DATTO HOLDING CORP. - FORM 8-K - EX-99.1 - May 12, 2021

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EXHIBIT 99.1
Datto Announces First Quarter 2021 Financial Results
First quarter subscription revenue grew 17 percent year-over-year to $135.6 million
ARR grew 15 percent year-over-year to $572.5 million
Norwalk, CT – May 12, 2021—Datto Holding Corp. (Datto) (NYSE: MSP), the leading global provider of cloud-based software and security solutions purpose-built for delivery by managed service providers (MSPs), today announced its financial results for the first-quarter ended March 31, 2021.
“Our first quarter results represented a great start to the year,” said Tim Weller, Datto’s Chief Executive Officer. “We delivered subscription revenue growth of 17% year over year, added 300 net new partners during the quarter and drove another sequential increase in ARR growth, so the business continues to accelerate. Looking ahead to the rest of 2021, we remain focused on our investments in cloud and security as we give our MSP partners the ability to secure SMB digital assets in a hybrid cloud world no matter where the data and applications live. We see good momentum across the product suite and we are well positioned to capitalize on the large and growing market opportunity ahead of us.”
First Quarter 2021 Financial Results
(In Millions)  Q1 2021 Q1 2020 Y/Y Change
Subscription Revenue(1)
  $135.6$116.0 17%
Total Revenue(1)
  $144.9$124.7 16%
ARR(2)
  $572.5$498.4 15%
Gross Margin  73%70% +341 bps
Net Income  $15.3$1.4 1030%
Adjusted EBITDA(3)
  $46.9$25.0 88%
Net Cash Provided by Operating Activities$35.2$(1.3)NM
Free Cash Flow(3)
  $24.5$(15.2) NM
1Subscription Revenue and Total Revenue include benefits from favorable foreign exchange rates of approximately 3%.
2Annual 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.
3A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”
Recent Highlights

•Ended the quarter with more than 17,300 MSP partners, a net increase of 300 in the quarter.
•Expanded MSPs contributing over $100,000 ARR to 1,150 up from 1,000 at March 31, 2020.
•Launched Datto Commerce in North America. By simplifying how MSPs quote, sell and procure, Datto Commerce improves operational efficiency and productivity for MSPs.
•Hosted our fourth MSP Tech Day, with a focus on cyber resilience. The event delivered a deep dive into cybersecurity, business continuity, and incident response to help MSPs and their small and medium business (SMB) clients protect against growing cyber threats.
•Announced the findings of a commissioned study by Forrester highlighting that Datto’s integrated solutions yielded an average return on investment (ROI) of 256% within a three year period for MSPs, with the platform paying for itself in less than six months.
•Recognized as a Strategic, high-performance RMM/PSA vendor by Canalys in their recent RMM/PSA vendor Point of View report.
•Closed the acquisition of BitDam, an Israel-based cyber security company that protects SMBs against ransomware, malware, and phishing threats. BitDam’s elite team and leading cyber threat detection technology significantly enhance Datto’s cyber resilience solutions.
 
Second Quarter and Full Year 2021 Financial Outlook
Datto is providing the following guidance for the first quarter and full-year 2021:
 
   Q2 2021 Outlook  FY 2021 Outlook
Revenue  $146 - $148 million  $594 - $600 million
Adjusted EBITDA  $34 - $35 million  $134 - $138 million






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Datto First Quarter 2021 Results Conference Call
When: Wednesday, May 12, 2021
Time: 5:00 pm ET
Conference ID: 1110219
Live Call: 1-833-312-1358 (US/Canada Toll-Free) or 1-236-712-2458 (International)
Replay: 1-800-585-8367 (US/Canada Toll-Free) or 1- 416-621-4642 (International)
(The replay will be available approximately two hours after the completion of the live call until 11:59 pm ET on May 19, 2021)
Webcast: https://investors.datto.com
About Datto
As the world’s leading provider of cloud-based software and security solutions purpose-built for delivery by managed service providers (MSPs), Datto believes there is no limit to what small and medium businesses (SMBs) can achieve with the right technology.

Datto’s proven Unified Continuity, Networking, and Business Management solutions drive cyber resilience, efficiency, and growth for MSPs. Delivered via an integrated platform, Datto’s solutions help its global ecosystem of MSP partners serve over one million businesses around the world. From proactive dynamic detection and prevention to fast, flexible recovery from cyber incidents, Datto’s solutions defend against costly downtime and data loss in servers, virtual machines, cloud applications, or anywhere data resides.

Since its founding in 2007, Datto has won numerous awards for its product excellence, superior technical support, rapid growth, and for fostering an outstanding workplace. With headquarters in Norwalk, Connecticut, Datto has global offices in Australia, Canada, China, Denmark, Germany, Israel, the Netherlands, Singapore, and the United Kingdom.
Learn more at datto.com.
Forward-Looking Statements
This press release contains forward-looking statements that reflect Datto’s current expectations and projections with respect to, among other things, its financial condition, results of operations, plans, objectives, future performance, and business. These statements may be preceded by, followed by or include the words ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘project,’’ ‘‘plan,’’ ‘‘intend,’’ ‘‘believe,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘can have,’’ ‘‘likely’’ and the negatives thereof and other words and terms of similar meaning. Further information on potential factors that could affect our results is included in our Annual Report on Form 10-K.
Forward-looking statements include all statements that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements.
 
There is no assurance that any forward-looking statements will materialize. You are cautioned not to place undue reliance on forward-looking statements, which reflect expectations only as of this date. Datto undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.







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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.
 







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DATTO HOLDING CORP.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
 
 Three Months Ended March 31, 
 2021 2020 
Revenue:
Subscription$135,590 $115,995  
Device8,385 8,081  
Professional services and other934 587  
Total revenue144,909 124,663  
Cost of revenue:
Subscription20,930 21,766 
Device9,498 9,117 
Professional services and other1,502 1,538 
Depreciation and amortization6,625 4,994 
Total cost of revenue38,555 37,415 
Gross profit106,354 87,248 
Operating expenses:
Sales and marketing31,926 31,957 
Research and development22,474 16,733 
General and administrative24,621 21,784 
Depreciation and amortization6,570 6,917 
Total operating expenses85,591 77,391 
Income from operations20,763 9,857 
Other expense:
Interest expense102 9,006 
Other (income) expense, net(19)1,329 
Total other expense83 10,335 
Income (loss) before income taxes20,680 (478)
(Provision for) benefit from income taxes(5,394)1,831 
Net income$15,286 $1,353 
  
Net income per share attributable to common stockholders:
Basic$0.09 $0.01 
Diluted$0.09 $0.01 
Weighted-average shares used in computing net income per share:
Basic161,066,404 135,386,420 
Diluted164,734,402 136,268,713 
   
 






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DATTO HOLDING CORP.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited) 

 March 31,December 31,  
 2021 2020 
ASSETS
Current assets
Cash and cash equivalents$147,819 $168,877  
Restricted cash1,375 1,536  
Accounts receivable, net12,920 13,946  
Inventory19,332 13,811  
Prepaid expenses and other current assets32,089 28,316  
Total current assets213,535 226,486  
Property and equipment, net95,408 91,876  
Operating lease assets
33,881 — 
Goodwill1,143,796 1,120,954  
Intangible assets, net308,711 287,395  
Other assets70,582 66,560  
Total assets$1,865,913 $1,793,271  
    
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable$10,425 $7,574  
Accrued expenses and other current liabilities48,845 39,461  
Deferred revenue21,838 23,763  
Total current liabilities81,108 70,798  
Deferred revenue, noncurrent3,423 3,322  
Deferred income taxes27,895 18,947  
Operating lease liabilities, noncurrent
35,303 — 
Other long-term liabilities3,814 11,736  
Total liabilities151,543 104,803  
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock161 161  
Additional paid-in capital1,767,015 1,755,387 
Treasury stock(3,621)(3,621)
Accumulated deficit(49,940)(65,226)
Accumulated other comprehensive income755 1,767 
Total stockholders’ equity1,714,370 1,688,468  
Total liabilities and stockholders’ equity$1,865,913 $1,793,271  
    
 
 








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DATTO HOLDING CORP.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 Three Months Ended March 31, 
 20212020 
OPERATING ACTIVITIES
Net income$15,286 $1,353 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation7,461 6,334 
Amortization of acquired intangible assets5,734 5,577 
Amortization of debt issuance costs84 421 
Reserve for inventory obsolescence36 — 
Non-cash operating lease expense1,870 — 
Stock-based compensation11,511 1,914 
Provision for bad debt1,211 799 
Deferred income taxes4,717 (2,895)
Unrealized foreign exchange(626)1,938 
Changes in operating assets and liabilities:
Accounts receivable(160)(3,129)
Inventory(5,559)(7,010)
Prepaid expenses and other current assets(3,820)(4,256)
Other assets(4,083)(584)
Accounts payable, accrued expenses and other3,535 (2,563)
Deferred revenue(2,030)824 
Net cash provided by (used in) operating activities35,167 (1,277)
INVESTING ACTIVITIES
Purchase of property and equipment(10,681)(13,920)
Acquisition of business, net of cash acquired(45,486)— 
Net cash used in investing activities(56,167)(13,920)
FINANCING ACTIVITIES
Proceeds from debt— 32,100 
Repayments of debt and capital leases(28)(1,578)
Capitalized transaction costs(414)(724)
Proceeds from stock option exercises177 2,500 
Net cash (used in) provided by financing activities(265)32,298 
Effect of exchange rate changes on cash46 (1,022)
Net increase (decrease) in cash(21,219)16,079 
Cash and cash equivalents and restricted cash, beginning of year170,413 29,066 
Cash and cash equivalents and restricted cash, end of period$149,194 $45,145 
Reconciliation of cash and restricted cash:
Cash$147,819 $43,836  
Restricted cash$1,375 $1,309  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes$226 $31  
Cash paid for interest$— $8,523  
NON-CASH INVESTING AND FINANCING ACTIVITIES
Purchase of property and equipment included in accounts payable$271 $487  
Unpaid initial public offering costs in total current liabilities$270 $2,034  
 


 






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DATTO HOLDING CORP.
Non-GAAP Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
 
 Three Months Ended March 31, 
 20212020 
Revenue:
Subscription$135,590 $115,995  
Device8,385 8,081  
Professional services and other934 587  
Total revenue144,909 124,663  
Cost of revenue:
Subscription19,702 21,746  
Device9,436 9,117  
Professional services and other1,399 1,538  
Depreciation and amortization5,313 3,819  
Total cost of revenue35,850 36,220  
Gross profit109,059 88,443  
Operating expenses:
Sales and marketing29,631 31,313  
Research and development17,600 16,423  
General and administrative20,233 19,543  
Depreciation and amortization2,148 2,515  
Total operating expenses69,612 69,794  
Income from operations39,447 18,649  
Other expense:
Interest expense102 9,006  
Other (income) expense, net(19)1,329  
Total other expense83 10,335  
Income before income taxes39,364 8,314  
Provision for income taxes(9,841)(2,079)
Net income$29,523 $6,235  
 
Net income per share attributable to common stockholders:
Basic$0.18 $0.05  
Diluted$0.18 $0.05  
Weighted-average shares used in computing net income per share:
Basic161,066,404 135,386,420  
Diluted164,734,402 136,268,713  
 













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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, 
 20212020 
Non-GAAP Subscription Cost of Revenue 
GAAP subscription cost of revenue$20,930 $21,766 
Stock-based compensation expense(1,228)(20)
Non-GAAP subscription cost of revenue$19,702 $21,746 
Non-GAAP Device Cost of Revenue
GAAP device cost of revenue$9,498 $9,117 
Stock-based compensation expense(62)— 
Non-GAAP device gross cost of revenue$9,436 $9,117 
Non-GAAP Professional Services and Other Cost of Revenue
GAAP professional services and other cost of revenue$1,502 $1,538 
Stock-based compensation expense(103)— 
Non-GAAP professional services and other cost of revenue$1,399 $1,538 
Non-GAAP Depreciation and Amortization in Cost of Revenue
GAAP depreciation and amortization in cost of revenue$6,625 $4,994 
Amortization of acquired intangible assets(1,312)(1,175)
Non-GAAP depreciation and amortization in cost of revenue$5,313 $3,819 
Non-GAAP Cost of Revenue
GAAP cost of revenue$38,555 $37,415 
Amortization of acquired intangible assets(1,312)(1,175)
Stock-based compensation expense(1,393)(20)
Non-GAAP cost of revenue$35,850 $36,220 
   
Non-GAAP Gross Profit 
GAAP gross profit$106,354 $87,248 
Amortization of acquired intangible assets1,312 1,175 
Stock-based compensation expense1,393 20 
Non-GAAP gross profit$109,059 $88,443 
Non-GAAP gross margin75.3 %70.9 %
 






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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,
 20212020
Non-GAAP Sales and Marketing 
GAAP sales and marketing expense$31,926 $31,957 
Stock-based compensation expense(2,295)(644)
Non-GAAP sales and marketing expense$29,631 $31,313 
Non-GAAP sales and marketing as a % of revenue20.4 %25.1 %
Non-GAAP Research and Development 
GAAP research and development expense$22,474 $16,733 
Stock-based compensation expense(4,874)(310)
Non-GAAP research and development expense$17,600 $16,423 
Non-GAAP research and development as a % of revenue12.1 %13.2 %
Non-GAAP General and Administrative 
GAAP general and administrative expense$24,621 $21,784 
Stock-based compensation expense(2,949)(940)
Transaction related and other expense(1,439)(1,301)
Non-GAAP general and administrative expense$20,233 $19,543 
Non-GAAP general and administrative as a % of revenue14.0 %15.7 %
Non-GAAP Depreciation and Amortization in Operating Expenses 
GAAP depreciation and amortization in operating expenses$6,570 $6,917 
Amortization of acquired intangible assets(4,422)(4,402)
Non-GAAP depreciation and amortization in operating expense$2,148 $2,515 
Non-GAAP depreciation and amortization in operating expense as a % of revenue1.5 %2.0 %
Non-GAAP Operating Expenses 
GAAP operating expenses$85,591 $77,391 
Amortization of acquired intangible assets(4,422)(4,402)
Stock-based compensation expense(10,118)(1,894)
Transaction related and other expense(1,439)(1,301)
Non-GAAP operating expenses$69,612 $69,794 
Non-GAAP operating expenses as a % of revenue48.0 %56.0 %
Non-GAAP Income From Operations 
GAAP income from operations$20,763 $9,857 
Amortization of acquired intangible assets5,734 5,577 
Stock-based compensation expense11,511 1,914 
Transaction related and other expense1,439 1,301 
Non-GAAP income from operations$39,447 $18,649 
Non-GAAP operating margin27.2 %15.0 %
 













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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,
 20212020
Non-GAAP Net Income and Net Income Per Share 
GAAP net income$15,286 $1,353 
GAAP provision for (benefit from) income taxes5,394 (1,831)
GAAP income (loss) before income taxes20,680 (478)
Amortization of acquired intangible assets5,734 5,577 
Stock-based compensation expense11,511 1,914 
Transaction related and other expense1,439 1,301 
Non-GAAP provision for income taxes(9,841)(2,079)
Non-GAAP net income$29,523 $6,235 
Non-GAAP net income per share attributable to common shareholders: 
Basic$0.18 $0.05 
Diluted$0.18 $0.05 
Weighted-Average Shares used in computing Non-GAAP Net Income per Share: 
GAAP and Non-GAAP weighted-average shares used in computing net income per share, basic161,066,404 135,386,420 
GAAP and Non-GAAP weighted-average shares used in computing net income per share, diluted164,734,402 136,268,713 
   
Adjusted EBITDA 
GAAP net income$15,286 $1,353 
Interest and other expense, net83 10,335 
Depreciation and amortization13,195 11,911 
Provision for (benefit from) income tax5,394 (1,831)
Stock-based compensation expense11,511 1,914 
Transaction related and other expense1,439 1,301 
Adjusted EBITDA$46,908 $24,983 
Adjusted EBITDA margin32.4 %20.0 %
Free Cash Flow 
GAAP net cash provided by operating activities$35,167 $(1,277)
Less: Purchases of property and equipment(10,681)(13,920)
Free cash flow$24,486 $(15,197)
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Media Contact:
Shoba V. Lemoine
communications@datto.com
Investor Contact:
Ryan Burkart
ir@datto.com
MSP-F
 







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DATTO HOLDING CORP. Reports