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 2022 Financial Results By: Datto Holding Corp. via Business Wire May 09, 2022 at 16:10 PM EDT First quarter subscription revenue grew 18% year-over-year to $160.5 million and 20% in constant currency ARR grew 20% year-over-year to $689.3 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 first quarter ended March 31, 2022. “We had a strong start to 2022, achieving 20% subscription revenue growth in constant currency terms for the first time since going public,” said Tim Weller, Datto’s Chief Executive Officer. “We added 700 net new MSP partners during the quarter, our best quarter of partner additions in over two years, and we continued to expand ARR per MSP. Our security-first product offerings are clearly resonating in today’s market. Finally, we entered into a definitive agreement for Kaseya to acquire Datto, in an all-cash transaction in which Datto stockholders will receive $35.50 per share, valuing Datto at approximately $6.2 billion, validating Datto’s leading position and the large opportunity in the MSP channel.” First Quarter 2022 Financial Results (In Millions) Q1 2022 Q1 2021 Y/Y Change Subscription Revenue(1) $160.5 $135.6 18% Total Revenue(1) $170.8 $144.9 18% ARR(2) $689.3 $572.5 20% Gross Margin 71% 73% (235 bps) Non-GAAP Gross Margin(3) 74% 75% (172 bps) Net Income $7.9 $15.3 (48)% Adjusted EBITDA(3) $39.5 $46.9 (16)% Net Cash Provided by Operating Activities $15.1 $35.2 (57)% Free Cash Flow(3) $4.6 $24.5 (81)% 1 Subscription and Total Revenues Y/Y percentage change includes the negative impact of foreign exchange rates of approximately 1.3%. 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 Announced that the company entered into a definitive agreement for Kaseya to acquire Datto in an all-cash transaction in which Datto stockholders will receive $35.50 per share, valuing Datto at approximately $6.2 billion. The acquisition is subject to regulatory approvals in addition to the satisfaction of customary closing conditions and is expected to close in the second half of 2022. Ended the quarter with more than 19,200 MSP partners, a net increase of 700 from the previous quarter. Expanded the number of MSPs contributing over $100,000 ARR to 1,500, a 30% increase from 1,150 at March 31, 2021. Launched two continuity solutions: i) the next generation SIRIS 5 product featuring up to 4X the performance, and ii) Cloud Continuity for PCs, improved for today’s dynamic, hybrid workforce. Both all-in-one backup and recovery solutions empower MSPs with best-in-class continuity for their small and medium business (SMB) clients. Hosted an MSP Technology Day focused on addressing security for SaaS applications. The virtual event attracted more than 3,800 registrants. Announced that DattoCon, the largest open-ecosystem MSP-centric event, will take place in person September 11-13, 2022, in Washington, DC. Second Quarter and Full Year 2022 Financial Outlook Given the pending acquisition by Kaseya, which is subject to regulatory approvals in addition to the satisfaction of customary closing conditions, Datto is withdrawing its prior guidance for full year 2022 and will not be providing guidance going forward. Datto Will Not Host a First Quarter 2022 Results Conference Call Given the pending acquisition by Kaseya, Datto will not be hosting a results conference call this quarter. For more information about Datto’s first quarter 2022 results, please see Datto’s Quarterly Report on Form 10-Q for the first quarter ended March 31, 2022, which is posted on the Company’s website at www.datto.com under the “Investors” section of the site. 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, the proposed acquisition of Datto by Kaseya, Datto’s 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. Forward-looking statements include all statements that are not historical facts. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements, including: uncertainties associated with the proposed acquisition of Datto by Kaseya; the occurrence of any event, change or other circumstances that could give rise to the termination of the related Merger Agreement; the inability to complete the proposed acquisition due to the failure to satisfy conditions to completion of the proposed acquisition, including the receipt of applicable approvals and clearances by government authorities; risks related to disruption of management’s attention from our ongoing business operations due to the proposed acquisition; the effect of the announcement of the proposed acquisition on our relationships with our customers, operating results and business generally; the risk that the proposed acquisition will not be consummated in a timely manner or at all; the costs of the proposed acquisition if the proposed acquisition is not consummated; restrictions imposed on our business during the pendency of the proposed acquisition; our ability to recruit, retain and develop key employees and management personnel, including in light of the proposed acquisition; the continuing impacts on our operations and financial condition from the effects of the COVID-19 pandemic; our ability to effectively compete; fluctuations in our operating results; our ability to sustain cash flows and profitability; our ability to attract new managed service provider (“MSP”) partners; our ability to sell additional products and subscriptions to our MSP partners; the recognition of revenue from our subscription offerings; the strength of the small and medium businesses (“SMB”) information technology (“IT”) market; our ability to manage the ongoing growth of our business; the risks associated with our current and future international operations, including the risks of expansion into new international markets; the impact of volatility in the global economy; including heightened inflation, rising interest rates and the effects from the war in Ukraine; the ability of our MSP partners to sell our products; possible data losses or breaches experienced by MSP partners or their SMB customers using our products or solutions; the risks associated with defects or vulnerabilities in our or our third-parties’ software, solutions, infrastructure and hardware; the impact of natural disasters, health pandemics, terrorism or other catastrophic events; and other factors disclosed in the section entitled “Risk Factors” of our most recent Annual Report on Form 10-K and subsequent filings with the SEC. 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 Gross Margin, 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, Adjusted EBITDA Margin, and Free Cash Flow are useful in evaluating our operating performance and liquidity, as applicable. 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. Non-GAAP Gross Margin and Adjusted EBITDA Margin are calculated by dividing Non-GAAP Gross Profit and Adjusted EBITDA, as applicable, by revenues. 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. 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, 2022 2021 Revenue: Subscription $ 160,513 $ 135,590 Device 9,516 8,385 Professional services and other 752 934 Total revenue 170,781 144,909 Cost of revenue: Subscription 25,660 20,930 Device 12,608 9,498 Professional services and other 1,783 1,502 Depreciation and amortization 9,399 6,625 Total cost of revenue 49,450 38,555 Gross profit 121,331 106,354 Operating expenses: Sales and marketing 39,862 31,926 Research and development 33,582 22,474 General and administrative 32,569 24,621 Depreciation and amortization 7,269 6,570 Total operating expenses 113,282 85,591 Income from operations 8,049 20,763 Other (income) expense: Interest expense 122 102 Other income, net (672 ) (19 ) Total other (income) expense (550 ) 83 Income before income taxes 8,599 20,680 Provision for income taxes (652 ) (5,394 ) Net income $ 7,947 $ 15,286 Net income per share attributable to common stockholders: Basic $ 0.05 $ 0.09 Diluted $ 0.05 $ 0.09 Weighted-average shares used in computing net income per share: Basic 164,081,628 161,066,404 Diluted 167,535,063 164,734,402 DATTO HOLDING CORP. Condensed Consolidated Balance Sheets (in thousands) (unaudited) March 31, December 31, 2022 2021 ASSETS Current assets Cash and cash equivalents $ 191,188 $ 221,421 Restricted cash 1,637 1,319 Accounts receivable, net 13,419 12,870 Inventory 43,913 34,901 Prepaid expenses and other current assets 44,490 39,456 Total current assets 294,647 309,967 Property and equipment, net 108,475 106,577 Operating lease assets 31,994 31,003 Goodwill 1,172,860 1,141,726 Intangible assets, net 292,568 287,605 Other assets 89,901 85,313 Total assets $ 1,990,445 $ 1,962,191 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 15,227 $ 9,997 Accrued expenses and other current liabilities 56,125 59,553 Deferred revenue 20,274 20,356 Total current liabilities 91,626 89,906 Deferred revenue, noncurrent 3,293 3,341 Deferred income taxes 22,725 24,955 Operating lease liabilities, noncurrent 30,761 31,332 Other long-term liabilities 762 715 Total liabilities 149,167 150,249 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock 165 164 Additional paid-in capital 1,852,073 1,829,957 Treasury stock (3,621 ) (3,621 ) Accumulated deficit (5,845 ) (13,792 ) Accumulated other comprehensive income (loss) (1,494 ) (766 ) Total stockholders’ equity 1,841,278 1,811,942 Total liabilities and stockholders’ equity $ 1,990,445 $ 1,962,191 DATTO HOLDING CORP. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended March 31, 2022 2021 OPERATING ACTIVITIES Net income $ 7,947 $ 15,286 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,862 7,461 Amortization of acquired intangible assets 7,806 5,734 Amortization of debt issuance costs 84 84 Reserve for inventory obsolescence 375 36 Non-cash operating lease expense 1,926 1,870 Stock-based compensation 12,613 11,511 Provision for bad debt 485 1,211 Deferred income taxes (2,607 ) 4,717 Unrealized foreign exchange (298 ) (626 ) Changes in operating assets and liabilities: Accounts receivable (760 ) (160 ) Inventory (9,399 ) (5,559 ) Prepaid expenses and other current assets (4,951 ) (3,820 ) Other assets (4,253 ) (4,083 ) Accounts payable, accrued expenses and other (2,158 ) 3,535 Deferred revenue (602 ) (2,030 ) Net cash provided by operating activities 15,070 35,167 INVESTING ACTIVITIES Purchase of property and equipment (10,511 ) (10,681 ) Acquisition of business, net of cash acquired (43,521 ) (45,486 ) Net cash used in investing activities (54,032 ) (56,167 ) FINANCING ACTIVITIES Repayments of debt and capital leases (28 ) (28 ) Capitalized transaction costs — (414 ) Proceeds from stock option exercises 6,239 177 Proceeds from employee stock purchase plan share purchases 3,261 — Net cash provided by (used in) financing activities 9,472 (265 ) Effect of exchange rate changes on cash and cash equivalents (425 ) 46 Net decrease in cash and cash equivalents (29,915 ) (21,219 ) Cash and cash equivalents and restricted cash, beginning of year 222,740 170,413 Cash and cash equivalents and restricted cash, end of period $ 192,825 $ 149,194 Reconciliation of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 191,188 $ 147,819 Restricted cash $ 1,637 $ 1,375 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes $ 816 $ 226 Cash paid for interest $ 93 $ — NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of property and equipment included in accounts payable $ 400 $ 271 Unpaid initial public offering costs in total current liabilities $ — $ 270 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, 2022 2021 Non-GAAP Subscription Cost of Revenue GAAP subscription cost of revenue $ 25,660 $ 20,930 Stock-based compensation expense (1,020 ) (1,228 ) Non-GAAP subscription cost of revenue $ 24,640 $ 19,702 Non-GAAP Device Cost of Revenue GAAP device cost of revenue $ 12,608 $ 9,498 Stock-based compensation expense (36 ) (62 ) Non-GAAP device gross cost of revenue $ 12,572 $ 9,436 Non-GAAP Professional Services and Other Cost of Revenue GAAP professional services and other cost of revenue $ 1,783 $ 1,502 Stock-based compensation expense (66 ) (103 ) Non-GAAP professional services and other cost of revenue $ 1,717 $ 1,399 Non-GAAP Depreciation and Amortization in Cost of Revenue GAAP depreciation and amortization in cost of revenue $ 9,399 $ 6,625 Amortization of acquired intangible assets (3,140 ) (1,312 ) Non-GAAP depreciation and amortization in cost of revenue $ 6,259 $ 5,313 Non-GAAP Cost of Revenue GAAP cost of revenue $ 49,450 $ 38,555 Amortization of acquired intangible assets (3,140 ) (1,312 ) Stock-based compensation expense (1,122 ) (1,393 ) Non-GAAP cost of revenue $ 45,188 $ 35,850 Non-GAAP Gross Profit GAAP gross profit $ 121,331 $ 106,354 Amortization of acquired intangible assets 3,140 1,312 Stock-based compensation expense 1,122 1,393 Non-GAAP gross profit $ 125,593 $ 109,059 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, 2022 2021 Non-GAAP Sales and Marketing GAAP sales and marketing expense $ 39,862 $ 31,926 Stock-based compensation expense (2,588 ) (2,295 ) Non-GAAP sales and marketing expense $ 37,274 $ 29,631 Non-GAAP Research and Development GAAP research and development expense $ 33,582 $ 22,474 Stock-based compensation expense (6,174 ) (4,874 ) Non-GAAP research and development expense $ 27,408 $ 17,600 Non-GAAP General and Administrative GAAP general and administrative expense $ 32,569 $ 24,621 Stock-based compensation expense (2,729 ) (2,949 ) Transaction related and other expense (2,210 ) (1,439 ) Non-GAAP general and administrative expense $ 27,630 $ 20,233 Non-GAAP Depreciation and Amortization in Operating Expenses GAAP depreciation and amortization in operating expenses $ 7,269 $ 6,570 Amortization of acquired intangible assets (4,666 ) (4,422 ) Non-GAAP depreciation and amortization in operating expenses $ 2,603 $ 2,148 Non-GAAP Operating Expenses GAAP operating expenses $ 113,282 $ 85,591 Amortization of acquired intangible assets (4,666 ) (4,422 ) Stock-based compensation expense (11,491 ) (10,118 ) Transaction related and other expense (2,210 ) (1,439 ) Non-GAAP operating expenses $ 94,915 $ 69,612 Non-GAAP Income From Operations GAAP income from operations $ 8,049 $ 20,763 Amortization of acquired intangible assets 7,806 5,734 Stock-based compensation expense 12,613 11,511 Transaction related and other expense 2,210 1,439 Non-GAAP income from operations $ 30,678 $ 39,447 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, 2022 2021 Non-GAAP Net Income and Net Income Per Share GAAP net income $ 7,947 $ 15,286 GAAP provision for income taxes 652 5,394 GAAP income before income taxes 8,599 20,680 Amortization of acquired intangible assets 7,806 5,734 Stock-based compensation expense 12,613 11,511 Transaction related and other expense 2,210 1,439 Non-GAAP provision for income taxes (7,807 ) (9,841 ) Non-GAAP net income $ 23,421 $ 29,523 Non-GAAP net income per share attributable to common shareholders: Basic $ 0.14 $ 0.18 Diluted $ 0.14 $ 0.18 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 164,081,628 161,066,404 Non-GAAP weighted-average shares used in computing net income per share, diluted 167,535,063 164,734,402 Adjusted EBITDA GAAP net income $ 7,947 $ 15,286 Interest and other (income) expense, net (550 ) 83 Depreciation and amortization 16,668 13,195 Provision for income tax 652 5,394 Stock-based compensation expense 12,613 11,511 Transaction related and other expense 2,210 1,439 Adjusted EBITDA $ 39,540 $ 46,908 Adjusted EBITDA margin 23.2 % 32.4 % Free Cash Flow GAAP net cash provided by operating activities $ 15,070 $ 35,167 Less: Purchases of property and equipment (10,511 ) (10,681 ) Free cash flow $ 4,559 $ 24,486 MSP-F View source version on businesswire.com: https://www.businesswire.com/news/home/20220509005724/en/Contacts Media Contact: Shoba V. 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Datto Announces First Quarter 2022 Financial Results By: Datto Holding Corp. via Business Wire May 09, 2022 at 16:10 PM EDT First quarter subscription revenue grew 18% year-over-year to $160.5 million and 20% in constant currency ARR grew 20% year-over-year to $689.3 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 first quarter ended March 31, 2022. “We had a strong start to 2022, achieving 20% subscription revenue growth in constant currency terms for the first time since going public,” said Tim Weller, Datto’s Chief Executive Officer. “We added 700 net new MSP partners during the quarter, our best quarter of partner additions in over two years, and we continued to expand ARR per MSP. Our security-first product offerings are clearly resonating in today’s market. Finally, we entered into a definitive agreement for Kaseya to acquire Datto, in an all-cash transaction in which Datto stockholders will receive $35.50 per share, valuing Datto at approximately $6.2 billion, validating Datto’s leading position and the large opportunity in the MSP channel.” First Quarter 2022 Financial Results (In Millions) Q1 2022 Q1 2021 Y/Y Change Subscription Revenue(1) $160.5 $135.6 18% Total Revenue(1) $170.8 $144.9 18% ARR(2) $689.3 $572.5 20% Gross Margin 71% 73% (235 bps) Non-GAAP Gross Margin(3) 74% 75% (172 bps) Net Income $7.9 $15.3 (48)% Adjusted EBITDA(3) $39.5 $46.9 (16)% Net Cash Provided by Operating Activities $15.1 $35.2 (57)% Free Cash Flow(3) $4.6 $24.5 (81)% 1 Subscription and Total Revenues Y/Y percentage change includes the negative impact of foreign exchange rates of approximately 1.3%. 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 Announced that the company entered into a definitive agreement for Kaseya to acquire Datto in an all-cash transaction in which Datto stockholders will receive $35.50 per share, valuing Datto at approximately $6.2 billion. The acquisition is subject to regulatory approvals in addition to the satisfaction of customary closing conditions and is expected to close in the second half of 2022. Ended the quarter with more than 19,200 MSP partners, a net increase of 700 from the previous quarter. Expanded the number of MSPs contributing over $100,000 ARR to 1,500, a 30% increase from 1,150 at March 31, 2021. Launched two continuity solutions: i) the next generation SIRIS 5 product featuring up to 4X the performance, and ii) Cloud Continuity for PCs, improved for today’s dynamic, hybrid workforce. Both all-in-one backup and recovery solutions empower MSPs with best-in-class continuity for their small and medium business (SMB) clients. Hosted an MSP Technology Day focused on addressing security for SaaS applications. The virtual event attracted more than 3,800 registrants. Announced that DattoCon, the largest open-ecosystem MSP-centric event, will take place in person September 11-13, 2022, in Washington, DC. Second Quarter and Full Year 2022 Financial Outlook Given the pending acquisition by Kaseya, which is subject to regulatory approvals in addition to the satisfaction of customary closing conditions, Datto is withdrawing its prior guidance for full year 2022 and will not be providing guidance going forward. Datto Will Not Host a First Quarter 2022 Results Conference Call Given the pending acquisition by Kaseya, Datto will not be hosting a results conference call this quarter. For more information about Datto’s first quarter 2022 results, please see Datto’s Quarterly Report on Form 10-Q for the first quarter ended March 31, 2022, which is posted on the Company’s website at www.datto.com under the “Investors” section of the site. 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, the proposed acquisition of Datto by Kaseya, Datto’s 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. Forward-looking statements include all statements that are not historical facts. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements, including: uncertainties associated with the proposed acquisition of Datto by Kaseya; the occurrence of any event, change or other circumstances that could give rise to the termination of the related Merger Agreement; the inability to complete the proposed acquisition due to the failure to satisfy conditions to completion of the proposed acquisition, including the receipt of applicable approvals and clearances by government authorities; risks related to disruption of management’s attention from our ongoing business operations due to the proposed acquisition; the effect of the announcement of the proposed acquisition on our relationships with our customers, operating results and business generally; the risk that the proposed acquisition will not be consummated in a timely manner or at all; the costs of the proposed acquisition if the proposed acquisition is not consummated; restrictions imposed on our business during the pendency of the proposed acquisition; our ability to recruit, retain and develop key employees and management personnel, including in light of the proposed acquisition; the continuing impacts on our operations and financial condition from the effects of the COVID-19 pandemic; our ability to effectively compete; fluctuations in our operating results; our ability to sustain cash flows and profitability; our ability to attract new managed service provider (“MSP”) partners; our ability to sell additional products and subscriptions to our MSP partners; the recognition of revenue from our subscription offerings; the strength of the small and medium businesses (“SMB”) information technology (“IT”) market; our ability to manage the ongoing growth of our business; the risks associated with our current and future international operations, including the risks of expansion into new international markets; the impact of volatility in the global economy; including heightened inflation, rising interest rates and the effects from the war in Ukraine; the ability of our MSP partners to sell our products; possible data losses or breaches experienced by MSP partners or their SMB customers using our products or solutions; the risks associated with defects or vulnerabilities in our or our third-parties’ software, solutions, infrastructure and hardware; the impact of natural disasters, health pandemics, terrorism or other catastrophic events; and other factors disclosed in the section entitled “Risk Factors” of our most recent Annual Report on Form 10-K and subsequent filings with the SEC. 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 Gross Margin, 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, Adjusted EBITDA Margin, and Free Cash Flow are useful in evaluating our operating performance and liquidity, as applicable. 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. Non-GAAP Gross Margin and Adjusted EBITDA Margin are calculated by dividing Non-GAAP Gross Profit and Adjusted EBITDA, as applicable, by revenues. 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. 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, 2022 2021 Revenue: Subscription $ 160,513 $ 135,590 Device 9,516 8,385 Professional services and other 752 934 Total revenue 170,781 144,909 Cost of revenue: Subscription 25,660 20,930 Device 12,608 9,498 Professional services and other 1,783 1,502 Depreciation and amortization 9,399 6,625 Total cost of revenue 49,450 38,555 Gross profit 121,331 106,354 Operating expenses: Sales and marketing 39,862 31,926 Research and development 33,582 22,474 General and administrative 32,569 24,621 Depreciation and amortization 7,269 6,570 Total operating expenses 113,282 85,591 Income from operations 8,049 20,763 Other (income) expense: Interest expense 122 102 Other income, net (672 ) (19 ) Total other (income) expense (550 ) 83 Income before income taxes 8,599 20,680 Provision for income taxes (652 ) (5,394 ) Net income $ 7,947 $ 15,286 Net income per share attributable to common stockholders: Basic $ 0.05 $ 0.09 Diluted $ 0.05 $ 0.09 Weighted-average shares used in computing net income per share: Basic 164,081,628 161,066,404 Diluted 167,535,063 164,734,402 DATTO HOLDING CORP. Condensed Consolidated Balance Sheets (in thousands) (unaudited) March 31, December 31, 2022 2021 ASSETS Current assets Cash and cash equivalents $ 191,188 $ 221,421 Restricted cash 1,637 1,319 Accounts receivable, net 13,419 12,870 Inventory 43,913 34,901 Prepaid expenses and other current assets 44,490 39,456 Total current assets 294,647 309,967 Property and equipment, net 108,475 106,577 Operating lease assets 31,994 31,003 Goodwill 1,172,860 1,141,726 Intangible assets, net 292,568 287,605 Other assets 89,901 85,313 Total assets $ 1,990,445 $ 1,962,191 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 15,227 $ 9,997 Accrued expenses and other current liabilities 56,125 59,553 Deferred revenue 20,274 20,356 Total current liabilities 91,626 89,906 Deferred revenue, noncurrent 3,293 3,341 Deferred income taxes 22,725 24,955 Operating lease liabilities, noncurrent 30,761 31,332 Other long-term liabilities 762 715 Total liabilities 149,167 150,249 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock 165 164 Additional paid-in capital 1,852,073 1,829,957 Treasury stock (3,621 ) (3,621 ) Accumulated deficit (5,845 ) (13,792 ) Accumulated other comprehensive income (loss) (1,494 ) (766 ) Total stockholders’ equity 1,841,278 1,811,942 Total liabilities and stockholders’ equity $ 1,990,445 $ 1,962,191 DATTO HOLDING CORP. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended March 31, 2022 2021 OPERATING ACTIVITIES Net income $ 7,947 $ 15,286 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,862 7,461 Amortization of acquired intangible assets 7,806 5,734 Amortization of debt issuance costs 84 84 Reserve for inventory obsolescence 375 36 Non-cash operating lease expense 1,926 1,870 Stock-based compensation 12,613 11,511 Provision for bad debt 485 1,211 Deferred income taxes (2,607 ) 4,717 Unrealized foreign exchange (298 ) (626 ) Changes in operating assets and liabilities: Accounts receivable (760 ) (160 ) Inventory (9,399 ) (5,559 ) Prepaid expenses and other current assets (4,951 ) (3,820 ) Other assets (4,253 ) (4,083 ) Accounts payable, accrued expenses and other (2,158 ) 3,535 Deferred revenue (602 ) (2,030 ) Net cash provided by operating activities 15,070 35,167 INVESTING ACTIVITIES Purchase of property and equipment (10,511 ) (10,681 ) Acquisition of business, net of cash acquired (43,521 ) (45,486 ) Net cash used in investing activities (54,032 ) (56,167 ) FINANCING ACTIVITIES Repayments of debt and capital leases (28 ) (28 ) Capitalized transaction costs — (414 ) Proceeds from stock option exercises 6,239 177 Proceeds from employee stock purchase plan share purchases 3,261 — Net cash provided by (used in) financing activities 9,472 (265 ) Effect of exchange rate changes on cash and cash equivalents (425 ) 46 Net decrease in cash and cash equivalents (29,915 ) (21,219 ) Cash and cash equivalents and restricted cash, beginning of year 222,740 170,413 Cash and cash equivalents and restricted cash, end of period $ 192,825 $ 149,194 Reconciliation of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 191,188 $ 147,819 Restricted cash $ 1,637 $ 1,375 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes $ 816 $ 226 Cash paid for interest $ 93 $ — NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of property and equipment included in accounts payable $ 400 $ 271 Unpaid initial public offering costs in total current liabilities $ — $ 270 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, 2022 2021 Non-GAAP Subscription Cost of Revenue GAAP subscription cost of revenue $ 25,660 $ 20,930 Stock-based compensation expense (1,020 ) (1,228 ) Non-GAAP subscription cost of revenue $ 24,640 $ 19,702 Non-GAAP Device Cost of Revenue GAAP device cost of revenue $ 12,608 $ 9,498 Stock-based compensation expense (36 ) (62 ) Non-GAAP device gross cost of revenue $ 12,572 $ 9,436 Non-GAAP Professional Services and Other Cost of Revenue GAAP professional services and other cost of revenue $ 1,783 $ 1,502 Stock-based compensation expense (66 ) (103 ) Non-GAAP professional services and other cost of revenue $ 1,717 $ 1,399 Non-GAAP Depreciation and Amortization in Cost of Revenue GAAP depreciation and amortization in cost of revenue $ 9,399 $ 6,625 Amortization of acquired intangible assets (3,140 ) (1,312 ) Non-GAAP depreciation and amortization in cost of revenue $ 6,259 $ 5,313 Non-GAAP Cost of Revenue GAAP cost of revenue $ 49,450 $ 38,555 Amortization of acquired intangible assets (3,140 ) (1,312 ) Stock-based compensation expense (1,122 ) (1,393 ) Non-GAAP cost of revenue $ 45,188 $ 35,850 Non-GAAP Gross Profit GAAP gross profit $ 121,331 $ 106,354 Amortization of acquired intangible assets 3,140 1,312 Stock-based compensation expense 1,122 1,393 Non-GAAP gross profit $ 125,593 $ 109,059 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, 2022 2021 Non-GAAP Sales and Marketing GAAP sales and marketing expense $ 39,862 $ 31,926 Stock-based compensation expense (2,588 ) (2,295 ) Non-GAAP sales and marketing expense $ 37,274 $ 29,631 Non-GAAP Research and Development GAAP research and development expense $ 33,582 $ 22,474 Stock-based compensation expense (6,174 ) (4,874 ) Non-GAAP research and development expense $ 27,408 $ 17,600 Non-GAAP General and Administrative GAAP general and administrative expense $ 32,569 $ 24,621 Stock-based compensation expense (2,729 ) (2,949 ) Transaction related and other expense (2,210 ) (1,439 ) Non-GAAP general and administrative expense $ 27,630 $ 20,233 Non-GAAP Depreciation and Amortization in Operating Expenses GAAP depreciation and amortization in operating expenses $ 7,269 $ 6,570 Amortization of acquired intangible assets (4,666 ) (4,422 ) Non-GAAP depreciation and amortization in operating expenses $ 2,603 $ 2,148 Non-GAAP Operating Expenses GAAP operating expenses $ 113,282 $ 85,591 Amortization of acquired intangible assets (4,666 ) (4,422 ) Stock-based compensation expense (11,491 ) (10,118 ) Transaction related and other expense (2,210 ) (1,439 ) Non-GAAP operating expenses $ 94,915 $ 69,612 Non-GAAP Income From Operations GAAP income from operations $ 8,049 $ 20,763 Amortization of acquired intangible assets 7,806 5,734 Stock-based compensation expense 12,613 11,511 Transaction related and other expense 2,210 1,439 Non-GAAP income from operations $ 30,678 $ 39,447 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, 2022 2021 Non-GAAP Net Income and Net Income Per Share GAAP net income $ 7,947 $ 15,286 GAAP provision for income taxes 652 5,394 GAAP income before income taxes 8,599 20,680 Amortization of acquired intangible assets 7,806 5,734 Stock-based compensation expense 12,613 11,511 Transaction related and other expense 2,210 1,439 Non-GAAP provision for income taxes (7,807 ) (9,841 ) Non-GAAP net income $ 23,421 $ 29,523 Non-GAAP net income per share attributable to common shareholders: Basic $ 0.14 $ 0.18 Diluted $ 0.14 $ 0.18 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 164,081,628 161,066,404 Non-GAAP weighted-average shares used in computing net income per share, diluted 167,535,063 164,734,402 Adjusted EBITDA GAAP net income $ 7,947 $ 15,286 Interest and other (income) expense, net (550 ) 83 Depreciation and amortization 16,668 13,195 Provision for income tax 652 5,394 Stock-based compensation expense 12,613 11,511 Transaction related and other expense 2,210 1,439 Adjusted EBITDA $ 39,540 $ 46,908 Adjusted EBITDA margin 23.2 % 32.4 % Free Cash Flow GAAP net cash provided by operating activities $ 15,070 $ 35,167 Less: Purchases of property and equipment (10,511 ) (10,681 ) Free cash flow $ 4,559 $ 24,486 MSP-F View source version on businesswire.com: https://www.businesswire.com/news/home/20220509005724/en/Contacts Media Contact: Shoba V. Lemoine communications@datto.com Investor Contact: Ryan Burkart ir@datto.com
First quarter subscription revenue grew 18% year-over-year to $160.5 million and 20% in constant currency ARR grew 20% year-over-year to $689.3 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 first quarter ended March 31, 2022. “We had a strong start to 2022, achieving 20% subscription revenue growth in constant currency terms for the first time since going public,” said Tim Weller, Datto’s Chief Executive Officer. “We added 700 net new MSP partners during the quarter, our best quarter of partner additions in over two years, and we continued to expand ARR per MSP. Our security-first product offerings are clearly resonating in today’s market. Finally, we entered into a definitive agreement for Kaseya to acquire Datto, in an all-cash transaction in which Datto stockholders will receive $35.50 per share, valuing Datto at approximately $6.2 billion, validating Datto’s leading position and the large opportunity in the MSP channel.” First Quarter 2022 Financial Results (In Millions) Q1 2022 Q1 2021 Y/Y Change Subscription Revenue(1) $160.5 $135.6 18% Total Revenue(1) $170.8 $144.9 18% ARR(2) $689.3 $572.5 20% Gross Margin 71% 73% (235 bps) Non-GAAP Gross Margin(3) 74% 75% (172 bps) Net Income $7.9 $15.3 (48)% Adjusted EBITDA(3) $39.5 $46.9 (16)% Net Cash Provided by Operating Activities $15.1 $35.2 (57)% Free Cash Flow(3) $4.6 $24.5 (81)% 1 Subscription and Total Revenues Y/Y percentage change includes the negative impact of foreign exchange rates of approximately 1.3%. 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 Announced that the company entered into a definitive agreement for Kaseya to acquire Datto in an all-cash transaction in which Datto stockholders will receive $35.50 per share, valuing Datto at approximately $6.2 billion. The acquisition is subject to regulatory approvals in addition to the satisfaction of customary closing conditions and is expected to close in the second half of 2022. Ended the quarter with more than 19,200 MSP partners, a net increase of 700 from the previous quarter. Expanded the number of MSPs contributing over $100,000 ARR to 1,500, a 30% increase from 1,150 at March 31, 2021. Launched two continuity solutions: i) the next generation SIRIS 5 product featuring up to 4X the performance, and ii) Cloud Continuity for PCs, improved for today’s dynamic, hybrid workforce. Both all-in-one backup and recovery solutions empower MSPs with best-in-class continuity for their small and medium business (SMB) clients. Hosted an MSP Technology Day focused on addressing security for SaaS applications. The virtual event attracted more than 3,800 registrants. Announced that DattoCon, the largest open-ecosystem MSP-centric event, will take place in person September 11-13, 2022, in Washington, DC. Second Quarter and Full Year 2022 Financial Outlook Given the pending acquisition by Kaseya, which is subject to regulatory approvals in addition to the satisfaction of customary closing conditions, Datto is withdrawing its prior guidance for full year 2022 and will not be providing guidance going forward. Datto Will Not Host a First Quarter 2022 Results Conference Call Given the pending acquisition by Kaseya, Datto will not be hosting a results conference call this quarter. For more information about Datto’s first quarter 2022 results, please see Datto’s Quarterly Report on Form 10-Q for the first quarter ended March 31, 2022, which is posted on the Company’s website at www.datto.com under the “Investors” section of the site. 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, the proposed acquisition of Datto by Kaseya, Datto’s 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. Forward-looking statements include all statements that are not historical facts. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements, including: uncertainties associated with the proposed acquisition of Datto by Kaseya; the occurrence of any event, change or other circumstances that could give rise to the termination of the related Merger Agreement; the inability to complete the proposed acquisition due to the failure to satisfy conditions to completion of the proposed acquisition, including the receipt of applicable approvals and clearances by government authorities; risks related to disruption of management’s attention from our ongoing business operations due to the proposed acquisition; the effect of the announcement of the proposed acquisition on our relationships with our customers, operating results and business generally; the risk that the proposed acquisition will not be consummated in a timely manner or at all; the costs of the proposed acquisition if the proposed acquisition is not consummated; restrictions imposed on our business during the pendency of the proposed acquisition; our ability to recruit, retain and develop key employees and management personnel, including in light of the proposed acquisition; the continuing impacts on our operations and financial condition from the effects of the COVID-19 pandemic; our ability to effectively compete; fluctuations in our operating results; our ability to sustain cash flows and profitability; our ability to attract new managed service provider (“MSP”) partners; our ability to sell additional products and subscriptions to our MSP partners; the recognition of revenue from our subscription offerings; the strength of the small and medium businesses (“SMB”) information technology (“IT”) market; our ability to manage the ongoing growth of our business; the risks associated with our current and future international operations, including the risks of expansion into new international markets; the impact of volatility in the global economy; including heightened inflation, rising interest rates and the effects from the war in Ukraine; the ability of our MSP partners to sell our products; possible data losses or breaches experienced by MSP partners or their SMB customers using our products or solutions; the risks associated with defects or vulnerabilities in our or our third-parties’ software, solutions, infrastructure and hardware; the impact of natural disasters, health pandemics, terrorism or other catastrophic events; and other factors disclosed in the section entitled “Risk Factors” of our most recent Annual Report on Form 10-K and subsequent filings with the SEC. 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 Gross Margin, 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, Adjusted EBITDA Margin, and Free Cash Flow are useful in evaluating our operating performance and liquidity, as applicable. 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. Non-GAAP Gross Margin and Adjusted EBITDA Margin are calculated by dividing Non-GAAP Gross Profit and Adjusted EBITDA, as applicable, by revenues. 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. 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, 2022 2021 Revenue: Subscription $ 160,513 $ 135,590 Device 9,516 8,385 Professional services and other 752 934 Total revenue 170,781 144,909 Cost of revenue: Subscription 25,660 20,930 Device 12,608 9,498 Professional services and other 1,783 1,502 Depreciation and amortization 9,399 6,625 Total cost of revenue 49,450 38,555 Gross profit 121,331 106,354 Operating expenses: Sales and marketing 39,862 31,926 Research and development 33,582 22,474 General and administrative 32,569 24,621 Depreciation and amortization 7,269 6,570 Total operating expenses 113,282 85,591 Income from operations 8,049 20,763 Other (income) expense: Interest expense 122 102 Other income, net (672 ) (19 ) Total other (income) expense (550 ) 83 Income before income taxes 8,599 20,680 Provision for income taxes (652 ) (5,394 ) Net income $ 7,947 $ 15,286 Net income per share attributable to common stockholders: Basic $ 0.05 $ 0.09 Diluted $ 0.05 $ 0.09 Weighted-average shares used in computing net income per share: Basic 164,081,628 161,066,404 Diluted 167,535,063 164,734,402 DATTO HOLDING CORP. Condensed Consolidated Balance Sheets (in thousands) (unaudited) March 31, December 31, 2022 2021 ASSETS Current assets Cash and cash equivalents $ 191,188 $ 221,421 Restricted cash 1,637 1,319 Accounts receivable, net 13,419 12,870 Inventory 43,913 34,901 Prepaid expenses and other current assets 44,490 39,456 Total current assets 294,647 309,967 Property and equipment, net 108,475 106,577 Operating lease assets 31,994 31,003 Goodwill 1,172,860 1,141,726 Intangible assets, net 292,568 287,605 Other assets 89,901 85,313 Total assets $ 1,990,445 $ 1,962,191 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 15,227 $ 9,997 Accrued expenses and other current liabilities 56,125 59,553 Deferred revenue 20,274 20,356 Total current liabilities 91,626 89,906 Deferred revenue, noncurrent 3,293 3,341 Deferred income taxes 22,725 24,955 Operating lease liabilities, noncurrent 30,761 31,332 Other long-term liabilities 762 715 Total liabilities 149,167 150,249 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock 165 164 Additional paid-in capital 1,852,073 1,829,957 Treasury stock (3,621 ) (3,621 ) Accumulated deficit (5,845 ) (13,792 ) Accumulated other comprehensive income (loss) (1,494 ) (766 ) Total stockholders’ equity 1,841,278 1,811,942 Total liabilities and stockholders’ equity $ 1,990,445 $ 1,962,191 DATTO HOLDING CORP. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended March 31, 2022 2021 OPERATING ACTIVITIES Net income $ 7,947 $ 15,286 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,862 7,461 Amortization of acquired intangible assets 7,806 5,734 Amortization of debt issuance costs 84 84 Reserve for inventory obsolescence 375 36 Non-cash operating lease expense 1,926 1,870 Stock-based compensation 12,613 11,511 Provision for bad debt 485 1,211 Deferred income taxes (2,607 ) 4,717 Unrealized foreign exchange (298 ) (626 ) Changes in operating assets and liabilities: Accounts receivable (760 ) (160 ) Inventory (9,399 ) (5,559 ) Prepaid expenses and other current assets (4,951 ) (3,820 ) Other assets (4,253 ) (4,083 ) Accounts payable, accrued expenses and other (2,158 ) 3,535 Deferred revenue (602 ) (2,030 ) Net cash provided by operating activities 15,070 35,167 INVESTING ACTIVITIES Purchase of property and equipment (10,511 ) (10,681 ) Acquisition of business, net of cash acquired (43,521 ) (45,486 ) Net cash used in investing activities (54,032 ) (56,167 ) FINANCING ACTIVITIES Repayments of debt and capital leases (28 ) (28 ) Capitalized transaction costs — (414 ) Proceeds from stock option exercises 6,239 177 Proceeds from employee stock purchase plan share purchases 3,261 — Net cash provided by (used in) financing activities 9,472 (265 ) Effect of exchange rate changes on cash and cash equivalents (425 ) 46 Net decrease in cash and cash equivalents (29,915 ) (21,219 ) Cash and cash equivalents and restricted cash, beginning of year 222,740 170,413 Cash and cash equivalents and restricted cash, end of period $ 192,825 $ 149,194 Reconciliation of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 191,188 $ 147,819 Restricted cash $ 1,637 $ 1,375 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for income taxes $ 816 $ 226 Cash paid for interest $ 93 $ — NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of property and equipment included in accounts payable $ 400 $ 271 Unpaid initial public offering costs in total current liabilities $ — $ 270 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, 2022 2021 Non-GAAP Subscription Cost of Revenue GAAP subscription cost of revenue $ 25,660 $ 20,930 Stock-based compensation expense (1,020 ) (1,228 ) Non-GAAP subscription cost of revenue $ 24,640 $ 19,702 Non-GAAP Device Cost of Revenue GAAP device cost of revenue $ 12,608 $ 9,498 Stock-based compensation expense (36 ) (62 ) Non-GAAP device gross cost of revenue $ 12,572 $ 9,436 Non-GAAP Professional Services and Other Cost of Revenue GAAP professional services and other cost of revenue $ 1,783 $ 1,502 Stock-based compensation expense (66 ) (103 ) Non-GAAP professional services and other cost of revenue $ 1,717 $ 1,399 Non-GAAP Depreciation and Amortization in Cost of Revenue GAAP depreciation and amortization in cost of revenue $ 9,399 $ 6,625 Amortization of acquired intangible assets (3,140 ) (1,312 ) Non-GAAP depreciation and amortization in cost of revenue $ 6,259 $ 5,313 Non-GAAP Cost of Revenue GAAP cost of revenue $ 49,450 $ 38,555 Amortization of acquired intangible assets (3,140 ) (1,312 ) Stock-based compensation expense (1,122 ) (1,393 ) Non-GAAP cost of revenue $ 45,188 $ 35,850 Non-GAAP Gross Profit GAAP gross profit $ 121,331 $ 106,354 Amortization of acquired intangible assets 3,140 1,312 Stock-based compensation expense 1,122 1,393 Non-GAAP gross profit $ 125,593 $ 109,059 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, 2022 2021 Non-GAAP Sales and Marketing GAAP sales and marketing expense $ 39,862 $ 31,926 Stock-based compensation expense (2,588 ) (2,295 ) Non-GAAP sales and marketing expense $ 37,274 $ 29,631 Non-GAAP Research and Development GAAP research and development expense $ 33,582 $ 22,474 Stock-based compensation expense (6,174 ) (4,874 ) Non-GAAP research and development expense $ 27,408 $ 17,600 Non-GAAP General and Administrative GAAP general and administrative expense $ 32,569 $ 24,621 Stock-based compensation expense (2,729 ) (2,949 ) Transaction related and other expense (2,210 ) (1,439 ) Non-GAAP general and administrative expense $ 27,630 $ 20,233 Non-GAAP Depreciation and Amortization in Operating Expenses GAAP depreciation and amortization in operating expenses $ 7,269 $ 6,570 Amortization of acquired intangible assets (4,666 ) (4,422 ) Non-GAAP depreciation and amortization in operating expenses $ 2,603 $ 2,148 Non-GAAP Operating Expenses GAAP operating expenses $ 113,282 $ 85,591 Amortization of acquired intangible assets (4,666 ) (4,422 ) Stock-based compensation expense (11,491 ) (10,118 ) Transaction related and other expense (2,210 ) (1,439 ) Non-GAAP operating expenses $ 94,915 $ 69,612 Non-GAAP Income From Operations GAAP income from operations $ 8,049 $ 20,763 Amortization of acquired intangible assets 7,806 5,734 Stock-based compensation expense 12,613 11,511 Transaction related and other expense 2,210 1,439 Non-GAAP income from operations $ 30,678 $ 39,447 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, 2022 2021 Non-GAAP Net Income and Net Income Per Share GAAP net income $ 7,947 $ 15,286 GAAP provision for income taxes 652 5,394 GAAP income before income taxes 8,599 20,680 Amortization of acquired intangible assets 7,806 5,734 Stock-based compensation expense 12,613 11,511 Transaction related and other expense 2,210 1,439 Non-GAAP provision for income taxes (7,807 ) (9,841 ) Non-GAAP net income $ 23,421 $ 29,523 Non-GAAP net income per share attributable to common shareholders: Basic $ 0.14 $ 0.18 Diluted $ 0.14 $ 0.18 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 164,081,628 161,066,404 Non-GAAP weighted-average shares used in computing net income per share, diluted 167,535,063 164,734,402 Adjusted EBITDA GAAP net income $ 7,947 $ 15,286 Interest and other (income) expense, net (550 ) 83 Depreciation and amortization 16,668 13,195 Provision for income tax 652 5,394 Stock-based compensation expense 12,613 11,511 Transaction related and other expense 2,210 1,439 Adjusted EBITDA $ 39,540 $ 46,908 Adjusted EBITDA margin 23.2 % 32.4 % Free Cash Flow GAAP net cash provided by operating activities $ 15,070 $ 35,167 Less: Purchases of property and equipment (10,511 ) (10,681 ) Free cash flow $ 4,559 $ 24,486 MSP-F View source version on businesswire.com: https://www.businesswire.com/news/home/20220509005724/en/