11 April 2024
Darktrace
plc 3Q FY 2024 Trading Update
Return to
positive Net ARR added growth drives strong growth in ARR and
Revenue
Raising
ARR, Revenue, margin and FCF expectations for FY 2024
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 three months ended 31 March
2024.
Operating and Financial Performance
At its FY 2024 constant currency
rates(1), Annualised recurring revenue ("ARR")
at 31 March 2024 was $731.1 million, representing year-over-year
growth of 23.5%(2). In the third quarter,
Darktrace added Net ARR of $29.0 million, for year-over-year growth
of 6.2% on a constant currency basis. This marked a return to
year-over-year growth and the second consecutive quarter of upward
trajectory in Net ARR added.
Revenue for Darktrace's third
quarter was $176.1 million, reflecting year-over-year growth of
26.5%. Gross margin remained in the range reported
at 31 December 2023, while at 6.6%, One-year gross ARR churn
remained equal to the range reported at December 2023 and showed a
0.2 percentage point improvement on March 2023. Net ARR retention
rate at 31 March 2024 was 105.3%, improved by 0.3 and 0.6
percentage points from December 2023 and March 2023, respectively,
as higher upsell rates began to show within a stabilised churn
environment.
Though its accounts for the period
are not yet fully closed, Darktrace expects Adjusted EBITDA margin
for the third quarter to be above its previously communicated FY
2024 guidance range of at least 21%.
With 9,402 customers at 31 March
2024, year-over-year growth in Darktrace's customer base was 11.9%,
having added 170 customers in the third quarter for a total of 999
net new customers since March 2023. Darktrace continues to drive a
significant amount of new ARR added from its existing customer
base, but expects new customer ARR additions to increase once this
economic environment, which appears to have stabilised, begins to
improve.
(1) The Group's primary currency exposures are the British Pound
and the Euro converting to its US Dollar reporting currency. For FY
2024, its constant currency rates are 1.2682 and 1.0908 for the
British Pound and the Euro, respectively.
(2) Darktrace's USD ARR at 31 March 2024 was $727.3 million, which
represents year-over-year growth of 23.4%.
FY
2024 Outlook
At the end of its first half
Darktrace reported that Go-to-Market initiatives undertaken early
in its financial year were continuing to gain traction, and this is
further reflected in its third quarter results. As a result,
Darktrace is again narrowing its guidance
range for year-over-year constant currency ARR growth to between
22.25% and 23.0% (previously 21.5% and 23.0%), raising its midpoint
expectation by approximately $2.4 million. This implies FY 2024 net
ARR additions of between $141.8 million and $146.6
million (previously $137.0 million to $146.6
million) and year-over-year growth in Net ARR added of between
(2.5)% and 1% (previously between (6)% and 1%).
Darktrace is also raising its
expectations for year-over-year Revenue growth and Adjusted EBITDA
margin. It now expects FY 2024 Revenue growth of at least 25.5%,
0.5 percentage points above the high end of its previous 23.5% and
25.0% range, reflecting continued strong ARR to revenue conversion
and a relatively stable exchange rate environment. Further, as it
continues to control its discretionary spending without sacrificing
planned investment, Darktrace is increasing its expectation for
Adjusted EBITDA margin to at least 23.0% (previously at least
21.0%). It also confirms its guidance for
Free cash flow (FCF) in the range of 50% to 60% of a now increased
Adjusted EBITDA expectation.
Cathy Graham, CFO of Darktrace, said:
"Following the roll-out of significant
Go-to-Market
changes in our first quarter, we were very pleased to see the
resulting benefits that drove strong second quarter results,
continue to accelerate third quarter financial performance. Today's
results reinforce our view
of first half stabilisation and second half re-acceleration, with
a return to Net ARR added growth supporting our view that Darktrace
has a sustainable opportunity for ARR, revenue and margin
expansion. We are pleased to be able to
make the resulting upward revisions to our full year guidance as we
enter this final quarter of our financial year.
Our strong margin and cash generation profile enables us to
continue making smart investments in our product pipeline and
positioning, Go-to-Market effectiveness and business foundations.
We believe the markets in which we operate are emerging from a
period of relative economic uncertainty and moving to an
environment where organisations can prioritise proactive cyber
defense. Darktrace products are uniquely effective at combating
attackers who are increasingly exploiting generative AI, automation
and cybercrime-as-a-service to increase the speed, sophistication,
and success of cyber security attacks. With this week's
announcement of the Darktrace ActiveAI Security Platform, we
believe we can now better explain the power of our approach as we
continue to evolve our existing best-in-class security products
with new innovations and enhanced features to enable proactive
cyber resilience in an increasingly challenging
environment."
Recent Developments
Announcement of Darktrace ActiveAI Security
Platform
On 9 April 2024, Darktrace
introduced the Darktrace ActiveAI Security
Platform™, its new positioning for the Darktrace product offering,
replacing the Cyber AI Loop. It encompasses
Darktrace's existing best-in-class security
products, supplemented by new
industry-first innovations and features, including for email and
operational technology (OT). Darktrace
believes the ActiveAI Security Platform provides a better framework
to communicate how it uses AI to transform security operations from
reactive to proactive, and improves cyber resilience by
visualising, correlating, and investigating security incidents
across cloud, email, network, endpoint, identity, OT, and
third-party tools and applications.
Termination of Pre-IPO Shareholder
Agreements
As a result of share sales made
between May 2023 and March 2024, each of the three shareholder
agreements dated 30 April 2021 between Darktrace and the Invoke
Shareholders, KKR DA, and the Summit Shareholders have terminated
in accordance with their terms (as described in the Darktrace IPO
prospectus). Consequentially, no shareholders have rights to
nominate potential directors for consideration by the Darktrace
Board of Directors.
About Darktrace
Darktrace (DARK.L), a global leader
in cybersecurity artificial intelligence, is on a mission to free
the world from cyber disruption. Breakthrough innovations from our
R&D teams in Cambridge, UK, and The Hague, Netherlands have
resulted in over 175 patent applications filed. Rather than study
historic attacks, Darktrace's technology continuously learns and
updates its knowledge of your business data and applies that
understanding to help transform security operations to a state of
proactive cyber resilience. The Darktrace ActiveAI Security
Platform™ provides a full lifecycle approach to cyber resilience
that can autonomously spot and respond to known and unknown in
progress threats within seconds across the entire organisation,
including cloud, apps, email, endpoint, network and operational
technology (OT). Darktrace, which listed on the London Stock
Exchange in 2021, employs over 2,300 people around the world and
protects over 9,400 customers globally from advanced cyber threats.
To learn more, visit http://www.darktrace.com.
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 027 918
luk.janssens@darktrace.com
Headland - PR advisor
Henry Wallers
Direct: +44 7876 562 436
hwallers@headlandconsultancy.com