MSP - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Datto's Fourth Quarter 2020 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. of Director Datto's Burkart, Investor Relations. Ryan sir. you, Thank Please go ahead.

Ryan Burkart

on and you, Datto's joining for Chief Good Executive With fourth Weller, John are everyone, Financial operator. afternoon, thank Officer. me results. us financial our and Officer; year you call, our full today Tim Thank quarter XXXX the Abbot, today Chief and to review

our securities XXXX, During first and operating considered forward-looking be business that this call, would year future full we and December of may under quarter make laws, federal ending statements results XXXX, projections for related respectively. to our XX, including statements March XX,

As with today, a our in as may such as number the statements. forward-looking be under filings. encourage as release read forth and views of investors factors, in to projected differ factors reports fully These representing date. actual earnings relied reflect are any more set section views Securities statements filed We important described captioned result Commission. should our results and are of not these all risk today, a factors statements. and following our SEC Exchange our in And those upon the issued materially other subsequent we from The the of of only that

publicly Datto undertakes no or In addition, forward-looking obligation update made any here. to statements revise

is financial measures I'd earnings Tim our non-GAAP Tim? also Relations Executive supplement in call XXXX non-GAAP Relations most which A to to the can our measures webcast call. on full financial financial available available these website. financial like and of will Weller. our of Officer, call turn are Investor Chief over the measures found Additionally, on be to comparable be our Investor release, and discussed With conference on that, fourth A today's reconciliation this website. press year directly quarter GAAP

Tim Weller

everyone you. the us this thanks and many on joining Thank afternoon. Ryan, for to call

with I'll year BitDam. a the more quarter a to for in including fourth discuss acquisition We and over results, results capping XXXX, guidance few strong I'll to financial Datto. initiatives year, And turn are excited from quarter for and recent strategic our the off then discuss start our detail. milestone to report I'll call specific John highlights finally, too of

the subscription for never set been global strong margins higher But transformation. MSP the cash partner for flow Last relationships. economy. opportunity accelerate challenges, continue introduced challenges new MSP revenue their enthusiasm expanded global year-over-year, to Our for we our SMBs XX% our has year and Datto as despite full deepened a of year grew those and digital

to Our symbiotic platform, the with demand performance a power and have Datto's our is testament model. the revenue for the relationship recurring and of subscription MSPs, unique we

opportunity deliver are be in we XXXX. focus security well-positioned to of front of cloud us, the to in MSP areas capitalize We of will themes solutions new and on the as Datto for our and global partners

well. free we touch $XX key strong million, QX, adjusted with indicator million fourth rebound quarter RMM and EBITDA cash QX, of higher particularly the in from represented of We I'll We of for This an beginning exceeding reacceleration. third was cash as the even a of business in continued MSPs revenue from our existing BCR nicely ended Datto consecutive sequential see SaaS total XXXX. guidance. than increase flow. in previous positive $XX generated free ARR, core expansion And quarter. with great view journey Datto. We previous revenue their represents newer In on our quarter delivered to $XXX pleased primarily with flow. First, continued another revenue growth million, which were by leading We partners was quarter of new sales with protection QX increase million XX% Subscription quarter this reached our from quarter $XXX and as an million, our strength $XXX the revenue results.

in details I'd Their two the areas describe on the to in MSP inception. are like and and of and the fills highest have long-term probably Datto, progress those cloud industry all some for John XXXX in overall, fundamental shifts you, Datto's security. DNA numbers been for for for on and both Before strategic focus companies since

monitoring. in to All their of of also which In and more been cloud, their continuity products from clients. products new heart cloud-managed, in protection directly day workloads deep protect have areas. are public set, SMB two our across for one, monetizing products about infusion product at a with security, common and these is be will example, help our In data for new security MSPs and we with the cloud, application in XXXX,

about talk first cloud. let's So

I most relevant we for our in Datto applications public cloud-managed. products continuity all In As for run Windows-based new launching the XXXX, Azure, be This our product the specifically will first said, are who which Azure cloud, success running of is beta servers. a cloud largely where continuity we Microsoft the the plan the protect is with in on in data follow Workspaces. hosted and XXX of QX. partners Google in take that will product in Azure SaaS Continuity group We Cloud to partners

The protect desktops Of the cloud directly many. for advantages are data today, also laptops continuity to cloud our PCs line business course, our of with as continuity will and Datto we Cloud well. bring

know service benefits will they our trust the there model, and the MSPs cloud. and in our same First, technology be us

user hybrid in critical a many in multi-tenant is be will have solutions on-premises, independent are cloud This their wherein focus, whether our public deployment so private clouds workloads workloads clients MSPs partners in in get Second, experience, places. of clouds. or and a diverse unified

transparent scaled public live And in from finally, data model and to our the delay clients away cloud. and exabyte applications with migrations environment Datto usual business are is that MSPs of the public and be to as will copies which many familiar proprietary providers has Cloud. cloud stored securely their caused every Datto, from Third something

clouds, anytime securing virtual on to physical applications machines protecting will continues data We solving and challenges long-term both in PCs. for in SMB machines, technology on-premises, be be and and economic and The continuity anywhere increasingly servers and partners. roadmap our and

let Now, security. to turn me

this and clients. proliferated, three increasingly vulnerable. our securing has Datto, SMBs rings, remote To and work, accelerated interim one developed concentric COVID securing in The enterprises MSP in have As partners model their securing transformation Datto. helping address trend, SMB visualized digital a partners cyberattacks we've best and those leaving also is

to continues today. the critical to cybercrime. for MSPs most Chief Ransomware We to Multi-Sector continue and Task Officer to products the SMBs and team the and in face best information Security was invest security highest recently industry, invited our against Ransomware the in be leads practices Security standards. our heavily join infrastructure to in which Institute fight technology secure Technologies and the Datto's Force Information problem the efforts

ransomware In the fact, SMBs, businesses XX% most to being targeted survey. according malware threat are XX% Datto's by common of MSPs report that and MSPs to annual report their report attacks, of both own ransomware as increasingly

company you examples service One urgent a has result Datto are of as ransomware. its backup security throughout two simple continuity, Let how is being where locked many by primary a been of give me lifetime. restorations of images

locked In and Another of their where RMM, applications production many erased victims primary are example fundamental thousands has of servers a after endpoints. year. and backup attacks protection of management times cybersecurity events, and is patch their to and or cases, even restore downtime attacker and recover for copies. monitoring We data system the

Experts important and technology, also need it's these attacker will recognize time. network not any only people, eventually. And Of auditing, course, training dynamic and strong but processes, over to be an increasingly breach involves what's cybersecurity important and to most to and ongoing real-time to it security resilience. remediating. approach is able systems be in while business and respond cyber call here. proactive your operate well-funded A We

the with collection We This two as MSPs team. leadership like it Ring and is proactive just or opportunities not MSPs we malicious of live moved one, risks world systems. malware weeks offer to resulted antivirus in and of the point they to cost events we Datto provided security help their Countermeasure take a use whether direct the prominent we the solutions FireEye the need were release money. So QX in our living released public, nations, to even community macOS. days, MSPs. tangible I Continuing cyber-resilience the Datto's we Within real This protecting In ring created old to Datto. firewalls. similar cyberattacks interaction with also started action couple matter it, signatures and to partner help. detection one and approach, over that's a not and response scanner a customer. as of with our The thought Datto on MSPs, Cyber the clients companies ring Scanner. webinars, threat But means of and resilience also the security and several Silver Sparrow scanners MSP for and mindset SMB content, community. MSP scans protect breathing to two Datto partners. that a described the quickly a scripts released this FireEye technology form detections and or million for address a within to ago many

opportunities Now, new protect let's their about help three. margin about talk to is with clients. ring offering products them This SMB MSPs

security, marks with while beginning allow products selling grow MSPs the offering While we security to this have always been us specific Datto. or in that of features

isolated where numerous and from deployed here XXX,XXX entry launched isolation isolated in XX and the and our the has just seen of been the -- RMM, which machines in ransomware We've which first December prevent first detection identified infection. for over was Our product Datto sales on we now ransomware days. spread verified

protects ransomware, Our phishing second BitDam acquisition. foray BitDam's attacks. applications is malware from cloud-based and this week's technology

to welcome We experts elite as security continue MSPs. cyber we the are for thrilled to roadmap to resilience team of BitDam's Datto, shape

integrating they turn of Starting but the process and opportunities are by be We In summary, offered our into cloud year, for XX,XXX them BitDam will partners. SMBs and of solutions millions later into this to our margin will secure the complex nature, help MSPs security are our their and we simple them starting technology that to serve. make growth cutting-edge platform.

well-positioned. to are enormous is believe and continue both feel Datto opportunities We

and which We our boost to see the adjusted to offerings year. XXXX EBITDA and but specific our will our will was partner you BitDam the we previewed a closing, acquisition growth. market, the each In investment milestone addressable on you increasing margins impact the XXXX call. last and reflect drive our security will cloud strong continue that retention area expand in will John give revenue believe product investment guidance, increase long-term in as and of

progress IPO are thrilled made with the our year, in throughout we October. the with culminating We

our good start now to fourth year, well you John strong and quarter and results I'll XXXX go full early in us growth financials more beyond. to detail. the Our turn John? as in can call over year a through the and to position in see QX guidance, this for

John Abbot

Thank We're year fourth quarter and you, strong pleased Tim, to report and everyone. results. good full afternoon, XXXX

otherwise specified. unless please review our today, note referring be I to metrics numbers I'll As that non-GAAP

a You of find GAAP the press issued this posted that our on release in measures to and can the we financials reconciliation afternoon website. non-GAAP in measures supplemental

Our grew ARR acceleration in quarters our was operating $XXX.X slightly our we overall the fallout decrease our was fourth smaller XXX revenue sequentially, sequential ARR, year we're $XXX increase December to a quarter subscription of MSPs averaged the more up more by fourth up ARR Fourth growth million comprised MSP at QX million execution. of revenue previous We that take quarter but subscription less the in We the pandemic. $XX partners, year MSPs from down by believe importantly, than XXXX, from focused of a $XXX.X as than sequentially. QX, These expanded XX% year-over-year in XX,XXX and XX% the million revenue guidance. than a $XX ARR and to per most ended million up of business. increased growth the our model driven million, nearly indicator $XXX exceeding And MSP results of challenged evidence XX% strength reflect churn the reacceleration recurring in of increase of $XX,XXX $X,XXX leading from were of of with year-over-year, ARR churned $XX,XXX growth. economic small ago, the the XX, then The increase million December while continued before. net and revenue higher $X impact and quarter of normal quarter, few think of XX seeing a than million total to a will at

MSP the additions gross partners Importantly, were which a the and to in pandemic. MSPs with small cohort new than new fuel to more we from XXXX, X,XXX off adding far not MSP time, strong added over we prior start was helping expand levels of future growth. typically These

year-to-date at than grew from new XXXX, XXX in XXXX. year-end ARR positive hundred also $XXX,XXX net MSP the We MSPs contributing On another number of editions. over note, to several in we've X,XXX, up more seen

XXXX, million a of QX in expenses in operating $X.X expenses $XX were X.X% XXXX, slight our revenue, increase in to QX revenue Continuity quarter year-over-year. function EBITDA EBITDA million Within XXXX. were driven XX.X% OpEx, costs million, in during the now marketing $XX.X fourth $X.X million $XX.X further or of include XXXX. in million Unified recalibrating development of adjusted in by from XX.X%, subscription were infrastructure XX.X% compensation, fourth costs. COVID, in million, operating $XX.X QX our increase significant revenue Operating increase quarter finally, from General higher-margin supporting public compared leverage, for the XX% to from QX within of which income depreciation QX and reduction million in expenses And QX basis quarter, million, company and margins or XXXX. QX Adjusted compared In and Our million and Research to a expense operating the was excludes an million, XX.X% XXX XXXX. or was and the mix XXXX. sales were XXXX stock-based our $XX.X expenses quarter decline million, $XX.X administrative from from in for QX we of $XX.X decline the of revenue an cost XXXX. to a from compared we're a structure support $XX.X $XX.X restructuring million in in up our solutions. expanded $XX.X was expenses XX% and Fourth transaction margins million, expenses realizing gross were $XX.X points and

call, QX events, office we COVID. and our during EBITDA reductions associated travel, we high, As and lower we artificially adjusted with certain implemented marketing last significantly discussed earnings on the remain reduced believe expense expenses margins in costs reflecting

return returns more Free in XXXX. over investing more flow was quarter continue levels, to to ended positive drive $X.X normal the quarter compared million cash. innovation growth expenses we QX million and will just in and to we revenue activity will normalized As increase levels. these $XXX technology to in with the commercial in margins million, $XX.X cash negative And

balance IPO transaction quarter cover million, added in $XXX remaining fourth used with to for a $XXX to our our reminder, completed we pay proceeds IPO used we debt As million, of off outstanding the proceeds net which of to the over cash were with other costs.

and a new credit tremendous We facility, which provides flexibility also million the which and entered undrawn us to with into revolving remains grow $XXX invest business.

employee over stock-based QX. Additionally, level at our more ratably the be which IPO approximately options, as to vesting they triggered expensed added million divesting in a subsequent expense continue The of of will compensation value certain remaining options normal $XX those quarters.

an year-over-year year subscription results. to Total $XXX.X We XXXX grew XX% million, year-over-year revenue Moving full and million. XX% million year to $XXX.X a revenue grew full EBITDA of delivered XX% to increase year-over-year. our $XXX.X of adjusted

structural continue and support and The innovation, Turning technology in our and growth ample profitability us for solid business market. to capacity leverage the investing full first our resources go-to-market for in leadership and to quarter to operating scaling the sustain our infrastructure XXXX. provides year long-term guidance and position expand in

amount Our for price includes XXXX revenue million will of BitDam in second with the acquisition cash growth the areas a to from the guidance The we the EBITDA meaningfully year in of expect the dilution impact expected and the XXXX. BitDam in acquisition, was important cloud security. purchase of incremental revenue the of in and and investments $XX contribute along half the modest

of $XX expected quarter to million EBITDA in the is $XXX first million. $XX $XXX be be to expected of Adjusted in the of range million range to million. XXXX, to is For revenue the

year range to million to million. $XXX in the in $XXX expected million. revenues the And be million $XXX to be XXXX, For full EBITDA of expected to the adjusted is $XXX of range

in We range revenue. expenses to expect of percentage be XX% the capital total continue in high-single-digit low to subscription and mid XXXX, revenue be to to in revenue range the of

and non-GAAP QX of million full for XX%. shares tax for use million As to for estimate taxes, We're we results on look business. in for XXX XXX of calculating diluted and income year. approximately With to an reacceleration call we diluted XXXX that, effective closing, we'll the shares progress forward In the QX very our EPS, fully a the rate ongoing come. future excited up Operator? the the the fully and believe reporting guidance our questions. reminder, about reflect quarters open we for And

Operator

line from of with question first RBC comes Your Capital Hedberg Instructions] the Markets. Matt [Operator

Matt Hedberg

to guess, ability I in noted Hi, to there guys, your my MSPs John, MSPs, you a through started you on think new -- with or thanks was year just for that for Tim the taking adds. script, your start the add I Congrats quarter. questions. thinking John, either strong

post-COVID? trends Just revert XXXX the it that. bit -- or cadence how kind you sort more you wondering maybe kind about in to back think perspective of on little of a the Does of 'XX? Just saw

Tim Weller

Thank some think a go We you And referenced lower steady QX, challenge, Yes, John steady Obviously, COVID number of that make John the the there of finished QX comment end by into. kind year. I you it financial Tim. year, had QX It's in some good nothing in I'll you. again. we will cleanup. came seeing, to the hits we're the of give and and X,XXX, be I'll up jump think, know, will we low and the under -- gross good last throughout adds gross end adds, there; Matt. welcome actually

good effect a would feel we about that say going reopening. into macroeconomic pretty So I it's

Matt Hedberg

That's Sure, helpful. And then… okay.

John Abbot

[Indiscernible].

Matt Hedberg

like continuity to about get for bit and Maybe Tim, more there. click bit sort Yes. thanks. a Azure a a just And little for you more the John. apps base. interesting then installed sense talked real that -- thanks, if a on like on you especially No, maybe Okay, wanted maybe your addition. sounds which nice guess, it's I It know, just seems double of could timing opportunity, you

Tim Weller

is. Yes, it definitely

service I much lift but tell the you that's it's think have clearly, of those and as to into before you'd go you directly, new for elements would and course, are we many platform. the the as one I same servers a Azure, address there be will base on installed for want shift net very nice of where Azure can all that also now opportunity us, represent already,

timing, be in So that on availability with this beta said other And in it's we'd QX broader really have later we much well. probably won't going than year.

about So to moment. say the But of basics the you the probably all, want opportunity and the at I have I it. scale of think

Matt Hedberg

Excellent. Thank you very much.

Tim Weller

Matt. Thanks,

Operator

Barclays. question with next line comes from Your Saket Kalia the of

Saket Kalia

Hey, for questions Barclays. Saket guys. taking It's my from Thanks here.

Tim Weller

Hi, Saket.

Saket Kalia

could margin make of a security, on what bit products level offering around MSP maybe significant your Hey, also pricing. bit. was guys. for into on is security I think you and your that remarks love cloud you in be to means, Tim, around almost I if And dig sense? economic little cloud, maybe customers. wondering course. Maybe of wondering opportunities a mentioned kind differentiation prepared commentary brushes, and was what more transparency Hi, and for the the you offering, Azure then interesting most sounded cloud some BitDam if on you. like deeper into of just little that the that around broad just I'd the dig Does something you could [ph] sort in go one

Tim Weller

Yes. of a those. shot I'll take at each

running of you'll in VMs your around it's move that cetera, top can you goes then -- it bill. CapEx well key over the industry, in a of of cost is the use the So gas you as a And know, those, your -- and it's move cloud, years don't you server, Dell VMware building, know two compute. have et becomes knowing OpEx. the I Azure, cloud, analyst. AWS, And from right, but put as going idea what you and in, When move that more what's to a of more your you box third on really you as a you joke public big whether sort on to a way your When you server. on cloud move might when this up, a as economics, terabytes, you cost month's it's a into anybody hazardous in, and think have

obviously, some some the I so and toward will MSPs hesitant about horror cloud obviously, think of long-term things it's can a tell And you, remove And trend hey, caused others early be the those and the one stories. labor cloud. so to much their better. of strong that's is clients I public is there

we're So, but solve you the that the that have you in move, only of not fact technical elements entering elements to to the economic solve have well. as just

it's years done You and to what five to MSPs going do you to have it's And cost on to of day think to one a you tell that. of going in. be think lot studying cost able what three we've

want the I like technology tells more. that. on of say paste lot of it's a quickly So that won't and nuance would don't so great that a the bag moving we might day got to as we've speak. to let think of first one reasons copy and quite Azure they the have. maybe and I are you, MSPs as it the cat But there discovered work in works we've hey, just out But anybody is

question, security in your the in the world it. terms of right MSP of at crux on margin. drilled on So you look We

area certainly in a we exact And to kind But product said whole we'll pay it's what, and of of work [ph] proceeds. getting through I for point. generally like where we XXX, feels with SaaS breadth I'll have think MSPs just end-users live I protection, SaaS and that with of have Google very to pretty and sort Workspace focused it you Google of It's that a accordingly give today. we'll an collaboration know protection applications very and ecosystem. as M pricing. in back address get new strong so And initially, good that And price technology. set. M tools from XXX, our in make that a They spectrum terms the a to do fit margin wide initially, for MSPs what there We've worked MSPs dollars sure applicable Workspaces

Hope -- be that So one. that it's job helps. will

Saket Kalia

it. next base? Yes, of And interplay part John, as year ARR? of any growth maybe that, you, side. on in think visibility sort financial willing How ARR year on next Got and just ARR for MSP just maybe per comments you that the to about do customer you'll overall the growth, or does. on that the be for make any of customer

John Abbot

Thanks, Sure. Saket.

would that it's those -- degree, reflection And the this MSPs But you've in important future. that to larger the [ph] some It our quarter, per more it obviously count. of in average some ago, MSPs As fluctuations larger metric can and those and continued year And churn in expand MSP and the small down with time. XX,XXX with our of also their to bring the to our has actually reflecting products, MSP been the MSPs XX.X,XXX expanding nearly some we a expect MSP adopting ironically, with seen, expanded it's Datto business nicely would start to more new growth reflects grow -- a that smaller with has up of consistently of continue general, adding per some even here over over time note from each of is partners. because partners.

way. blowout arguably, we So even metric the new for other MSPs, could ARR the had per if period go MSP a

not reacceleration our just MSPs obviously would about, a a point the good good QX. is -- stimulus in and only that QX it hurt, given at guidance feel economic add, would reopening. in guess, QX to tailwind we provide can new QX probably we the works, ARR And but guiding I that the broader a for our to and could and The come expect in doesn't you happen, And I that the on right, the sort seen lower again we package happen QX, ARR. recent about continued to math we'll the but we feel from of way business. reacceleration to to year, for see year. way And haven't We thing we're

Saket Kalia

Thanks guys. Absolutely. very Very helpful, much.

John Abbot

Thank you.

Operator

Your from comes Jason next William Ader Blair. the line of question with

Jason Ader

Thank of question. also specific guys, us for a to revenue deal? for you contribution Could impact BitDam. the price the the paid. the thank the about from give in EBITDA ask you Hey, I detail you sense first on XXXX, wanted the and

John Abbot

is Yes. I you a to This factoring We later EBITDA very either year those the in of revenue that the would anyway. the so We right, give business year, inherit way that those. small the that little we [ph]. a -- little in all then day of want and it's number. EBITDA expenses we're break be but didn't be color out obviously, try really one, And characterize of into the may any impact, impact -- don't to it XXXX

Jason Ader

Is it $XX $XX million [ph] or something like that? million…

John Abbot

worth it's -- Yes. meaningful. I don't it's I'll -- but -- was so. we're it's not mentioning, really number, It giving a say

Jason Ader

are people coming many Company in the over? How

John Abbot

either, haven't out We put that Jason.

Jason Ader

on on additions comment then, just the Okay. new of And MSPs. -- year-to-date the net the

was more kind we that Or what we little focus wanted. of kind to a I a what know need things adding said, a you several -- We that loosen is QX wasn't not kind think QX of in new you said of hundred of or guys new QX. and what, it MSPs internal double-down to wanted, Tim, up really was on economic just there you MSPs. net bit? are impact starting

Tim Weller

so Yes. bringing said from is world just grow -- We say producing on, a We've gross steady MSPs and there. good before. generally in the and obviously, got you're MSPs. bring There lots No, in we them of them I'll Jason, model. them what machine our for I on small

general to I would you which in churn that is economic, want engine if so the And attribute pandemic, higher still the to there. growth

better growing. side churn the on see we it just into As things going reopening, now get

a end bit getting So our day. that. on little more special every drive we're now do no think global programs to I

as as might grows, can so MSPs back the see anything special. we're new interested think many and get. we as And there. maybe in always half, we that pickup towards We're some I doing don't But

Jason Ader

Okay.

John Abbot

ended really been you and and seeing will, say it's a we movement the churn it's year, positive the It's And economic as I held as gross really we're it right? would have -- churn. COVID, now. up a COVID-related adds environment-related that -- clean was net well The up, Jason, and there been really been despite feel Tim if good about said, remarkably factor, turn

Jason Ader

last ARR then, me. one And number? saw, you, that around from on a to John, trailing think which I for quick just -- XXX%, I is Great. down XX-month

John Abbot

is. It

way of reacceleration we not see the to always continue COVID I backward-looking, so think it. we revenue get-go revenue it's so been is growth early things we're net like sort mean, back growth the other retention the saying leading going it's we right that's to where until what start from that ARR our lows that's that lap QX And and seeing subscription indicator like just the to about the and turning and way. we're see of It's it.

Jason Ader

back on where ultimately? And what I'm NRR? with not NRR you gets you give be do to to would a think timeframe, trying specific but you happy

John Abbot

see and any wouldn't we it what that's certainly reason we're levels, towards. to why get Yes. back mean I don't historical aiming

Jason Ader

you. Got

a good you, night. Okay. Have Thank guys.

John Abbot

Great, you. thank

Tim Weller

Thanks, Jason.

Operator

of line the comes Singh with Your next Morgan question Stanley. Sanjit from

Unidentified Analyst

for Sanjit. have This everyone. on two guys. Calvin the I quarter. is for Congrats questions Hi, [ph] you on

have us on have a attacks impact look think of continuity first as set? MSPs solutions? at MSPs? you more core well on likely security on awareness, ransomware the product an now conversations And large solutions, to overview the an as give storm. will Are you attacks So is and Can solar sense with the existing your how of how uptake new affected do

Tim Weller

great Hi, question. Calvin. It's a It's Tim.

way Driving were more already the the fair for Security we I theme, think probably attention you to demands risk. as hit any like our for way. characterize products security in Obviously, is a on it which of is output. us on demand a and more resilience right? opportunity most mode companies cyber in it,

to our specific for same we yesterday we were able we Microsoft we today, And both to the for for the think posted recent and release as within script direct and in as countermeasure the I just we the our the I did mentioned well. attack, the RMM tool, public scripts to Silver response well quickly think some that either same actually, as domain MSPs hacks or Sparrow. did

it's So fairly we're well something in. versed getting

on focusing focus we've started we're security level. that inward and pipelines talk with wouldn't on our much whether sure not. I And it or outward. continue make to go-forward think probably But a to BitDam bit on little I basis, comment at about a we RMM, to helped now

kind event an of on that wish never another company. You

just companies. that And in So hearing strong obviously. you're security, for other I'm very tailwinds sure overall,

Unidentified Analyst

specifically. how there, the thought there? of Thank one that. you that and assess And trained Great. you then No, makes how BitDam that strategy you pursuing you're a about this lot company did to then product And the get it, for sense. on When on the the set and need MSPs security fit on up? ramp in the does on ability the for specifically marketplace the into broader second

Tim Weller

Yes.

There growth protecting that today, of a of well And that lot see one this of companies. you the at foremost it of third of and the then when dozens that of that traffic a a we we see are So piece needs think we're exabyte another, vector have world, have there. we and there, and the attach, a that's and said these first technology you of of kind great and and fit. We but into us needs kind say of world to data is fourth get collaboration connect And there, in interesting is scale, we if find to a cloud thinking, technology would ones start looked and obviously evolving lot interesting that our RMM, perimeter and that a of data so okay, kind XXX, is, wall. I there security. out be, with will you'll the We team. trust have And networking. We along very security protecting to data run expect down raising tools, all question. again that driving I SaaS things do keep is get line and some would have products which M you with your you a and good as to Google, be vectors there towards great networking software-defined can did. ransomware, accelerating And it we me, see the other you want the

applicability one So of us their kind stay set as watch but has for that of said, growth in of focused round broad to it here with vector I on SaaS technologies.

Unidentified Analyst

Awesome. Thank you, guys.

John Abbot

you. Thank

Operator

Your next comes line of from the question of Montreal. Bachman Keith with Bank

Keith Bachman

pricing And wasn't Most you question. and feature And more you days there has. cost? customers, over had to in I to from Backup migrating I Azure I mention I solution. MSPs features to any what want potential that Thank Azure conversations wanted by interested delivering for some ask even solution thanks. challenges Many of MSPs [ph] the and in and want Backup. to in a and facing more did hey, the And how back versus so cloud, particularly and there with degradation you trying from go you're use margin, to as with of my and also the kind are mentioned your you're in being understand, -- capabilities? you at backup of what point customers Azure terms to all excuse about workloads a for And to competitive in you able to risk be a for goto Azure. at Microsoft but I you solution that are compete And I'm that more you risk of offering think that's on-prem they is and margin lot, how share me, go Datto Azure But backup? as the view? of Datto How when would of the a you that in risk terms solution, with losing [ph] it with the we last detected -- XX parity some cannibalization really Azure to does on-prem on, interest direct solution? Tim, cooperation taking thinking of then enable you you Backup if Is [ph] that you're out. about from feature, just your mean know, that know would what margins? your technology of this

Tim Weller

questions have Yes, the gone would We've We actually right? year had great opportunity here. I you understand question. question, have been it's the ago, think answer same had. would a opportunity A great a and think I share. deep the able I to all to have it's gain not

Keith Bachman

Okay.

Tim Weller

big world we there a in anybody now, are and is not already, addressing. that's Azure

I way. is would heard have about crude MSPs suppose hacking and Azure, stories a -- we're people today we existing Although on-prem solution But moving of in going there heard going work there to some solutions technically. I be have high our together. if new. lot net deliver level confidence are in there to and a of going to be we we're Also, what to a

actually the gain think in can I to migration. share And fine think we be on we're going some so And we margin.

get some well. is know, there scale of You you economies as there

would So, feeling been for new few opportunity net of We've much windows, to points I into through to this a for backup But they've backup Azure. backup a backup true And said has server racing we product dawn customers try deliver it quality more is Microsoft always things. ago, get like there. Datto call since offered to a candidly, There and Microsoft Look, and us, you lot sort. want you so a because option them. as patient table in walk solution. than I sure, it's some really a the of we're I'll continuity. get stakes catch of to a as right? decades

of to are can several ecosystem there enough. win. But isn't built confident reasons in we hey, up backup come sort say, my if some hasn't early and we're there can't the the cloud You days some

we First, to technology differentiation all more have we'll perspective, true need we a from With continuity, think strong than solution. do the here. functionality and obviously their

it's interesting. Secondly,

continuity they We big service. know, partnership the have as we with value-added have don't to you channel be would as And a here. relationship that many. a partners reason Microsoft, And why business see a not backup do historically case left

have thousands backup Azure, But and you Cloud, the towards and to versus MSPs is Azure to if their Azure public continuity have So Microsoft of any a bigs. Google even other likely universe you're product Datto clouds. end-user bring solution entire a any strong of

and be So we be will fine. think it symbiotic

we third hybrid the thing to think note have that cloud I is solution. a

and wouldn't support purchase real to multi-tenant their a own locations. living get is an all has of So be And unified the in different which to a types of if private MSP there make that the day, And that of you're do and they to will centers, their MSP users management Microsoft, across wouldn't do key many in us sitting the they're going with cloud, be servers in hundreds going that servers application data cloud unify each for going public experience to be be for is to environment in each workloads. going those you and end sense. years And that different on-premises.

don't on So anybody really I Backup basically think solution. see they've in to specific a or built through very hybrid where they generally worth a bit. with that cloud last little mind and fact, platform. We Azure point seamless done something it your they people acquisition, dwelling date, have in is winning done don't even a And common have

And [ph] thinking I or how way hit there. about along kind we're five of I questions six So Keith. it that's hope the

Keith Bachman

for way. you you answering thank was that along so thank And for That comprehensive response. Right. terrific. And the

Tim Weller

like Yes. And it's We mind. will can through But mind. point. know on probably we And I your you a on your [ph] your of the ride demo, the here. at that's most we tell excitement it's year know sort this

Keith Bachman

follow-on thank terrific. Tim, -- comprehensive you No, think the that's as And my about again, response. you is for and just question

changing Do months see how now versus you see is how M&A, profile of about terms of As mix, revenue that that think including meaningfully your in versus to XX backup unfolding? XX do it in from do or it you about recent mix you other, you today? where mix think you do terms -- the see

Tim Weller

John I me put and don't to Yes, the here. kick that on virtual under good number it, know want question. will I a it's a in table

SaaS on from remain Certainly, scale, and lines expect I you know to I a business. the fairly bullish their things of on be networking grow and think smaller would RMM faster able to like percent you basis. continuity

relative a a in growth way kind just you're of So debating thing.

Keith Bachman

Yes.

Tim Weller

you timeframe, newer over of would the a suggested would we're security-focused person acquisitions if say, be arrangements. they of doing types cloud-focused, think betting I in And

you that's be growth to want interesting, then very continuity, So the right continue And mix a the traditional anybody's race even but more area, to to guess. it's call big because going will Azure gets shift in likely. if most then

Keith Bachman

Well, me. I'll for That's [indiscernible]. Okay. the see thank for it response. you

Tim Weller

Great.

Operator

comes question Sills Brad the Your next line from Securities. with BofA of

Brad Sills

main of my guys, out that look question. perhaps Hey, net -- revenue exiting I way thanks the expansion there When the have good. post-pandemic some guess pandemic, gross another is It any deceleration. are acceleration? that mentioned the you like churn the that been reacceleration for the for categories your you the see Obviously, of I taking is Great. sounds into question. to asking, retention held is you -- retention visibility reason back and wanted think could ask may would

comment impacted you just call could you that may categories could on come where think cross-sell opportunity back, any you been if have that So out? up-sell

John Abbot

feel had look particular you partners or any exposure benefit may that verticals hit say I Yes. we first -- it's at the was that. obviously, badly mean particularly -- and BCDR where will from healthy, a heard I through obviously quarter, industry mean pandemic pass be that, and that I I are certainly I'll MSP take think a have been our very in it's partners felt a -- Tim new to have positive MSP which where some rebounding add. least Tim net can and we in already, But rebounding, you perspective fourth retention. we'll exposure,

So that's of it. one sort angle look at to

The adding is and net drive and of talking growth products, activity. layering other sell-through retention that in opportunities and provide hear that across growth us any cross-sell as numbers to also about vectors, those will higher networking, support -- security you in

Brad Sills

one much, And I may. if so more John. Thanks then

opportunity trending? is? the And you. from opportunity it how the make commentary of maybe -- PSA how any that just as cross-sell penetrated is to And How you where on here? Just cross-sell activity is that reminder a solution? is would Thank kind

Tim Weller

competitors platform about Hey, of first was different a employee an would as to Brad, shift call to of some this the dropping of is QX, little like in run things kind much the had in of kind uses share in that. the some transactions, what tighten The actually their it I there good product their terms QX, there is ticketing, Tim. pandemic seat so much is a features in and and for there. QX, of a hit there. MSPs in as count seat sense count. We've in lot their trend us than base of much a very that this PSA. I brought of We the as as business, talked MSP following of PSA But one to back CRM, new about massive That one of other it's think PSA displacement -- QX belts. actually as less It's the smaller some way a wouldn't right, a get products net demand. came And

other some of we've dimensions well. of people and built-in have sort a with as couple and some documentation We added upsell

new you was the focus few we is So that were was better lockdown only platform. the But not challenging. are ago. That than about stickiness. of it partners know, big MSPs. there ones that that contributes It that one growth kind year helps more say today PSA. platforms a with it would the And two. a have then think we out And net to but -- two helps and a again for on one the winning I it's feel bit There is quite stickiness there on is or

Brad Sills

much, so Tim, appreciate great. it. That's Thanks

Tim Weller

Yes.

welcome. You're

John Abbot

you. thank Brad,

Operator

of Havemeyer Your the next line with Fred Macquarie. comes from question

Fred Havemeyer

a you and with a thank but the question. appears qualified experience. company cybersecurity Stepping team robust also engineering technology extensive taking only back for not interesting with that acquired with you it Hey, BitDam,

the do expect this curious of I'm that team product portfolio Datto, inclusion help the you with advance BitDam roadmap? evolve and your potentially So could how into our product

Tim Weller

But feeling has smart three my folks Tim. and that on. -- we're pre-BitDam. to go Yes. new strong got concentric security defensive never so a security good offensive have Hey, is some I'd compliance, very Fred, technology this more back to and rings. hurts sense, capabilities, there and team internal We've and

first XX about time MSPs BitDam. been days, we're in always the now now part has and ring-two ransomware that is in exciting last ring The think for I and thought three the leadership.

together And so We more key platforms, start-up than a start-up. one is sense. as a MSPs can years people have over they some year, going in ideas as They've integrated security team it's a start it us there. great focus. margin to amount we'll forward. into so Israel around and require for adding not be to get of The get you breadth been narrowing going as broaden have then many actually into to real on And know and right? many, there the of them fast and is a this as producing not of from is could hands need core depth get instantiated this in they our we it's But that's that nice well, there lost technology their based possible, talent hopefully

So, found really in so security, an took great important of which a a in our top merger. our and ambitions that, in which best, accelerant several dimensions confident for we we're cultural fit on is time and we the

Fred Havemeyer

you. thank Yes,

countries this high-quality engineering hit a as say company, But I effort I'm such to talent could acquisition think you -- of an Israeli as of on my this. longer-term a Israeli question overseas well curious partly let's access with Israel? also having be start around in or the say follow-up top-tier on

Tim Weller

us. becomes -- look, for war Israel another talent, spot global a it's Yes. so for attractive It's

technology team in meaningful development in Denmark. a and London, We teams have have we surrounds the

I think I'm losing track.

developers. six we where countries have think I we five already, or have

benefits clear market in great of a talent the so. among many absolutely base pool, got for a a So that's operations technology is

Fred Havemeyer

you. Thank

John Abbot

Thanks, Fred.

Tim Weller

Welcome.

Operator

of the from comes line question Mizuho. next Gregg Your Moskowitz with

Gregg Moskowitz

very much. thanks Okay,

earlier forward? wanted that breach. MSPs? impact, what breach will you Datto's any, And Exchange about this for might on Tim, solar do the have So to do actually an recent server nature cloud that Microsoft think then know on I was on-premise accelerate to business ask there think shift question of I also storm, this but the you the if going

Tim Weller

[ph] literally pretty two-person, or it to and do here just because emerging usually which released It's a Yes. is the obviously we one scripts it. for it's crazy a couple like

how it fundamental heroes. To servers have then reasons. moving now, for the the the following you for and years Gregg would more the been me, got numbers I. I know don't have is we've than Exchange So

I and a stage, Click wrong every a he think the famous O mind lock in showed a in ransomware. kind and XXX had on box Kevin sticks up us my box. hacker back Datto main what's half the -- my email, into And day. of from of in on year somebody's went ago, we what email the Mitnick email

MSPs. into It's issue. So, a synergistic. And just they about investing security, interesting I you move of security new is are that's exciting totally the cloud, because doing in talk that way mean doesn't investing we not business. be very think going And to and cloud, in an for

year the So out. MSPs. numb more of week many people in revenue ago. they paying the storm real than feeling techs security. year SMBs they're this from think these just a almost money than be and heard I little different they're think to is starting I were The for a there -- are we've pain. But a There very this to think coming place more overwhelmed, solar to attention are used But when. some they're let's Both say, say so little last on opportunity lot caught should they hey, I in a but

of So at cast this moment. would that's how it kind I

Gregg Moskowitz

a to Thanks, Right, assumptions recovery are around XXXX revenue And bit what on John, Tim. then just got embedded in Thanks. SMB your able are expand it. you guidance?

John Abbot

to of a tie a the second and and we tied macroeconomic see a there of reopening, Sure. expense the -- we But specific year, absolutely half guidance have that from is of model. sort standpoint standpoint, our revenue We broader don't a certainly impacts that. assume that an both

Gregg Moskowitz

Okay, great. Thank you.

John Abbot

Sure.

Tim Weller

Gregg. Thanks,

Operator

question from Thill Brent with of last Jefferies. the comes Your line

Unidentified Analyst

have in Really [ph] it think I question. Hey, the is XX% quarter? in XX% XQ Brent. gross and it quantify for renewal on but what missed was last guys, this appreciate Joe you the year. I may is can rate the

curious it Just this was what quarter.

John Abbot

Sure.

year. was quarter This XX% was the the the so in low really XX%,

Unidentified Analyst

And forward. Awesome. then just… will to rates and that going retention help That's hear fantastic all

John Abbot

not… that's And based, obviously dollar Yes.

Unidentified Analyst

and got know, then home Yes. from there? investments [indiscernible] you're is talk you're a more clear bit growth have -- traditional you're lot Yes, dollar-based And been a the could PaaS, savings, you priority just spending just side in investing for guys a clearly, you given that work moving you on those the don't about go-to-market sales model? clear. where and so products. a you little Maybe you've And

Tim Weller

up. it right, I global, throwing just may The Yes. or it's more XXX two But past, said MSP a take reiterate. going to traditional reps who the more the ones speed of us. want John have is you a you talked something may about quota-bearing not could shot model, so That qualitative moving is you're who -- so on for a or do number there at and said, base may the international, there. do not hiring selling we've in

for you what expertise marketing out security know, the things matching and a product be security, cloud over have You that, so word John I security, -- you would for we roll like adding you expect of or in time. something, the know some we'll that know, has it, cloud, cloud. sales engineers, things newer functions

on unusual. think that? don't anything So some have may more John, you I it's color

John Abbot

umbrella not there our our may towards geared enabling sales it effectively for extension It's be in lot who little. of lot -- MSP salespeople, team, marketing and right? example, It's just just is and No, that's sales -- our adding partners so. of a a a an is

Unidentified Analyst

guys. That's helpful. Thanks,

Operator

now closing call like turn any I the back would to over remarks. for Weller to Tim

Tim Weller

much for you maybe in [ph]. like call. many for the getting XXXX. sure We're your outdoors excited about I'm Well, very you the of appreciate again outlook summer are all really And thank We me Datto. interest joining about excited

again So, soon. Take with we speaking care. to very look forward you

Operator

Ladies and you your conference concludes participation. today's gentlemen, this for thank We call.

disconnect. You may now

Datto Holding (MSP) 12 Mar 212020 Q4 Earnings call transcript