223 Total operating expenses 105,719 95,796 380,105 307,613 Income from operations 9,399 387 62,204 60,968 Other expense: Interest expense 22 1,758 455 25,348 Loss on extinguishment of debt — 8,488 — 8,488 Other expense (income), net 163 (2,026 ) 387 (3,428 ) Total other expense 185 8,220 842 30,408 Income (loss) before income taxes 9,214 (7,833 ) 61,362 30,560 Provision for income taxes (3,467 ) 665 (9,928 ) (8,062 ) Net income (loss) $ 5,747 $ (7,168 ) $ 51,434 $ 22,498 Net income per share attributable to common stockholders: Basic $ 0.04 $ (0.05 ) $ 0.32 $ 0.16 Diluted $ 0.03 $ (0.05 ) $ 0.31 $ 0.16 Weighted-average shares used in computing net income per share: Basic 163,210,116 154,968,918 162,048,828 140,404,763 Diluted 166,574,607 154,968,918 165,759,624 142,514,848 DATTO HOLDING CORP. Condensed Consolidated Balance Sheets (in thousands) (unaudited) December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 221,421 $ 168,877 Restricted cash 1,319 1,536 Accounts receivable, net 12,870 13,946 Inventory 34,901 13,811 Prepaid expenses and other current assets 39,456 28,316 Total current assets 309,967 226,486 Property and equipment, net 106,577 91,876 Operating lease assets 31,003 — Goodwill 1,141,726 1,120,954 Intangible assets, net 287,605 287,395 Other assets 85,313 66,560 Total assets $ 1,962,191 $ 1,793,271 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 9,997 $ 7,574 Accrued expenses and other current liabilities 59,553 39,461 Deferred revenue 20,356 23,763 Total current liabilities 89,906 70,798 Deferred revenue, noncurrent 3,341 3,322 Deferred income taxes 24,955 18,947 Operating lease liabilities, noncurrent 31,332 — Other long-term liabilities 715 11,736 Total liabilities 150,249 104,803 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock 164 161 Additional paid-in capital 1,829,957 1,755,387 Treasury stock (3,621 ) (3,621 ) Accumulated deficit (13,792 ) (65,226 ) Accumulated other comprehensive income (766 ) 1,767 Total stockholders’ equity 1,811,942 1,688,468 Total liabilities and stockholders’ equity $ 1,962,191 $ 1,793,271 DATTO HOLDING CORP. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Year Ended December 31, 2021 2020 OPERATING ACTIVITIES Net income $ 51,434 $ 22,498 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 32,044 26,434 Amortization of acquired intangible assets 27,139 22,679 Loss on extinguishment of debt — 8,488 Amortization of debt issuance costs 341 1,428 Reserve for inventory obsolescence 57 1,517 Non-cash operating lease expense 7,292 — Stock-based compensation 48,909 33,460 Allowance for expected credit losses 367 6,217 Deferred income taxes 4,922 7,770 Unrealized foreign exchange (1,303 ) (1,204 ) Changes in operating assets and liabilities: Accounts receivable 1,598 769 Inventory (21,186 ) (2,826 ) Prepaid expenses and other current assets (11,487 ) (7,498 ) Other assets (19,641 ) (12,952 ) Accounts payable, accrued expenses and other 8,391 3,073 Deferred revenue (3,511 ) (1,155 ) Net cash provided by operating activities 125,366 108,698 INVESTING ACTIVITIES Purchase of property and equipment (47,237 ) (40,466 ) Acquisition of business, net of cash acquired (45,486 ) (4,371 ) Net cash used in investing activities (92,723 ) (44,837 ) FINANCING ACTIVITIES Proceeds from debt — 32,100 Repayments of debt and capital leases (101 ) (594,727 ) Debt issuance costs — (1,178 ) Proceeds from initial public offering, net of underwriting costs — 641,643 Capitalized transaction costs (684 ) (5,256 ) Proceeds from stock option exercises 22,510 3,150 Repurchase of common stock and settlement of stock-based payment awards — (53 ) Net cash provided by financing activities 21,725 75,679 Effect of exchange rate changes on cash and cash equivalents (2,041 ) 1,807 Net increase in cash and cash equivalents 52,327 141,347 Cash and cash equivalents and restricted cash, beginning of year 170,413 29,066 Cash and cash equivalents and restricted cash, end of period $ 222,740 $ 170,413 Reconciliation of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 221,421 $ 168,877 Restricted cash $ 1,319 $ 1,536 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes $ 6,380 $ 890 Cash paid for interest $ 133 $ 24,037 NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of property and equipment included in accounts payable $ — $ 17 Unpaid initial public offering costs in total current liabilities $ — $ 684 DATTO HOLDING CORP. Non-GAAP Condensed Consolidated Statements of Operations (in thousands, except share and per share amounts) (unaudited) Three Months Ended December 31, Year Ended December 31, 2021 2020 2021 2020 Revenue: Subscription $ 153,224 $ 128,978 $ 577,321 $ 485,326 Device 10,180 9,104 37,832 30,202 Professional services and other 850 910 3,504 3,257 Total revenue 164,254 138,992 618,657 518,785 Cost of revenue: Subscription 23,681 19,703 85,860 79,909 Device 13,820 10,940 47,222 37,404 Professional services and other 1,489 1,427 5,859 5,687 Depreciation and amortization 6,180 4,646 23,261 16,867 Total cost of revenue 45,170 36,716 162,202 139,867 Gross profit 119,084 102,276 456,455 378,918 Operating expenses: Sales and marketing 37,047 27,151 129,790 107,255 Research and development 25,047 18,457 84,480 64,393 General and administrative 23,367 20,478 89,997 73,649 Depreciation and amortization 2,496 2,173 8,783 9,567 Total operating expenses 87,957 68,259 313,050 254,864 Income from operations 31,127 34,017 143,405 124,054 Other expense: Interest expense 22 1,758 455 25,348 Other expense (income), net 163 (2,026 ) 387 (3,428 ) Total other expense (income) 185 (268 ) 842 21,920 Income before income taxes 30,942 34,285 142,563 102,134 Provision for income taxes (7,736 ) (8,571 ) (35,641 ) (25,534 ) Net income $ 23,206 $ 25,714 $ 106,922 $ 76,600 Net income per share attributable to common stockholders: Basic $ 0.14 $ 0.17 $ 0.66 $ 0.55 Diluted $ 0.14 $ 0.16 $ 0.65 $ 0.54 Weighted-average shares used in computing net income per share: Basic 163,210,116 154,968,918 162,048,828 140,404,763 Diluted 166,574,607 158,856,958 165,759,624 142,514,848 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Non-GAAP Subscription Cost of Revenue GAAP subscription cost of revenue $ 24,818 $ 23,677 $ 90,162 $ 84,463 Stock-based compensation expense (1,137 ) (3,974 ) (4,302 ) (4,092 ) Restructuring expense — — — (462 ) Non-GAAP subscription cost of revenue $ 23,681 $ 19,703 $ 85,860 $ 79,909 Non-GAAP Device Cost of Revenue GAAP device cost of revenue $ 13,863 $ 11,143 $ 47,415 $ 37,607 Stock-based compensation expense (43 ) (203 ) (193 ) (203 ) Non-GAAP device gross cost of revenue $ 13,820 $ 10,940 $ 47,222 $ 37,404 Non-GAAP Professional Services and Other Cost of Revenue GAAP professional services and other cost of revenue $ 1,538 $ 1,845 $ 6,059 $ 6,244 Stock-based compensation expense (49 ) (418 ) (200 ) (418 ) Restructuring expense — — — (139 ) Non-GAAP professional services and other cost of revenue $ 1,489 $ 1,427 $ 5,859 $ 5,687 Non-GAAP Depreciation and Amortization in Cost of Revenue GAAP depreciation and amortization in cost of revenue $ 8,917 $ 6,144 $ 32,712 $ 21,890 Amortization of acquired intangible assets (2,737 ) (1,498 ) (9,451 ) (5,023 ) Non-GAAP depreciation and amortization in cost of revenue $ 6,180 $ 4,646 $ 23,261 $ 16,867 Non-GAAP Cost of Revenue GAAP cost of revenue $ 49,136 $ 42,809 $ 176,348 $ 150,204 Amortization of acquired intangible assets (2,737 ) (1,498 ) (9,451 ) (5,023 ) Stock-based compensation expense (1,229 ) (4,595 ) (4,695 ) (4,713 ) Restructuring expense — — — (601 ) Non-GAAP cost of revenue $ 45,170 $ 36,716 $ 162,202 $ 139,867 Non-GAAP Gross Profit GAAP gross profit $ 115,118 $ 96,183 $ 442,309 $ 368,581 Amortization of acquired intangible assets 2,737 1,498 9,451 5,023 Stock-based compensation expense 1,229 4,595 4,695 4,713 Restructuring expense — — — 601 Non-GAAP gross profit $ 119,084 $ 102,276 $ 456,455 $ 378,918 Non-GAAP gross margin 72.5 % 73.6 % 73.8 % 73.0 % 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Non-GAAP Sales and Marketing GAAP sales and marketing expense $ 40,023 $ 31,962 $ 139,257 $ 115,790 Stock-based compensation expense (2,976 ) (4,811 ) (9,467 ) (6,614 ) Restructuring expense — — — (1,921 ) Non-GAAP sales and marketing expense $ 37,047 $ 27,151 $ 129,790 $ 107,255 Non-GAAP sales and marketing as a % of revenue 22.6 % 19.5 % 21.0 % 20.7 % Non-GAAP Research and Development GAAP research and development expense $ 31,209 $ 30,932 $ 107,899 $ 78,932 Stock-based compensation expense (6,162 ) (12,475 ) (23,419 ) (13,590 ) Restructuring expense — — — (949 ) Non-GAAP research and development expense $ 25,047 $ 18,457 $ 84,480 $ 64,393 Non-GAAP research and development as a % of revenue 15.2 % 13.3 % 13.7 % 12.4 % Non-GAAP General and Administrative GAAP general and administrative expense $ 27,570 $ 26,279 $ 106,478 $ 85,668 Stock-based compensation expense (3,187 ) (5,018 ) (11,328 ) (8,543 ) Restructuring expense — — — (364 ) Transaction related and other expense (1,016 ) (783 ) (5,153 ) (3,112 ) Non-GAAP general and administrative expense $ 23,367 $ 20,478 $ 89,997 $ 73,649 Non-GAAP general and administrative as a % of revenue 14.2 % 14.7 % 14.5 % 14.2 % Non-GAAP Depreciation and Amortization in Operating Expenses GAAP depreciation and amortization in operating expenses $ 6,917 $ 6,623 $ 26,471 $ 27,223 Amortization of acquired intangible assets (4,421 ) (4,450 ) (17,688 ) (17,656 ) Non-GAAP depreciation and amortization in operating expense $ 2,496 $ 2,173 $ 8,783 $ 9,567 Non-GAAP depreciation and amortization in operating expense as a % of revenue 1.5 % 1.6 % 1.4 % 1.8 % Non-GAAP Operating Expenses GAAP operating expenses $ 105,719 $ 95,796 $ 380,105 $ 307,613 Amortization of acquired intangible assets (4,421 ) (4,450 ) (17,688 ) (17,656 ) Stock-based compensation expense (12,325 ) (22,304 ) (44,214 ) (28,747 ) Restructuring expense — — — (3,234 ) Transaction related and other expense (1,016 ) (783 ) (5,153 ) (3,112 ) Non-GAAP operating expenses $ 87,957 $ 68,259 $ 313,050 $ 254,864 Non-GAAP operating expenses as a % of revenue 53.5 % 49.1 % 50.6 % 49.1 % Non-GAAP Income From Operations GAAP income from operations $ 9,399 $ 387 $ 62,204 $ 60,968 Amortization of acquired intangible assets 7,158 5,948 27,139 22,679 Stock-based compensation expense 13,554 26,899 48,909 33,460 Restructuring expense — — — 3,835 Transaction related and other expense 1,016 783 5,153 3,112 Non-GAAP income from operations $ 31,127 $ 34,017 $ 143,405 $ 124,054 Non-GAAP operating margin 19.0 % 24.5 % 23.2 % 23.9 % 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Non-GAAP Net Income and Net Income Per Share GAAP net income $ 5,747 $ (7,168 ) $ 51,434 $ 22,498 GAAP provision for income taxes 3,467 (665 ) 9,928 8,062 GAAP income before income taxes 9,214 (7,833 ) 61,362 30,560 Loss on extinguishment of debt — 8,488 — 8,488 Amortization of acquired intangible assets 7,158 5,948 27,139 22,679 Stock-based compensation expense 13,554 26,899 48,909 33,460 Restructuring expense — — — 3,835 Transaction related and other expense 1,016 783 5,153 3,112 Non-GAAP provision for income taxes (7,736 ) (8,571 ) (35,641 ) (25,534 ) Non-GAAP net income $ 23,206 $ 25,714 $ 106,922 $ 76,600 Non-GAAP net income per share attributable to common shareholders: Basic $ 0.14 $ 0.17 $ 0.66 $ 0.55 Diluted $ 0.14 $ 0.16 $ 0.65 $ 0.54 Weighted-Average Shares used in computing Non-GAAP Net Income per Share: Non-GAAP weighted-average shares used in computing net income per share, basic 163,210,116 154,968,918 162,048,828 140,404,763 Non-GAAP weighted-average shares used in computing net income per share, diluted 166,574,607 158,856,958 165,759,624 142,514,848 Adjusted EBITDA GAAP net income $ 5,747 $ (7,168 ) $ 51,434 $ 22,498 Interest and other expense, net 185 (268 ) 842 21,920 Loss on extinguishment of debt — 8,488 — 8,488 Depreciation and amortization 15,834 12,767 59,183 49,113 Provision for income tax 3,467 (665 ) 9,928 8,062 Stock-based compensation expense 13,554 26,899 48,909 33,460 Restructuring expense — — — 3,835 Transaction related and other expense 1,016 783 5,153 3,112 Adjusted EBITDA $ 39,803 $ 40,836 $ 175,449 $ 150,488 Adjusted EBITDA margin 24.2 % 29.4 % 28.4 % 29.0 % Free Cash Flow GAAP net cash provided by operating activities $ 26,257 $ 34,643 $ 125,366 $ 108,698 Less: Purchases of property and equipment (15,067 ) (11,947 ) (47,237 ) (40,466 ) Free cash flow $ 11,190 $ 22,696 $ 78,129 $ 68,232 MSP-F View source version on businesswire.com: https://www.businesswire.com/news/home/20220223005960/en/Contacts Media Contact: Shoba V. 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Datto Announces Fourth Quarter and Full Year 2021 Financial Results By: Datto Holding Corp. via Business Wire February 23, 2022 at 16:10 PM EST Fourth quarter subscription revenue grew 19 percent year-over-year to $153.2 million ARR grew 21 percent year-over-year to $658.4 million Datto Holding Corp. (Datto) (NYSE: MSP), the leading global provider of security and cloud-based software solutions purpose-built for Managed Service Providers (MSPs), today announced its financial results for the fourth quarter and full year ended December 31, 2021. “We finished 2021 on a strong note with another quarter of accelerating growth,” said Tim Weller, Datto’s Chief Executive Officer. “The fourth quarter capped an exceptional year for Datto and our MSP partners. We exceeded all of our targets in our first full year as a public company and launched several new, highly differentiated products that help our MSP partners better secure digital assets on behalf of their SMB clients. MSPs now find themselves squarely in the security business, and Datto is right there with them. We further solidified Datto’s leading position in security solutions with the early 2022 acquisition of cybersecurity firm Infocyte. 2022 is shaping up to be another exciting year for Datto as we continue to help our MSP partners on their security journey with our new products ramping and more on the way.” Fourth Quarter and Full Year 2021 Financial Results (In Millions) Q4 2021 Q4 2020 Y/Y Change FY 2021 FY 2020 Y/Y Change Subscription Revenue(1) $153.2 $129.0 19% $577.3 $485.3 19% Total Revenue(1) $164.3 $139.0 18% $618.7 $518.8 19% ARR(2) $658.4 $542.8 21% $658.4 $542.8 21% Gross Margin 70% 69% 88 bps 71% 71% 45 bps Non-GAAP Gross Margin(3) 72% 74% (108 bps) 74% 73% 74 bps Net Income $5.7 $(7.2) N/M $51.4 $22.5 129% Adjusted EBITDA(3) $39.8 $40.8 (3)% $175.4 $150.5 17% Net Cash Provided by Operating Activities $26.3 $34.6 (24)% $125.4 $108.7 15% Free Cash Flow(3) $11.2 $22.7 (51)% $78.1 $68.2 15% 1 Subscription and Total Revenue Y/Y percentage change includes benefits from favorable foreign exchange rates of approximately 25 basis points for the fourth quarter and 200 basis points for the full year. 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 18,500 MSP partners, a net increase of 1,500 (+9%) from the previous year. Ended the quarter with average ARR per MSP of approximately $35,600, an increase of approximately $3,600 (+11%) from the previous year. Expanded the number of MSPs contributing over $100,000 ARR to 1,400, a 27% increase from 1,100 at December 31, 2020. Acquired cybersecurity company Infocyte, an innovator in Endpoint Detection and Response (EDR) technologies and Managed Detection and Response (MDR) services. The Infocyte team and technology augment Datto’s capabilities within the critical Protect, Detect, and Respond stages of the NIST security framework, and add to the Company’s rapidly expanding set of MSP-delivered security offerings. Released a tool for MSPs to combat the Apache Log4j vulnerability. This endpoint assessment software works with any Remote Monitoring and Management (RMM) solution and can uniquely enumerate potentially vulnerable systems, detect intrusion attempts, and inoculate Windows systems against Log4j attacks. In support of Datto’s growth strategy and commitment to the DACH region (Germany, Austria, and Switzerland), the Company announced a partnership with Infinigate, a leading Value-Added Distributor of cybersecurity solutions in Europe. Infinigate has a large customer base in DACH and will strengthen our sales efforts in the region and help attract new MSPs to Datto through a proven selling model. Announced that Brooke Cunningham has joined the Company as Datto’s Chief Marketing Officer and Emily Tabak Epstein has joined as General Counsel. First Quarter and Full Year 2022 Financial Outlook Datto is providing the following guidance for the first quarter and full-year 2022: (In Millions) Q1 2022 Outlook FY 2022 Outlook Total Revenue (1) $168 - $169 $720 - $726 Y/Y growth as reported 16% - 17% 16% - 17% Y/Y growth constant currency 17% - 18% 18% - 19% Subscription Revenue (1) $158 - $159 $676 - $682 Y/Y growth as reported 17% - 17% 17% - 18% Y/Y growth constant currency 18% - 19% 18% - 19% Adjusted EBITDA $37 - $38 $163 - $168 Adjusted EBITDA margin 22% 23% 1 Subscription and Total Revenue guidance include foreign exchange rate assumptions which reduce Y/Y growth rates by approximately 150 basis points for the first quarter and 130 basis points for the full year and which are excluded in the constant currency growth rates. Datto Fourth Quarter and Full-Year 2021 Results Conference Call When: Wednesday, February 23, 2022 Time: 5:00 pm ET Conference ID: 8751783 Live Call: 1-888-660-6179 (US/Canada Toll-Free) or 1-929-203-1946 (International) Replay: 1-800-770-2030 (US/Canada Toll-Free) or 1-647-362-9199 (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 leading global provider of security and cloud-based software solutions purpose-built for 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, Endpoint Management, 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Revenue: Subscription $ 153,224 $ 128,978 $ 577,321 $ 485,326 Device 10,180 9,104 37,832 30,202 Professional services and other 850 910 3,504 3,257 Total revenue 164,254 138,992 618,657 518,785 Cost of revenue: Subscription 24,818 23,677 90,162 84,463 Device 13,863 11,143 47,415 37,607 Professional services and other 1,538 1,845 6,059 6,244 Depreciation and amortization 8,917 6,144 32,712 21,890 Total cost of revenue 49,136 42,809 176,348 150,204 Gross profit 115,118 96,183 442,309 368,581 Operating expenses: Sales and marketing 40,023 31,962 139,257 115,790 Research and development 31,209 30,932 107,899 78,932 General and administrative 27,570 26,279 106,478 85,668 Depreciation and amortization 6,917 6,623 26,471 27,223 Total operating expenses 105,719 95,796 380,105 307,613 Income from operations 9,399 387 62,204 60,968 Other expense: Interest expense 22 1,758 455 25,348 Loss on extinguishment of debt — 8,488 — 8,488 Other expense (income), net 163 (2,026 ) 387 (3,428 ) Total other expense 185 8,220 842 30,408 Income (loss) before income taxes 9,214 (7,833 ) 61,362 30,560 Provision for income taxes (3,467 ) 665 (9,928 ) (8,062 ) Net income (loss) $ 5,747 $ (7,168 ) $ 51,434 $ 22,498 Net income per share attributable to common stockholders: Basic $ 0.04 $ (0.05 ) $ 0.32 $ 0.16 Diluted $ 0.03 $ (0.05 ) $ 0.31 $ 0.16 Weighted-average shares used in computing net income per share: Basic 163,210,116 154,968,918 162,048,828 140,404,763 Diluted 166,574,607 154,968,918 165,759,624 142,514,848 DATTO HOLDING CORP. Condensed Consolidated Balance Sheets (in thousands) (unaudited) December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 221,421 $ 168,877 Restricted cash 1,319 1,536 Accounts receivable, net 12,870 13,946 Inventory 34,901 13,811 Prepaid expenses and other current assets 39,456 28,316 Total current assets 309,967 226,486 Property and equipment, net 106,577 91,876 Operating lease assets 31,003 — Goodwill 1,141,726 1,120,954 Intangible assets, net 287,605 287,395 Other assets 85,313 66,560 Total assets $ 1,962,191 $ 1,793,271 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 9,997 $ 7,574 Accrued expenses and other current liabilities 59,553 39,461 Deferred revenue 20,356 23,763 Total current liabilities 89,906 70,798 Deferred revenue, noncurrent 3,341 3,322 Deferred income taxes 24,955 18,947 Operating lease liabilities, noncurrent 31,332 — Other long-term liabilities 715 11,736 Total liabilities 150,249 104,803 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock 164 161 Additional paid-in capital 1,829,957 1,755,387 Treasury stock (3,621 ) (3,621 ) Accumulated deficit (13,792 ) (65,226 ) Accumulated other comprehensive income (766 ) 1,767 Total stockholders’ equity 1,811,942 1,688,468 Total liabilities and stockholders’ equity $ 1,962,191 $ 1,793,271 DATTO HOLDING CORP. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Year Ended December 31, 2021 2020 OPERATING ACTIVITIES Net income $ 51,434 $ 22,498 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 32,044 26,434 Amortization of acquired intangible assets 27,139 22,679 Loss on extinguishment of debt — 8,488 Amortization of debt issuance costs 341 1,428 Reserve for inventory obsolescence 57 1,517 Non-cash operating lease expense 7,292 — Stock-based compensation 48,909 33,460 Allowance for expected credit losses 367 6,217 Deferred income taxes 4,922 7,770 Unrealized foreign exchange (1,303 ) (1,204 ) Changes in operating assets and liabilities: Accounts receivable 1,598 769 Inventory (21,186 ) (2,826 ) Prepaid expenses and other current assets (11,487 ) (7,498 ) Other assets (19,641 ) (12,952 ) Accounts payable, accrued expenses and other 8,391 3,073 Deferred revenue (3,511 ) (1,155 ) Net cash provided by operating activities 125,366 108,698 INVESTING ACTIVITIES Purchase of property and equipment (47,237 ) (40,466 ) Acquisition of business, net of cash acquired (45,486 ) (4,371 ) Net cash used in investing activities (92,723 ) (44,837 ) FINANCING ACTIVITIES Proceeds from debt — 32,100 Repayments of debt and capital leases (101 ) (594,727 ) Debt issuance costs — (1,178 ) Proceeds from initial public offering, net of underwriting costs — 641,643 Capitalized transaction costs (684 ) (5,256 ) Proceeds from stock option exercises 22,510 3,150 Repurchase of common stock and settlement of stock-based payment awards — (53 ) Net cash provided by financing activities 21,725 75,679 Effect of exchange rate changes on cash and cash equivalents (2,041 ) 1,807 Net increase in cash and cash equivalents 52,327 141,347 Cash and cash equivalents and restricted cash, beginning of year 170,413 29,066 Cash and cash equivalents and restricted cash, end of period $ 222,740 $ 170,413 Reconciliation of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 221,421 $ 168,877 Restricted cash $ 1,319 $ 1,536 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes $ 6,380 $ 890 Cash paid for interest $ 133 $ 24,037 NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of property and equipment included in accounts payable $ — $ 17 Unpaid initial public offering costs in total current liabilities $ — $ 684 DATTO HOLDING CORP. Non-GAAP Condensed Consolidated Statements of Operations (in thousands, except share and per share amounts) (unaudited) Three Months Ended December 31, Year Ended December 31, 2021 2020 2021 2020 Revenue: Subscription $ 153,224 $ 128,978 $ 577,321 $ 485,326 Device 10,180 9,104 37,832 30,202 Professional services and other 850 910 3,504 3,257 Total revenue 164,254 138,992 618,657 518,785 Cost of revenue: Subscription 23,681 19,703 85,860 79,909 Device 13,820 10,940 47,222 37,404 Professional services and other 1,489 1,427 5,859 5,687 Depreciation and amortization 6,180 4,646 23,261 16,867 Total cost of revenue 45,170 36,716 162,202 139,867 Gross profit 119,084 102,276 456,455 378,918 Operating expenses: Sales and marketing 37,047 27,151 129,790 107,255 Research and development 25,047 18,457 84,480 64,393 General and administrative 23,367 20,478 89,997 73,649 Depreciation and amortization 2,496 2,173 8,783 9,567 Total operating expenses 87,957 68,259 313,050 254,864 Income from operations 31,127 34,017 143,405 124,054 Other expense: Interest expense 22 1,758 455 25,348 Other expense (income), net 163 (2,026 ) 387 (3,428 ) Total other expense (income) 185 (268 ) 842 21,920 Income before income taxes 30,942 34,285 142,563 102,134 Provision for income taxes (7,736 ) (8,571 ) (35,641 ) (25,534 ) Net income $ 23,206 $ 25,714 $ 106,922 $ 76,600 Net income per share attributable to common stockholders: Basic $ 0.14 $ 0.17 $ 0.66 $ 0.55 Diluted $ 0.14 $ 0.16 $ 0.65 $ 0.54 Weighted-average shares used in computing net income per share: Basic 163,210,116 154,968,918 162,048,828 140,404,763 Diluted 166,574,607 158,856,958 165,759,624 142,514,848 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Non-GAAP Subscription Cost of Revenue GAAP subscription cost of revenue $ 24,818 $ 23,677 $ 90,162 $ 84,463 Stock-based compensation expense (1,137 ) (3,974 ) (4,302 ) (4,092 ) Restructuring expense — — — (462 ) Non-GAAP subscription cost of revenue $ 23,681 $ 19,703 $ 85,860 $ 79,909 Non-GAAP Device Cost of Revenue GAAP device cost of revenue $ 13,863 $ 11,143 $ 47,415 $ 37,607 Stock-based compensation expense (43 ) (203 ) (193 ) (203 ) Non-GAAP device gross cost of revenue $ 13,820 $ 10,940 $ 47,222 $ 37,404 Non-GAAP Professional Services and Other Cost of Revenue GAAP professional services and other cost of revenue $ 1,538 $ 1,845 $ 6,059 $ 6,244 Stock-based compensation expense (49 ) (418 ) (200 ) (418 ) Restructuring expense — — — (139 ) Non-GAAP professional services and other cost of revenue $ 1,489 $ 1,427 $ 5,859 $ 5,687 Non-GAAP Depreciation and Amortization in Cost of Revenue GAAP depreciation and amortization in cost of revenue $ 8,917 $ 6,144 $ 32,712 $ 21,890 Amortization of acquired intangible assets (2,737 ) (1,498 ) (9,451 ) (5,023 ) Non-GAAP depreciation and amortization in cost of revenue $ 6,180 $ 4,646 $ 23,261 $ 16,867 Non-GAAP Cost of Revenue GAAP cost of revenue $ 49,136 $ 42,809 $ 176,348 $ 150,204 Amortization of acquired intangible assets (2,737 ) (1,498 ) (9,451 ) (5,023 ) Stock-based compensation expense (1,229 ) (4,595 ) (4,695 ) (4,713 ) Restructuring expense — — — (601 ) Non-GAAP cost of revenue $ 45,170 $ 36,716 $ 162,202 $ 139,867 Non-GAAP Gross Profit GAAP gross profit $ 115,118 $ 96,183 $ 442,309 $ 368,581 Amortization of acquired intangible assets 2,737 1,498 9,451 5,023 Stock-based compensation expense 1,229 4,595 4,695 4,713 Restructuring expense — — — 601 Non-GAAP gross profit $ 119,084 $ 102,276 $ 456,455 $ 378,918 Non-GAAP gross margin 72.5 % 73.6 % 73.8 % 73.0 % 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Non-GAAP Sales and Marketing GAAP sales and marketing expense $ 40,023 $ 31,962 $ 139,257 $ 115,790 Stock-based compensation expense (2,976 ) (4,811 ) (9,467 ) (6,614 ) Restructuring expense — — — (1,921 ) Non-GAAP sales and marketing expense $ 37,047 $ 27,151 $ 129,790 $ 107,255 Non-GAAP sales and marketing as a % of revenue 22.6 % 19.5 % 21.0 % 20.7 % Non-GAAP Research and Development GAAP research and development expense $ 31,209 $ 30,932 $ 107,899 $ 78,932 Stock-based compensation expense (6,162 ) (12,475 ) (23,419 ) (13,590 ) Restructuring expense — — — (949 ) Non-GAAP research and development expense $ 25,047 $ 18,457 $ 84,480 $ 64,393 Non-GAAP research and development as a % of revenue 15.2 % 13.3 % 13.7 % 12.4 % Non-GAAP General and Administrative GAAP general and administrative expense $ 27,570 $ 26,279 $ 106,478 $ 85,668 Stock-based compensation expense (3,187 ) (5,018 ) (11,328 ) (8,543 ) Restructuring expense — — — (364 ) Transaction related and other expense (1,016 ) (783 ) (5,153 ) (3,112 ) Non-GAAP general and administrative expense $ 23,367 $ 20,478 $ 89,997 $ 73,649 Non-GAAP general and administrative as a % of revenue 14.2 % 14.7 % 14.5 % 14.2 % Non-GAAP Depreciation and Amortization in Operating Expenses GAAP depreciation and amortization in operating expenses $ 6,917 $ 6,623 $ 26,471 $ 27,223 Amortization of acquired intangible assets (4,421 ) (4,450 ) (17,688 ) (17,656 ) Non-GAAP depreciation and amortization in operating expense $ 2,496 $ 2,173 $ 8,783 $ 9,567 Non-GAAP depreciation and amortization in operating expense as a % of revenue 1.5 % 1.6 % 1.4 % 1.8 % Non-GAAP Operating Expenses GAAP operating expenses $ 105,719 $ 95,796 $ 380,105 $ 307,613 Amortization of acquired intangible assets (4,421 ) (4,450 ) (17,688 ) (17,656 ) Stock-based compensation expense (12,325 ) (22,304 ) (44,214 ) (28,747 ) Restructuring expense — — — (3,234 ) Transaction related and other expense (1,016 ) (783 ) (5,153 ) (3,112 ) Non-GAAP operating expenses $ 87,957 $ 68,259 $ 313,050 $ 254,864 Non-GAAP operating expenses as a % of revenue 53.5 % 49.1 % 50.6 % 49.1 % Non-GAAP Income From Operations GAAP income from operations $ 9,399 $ 387 $ 62,204 $ 60,968 Amortization of acquired intangible assets 7,158 5,948 27,139 22,679 Stock-based compensation expense 13,554 26,899 48,909 33,460 Restructuring expense — — — 3,835 Transaction related and other expense 1,016 783 5,153 3,112 Non-GAAP income from operations $ 31,127 $ 34,017 $ 143,405 $ 124,054 Non-GAAP operating margin 19.0 % 24.5 % 23.2 % 23.9 % 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Non-GAAP Net Income and Net Income Per Share GAAP net income $ 5,747 $ (7,168 ) $ 51,434 $ 22,498 GAAP provision for income taxes 3,467 (665 ) 9,928 8,062 GAAP income before income taxes 9,214 (7,833 ) 61,362 30,560 Loss on extinguishment of debt — 8,488 — 8,488 Amortization of acquired intangible assets 7,158 5,948 27,139 22,679 Stock-based compensation expense 13,554 26,899 48,909 33,460 Restructuring expense — — — 3,835 Transaction related and other expense 1,016 783 5,153 3,112 Non-GAAP provision for income taxes (7,736 ) (8,571 ) (35,641 ) (25,534 ) Non-GAAP net income $ 23,206 $ 25,714 $ 106,922 $ 76,600 Non-GAAP net income per share attributable to common shareholders: Basic $ 0.14 $ 0.17 $ 0.66 $ 0.55 Diluted $ 0.14 $ 0.16 $ 0.65 $ 0.54 Weighted-Average Shares used in computing Non-GAAP Net Income per Share: Non-GAAP weighted-average shares used in computing net income per share, basic 163,210,116 154,968,918 162,048,828 140,404,763 Non-GAAP weighted-average shares used in computing net income per share, diluted 166,574,607 158,856,958 165,759,624 142,514,848 Adjusted EBITDA GAAP net income $ 5,747 $ (7,168 ) $ 51,434 $ 22,498 Interest and other expense, net 185 (268 ) 842 21,920 Loss on extinguishment of debt — 8,488 — 8,488 Depreciation and amortization 15,834 12,767 59,183 49,113 Provision for income tax 3,467 (665 ) 9,928 8,062 Stock-based compensation expense 13,554 26,899 48,909 33,460 Restructuring expense — — — 3,835 Transaction related and other expense 1,016 783 5,153 3,112 Adjusted EBITDA $ 39,803 $ 40,836 $ 175,449 $ 150,488 Adjusted EBITDA margin 24.2 % 29.4 % 28.4 % 29.0 % Free Cash Flow GAAP net cash provided by operating activities $ 26,257 $ 34,643 $ 125,366 $ 108,698 Less: Purchases of property and equipment (15,067 ) (11,947 ) (47,237 ) (40,466 ) Free cash flow $ 11,190 $ 22,696 $ 78,129 $ 68,232 MSP-F View source version on businesswire.com: https://www.businesswire.com/news/home/20220223005960/en/Contacts Media Contact: Shoba V. Lemoine communications@datto.com Investor Contact: Ryan Burkart ir@datto.com
Fourth quarter subscription revenue grew 19 percent year-over-year to $153.2 million ARR grew 21 percent year-over-year to $658.4 million
Datto Holding Corp. (Datto) (NYSE: MSP), the leading global provider of security and cloud-based software solutions purpose-built for Managed Service Providers (MSPs), today announced its financial results for the fourth quarter and full year ended December 31, 2021. “We finished 2021 on a strong note with another quarter of accelerating growth,” said Tim Weller, Datto’s Chief Executive Officer. “The fourth quarter capped an exceptional year for Datto and our MSP partners. We exceeded all of our targets in our first full year as a public company and launched several new, highly differentiated products that help our MSP partners better secure digital assets on behalf of their SMB clients. MSPs now find themselves squarely in the security business, and Datto is right there with them. We further solidified Datto’s leading position in security solutions with the early 2022 acquisition of cybersecurity firm Infocyte. 2022 is shaping up to be another exciting year for Datto as we continue to help our MSP partners on their security journey with our new products ramping and more on the way.” Fourth Quarter and Full Year 2021 Financial Results (In Millions) Q4 2021 Q4 2020 Y/Y Change FY 2021 FY 2020 Y/Y Change Subscription Revenue(1) $153.2 $129.0 19% $577.3 $485.3 19% Total Revenue(1) $164.3 $139.0 18% $618.7 $518.8 19% ARR(2) $658.4 $542.8 21% $658.4 $542.8 21% Gross Margin 70% 69% 88 bps 71% 71% 45 bps Non-GAAP Gross Margin(3) 72% 74% (108 bps) 74% 73% 74 bps Net Income $5.7 $(7.2) N/M $51.4 $22.5 129% Adjusted EBITDA(3) $39.8 $40.8 (3)% $175.4 $150.5 17% Net Cash Provided by Operating Activities $26.3 $34.6 (24)% $125.4 $108.7 15% Free Cash Flow(3) $11.2 $22.7 (51)% $78.1 $68.2 15% 1 Subscription and Total Revenue Y/Y percentage change includes benefits from favorable foreign exchange rates of approximately 25 basis points for the fourth quarter and 200 basis points for the full year. 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 18,500 MSP partners, a net increase of 1,500 (+9%) from the previous year. Ended the quarter with average ARR per MSP of approximately $35,600, an increase of approximately $3,600 (+11%) from the previous year. Expanded the number of MSPs contributing over $100,000 ARR to 1,400, a 27% increase from 1,100 at December 31, 2020. Acquired cybersecurity company Infocyte, an innovator in Endpoint Detection and Response (EDR) technologies and Managed Detection and Response (MDR) services. The Infocyte team and technology augment Datto’s capabilities within the critical Protect, Detect, and Respond stages of the NIST security framework, and add to the Company’s rapidly expanding set of MSP-delivered security offerings. Released a tool for MSPs to combat the Apache Log4j vulnerability. This endpoint assessment software works with any Remote Monitoring and Management (RMM) solution and can uniquely enumerate potentially vulnerable systems, detect intrusion attempts, and inoculate Windows systems against Log4j attacks. In support of Datto’s growth strategy and commitment to the DACH region (Germany, Austria, and Switzerland), the Company announced a partnership with Infinigate, a leading Value-Added Distributor of cybersecurity solutions in Europe. Infinigate has a large customer base in DACH and will strengthen our sales efforts in the region and help attract new MSPs to Datto through a proven selling model. Announced that Brooke Cunningham has joined the Company as Datto’s Chief Marketing Officer and Emily Tabak Epstein has joined as General Counsel. First Quarter and Full Year 2022 Financial Outlook Datto is providing the following guidance for the first quarter and full-year 2022: (In Millions) Q1 2022 Outlook FY 2022 Outlook Total Revenue (1) $168 - $169 $720 - $726 Y/Y growth as reported 16% - 17% 16% - 17% Y/Y growth constant currency 17% - 18% 18% - 19% Subscription Revenue (1) $158 - $159 $676 - $682 Y/Y growth as reported 17% - 17% 17% - 18% Y/Y growth constant currency 18% - 19% 18% - 19% Adjusted EBITDA $37 - $38 $163 - $168 Adjusted EBITDA margin 22% 23% 1 Subscription and Total Revenue guidance include foreign exchange rate assumptions which reduce Y/Y growth rates by approximately 150 basis points for the first quarter and 130 basis points for the full year and which are excluded in the constant currency growth rates. Datto Fourth Quarter and Full-Year 2021 Results Conference Call When: Wednesday, February 23, 2022 Time: 5:00 pm ET Conference ID: 8751783 Live Call: 1-888-660-6179 (US/Canada Toll-Free) or 1-929-203-1946 (International) Replay: 1-800-770-2030 (US/Canada Toll-Free) or 1-647-362-9199 (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 leading global provider of security and cloud-based software solutions purpose-built for 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, Endpoint Management, 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Revenue: Subscription $ 153,224 $ 128,978 $ 577,321 $ 485,326 Device 10,180 9,104 37,832 30,202 Professional services and other 850 910 3,504 3,257 Total revenue 164,254 138,992 618,657 518,785 Cost of revenue: Subscription 24,818 23,677 90,162 84,463 Device 13,863 11,143 47,415 37,607 Professional services and other 1,538 1,845 6,059 6,244 Depreciation and amortization 8,917 6,144 32,712 21,890 Total cost of revenue 49,136 42,809 176,348 150,204 Gross profit 115,118 96,183 442,309 368,581 Operating expenses: Sales and marketing 40,023 31,962 139,257 115,790 Research and development 31,209 30,932 107,899 78,932 General and administrative 27,570 26,279 106,478 85,668 Depreciation and amortization 6,917 6,623 26,471 27,223 Total operating expenses 105,719 95,796 380,105 307,613 Income from operations 9,399 387 62,204 60,968 Other expense: Interest expense 22 1,758 455 25,348 Loss on extinguishment of debt — 8,488 — 8,488 Other expense (income), net 163 (2,026 ) 387 (3,428 ) Total other expense 185 8,220 842 30,408 Income (loss) before income taxes 9,214 (7,833 ) 61,362 30,560 Provision for income taxes (3,467 ) 665 (9,928 ) (8,062 ) Net income (loss) $ 5,747 $ (7,168 ) $ 51,434 $ 22,498 Net income per share attributable to common stockholders: Basic $ 0.04 $ (0.05 ) $ 0.32 $ 0.16 Diluted $ 0.03 $ (0.05 ) $ 0.31 $ 0.16 Weighted-average shares used in computing net income per share: Basic 163,210,116 154,968,918 162,048,828 140,404,763 Diluted 166,574,607 154,968,918 165,759,624 142,514,848 DATTO HOLDING CORP. Condensed Consolidated Balance Sheets (in thousands) (unaudited) December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 221,421 $ 168,877 Restricted cash 1,319 1,536 Accounts receivable, net 12,870 13,946 Inventory 34,901 13,811 Prepaid expenses and other current assets 39,456 28,316 Total current assets 309,967 226,486 Property and equipment, net 106,577 91,876 Operating lease assets 31,003 — Goodwill 1,141,726 1,120,954 Intangible assets, net 287,605 287,395 Other assets 85,313 66,560 Total assets $ 1,962,191 $ 1,793,271 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 9,997 $ 7,574 Accrued expenses and other current liabilities 59,553 39,461 Deferred revenue 20,356 23,763 Total current liabilities 89,906 70,798 Deferred revenue, noncurrent 3,341 3,322 Deferred income taxes 24,955 18,947 Operating lease liabilities, noncurrent 31,332 — Other long-term liabilities 715 11,736 Total liabilities 150,249 104,803 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock 164 161 Additional paid-in capital 1,829,957 1,755,387 Treasury stock (3,621 ) (3,621 ) Accumulated deficit (13,792 ) (65,226 ) Accumulated other comprehensive income (766 ) 1,767 Total stockholders’ equity 1,811,942 1,688,468 Total liabilities and stockholders’ equity $ 1,962,191 $ 1,793,271 DATTO HOLDING CORP. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Year Ended December 31, 2021 2020 OPERATING ACTIVITIES Net income $ 51,434 $ 22,498 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 32,044 26,434 Amortization of acquired intangible assets 27,139 22,679 Loss on extinguishment of debt — 8,488 Amortization of debt issuance costs 341 1,428 Reserve for inventory obsolescence 57 1,517 Non-cash operating lease expense 7,292 — Stock-based compensation 48,909 33,460 Allowance for expected credit losses 367 6,217 Deferred income taxes 4,922 7,770 Unrealized foreign exchange (1,303 ) (1,204 ) Changes in operating assets and liabilities: Accounts receivable 1,598 769 Inventory (21,186 ) (2,826 ) Prepaid expenses and other current assets (11,487 ) (7,498 ) Other assets (19,641 ) (12,952 ) Accounts payable, accrued expenses and other 8,391 3,073 Deferred revenue (3,511 ) (1,155 ) Net cash provided by operating activities 125,366 108,698 INVESTING ACTIVITIES Purchase of property and equipment (47,237 ) (40,466 ) Acquisition of business, net of cash acquired (45,486 ) (4,371 ) Net cash used in investing activities (92,723 ) (44,837 ) FINANCING ACTIVITIES Proceeds from debt — 32,100 Repayments of debt and capital leases (101 ) (594,727 ) Debt issuance costs — (1,178 ) Proceeds from initial public offering, net of underwriting costs — 641,643 Capitalized transaction costs (684 ) (5,256 ) Proceeds from stock option exercises 22,510 3,150 Repurchase of common stock and settlement of stock-based payment awards — (53 ) Net cash provided by financing activities 21,725 75,679 Effect of exchange rate changes on cash and cash equivalents (2,041 ) 1,807 Net increase in cash and cash equivalents 52,327 141,347 Cash and cash equivalents and restricted cash, beginning of year 170,413 29,066 Cash and cash equivalents and restricted cash, end of period $ 222,740 $ 170,413 Reconciliation of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 221,421 $ 168,877 Restricted cash $ 1,319 $ 1,536 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes $ 6,380 $ 890 Cash paid for interest $ 133 $ 24,037 NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of property and equipment included in accounts payable $ — $ 17 Unpaid initial public offering costs in total current liabilities $ — $ 684 DATTO HOLDING CORP. Non-GAAP Condensed Consolidated Statements of Operations (in thousands, except share and per share amounts) (unaudited) Three Months Ended December 31, Year Ended December 31, 2021 2020 2021 2020 Revenue: Subscription $ 153,224 $ 128,978 $ 577,321 $ 485,326 Device 10,180 9,104 37,832 30,202 Professional services and other 850 910 3,504 3,257 Total revenue 164,254 138,992 618,657 518,785 Cost of revenue: Subscription 23,681 19,703 85,860 79,909 Device 13,820 10,940 47,222 37,404 Professional services and other 1,489 1,427 5,859 5,687 Depreciation and amortization 6,180 4,646 23,261 16,867 Total cost of revenue 45,170 36,716 162,202 139,867 Gross profit 119,084 102,276 456,455 378,918 Operating expenses: Sales and marketing 37,047 27,151 129,790 107,255 Research and development 25,047 18,457 84,480 64,393 General and administrative 23,367 20,478 89,997 73,649 Depreciation and amortization 2,496 2,173 8,783 9,567 Total operating expenses 87,957 68,259 313,050 254,864 Income from operations 31,127 34,017 143,405 124,054 Other expense: Interest expense 22 1,758 455 25,348 Other expense (income), net 163 (2,026 ) 387 (3,428 ) Total other expense (income) 185 (268 ) 842 21,920 Income before income taxes 30,942 34,285 142,563 102,134 Provision for income taxes (7,736 ) (8,571 ) (35,641 ) (25,534 ) Net income $ 23,206 $ 25,714 $ 106,922 $ 76,600 Net income per share attributable to common stockholders: Basic $ 0.14 $ 0.17 $ 0.66 $ 0.55 Diluted $ 0.14 $ 0.16 $ 0.65 $ 0.54 Weighted-average shares used in computing net income per share: Basic 163,210,116 154,968,918 162,048,828 140,404,763 Diluted 166,574,607 158,856,958 165,759,624 142,514,848 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Non-GAAP Subscription Cost of Revenue GAAP subscription cost of revenue $ 24,818 $ 23,677 $ 90,162 $ 84,463 Stock-based compensation expense (1,137 ) (3,974 ) (4,302 ) (4,092 ) Restructuring expense — — — (462 ) Non-GAAP subscription cost of revenue $ 23,681 $ 19,703 $ 85,860 $ 79,909 Non-GAAP Device Cost of Revenue GAAP device cost of revenue $ 13,863 $ 11,143 $ 47,415 $ 37,607 Stock-based compensation expense (43 ) (203 ) (193 ) (203 ) Non-GAAP device gross cost of revenue $ 13,820 $ 10,940 $ 47,222 $ 37,404 Non-GAAP Professional Services and Other Cost of Revenue GAAP professional services and other cost of revenue $ 1,538 $ 1,845 $ 6,059 $ 6,244 Stock-based compensation expense (49 ) (418 ) (200 ) (418 ) Restructuring expense — — — (139 ) Non-GAAP professional services and other cost of revenue $ 1,489 $ 1,427 $ 5,859 $ 5,687 Non-GAAP Depreciation and Amortization in Cost of Revenue GAAP depreciation and amortization in cost of revenue $ 8,917 $ 6,144 $ 32,712 $ 21,890 Amortization of acquired intangible assets (2,737 ) (1,498 ) (9,451 ) (5,023 ) Non-GAAP depreciation and amortization in cost of revenue $ 6,180 $ 4,646 $ 23,261 $ 16,867 Non-GAAP Cost of Revenue GAAP cost of revenue $ 49,136 $ 42,809 $ 176,348 $ 150,204 Amortization of acquired intangible assets (2,737 ) (1,498 ) (9,451 ) (5,023 ) Stock-based compensation expense (1,229 ) (4,595 ) (4,695 ) (4,713 ) Restructuring expense — — — (601 ) Non-GAAP cost of revenue $ 45,170 $ 36,716 $ 162,202 $ 139,867 Non-GAAP Gross Profit GAAP gross profit $ 115,118 $ 96,183 $ 442,309 $ 368,581 Amortization of acquired intangible assets 2,737 1,498 9,451 5,023 Stock-based compensation expense 1,229 4,595 4,695 4,713 Restructuring expense — — — 601 Non-GAAP gross profit $ 119,084 $ 102,276 $ 456,455 $ 378,918 Non-GAAP gross margin 72.5 % 73.6 % 73.8 % 73.0 % 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Non-GAAP Sales and Marketing GAAP sales and marketing expense $ 40,023 $ 31,962 $ 139,257 $ 115,790 Stock-based compensation expense (2,976 ) (4,811 ) (9,467 ) (6,614 ) Restructuring expense — — — (1,921 ) Non-GAAP sales and marketing expense $ 37,047 $ 27,151 $ 129,790 $ 107,255 Non-GAAP sales and marketing as a % of revenue 22.6 % 19.5 % 21.0 % 20.7 % Non-GAAP Research and Development GAAP research and development expense $ 31,209 $ 30,932 $ 107,899 $ 78,932 Stock-based compensation expense (6,162 ) (12,475 ) (23,419 ) (13,590 ) Restructuring expense — — — (949 ) Non-GAAP research and development expense $ 25,047 $ 18,457 $ 84,480 $ 64,393 Non-GAAP research and development as a % of revenue 15.2 % 13.3 % 13.7 % 12.4 % Non-GAAP General and Administrative GAAP general and administrative expense $ 27,570 $ 26,279 $ 106,478 $ 85,668 Stock-based compensation expense (3,187 ) (5,018 ) (11,328 ) (8,543 ) Restructuring expense — — — (364 ) Transaction related and other expense (1,016 ) (783 ) (5,153 ) (3,112 ) Non-GAAP general and administrative expense $ 23,367 $ 20,478 $ 89,997 $ 73,649 Non-GAAP general and administrative as a % of revenue 14.2 % 14.7 % 14.5 % 14.2 % Non-GAAP Depreciation and Amortization in Operating Expenses GAAP depreciation and amortization in operating expenses $ 6,917 $ 6,623 $ 26,471 $ 27,223 Amortization of acquired intangible assets (4,421 ) (4,450 ) (17,688 ) (17,656 ) Non-GAAP depreciation and amortization in operating expense $ 2,496 $ 2,173 $ 8,783 $ 9,567 Non-GAAP depreciation and amortization in operating expense as a % of revenue 1.5 % 1.6 % 1.4 % 1.8 % Non-GAAP Operating Expenses GAAP operating expenses $ 105,719 $ 95,796 $ 380,105 $ 307,613 Amortization of acquired intangible assets (4,421 ) (4,450 ) (17,688 ) (17,656 ) Stock-based compensation expense (12,325 ) (22,304 ) (44,214 ) (28,747 ) Restructuring expense — — — (3,234 ) Transaction related and other expense (1,016 ) (783 ) (5,153 ) (3,112 ) Non-GAAP operating expenses $ 87,957 $ 68,259 $ 313,050 $ 254,864 Non-GAAP operating expenses as a % of revenue 53.5 % 49.1 % 50.6 % 49.1 % Non-GAAP Income From Operations GAAP income from operations $ 9,399 $ 387 $ 62,204 $ 60,968 Amortization of acquired intangible assets 7,158 5,948 27,139 22,679 Stock-based compensation expense 13,554 26,899 48,909 33,460 Restructuring expense — — — 3,835 Transaction related and other expense 1,016 783 5,153 3,112 Non-GAAP income from operations $ 31,127 $ 34,017 $ 143,405 $ 124,054 Non-GAAP operating margin 19.0 % 24.5 % 23.2 % 23.9 % 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 December 31, Year Ended December 31, 2021 2020 2021 2020 Non-GAAP Net Income and Net Income Per Share GAAP net income $ 5,747 $ (7,168 ) $ 51,434 $ 22,498 GAAP provision for income taxes 3,467 (665 ) 9,928 8,062 GAAP income before income taxes 9,214 (7,833 ) 61,362 30,560 Loss on extinguishment of debt — 8,488 — 8,488 Amortization of acquired intangible assets 7,158 5,948 27,139 22,679 Stock-based compensation expense 13,554 26,899 48,909 33,460 Restructuring expense — — — 3,835 Transaction related and other expense 1,016 783 5,153 3,112 Non-GAAP provision for income taxes (7,736 ) (8,571 ) (35,641 ) (25,534 ) Non-GAAP net income $ 23,206 $ 25,714 $ 106,922 $ 76,600 Non-GAAP net income per share attributable to common shareholders: Basic $ 0.14 $ 0.17 $ 0.66 $ 0.55 Diluted $ 0.14 $ 0.16 $ 0.65 $ 0.54 Weighted-Average Shares used in computing Non-GAAP Net Income per Share: Non-GAAP weighted-average shares used in computing net income per share, basic 163,210,116 154,968,918 162,048,828 140,404,763 Non-GAAP weighted-average shares used in computing net income per share, diluted 166,574,607 158,856,958 165,759,624 142,514,848 Adjusted EBITDA GAAP net income $ 5,747 $ (7,168 ) $ 51,434 $ 22,498 Interest and other expense, net 185 (268 ) 842 21,920 Loss on extinguishment of debt — 8,488 — 8,488 Depreciation and amortization 15,834 12,767 59,183 49,113 Provision for income tax 3,467 (665 ) 9,928 8,062 Stock-based compensation expense 13,554 26,899 48,909 33,460 Restructuring expense — — — 3,835 Transaction related and other expense 1,016 783 5,153 3,112 Adjusted EBITDA $ 39,803 $ 40,836 $ 175,449 $ 150,488 Adjusted EBITDA margin 24.2 % 29.4 % 28.4 % 29.0 % Free Cash Flow GAAP net cash provided by operating activities $ 26,257 $ 34,643 $ 125,366 $ 108,698 Less: Purchases of property and equipment (15,067 ) (11,947 ) (47,237 ) (40,466 ) Free cash flow $ 11,190 $ 22,696 $ 78,129 $ 68,232 MSP-F View source version on businesswire.com: https://www.businesswire.com/news/home/20220223005960/en/