Business Wire | Mar 11, 2021 04:18PM EST

Datto Announces Fourth Quarter and Full Year 2020 Financial Results

Mar. 11, 2021

NORWALK, Conn.--(BUSINESS WIRE)--Mar. 11, 2021--Datto Holding Corp. ("Datto") (NYSE: MSP), the leading global provider of cloud-based software and technology solutions purpose-built for delivery by managed service providers (MSPs), today announced its financial results for the fourth-quarter and full year ended December 31, 2020.

"2020 was a milestone year for Datto. We completed our first year as a public company, delivering full year subscription revenue growth of 18%, expanding cash flow margins and deepening our strong, global MSP partner relationships," said Tim Weller, Datto's Chief Executive Officer. "Our strong fourth quarter and full year performance is a testament to the power of Datto's MSP-centric platform and the durability of our recurring revenue subscription model, even during these challenging times. Our sequential quarterly ARR growth of $20 million is continued evidence of the reacceleration of our business and the tailwinds from the digital transformation of small and medium businesses. Looking ahead to 2021 in this increasingly hybrid cloud environment, we remain focused on providing MSPs and their SMB clients with best-in-class security, continuity, and remote monitoring and management solutions for complete cyber resilience. Cloud and security have been at the core of Datto's mission to protect digital assets since inception. Our recent acquisition of BitDam further advances the value we provide to our network of more than 17,000 MSP partners and we are well positioned take advantage of the large opportunities in front of us."

Fourth Quarter and Full Year 2020 Financial Results

(In Millions) Q4 Q4 Y/Y FY FY Y/Y 2020 2019 Change 2020 2019 Change

Subscription Revenue $129.0 $111.1 16% $485.3 $412.2 18%

Total Revenue $139.0 $126.1 10% $518.8 $458.8 13%

ARR^(1) $542.8 $474.8 14% $542.8 $474.8 14%

Gross Margin 69% 64% +498bps 71% 66% +534bps

Net Income (Loss) $(7.2) $(8.2) 13% $22.5 $ NM (31.2)

Adjusted EBITDA^(2) $40.8 $17.1 139% $150.5 $84.6 78%

Net cash provided by $34.6 $4.6 NM $108.7 $11.2 NMoperating activities

Free Cash Flow^(2) $22.7 $(5.8) NM $68.2 $ NM (27.0)

1

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.

2

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

* Acquired BitDam, an Israel-based cyber security company that protects small and medium businesses (SMBs) against ransomware, malware, and phishing threats. BitDam's best-in-class technology and team significantly enhance Datto's cyber resilience solutions for SMBs. * Released RMM Ransomware Detection to monitor, prevent and remediate ransomware attacks, giving MSPs an extra layer of security. * Joined the Institute for Security and Technology's Multi-Sector Ransomware Task Force in the fight against cyber crime. * Hosted Datto's third virtual MSP Technology Day dedicated to highlighting operational efficiency and cyber security themes for MSPs. * Published the 5th annual State of the Channel Ransomware Report surveying more than 1,000 MSPs, which found that cyber security is MSPs' number one concern and phishing is the leading attack vector. * Ended the quarter with more than 17,000 MSP partners, an increase of 400 year-over-year.

First Quarter and Full Year 2021 Financial Outlook

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

^ Annual run-rate revenue (ARR) is the annualized value of all subscription1 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.

A reconciliation of GAAP to non-GAAP financial measures is provided in the^ financial statement tables included in this press release. An explanation of2 these measures is also included under the heading "Non-GAAP Financial Measures."

Recent Highlights

* Acquired BitDam, an Israel-based cyber security company that protects small and medium businesses (SMBs) against ransomware, malware, and phishing threats. BitDam's best-in-class technology and team significantly enhance Datto's cyber resilience solutions for SMBs. * Released RMM Ransomware Detection to monitor, prevent and remediate ransomware attacks, giving MSPs an extra layer of security. * Joined the Institute for Security and Technology's Multi-Sector Ransomware Task Force in the fight against cyber crime. * Hosted Datto's third virtual MSP Technology Day dedicated to highlighting operational efficiency and cyber security themes for MSPs. * Published the 5th annual State of the Channel Ransomware Report surveying more than 1,000 MSPs, which found that cyber security is MSPs' number one concern and phishing is the leading attack vector. * Ended the quarter with more than 17,000 MSP partners, an increase of 400 year-over-year.

First Quarter and Full Year 2021 Financial Outlook

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

Q1 2021 Outlook FY 2021 Outlook

Revenue $142 - $144 million $582 - $590 million

Adjusted EBITDA $45 - $46 million $130 - $135 million

Datto Fourth Quarter and Full Year 2020 Financial Results Conference Call

When: Thursday, March 11, 2020 Time: 5:00 pm ET Conference ID: 6343809 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 March 18, 2021) Webcast: https://investors.datto.com

About Datto

As the world's leading provider of cloud-based software and technology solutions purpose-built for delivery by managed service providers (MSPs), Datto believes there is no limit to what small and medium businesses can achieve with the right technology. Datto offers Unified Continuity, Networking, and Business Management solutions and has created a unique ecosystem of MSP partners. These partners provide Datto solutions to over one million businesses across the globe. Since its founding in 2007, Datto has won awards for its rapid growth, product excellence, superior technical support, and for fostering an outstanding workplace. With headquarters in Norwalk, Connecticut, Datto has global offices in the United Kingdom, the Netherlands, Denmark, Germany, Canada, Australia, China, and Singapore. 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, restructuring expense and transaction-related and other expense. In addition, for Non-GAAP Net Income we utilize a non-GAAP tax rate of 25%, which we believe reflects our normalized effective tax rate. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies.

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

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

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

DATTO HOLDING CORP.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)



Three Months Ended Years Ended December 31, December 31,

2020 2019 2020 2019

Revenue:

Subscription $ 128,978 $ 111,060 $ 485,326 $ 412,167

Device 9,104 14,470 30,202 44,052

Professionalservices and 910 596 3,257 2,533 other

Total revenue 138,992 126,126 518,785 458,752

Cost of revenue:

Subscription 23,677 21,594 84,463 82,066

Device 11,143 17,342 37,607 53,933

Professionalservices and 1,845 1,689 6,244 5,563 other

Depreciation and 6,144 4,489 21,890 15,745 amortization

Total cost of 42,809 45,114 150,204 157,307 revenue

Gross profit 96,183 81,012 368,581 301,445

Operating expenses:

Sales and 31,962 31,269 115,790 110,441 marketing

Research and 30,932 16,535 78,932 60,459 development

General and 26,279 23,348 85,668 73,903 administrative

Depreciation and 6,623 6,911 27,223 27,417 amortization

Total operating 95,796 78,063 307,613 272,220 expenses

Income from 387 2,949 60,968 29,225 operations

Other expense:

Interest expense 1,758 9,306 25,348 43,437

Loss onextinguishment 8,488 - 8,488 19,231 of debt

Other (income) (2,026 ) 254 (3,428 ) 256 expense, net

Total other 8,220 9,560 30,408 62,924 expense

Income (loss)before income (7,833 ) (6,611 ) 30,560 (33,699 ) taxes

(Provision for)benefit from 665 (1,619 ) (8,062 ) 2,511 income taxes

Net income $ (7,168 ) $ (8,230 ) $ 22,498 $ (31,188 ) (loss)



Net income(loss) per shareattributable to commonstockholders:

Basic $ (0.05 ) $ (0.06 ) $ 0.16 $ (0.23 )

Diluted $ (0.05 ) $ (0.06 ) $ 0.16 $ (0.23 )

Weighted-averageshares used incomputing net income (loss)per share:

Basic 154,968,918 135,262,441 140,404,763 135,212,597

Diluted 154,968,918 135,262,441 142,514,848 135,212,597



DATTO HOLDING CORP.

Consolidated Balance Sheets

(in thousands)

(unaudited)

December 31,

2020

2019

ASSETS

Current assets

Cash

$

168,877

$

27,597

Restricted cash

1,536

1,469

Accounts receivable, net

13,946

20,841

Inventory

13,811

12,415

Prepaid expenses and other current assets

28,316

20,385

Total current assets

226,486

82,707

Property and equipment, net

91,876

80,746

Goodwill

1,120,954

1,118,856

Intangible assets, net

287,395

306,685

Other assets

66,560

53,298

Total assets

$

1,793,271

$

1,642,292

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

7,574

$

16,049

Accrued expenses and other current liabilities

39,461

33,909

Long-term debt, current portion

-

5,500

Deferred revenue

23,763

24,254

Total current liabilities

70,798

79,712

Long-term debt

-

546,499

Deferred revenue, noncurrent

3,322

3,798

Deferred income taxes

18,947

10,120

Other long-term liabilities

11,736

9,860

Total liabilities

104,803

649,989

Commitments and contingencies

STOCKHOLDERS' EQUITY

Common stock

136

136

Additional paid-in capital

1,755,412

1,083,082

Treasury stock

(3,621

)

(3,621

)

Accumulated deficit

(65,226

)

(87,724

)

Accumulated other comprehensive income

1,767

430

Total stockholders' equity

1,688,468

992,303

Total liabilities and stockholders' equity

$

1,793,271

$

1,642,292

DATTO HOLDING CORP.

Consolidated Balance Sheets

(in thousands)

(unaudited)

December 31,

2020 2019

ASSETS

Current assets

Cash $ 168,877 $ 27,597

Restricted cash 1,536 1,469

Accounts receivable, net 13,946 20,841

Inventory 13,811 12,415

Prepaid expenses and other current assets 28,316 20,385

Total current assets 226,486 82,707

Property and equipment, net 91,876 80,746

Goodwill 1,120,954 1,118,856

Intangible assets, net 287,395 306,685

Other assets 66,560 53,298

Total assets $ 1,793,271 $ 1,642,292



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable $ 7,574 $ 16,049

Accrued expenses and other current 39,461 33,909 liabilities

Long-term debt, current portion - 5,500

Deferred revenue 23,763 24,254

Total current liabilities 70,798 79,712

Long-term debt - 546,499

Deferred revenue, noncurrent 3,322 3,798

Deferred income taxes 18,947 10,120

Other long-term liabilities 11,736 9,860

Total liabilities 104,803 649,989

Commitments and contingencies

STOCKHOLDERS' EQUITY

Common stock 136 136

Additional paid-in capital 1,755,412 1,083,082

Treasury stock (3,621 ) (3,621 )

Accumulated deficit (65,226 ) (87,724 )

Accumulated other comprehensive income 1,767 430

Total stockholders' equity 1,688,468 992,303

Total liabilities and stockholders' equity $ 1,793,271 $ 1,642,292



DATTO HOLDING CORP.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Years Ended December 31

2020

2019

OPERATING ACTIVITIES

Net income (loss)

$

22,498

$

(31,188

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation

26,434

20,562

Amortization of acquired intangible assets

22,679

22,600

Loss on extinguishment of debt

8,488

19,231

Amortization of debt issuance costs

1,428

1,879

Reserve for inventory obsolescence

1,517

3,168

Stock-based compensation

33,460

12,215

Provision for bad debt

6,217

6,634

Deferred income taxes

7,770

(6,071

)

Unrealized foreign exchange

(1,204

)

(18

)

Changes in operating assets and liabilities:

Accounts receivable

769

(10,837

)

Inventory

(2,826

)

(3,538

)

Prepaid expenses and other current assets

(7,498

)

(6,073

)

Other assets

(12,952

)

(24,172

)

Accounts payable, accrued expenses and other

3,073

14,786

Deferred revenue

(1,155

)

(7,943

)

Net cash provided by operating activities

108,698

11,235

INVESTING ACTIVITIES

Purchase of property and equipment

(40,466

)

(38,226

)

Acquisition of business, net of cash acquired

(4,371

)

-

Net cash used in investing activities

(44,837

)

(38,226

)

FINANCING ACTIVITIES

Proceeds from debt

32,100

562,250

Repayments of debt

(594,727

)

(523,523

)

Debt issuance costs

(1,178

)

(8,775

)

Prepayment penalty on debt

-

(10,400

)

Proceeds from initial public offering, net of underwriting costs

641,643

-

Capitalized transaction costs

(5,256

)

-

Proceeds from stock option exercises

3,150

291

Repurchase of common stock and settlement of stock-based payment awards

(53

)

(1,338

)

Net cash provided by financing activities

75,679

18,505

Effect of exchange rate changes on cash

1,807

294

Net increase (decrease) in cash

141,347

(8,192

)

Cash and restricted cash, beginning of year

29,066

37,258

Cash and restricted cash, end of period

$

170,413

$

29,066

Reconciliation of cash and restricted cash:

Cash

$

168,877

$

27,597

Restricted cash

$

1,536

$

1,469

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for income taxes

$

890

$

2,333

Cash paid for interest

$

24,037

$

43,624

NON-CASH INVESTING AND FINANCING ACTIVITIES

Purchase of property and equipment included in accounts payable

$

17

$

3,051

Deferred initial public offering costs in accounts payable and accrued liabilities

$

684

$

1,885

DATTO HOLDING CORP.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Years Ended December 31

2020 2019

OPERATING ACTIVITIES

Net income (loss) $ 22,498 $ (31,188 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation 26,434 20,562

Amortization of acquired intangible assets 22,679 22,600

Loss on extinguishment of debt 8,488 19,231

Amortization of debt issuance costs 1,428 1,879

Reserve for inventory obsolescence 1,517 3,168

Stock-based compensation 33,460 12,215

Provision for bad debt 6,217 6,634

Deferred income taxes 7,770 (6,071 )

Unrealized foreign exchange (1,204 ) (18 )

Changes in operating assets and liabilities:

Accounts receivable 769 (10,837 )

Inventory (2,826 ) (3,538 )

Prepaid expenses and other current assets (7,498 ) (6,073 )

Other assets (12,952 ) (24,172 )

Accounts payable, accrued expenses and other 3,073 14,786

Deferred revenue (1,155 ) (7,943 )

Net cash provided by operating activities 108,698 11,235

INVESTING ACTIVITIES

Purchase of property and equipment (40,466 ) (38,226 )

Acquisition of business, net of cash acquired (4,371 ) -

Net cash used in investing activities (44,837 ) (38,226 )

FINANCING ACTIVITIES

Proceeds from debt 32,100 562,250

Repayments of debt (594,727 ) (523,523 )

Debt issuance costs (1,178 ) (8,775 )

Prepayment penalty on debt - (10,400 )

Proceeds from initial public offering, net of 641,643 - underwriting costs

Capitalized transaction costs (5,256 ) -

Proceeds from stock option exercises 3,150 291

Repurchase of common stock and settlement of (53 ) (1,338 ) stock-based payment awards

Net cash provided by financing activities 75,679 18,505

Effect of exchange rate changes on cash 1,807 294

Net increase (decrease) in cash 141,347 (8,192 )

Cash and restricted cash, beginning of year 29,066 37,258

Cash and restricted cash, end of period $ 170,413 $ 29,066

Reconciliation of cash and restricted cash:

Cash $ 168,877 $ 27,597

Restricted cash $ 1,536 $ 1,469

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for income taxes $ 890 $ 2,333

Cash paid for interest $ 24,037 $ 43,624

NON-CASH INVESTING AND FINANCING ACTIVITIES

Purchase of property and equipment included in $ 17 $ 3,051 accounts payable

Deferred initial public offering costs in $ 684 $ 1,885 accounts payable and accrued liabilities



DATTO HOLDING CORP.

Non-GAAP Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

Three Months Ended December 31,

Years EndedDecember 31,

2020

2019

2020

2019

Revenue:

Subscription

$

128,978

$

111,060

$

485,326

$

412,167

Device

9,104

14,470

30,202

44,052

Professional services and other

910

596

3,257

2,533

Total revenue

138,992

126,126

518,785

458,752

Cost of revenue:

Subscription

19,703

21,573

79,909

81,968

Device

10,940

17,342

37,404

53,933

Professional services and other

1,427

1,689

5,687

5,563

Depreciation and amortization

4,646

3,314

16,867

11,045

Total cost of revenue

36,716

43,918

139,867

152,509

Gross profit

102,276

82,208

378,918

306,243

Operating expenses:

Sales and marketing

27,151

30,582

107,255

107,495

Research and development

18,457

16,076

64,393

56,949

General and administrative

20,478

21,754

73,649

68,242

Depreciation and amortization

2,173

2,509

9,567

9,517

Total operating expenses

68,259

70,921

254,864

242,203

Income from operations

34,017

11,287

124,054

64,040

Other expense:

Interest expense

1,758

9,306

25,348

43,437

Other (income) expense, net

(2,026

)

254

(3,428

)

256

Total other expense

(268

)

9,560

21,920

43,693

Income (loss) before income taxes

34,285

1,727

102,134

20,347

(Provision for) benefit from income taxes

(8,571

)

(432

)

(25,534

)

(5,088

)

Net income (loss)

$

25,714

$

1,295

$

76,600

$

15,259

Net income per share attributable to common stockholders:

Basic

$

0.17

$

0.01

$

0.55

$

0.11

Diluted

$

0.16

$

0.01

$

0.54

$

0.11

Weighted-average shares used in computing net income per share:

Basic

154,968,918

135,262,441

140,404,763

135,212,597

Diluted

158,856,958

135,710,319

142,514,848

135,647,284

DATTO HOLDING CORP.

Non-GAAP Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

Three Months Ended Years Ended December 31, December 31,

2020 2019 2020 2019

Revenue:

Subscription $ 128,978 $ 111,060 $ 485,326 $ 412,167

Device 9,104 14,470 30,202 44,052

Professionalservices and 910 596 3,257 2,533 other

Total revenue 138,992 126,126 518,785 458,752

Cost of revenue:

Subscription 19,703 21,573 79,909 81,968

Device 10,940 17,342 37,404 53,933

Professionalservices and 1,427 1,689 5,687 5,563 other

Depreciation and 4,646 3,314 16,867 11,045 amortization

Total cost of 36,716 43,918 139,867 152,509 revenue

Gross profit 102,276 82,208 378,918 306,243

Operating expenses:

Sales and 27,151 30,582 107,255 107,495 marketing

Research and 18,457 16,076 64,393 56,949 development

General and 20,478 21,754 73,649 68,242 administrative

Depreciation and 2,173 2,509 9,567 9,517 amortization

Total operating 68,259 70,921 254,864 242,203 expenses

Income from 34,017 11,287 124,054 64,040 operations

Other expense:

Interest expense 1,758 9,306 25,348 43,437

Other (income) (2,026 ) 254 (3,428 ) 256 expense, net

Total other (268 ) 9,560 21,920 43,693 expense

Income (loss)before income 34,285 1,727 102,134 20,347 taxes

(Provision for)benefit from (8,571 ) (432 ) (25,534 ) (5,088 ) income taxes

Net income $ 25,714 $ 1,295 $ 76,600 $ 15,259 (loss)



Net income pershareattributable to commonstockholders:

Basic $ 0.17 $ 0.01 $ 0.55 $ 0.11

Diluted $ 0.16 $ 0.01 $ 0.54 $ 0.11

Weighted-averageshares used incomputing net income pershare:

Basic 154,968,918 135,262,441 140,404,763 135,212,597

Diluted 158,856,958 135,710,319 142,514,848 135,647,284



DATTO HOLDING CORP.

GAAP to Non-GAAP Reconciliations and Calculation of Other Key Metrics

(in thousands, except percentages and share and per share amounts)

(unaudited)

Three Months Ended December 31,

Years EndedDecember 31,

2020

2019

2020

2019

Non-GAAP Subscription Cost of Revenue

GAAP subscription cost of revenue

$

23,677

$

21,594

$

84,463

$

82,066

Stock-based compensation expense

(3,974

)

(21

)

(4,092

)

(98

)

Restructuring expense

-

-

(462

)

-

Non-GAAP subscription cost of revenue

$

19,703

$

21,573

$

79,909

$

81,968

Non-GAAP Device Cost of Revenue

GAAP device cost of revenue

$

11,143

$

17,342

$

37,607

$

53,933

Stock-based compensation expense

(203

)

-

(203

)

-

Non-GAAP device gross cost of revenue

$

10,940

$

17,342

$

37,404

$

53,933

Non-GAAP Professional Services and Other Cost of Revenue

GAAP professional services and other cost of revenue

$

1,845

$

1,689

$

6,244

$

5,563

Stock-based compensation expense

(418

)

-

(418

)

-

Restructuring expense

-

-

(139

)

-

Non-GAAP professional services and other cost of revenue

$

1,427

$

1,689

$

5,687

$

5,563

Non-GAAP Depreciation and Amortization in Cost of Revenue

GAAP depreciation and amortization in cost of revenue

$

6,144

$

4,489

$

21,890

$

15,745

Amortization of acquired intangible assets

(1,498

)

(1,175

)

(5,023

)

(4,700

)

Non-GAAP depreciation and amortization in cost of revenue

$

4,646

$

3,314

$

16,867

$

11,045

Non-GAAP Cost of Revenue

GAAP cost of revenue

$

42,809

$

45,114

$

150,204

$

157,307

Amortization of acquired intangible assets

(1,498

)

(1,175

)

(5,023

)

(4,700

)

Stock-based compensation expense

(4,595

)

(21

)

(4,713

)

(98

)

Restructuring expense

-

-

(601

)

-

Non-GAAP cost of revenue

$

36,716

$

43,918

$

139,867

$

152,509

Non-GAAP Gross Profit

GAAP gross profit

$

96,183

$

81,012

$

368,581

$

301,445

Amortization of acquired intangible assets

1,498

1,175

5,023

4,700

Stock-based compensation expense

4,595

21

4,713

98

Restructuring expense

-

-

601

-

Non-GAAP gross profit

$

102,276

$

82,208

$

378,918

$

306,243

Non-GAAP gross margin

73.6

%

65.2

%

73.0

%

66.8

%

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 Years Ended December 31, December 31,

2020 2019 2020 2019

Non-GAAPSubscription Cost ofRevenue

GAAPsubscription $ 23,677 $ 21,594 $ 84,463 $ 82,066 cost ofrevenue

Stock-basedcompensation (3,974 ) (21 ) (4,092 ) (98 ) expense

Restructuring - - (462 ) - expense

Non-GAAPsubscription $ 19,703 $ 21,573 $ 79,909 $ 81,968 cost ofrevenue



Non-GAAPDevice Cost of Revenue

GAAP devicecost of $ 11,143 $ 17,342 $ 37,607 $ 53,933 revenue

Stock-basedcompensation (203 ) - (203 ) - expense

Non-GAAPdevice gross $ 10,940 $ 17,342 $ 37,404 $ 53,933 cost ofrevenue



Non-GAAPProfessionalServices and Other Cost ofRevenue

GAAPprofessionalservices and $ 1,845 $ 1,689 $ 6,244 $ 5,563 other cost ofrevenue

Stock-basedcompensation (418 ) - (418 ) - expense

Restructuring - - (139 ) - expense

Non-GAAPprofessionalservices and $ 1,427 $ 1,689 $ 5,687 $ 5,563 other cost ofrevenue



Non-GAAPDepreciationand Amortizationin Cost ofRevenue

GAAPdepreciationand $ 6,144 $ 4,489 $ 21,890 $ 15,745 amortizationin cost ofrevenue

Amortizationof acquired (1,498 ) (1,175 ) (5,023 ) (4,700 ) intangibleassets

Non-GAAPdepreciationand $ 4,646 $ 3,314 $ 16,867 $ 11,045 amortizationin cost ofrevenue



Non-GAAP Cost of Revenue

GAAP cost of $ 42,809 $ 45,114 $ 150,204 $ 157,307 revenue

Amortizationof acquired (1,498 ) (1,175 ) (5,023 ) (4,700 ) intangibleassets

Stock-basedcompensation (4,595 ) (21 ) (4,713 ) (98 ) expense

Restructuring - - (601 ) - expense

Non-GAAP cost $ 36,716 $ 43,918 $ 139,867 $ 152,509 of revenue



Non-GAAP Gross Profit

GAAP gross $ 96,183 $ 81,012 $ 368,581 $ 301,445 profit

Amortizationof acquired 1,498 1,175 5,023 4,700 intangibleassets

Stock-basedcompensation 4,595 21 4,713 98 expense

Restructuring - - 601 - expense

Non-GAAP $ 102,276 $ 82,208 $ 378,918 $ 306,243 gross profit

Non-GAAP 73.6 % 65.2 % 73.0 % 66.8 %gross margin

DATTO HOLDING CORP.

GAAP to Non-GAAP Reconciliations and Calculation of Other Key Metrics

(in thousands, except percentages and share and per share amounts)

(unaudited)

Three Months Ended December 31,

Years EndedDecember 31,

2020

2019

2020

2019

Non-GAAP Sales and Marketing

GAAP sales and marketing expense

$

31,962

$

31,269

$

115,790

$

110,441

Stock-based compensation expense

(4,811

)

(687

)

(6,614

)

(2,946

)

Restructuring expense

-

-

(1,921

)

-

Non-GAAP sales and marketing expense

$

27,151

$

30,582

$

107,255

$

107,495

Non-GAAP sales and marketing as a % of revenue

19.5

%

24.2

%

20.7

%

23.4

%

Non-GAAP Research and Development

GAAP research and development expense

$

30,932

$

16,535

$

78,932

$

60,459

Stock-based compensation expense

(12,475

)

(459

)

(13,590

)

(3,510

)

Restructuring expense

-

-

(949

)

-

Non-GAAP research and development expense

$

18,457

$

16,076

$

64,393

$

56,949

Non-GAAP research and development as a % of revenue

13.3

%

12.7

%

12.4

%

12.4

%

Non-GAAP General and Administrative

GAAP general and administrative expense

$

26,279

$

23,348

$

85,668

$

73,903

Stock-based compensation expense

(5,018

)

(1,594

)

(8,543

)

(5,661

)

Restructuring expense

-

-

(364

)

-

Transaction related and other expense

(783

)

-

(3,112

)

-

Non-GAAP general and administrative expense

$

20,478

$

21,754

$

73,649

$

68,242

Non-GAAP general and administrative as a % of revenue

14.7

%

17.2

%

14.2

%

14.9

%

Non-GAAP Depreciation and Amortization in Operating Expenses

GAAP depreciation and amortization in operating expenses

$

6,623

$

6,911

$

27,223

$

27,417

Amortization of acquired intangible assets

(4,450

)

(4,402

)

(17,656

)

(17,900

)

Non-GAAP depreciation and amortization in operating expense

$

2,173

$

2,509

$

9,567

$

9,517

Non-GAAP depreciation and amortization in operating expense as a % of revenue

1.6

%

2.0

%

1.8

%

2.1

%

Non-GAAP Operating Expenses

GAAP operating expenses

$

95,796

$

78,063

$

307,613

$

272,220

Amortization of acquired intangible assets

(4,450

)

(4,402

)

(17,656

)

(17,900

)

Stock-based compensation expense

(22,304

)

(2,740

)

(28,747

)

(12,117

)

Restructuring expense

-

-

(3,234

)

-

Transaction related and other expense

(783

)

-

(3,112

)

-

Non-GAAP operating expenses

$

68,259

$

70,921

$

254,864

$

242,203

Non-GAAP operating expenses as a % of revenue

49.1

%

56.2

%

49.1

%

52.8

%

Non-GAAP Income From Operations

GAAP income from operations

$

387

$

2,949

$

60,968

$

29,225

Amortization of acquired intangible assets

5,948

5,577

22,679

22,600

Stock-based compensation expense

26,899

2,761

33,460

12,215

Restructuring expense

-

-

3,835

-

Transaction related and other expense

783

-

3,112

-

Non-GAAP income from operations

$

34,017

$

11,287

$

124,054

$

64,040

Non-GAAP operating margin

24.5

%

8.9

%

23.9

%

14.0

%

DATTO HOLDING CORP.

GAAP to Non-GAAP Reconciliations and Calculation of Other Key Metrics

(in thousands, except percentages and share and per share amounts)

(unaudited)

Three Months Ended Years Ended December 31, December 31,

2020 2019 2020 2019

Non-GAAP Sales and Marketing

GAAP sales and $ 31,962 $ 31,269 $ 115,790 $ 110,441 marketing expense

Stock-basedcompensation (4,811 ) (687 ) (6,614 ) (2,946 ) expense

Restructuring - - (1,921 ) - expense

Non-GAAP sales and $ 27,151 $ 30,582 $ 107,255 $ 107,495 marketing expense

Non-GAAP sales andmarketing as a % of 19.5 % 24.2 % 20.7 % 23.4 %revenue

Non-GAAP Research and Development

GAAP research and $ 30,932 $ 16,535 $ 78,932 $ 60,459 development expense

Stock-basedcompensation (12,475 ) (459 ) (13,590 ) (3,510 ) expense

Restructuring - - (949 ) - expense

Non-GAAP researchand development $ 18,457 $ 16,076 $ 64,393 $ 56,949 expense

Non-GAAP researchand development as 13.3 % 12.7 % 12.4 % 12.4 %a % of revenue

Non-GAAP General and Administrative

GAAP general andadministrative $ 26,279 $ 23,348 $ 85,668 $ 73,903 expense

Stock-basedcompensation (5,018 ) (1,594 ) (8,543 ) (5,661 ) expense

Restructuring - - (364 ) - expense

Transaction related (783 ) - (3,112 ) - and other expense

Non-GAAP generaland administrative $ 20,478 $ 21,754 $ 73,649 $ 68,242 expense

Non-GAAP generaland administrative 14.7 % 17.2 % 14.2 % 14.9 %as a % of revenue

Non-GAAPDepreciation and Amortization inOperating Expenses

GAAP depreciationand amortization in $ 6,623 $ 6,911 $ 27,223 $ 27,417 operating expenses

Amortization ofacquired intangible (4,450 ) (4,402 ) (17,656 ) (17,900 ) assets

Non-GAAPdepreciation and $ 2,173 $ 2,509 $ 9,567 $ 9,517 amortization inoperating expense

Non-GAAPdepreciation andamortization in 1.6 % 2.0 % 1.8 % 2.1 %operating expenseas a % of revenue

Non-GAAP Operating Expenses

GAAP operating $ 95,796 $ 78,063 $ 307,613 $ 272,220 expenses

Amortization ofacquired intangible (4,450 ) (4,402 ) (17,656 ) (17,900 ) assets

Stock-basedcompensation (22,304 ) (2,740 ) (28,747 ) (12,117 ) expense

Restructuring - - (3,234 ) - expense

Transaction related (783 ) - (3,112 ) - and other expense

Non-GAAP operating $ 68,259 $ 70,921 $ 254,864 $ 242,203 expenses

Non-GAAP operatingexpenses as a % of 49.1 % 56.2 % 49.1 % 52.8 %revenue

Non-GAAP Income From Operations

GAAP income from $ 387 $ 2,949 $ 60,968 $ 29,225 operations

Amortization ofacquired intangible 5,948 5,577 22,679 22,600 assets

Stock-basedcompensation 26,899 2,761 33,460 12,215 expense

Restructuring - - 3,835 - expense

Transaction related 783 - 3,112 - and other expense

Non-GAAP income $ 34,017 $ 11,287 $ 124,054 $ 64,040 from operations

Non-GAAP operating 24.5 % 8.9 % 23.9 % 14.0 %margin

DATTO HOLDING CORP.

GAAP to Non-GAAP Reconciliations and Calculation of Other Key Metrics

(in thousands, except percentages and share and per share amounts)

(unaudited)

Three Months Ended December 31,

Years EndedDecember 31,

2020

2019

2020

2019

Non-GAAP Net Income and Net Income Per Share

GAAP net income (loss)

$

(7,168

)

$

(8,230

)

$

22,498

$

(31,188

)

GAAP (provision for) benefit from income taxes

665

(1,619

)

(8,062

)

2,511

GAAP income (loss) before income taxes

(7,833

)

(6,611

)

30,560

(33,699

)

Loss on extinguishment of debt

8,488

-

8,488

19,231

Amortization of acquired intangible assets

5,948

5,577

22,679

22,600

Stock-based compensation expense

26,899

2,761

33,460

12,215

Restructuring expense

-

-

3,835

-

Transaction related and other expense

783

-

3,112

-

Non-GAAP (provision for) benefit from income taxes

(8,571

)

(432

)

(25,534

)

(5,088

)

Non-GAAP net income

$

25,714

$

1,295

$

76,600

$

15,259

Non-GAAP net income per share attributable to common shareholders:

Basic

$

0.17

$

0.01

$

0.55

$

0.11

Diluted

$

0.16

$

0.01

$

0.54

$

0.11

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, basic

154,968,918

135,262,441

140,404,763

135,212,597

GAAP weighted-average shares used in computing net income per share, diluted

154,968,918

135,262,441

142,514,848

135,212,597

Adjustment to fully diluted shares

3,888,040

447,878

-

434,687

Non-GAAP weighted-average shares used in computing net income per share, diluted

158,856,958

135,710,319

142,514,848

135,647,284

Adjusted EBITDA

GAAP net income (loss)

$

(7,168

)

$

(8,230

)

$

22,498

$

(31,188

)

Interest and other expense, net

(268

)

9,560

21,920

43,693

Loss on extinguishment of debt

8,488

-

8,488

19,231

Depreciation and amortization

12,767

11,400

49,113

43,162

Provision for (benefit from) income tax

(665

)

1,619

8,062

(2,511

)

Stock-based compensation expense

26,899

2,761

33,460

12,215

Restructuring expense

-

-

3,835

-

Transaction related and other expense

783

-

3,112

-

Adjusted EBITDA

$

40,836

$

17,110

$

150,488

$

84,602

Adjusted EBITDA margin

29.4

%

13.6

%

29.0

%

18.4

%

Free Cash Flow

GAAP net cash provided by operating activities

$

34,643

$

4,612

$

108,698

$

11,235

Less: Purchases of property and equipment

(11,947

)

(10,449

)

(40,466

)

(38,226

)

Free cash flow

$

22,696

$

(5,837

)

$

68,232

$

(26,991

)

MSP-F

View source version on businesswire.com: https://www.businesswire.com/news/home/20210311005969/en/

CONTACT: Media Contact: Shoba V. Lemoine communications@datto.com

CONTACT: Investor Contact: Ryan Burkart ir@datto.com