Darktrace lifts, focuses full-year guidance
By Josh White
Date: Thursday 11 Apr 2024
(Sharecast News) - Cybersecurity specialist Darktrace reported solid growth in both operating and financial metrics in the March quarter on Thursday, as it raised its full-year guidance.
The FTSE 250 company said annualised recurring revenue (ARR) as of 31 March stood at $731.1m, making for a robust year-on-year increase of 23.5% at constant currency rates.
During the third quarter, Darktrace added a net ARR of $29m, for 6.2% year-on-year growth in constant currency terms.
The board said that positive trajectory represented a return to year-on-year growth, and marked the second consecutive quarter of upward momentum in net ARR added.
Revenue for the third quarter totalled $176.1m, reflecting substantial growth of 26.5% on the year, as the gross margin remained consistent with previous reports, and the one-year gross ARR churn showed a slight improvement from the previous year.
Darktrace said its customer base continued to expand, reaching 9,402 customers by 31 March, representing 11.9% year-on-year growth.
The company added 170 customers during the third quarter, totaling 999 net new customers since March last year.
Darktrace said it expected further growth in new customer ARR additions as economic conditions stabilise and improve.
Looking ahead to the rest of fiscal year 2024, Darktrace narrowed its guidance range for year-on-year constant currency ARR growth to between 22.25% and 23.0%.
It said the adjustment reflected the success of its go-to-market initiatives, and raised the midpoint expectation by about $2.4m.
Darktrace also increased its expectations for year-on-year revenue growth to at least 25.5%, reflecting continued strong ARR to revenue conversion and a stable exchange rate environment.
The company also anticipated achieving an adjusted EBITDA margin of at least 23.0%, up from the previous expectation of at least 21%, as it maintained control over discretionary spending while continuing planned investments.
Darktrace confirmed its guidance for free cash flow in the range of 50% to 60% of its increased adjusted EBITDA expectation.
"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," said chief financial officer Cathy Graham.
"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."
Graham said the company's strong margin and cash generation profile enabled it 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 defence.
"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."
Reporting by Josh White for Sharecast.com.
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