Datto looks to go public with NYSE IPO
Vendor claims IPO will increase its financial flexibility and repay outstanding long-term debts
Datto has filed an IPO on the New York Stock Exchange with onlookers forecasting the MSP vendor could raise up to $400m in net proceeds.
The Connecticut-based firm submitted its application to the SEC o Tuesday to raise up to $100m in an IPO.
It intends to list on the New York Stock Exchange under the ticker symbol "MSP" - in a nod towards the market that it serves.
Datto claims the IPO will help it to increase its financial flexibility and to repay outstanding long-term debts, which amounted to $591.60m as of 30 June 2020, according to its SEC filing, comprising a $47.10m revolving credit facility and a $544.50m term loan facility.
The vendor's SEC filing claims that Datto has not identified how it will use the net proceeds raised from the IPO, but said that it could use a portion of the funds raised to acquire or invest in complementary businesses, products, services or technologies.
Datto reached revenues of $458.75m in its year ending 31 December 2019, an increase of 18 per cent year on year. The firm meanwhile logged revenues of $249.13m for the first six months of 2020, up 16 per cent on the same period last year.
Subscription-based revenues accounted for some 94 per cent of Datto's revenues during the first six months of 2020. The firm claims that its subscription revenue has increased by 19 per cent year on year during that period.
The vendor claims to cater for more than 17,000 MSP partners globally, with more than 1,000 partners contributing at least $100,000 in annual recurring revenue.
Datto believes it will raise up to $100m through an IPO, but some onlookers believe the MSP vendor will fetch a much higher value.
Renaissance Capital claims that Datto could fetch up to $400m in its IPO.
Datto's IPO filing comes after a transformational few years for the vendor. It merged with rival Autotask, adding RMM and PSA abilities to its business, in 2017 as it was acquired by private equity firm Vista Equity Partners.
Vista Equity Partners sees now as the right time to IPO, according to TechMarketView analyst Tola Sargeant, given the rising need for SMB customers to digitalise their businesses amid the COVID pandemic.
"Vista clearly believes the time is now right for an IPO. Datto's focus on the SMB market via MSPs means that it is well placed to benefit as digital transformation becomes a strategic imperative for more small firms, in part driven by the coronavirus crisis, and they increasingly turn to MSPs for technical expertise," she said.
"According to Datto CEO Tim Weller, MSPs now manage well over 10 per cent of the global SMB IT spend, which is $159bn and growing"
In a letter accompanying the IPO filing, Weller said MSPs will become more relevant than ever amid the COVID-19 pandemic.
"We believe SMBs will adopt technology faster than ever as the world emerges from this pandemic. We expect MSPs will help them more than ever. Datto will be there as technology creator, thought leader and support partner as they deploy new applications; navigate technology on-premises, in public clouds and in hybrids of both; and continue to defend against proliferating security threats," he said.