Datto Holding Corp.
Q1 2021 Earnings Call Transcript

Published: 12 May 2021

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. And please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Ryan Burkart, Director of Investor Relations. Please go ahead.
Ryan Burkart:

Thank you, operator. Good afternoon, everyone, and thank you for joining us today to review Datto's first quarter 2021 financial results. With me on the call, today are Tim Weller, our Chief Executive Officer; and John Abbot, our Chief Financial Officer.
Tim Weller:

Thank you. Ryan, and many thanks to everyone for joining us on the call this afternoon. We are excited to report strong Q1 results and an improved outlook for 2021. I'll begin with a few highlights from the quarter, followed by comments on Datto Commerce, our latest product launch, and then I'll update you on two key things for 2021 Cloud and Security. Finally, I'll turn the call over to john to discuss our financial results and guidance in more detail. This year started on a strong note as momentum from Q4 carried into Q1 with total revenue growth of 16% and subscription revenue growth of 17%, year-over-year. We saw strength across our entire product suite led by continued rebounding of our BCDR products and strong growth in our SaaS protection and RMM products, driven by the powerful trends of digital transformation and cyber resilience.
John Abbot:

Thank you, Tim. And good afternoon, everyone. We're pleased to report strong first quarter results. And as I review our numbers today, please note that I'll be referring to non-GAAP metrics unless otherwise specified. You can find a reconciliation of non-GAAP measures to GAAP measures in the press release that we issued this afternoon and in the supplemental financials posted on our website.
Operator:

Your first question comes from the line of Sanjit Singh - Morgan Stanley.
Sanjit Singh:

Thank you for taking the questions. And first off congrats to the team on a really great Q1. I think particularly impressive was the net ARR performance this quarter, even though sort of normalized for the FX benefit. So my question Tim is, if you could speak to end market demand? And how that may have changed to that across the portfolio and during the quarter? And was there any sort of onetime items or benefits we should be thinking about that may have benefited Q1?
Tim Weller:

Yeah, thank you. I'll ask John to doodle on whether there are some onetime or other than what he said, I don't think so. But it's always been a little tough for us. We can survey the base, of course. But when you have 17,000, plus partners dealing with hundreds of 1000s of SMBs, for every story you have a partner struggling to have one is having a record year. So I think we just have a general sense across regions that reopening is occurring step-by-step. And we think that was the case here. I can't point to any, for example, a good breath across the product lines in terms of growth. So it's not one breakout superstar with good, good international rebalancing, and good domestic. So I don't think I stick my neck out and say it was any one thing. But clearly, the longer the pandemic goes on and work-from-home or particular, the SMBs need more and more on the technology front. And at the same time, we're optimistic. We'll get additional reacceleration, once MSPs are able to get out of their home cage, so to speak, and start seeing more of their customers and maybe a little bit of that for our team as well. So I wish I had something more specific there for you. But John, I don't know anything beyond what you said in the prepared remarks? You want to add?
John Abbot:

No extraordinary onetime items. The FX was the one point we wanted to call out. But even as you say, excluding the FX, it was a terrific order and a great increase in ARR. It's really just a continuation of the reacceleration in the business that we've been seeing that we've been talking about. And Tim mentioned before that BCDR had a nice rebound in Q4 and that's continued. And we continue to see great strength in Datto's protection in RMM with great contributions from other products, as well. So it's - since had really across the board products, geographies, continued momentum.
Sanjit Singh:

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

Yeah. No question about it. And we highlighted, I think Sanjit, very strong our intentions on the last call. What a difference a year makes that I think the headlines you and I read are sort of scary. And that's being processed by SMBs as an increased willingness to pay some money for security beyond maybe the antivirus they've had in there for 15 years. So that's absolutely rippling through. And I think you're going to see MSPs now trying to figure out what's their full stack, and starting to view themselves as basically security companies. If you can't protect your SMB, all the rest of the creature comforts and Zoom conference calls or whatever solutions you're providing start to not matter. I think we've had good exposure here. You've heard me from the IPO and were talked about security as the last line of defense. And, considering the Continuity as a last line of defense and a security strategy, I'll call that the recovery phase. But by then something bad is happened. And now in Ransomware, we're finding out, we can get on the front end of that on the prevention side. And so, a couple of data points that give you. One is our kind of state of the industry report. The MSPs, last year listed Ransomware as the number one problem facing MSPs. And that's before all the recent round of half a dozen visible attacks. I think the Homeland Security Secretary just warned of increasing Ransomware risk to SMBs. And our own SISO, we've put out a release has joined the founding member of the Ransomware Task Force. They just put their report out. And it's just everywhere. And we're pleased to see that I think some government monies is even going to be coming this way as well. So it's not just the SMBs MSPs themselves have exposure. And if you get your hands on their assets, then that can be recognized. So it's up basically in every conversation. I would leave it there and we think we're in good shape to capitalize on it.
Sanjit Singh:

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

Thank you.
Operator:

Your next question comes from Saket Kalia with Barclays.
Saket Kalia:

Hey, guys, thanks for taking my questions here. Hey, how you doing? Hey, Tim, maybe first for you. Maybe just accepting one particular part of the ARR. It was great to see the customer ads start to increase again, right. Not just from last quarter where we had some pandemic related churn, but even above the run-rate that we saw through 2020. And so maybe the question is, how do you sort of feel anecdotally about the pipeline here for customer adds over the next couple quarters?
Tim Weller:

Good. Thank you, Saket. And, hello. I think we noted in the past couple of quarterly calls, but even when we first met you a year ago, gross MSP adds were solid throughout 2020. It's not going to gross ads question. Pandemic comes along Q2, Q3, see some disruption at the lower end of our base, with some MSPs were struggling. And, we tightened our credit policies et cetera. So now that most of that has passed. We're seeing net MSPs growing and we would expect that dynamic and normal economy, normal markets to continue. There's still plenty of MSPs out there. A lot of runway, when you think about 125,000 plus MSPs, globally. So we're optimistic on that front.
Saket Kalia:

Got it. That makes a lot of sense. John, maybe my follow up for you. Understanding you don't guide to net new ARR. Is there anything you want to call out seasonally, or - I mean, you call that FX doesn't sound like there any other anomalies that we should be thinking about. But just sort of broad brush, how should we sort of be thinking about modeling ARR or net new ARR kind of through the rest of 2021? Because you have some caught, you know, easier comps and recovery and such. So, any sort of color you could give on how we should think about ARR as the year sort of progresses?
John Abbot:

Yeah, that's a good question, Saket. Thanks. And historically as I think you may know, we actually had a sawtooth pattern with ARR climbing each quarter, Q1 through Q4, and then falling slightly again in Q1 before starting to grow again. Obviously, this year in Q1, we didn't follow that pattern. We had a very strong quarter, even without the impact of FX. $26 million increase was the second highest ARR increase ever. And we think that reflects the strong momentum we're seeing in our business. As you said, we don't guide the ARR, but we've guided to higher revenue range in Q2 and for the full year. And, obviously, ARR is a leading indicator of revenue. And we're focused on continuing to drive higher growth in ARR, which we view is that leading indicator, and driver of the revenue growth. As you can imagine, that will always come in a straight linear increase. But we do believe the overall trend will be up and consistent with our theme of re-acceleration.
Saket Kalia:

Very helpful, guys. Thanks again.
John Abbot:

Thank you.
Operator:

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

Great. Thanks for taking my question, guys. Tim, I wanted to ask you about Datto Commerce. You had a press release out on it earlier, and you obviously referenced it in your script. I know you don't talk specifically about pricing, that's up to the MSPs. Can you talk about the mechanism for pricing? How might MSP prices relative to your other solutions?
Tim Weller:

Yeah, it's a great question Matt. This is at the moment, what I would describe in the sell through category. So it's a subscription that they're buying, to help them with a pain point in terms of just sheer time that. If you've got dozens or hundreds of customers, and an MSP, buying those laptops, buying the mouse, dealing with all of that things are broken, getting that procurement function that we all have at larger companies. And then is abstracted away from us. That's front and center for MSPs. It's noise at the Help Desk level and takes a lot of time. So we found this tool we acquired last year. And put it into a platform now it's in North America and Australia, New Zealand. And effectively it's a flat rate subscription price. So on the one hand, we think it's going to be a great revenue opportunity. On the other hand, it fits into our strategy of platforms for MSPs. In some cases, we give them some platforms, email platforms, other marketing, digital content. In this case, we thought there was a real revenue opportunity there and obviously starts to put us in the flow of their purchasing cycles connects perfectly back into Autotask PSA on our end, but it's also an open ecosystem tool that's consistent with our theme as a company, and so connection to other PSAs as well. So we think about it as kind of getting into the top of their workflow.
Matt Hedberg:

That's great. It really seems super complimentary and additive to your stack. I guess one more product question. Now that Unified Continuity is available on Azure. I'm curious, what did you learn from your beta testing? What sort of feedback did you get? And it's probably hard to dissipate what the demands going to be like for that, but just sort of curious, on maybe that aspect of kind of what you've learned?
Tim Weller:

Yeah, so first, let me just calibrate on the last question. That we'll go into beta and Q2. So, gathering those names, now we come out of alpha and in the beta. And the learnings we've had so far, though, we've been live with many partners now for four months. I think around obviously first and foremost, technology, we want to make sure it's as bulletproof of a solution as our on-premise and private cloud solutions are. And I think our confidence there is high. Candidly, the second set of learnings is around what MSPs are struggling with in their move to Azure. So you can find a few start dialing and MSPs that have moved everything to Azure, I love that. You can find MSPs that are 75-25, 25-75. You can find MSPs that move there and came back. And they just have a variety of technology, business process and economic challenges, where economic being interesting. You don't quite know what your six month, Azure though is going to look like as it goes up, not down. And so I think now understanding their journeys as MSPs and that the journeys of different workloads into the cloud, has been very insightful for us. We've never thought there was going to be a magic quarter magic year, what kind of everything moved to the cloud. It's going to be this multi-year, drawn out journey. And our goal is to abstract away all of that for them so that their continuity solution is a little bit indifferent as to whether it's on-prem private cloud Azure. And I think we're - I think we're getting increasingly confident that's going to happen. We have these guys looking at screenshots, we're into the details of their texts and what have you. So that's what the summaries about those are broader, much deeper beta that kind of get that last bit and polish on it.
Matt Hedberg:

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

Thank you.
Operator:

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

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

It's a great question. I don't know if we've - I mean, other than everyday it's a war for talents, everybody's facing the same thing. To me the rise of the MSP and you know I talked about this even in the think piece we did last year. The rise of the MSP is really around SMBs having trouble getting technology. And the rise of Datto and other vendors serving MSP that even MSPs are having trouble getting the right kind of technology talent. So it can't be helping SMBs it has to be helping MSPs. I do think you see the strength we got for example, in SaaS protection and RMM and some of our other cloud products. The more you can kind of geo shift, so to speak and bring the tech to you, in terms of dashboards and other things to the more you can really pressure on that. But it's not a question we've asked as exclusively as you have. And I see the same signs. There's definitely a shortage. And you can multiply that by some factor when you get into tech and security.
Jason Ader:

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

So far, so good. It's valuable, but we have a very large sourcing and recruiting team. And we've been hiring in a very good clip. And I think you'll see that in our quarterly numbers as we roll forward. So far, so good. Obviously, we've had to maintain more geographic flexibility than we might have a year ago, but that's a theme for every tech company we know.
Jason Ader:

Okay, great. And then, one quick one for John. John, you said the FX adjustment in Q1 was $4 million. What was it a year ago, in the Q1 of a year ago?
John Abbot:

Let me circle back to you. Yeah, you may have skill. I was ready to talk about Q4 and I was ready to talk about full year last year, I didn't have Q1 right in front of me. It was a bit less of an impact last year - in quarter the last year. I know that the pattern last year it was a headwind in the first part of the year. And then a tailwind at the end of the year. I want to say Q4, it was a tailwind of about 1%. And for the full year, it was about zero. So maybe that gives you a little bit of some kind of shade.
Jason Ader:

Perfect, thank you.
Operator:

Next question comes from line of Cozy Akida with Bank of America.
Unidentified Analyst:

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

Absolutely. There's a number of ways this could go. For us job one is, you got build out the platform. You got to build up the MSPs. And then you build out the platform for connecting all the different vendors into that platform. So there's a lot of plumbing work to do, even before you get to the sell and procure part, which we're particularly good at. And we think we're very uniquely good at the procure side of that. The quoting is what generates the volume. You think about being an MSP and the customers are calling or emailing, hey, I need to get XYZ, or maybe you're calling them saying you need a new Dell server. Here's what it looks like. It's a big ticket item. You're constantly having to send those quotes across track those quotes, get the approvals. And so the tool starts at the very top of that funnel, but downstream, you're spot on. There's a number of interesting ways to go with it. So right now we're sort of trying to build the base set at the top of the funnel, so to speak.
Unidentified Analyst:

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

Yeah, what was interesting about it for me is it was a slightly lower attendance than Continuity, and RMM that the previous two that we've done. But given that, at the time, we only had just announced Ransomware, we have very limited specific security offerings, that the number was much, much bigger than we could have imagined. So we've had our SISO and our team out there, doing thought leadership on security for a couple of years with MSPs. And it's probably twice as large as our previous largest webinar. And I know the size of our webinars is comparable to anybody that's in the security business. So I think it represents, Datto has been talking about security, our concentric rings model, protect Datto first, then protect MSPs then, and only then get to revenue opportunities. We're in the concentric circle three now. Here comes Datto with some actual sell through revenue opportunities for us. And we obviously announced BitDam acquisition concurrent with that as well. So it was meant to signal a new era with Datto and we're going to try to get some revenue and margin in the MSP's pockets as the security becomes more and more of a focus. So that's added color I gave you.
Unidentified Analyst:

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

Thank you, sir.
Operator:

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

Yeah, thanks. And I echo the congrats on the quarter. Tim, I was wondering if you could talk a little bit about some of the progress you're making if that sort of high end of your MSP customer base? Obviously, the economy's reopening, that obviously helps on the sell through business. But do you think within that sort of upper cohort or quartile, however you have discovered that the MSP is paying you over 100 grant a year. Do you feel like you're taking share with them from a wallet perspective? And is there any particular product in general that you feel like you're doing better with those kind of bigger clients of yours or partners rather?
Tim Weller:

Yeah, it's a good question. I don't think they talked to us. They, they all tend to play it a little close to the vest. So I don't think they talked to us about wallet share and where else they are. We obviously at an account level with the rep have a good sense. The very largest ones tend to not be completely standardized. If they're serving hundreds of customers, they inherit when they inherit, whether it's networking, or the Continuity Solutions. And so you're working your way through that from a penetration perspective. Definitely, that piece of the base grows as faster than company though. And so you could definitely assume where we're gaining overall share in that part of the base. And at the same time, it can be a little misleading. 100,000. Sounds vague, but you could imagine us moving upstream into million dollar plus sort of accounts as time goes on, too. So as we glue the product sets together, I do think people are starting to think about us in a different way with that number of big displacements. For example, up there where we beat a competitor and immediately get a couple of larger accounts, which is unusual. Most of the start small medium, and then we grow them. And I think we're feeling more confident in our ability to sort of execute a little bit of market. But otherwise, all the different segments have grown pretty nicely for us. And we still focus on the whole spectrum.
Kirk Materne:

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

It's a good question, Kirk? Yeah, obviously, very good gross margin in the quarters 78% non-GAAP versus 71% last year. And overall, we're pleased with the progress we've made on gross margins. And I think that does, on the one hand, reflect the underlying strength of the business model. And the great work that teams done in driving operating leverage, both in the 24/7 support team and delivering increased efficiencies in the infrastructure that supports all our software solutions. But we're approaching long-term target levels today that we've talked about. And so as we do, I think there are a couple things to keep in mind. One, new products have the potential to average in some slightly lower margin, at least out of the box, than we're seeing on the on the more mature products. But on the other hand, as we move to more products that don't require devices, that's obviously going to continue to be beneficial the margins. And as you point out, certainly expenses related to COVID remain low, like travel events, office expenses. Not a lot of that is up in the cost of revenue, but there is a little bit. So hopefully that help some.
Kirk Materne:

That's great. Thanks, guys. Congrats on quarter.
John Abbot:

Thank you.
Operator:

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

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

Thanks, Keith. It's a great question. We think of it right now, as a large new net demand opportunity for us in terms of MSPs and clients that are in Azure and not being well served. Microsoft has kind of a lower end, what I'll call backup solution, you check the box and you have to do something if you move in Azure. And then they've got a little higher end, more complete solution. Our general goal is to be functionally well above that solution, and price wise make it sort of competitive. So that the MSP knows are getting a premium product as they always do from Datto. It's not a discount. But again, they tie it back into how they manage their on-premise business and all their other loads, whether it's in their data center, a regional data center, rack space, et cetera. So becomes this hybrid cloud protection solution. We obviously then add one thing that Microsoft wouldn't which is we have a Datto Cloud. It's a multi-cloud replication and, not storing all your eggs in one basket. It is anywhere from desirable for MSPs to even mandated in some cases that everything can't be in one cloud. So I would think of it initially as large net new demand. It's not going to be our ammo to run into the market on the first day and say, okay, safe to come into the Azure waters, everybody rushed over there. I do think as we get operating experience and we do expect to be partners with Microsoft, and we would be very happy to help people. And I think a really top-end Continuity Solution will absolutely help some of the larger and more sophisticated MSPs go to Azure faster. So we and Microsoft both think it's net new demand on the migration front too.
Keith Bachman:

Okay. And then just any comments on GA. And maybe I'll sneak in my question to John, if I could at the same time. John, just a clarification. I just wondered what the FX was that was embedded in the guidance. I looked at the last transcript, and I didn't see any comments on what the expectations were for FX, in either Q1 or the calendar year '21. And if there's now two points of FX, that's about $10 million of new revenue, which is about the same amount as the guide raised. But if you could just clarify, perhaps I missed it. But I didn't see any comments. So if you could just clarify the two points that you're now expecting in '21, versus what you'd previously been expecting?
Tim Weller:

So Keith, on the GA question we've just said second half, I think part of the timing and answer will be related to how the beta goes. And then what hear and, we definitely don't want to launch something that we don't think is really robust and at the Datto quality. So I think the other thing is it's a bit of a continuum. The Datto starts, it expands, it expands an early adopter will definitely signal you when it's commercial availability and ready to buy retail off the shelf. But for right now, we'll probably just stick with sometime later this year.
Keith Bachman:

John, if you?
John Abbot:

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

Okay, thank you, John.
John Abbot:

Yeah.
Operator:

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

Hey, Gregg. We lose you?
Gregg Moskowitz:

Hey, Tim. I'm sorry, I was on mute. The 2020 Zoom coming back to me. But congrats, as well a very good quarter. So, my first question Tim, is just on Datto Commerce. Initially I know, it's designed as a sell through product. And my question is, do you have interest in extending this to a sell through product? And if so, how difficult would that be from an engineering perspective?
Tim Weller:

Yeah, it's a good question. And by the way, I've been on mute for my last two townhalls. So the first 30 seconds, so as a reference to everybody. In front of1800 employees, it's not great. But it's the feature. So Datto Commerce I think as a platform, is currently in vision is absolutely going to stay sell through. Is it possible, down the road that MSP said, Hey, we have larger clients kind of co-manage situations, they'd like to quote. Maybe you're serving an IT staff, it's possible. You see, occasionally RMM get extended a little bit like that PSA get extended a little bit like that. But, now you're into the enterprise realm, and you're really competing with a whole bunch of different platforms that are much more tailored. So I would think about it as a sell through. That said, we've called RMM a quasi-sell through. And as much as once you give it to an MSP and get them up and running. When they add new clients, they add new seats and therefore in a way they are selling it through even though they probably just put it into their base fee. So they're getting paid by using a great RMM tool. And I think the same thing happens here. As they go streamline the purchasing flows of their clients. There's no question that shores up their base fee. I'm not sure in the first year or two that there's a line item on the clients bill that says Datto Commerce marked up for something. There's probably more in that base package. And then there are other things in that base package too, including just the MSPs time. So we would tend to call it sell through. But it's probably in that category of quasi sell through.
Gregg Moskowitz:

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

Sure. Hey, Gregg. Yeah, we did not - we didn't talk about NRRs. As we've said, a net revenue retention is a metric that will report on an annual basis. It's a lagging indicator. You may recall that it was 111% as of the end of 2020. And we've talked about how that like other lagging indicators, revenue growth, really would during the year last year were declining, and would bottom out in Q4 last year, Q1 this year before they started turning back up. Because we had the last the Q2 lows - COVID Q2 lows of last year. And so we believe, that we passed the low point. And we're starting to move back up basically.
Gregg Moskowitz:

All right, perfect. Thank you.
John Abbot:

Yep.
Operator:

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

Hey guys, Joe on to Brent, really appreciate the question. Just want to double click into the international markets. It looks like that area grew almost three times as fast as domestically. Was there anything to call out there?
Tim Weller:

I wouldn't say - go ahead John.
John Abbot:

Yeah, one thing I was actually looking at that right before the call. Because I thought that might come up looking for my notes. But it was - remember all the FX impacts would be in that international segment. So while that growth ballpark added here 30%. That FX impact would have a greater impact on that smaller number than it does on the total. So that's the only thing I would highlight.
Unidentified Analyst:

Okay, I mean -
John Abbot:

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

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

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

Yeah. Just the implied mix as we move throughout the year, right.
John Abbot:

Yeah. I mean, I think we still would expect subscription revenue to be well north of 90% of the mix. And if we think about the back half of the year, we're optimistic. And I think we all expect the environment continue to improve. And we expect our core BCDR business to continue to improve and grow. And obviously, we have strong momentum in SaaS protection and RMM. I think we pointed out current two will be at least in our guidance. We expect it to be a little bit less of a tailwind in the second half than the first half, as you pointed out.
Unidentified Analyst:

Awesome. Thanks, guys. Congrats on the results.
John Abbot:

Thank you, Joe.
Operator:

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

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

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

Datto Holding Corp. Q1 2021 Earnings Call Transcript

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Datto Holding Corp.
Q1 2021 Earnings Call Transcript