Datto Announces Third Quarter 2021 Financial Results

November 10, 2021

Third quarter subscription revenue grew 20 percent year-over-year to $146.8 million. ARR grew 20 percent year-over-year to $626.7 million.

Norwalk, CT – November 10, 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 third quarter ended September 30, 2021.

“The third quarter was another record quarter for Datto,” said Tim Weller, Datto’s Chief Executive Officer. “Our revenue growth exceeded 20% for a second consecutive quarter and our subscription revenue growth continued to accelerate. We grew our MSP partners to over 18,200, and ARR per MSP continued to expand. In addition, we launched two significant new products in security and cloud – SaaS Defense, and Datto Continuity for Microsoft Azure – that both meet the critical need of securing digital assets for our MSP partners and their SMB clients. These new products solidify our leading position in providing cyber resilience to our MSP partners, expand our addressable market, and will contribute to our continued growth in years to come. Looking ahead, I’m as optimistic as ever about the large opportunity in front of us to empower our MSP partners to help their SMB clients thrive in an increasingly complex IT world.”

Third Quarter 2021 Financial Results

(In Millions)Q3 2021Q3 2020Y/Y Change
Subscription Revenue(1)$146.8$122.820%
Total Revenue(1)$157.9$130.721%
Gross Margin71%73%(153 bps)
Non-GAAP Gross Margin(3)73%74%(9 bps)
Net Income$13.5$19.5(31)%
Adjusted EBITDA(3)$43.8$45.8(4)%
Net Cash Provided by Operating Activities$32.0$50.1(36)%
Free Cash Flow(3)$20.3$43.6(53)%
1Subscription and Total Revenues Y/Y percentage change includes benefits from favorable foreign exchange rates of approximately 1.5%.
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 18,200 MSP partners, a net increase of 400 from the previous quarter.
  • Expanded the number of MSPs contributing over $100,000 ARR to 1,300, a 24% increase from 1,050 at September 30, 2020.
  • Launched Datto Continuity for Microsoft Azure (DCMA). DCMA is a comprehensive Business Continuity and Disaster Recovery (BCDR) solution that protects MSPs and their clients’ data in the public cloud in the event of malicious ransomware attacks, security breaches, and vendor outages.
  • Launched Datto’s SaaS Defense security product. SaaS Defense is an advanced threat protection and spam-filtering solution that provides MSPs with patented technology to proactively detect and prevent malicious malware, phishing, and Business Email Compromise (BEC) attacks that target Microsoft Exchange, OneDrive, SharePoint, and Teams. The product is based on patented technology obtained in Datto’s acquisition of Israel-based cyber threat-detection company BitDam earlier this year.
  • Hosted DattoCon NOW, Datto’s largest event in its history, attracting more than 4,700 virtual attendees from 50 countries. The overarching theme was Security and the event featured keynote addresses and other presentations covering everything from technology trends and new product launches to security best practices. MSPs were able to learn from peers, industry thought leaders like Microsoft, and top vendors from across the channel.
  • Achieved notably high marks for the security of Datto RMM in an independent third-party assessment of software applications by Synopsis. The assessment was based on the industry-standard Building Security in Maturity Model (BSIMM). Datto is the only MSP-focused company that participates in the assessment, and Datto RMM is the only channel RMM that has been evaluated under the BSIMM framework. Other participants include enterprises such as Microsoft, Cisco, Verizon, Aetna, Johnson & Johnson, TD Ameritrade, US Bank, Bank of America, and many other large institutions.

Fourth Quarter and Full Year 2021 Financial Outlook

Datto is providing the following guidance for the fourth quarter and full-year 2021:

Q4 2021 OutlookFY 2021 Outlook
Revenue$161 – $163 million$615 – $617 million
Adjusted EBITDA$38- $40 million$174 – $176 million

Datto Third Quarter 2021 Results Conference Call

When: Wednesday, November 10, 2021
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)

About Datto
As the world’s leading provider of cloud-based software and security solutions purpose-built for delivery by managed service providers (MSPs), Datto believes there is no limit to what small and medium businesses (SMBs) can achieve with the right technology. Datto’s proven Unified Continuity, Networking, and Business Management solutions drive cyber resilience, efficiency, and growth for MSPs. Delivered via an integrated platform, Datto’s solutions help its global ecosystem of MSP partners serve over one million businesses around the world. From proactive dynamic detection and prevention to fast, flexible recovery from cyber incidents, Datto’s solutions defend against costly downtime and data loss in servers, virtual machines, cloud applications, or anywhere data resides. Since its founding in 2007, Datto has won numerous awards for its product excellence, superior technical support, rapid growth, and for fostering an outstanding workplace. With headquarters in Norwalk, Connecticut, Datto has global offices in Australia, Canada, China, Denmark, Germany, Israel, the Netherlands, Singapore, and the United Kingdom.

Learn more at datto.com.

Forward-Looking Statements

This press release contains forward-looking statements that reflect Datto’s current expectations and projections with respect to, among other things, its financial condition, results of operations, plans, objectives, future performance, and business. These statements may be preceded by, followed by or include the words ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘project,’’ ‘‘plan,’’ ‘‘intend,’’ ‘‘believe,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘can have,’’ ‘‘likely’’ and the negatives thereof and other words and terms of similar meaning. Further information on potential factors that could affect our results is included in our Annual Report on Form 10-K. Forward-looking statements include all statements that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. There is no assurance that any forward-looking statements will materialize. You are cautioned not to place undue reliance on forward-looking statements, which reflect expectations only as of this date. Datto undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Non-GAAP Financial Measures

In addition to our results determined in accordance with generally accepted accounting principles in the United States (“GAAP”), we believe that the non-GAAP financial measures of Non-GAAP Subscription Cost of Revenue, Non-GAAP Device Cost of Revenue, Non-GAAP Professional Services and Other Cost of Revenue, Non-GAAP Depreciation and Amortization in Cost of Revenue, Non-GAAP Cost of Revenue, Non-GAAP Gross Profit, Non-GAAP Sales and Marketing expense, Non-GAAP Research and Development expense, Non-GAAP General and Administrative expense, Non-GAAP Depreciation and Amortization in Operating Expenses, Non-GAAP Operating Expenses, Non-GAAP Income from Operations, Non-GAAP Net Income and Non-GAAP Net Income Per Share, Adjusted EBITDA, and Free Cash Flow are useful in evaluating our operating performance. Certain of these measures exclude interest and other (income) expense, net, loss on extinguishment of debt, depreciation and amortization, stock-based compensation expense, restructuring expense and transaction related and other expense. In addition, for Non-GAAP Net Income we utilize a non-GAAP tax rate of 25%, which we believe reflects our normalized effective tax rate. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. Reconciliation tables of the most directly comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this press release. Datto is not providing a quantitative reconciliation of forward-looking guidance of Adjusted EBITDA to its most directly comparable GAAP measure because certain items are out of Datto’s control or cannot be reasonably predicted, as the items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance period. Accordingly, a reconciliation for forward-looking Adjusted EBITDA is not available without unreasonable effort. For more information about Datto, including supplemental financial information, please visit the investor relations website at investors.datto.com.