- Resilient 1Q sales growth of 37% year-on-year
- Company flagged continuing currency headwinds
- Full year guidance reiterated
Artificial intelligence based cyber security firm Darktrace (DARK) said first quarter revenues to 30 September jumped 37% year-on-year to $126.3 million driven by a 29% increase in net new customers to over 7,700.
Despite headwinds from a strong US dollar, the company reiterated full year guidance. Revenues are anticipated to grow by between 30%-to-33%.
Meanwhile, the EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin is expected to be between 15% and 18%.
Darktrace expects to convert between 60% and 65% of EBITDA into free cash flow in fiscal 2023, lower than normal reflecting higher share-based expenses related to becoming a listed company.
Typically, the company would expect to convert between 75% and 105% of EBITDA into free cash flow.
UPGRADE POTENTIAL
Market expectations are at the bottom end of the guided range, leaving scope for upgrades.
Earnings revisions have been on an upward trajectory over the last few months moving from an anticipated 1.5p per share loss to the current consensus forecast of 3.2p per share.
However, investors marked the shares down 1.5% to 293.7p, reflecting caution over the potential for further currency headwinds and rising interest rates which act as a drag on the valuation of high growth companies.
Last month Darktrace terminated takeover discussions with private equity firm Thoma Bravo after it made an unsolicited offer (15 August) to buy the company.
EXPERT VIEW
Investment bank Berenberg believes today’s update demonstrates resilient sales traction. It commented: ‘Given the tough comparable of Q1 last year, this is at least a mid-single-digit amount ahead of the growth we would have anticipated for the period.
‘Despite a more muted economic backdrop, we continue to view cybersecurity as an area of corporate spend that will increase and believe Darktrace's new ecosystem of products is well positioned to capitalise on this.’
