EX-99.1 2 exhibit991q32021pressrelea.htm EX-99.1 Document
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EXHIBIT 99.1
Datto Announces Third Quarter 2021 Financial Results
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, 2021Datto 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 2021
 
Q3 2020
 Y/Y Change
Subscription Revenue(1)
  $146.8$122.8 20%
Total Revenue(1)
  $157.9$130.7 21%
ARR(2)
  $626.7$522.8 20%
Gross Margin  71%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.








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Fourth Quarter and Full Year 2021 Financial Outlook
Datto is providing the following guidance for the fourth quarter and full-year 2021:
 
   
Q4 2021 Outlook
  FY 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)
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
September 30,
 Nine Months Ended
September 30,
 
 2021 2020 20212020 
Revenue:
Subscription$146,764 $122,753 $424,097 $356,348  
Device10,242 6,964 27,652 21,098  
Professional services and other886 950 2,654 2,347  
Total revenue157,892 130,667 454,403 379,793  
Cost of revenue:
Subscription22,776 18,915 65,344 60,786 
Device12,930 10,089 33,552 26,464 
Professional services and other1,470 1,332 4,521 4,399 
Depreciation and amortization8,572 5,526 23,795 15,746 
Total cost of revenue45,748 35,862 127,212 107,395 
Gross profit112,144 94,805 327,191 272,398 
Operating expenses:
Sales and marketing35,173 24,709 99,234 83,828 
Research and development26,872 15,257 76,690 48,000 
General and administrative27,802 17,433 78,908 59,389 
Depreciation and amortization6,531 6,820 19,554 20,600 
Total operating expenses96,378 64,219 274,386 211,817 
Income from operations15,766 30,586 52,805 60,581 
Other expense:
Interest expense156 7,065 433 23,590 
Other expense (income), net338 (987)224 (1,402)
Total other expense494 6,078 657 22,188 
Income before income taxes15,272 24,508 52,148 38,393 
Provision for income taxes(1,787)(4,962)(6,461)(8,727)
Net income$13,485 $19,546 $45,687 $29,666 
    
Net income per share attributable to common stockholders:
Basic$0.08 $0.14 $0.28 $0.22 
Diluted$0.08 $0.14 $0.28 $0.22 
Weighted-average shares used in computing net income per share:
Basic162,424,260 135,553,097 161,657,479 135,496,696 
Diluted166,248,941 138,590,770 165,483,710 137,006,921 
     
 






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

 September 30,December 31,  
 20212020 
ASSETS
Current assets
Cash and cash equivalents$205,862 $168,877  
Restricted cash1,309 1,536  
Accounts receivable, net9,400 13,946  
Inventory31,739 13,811  
Prepaid expenses and other current assets33,640 28,316  
Total current assets281,950 226,486  
Property and equipment, net100,420 91,876  
Operating lease assets30,290 — 
Goodwill1,144,496 1,120,954  
Intangible assets, net295,264 287,395  
Other assets82,486 66,560  
Total assets$1,934,906 $1,793,271  
    
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable$12,549 $7,574  
Accrued expenses and other current liabilities47,538 39,461  
Deferred revenue21,634 23,763  
Total current liabilities81,721 70,798  
Deferred revenue, noncurrent3,108 3,322  
Deferred income taxes30,476 18,947  
Operating lease liabilities, noncurrent30,849 — 
Other long-term liabilities3,537 11,736  
Total liabilities149,691 104,803  
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock163 161  
Additional paid-in capital1,807,533 1,755,387 
Treasury stock(3,621)(3,621)
Accumulated deficit(19,539)(65,226)
Accumulated other comprehensive income679 1,767 
Total stockholders’ equity1,785,215 1,688,468  
Total liabilities and stockholders’ equity$1,934,906 $1,793,271  
    
 
 








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DATTO HOLDING CORP.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 Nine Months Ended
September 30,
 
 20212020 
OPERATING ACTIVITIES
Net income$45,687 $29,666 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation23,368 19,615 
Amortization of acquired intangible assets19,981 16,731 
Amortization of debt issuance costs255 1,265 
Reserve for inventory obsolescence54 1,508 
Non-cash operating lease expense5,273 — 
Stock-based compensation35,355 6,561 
Provision for bad debt2,630 4,793 
Deferred income taxes4,727 7,556 
Unrealized foreign exchange(296)(647)
Changes in operating assets and liabilities:
Accounts receivable1,878 (766)
Inventory(18,043)(6,337)
Prepaid expenses and other current assets(5,490)2,099 
Other assets(16,719)(8,446)
Accounts payable, accrued expenses and other2,928 109 
Deferred revenue(2,479)348 
Net cash provided by operating activities99,109 74,055 
INVESTING ACTIVITIES
Purchase of property and equipment(32,170)(28,519)
Acquisition of business, net of cash acquired(45,486)(4,371)
Net cash used in investing activities(77,656)(32,890)
FINANCING ACTIVITIES
Proceeds from debt— 32,100 
Repayments of debt and capital leases(73)(4,468)
Capitalized transaction costs(684)(980)
Proceeds from stock option exercises16,839 2,500 
Repurchase of common stock and settlement of stock-based payment awards— (53)
Net cash provided by financing activities16,082 29,099 
Effect of exchange rate changes on cash and cash equivalents(777)720 
Net increase in cash and cash equivalents36,758 70,984 
Cash and cash equivalents and restricted cash, beginning of year170,413 29,066 
Cash and cash equivalents and restricted cash, end of period$207,171 $100,050 
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents$205,862 $98,614  
Restricted cash$1,309 $1,436  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes$3,533 $151  
Cash paid for interest$— $22,317  
NON-CASH INVESTING AND FINANCING ACTIVITIES
Purchase of property and equipment included in accounts payable$251 $40  
Unpaid initial public offering costs in total current liabilities$— $2,620  
 








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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
September 30,
Nine Months Ended
September 30,
 
 2021202020212020 
Revenue:
Subscription$146,764 $122,753 $424,097 $356,348  
Device10,242 6,964 27,652 21,098  
Professional services and other886 950 2,654 2,347  
Total revenue157,892 130,667 454,403 379,793  
Cost of revenue:
Subscription21,724 18,838 62,179 60,206  
Device12,887 10,089 33,402 26,464  
Professional services and other1,485 1,332 4,370 4,260  
Depreciation and amortization5,870 4,351 17,081 12,221  
Total cost of revenue41,966 34,610 117,032 103,151  
Gross profit115,926 96,057 337,371 276,642  
Operating expenses:
Sales and marketing32,819 24,200 92,743 80,104  
Research and development21,547 14,763 59,433 45,936  
General and administrative23,620 15,644 66,630 53,171  
Depreciation and amortization2,109 2,418 6,287 7,394  
Total operating expenses80,095 57,025 225,093 186,605  
Income from operations35,831 39,032 112,278 90,037  
Other expense:
Interest expense156 7,065 433 23,590  
Other expense (income), net338 (987)224 (1,402) 
Total other expense494 6,078 657 22,188  
Income before income taxes35,337 32,954 111,621 67,849  
Provision for income taxes(8,834)(8,239)(27,905)(16,963)
Net income$26,503 $24,715 $83,716 $50,886  
 
Net income per share attributable to common stockholders:
Basic$0.16 $0.18 $0.52 $0.38  
Diluted$0.16 $0.18 $0.51 $0.37  
Weighted-average shares used in computing net income per share:
Basic162,424,260 135,553,097 161,657,479 135,496,696  
Diluted166,248,941 138,590,770 165,483,710 137,006,921  
 













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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
September 30,
Nine Months Ended
September 30,
 
 2021202020212020 
Non-GAAP Subscription Cost of Revenue   
GAAP subscription cost of revenue$22,776 $18,915 $65,344 $60,786 
Stock-based compensation expense(1,052)(77)(3,165)(118)
Restructuring expense— — — (462)
Non-GAAP subscription cost of revenue$21,724 $18,838 $62,179 $60,206 
Non-GAAP Device Cost of Revenue
GAAP device cost of revenue$12,930 $10,089 $33,552 $26,464 
Stock-based compensation expense(43)— (150)— 
Non-GAAP device gross cost of revenue$12,887 $10,089 $33,402 $26,464 
Non-GAAP Professional Services and Other Cost of Revenue
GAAP professional services and other cost of revenue$1,470 $1,332 $4,521 $4,399 
Stock-based compensation expense15 — (151)— 
Restructuring expense— — — (139)
Non-GAAP professional services and other cost of revenue$1,485 $1,332 $4,370 $4,260 
Non-GAAP Depreciation and Amortization in Cost of Revenue
GAAP depreciation and amortization in cost of revenue$8,572 $5,526 $23,795 $15,746 
Amortization of acquired intangible assets(2,702)(1,175)(6,714)(3,525)
Non-GAAP depreciation and amortization in cost of revenue$5,870 $4,351 $17,081 $12,221 
Non-GAAP Cost of Revenue
GAAP cost of revenue$45,748 $35,862 $127,212 $107,395 
Amortization of acquired intangible assets(2,702)(1,175)(6,714)(3,525)
Stock-based compensation expense(1,080)(77)(3,466)(118)
Restructuring expense— — — (601)
Non-GAAP cost of revenue$41,966 $34,610 $117,032 $103,151 
Non-GAAP Gross Profit
GAAP gross profit$112,144 $94,805 $327,191 $272,398 
Amortization of acquired intangible assets2,702 1,175 6,714 3,525 
Stock-based compensation expense1,080 77 3,466 118 
Restructuring expense— — — 601 
Non-GAAP gross profit$115,926 $96,057 $337,371 $276,642 
Non-GAAP gross margin73.4 %73.5 %74.2 %72.8 %
 






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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
September 30,
Nine Months Ended
September 30,
 2021202020212020
Non-GAAP Sales and Marketing   
GAAP sales and marketing expense$35,173 $24,709 $99,234 $83,828 
Stock-based compensation expense(2,354)(524)(6,491)(1,803)
Restructuring expense— 15 — (1,921)
Non-GAAP sales and marketing expense$32,819 $24,200 $92,743 $80,104 
Non-GAAP sales and marketing as a % of revenue20.8 %18.5 %20.4 %21.1 %
Non-GAAP Research and Development   
GAAP research and development expense$26,872 $15,257 $76,690 $48,000 
Stock-based compensation expense(5,325)(494)(17,257)(1,115)
Restructuring expense— — — (949)
Non-GAAP research and development expense$21,547 $14,763 $59,433 $45,936 
Non-GAAP research and development as a % of revenue13.6 %11.3 %13.1 %12.1 %
Non-GAAP General and Administrative   
GAAP general and administrative expense$27,802 $17,433 $78,908 $59,389 
Stock-based compensation expense(2,844)(1,694)(8,141)(3,525)
Restructuring expense— — — (364)
Transaction related and other expense(1,338)(95)(4,137)(2,329)
Non-GAAP general and administrative expense$23,620 $15,644 $66,630 $53,171 
Non-GAAP general and administrative as a % of revenue15.0 %12.0 %14.7 %14.0 %
Non-GAAP Depreciation and Amortization in Operating Expenses   
GAAP depreciation and amortization in operating expenses$6,531 $6,820 $19,554 $20,600 
Amortization of acquired intangible assets(4,422)(4,402)(13,267)(13,206)
Non-GAAP depreciation and amortization in operating expense$2,109 $2,418 $6,287 $7,394 
Non-GAAP depreciation and amortization in operating expense as a % of revenue1.3 %1.9 %1.4 %1.9 %
Non-GAAP Operating Expenses   
GAAP operating expenses$96,378 $64,219 $274,386 $211,817 
Amortization of acquired intangible assets(4,422)(4,402)(13,267)(13,206)
Stock-based compensation expense(10,523)(2,712)(31,889)(6,443)
Restructuring expense— 15 — (3,234)
Transaction related and other expense(1,338)(95)(4,137)(2,329)
Non-GAAP operating expenses$80,095 $57,025 $225,093 $186,605 
Non-GAAP operating expenses as a % of revenue50.7 %43.6 %49.5 %49.1 %
Non-GAAP Income From Operations   
GAAP income from operations$15,766 $30,586 $52,805 $60,581 
Amortization of acquired intangible assets7,124 5,577 19,981 16,731 
Stock-based compensation expense11,603 2,789 35,355 6,561 
Restructuring expense— (15)— 3,835 
Transaction related and other expense1,338 95 4,137 2,329 
Non-GAAP income from operations$35,831 $39,032 $112,278 $90,037 
Non-GAAP operating margin22.7 %29.9 %24.7 %23.7 %
 








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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
September 30,
Nine Months Ended
September 30,
 2021202020212020
Non-GAAP Net Income and Net Income Per Share   
GAAP net income$13,485 $19,546 $45,687 $29,666 
GAAP provision for income taxes1,787 4,962 6,461 8,727 
GAAP income before income taxes15,272 24,508 52,148 38,393 
Amortization of acquired intangible assets7,124 5,577 19,981 16,731 
Stock-based compensation expense11,603 2,789 35,355 6,561 
Restructuring expense— (15)— 3,835 
Transaction related and other expense1,338 95 4,137 2,329 
Non-GAAP provision for income taxes(8,834)(8,239)(27,905)(16,963)
Non-GAAP net income$26,503 $24,715 $83,716 $50,886 
Non-GAAP net income per share attributable to common shareholders:   
Basic$0.16 $0.18 $0.52 $0.38 
Diluted$0.16 $0.18 $0.51 $0.37 
Weighted-Average Shares used in computing Non-GAAP Net Income per Share:   
Non-GAAP weighted-average shares used in computing net income per share, basic162,424,260 135,553,097 161,657,479 135,496,696 
Non-GAAP weighted-average shares used in computing net income per share, diluted166,248,941 138,590,770 165,483,710 137,006,921 
       
Adjusted EBITDA   
GAAP net income$13,485 $19,546 $45,687 $29,666 
Interest and other expense, net494 6,078 657 22,188 
Depreciation and amortization15,103 12,346 43,349 36,346 
Provision for income tax1,787 4,962 6,461 8,727 
Stock-based compensation expense11,603 2,789 35,355 6,561 
Restructuring expense— (15)— 3,835 
Transaction related and other expense1,338 95 4,137 2,329 
Adjusted EBITDA$43,810 $45,801 $135,646 $109,652 
Adjusted EBITDA margin27.7 %35.1 %29.9 %28.9 %
Free Cash Flow   
GAAP net cash provided by operating activities$32,012 $50,080 $99,109 $74,055 
Less: Purchases of property and equipment(11,732)(6,519)(32,170)(28,519)
Free cash flow$20,280 $43,561 $66,939 $45,536 
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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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