MSP - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Datto's First Quarter 2021 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] And please be advised that today's conference is being recorded. now today, hand Mr. would to conference I speaker your Instructions] like the to over [Operator Ryan Director Burkart, of Investor Relations. Please go ahead.

Ryan Burkart

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

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

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

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

Evercore our conferences on also like discussed the supplement conference our we the the call on Growth the A William Tim A Tim? joining earnings website. several call. can found Investor to our out in I'd Blair Relations are to be this to and you reconciliation be up our schedule. and to Officer, Stock Please release, turn I Relations like investor non-GAAP interested of me over of will on is Conference, will financial TMT the which would Bank that webcast if ISI Conference XXXX June comparable directly most Weller. you're year Technology reach to Conference. Investor Executive measures today's GAAP financial press in in coming also available full call website. including With quarter be and these America participating financial measures non-GAAP financial Additionally, Global that, fourth available inform of Chief our measures

Tim Weller

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

quarter, strong to outlook are We our Datto QX a for and and comments Commerce, on you update and with report two I'll product begin for improved latest the key excited XXXX things XXXX. then followed an results few on highlights Cloud I'll by from launch, Security.

free more cash fourth across of the consecutive growth discuss Finally, This entire revenue products momentum from reacceleration. was million ended our of strong led I'll the results We growth with subscription representing adjusted revenue financial to sequential this our ARR, In free flow. revenue $XX product We and by a as higher We represents million detail. the which year quarter driven the generated saw of growth of view indicator products, a QX QX to quarter. key QX XX% of in strength call on more with our leading resilience. and transformation BCDR continued suite by strong and turn our SaaS and flow than year-over-year. and note million started over digital and XX%, guidance into powerful $XXX EBITDA of RMM we in previous cyber protection $XX rebounding in a trends of total as of cash john quarter than increase positive carried our

up partners we end to grew In XXX serve the XX,XXX, addition, the from of MSP number of XXXX.

every own channel have we run expand customers, their largest businesses to we sell provide a that are and MSP efficiently purpose provider aligned And with their sales their is day in to relationships for community. SMB tools grow that building which businesses their IT channel. As our MSPs solutions service the never to and unique resources the years support around motions. one-by-one. serving a their to solutions managed for pure of SMB established directly sell customers. built play margins. know wealth through provider have dedicated go We MSP in software technology, creating to And this We you highly has and to to mission-critical And we spent

than MSPs. on vendor of deliver our MSPs, to it are company for promise partner. other a more barrier another to are just creates potential We entry to And that No can competitors. sale we their major trusted

our PSA partners in continuity on open market I months for shout of point-of-view than on work with give the Consistent established the with of should Let me in MSP's New of quote, Datto's the protection acquisitions sell playbook of North investment an and will most Datto PSA we it product is integrated solutions RMM and with American adapting in a recently to platform of simplifies real-time software. average Forrester Commerce period Datto that concluded recent the while differentiated Research operated high security We And PSA also year, demands our integrates Datto for seamlessly any now using. that ecosystem it technology teams Canalys ROI. for Zealand RMM, the payback And we are into technology unified efficiency the It is and briefly course, increases quoting commerce North last Commerce XXXX. in virtually SaaS and touch to the Datto their very of our Commerce RMM small how in teams With networking, it RMM for philosophy, middle enter and and Partners quadrant before and the with out American RMM April. commercially that follow the how MSPs. Meanwhile, less well Datto grid. a launch Research launching we MSPs Commerce, landing and right tailored upper unique of great platforms purchased Australia, PSA market. procurement profitability. we on Datto a our procure. six

call work over financial and our on wanted Before security. outlook, to help thoughts to clients SMB key Cloud some MSPs I turn to leave Datto run I themes John securing and digital through manage, results assets. assets, two for you and with common their both Protect, the protect those XXXX, assets, help in in applications manage goal all validate and those assets protection, those of our connect and securing to users data, that that we to assets. and products digital together connect, help

cloud. about talk Let's

own the advantages of delivered applications. that flexibility Cloud us exabyte services are software SaaS and as gives Datto cloud-managed, Our and scale cost, operate control. We our

most and Our various they in cloud. in have data will their own environments stages digital which ability in a the us where for a partners cloud continuity from for highly future. security hybrid serve What important disparate no to environments many Workspaces run sometimes data give performance experience is believe clients continuity, Google our protection partners that is on partners premises in high our in ability cases, and SMB our world, and they for to digital the public that assets our XXX, Datto. workloads, and The foreseeable the M come secure for live. are to the robust journeys offer is and operate public assets cloud hybrid clouds matter cloud applications in part the the the We manage we to at unified offer of partners our predictable will private performance, that step cloud product, next Azure in trust cloud reliable hybrid same across who

for beta track is QX product very Our and partner demand on Azure encouraging. is and

We broaden more to in our I coming quarters. our for market expect forward reacceleration. to look contribute Azure opportunity unified and to continuity sharing ongoing

of of about of webinars detection occasional as bring Datto and content natural now any we Day other Continuity active of line or which than are and response the endpoints good. help application against MSP's areas internet as isolation with With recoveries resilience. like strong cyber evidence margin new our Because We're Ransomware delivered dive their cyber clients in XXX,XXX or acquisition for and squarely and cyber just our form offering leadership a we security. protect their for just SMB for fits double defense from every to Ransomware to recent security. clients I've thought server the disaster, the protection shape opportunities, data primarily protect we're last the talk and our XXX,XXX early week, event monetize feature let's they involved to plan resilience a Continuity of are QX Finally, incident result also MSP of new protected partners Partner RMM a QX, launch under on path in outages beyond and ago. now our be our recovery. in of for MSPs of cybersecurity almost growing with With MSPs the less grow in other SMB quarter each into threats. cyberattacks. Continuity our we against continues roadmaps against described providing BitDam it and cyber RMM business security continuity crashes, demand and The deep helping The security. to is deliver of Ransomware framework. always defense used Tech in security into accelerating many threats. events,

report as sponsored coming and events a international world. industry, on around national international audience arena, member to law an Homeland the addressed policymakers of confront Task security taskforce a against and urgent of the enforcement, recently Datto and our with Our event government, Security Force, founding the of together this U.S. others, leadership released to Ransomware. countries in broad fight where of where serves for how Secretary the risk The security expands Ransomware the experts in coalition beyond its U.S. an organizations recommendations and

home, through our and the see We our to SMBs. our ensure Our partners among across the good guidance help pleased In highest the develop MSP see funding business. you complexity you summary, results the standards. that, to and partners. I I'll momentum infrastructure to our support critical and With measures. results to products MSP ever your ever Thank Datto. sell in and for participation, financial own own our help with invest to as secured their cyber to products, areas And businesses practices Commerce make and Cloud capabilities to enhancing them to to resilience to been more margin to inherent taskforce fundamental operate the will with their products. take have PSA, committed MSPs remain story. over financial and increasing MSPs growth always are efficiently into turn opportunities through be more couldn't interest as recommend and MSP and we margin in to SISO's outlook. opportunities with John other turn continue security many away for these QX and RMM call continue extract that investments Closer Datto for and them grow and with shift to John? and

John Abbot

Thank metrics referring to And And otherwise afternoon, Tim. numbers to We're you, as I'll today, strong that please be good results. first note our I review quarter everyone. report pleased specified. non-GAAP unless

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

reflect Our results first whole continued our team strong execution and suite from products. momentum our quarter of across

at ARR million ARR annual the of subscription increased was XX% approximately total exceeding million from benefit guidance. our a revenue importantly, This $X a from foreign approximately from of revenue which rates our benefit XX% high comprised XX million million, revenue XX% million included end previous a ago, our up of exchange $XXX.X sequentially. currency recurring quarter was million, of exchange and $XX $XXX.X year includes of First the March $XXX.X Subscription recalibration. up rate $XXX.X year-over-year, in quarter, X%. favorable

QX, Excluding million in increased believe and up $XX the encouraged of quarter associated of the the increase business. this continued sequentially, in us. in and FX We're by with reacceleration in now $XX and return evidence increased dollars million providing a first first MSP with ended of XXXX QX partners ARR more than We impact $XX from net XXX million increase year-over-year XXX behind an to sequentially. largely of partners, growth the the the is churn the pandemic MSP quarter, of XX,XXX

of ago. number in $XXX,XXX the more to XXXX, year We over up from a grew ARR contributing than XXXX also MSPs

seeds. strong out our more to continues And roll they Our SMBs sell installed or of growth more model drive products. partners more base both within Those adopt as Datto Datto SMBs. consume Solutions to they data through

supporting and our XXXX our increased first XX% in infrastructure the efficiencies leverage in from function gross Our margins quarter the software were of up XX% we're driven QX support by XX/X realizing solutions. operating in

expanded First in restructuring $XX.X costs. expenses million as quarter we a during And of sales operating in within million, $XX.X stock-based XX% from XXXX. from for operating an $XX $X.X pandemic. $XX.X our structure an million from were million, quarter Within to were million million, slight lower EBITDA XXXX. QX were of in last and revenue increase for marketing XXXX. million, R&D significant slight XXXX. $X.X XXXX. now our XXXX. and a Adjusted G&A expenses $XX.X margins increase XXXX or million, XX% decline public a compensation structure In efficiency XX% year, and $XX.X to increase QX, of revenue company during QX, QX adjusted which ongoing were cost million compared the $XX.X excludes in recalibrating QX $XX.X in finally, was initiatives, reduction from expenses the was COVID in OpEx, a expenses was QX the Operating million, result million cost XX% million, income QX EBITDA from a first in expenses, QX transaction in to expenses quarter, depreciation million $XX.X $XX.X expense include compared to $XX.X cost or compared reflecting

investing discussed with pre-pandemic commercial we its in over to $XXX mid-XX% adjusted revenue in security positive drive XXXX. call, returns ended we And activity compared $XX.X we in our on the just cash the margins to to $XX.X levels negative quarter we're As last earnings levels, the cloud will And in quarter Free and cash. growth. million low million was to million, revert EBITDA in to expect flow range. qX

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

the the of to include Our impact of security. in cloud XXXX incremental investments guidance continues and important areas

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

year $XXX we're of a million our For $XXX And guidance of revenue $XXX XXXX, our we're the million. guidance to a raising $XXX range range to adjusted raising also to to full EBITDA million. million

year at And tailwind. at revenue represents of growth XX% COVID year-over-year year-over-year of quarter inclusive inclusive an X% a XXXX revenue It's growth year. tailwind. the that X% a remember as represents guidance FX important guidance this XX% the midpoint of QX QX result easier year midpoint Our last FX of to was making our that our of revenue comparison a full impact, lowest

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

income non-GAAP effective an for we of rate reminder, a As taxes, use XX%. tax

qX And We'll and In the believe momentum XXX in in our results approximately about estimate to of full forward we the ongoing we for rest EPS, the diluted going the the guidance QX, reflect for the call the shares reacceleration Operator? shares year. calculating fully quarters For our up million very of XXX closing, million year. on diluted into fully open reporting to progress look business. excited for With come. We're that. questions. our XXXX

Operator

Your Morgan [Operator of question - line Sanjit first Singh comes Stanley. the Instructions] from

Sanjit Singh

a on really And you the first to great Thank congrats questions. team taking the off for QX.

impressive though particularly was sort the this ARR of net even benefit. the performance think for I normalized FX quarter,

there the may we So demand? have speak during thinking benefited onetime the changed that Tim quarter? or how end may should about portfolio And And items and is, QX? be to benefits sort if of my that question could to was any that you have across market

Tim Weller

partner survey or said, one you. record for having you whether year. can John always have the to I'll of tough there have you with XX,XXX, story what XXXXs than been onetime it's But have to are on plus when base, every don't dealing But doodle a thank ask Yeah, for other of a course. so. some us. partners he SMBs, of I think hundreds struggling We little a is

across a a the point of growth. breath terms that across any, reopening I have sense we in good that the product lines here. I occurring is step-by-step. to regions can't we And example, was So just case think general think for

good, international So breakout it's and one domestic. not superstar good rebalancing, with good

more same time, my We'll the customers out a I or think neck stick the And that to additional well. any more thing. little able at technology on their our start and I team seeing of the and the So one front. we're as longer and don't on their the pandemic of clearly, it home need say cage, optimistic. for goes speak, SMBs work-from-home out particular, was reacceleration, But get bit of more to once get so and are maybe MSPs and

for I the more said beyond You had I anything wish to But don't I in specific So John, you. something there want prepared know add? what remarks? you

John Abbot

No onetime wanted say, The It's as increase nice in that was to terrific talking you just Tim ARR. a great great But contributions see we we've that to the of had seeing call reacceleration products, in continued. items. a rebound that from even a a one other FX, with in great been business we FX the excluding really And Datto's and point well. and we've strength QX in out. mentioned protection continuation continue the was been before as extraordinary that's in it the And about. BCDR order RMM

across board momentum. really since geographies, products, continued So it's the - had

Sanjit Singh

demand terms meaningful wanted Ransomware in to for I next lot incremental security to it attacks? the that looking sort offering solutions. Appreciate is customers hit security are of security this headline around sense, attack a be that of comes of kind through is I efforts, Tim, what I you meeting cloud a well. pretty know of get in plays position Obviously, that two. of But the terms context has positioned? on both around front number was customers help - of country And position on those one, meet is want to and fronts. another to to item when likely a business How your going Ransomware in into BCDR challenge the a is the as Ransomware? in

Tim Weller

and think it. that think intentions Yeah. last No the I year a question headlines strong the we you on our highlighted, a I And Sanjit, call. What about are read difference very some XX makes increased being security money maybe pay for had SMBs processed to in And scary. antivirus for there sort beyond of by an willingness as that's the years. they've I

that's stack, absolutely full to I So through. out think And rippling see trying security and view going themselves figure you're MSPs starting to to basically their as what's companies. now

can't rest providing solutions of start conference whatever your you Zoom calls matter. or protect to and all SMB, not the comforts creature you're If the

I think exposure good we've had here.

last You've were the about And, and last of from line as IPO I'll heard of defense line the security defense. me a the a strategy, and as considering talked Continuity security that is the on we And front call phase. end happened. the bad recovery finding side. that Ransomware, in something out, now prevention But of get on can then we're the by

facing a last our listed report. before give the of round as Ransomware so, attacks. industry of a number And half problem MSPs. The that the all year MSPs, is state One of of kind data visible dozen points couple And recent that's one you. the

coming the is founding to warned just put government way member of put this everywhere. see monies our we've has I a just to some SMBs. Task Homeland own think joined increasing report And pleased And their the They And well. that be Ransomware think out. we're to risk going of even as Security SISO, Force. it's out Secretary just I Ransomware the release

you MSPs can on So then themselves their hands not recognized. that it's assets, SMBs the exposure. if your be And have get just

conversation. would capitalize So to leave we it's think there on in every up it. in and basically I we're it shape good

Sanjit Singh

Thanks, Tim. on the And Understood. congrats quarter.

Tim Weller

Thank you.

Operator

Kalia next from with Your Saket question comes Barclays.

Saket Kalia

had was maybe for through but again, particular from run-rate just one just ads Hey, start for thanks some questions last It the accepting Tim, Hey, you where we saw see we great Not doing? how first customer you. pandemic quarter here. related right. the churn, even my Maybe to part increase the taking guys, ARR. of above that to Hey, XXXX.

so anecdotally do you is, And pipeline of feel quarters? customer next the for maybe about the here couple adds the sort over how question

Tim Weller

hello. And, Good. Thank you, Saket.

met I the struggling. It's disruption noted we you policies XXXX. we And, credit even were year not Pandemic MSP the et adds think base, along were ads solid QX, to we gross MSPs of throughout quarterly some calls, lower with tightened couple gross of ago, in past some QX, end going our a comes cetera. our but when first at see question.

would that lot we continue. MSPs and of MSPs of dynamic net markets normal to So most out that you globally. still think that plus has there. We're now plenty about expect and when passed. normal economy, XXX,XXX MSPs, seeing A runway, growing There's of

we're on optimistic front. that So

Saket Kalia

up that Understanding we caught, how rest Got out of it. and don't you call you. you any doesn't you just new That sense. know, other have sort such. mean, new of maybe brush, of about call ARR for sound about. thinking anything John, of FX and some through comps ARR. Because anomalies lot net you easier kind But want that there follow be or XXXX? we to modeling of seasonally, makes the broad a or ARR my you recovery like I there should Is thinking - to be net sort should guide

of give we year So, the progresses? as could of should how ARR any you on sort sort color about think

John Abbot

Thanks. in falling ARR question, I actually and then Saket. sawtooth good slightly quarter, climbing business. know, historically And a again. that's a we each We again may we're pattern. ever. QX through increase starting $XX that highest in the And was second you momentum had think QX as of strong the think Obviously, to with very this had FX. increase before the grow Yeah, in our we pattern didn't strong quarter, million we without impact a even reflects year that seeing QX, follow ARR QX,

revenue. leading to higher in view and to obviously, driver revenue QX we've which we're And, don't is a that the indicator, focused guide And and continuing we you higher full leading indicator is As for revenue growth. ARR, drive range ARR, on guided the the of of growth ARR in year. but said, we

As increase. do overall our with linear will come always up trend you be believe of But theme can imagine, straight in consistent re-acceleration. the that we will a and

Saket Kalia

again. Very Thanks helpful, guys.

John Abbot

Thank you.

Operator

next line question comes RBC Hedberg from Matt Markets. of Your with Capital

Matt Hedberg

Great. about Thanks to taking I ask for my Tim, you question, guys. Commerce. Datto wanted

had and you You press solutions? to MSPs. script. pricing? in How obviously I don't release referenced pricing, prices earlier, might a talk relative it out on you specifically other about for your talk know the the Can it your mechanism you that's about up MSP to

Tim Weller

Yeah, it's sell what a in This at through I moment, great describe Matt. is would category. question the the

they're help buying, So that pain in point it's sheer a terms that. time subscription a of them just with to

customers, from for hundreds then abstracted an companies. mouse, at buying that time. the things of And those that larger noise level dealing a That's lot have dozens are takes all got and you've or all center buying Help we and is function with of and the MSPs. away getting MSP, us. of that If Desk It's laptops, broken, front procurement at

So put America and acquired this it's And a price. platform in into found New Zealand. year. effectively we flat Australia, tool we And rate subscription North it now last it's a

to great on we So think the revenue a hand, going be opportunity. it's one

content. this consistent PSA other of obviously In an flow there purchasing our into a and into so fits we connection it it's cycles their to the as hand, thought platforms, we as case, revenue in our them but perfectly a marketing, other well. that's also us digital our put end, starts and on opportunity with the there company, MSPs. tool email to of for platforms give PSAs some real open In cases, ecosystem strategy Autotask other connects back some theme was platforms, On

about their as we So it workflow. top getting think kind the into of of

Matt Hedberg

It one great. complimentary guess I stack. question. super seems additive product really to more and your That's

Now on what I'm beta be what learn you what demands that, kind you've but did to the for probably is sort that dissipate going learned? your from that available curious, just hard And aspect it's of get? What Unified sort of of you feedback Continuity to of curious, testing? did like on maybe Azure.

Tim Weller

go beta on first, just we'll let and question. me QX. calibrate so into That Yeah, the last

So, the now so out been gathering And the those names, months. had far, with we've though, and for of we've learnings four now in beta. live many we alpha come partners

I private our as of a technology, and move of around what with think to cloud want sure is to bulletproof we And in and struggling our confidence solution solutions think on-premise around are the Azure. high. are. learnings is their foremost, make there second obviously as I first set MSPs it's Candidly,

Azure, and everything So that. find can a MSPs start dialing that few moved you have love to I

You can find XX-XX, MSPs that are XX-XX.

economic You can process technology, where interesting. have economic they back. there and being And of that find just move and challenges, MSPs came a variety business

up, six You know don't quite goes as it what is your month, Azure not though down. going to look like

goal our MSPs and is what was abstract to has to going workloads of for quarter solution moved cloud getting year, going different as to I continuity to very journeys multi-year, it's that all magic is - us. never be happen. for And We've And Azure. them into so that of little think kind the everything journey. a understanding to now confident out cloud, their It's whether that magic indifferent the cloud. going bit on-prem that's I this we're their private journeys be been I away as increasingly think think so drawn we're there insightful the of to a And thought

their details we're texts what looking you. at have of guys and these into have the We screenshots,

what and it. that the broader, polish are about So much that's on beta kind summaries deeper last bit those of that get

Matt Hedberg

Congrats acceleration, the on to Great it. guys. hear. Got

Tim Weller

you. Thank

Operator

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

Jason Ader

was I impact what you mean, have I enough get it the And Tim, I'm labor don't on afternoon. SMB to we might say data good about But Yeah, thought that shortage. as people? this? emerging a you IT I cannot labor wondering wondering, safely how have know, shortage? there's outsourcing, have thought SMBs

Tim Weller

last other me a facing It's talents, rise think kind and piece talent. serving rise the the I Datto The thing. is don't rise - everyday than and MSP MSP I did I in getting it's we've vendors having To getting right SMBs know the year. of we if other trouble the MSP for even trouble everybody's of this talked about the technology. of war MSPs question. And know mean, around you the technology a having are great even the really of same that

So and and SaaS in other it more MSPs. can as you, have. geo tech strength But cloud to I and it get question signs. exclusively multiply RMM example, on by not think There's do see can't things shift, you kind speak protection some to can and other a pressure be products. see helping the the got a security. bring helping so more in has the when The to and that. And dashboards be into I we tech of And of definitely you SMBs you for of you shortage. as it's asked the to same you can some terms really you that we've factor our

Jason Ader

had had been if you hiring? any and guys hiring you as difficulties have And you -

Tim Weller

clip. we our see And a good. and roll we've in good been hiring far, valuable, large think you'll sourcing very but as that in And I have quarterly So numbers so forward. It's a we very recruiting team.

than far, every that's to but Obviously, geographic tech have we a ago, theme know. we've had flexibility so maintain for company more So good. might we year a

Jason Ader

$X adjustment for ago, a the of QX it million. said QX then, And in one you John, John. in What quick was year year ago? the a one was Okay, great. FX

John Abbot

It a full the was know of circle was I was it a Yeah, zero. bit that front last of part to last you right tailwind it me I to year didn't want a the in tailwind year, to skill. the X%. QX, an end year. QX quarter the year the headwind ready to I And of about me. talk in of you. about may impact year. in pattern back and - talk a full it the last for I say about Let QX at then year. was less was first And the was of about year have ready I last have year,

of bit shade. little maybe So of some you a kind that gives

Jason Ader

thank Perfect, you.

Operator

comes Next line of question with from America. Akida Bank of Cozy [ph]

Unidentified Analyst

taking Hey, question. guys, for Really my quarter. nice thanks

Commerce invoices a maybe and that guys Commerce, at the into I about from When on things too. a with pops procure. dig this sell that angle to pricing the different application wanted Commerce of see, think add it is over I monetization that is lever products prior at And platform? mind one I mechanism. something first to my quote, here a question look and you potential I you Just, could that this the guess, into coming that And there - that and is as payments.

Tim Weller

There's of this go. number Absolutely. could a ways

out For us build one is, job the platform. you got

into You to got platform. And platform you the out build all MSPs. then up vendors the the that different connecting for build

procure particularly plumbing So procure get at lot a of do, and the to what good volume. the there's work the to And sell side we're part, that. before you uniquely The which we think of quoting even we're generates at. good very is

calling get or are XYZ, an and maybe them the being you server. need new or you're Dell about MSP emailing, You to I need saying a customers hey, calling think

ticket Here's a big like. what It's item. it looks

quotes to track having constantly get quotes, across those the send those You're approvals.

interesting And tool There's downstream, it. so at of funnel, of a with go to very number top spot on. but starts the the you're ways that

of so right to trying we're of So build set top speak. the now to the the sort base at funnel,

Unidentified Analyst

the from you. Thank prior MSP of of an the it. a any any events, perspective? sort qualitative ask very there? from that sounds number either guess to this fourth sort And maybe you the wanted question in from you. from versus I maybe like is Day absolute this It or on got Thank I helpful. Tech you the of guys event Day. feedback color Tech the attendees that MSP That's Got And had. the

Tim Weller

number about interesting Ransomware, a previous security than was for time, was what was given much that, specific attendance the that Yeah, two imagined. just have it me much, Continuity, But and we offerings, than only could bigger RMM at announced we've had the limited it that the we we very have is done. that lower slightly

thought size to So webinars probably largest the with leadership as our webinar. anybody of business. team MSPs. for security is I in of there, comparable we've know couple out and And had SISO on our our previous as a security And doing that's twice our the years large it's

has Datto then then and it protect security, represents, circle Datto protect get talking concentric then, opportunities. three to think the concentric So only MSPs been our I first, about rings now. We're revenue model, in

through for some Datto opportunities actual announced with obviously comes revenue BitDam acquisition sell Here well. us. And we that concurrent with as

signal as revenue focus. and security the margin Datto meant and and some more MSP's becomes we're So to pockets with it more in get era the try of a was going new a to to

color I So that's added you. gave

Unidentified Analyst

helpful. Very And you. thank Thanks quarter, nice No, again. guys.

Tim Weller

sir. you, Thank

Operator

one next with of question Materne Kirk comes Evercore Your ISI.

Kirk Materne

you MSP upper within with I congrats talk XXX share you end you helps however I high kind those that customer business. feel through reopening, like economy's on wondering over progress is the echo on the you're if MSP quartile, general better partners taking about Tim, the them Do obviously yours Obviously, from think your was of with do cohort sort discovered you a making there of or that And sort clients base? you're or you quarter. sell is of particular of some a the like And year. in thanks. Yeah, of that of little the But the if have paying that bit doing [ph] perspective? any that bigger you're rather? a feel product you wallet grant could

Tim Weller

a play a tend They, to to good think it close don't talked question. the us. they vest. they Yeah, it's to all I little

very good networking, when else are. standardized. of inherit largest be us don't Continuity it's whether I hundreds Solutions. obviously think at have If We not completely inherit, account share and wallet they sense. about The they talked with to customers, So ones tend to they're they they serving an or rep a the the where level

a you're company than that working grows though. from And through piece penetration faster your the base way of so perspective. that as Definitely,

base. the it you be could where misleading. so that XXX,XXX. of can assume part in gaining overall little at definitely same a time, And share the we're And

million us time goes into could moving but upstream too. on, as imagine you vague, Sounds dollar plus sort of accounts

think to about So in of we together, way a sets do starting the that I with people glue displacements. us think as different big number product are

where beat we think of Most of more unusual. and otherwise, for grow us. which in and And execute accounts, competitor feeling still of all we start we're But the a sort spectrum. couple market. we ability the a I a immediately different the larger up little pretty is to confident on our then bit segments them. whole grown For get small And there of example, medium, focus nicely have

Kirk Materne

lift in have helpful. coming had gross And know, going I margins? we as to there forward back nice should What is back office adjusted EBITDA people general as back bit. consider as go down that's guys gross you anything on little we over obviously Is little in think shifts two? mix with come John, we to a about year maybe product margins. the going we Okay, just But that front? a think obviously, about spending bit the should the Thanks? next a

John Abbot

strength done progress pleased in underlying leverage, increased all software about. year. the efficiencies question, It's we've one in And the delivering great in the model. overall, solutions. the the both I we're in very support And quarters on gross we've teams supports that work a that driving made talked levels operating reflect non-GAAP long-term margins. And approaching Kirk? XX/X the we're our that the hand, But target good XX% of good and last think with does, infrastructure gross team that the business today margin on Yeah, XX% versus obviously,

hand, the out that's COVID going we think but mind. on But you we're products. One, mature continue like products as as to some on devices, up more keep are that out, margin, we require products events, box, point is travel have the be couple is seeing revenue, things least in on so there beneficial a to move do, new as a lower remain the the potential of cost expenses of bit. margins. slightly at expenses. to the related office low, to don't in average Not there than that a of And I in the more And certainly to to the obviously lot little other

that hopefully So some. help

Kirk Materne

great. guys. Thanks, That's on Congrats quarter.

John Abbot

you. Thank

Operator

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

Keith Bachman

want Hi, opportunity backup many. the Tim, to that question I of in you to front Thanks, on you. the drag in first see you

John, its in that think And next the in how understand terms And First solution? do How of Microsoft do was here about price clarification, your think to know follow do own then just over from how real potential? And just have previous potential question you the you of much that offering? trying two here is, question could? of potential migrating the terms there you is the I be much growth just part years? a pricing. Azure the about up frame And second workloads growth you might And a you what I to of how then say, do wondering GA? for will growth I if the be? on-premise when how is surrounded think pricing

Tim Weller

new the in little large served. what higher being solution, in Thanks, and as a do of has a net to it I'll something Keith. well question. are have opportunity in then a Azure and clients backup not MSPs Microsoft It's We now, right got that move kind Azure. And end, of terms call you think great box of if a demand more us you solution. they've complete check lower end, you and for

Our be above general competitive. make well solution, it is to of sort price that wise goal functionally and

premium et are data in So their that on-premise not rack again, their MSP a knows whether It's do from it's all it loads, center, other they the their center, space, back business Datto. regional they always a discount. getting data and cetera. they how as into But tie a product manage

and, cloud is in protection It from thing is mandated one Microsoft one be So your cases we for have We replication even not in anywhere cloud. wouldn't MSPs that storing all obviously can't becomes some which hybrid Cloud. everything then multi-cloud desirable solution. basket. that a a one add this It's in to Datto eggs

experience over first there. say, large rushed would we think larger the sophisticated more into the people. think some Solution It's and really net we of happy be demand. top-end it do expect with very and to Microsoft, I of to help I come as I as And help So think ammo everybody initially Azure be would waters, and a into market run Continuity day not okay, Azure to the go safe our absolutely new MSPs and to on get do we operating to going the be will to partners faster.

Microsoft and think we both So new it's migration too. the demand on front net

Keith Bachman

FX, two 'XX. to raised. either the I of new clarification. clarify, for my And was question just or GA. didn't expectations amount and were QX But could comments as And the comments. which about you it. in Okay. of the I revenue, the I same transcript, year points maybe sneak what the is guide calendar on John, didn't just any if $XX see embedded the in in there's the any at John, I a I'll could at that comments any just But that's million just looked last perhaps see FX, now if wondered about time. if I then guidance. same the FX missed on I was And what

you'd you're been the in points expecting previously expecting? could So versus that now 'XX, if just what two you clarify

Tim Weller

want the just to think second we've the is will of said robust and how don't we Datto at be think don't the goes. definitely launch on GA part related timing that and question beta and, really to Keith, something quality. then hear answer And the half, So I what we

Datto a the sometime commercial adopter probably stick for think the year. I an The But will it's buy just of expands a it retail definitely it with it's ready thing to and now, other continuum. this you shelf. bit is starts, we'll So later right signal expands, when availability off early

Keith Bachman

John, you? if

John Abbot

guidance strong the We assumption question. in our momentum did operating would an quarter last impact reflect assume tailwind a the driven Yeah. did from predominantly it FX. FX guidance. And big in current guidance FX guidance. in is And the But talk did in on by absolutely Not change our in a view. about that not business. Keith, I FX increase say fair

Keith Bachman

John. you, thank Okay,

John Abbot

Yeah.

Operator

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

Tim Weller

Hey, Gregg. you? lose We

Gregg Moskowitz

congrats, well I'm XXXX on Tim. to I sorry, The But mute. back me. a Zoom was as Hey, coming quarter. good very

do sell first to through And product? And question Tim, product. Commerce. through if an on a from how that sell designed is in be perspective? question would engineering Datto my Initially know, just I you this as have my difficult So, a extending is, interest it's so,

Tim Weller

Yeah, mute good it's last my the on way, been And a for question. by two townhalls. I've

employees, So great. everybody. front XX so the first not seconds, as In it's But it's the to ofXXXX reference a feature.

So it IT absolutely to possible, going larger said, Hey, like they'd clients you're as in Datto an kind Commerce of sell stay co-manage staff, that Is is I it's situations, through. have currently serving possible. to the think is vision Maybe a we platform, down MSP road quote.

You whole really are little platforms a different more little that. competing you're see, and like extended the bunch bit realm, bit with enterprise occasionally RMM tailored. extended PSA of get now a into much that that get like a But, you're

they they selling a new they probably running. base it seats new as a put you sell add it an through their called That fee. up think into add and even as get just When about and in would I and they a MSP through. it said, once to are way though give clients, it them much So And through. quasi-sell therefore as RMM we've

getting using I And they're here. a tool. So same paid by great think the thing RMM happens

including in says or that things that that up the of in the go in package base line MSPs something. base that There's their too, their streamline There's there clients. on marked Datto more time. probably question up two just bill And fee. clients sure package. flows the for purchasing the are not base then no they Commerce other a year As item that shores I'm there's first

tend probably of that call So category we it to sell would in through. it's through. quasi sell But

Gregg Moskowitz

you that any missed around Okay, I lot NRR guess, apologize of make Or John. makes just And I sense. provide if then for not, dollar-based or if gross Nice, Did a I retention? color comments? can you Tim. it. any

John Abbot

Yeah, we didn't about did - Hey, we Sure. NRRs. Gregg. talk not

on a report is retention revenue indicator. basis. net annual a will said, we've a lagging metric an that As It's

would last QX out the year in during declining, of last - started like lows QX bottom may last that the we as before this lagging end last were that growth, lows up. turning year Because it year, the and about had revenue of talked of back year. how really the would XXX% QX was You recall QX other XXXX. year they indicators, And we've COVID

believe, we we basically. starting so to point. up we're And low And passed the that move back

Gregg Moskowitz

All right, perfect. Thank you.

John Abbot

Yep.

Operator

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

Unidentified Analyst

Brent, Joe appreciate guys, question. to on Hey really the

that into times anything looks area there? like grew as international there the three domestically. out double to call Was It fast click almost want to as Just markets.

Tim Weller

say ahead wouldn't - I John. go

John Abbot

Because remember looking Yeah, it that thought that would segment. the my before come at one in for FX right looking the international was But might be notes. impacts actually was thing I that I up call. all -

have would number So does here the that while that smaller ballpark total. than added XX%. it impact on a FX growth greater on impact That

that's So highlight. would the thing I only

Unidentified Analyst

- Okay, I mean

John Abbot

It's bigger very nicely growing a still growing faster the tailwind and U.S. but than FX. from the

Unidentified Analyst

and one half help year, Okay. you provide conservatism. some That's helpful. which And about devices then is guidance implied year? a and FX healthy can be in guardrails decel devices? the if ahead throughout of mix a will revenue on think And the I subscription second the of how But assume to

John Abbot

mean be revenue device you Sorry, headwind? if a will

Unidentified Analyst

Yeah.

year, Just move right. throughout mix as the we the implied

John Abbot

have core grow. momentum in continue environment protection strong business year, mix. the to about half think I improve. the And mean, of expect would back XX% and SaaS the And I Yeah. revenue obviously, improve we expect expect think BCDR be And subscription well all we the our continue if optimistic. to think still And to RMM. I north of we to we we're and of we

will think our guidance. least be pointed at I in we out current two

the it out. a be expect the you to half, than first in as of We a pointed tailwind bit less half little second

Unidentified Analyst

Awesome. Thanks, results. guys. the Congrats on

John Abbot

Thank you, Joe.

Operator

Ryan There time. it I'll over Burkart this remarks. back And are no turn for questions closing any further at to

Ryan Burkart

joining your all. everyone again we speaking Datto. today. Thanks call look for to appreciate everyone really We Thank soon. And forward the interest with in

Operator

now you This participating. conference concludes may And disconnect. today's for call. Thank you

Datto Holding (MSP) 13 May 212021 Q1 Earnings call transcript