Darktrace reassures on earnings cut as it ramps up M&A war chest


Darktrace today sought to calm investor nerves over a cut in earnings forecasts as the cybersecurity firm boosted its readiness for acquisitions.

The earnings cut, which revises 2024 EBITDA down from 22% to 17-19%, came as a result of an accounting adjustment following a change in the payments structure for sales commissions, which led to a drop in free cash flow.

Shares initially sunk 8.2% as markets opened this morning, before losses were pared back later into the trading session.

Darktrace CFO Cathy Graham told the Standard the sales commission change – which would see more fees paid up front -- followed a multi-month process with a pay consultant to make its pay structure more competitive.

“Fundamentally there is an underlying improvement in the business…we would have increased our margins guidance range,” she said.

“But we said we don’t want to have an inflated metric so we’re going to redefine our metric in the most prudent way we can.

“It’s not a result of performance, it’s a result of redefinition. It’s not a policy decision it’s just what the rules say.”

Darktrace also today said it was planning to increase its revolving credit facility from the current level agreed with HSBC Innovation Bank which Graham said was “to provide us with more flexibility if we were to for example see an acquisition.”

“What this does is say let’s upsize that a little in case you run across something. It’s not our strategy, it’s opportunistic,” she said.

James Musker, equity analyst at stockbroker Davy, said: “One of the areas slowing Darktrace down is talent. They are producing more products than they can release and there is a small talent pool of AI experts, so the company might be looking for more talent-based M&A rather than expansive.”

Darktrace today said its revenue rose 31.3% to $545 million in the year to the end of June, while net profits climbed to $59 million.