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Datto Earnings Tout MSP Partner Growth

Datto now supports more than 17,000 MSPs, and subscription revenue grew 16 percent during the period compared to Q4 of 2019. The data protection, cybersecurity and IT automation technology company said Q4 revenues grew 10 percent to $139 million.

The results generally beat Wall Street’s expectations, according to Seeking Alpha. Datto’s quarterly earnings ($MSP) are a bellwether for the overall managed IT services provider market. Most MSP technology companies are either privately held and/or backed by private equity firms. Datto, SolarWinds, OpenText (owner of Webroot) and Zix are among the few publicly traded companies with major MSP-centric sales models for some or all business units. SolarWinds is in the process of rebranding SolarWinds MSP and spinning it out as N-able. Also, Kaseya is exploring a potential IPO.

Datto’s Q4 2020 earnings surface roughly five months after the company launched an IPO. Private equity firm Vista Equity Partners remains a major shareholder in the business.

Datto: MSP Technology Business Evolution

Datto’s original business involved on-premises storage appliances that provide backup services to Datto’s cloud. The business depends on MSPs as the pure go-to-market sales model into the SMB sector.

In recent years, Datto has evolved through M&A and R&D to offer remote monitoring and management (RMM), professional services automation (PSA), networking and cloud-to-cloud backup technologies for MSPs.

In a prepared statement about the earnings, Datto CEO Tim Weller said:

“Our strong fourth quarter and full year performance is a testament to the power of Datto’s MSP-centric platform and the durability of our recurring revenue subscription model, even during these challenging times. Our sequential quarterly ARR growth of $20 million is continued evidence of the reacceleration of our business and the tailwinds from the digital transformation of small and medium businesses. Looking ahead to 2021 in this increasingly hybrid cloud environment, we remain focused on providing MSPs and their SMB clients with best-in-class security, continuity, and remote monitoring and management solutions for complete cyber resilience. Cloud and security have been at the core of Datto’s mission to protect digital assets since inception. Our recent acquisition of BitDam further advances the value we provide to our network of more than 17,000 MSP partners and we are well positioned take advantage of the large opportunities in front of us.”

Datto Acquisitions and More

Datto announced the BitDam acquisition on March 10 to help MSPs address security for Microsoft 365, Google Workplace and other SaaS applications. Also, Datto acquired Gluh in mid-2020 and is now positioning that software as Datto Commerce — essentially, a sales automation system for MSPs.

Datto also has a cloud-managed network hardware business that’s seeking to compete in some ways with Cisco Meraki. We’re curious to see if Datto mentions the networking business as well as the overall health of the storage appliance business model during the earnings call (stay tuned).

Among the figures to watch closely, Datto said it ended Q4 of 2020 with more than 17,000 MSP partners, an increase of 400 compared to Q4 of 2019, the company indicated. Based on those figures, quick math suggests Datto has been adding about 33 MSP partners per month, which may suggest most of the company’s growth now involves existing MSPs rather than new MSPs. Still, we’re checking to see if our view on the figures is correct. Stay tuned for potential updates after the earnings call.

 

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