msp-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-39637

DATTO HOLDING CORP.

(Exact name of registrant as specified in its charter)


Delaware						81-3345706
(State or other jurisdiction of incorporation)						(IRS Employer Identification No.)

101 Merritt 7

Norwalk, CT 06851

(Address of principal executive offices and zip code)

888-995-1431

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, $0.001 par value

MSP

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At April 30, 2021, there were approximately 161,275,723 shares of the Registrant’s Common Stock outstanding (excluding treasury shares of 362,126).

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 20 20	4
	Condensed Consolidated Statements of Operations for the Three Mo nths Ended March 31 , 202 1 and 20 20	5
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31 , 202 1 and 20 20	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31 , 202 1 and 20 20	7
	Condensed Consolidated Statements of Cash Flows for the Thre e Months Ended March 31 , 202 1 and 20 20	8
	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
SIGNATURE

OTHER AVAILABLE INFORMATION

Please note that in addition to filing our periodic and current reports, we may announce material business and financial information to our investors using filings we make with the Securities and Exchange Commission ("SEC"), webcasts, press releases, conference calls, and our investor relations website which can be found at www.investors.datto.com. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. We use these mediums, including our website, to communicate with our stockholders and the public about our company. It is possible that the information that we make available through these mediums may be deemed to be material information. We therefore encourage investors and others interested in our company to review all such mediums.

The information contained on the website referenced in this Quarterly Report on Form 10-Q is not incorporated by reference into this filing, and the website address is provided only as an inactive textual reference.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DATTO HOLDING CORP.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


	Page

Financial Statements:

Co ndensed Co nsolidated Balance Sheets		4

Co ndensed Co nsolidated Statements of Operations		5

Co ndensed Co nsolidated Statements of Comprehensive Income		6

Co ndensed Co nsolidated Statements of Changes in Stockholders’ Equity		7

Con densed Con solidated Statements of Cash Flows		8

Notes to Condensed Consolidated Financial Statements		9

DATTO HOLDING CORP.

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

(unaudited)


	March 31, 2021		December 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	147,819	$	168,877
Restricted cash	1,375		1,536
Accounts receivable, net	12,920		13,946
Inventory	19,332		13,811
Prepaid expenses and other current assets	32,089		28,316

Total current assets	213,535		226,486
Property and equipment, net	95,408		91,876
Operating lease assets	33,881		—
Goodwill	1,143,796		1,120,954
Intangible assets, net	308,711		287,395
Other assets	70,582		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 liabilities	48,845		39,461

Deferred revenue	21,838		23,763
Total current liabilities	81,108		70,798

Deferred revenue, noncurrent	3,423		3,322
Deferred income taxes	27,895		18,947
Operating lease liabilities, noncurrent	35,303		—
Other long-term liabilities	3,814		11,736
Total liabilities	151,543		104,803
Commitments and contingencies (Note 8)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value; 50,000,000 authorized at March 31, 2021 and December 31, 2020; no shares issued or outstanding at March 31, 2021 and December 31, 2020	—		—
Common stock, $0.001 par value; 500,000,000 shares authorized at March 31, 2021 and December 31, 2020; 161,439,155 and 161,420,016 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively (inclusive of treasury stock)	161		161
Additional paid-in capital	1,767,015		1,755,387
Treasury stock, at cost; 362,126 shares at March 31, 2021 and December 31, 2020	(3,621)		(3,621)
Accumulated deficit	(49,940)		(65,226)
Accumulated other comprehensive income	755		1,767
Total stockholders’ equity	1,714,370		1,688,468
Total liabilities and stockholders’ equity	$	1,865,913	$	1,793,271

The accompanying notes are an integral part of these condensed consolidated financial statements.

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
Device	8,385		8,081
Professional services and other	934		587
Total revenue	144,909		124,663
Cost of revenue:
Subscription	20,930		21,766
Device	9,498		9,117
Professional services and other	1,502		1,538
Depreciation and amortization	6,625		4,994
Total cost of revenue	38,555		37,415
Gross profit	106,354		87,248
Operating expenses:
Sales and marketing	31,926		31,957
Research and development	22,474		16,733
General and administrative	24,621		21,784
Depreciation and amortization	6,570		6,917
Total operating expenses	85,591		77,391
Income from operations	20,763		9,857
Other expense:
Interest expense	102		9,006

Other (income) expense, net	(19)		1,329
Total other expense	83		10,335
Income (loss) before income taxes	20,680		(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:
Basic	161,066,404		135,386,420
Diluted	164,734,402		136,268,713

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DATTO HOLDING CORP.

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

SEC Form 10-Q filed by Datto Holding Corp.