The Darktrace [DARK] share price jumped sharply in August on reports that the cyber-defence company was in talks with private equity firm Thoma Bravo, though no figure was attributed to the discussions.
This morning it was confirmed that these talks have ended with no prospect of an offer being made in the next six months, sending the shares down 30% in early trading. The bid option will, however, be revisited in six months' time. With Darktrace's shares well below last year's post-IPO peak, investors appear split over whether the company can live up to expectations for customer and annual recurring revenue growth.
End of bid talks overshadows full-year results
Today’s full-year results are likely to get lost in the noise amid this morning's announcement that Thoma Bravo won’t be moving forward with an offer for the cyber-security business.
For the London market, the news comes as a mixed blessing. On the one hand, it means that the city can retain one of its tech success stories. That said, the company’s valuation will remain under scrutiny as the debate about its business model continues.
Darktrace has been touted as an award-winning pioneer in the cyber-security space, a sector that is more important than ever in these testing times, not least because of Russia's invasion of Ukraine. However, questions remain over Darktrace's links with Autonomy owner Mike Lynch, with some investors asking how deep these links go. Lynch is facing extradition to the US on alleged criminal fraud charges. There are also question marks concerning the amount of money that Darktrace spends on research and development, with some suggestion that the amount is too low in such an important, technologically advanced sector.
Full-year revenue up by almost half
Darktrace today reported that revenue for the 12 months to the end of June grew 45.7% to $415.5m from last year’s restated total of $285.1m, slightly missing expectations. The miss seems to have arisen because Darktrace reallocated $3.8m in revenue from this financial year to the previous year's results.
Darktrace said that the increase in revenue was driven primarily by subscription contracts that averaged about 33 months, which has helped lift Remaining Performance Obligations (RPO) for the next three years to $942m.
Darktrace reiterated the guidance that it set out in July, stating that it expects to see annual recurring revenue rise between 31% and 34% for the year to the end of June 2023. This would mark a decrease from the 42.6% rise reported this year, which saw annual recurring revenue rise to $514.4m.
The company posted an operating profit of $7.6m for its 2022 financial year, compared to a loss of $34.7m a year ago. After tax and other expenses, net profit came in at $1.5m, compared to a loss of $145.8m last year. This was despite a sizeable increase in operating costs, which have risen to $358 2m. Sales and marketing accounted for $232.8m of that total. Darktrace also said that its number of customers had risen 32.1% to 7,437, up from 5,629.
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