Darktrace plc
Results for the Six-Months Ended 31st December 2021
Strong operating and financial performance resulting in significant growth
52.3% year-on-year revenue growth
39.6% year-on-year growth in customer base
Increasing expectations for FY 2022
Darktrace plc (DARK.L) (together with its subsidiaries, “Darktrace” or “the Group”) a global leader in cyber security AI, today provides its results for the six months ended 31 December 2021.
Financial Performance
|
|
Six-months ended |
Six-months ended |
% |
|
31-Dec-21 |
31-Dec-20 |
||
|
Unaudited |
Unaudited |
||
|
Revenue ($'000) |
192,642 |
126,514 |
52.3% |
|
Gross margin (%) |
89.3% |
90.2% |
-0.9% |
|
EBIT or operating profit/(loss) ($'000) |
8,648 |
(4,881) |
n/a |
|
Net profit/(loss) ($'000) |
5,917 |
(48,411) |
n/a |
|
EBITDA* ($'000) |
34,845 |
14,268 |
144.2% |
|
Adjusted EBITDA* ($'000) |
46,702 |
20,797 |
124.6% |
|
Cash inflow before financing activities ($'000) |
43,298 |
16,732 |
158.8% |
See “Alternative Performance Measures Definitions” below for the meanings of non-IFRS measures and other key performance indicators
- Strong year-over-year revenue growth across all geographic markets and customer sizes.
- Scale efficiencies created by a multi-year contract model continued to drive improvement across all earnings measures.
- Operating expense growth remained below expectations largely because travel and entertainment, and return to office-related expenses, while increasing, have been doing so at a slower than planned rate. Consistent with its stated goal of expanding core research and product development capacity, however, Darktrace continued to increase its investment in R&D during the period.
- Recent growth in EBITDA and adjusted EBITDA have been higher than expected because of continuing pandemic-related suppression of key costs. These costs are expected to return over the intermediate term, but scale efficiencies continue to support expected long-term steady state margins.
- Increase in cash inflow before financing activities resulted from increases in all earnings measures combined with improvement in accounts receivables collections rates.
Operating Performance
|
|
Six-months ended 31-Dec-21 Unaudited |
Six-months ended 31-Dec-20 Unaudited |
%
|
|
Constant currency ARR at 31 Dec ($'000) |
427,267 |
293,716 |
45.5% |
|
Net constant currency ARR Added ($'000) |
69,925 |
47,028 |
48.7% |
|
One year constant currency ARR gross churn at 31 Dec |
6.4% |
8.0% |
n/a |
|
Net constant currency ARR retention rate at 31 Dec (%) |
105.1% |
99.9% |
n/a |
|
Number of customers at 31 Dec |
6,531 |
4,677 |
39.6% |
|
Remaining US$ performance obligations (RPO) at 31 Dec ($'000) |
876,751 |
612,313 |
43.2% |
See “Alternative Performance Measures Definitions” below for the meanings of non-IFRS measures and other key performance indicators
- Strong growth in constant currency ARR and net constant currency ARR added driven primarily by the year-over-year addition of 1,854 net new customers, 926 of which were added in the first six months of FY 2022.
- Also contributing to ARR growth was a 4.2% year-over-year increase in average contract ARR. This increase was driven by both new and existing customer activity, with the average ARR of new contracts increasing by more than 15%, and average ARR uplift per existing customer more than tripling, compared to the prior year period.
- One-year constant currency gross ARR churn improved year-over-year by 1.6 percentage points, driven by continuing stabilisation in the customer base following early pandemic effects and the impact of consistent customer success efforts
- The combined impact of a reduction in one-year gross ARR churn and a continued focus on upsell activities resulted in a 5.2 percentage point year-over-year improvement in net ARR retention rate.
- RPO, representing contracted revenue backlog, continues to expand as Darktrace enters and expands multi-year contracts with new and existing customers. A significant portion of Darktrace's revenue is already contracted and in RPO at the beginning of each period, providing significant revenue visibility.
FY 2022 Outlook (Unaudited)
Darktrace is increasing its expectations for FY 2022 from those presented in its 1H FY 2022 trading update on 11 January 2022. The Group now expects a year-over-year increase in constant currency ARR of between 38.5% and 40% (previously 37% to 38.5%), implying a year-over-year increase in net constant currency ARR added of between 24% and 29% (previously 19% to 24%). Driven in part by these increased ARR expectations, the Group now expects year-over-year revenue growth of between 44.5% and 46.5% (previously 42% to 44%). This increase is also partly driven by lower than previously predicted forecasts for foreign exchange headwinds, which accelerates the conversion of constant currency ARR to US dollar denominated revenue.
Following the recent acquisition of Cybersprint B.V., Darktrace has incorporated the expected impact of this transaction into its guidance. Given the size of the acquired company and timing of the acquisition, the business combination has no material impact on the Group's FY 2022 revenue expectations. However, approximately 1 percentage point of the increase in expected year-over-year ARR growth, and approximately 3.5 percentage points of the increase in expected net ARR added, are related to the acquisition of Cybersprint. The expected dollar value of the organic Net ARR to be added in 2H FY 2022 should be distributed according to the Group's normal quarterly seasonality patterns, including typically softer third-quarter sales within the second half of the financial year.
The Group continues to balance strong sales momentum trends with potential temporary sales productivity impacts that may occur as it evolves ways to expand and optimise its salesforce structure. These efforts, which are intended to support anticipated growth and continued scaling of its business, began in the second quarter of FY 2022 and are expected to continue through 2H FY 2022. Additionally, the Group continues to forecast an impact from having a salesforce with lower average tenure as it works to recover from pandemic-related salesforce hiring delays.
Consistent with prior expectations, Darktrace continues to forecast that, relative to 1H FY 2022, the Group's cost structure will increase as a percent of revenue in 2H FY 2022. This increase is largely due to the extrapolation of trends being seen related to the return of travel and entertainment expense. The Group is also incorporating into its expectations, the impact of recent and ongoing hiring, increases in facilities costs as employees return to the office and, in key locations, the Group moving to larger premises. While the return of these costs may temporarily flatten margin growth in the short to intermediate term, scale efficiencies continue to support expected long-term steady state margins.
Furthermore, Darktrace continues to expect higher-than-typical share-based payment and associated employer tax charges resulting from making the transition to listed company equity compensation plan structures, expected to continue through FY 2023. Incorporating its first half results and plans for the remainder of the year, Darktrace now expects an adjusted EBITDA margin for the year of between 10% and 12% (previously 3% to 6%). Given the size of Cybersprint, and timing of the acquisition, the business combination should not have a material impact on the Group's FY 2022 adjusted EBITDA expectations.