Datto Announces Fourth Quarter and Full Year 2021 Financial Results

Fourth quarter subscription revenue grew 19 percent year-over-year to $153.2 million

ARR grew 21 percent year-over-year to $658.4 million

Datto Holding Corp. (Datto) (NYSE:MSP), the leading global provider of security and cloud-based software solutions purpose-built for Managed Service Providers (MSPs), today announced its financial results for the fourth quarter and full year ended December 31, 2021.

"We finished 2021 on a strong note with another quarter of accelerating growth," said Tim Weller, Datto's Chief Executive Officer. "The fourth quarter capped an exceptional year for Datto and our MSP partners. We exceeded all of our targets in our first full year as a public company and launched several new, highly differentiated products that help our MSP partners better secure digital assets on behalf of their SMB clients. MSPs now find themselves squarely in the security business, and Datto is right there with them. We further solidified Datto's leading position in security solutions with the early 2022 acquisition of cybersecurity firm Infocyte. 2022 is shaping up to be another exciting year for Datto as we continue to help our MSP partners on their security journey with our new products ramping and more on the way."

Recent Highlights

• Ended the quarter with more than 18,500 MSP partners, a net increase of 1,500 (+9%) from the previous year.
• Ended the quarter with average ARR per MSP of approximately $35,600, an increase of approximately $3,600 (+11%) from the previous year.
• Expanded the number of MSPs contributing over $100,000 ARR to 1,400, a 27% increase from 1,100 at December 31, 2020.
• Acquired cybersecurity company Infocyte, an innovator in Endpoint Detection and Response (EDR) technologies and Managed Detection and Response (MDR) services. The Infocyte team and technology augment Datto's capabilities within the critical Protect, Detect, and Respond stages of the NIST security framework, and add to the Company's rapidly expanding set of MSP-delivered security offerings.
• Released a tool for MSPs to combat the Apache Log4j vulnerability. This endpoint assessment software works with any Remote Monitoring and Management (RMM) solution and can uniquely enumerate potentially vulnerable systems, detect intrusion attempts, and inoculate Windows systems against Log4j attacks.
• In support of Datto's growth strategy and commitment to the DACH region (Germany, Austria, and Switzerland), the Company announced a partnership with Infinigate, a leading Value-Added Distributor of cybersecurity solutions in Europe. Infinigate has a large customer base in DACH and will strengthen our sales efforts in the region and help attract new MSPs to Datto through a proven selling model.
• Announced that Brooke Cunningham has joined the Company as Datto's Chief Marketing Officer and Emily Tabak Epstein has joined as General Counsel.

First Quarter and Full Year 2022 Financial Outlook

Datto is providing the following guidance for the first quarter and full-year 2022:

Datto Fourth Quarter and Full-Year 2021 Results Conference Call

    When: Wednesday, February 23, 2022

    Time: 5:00 pm ET 

    Conference ID: 8751783 

    Live Call: 1-888-660-6179 (US/Canada Toll-Free) or 1-929-203-1946 (International) 

    Replay: 1-800-770-2030 (US/Canada Toll-Free) or 1-647-362-9199 (International) 

    (The replay will be available approximately two hours after the completion of the live call) 

    Webcast: https://investors.datto.com

About Datto

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

Learn more at datto.com.

Forward-Looking Statements

This press release contains forward-looking statements that reflect Datto's current expectations and projections with respect to, among other things, its financial condition, results of operations, plans, objectives, future performance, and business. These statements may be preceded by, followed by or include the words ‘‘anticipate,'' ‘‘estimate,'' ‘‘expect,'' ‘‘project,'' ‘‘plan,'' ‘‘intend,'' ‘‘believe,'' ‘‘may,'' ‘‘will,'' ‘‘should,'' ‘‘can have,'' ‘‘likely'' and the negatives thereof and other words and terms of similar meaning. Further information on potential factors that could affect our results is included in our Annual Report on Form 10-K.

Forward-looking statements include all statements that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements.

There is no assurance that any forward-looking statements will materialize. You are cautioned not to place undue reliance on forward-looking statements, which reflect expectations only as of this date. Datto undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Non-GAAP Financial Measures

In addition to our results determined in accordance with generally accepted accounting principles in the United States ("GAAP"), we believe that the non-GAAP financial measures of Non-GAAP Subscription Cost of Revenue, Non-GAAP Device Cost of Revenue, Non-GAAP Professional Services and Other Cost of Revenue, Non-GAAP Depreciation and Amortization in Cost of Revenue, Non-GAAP Cost of Revenue, Non-GAAP Gross Profit, Non-GAAP Sales and Marketing expense, Non-GAAP Research and Development expense, Non-GAAP General and Administrative expense, Non-GAAP Depreciation and Amortization in Operating Expenses, Non-GAAP Operating Expenses, Non-GAAP Income from Operations, Non-GAAP Net Income and Non-GAAP Net Income Per Share, Adjusted EBITDA, and Free Cash Flow are useful in evaluating our operating performance. Certain of these measures exclude interest and other (income) expense, net, loss on extinguishment of debt, depreciation and amortization, stock-based compensation expense, restructuring expense and transaction related and other expense. In addition, for Non-GAAP Net Income we utilize a non-GAAP tax rate of 25%, which we believe reflects our normalized effective tax rate. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies.

Reconciliation tables of the most directly comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this press release.

Datto is not providing a quantitative reconciliation of forward-looking guidance of Adjusted EBITDA to its most directly comparable GAAP measure because certain items are out of Datto's control or cannot be reasonably predicted, as the items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance period. Accordingly, a reconciliation for forward-looking Adjusted EBITDA is not available without unreasonable effort.

For more information about Datto, including supplemental financial information, please visit the investor relations website at investors.datto.com.