TIDMDARK
RNS Number : 3117M
Darktrace PLC
11 January 2023
11(th) January 2023
Darktrace plc 1H FY 2023 Trading Update
Strong 1H revenue growth but macro headwinds temper FY 2023 ARR
expectations,
FY margin guidance increased on positive 1H trends
Darktrace plc (DARK.L) (together with its subsidiaries,
"Darktrace" or "the Group") a global leader in cyber security AI,
today provides a trading update for the six months ended 31(st)
December 2022.
Operating and Financial Performance
At its FY 2023 constant currency rates (1) , Darktrace expects
ARR at 31(st) December 2022 of at least $556.3 million,
representing year-over-year growth of at least 36.5% (2) . This
continued high constant currency ARR growth for the period was
supported by its multi-year contract model, despite a noticeable
late second quarter slowdown in new customer additions.
During 1H FY 2023, the Group added net constant currency ARR of
at least $71.4 million, for year-over-year growth of at least 6.8%.
A year-over-year increase in average contract ARR of at least 9.7%
across its customer base partially offset lower net ARR added
related to reduced new customer adds. Darktrace drove increases in
both average new contract ARR (up at least 17% period-over-period)
and average ARR of existing customer contracts (up at least 12%
year-over-year for contracts aged one year or more), from the
increased focus it has put on expanding its capabilities in larger
account sales and upsells.
Ending 1H 2023 with 8,178 customers, year-over-year growth in
Darktrace's customer base was 24.4%, with the customer base having
grown by 741, or 10%, since 30(th) June 2022. Leveraging the
multi-year investments made in its customer success function, the
Group maintained broad stability in its customer and ARR bases
during the first half of the financial year, with one-year gross
ARR churn and net ARR retention rates at 31(st) December 2022
expected to be not more than 6.6% (6.6% at 30(th) June 2022), and
at least 105.0% (105.3% at 30(th) June 2022), respectively.
Darktrace expects revenue for 1H FY 2023 of at least $258.0
million, reflecting year-over-year growth of at least 35.2%. It
also expects that gross margin for 1H FY 2023 has remained in the
range of recent reported periods and that its 1H FY 2023 adjusted
EBITDA margin will be at or above the top end of its previously
communicated 15% to 18% FY 2023 guidance range.
(1) The Group's primary currency exposures are the British Pound
and the Euro converting to its US Dollar reporting currency. For FY
2023, its constant currency rates are 1.2146 and 1.0450 for the
Pound and the Euro, respectively.
(2) Darktrace's USD ARR at 31(st) December 2022 is expected to
be at least $558.4 million, which represents year-over-year growth
of at least 31.6%.
FY 2023 Outlook
When Darktrace set its FY 2023 guidance at the start of its
financial year, it sought to account for macro-economic uncertainty
and the potential impact; late in the second quarter, it became
clear that the impact on new customer growth had been larger than
expected. Based on 1H FY 2023 preliminary results, recent trends
and its expectation that these trends will continue through the
second half of its financial year, Darktrace is lowering FY 2023
guidance for constant currency ARR and net ARR added, as well as
for revenue. However, as it expects to be able to continue to
operate efficiently while still investing to support future growth,
is raising its expectations for adjusted EBITDA margin.
For FY 2023, Darktrace now expects a year-over-year increase in
its constant currency ARR of between 29.0% and 31.5% (previously
31% to 34%). This implies a year-over-year change in net ARR added
of between (2)% and 6%.
Foreign exchange headwinds present early in the financial year
have largely reversed, allowing us to moderate our reduction in
revenue expectations. Based on this partial offset to lower ARR
growth expectations for FY 2023, Darktrace is now expecting
year-over-year revenue growth of between 29.5% and 31.0%
(previously 30% to 33%).
These new guidance ranges imply that for FY 2023, Darktrace now
expects that 47% to 51% of net ARR added, and 47% to 48% of
revenue, will have been contributed in the first half of the
financial year.
Based on strong preliminary 1H results, its plans for 2H
operations and investment, and its expectation that it will be able
to maintain operating efficiencies, Darktrace is increasing its
expectations for the FY 2023 adjusted EBITDA margin to between
16.0% and 18.5% (previously 15% to 18%).
Recent Developments
Darktrace appoints new Chief Revenue Officer
Today Darktrace is pleased to be announcing the appointment of
its new Chief Revenue Officer, Denise Walter, who brings over 25
years' experience in technology industries, most recently as VP
Sales, Enterprise and Globals at VMware. Based in California,
Denise will take global responsibility for all aspects of revenue
generation, including new business growth, particularly in the US,
and deepening its relationships with existing customers around the
world. Click here to read the full press release.
HEAL delivered to early adopters on schedule
As previously indicated, the fourth product in our Cyber AI
Loop, HEAL, was delivered to early adopters before the end of CY
2022. This AI product is now installed in these real-world customer
environments, enabling us to gain valuable feedback over the coming
months as we continue to evolve our HEAL product family. HEAL will
complete our vision of delivering a Cyber AI Loop, the first-ever
solution that starts with assessing cyber risk, provides real-time
cyber defense and, with HEAL, will extend our capabilities into
cyber resilience.
PREVENT Momentum
As previously indicated, we expect to be able to start assessing
the performance of our PREVENT products in the second half of this
financial year. While still early in the product introduction
cycle, December PREVENT activity continued to make us optimistic
about this product family's potential for near-term contributions
to our business.
Cathy Graham, CFO of Darktrace, said:
"I am pleased that we have been able to maintain high ARR and
revenue growth in the period, as well as preserving profitability
and cash generation. Clearly, however, the current macro-economic
environment is creating challenges to winning new customers, with
prospects more reluctant to run product trials and, in regions with
historically higher conversion rates, those rates starting to
decline. While we continue to be optimistic about PREVENT's ability
to contribute in the second half, and remain very positive about
the potential of other new product developments in our pipeline,
against this backdrop of weaker trends and continuing uncertainty,
we are being prudent and revising our FY 2023 guidance.
Despite expecting growth to remain slower for the rest of this
financial year, it is a testament to our resilient business model
that we can drive increases in our profitability forecasts over the
same period. With strong margins, a significant cash position and
ongoing operating cash generation, we intend to continue making
smart investments in our future product pipeline, go-to-market
strategy, and business foundations. Being able to take a
forward-looking view means that we expect to emerge from this
uncertain period in an even stronger position, both to capitalise
on our very large market opportunity and to demonstrate to
customers and investors that a period of economic adversity has not
hindered what we believe is our unique and sustainable value
proposition."
About Darktrace
Darktrace (DARK:L), a global leader in cyber security artificial
intelligence is on a mission to free the world of cyber disruption.
Breakthrough innovations in the Darktrace Cyber AI Research Centre
in Cambridge, UK have resulted in over 125 patent applications
filed and research published to contribute to the cyber security
community. Rather than study attacks, Darktrace's technology
continuously learns and updates its knowledge of 'you' and applies
that understanding to optimise your state of optimal cyber
security. Darktrace is delivering the first ever Cyber AI Loop,
fuelling a continuous end-to-end security capability that can
autonomously spot and respond to novel in-progress threats within
seconds. Darktrace employs over 2,200 people around the world and
protects over 8,100 customers globally from advanced cyber threats.
Darktrace was named one of TIME magazine's 'Most Influential
Companies' in 2021.
Cautionary Statement
This announcement contains certain forward-looking statements,
including with respect to the Group's current targets, expectations
and projections about future performance, anticipated events or
trends and other matters that are not historical facts. These
forward-looking statements, which sometimes use words such as
"aim", "anticipate", "believe", "intend", "plan", "estimate",
"expect" and words of similar meaning, include all matters that are
not historical facts and reflect the directors' beliefs and
expectations, made in good faith and based on the information
available to them at the time of the announcement. Such statements
involve a number of risks, uncertainties and assumptions that could
cause actual results and performance to differ materially from any
expected future results or performance expressed or implied by the
forward-looking statement and should be treated with caution. Any
forward-looking statements made in this announcement by or on
behalf of Darktrace speak only as of the date they are made. Except
as required by applicable law or regulation, Darktrace expressly
disclaims any obligation or undertaking to publish any updates or
revisions to any forward-looking statements contained in this
announcement to reflect any changes in its expectations with regard
thereto or any changes in events, conditions or circumstances on
which any such statement is based.
Important Information
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation (EU) No. 596/2014 (as it
forms part of UK law pursuant to the European Union (Withdrawal)
Act 2018). Upon publication of this announcement, this information
is now considered in the public domain.
Enquiries:
Luk Janssens - Investor Relations Darktrace
Direct: +44 7811 027918
luk.janssens@darktrace.com
Powerscourt (Public Relations adviser to Darktrace)
Victoria Palmer-Moore/Elly Williamson
Direct +44 (0) 20 7250 1446
darktrace@powerscourt-group.com
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