MSP Market Growth: What Datto, N-able Earnings Reveal
Datto and N-able — two bellwether companies for the MSP software and SMB technology industries — announced quarterly results on February 23 and 24, respectively.
Those earnings reports provide important clues about the health and growth of the MSP technology market — particularly in the SMB (small and midsize) business sector as well as the data protection, cyber resilience and cybersecurity markets.
Datto Business Evolution, MSP Ecosystem Growth
Originally known for backup hardware appliances tied to cloud services, Datto has aggressively expanded to offer cloud-centric software that allows MSPs to manage, monitor and safeguard SMB networks. The expansion strategy appears to be performing well. Indeed, Datto’s total revenue was $164.3 million in Q4 of 2021 — up 18% from 139.0 million in Q4 of 2020. Also, net income was $5.7 million — compared to a $7.2 million net loss in Q4 of 2020.
Datto also revealed multiple KPIs (key performance indicators) for its MSP partner base. Three of the KPIs to note include: Datto…
- Serves more than 18,500 MSP partners — up 9% from 1,500 from the previous year.
- Generates about $35,600 of ARR (annual recurring revenue) per MSP, up about 11% from the previous year.
- Supports 1,400 MSPs that spend at least $100,000 in ARR with Datto, up 27% from December 2020.
Datto’s Latest Acquisition, Wall Street Perspectives
Datto is also striving to blend organic growth with acquired technology. Key moves include acquiring Infocyte for Endpoint Detection and Response (EDR) technologies and Managed Detection and Response (MDR) services. It sounds like a promising acquisition, though Datto will face intense competition from far larger and rapidly growing EDR and MDR software and service providers — including a newly minted unicorn named eSentire.
Despite Datto’s continued growth, Wall Street seemed unimpressed with the latest financial results Datto’s stock ($MSP) was down about 2.2 percent in after-hours trading — though we’ll be waiting for additional feedback from the company’s earnings call.
Datto Side Notes:
- Talent: There has been some churn within Datto’s employee ranks. Some of the recent departures involve Autotask veterans who had joined the company through the Datto merger in 2017. We’re not suggesting that employees are running for the exits, but we have noticed a steady flow of Datto job-changers on LinkedIn in recent months. And on the flip side, new talent has also arrived at Datto — including Chief Marketing Officer Brooke Cunningham.
- DattoCon 2022: Datto is targeting Q3 to potentially host DattoCon 2022 — an in-person conference for MSPs, CEO Tim Weller said during the earnings call. He did not provide an exact date for the event.
N-able Business Performance
Meanwhile, N-able disclosed the following business performance metrics for Q4 of 2021:
- Total revenue of $89.5 million, up 12% from Q4 of 2020.
- GAAP net income of $2.1 million, compared to a $9.9 million loss in Q4 of 2020.
- Net retention rate remained at 110 percent — which essentially means MSPs are expanding their engagements with N-able.
N-able spun off from SolarWinds in 2021. The company is perhaps best known for two RMM (remote monitoring and management) software platforms, though the business has expanded into various data protection and security markets.
In a prepared statement about the Q4 2021 earnings, CFO Tim O’Brien pointed to momentum with N-able EDR and N-able Microsoft 365 cloud-to-cloud backup solutions, though he didn’t disclose actual ARR or revenue dollar figures for those products/services. The EDR capability involves an OEM (original equipment manufacturer) relationship with SentinelOne, which has been expanding relationships with MSP software providers.
Stay tuned for more analysis from N-able’s earnings call.
Additional MSP Industry Reality Checks
Most other rivals in the sector — names like ConnectWise, Kaseya and NinjaOne, just to name a few — are privately held and don’t disclose quarterly results.
Still, that could change in the months ahead. Kaseya, for instance, has been exploring a potential financial event that could transform the business into a publicly held company. But those exploratory Kaseya IPO plans apparently got pushed back a bit after the company suffered the VSA ransomware attack in July 2021. Most chatter suggests Kaseya finished 2021 with good financial momentum despite the attack.
Stay tuned for more updates to this story.