When Vista Equity Partners acquired backup and disaster recovery firm Datto in 2017, it was easy to think that was the end of the company’s story. It would be comfortably absorbed into the private equity portfolio continuing to make money for the firm, but that’s not really the way Vista works. It tends to build up its companies, sometimes eventually taking them public, and yesterday that’s what happened when Datto filed its S-1.

Datto has been busy since it was acquired and reports a healthy $507 million in annual recurring revenue (ARR) along with 17,000 managed service provider (MSP) customers. Among those, it has more than 1000 customers contributing over $100,000 in ARR. MSPs are service providers that act as a company’s IT department when they don’t have internal resources.

The company has included a standard $100 million placeholder for the amount they intend to raise for the event, and that will almost certainly change. In a nod to its manage service provider customer base, the company’s ticker symbol will be MSP.

When the company raised its $75 million Series B in 2015, former CEO and founder Austin McChord, said that the company was already profitable at that point, two years before Vista came knocking. “As a profitable company, Datto isn’t raising capital to fund operations, but instead, to enter new markets and build new products and technology,” he said in a statement at the time.

You can see that in the company’s financials. In the first six months of 2020, the company had subscription revenues of $234 million and a gross profit of $178 million. When sales and marketing and other costs are added in, the company had a net income of $10 million. That’s compared to $196 million in subscription revenue in the same period of 2019, a gross profit of $143 million, and a net loss of about $26 million.

In short, the company has managed to grow top-line revenue, keep its cost of revenues flat, and manage the growth of its other expenses to limit their effect on the bottom line. That swung its net income per share from -$0.19 to $0.07.

Of course, companies like Datto always try to make the numbers look good in preparation for a public offering, so the real understanding will come in the next few quarters as we see if Datto can sustain its growth and keep expenses in check.

When I spoke to Alan Cline, senior managing director at Vista last year, he said his firm tends to like high-performing startups like Datto that have built substantial companies.

“Software is the easiest place to innovate inside of technology. We see a huge advantage in terms of the productivity that it drives for the end business customer, and to us that high ROI is powerful because whether it’s an up market or a down market, if I can prove to you you’re going to make more money or save money in your own operations by using my software, you can find the budget,” Cline told TechCrunch.

Just last year another company in the Vista portfolio, Ping Identity, filed to go public for the same $100 million placeholder, eventually offering 12.5 million shares at $15 per share. Today the company is trading at $31.68 per share with a market cap of over $2.5 billion.

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