Darktrace full-year revenues rise as expected, 2024 guidance reiterated

Cybersecurity specialist Darktrace hit its guidance for full-year revenues and client additions.

Over the 12 months ending on 30 June, Darktrace reported a 31% jump in revenues to reach $545.4m, for a nearly 40-fold jump in net profits to $58.96m.

All geographies and customer sizes were said to have registered "strong" year-on-year growth.

The number of customers as at 30 June was up by 18.3% to reach 8,799.

Adjusted operating earnings before interest, taxes, depreciation and amortisation meanwhile rose 52% to $139.2m.

Free cash flow on the other hand dipped 5.8% to $93.75m. Dragging on the latter was the net settlement of vesting equity grants in the period for executive directors.

Guidance for full-year 2024 adjusted EBITDA margins was lowered to 17-19.0%, but that for revenues was confirmed.

Dragging on its margin guidance, which in July had been pegged at 22%, Darktrace said that it changed its definition of adjusted operating profits and would now treat all commissions as cash costs.

But if not for that change and modifications to the timing of its commission payouts, then its margins would still have risen by 11.2 percentage points between FY 2021 and FY 2024.

"There's always something [...] The numbers look in-line/a touch better than expectations; revenue is in-line after a strong operational performance with 31.3% yoy revenue growth," Jefferies analysts said in a research note sent to clients.

"Confirms FY24 ARR & revenue guidance & increase to u/lying FY24 margin. However, investors will be drawn to the lengthy commentary regarding the impact of changes to the sales compensation structure which will have a negative impact on FCF generation in FY24. There is also commentary around 'jam tomorrow' for FY24."

Analysts at Berenberg were more upbeat as regarded the implications of the accounting change to the adjusted EBITDA measure, saying: "Given the change in commission policy noted above, in order to be more competitive on talent, Darktrace has also had to update its cost recognition policy under IFRS.

"[...] There should not be a material impact on the long-term profile of the business or indeed on the IPO steady-state guidance for a 25% adjusted EBIT margin."

As of 0834 BST, shares of Darktrace were falling 6.26% to 346.10p.

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