7 March 2024
Darktrace plc
Results for the Six Months Ended 31 December
2023
2nd quarter rebound following
significant 1st quarter GTM changes delivers strong 1H
financial performance
27.4% year-over-year revenue
growth
24.4% year-over-year ARR
growth
Confirming FY 2024 ARR expectations;
increasing FY 2024 revenue and margin
expectations
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 2023.
1H FY 2024
Highlights
Darktrace delivered continued high revenue and
constant currency ARR growth in the period, supporting growth
across all its earnings measures. This growth was achieved amidst a
stabilised macro-economic environment, and reflects a second
quarter rebound from the temporary impacts of significant changes
made across Darktrace's Go-to-Market (GTM) organisation in the
first quarter.
Darktrace's performance track in the first
half of FY 2024 supports what it believes is a change in trajectory
following a period of transformation and stabilisation, moving to
Net constant currency ARR added growth in its second half. Further,
with sales performance for the first two months of 2H FY 2024 being
as expected, Darktrace is reiterating the FY 2024 guidance for ARR
and Net ARR added provided in its 11 January 2024 1H FY 2024
trading update. Darktrace is also increasing its expectations for
Revenue and Adjusted EBITDA margin, reflecting realised and
expected improvements to its FY 2024 financial and operating
profile.
Financial Highlights
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
% Change
|
Revenue
|
330,303
|
259,259
|
27.4%
|
Gross margin (%)
|
89.3%
|
89.7%
|
n/a
|
Net profit
|
52,518
|
581
|
8,939.2%
|
Adjusted EBIT
|
70,977
|
32,430
|
118.9%
|
Adjusted
EBITDA1
|
84,518
|
45,189
|
87.0%
|
Net cash inflow from operating
activities
|
65,589
|
27,094
|
142.1%
|
|
|
|
| |
See: "Key Performance Indicators (KPIs)" below for the
meanings of non-IFRS measures and other key performance
indicators.
1 At the start of FY 2024,
Darktrace changed its definition of Adjusted EBITDA to treat all
amortisation of commissions as though they were cash costs. On this
basis, Adjusted EBITDA is the Group's earnings before interest,
taxation, depreciation and amortisation, adjusted to include
appliance depreciation attributed to cost of sales and amortisation
of capitalised commissions, and adjusted to remove uncapitalised
share-based payment charges and related employer tax charges, as
well as certain one-off charges including the impairment of
right-of-use assets. Prior year comparatives have been recast under
this definition; see below for further details on definition and
reconciliation.
·
Resilient business model, underpinned by
multi-year contracts and a flexible cost structure, supported
continued revenue growth and improvements in all earnings
measures.
·
Strong year-over-year revenue growth across all
geographic markets and customer sizes.
·
Gross margin broadly stable on prior period
reflecting consistent contract economics.
·
Adjusted EBIT margin improvement of 9.0
percentage points over the prior period to 21.5%, reflecting
continued scale efficiencies, ongoing discretionary cost management
and, year-over-year, a more favourable foreign exchange
environment.
·
Adjusted EBITDA margin improvement of 8.2
percentage points over the prior period to 25.6%, similarly
reflecting scale efficiencies and ongoing cost management, but also
a decline, as a percent of revenue, in the adjusted depreciation
and amortisation added back.
·
Period-over-period decreases in both S&M and
G&A as a percentage of revenue, though underlying trends
partially distorted by certain Customer Success Manager (CSM) and
Channel Partner costs previously in G&A now being attributed to
S&M, reflecting changes to roles and responsibilities at the
start of FY 2024 (see Financial
Review - Income Statement Analysis section for
details).
·
15.3% period-over-period increase in R&D cash
employment costs, largely offset by a decrease in share-based
payments and related employer tax charges to more normalised
levels.
·
Net cash inflows from operating activities
increased by $38.5 million from the prior period to $65.6 million.
The movement in cash inflows was primarily driven by the $51.9
million increase in period-over-period Net profit, partially offset
by a $16.8 million decline in net working capital, reflecting in
part the move to monthly commission payments for FY 2024 onwards,
from quarterly commission payments in prior periods.
Operating Performance
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
% Change
|
ARR* at 31 Dec
($000)1
|
702,079
|
564,461
|
24.4%
|
Net ARR added* ($000)
|
64,778
|
72,607
|
(10.8)%
|
One-year gross ARR churn* at 31
Dec
|
6.6%
|
6.5%
|
n/a
|
Net ARR retention rate* at 31
Dec
|
105.0%
|
105.1%
|
n/a
|
Number of customers at 31
Dec
|
9,232
|
8,178
|
12.9%
|
USD Remaining Performance Obligations (RPO) at
31 Dec ($000)
|
1,253,693
|
1,117,390
|
12.2%
|
See "Key Performance Indicators (KPIs)" below for the
meanings of non-IFRS measures and other key performance
indicators.
*At constant currency rates established at the start of each
year. For FY 2024, constant currency rates are 1.26818 and 1.09082
for the British Pound and the Euro, respectively.
1 At 31 December 2023, USD
ARR (at exchange rates in effect at the reporting date) for 1H FY
2024 is $705.8 million, representing year-over-year growth of
26.3%.
·
24.4% year-over-year growth in constant currency
ARR, despite the large but temporary impact of changes made across
Darktrace's GTM organisation in the first quarter.
·
Net constant currency ARR added declined 10.8%
year-over-year, reflecting notable improvement in performance in
the second quarter, which declined 4.5% year-over-year.
·
During the period, Darktrace drove an increased
amount of new ARR added from its existing customer base:
o Ending 1H FY 2024 with 9,232 customers, year-over-year growth
in Darktrace's customer base was 12.9%, having grown by 433 since
30 June 2023.
o A
year-over-year increase in average contract ARR of 10.2% across
Darktrace's customer base was largely driven by an increase in
average ARR of existing customer contracts, which was up 12.4%
year-over-year for contracts aged one year or more.
·
With a continued focus on customer engagement,
gross and net retention metrics have broadly returned to prior year
levels, showing improvement since June 2023:
o One-year gross constant currency ARR churn remains 0.1
percentage points higher than December 2022 but decreased 0.2
percentage points since June 2023.
o Net constant currency ARR retention rate remains 0.1
percentage points lower than December 2022 but has increased 0.4
percentage points since June 2023, reflecting increased upsell
performance in the period.
· Remaining performance obligations (RPO), representing
contracted revenue backlog, expanded by 12.2%, or $136.3 million,
year-over-year to $1.254 billion
through acquiring new, and expanding existing,
multi-year contracts. A substantial portion of Darktrace's revenue
is contracted and in RPO prior to the beginning of each period,
providing significant revenue visibility.
FY 2024 Outlook
(Unaudited)
Darktrace raised certain expectations for the
current financial year on 11 January 2024, in its 1H FY 2024
trading update. As results for January and February
were largely in line with these expectations, it is reiterating the
FY 2024 guidance and related commentary it provided for ARR and Net
ARR added. Darktrace is, however, now increasing its
expectation for FY 2024 Revenue and Adjusted EBITDA
margin.
Darktrace now expects FY 2024 Revenue growth
of between 23.5% and 25.0% (previously 23.0% and 24.5%), reflecting
continued strong ARR to revenue conversion and a relatively stable
exchange rate environment.
Further, as Darktrace continues to control its
discretionary spending without sacrificing planned investment, it
is increasing its expectations for its FY 2024 Adjusted EBITDA
margin to at least 21.0%, above its previous range of between 18.0%
and 20.0%. Darktrace also confirms its guidance for Free cash flow
(FCF) in the range of 50% to 60% of a now increased Adjusted EBITDA
expectation. This lower-than-typical conversion range reflects the
temporary impact to FCF from transitioning to new commission payout
schedules at the start of FY 2024, reflecting a period in which
Darktrace pays out both all new commissions earned and second half
commission schedules from FY 2023. This impact is expected to be
largely confined to FY 2024 and early FY 2025. Beyond this
transitionary phase, Darktrace continues to expect its typical FCF
conversion to fall in the range of 100% of Adjusted EBITDA, plus or
minus 20 percentage points.
Poppy
Gustafsson, CEO, said:
"Following the impact in the first quarter of
our significant Go-to-Market changes, I was very pleased to see the
team adapt quickly, delivering significantly improved second
quarter sales, which enabled our strong financial performance in
the first half of the year.
At the start of this financial year, we
characterised our FY 2024 expectations as first half stabilisation
and second half re-acceleration, and performance indeed stabilised
in our second quarter. Now, it is the improvement in early cycle
operating measures that underpins our confidence in a return to net
new business growth in the second half. We see progress in longer
cycle initiatives such as large strategic, channel and government
pipeline development, and upsell momentum continues. In addition,
ramped salesperson tenure has lengthened, increasing by 28%,
including a 31% increase in our key North American markets. Our
conversion rate also rose, again driven by noticeable improvements
in North America, as more tenured salespeople followed a more
disciplined process to pursue better targeted and qualified sales
prospects.
We continue to see the cyber-crime landscape
evolve rapidly in a challenging geopolitical environment and as the
availability of generative AI tools lowers the barrier to entry for
hostile actors. Against this backdrop and in the period ahead, we
are preparing to roll out enhanced market and product positioning
to better demonstrate how our unique AI can help organisations to
address novel threats across their entire technology
footprint."
Cybersecurity
Landscape
The widespread availability of generative AI
tools continues to impact security operations across
organisations. The immediate impact Darktrace has seen is on
phishing, the most common form of attack. In April last
year,
Darktrace released research showing a 135% increase
in 'novel social engineering attacks' in the
first two months of 2023, corresponding with the widespread
adoption of ChatGPT, suggesting generative AI was providing an
avenue for threat actors to craft sophisticated and
targeted attacks at speed and scale. Both the scale and the
sophistication of these types of attacks continues to grow.
Darktrace customers received around 2.9 million phishing emails in
December 2023 alone, a 14% increase on September
2023[1]. Between
September and December 2023, phishing attacks that use novel social
engineering techniques grew by 35%[2] on average across the Darktrace
customer base.
Chief Information Security Officers (CISOs)
believe these types of AI-augmented threats will continue to grow.
New research commissioned by Darktrace3
shows that 89% of IT security teams polled globally believe
AI-augmented cyber threats will have a significant impact on their
organisation within the next two years, yet 60% believe they are
currently unprepared to defend against these attacks. Their
concerns are led by increased volume and sophistication of malware
that targets known vulnerabilities (rated 3.84 by respondents on a
1-5 scale of risk) alongside increased exposure of sensitive or
proprietary information from using generative AI tools (also rated
3.84).
To ensure their continued security,
organisations must pivot from a reactionary posture - built on
known attack data for threat detection and response - to proactive
cyber readiness by taking a preventative and automated approach to
visualising and correlating incidents across the entire IT
footprint of the business. Against this backdrop, and since the
start of the fiscal year, Darktrace has delivered on its promise of
completing the industry's first Cyber AI Loop with the introduction
of
Darktrace HEAL, which ensures readiness to
recover from an active cyber-attack and to rapidly restore the
business to an operational state. In addition, it has
launched
Darktrace/Cloud, which provides
comprehensive visibility of cloud architectures, real-time
cloud-native threat detection and response, and prioritized
recommendations and actions to help security teams manage
misconfigurations and strengthen compliance.
Recent
Developments
Darktrace has recently announced that its
Federal business has received a High Impact Level "In Process"
designation from the Federal Risk and Authorization Management
Program (FedRAMP), a U.S. government-wide program that provides a
standardised approach to security assessment, authorisation, and
continuous monitoring for cloud products and services.
Darktrace Federal's
Cyber AI Mission Defense™ and Cyber AI Email Protection™ products
are now listed in the FedRAMP Marketplace.
This designation marks a critical milestone for Darktrace Federal
as it seeks to deliver information technology (IT), operational
technology (OT), Internet of Things (IoT), and email security to
the U.S. federal government via cloud-native deployments,
empowering agencies to combat threats ranging from stealthy
insiders to zero-day attacks and supply chain
compromises.
Analyst and Investor
Webcast
Management will hold an analyst and investor
webcast to review its 1H FY2024 results on 7 March 2024 at 13:00
GMT / 08:00 ET. Please register at:
https://www.lsegissuerservices.com/spark/DARKTRACE/events/23b532ee-7e22-4b54-b834-4c4df0857102
About
Darktrace
Darktrace (DARK.L), a global leader in cyber
security artificial intelligence, is on a mission to free the world
of cyber disruption. Breakthrough innovations in the Darktrace
Cyber AI Research Centre in Cambridge, UK have resulted in over 165
patent applications filed and research published to contribute to
the cyber security community. Rather than study attacks,
Darktrace's technology continuously learns and updates its
knowledge of 'you' and applies that understanding to optimise your
state of optimal cyber security. Darktrace is delivering the first
ever Cyber AI Loop, fuelling a continuous end-to-end security
capability that can autonomously spot and respond to novel
in-progress threats within seconds. Darktrace employs over 2,300
people around the world and protects over 9,200 customers globally
from advanced cyber threats. Darktrace was named one of TIME
magazine's 'Most Influential Companies' in 2021.
Cautionary
Statement
This announcement contains certain
forward-looking statements, including with respect to the Group's
current targets, expectations and projections about future
performance, anticipated events or trends and other matters that
are not historical facts. These forward‐looking statements, which sometimes use words
such as "aim", "anticipate", "believe", "intend", "plan",
"estimate", "expect" and words of similar meaning, include all
matters that are not historical facts and reflect the directors'
beliefs and expectations, made in good faith and based on the
information available to them at the time of the announcement. Such
statements involve a number of risks, uncertainties and assumptions
that could cause actual results and performance to differ
materially from any expected future results or performance
expressed or implied by the forward‐looking statement and should be treated with
caution. Any forward-looking statements made in this announcement
by or on behalf of Darktrace speak only as of the date they are
made. Except as required by applicable law or regulation, Darktrace
expressly disclaims any obligation or undertaking to publish any
updates or revisions to any forward-looking statements contained in
this announcement to reflect any changes in its expectations with
regard thereto or any changes in events, conditions or
circumstances on which any such statement is based.
Important
Information
This announcement includes inside information
as defined in Article 7 of the Market Abuse Regulation (EU) No.
596/2014 (as it forms part of UK law pursuant to the European Union
(Withdrawal) Act 2018). Upon publication of this announcement, this
information is now considered in the public
domain.
Enquiries
Luk Janssens - Head of Investor Relations,
Darktrace
Direct: +44 7811 027918
luk.janssens@darktrace.com
Headland (Public Relations adviser to
Darktrace)
Henry Wallers
Direct +44 (0) 20 8786
562436
hwallers@headlandconsultancy.com
Key performance indicators (KPIs)
KPIs are financial and non-financial measures
used by Darktrace's Management, its Board of Directors and its
investors and other stakeholders, to assess business performance,
monitor principal risks and evaluate future expectations. KPIs
include the following Alternative Performance Measures (APMs). APMs
are not defined under IFRS and are not intended to be a substitute
for any IFRS measures of performance. Darktrace includes them in
its reporting as Management considers them to be important to
investors' understanding of its business, and alongside the
comparable IFRS financial measures, in assessing the performance
and cash flows. APMs do not have standardised definitions and
therefore may not be comparable to similar measures presented by
other entities.
ARR, and related performance metrics are
calculated on a constant currency basis established at the start of
the financial year. All comparative periods have been recast using
FY 2024 constant currency rates. The Group's primary currency
exposures are the British Pound and the Euro converting to its US
Dollar functional and reporting currency. For FY 2024,
constant currency rates are 1.26818 and 1.09082 for the British
Pound and the Euro, respectively.
Annualised Recurring Revenue (ARR)
$000
|
31-Dec-23
Unaudited
|
31-Dec-22
Unaudited
|
ARR
|
702,079
|
564,461
|
Year-over-year growth
|
24.4%
|
36.6%
|
Definition and
relevance
ARR is the sum of the annualised committed
subscription value of every contract for which Darktrace is
entitled to recognise revenue, measured at the period's constant
currency rate. In a very small number of cases where a customer has
an opt-out within six months of commencing a contract, Darktrace
does not recognise ARR on that contract until after that opt-out
period has lapsed. Where a one-off sale of appliances is required
for legal or regulatory reasons, or where training or other
services are provided on a one-off basis, this non-recurring
portion of the contract value is excluded from ARR.
ARR is a key indicator of future revenues. In
conjunction with other KPIs and IFRS measures, it allows the growth
of the business to be tracked on a more current basis than can be
measured by revenue, the success of its Go-to-Market strategy to be
assessed more quickly, and performance to be compared between
periods.
Performance
As of 31 December 2023, Darktrace increased
its ARR by 24.4% over the prior period, driven primarily by a
combination of a 12.9% year-over-year increase in customers and a
10.2% increase in average contract ARR across Darktrace's total
customer base, supported by a continued focus on upsells and
renewals with a pricing uplift in the period. Darktrace has seen
ARR growth across all regions in which it operates.
As at 31 December 2023, 56.6% of total ARR
came from customers with ARR over $100,000, compared to 52.2% in
the prior year. This shift reflects Darktrace's focus on both
selling to larger customers and driving product penetration while
continuing to support the addition of customers across the full
range of customer sizes and requirements.
At 31 December 2023, USD ARR (at exchange
rates in effect at the reporting date) for 1H FY 2024 is $705.8
million, representing year-over-year growth of 26.3%. Refer to the
RPO disclosure for a reconciliation between USD ARR and current
RPO.
Net ARR added
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
Net ARR added
|
64,778
|
72,607
|
Period-over-period change
|
(10.8)%
|
7.1%
|
Definition and
relevance
Net ARR added is Darktrace's new customer ARR
for a period, plus or minus the net impact of upsell, downsell, and
churn activity in the existing customer base for that same period,
measured in the current period's constant currency.
Net ARR added is a key indicator of
Darktrace's ability to secure future revenue and a current measure
reflecting changes in its internal and external operating tactics
or environment. As with ARR, it allows the growth of the business
to be tracked on a more current basis than can be measured by
revenue growth, the success of its Go-to-Market strategy to be
assessed more quickly, and performance to be more readily compared
between periods.
Performance
Net ARR added declined 10.8% between the
periods, though second quarter reflected a significant improvement
over first quarter, declining 4.5% year-over-year, compared to a
21.6% year-over-year first quarter decline. This reflects a
recovery from the temporary impacts of significant changes made
across Darktrace's Go-to-Market (GTM) organisation in the first
quarter against the backdrop of a stabilised macro-economic
environment.
Darktrace drove an increased amount of net ARR
additions from its existing customer base during the first half
after directing more of its sales focus towards upsells in response
to economic conditions that made it more difficult to convince new
prospects to trial software. Ending 1H FY 2024 with 9,232
customers, year-over-year growth in Darktrace's customer base was
12.9%, with the customer base having grown by 433 since 30 June
2023. A year-over-year increase in average contract ARR of 10.2%
across Darktrace's customer base was largely driven by an increase
in average ARR of existing customer contracts, which was up 12.4%
year-over-year for contracts aged one year or more, reflecting the
continued focus on upsells and renewals with a pricing uplift in
the period.
Darktrace's performance track in the first
half of FY 2024 supports what it believes is a change in trajectory
following a period of transformation and stabilisation, moving to
Net ARR added growth in its second half.
One-year gross ARR churn rate
%
|
|
31-Dec-23
Unaudited
|
30-Jun-23
Unaudited
|
31-Dec-22
Unaudited
|
One-year gross ARR churn
rate
|
|
6.6%
|
6.8%
|
6.5%
|
Definition and
relevance
One-year gross ARR churn rate is the constant
currency ARR value of customers lost from the existing customer
cohort one year prior to the measurement date, divided by the total
ARR value of that existing customer cohort one year prior to the
current measurement date. This churn rate reflects only customer
losses and does not reflect customer expansions or
contractions.
The one-year ARR gross churn rate is a key
indicator of Darktrace's ability to deliver value to its customers
at commercially accepted terms. It is a major factor that
Management, the Board and other stakeholders consider when
assessing the ability to effectively capture market opportunity and
continue to drive the business on a growth trajectory.
Performance
At 31 December 2023, Darktrace's one-year
gross ARR churn rate was 6.6%, a 0.1 percentage point increase on
the prior year, with this slight deterioration primarily due to the
impact that the macro-economic environment had in increasing
bankruptcies and defaults across Darktrace's customer base in the
second half of FY 2023. Continued investments and focus on
engagement have led to a stabilisation of these trends in the first
half of FY 2024, with one-year gross ARR churn improving 0.2
percentage points from June 2023 levels.
Net ARR retention rate
%
|
|
31-Dec-23
Unaudited
|
30-Jun-23
Unaudited
|
31-Dec-22
Unaudited
|
Net ARR retention rate
|
|
105.0%
|
104.6%
|
105.1%
|
Definition and
relevance
Net ARR retention rate is the current period
constant currency ARR value for all customers that were customers
one year prior to the measurement date, divided by their ARR, in
the same constant currency, one year prior to the measurement date.
This retention rate reflects the ARR impact of customer losses,
expansions, and contractions.
Net ARR retention expands on the insight
provided in Darktrace's measurement of churn, by also reflecting
the impact of product upsells and downsells, as well as other price
or coverage expansions or contractions. This provides Management,
the Board and other stakeholders with information they can use to
assess the net benefit or cost of activity in the existing customer
base. This assessment is valuable to assumptions about future
growth potential and the long-term costs associated with customer
acquisition and retention.
Performance
At 31 December 2023 Darktrace's Net ARR
retention rate was 105.0%, a 0.1 percentage point decrease on the
prior year. This slight reduction is consistent with the 0.1
percentage point year-over-year increase in one-year gross ARR
churn rate. Darktrace's Net ARR retention rate increased 0.4
percentage points on June 2023, reflecting in part the improvement
in churn trends since June, but also the impact of improving upsell
momentum in the first half of FY 2024, as demonstrated by the 12.4%
year-over-year increase in average ARR for contracts aged one year
or more.
Adjusted EBITDA and margin
$000
|
Six-months
ended
31-Dec-23
Unaudited
|
Six-months
ended
31-Dec-22
Unaudited
|
% Change
|
Adjusted EBITDA
|
84,518
|
45,189
|
87.0%
|
Adjusted EBITDA margin
(%)
|
25.6%
|
17.4%
|
n/a
|
Definition and
relevance
At the start of FY 2024 Darktrace changed its
definition of Adjusted EBITDA to treat all amortisation of
commissions as though they were cash costs. This definitional
update was made to reflect changes to GTM compensation structures
in July 2023, when Darktrace transitioned to paying 100% of all
future commissions upfront. Previously, approximately 50% of sales
commissions were paid at signing with the remaining 50% being paid
upon the earlier of the full contract value being paid, or, most
frequently, after one year. As a result of this change, Darktrace
is now required, under IFRS 15, to capitalise substantially all new
sales commissions from FY 2024 onwards, unlike in prior years where
it largely capitalised the first 50% but expensed the second 50%,
typically over the first year.
To support comparability, 1H FY 2023 Adjusted
EBITDA has been recast under this definition and hence differs to
the $59.7 million reported in Darktrace's Results for the Six
Months Ended 31 December 2022, with the difference relating to the
deduction of $14.5 million in amortisation of capitalised
commissions for the period.
On this updated basis, Adjusted EBITDA is the
Group's earnings before interest, taxation, depreciation and
amortisation, adjusted to include appliance depreciation attributed
to Cost of sales and amortisation of capitalised commissions, and
adjusted to remove uncapitalised share-based payment charges and
related employer tax charges, as well as certain one-off charges
including the impairment of right-of-use assets.
Due to the unpredictable nature of these
non-cash charges, and that share-based payment (SBP) related
employer tax charges (ETC) are driven by movements in share price
and are therefore outside of Darktrace's control, these costs are
excluded in the calculation of Adjusted EBITDA. Management believes
that this treatment improves the ability to make period-to-period
comparisons of core operating performance and is
consistent with treatment applied by listed European and US
software peer companies.
For the calculation of this measure, Darktrace
treats the appliance depreciation reflected in Cost of sales as
though it were a current period cash cost. As Darktrace is unusual
in supporting on-premise software deployments with appliances that
it owns, maintains and reuses over their useful lives, this
treatment provides better comparability to software companies that
sell hardware to support similar deployments and recognise those
direct cash costs.
Performance
Adjusted EBITDA increased by $39.3 million, or
87.0%, over the prior period, to $84.5 million, resulting in an 8.2
percentage point increase in Adjusted EBITDA margin to 25.6%. This
margin expansion reflects continued scale efficiencies and ongoing
discretionary cost management during the period, further
information on which can be found in the Financial Review - Income Statement
Analysis section.
A reconciliation of Operating profit (EBIT) to
Adjusted EBITDA is shown in the table below. Note that for its
calculation of Adjusted EBITDA, Darktrace does not add back to EBIT
appliance depreciation included in Cost of Sales or amortisation of
capitalised commissions, and instead considers these as cash costs
to support comparability with peers in the sector.
For 1H FY 2024, there was a $1.1 million, or
12.8%, period-over-period increase in depreciation of appliances in
Cost of sales, to $9.3 million. Appliance depreciation grew more
slowly than might be expected considering Darktrace's revenue
growth, as more customers chose to have products deployed
virtually, and as Darktrace sells more products that are only
deployed virtually.
For 1H FY 2024, there was a $6.1 million, or
42.2%, period-over-period increase in amortisation of capitalised
commission to $20.6 million. This increase reflects the impact of
underlying growth in sales commissions earned that were eligible
for capitalisation, but also the impact from the shift, at the
start of FY 2024, to capitalising substantially all new sales
commissions, compared to the prior period where approximately 50%
of sales commissions were capitalised and amortised over the life
of the contract.
In calculating Adjusted EBITDA, Darktrace also
adds back to EBIT uncapitalised share-based payment and related
employer tax charges. For 1H FY 2024 it added back $24.7 million in
SBP and related ETC, a decrease of $6.1 million, or 19.8%, on the
prior period. This decrease was primarily due to 1H FY 2023
reflecting the impact of a one-time modification of IPO equity
awards that fully vested in FY 2023 and hence did not recur in 1H
FY 2024.
Darktrace also added back to EBIT a
right-of-use asset impairment charge of $0.3 million, reflecting
its current assessment of the cost it will incur to exit a lease
contract on a now unused office space.
Reconciliation of Net profit to
Adjusted EBITDA
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
% Change
|
Revenue
|
330,303
|
259,259
|
27.4%
|
Net
profit
|
52,518
|
581
|
8,939.2%
|
Taxation
|
(2,062)
|
1,354
|
n/a
|
Finance income
|
(7,483)
|
(3,091)
|
142.1%
|
Finance cost
|
3,015
|
1,733
|
74.0%
|
Operating
profit (EBIT)
|
45,988
|
577
|
7,870.2%
|
Operating
profit margin (%)
|
13.9%
|
0.2%
|
n/a
|
Depreciation & amortisation
|
43,469
|
35,515
|
22.4%
|
EBITDA
|
89,457
|
36,092
|
147.9%
|
Appliance depreciation in Cost of
sales
|
(9,312)
|
(8,254)
|
12.8%
|
Impairment of right-of-use asset
|
323
|
1,105
|
(70.8)%
|
Capitalised commission
amortisation1
|
(20,616)
|
(14,502)
|
42.2%
|
SBP charges and related
ETC
|
24,666
|
30,748
|
(19.8)%
|
Adjusted EBITDA
|
84,518
|
45,189
|
87.0%
|
Adjusted EBITDA margin (%)
|
25.6%
|
17.4%
|
n/a
|
1 At the start of FY 2024,
Darktrace changed its definition of Adjusted EBITDA to treat all
amortisation of commissions as though they were cash costs. On this
basis, Adjusted EBITDA is the Group's earnings before interest,
taxation, depreciation and amortisation, adjusted to include
appliance depreciation attributed to Cost of sales and amortisation
of capitalised commissions, and adjusted to remove uncapitalised
share-based payment charges and related employer tax charges, as
well as certain one-off charges including the impairment of
right-of-use assets. Prior year comparatives have been recast under
this definition; see above for further details on definition and
reconciliation.
Adjusted EBITDA reconciliation by
function
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Adjustment to
EBITDA
|
Six-months ended
31-Dec-23
Unaudited
Adjusted
|
Six-months ended
31-Dec-22
Unaudited
|
Adjustment to
EBITDA
|
Six-months ended
31-Dec-22
Unaudited
Adjusted
|
Revenue
|
330,303
|
-
|
330,303
|
259,259
|
-
|
259,259
|
Cost of sales (CoS)
|
(24,840)
|
-
|
(24,840)
|
(18,376)
|
-
|
(18,376)
|
CoS related SBP charge and related
ETC
|
(1,270)
|
1,270
|
-
|
-
|
-
|
-
|
CoS related Depreciation and
amortisation
|
(9,312)
|
-
|
(9,312)
|
(8,254)
|
-
|
(8,254)
|
Total Cost of sales
|
(35,422)
|
1,270
|
(34,152)
|
(26,630)
|
-
|
(26,630)
|
Gross Profit
|
294,881
|
1,270
|
296,151
|
232,629
|
-
|
232,629
|
Sales and marketing
(S&M)
costs
|
(135,022)
|
-
|
(135,022)
|
(108,311)
|
-
|
(108,311)
|
S&M related SBP charge and
related ETC
|
(13,964)
|
13,964
|
-
|
(11,144)
|
11,144
|
-
|
Capitalised commission
amortisation*
|
(20,616)
|
-
|
(20,616)
|
(14,502)
|
-
|
(14,502)
|
S&M related Depreciation and
amortisation
|
(6,982)
|
6,982
|
-
|
(5,626)
|
5,626
|
-
|
Total S&M costs
|
(176,584)
|
20,946
|
(155,638)
|
(139,583)
|
16,770
|
(122,813)
|
Research and development (R&D)
costs
|
(16,471)
|
-
|
(16,471)
|
(15,386)
|
-
|
(15,386)
|
R&D related SBP charge and
related ETC
|
(3,556)
|
3,556
|
-
|
(5,629)
|
5,629
|
-
|
R&D related Depreciation and
amortisation
|
(3,772)
|
3,772
|
-
|
(4,695)
|
4,695
|
-
|
Total R&D costs
|
(23,799)
|
7,328
|
(16,471)
|
(25,710)
|
10,324
|
(15,386)
|
General and administrative (G&A)
costs
|
(41,319)
|
-
|
(41,319)
|
(46,349)
|
-
|
(46,349)
|
G&A related SBP charge and
related ETC
|
(5,876)
|
5,876
|
-
|
(13,976)
|
13,976
|
-
|
G&A related Depreciation,
amortisation and impairment
|
(3,110)
|
3,110
|
-
|
(3,542)
|
3,542
|
-
|
Total G&A costs
|
(50,305)
|
8,986
|
(41,319)
|
(63,867)
|
17,518
|
(46,349)
|
Foreign exchange
differences
|
(12)
|
-
|
(12)
|
(3,618)
|
-
|
(3,618)
|
Other operating income
|
1,807
|
-
|
1,807
|
726
|
-
|
726
|
Operating profit (EBIT)
|
45,988
|
-
|
45,988
|
577
|
-
|
577
|
Operating profit margin (%)
|
|
|
13.9%
|
|
|
0.2%
|
Adjusted EBTIDA
|
|
|
84,518
|
|
|
45,189
|
Adjusted EBITDA margin (%)
|
|
|
25.6%
|
|
|
17.4%
|
*At the start of FY 2024,
Darktrace changed its definition of Adjusted EBITDA to treat all
amortisation of commissions as though they were cash costs. On this
basis, Adjusted EBITDA is the Group's earnings before interest,
taxation, depreciation and amortisation, adjusted to include
appliance depreciation attributed to Cost of sales and amortisation
of capitalised commissions, and adjusted to remove uncapitalised
share-based payment charges and related employer tax charges, as
well as certain one-off charges including the impairment of
right-of-use assets. Prior year comparatives have been recast under
this definition; see above for further details on definition and
reconciliation.
Adjusted EBIT and margin
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
% Change
|
Adjusted EBIT
|
70,977
|
32,430
|
118.9%
|
Adjusted EBIT margin (%)
|
21.5%
|
12.5%
|
n/a
|
Definition and
relevance
Darktrace's Adjusted EBIT is its earnings
before interest and taxes, adjusted to remove uncapitalised
share-based payment (SBP) charges and related employer tax charges,
as well as certain one-off charges including the impairment of
right-of-use assets. Adjusted EBIT as a percentage of revenue is
the Adjusted EBIT margin.
Adjusted EBIT considers both cash and non-cash
charges incurred by Darktrace in the period, demonstrating what
underlying operating profit would have been without the impact of
certain charges that are both unpredictable and outside of
Darktrace's control. This includes SBP related employer tax charges
which are driven by movements in the share price. Management
believes this treatment aids period-to-period comparison of
operating performance with Darktrace's peers, and by excluding the
impact of these unpredictable or uncontrollable charges, further
enhances management's ability to predict and communicate
Darktrace's longer-term expected 'Steady State' economic
model.
Performance
Period-over-period, Adjusted EBIT increased by
$38.5 million to $71.0 million, resulting in a 9.0 percentage point
increase in Adjusted EBIT margin to 21.5%. As with Adjusted EBITDA,
this margin expansion reflects continued scale efficiencies and
ongoing discretionary cost management during the period, further
information on which can be found in the Financial Review - Income
Statement Analysis section. That Darktrace's Adjusted EBIT margin
has expanded 0.8 percentage points more than its Adjusted EBITDA
margin reflects the 0.8 percentage point reduction in adjusted
depreciation and amortisation as a percentage of revenue in the
period, which is added back to Adjusted EBITDA.
Reconciling Operating profit (EBIT) to
Adjusted EBIT for 1H FY 2024, the Group added back $24.7 million of
SBP and related employer tax charges, a decrease of $6.1 million in
the period. This decrease was primarily driven by a decrease in SBP
relating to the FY 2022 modification of awards made pre-IPO. This
one-time modification led to a higher charge in the comparative
period and is not included in the current period due to the awards
having fully vested in FY 2023. Darktrace also added
back a right-of-use asset impairment charge of $0.3 million
reflecting its current assessment of the cost it will incur to exit
a lease contract on now unused space.
Reconciliation of Operating profit
(EBIT) to Adjusted EBIT
$000
|
Six-months
ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
% Change
|
Operating
profit (EBIT)
|
45,988
|
577
|
7,870.2%
|
Impairment of right-of-use asset
|
323
|
1,105
|
(70.8)%
|
SBP charges
|
22,697
|
27,670
|
(18.0)%
|
SBP related ETC
|
1,969
|
3,078
|
(36.0)%
|
Adjusted
EBIT
|
70,977
|
32,430
|
118.9%
|
Adjusted EBIT
margin (%)
|
21.5%
|
12.5%
|
n/a
|
|
|
|
| |
Number of customers
|
31-Dec-23
Unaudited
|
30-Jun-23
Unaudited
|
31-Dec-22
Unaudited
|
Number of customers
|
9,232
|
8,799
|
8,178
|
Definition and
relevance
This is a count of total end-user entities
that are generating ARR at the measurement date.
Performance
Darktrace added 1,054 net new customers since
31 December 2022, a year-over-year growth rate of 12.9%. New
customer additions slowed across the period, as a challenging
macro-economic environment through the second half of FY 2023, made
prospects more reluctant to trial software they did not believe
they would have budget for and extended sales cycles for purchases.
In the first half of FY 2024, Darktrace added 433 net new
customers, reflecting the stabilising macro-economic environment,
and also the temporary impacts of significant changes made across
Darktrace's GTM organisation in the first quarter.
While trends with respect to new prospects appear to have
stabilised in the second quarter of FY 2024, they have not yet
materially improved, and the 11.5 percentage point reduction in
year-over-year growth of net new customers was a key factor in the
decline of Net ARR added to 10.8% below the amount added in the
prior period.
Average contract ARR
$
|
31-Dec-23
Unaudited
|
31-Dec-22
Unaudited
|
% Change
|
Average contract ARR
|
76,048
|
69,022
|
10.2%
|
Definition and
relevance
Average contract ARR is the total ARR at the
measurement date, divided by the number of customers at that
measurement date. In combination with other measures, including
shifts in the value distribution of ARR, metrics such as average
contract ARR are key to assessing whether Go-to-Market strategies,
such as sales team segmentation and changing in pricing or
packaging, are being reflected in Darktrace's
performance.
Performance
Average contract ARR at 31 December 2023
increased by 10.2% year-over-year to $76,048. This primarily
reflects upsells across Darktrace's existing customer base, as
demonstrated by the increase in average ARR of existing customer
contracts, which is up 12.4% year-over-year for contracts aged one
year or more.
In parallel to the year-over-year increase in
average contract ARR, and the underlying increase in existing
contract ARR values, the distribution of customer contracts above
and below $100,000 in ARR also shifted towards larger contract
sizes. This shift reflects Darktrace's increased focus in its
Go-to-Market strategy on both selling to larger customers and
driving product penetration, while continuing to support the
addition of customers across the full range of customer sizes and
requirements.
ARR distribution by customer size:
|
31-Dec-23
Unaudited
|
31-Dec-22
Unaudited
|
ARR from customers with ARR greater than
$100,000
|
56.6%
|
52.2%
|
ARR from customers with ARR less than
$100,000
|
43.4%
|
47.8%
|
The number of customers with ARR greater than
$100,000 represent 19.5% of total customers, a 2.8 percentage point
increase from 16.7% at 31 December 2022.
Remaining Performance Obligation (RPO)
$000
|
31-Dec-23
Unaudited
|
30-Jun-23
Unaudited
|
31-Dec-22
Unaudited
|
RPO
|
1,253,693
|
1,258,350
|
1,117,390
|
Definition and
relevance
RPO represents committed revenue backlog and
is calculated by summing all committed customer contract ARR values
that have not yet been recognised as revenue, valued at the
exchange rates on the last day of the reporting period rather than
at constant currency (as for example with ARR). For clarity, any
contracted amounts that are subject to opt-out or other
cancellation provisions are not included in RPO.
RPO is a common KPI used by software and
Software-as-a-Service ("SaaS") companies to provide stakeholders
with an indication of future recurring revenue and baseline revenue
growth. It includes only future recurring contract value - more
than 99% of Darktrace's contract value is subscription-based - with
all one-time future contract values excluded. RPO reflects actual
contract status so unrenewed contract values cease to be reflected
at their termination dates and future-dated contract
values only become included at their start dates.
RPO and the 'Future contracted revenue' amount
reported in the financial statements under the requirements of
paragraph 120 of IFRS 15 are both measures of future revenue and
differ for various reasons including:
· the
assumptions made about, and the application of, foreign exchange
rates differ between the two calculations;
· one-time revenue is included for the purpose of IFRS 15
reporting but is not included in RPO; and
· future contracted revenue recognises future values rateably
over the term of the contracts, in line with Darktrace's revenue
recognition principles, whereas RPO, aligning with ARR, considers
the status of the contract on the last day of the reporting
period.
Performance
Darktrace's multi-year contract strategy, and
the resulting RPO, creates significant revenue visibility. At 31
December 2023, RPO was 12.2% higher than it was at 31 December
2022, driven primarily by the acquisition of new customers, and the
renewal of contracts with existing customers, for multi-year terms.
Note that year-over-year RPO growth in the current period is less
than would typically be expected. This is primarily because a
large cohort of contracts signed in the late-pandemic period are
starting to come up for renewal. As a result, the average contract
life in RPO will be temporarily shorter than typical, and the
average value is lower, until this renewal cycle is
complete.
The difference between USD ARR of $705.8
million at 31 December 2023 ($637.3 million at 30 June 2023) and
RPO within 12 months is that not all of the ARR at 31 December 2023
will contribute to revenue for a full 12 months.
While USD ARR has increased 10.7% since 30
June 2023, RPO has reduced 0.4% over the same period. This
demonstrates that the average contract duration of ARR at 31
December 2023 has decreased over the 1H FY 2024 period, reflecting
the impact of sales trends in the current period, but to a greater
extent, the impact of the large cohort of late pandemic contracts
in current ARR. As these are now coming up for renewal, they may
not reflect a full year of future revenue at 31 December
2023.
For the current period, movements in RPO since
30 June 2023 also reflect the 10.8% period-over-period decline in
Net ARR additions signed in 1H FY 2024. Further, Darktrace saw a
reduction in average contract duration for contracts signed in the
period due in part to the higher-than-typical proportion of net ARR
additions in the period that came from upsell ARR, as upsell
contracts are typically of shorter duration than new contracts
(generally because customers seek to have upsell contracts be
coterminous with their existing contracts).
$000
|
31-Dec-23
Unaudited
|
30-Jun-23
Unaudited
|
31-Dec-22
Unaudited
|
Within 12 months
|
619,590
|
574,184
|
500,328
|
Between 1 - 2 years
|
389,188
|
397,063
|
355,665
|
Between 2 - 3 years
|
201,782
|
214,018
|
193,085
|
Between 3 - 4 years
|
41,929
|
69,894
|
63,005
|
Over 4 years
|
1,204
|
3,191
|
5,307
|
Total
|
1,253,693
|
1,258,350
|
1,117,390
|
Financial Review - Income Statement
Analysis
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
% Change
|
Revenue
|
330,303
|
259,259
|
27.4%
|
Gross profit
|
294,881
|
232,629
|
26.8%
|
Gross margin (%)
|
89.3%
|
89.7%
|
n/a
|
Operating profit (EBIT)
|
45,988
|
577
|
7,870.2%
|
Net profit
|
52,518
|
581
|
8,939.2%
|
Revenue
Revenue in the first half of FY 2024 increased
by $71.0 million, or 27.4%, to $330.3 million. This increase was
primarily attributable to the 12.9% increase in Darktrace customers
since 31 December 2022 and a 10.2% year-over-year increase in
average contract ARR.
Over 99.2% of all revenue came from recurring
subscription contracts with customers, with customer contracts
typically averaging approximately 36 months. These multi-year
contracts result in significant contracted revenue expected to
convert to revenue in future years (see Note 4). Subscription
revenue is recognised in accordance with IFRS 15 on a straight-line
basis over the service period, from commencement date to
termination date.
Cost of sales (CoS)
$000
|
Six-months
ended
31-Dec-23
Unaudited
|
Six-months
ended
31-Dec-22
Unaudited
|
% Change
|
Employment and other related
costs
|
(11,626)
|
(8,459)
|
37.4%
|
Hosting costs
|
(11,511)
|
(8,165)
|
41.0%
|
Appliance depreciation
|
(9,312)
|
(8,254)
|
12.8%
|
Shipping & other direct
costs
|
(1,703)
|
(1,752)
|
(2.8)%
|
SBP and related ETC
|
(1,270)
|
-
|
n/a
|
Total CoS
|
(35,422)
|
(26,630)
|
33.0%
|
Cost of sales includes all costs relating to
the deployment of Darktrace's software, whether through physical
appliances or in the cloud, and for providing both customer support
and supplementary monitoring and response capabilities.
Cost of sales increased by $8.8 million, or
33.0%, to $35.4 million in the period. This increase was due to a
$3.3 million increase in hosting fees in the period to $11.5
million, driven by additional virtual deployments for new and
existing customers, which reflected a decrease in per unit hosting
costs from continued volume-based discount plans with providers.
Correspondingly, appliance depreciation attributed to Cost of sales
grew $1.1 million to $9.3 million for the period; the lower growth
in physical deployment costs is offsetting higher growth in hosting
costs as more customers chose to have products deployed virtually,
and as Darktrace offers more products that are only deployed
virtually.
Employment and other related costs are
primarily labour costs associated with deploying Darktrace's
software to customers and providing ongoing services such as
customer support and supplementary monitoring and response
capabilities. In 1H FY 2024 Darktrace concluded that the
share-based payment expense together with the employer related tax
charges should be proportionately attributed to Cost of sales for
those functions where an attribution to Cost of sales is made for
labour related costs. Darktrace believes this change better
represents the true cost of a sale to the business, however it has
not applied this change retrospectively due to the impact of this
reclassification being immaterial on the prior period ($1.8
million). Please refer to note 8 for further details on the prior
period quantum.
On a percentage of revenue basis, the
first-time inclusion of SBP and related employer tax charges has
resulted in a 0.4 percentage point decline in gross margin to 89.3%
for the period. Without this change, Darktrace's 1H FY 2024 gross
margin would have remained flat on the prior period.
Sales and marketing (S&M) costs
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
% Change
|
Employment costs and other related
costs
|
(100,968)
|
(72,839)
|
38.6%
|
Other operating costs
|
(23,087)
|
(23,521)
|
(1.8)%
|
Facilities costs
|
(6,778)
|
(8,103)
|
(16.4)%
|
Travel and entertainment
|
(4,188)
|
(3,525)
|
18.8%
|
Depreciation and
amortisation
|
(27,598)
|
(20,451)
|
34.9%
|
SBP and related ETC
|
(13,964)
|
(11,144)
|
25.3%
|
Total S&M costs
|
(176,583)
|
(139,583)
|
26.5%
|
Sales and marketing (S&M) costs increased
by $37.0 million, or 26.5%, to $176.6 million for the
period.
The period-over-period increase is the result
of an underlying increase in Sales and marketing costs, an increase
in the apportionment of Customer Success Manager (CSM) costs to
S&M in the period, and the attribution of Channel Partner costs
to S&M for the first time. Prior to 1H FY 2024, CSM headcount
had been proportionately split between S&M and General and
administrative (G&A) on a full time equivalent (FTE) or pro
rata basis, reflecting the separate sales and operating roles and
responsibilities of the team at the time. Channel Partner costs had
previously been attributed entirely to G&A, as their roles were
to provide operating support to sales teams. This change in
functional attribution of costs to S&M reflects changes to
Darktrace's Go-to-Market strategy at the start of FY 2024, with
both the CSM and Channel Partner teams now sitting entirely within
the GTM function, led by Darktrace's CRO and with newly-defined
commercial roles, responsibilities and related compensation
structures that became effective in July 2023.
Had these changes to the CSM and Channel
Partner teams taken place at the start of FY 2023, total 1H FY 2023
S&M costs (excluding SBP and related ETC) would have been
higher by 15.0%, moving from $141.5 million to $162.6 million. This
clarifies that 38.1% of reported S&M cost growth (excluding SBP
and related ETC) came from role and responsibility changes that
drove changes to cost attribution, rather than from growth in
underlying operating costs.
Within S&M, employment and related costs
increased 38.6% over the prior period to $101.0 million. Had 1H FY
2024 role and related attribution changes been in place in 1H 2023,
employment and other related costs would have increased 19.6%, from
$84.5 million to $101.0 million. This underlying growth reflects
continued investments in our GTM teams to support Darktrace's
growth and retention strategy, and the impact of changes made to
GTM compensation structures, aligning these with industry
practices, thereby better supporting Darktrace's ability to hire
and retain key experienced talent.
The largest component of other operating costs
is direct marketing costs, which increased by $0.9 million
period-over-period to $18.7 million. As a percentage of revenue,
direct marketing costs declined 1.2 percentage points on the prior
period to 5.7% of revenue, as a result of efforts to increase the
efficiency and
effectiveness of Darktrace's direct marketing
approach under its new CMO.
Depreciation and amortisation charges
increased by $7.1 million to $27.6 million for the period, mostly
driven by a $6.1 million increase in the amortisation of
capitalised commission.
Share-based payment and related tax charges
increased by $2.8 million to $14.0 million for the period. This was
driven by new AIP awards being granted to employees, partly offset
by costs associated with the one-time modification of awards made
at the time of IPO, which impacted 1H FY 2023 costs, but which are
no longer being incurred.
Research and development (R&D) costs
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
% Change
|
Employment and other related
costs
|
(14,741)
|
(12,973)
|
13.6%
|
Facilities costs
|
(1,439)
|
(1,901)
|
(24.3)%
|
Travel and entertainment
|
(291)
|
(513)
|
(43.3)%
|
Depreciation and
amortisation
|
(3,772)
|
(4,695)
|
(19.7)%
|
SBP and related ETC
|
(3,556)
|
(5,628)
|
(36.8)%
|
Total R&D costs
|
(23,799)
|
(25,710)
|
(7.4)%
|
Research and development (R&D) costs
decreased by $1.9 million, or 7.4%, to $23.8 million in the period.
This decrease in R&D costs was primarily the result of a $2.1
million period-over-period reduction in share-based payment and
related employer tax charges to $3.6 million, as 1H FY 2023
reflected the impact of a one-time modification of IPO equity
awards that fully vested in FY 2023 and hence did not recur in 1H
FY 2024.
Excluding SBP and related ETC, R&D costs
increased only 0.8%, or $0.2 million, in the period. This limited
increase includes the timing impact of accounting policies on
capitalisable development costs, where in 1H FY 2024, more costs
were capitalised and less previously capitalised costs were
amortised, than in the 1H FY 2023 period. On a cash basis, R&D
employment costs increased 15.3% versus the prior period, driven by
continued investment in additional R&D headcount and an
increase in average salaries for both newly hired and existing
senior roles to attract and retain employees in a competitive job
market.
The $0.9 million decrease in R&D
depreciation and amortisation related primarily to having previous
development projects now fully amortised, with new, as of yet
unreleased products not yet eligible to amortisation.
General and administrative (G&A) costs
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
% Change
|
Employment and other related
costs
|
(21,426)
|
(30,546)
|
(29.9)%
|
Other operating costs
|
(17,302)
|
(12,560)
|
37.8%
|
Facilities costs
|
(1,397)
|
(2,445)
|
(42.9)%
|
Travel and entertainment
|
(1,518)
|
(2,225)
|
(31.8)%
|
Depreciation and
amortisation
|
(2,786)
|
(2,115)
|
31.7%
|
SBP and related ETC
|
(5,876)
|
(13,976)
|
(58.0)%
|
Total G&A costs
|
(50,305)
|
(63,867)
|
(21.2)%
|
General and administrative (G&A) costs
decreased by $13.6 million, or 21.2%, to $50.3 million for the
period. This overall decrease was entirely due to the impact of
Customer Success Managers (CSMs) and Channel Partner related costs
being fully attributed to S&M in 1H FY 2024, whereas in the
prior period an apportionment of CSM, and all Channel Partner
costs, were allocated to G&A.
Had the changes to the roles and
responsibilities, and the related cost attributions, for the CSM
and Channel Partner teams been in place at the start of FY 2023,
total G&A costs (excluding SBP and related ETC) would have been
higher by 20.5%, moving from $36.9 million to $44.4 million.
Including the impact of SBP and related ETC, G&A costs on this
underlying basis would have increased 1.8%, or $0.9 million, on the
prior period. This reflects the impact of a $6.7 million
period-over-period reduction in share-based payment and related
employer tax charges to $5.9 million, with 1H FY 2023 reflecting
the impact of a one-time modification of IPO equity awards that
fully vested in FY 2023 and hence did not recur in 1H FY
2024.
Within G&A, reported employment and
related costs decreased 29.9% over the prior period to $21.4
million. Had 1H FY 2024 attributions been in place in 1H 2023,
employment and other related costs would have increased 13.2%, from
$18.9 million to $21.4 million.
On an underlying cost basis, the largest
contributor to an increase in G&A costs (excluding SBP and
related ETC) was other operating costs, which increased 37.8%, or
$4.7 million to $17.3 million. $2.2 million of this increase was
from increased bad debt expense in the period, driven by
macro-related increases in customer bankruptcies and non-payment. A
further $1.5 million was due to the 15.7% period-over-period growth
in professional and consulting fees, totalling $11.3 million,
reflecting spend on system integration and implementation advisory
services for the roll outs of Workday and Salesforce, as well as
pricing and other advisory projects recently completed or currently
in progress.
Foreign exchange differences
$000
|
Six-months
ended
|
Six-months
ended
|
|
31-Dec-23
Unaudited
|
31-Dec-22
Unaudited
|
% Change
|
Exchange differences
|
(12)
|
(3,618)
|
(99.7)%
|
For 1H FY 2024, there was a $3.6 million
period-over-period decrease in the foreign exchange charge relating
to the translation of monetary assets and liabilities denominated
in currencies other than Darktrace's U.S. Dollar
reporting currency, most significantly, the British Pound and the
Euro. This reflects stability in Darktrace's foreign exchange rates
relative to the prior period.
Financial Review - Financial
Position Analysis
$000
|
31-Dec-23
Unaudited
|
30-Jun-23
Audited
|
% Change
|
31-Dec-22
Unaudited
|
Total assets
|
|
|
|
|
Goodwill
|
38,164
|
38,164
|
0.0%
|
38,164
|
Intangible assets
|
11,654
|
12,571
|
(7.3)%
|
13,455
|
Property, plant and
equipment
|
60,136
|
65,789
|
(8.6)%
|
63,743
|
Right-of-use assets
|
40,961
|
44,439
|
(7.8)%
|
53,738
|
Capitalised commission
|
84,992
|
76,653
|
10.9%
|
63,572
|
Deferred tax asset
|
23,978
|
19,849
|
20.8%
|
1,799
|
Deposits
|
6,317
|
8,234
|
(23.3)%
|
5,728
|
Inventory
|
93
|
100
|
(7.0)%
|
-
|
Trade and other
receivables
|
121,102
|
123,595
|
(2.0)%
|
98,373
|
Tax receivable
|
5,743
|
5,485
|
4.7%
|
1,757
|
Cash and cash equivalents
|
383,150
|
356,986
|
7.3%
|
374,915
|
Total liabilities
|
|
|
|
|
Trade and other payables
|
(88,781)
|
(109,342)
|
(18.8)%
|
(78,449)
|
Deferred revenue
|
(317,299)
|
(312,117)
|
1.7%
|
(259,434)
|
Lease liabilities
|
(60,151)
|
(57,608)
|
4.4%
|
(64,364)
|
Provisions
|
(7,576)
|
(8,668)
|
(12.6)%
|
(8,805)
|
Equity
|
|
|
|
|
Share capital
|
9,736
|
9,779
|
(0.4)%
|
10,030
|
Share premium
|
16,308
|
16,308
|
0.0%
|
16,117
|
Share capital redemption
reserve
|
298
|
255
|
16.9%
|
-
|
Merger reserve
|
305,789
|
305,789
|
0.0%
|
305,789
|
Foreign currency translation
reserve
|
(8,126)
|
(8,126)
|
0.0%
|
(8,126)
|
Stock compensation
reserve
|
60,570
|
50,333
|
20.3%
|
43,829
|
Treasury shares
|
(121,285)
|
(104,946)
|
15.6%
|
(40,139)
|
Retained earnings
|
39,193
|
(5,879)
|
n/a
|
(23,308)
|
Intangible assets
In the period, the Group capitalised $1.2
million of development costs, an increase of $0.1 million compared
to the previous period.
Capitalised development costs are amortised on
a straight-line basis over a three-year period and acquired third
party software is amortised over a period of five years, resulting
in an amortisation charge in the period of $2.1 million, in line
with the previous period. At 31 December 2023, the Group had $11.7
million of intangible assets, a decrease of $0.9 million from $12.6
million at 30 June 2023.
Deferred tax asset
At 31 December 2023, the Group has significant
tax losses in the UK available for offset against future taxable
profits. The latest management forecasts have shown an uplift from
those used to determine deferred tax recognition as at the 30 June
2023 year-end and as such there has been a net increase to the
total deferred tax asset recognised at 31 December 2023 of $4.1
million to $24.0 million. For further details, please refer to
Note 17.
The Group has not recognised a deferred tax
asset related to losses and share-based payments for approximately
$79.9 million (30 June 2023: $78.3 million) as there remains
sufficient uncertainty beyond the 2-year forecast period as to
whether the losses will be utilised in the foreseeable
future.
Capitalised commission
Up to 30 June 2023 the majority of sales
commissions were paid in two instalments, the first payment being
at the point of contract signing and the second upon the earlier of
either the payment for the entire contract value or one year from
the date of sale. For the first instalment, the Group capitalised
sales commissions and the associated payroll taxes, as required
under IFRS 15, and amortised them over the related contract term.
As there were continued employment and customer service obligations
required for the employee to receive the second instalment, these
commissions were not eligible for capitalisation under IFRS 15 and
were expensed over the one-year term up until payment.
Of the changes made to Darktrace's commissions
structures as part of the changes to its GTM strategy at the start
of FY 2024, the most financially impactful was the decision to pay
100% of sales commissions up front. This change was made to better
align with market practice, better supporting Darktrace's ability
to hire and retain key experienced talent. From a cost recognition
perspective, Darktrace, under IFRS15, is required as result of this
change to capitalise substantially all sales commissions and
recognise them over the lives of the related contracts.
Capitalised commissions on the Group's
Statement of Financial Position increased by 10.9% to $85.0 million
at 31 December 2023, from $76.7 million at 30 June 2023, as a
result of continuing sales growth and implementation of the new
commission plan. This increase in capitalised commissions was
driven by additions of $30.6 million ($21.8 million in 1H FY 2023)
offset by amortisation and impairment of $22.3 million ($15.4
million in 1H FY 2023).
Cash and cash equivalents
The Group had cash and cash equivalents at 31
December 2023 of $383.2 million, an increase of $26.2 million from
30 June 2023. For more details on the cash flow see Financial review - Cash Flow Analysis
below.
The balance includes deposits at call of
$283.4 million ($224.6 million at 30 June 2023) presented as cash
equivalents.
Deferred revenue
Total deferred revenue increased by 1.7% to
$317.3 million at 31 December 2023 from $312.1 million at 30 June
2023, and increased by 22.3% from $259.4 million at 31 December
2022. This year-over-year growth was a result of the increases in
invoicing driven by growth in contracted revenues. In recent years
Darktrace has typically raised between 41 to 45% of its total
invoicing in the first half of the financial year, with a higher
proportion of invoices raised in the second half while new business
continues to grow. The impact on deferred revenue is that
significantly more of the growth in deferred revenue occurs in the
second half of the financial year, and it is therefore more
representative to look at year-over-year growth to interpret
underlying trends in deferred revenue.
As the Group rarely invoices its multi-year
contracts more than a year in advance, growth in deferred revenue
is typically driven by movements in current deferred revenue,
rather than non-current deferred revenue. Occasionally, customers
will pay full contract values in advance but because this has
become increasingly infrequent and represents an increasingly small
proportion of the Group's total invoicing, growth in non-current
deferred revenue balances will lag those of current deferred
revenue. At $24.5 million at 31 December 2023, growth in
non-current deferred revenue was therefore less pronounced than
current deferred revenue, decreasing by 13.7% from June 2023 and
19.4% from December 2022. Meanwhile, current deferred revenue was
$292.8 million at 31 December 2023, an increase of 3.2% from 30
June 2023, and 27.8% from $229.0 million at 31 December 2022. We
can see this growth reflected in the 27.4% growth in revenue for
the period.
Equity
As a result of transactions with shareholders,
the Group had a decrease in equity of $13.6 million during 1H FY
2024 driven primarily by the cancellation of shares performed as
part of the share buyback programme completed on 31 October 2023.
18,349,541 shares were bought back on the open market and
16,367,676 have been subsequently cancelled. The remaining
1,981,865 shares have been added to the shares held in treasury to
cover future employee equity grants.
For more details on the equity movements
please refer to Note 7 of the consolidated interim financial
information below.
Financial review - Cash Flows
Analysis
$000
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
% Change
|
Operating cash flows before
movements in working capital
|
113,030
|
57,536
|
96.5%
|
Net cash inflow from operating activities
|
65,589
|
27,094
|
142.1%
|
Cash outflow from investing
activities
|
(540)
|
(11,152)
|
(95.2)%
|
Cash outflow from financing
activities
|
(39,279)
|
(31,179)
|
26.0%
|
Net changes in cash and cash equivalents
|
25,770
|
(15,237)
|
n/a
|
Cash and cash equivalents, beginning of
period
|
356,986
|
390,623
|
(8.6)%
|
Unrealised exchange difference on
cash and cash equivalents
|
394
|
(471)
|
n/a
|
Cash and cash equivalents, end of period
|
383,150
|
374,915
|
2.2%
|
Cash inflow
from operating activities before working capital
Cash generated from operating activities
before working capital movements increased by $55.5 million, or
96.5%, compared to the prior period. This was primarily due to the
$51.9 million increase in profit before tax, resulting from
Darktrace's continued revenue growth, maintenance of its invoicing
profiles and actions to control discretionary costs.
Net cash
inflow from operating activities
The Group had a net cash inflow from operating
activities of $65.6 million in the period, a 142.1% increase from
$27.1 million in 1H FY 2023. The $38.5 million increase in the net
cash inflows from operating activities was primarily due to the
$51.9 million increase in profit before tax and reduced by $16.8
million from working capital movements, primarily due to $17.8
million increase in the cash outflows relating to trade and other
payables.
Cash outflow
from investing activities
The Group had cash outflows from investing
activities of $0.5 million, a decrease of $10.6 million on the
prior period. This decrease in cash outflows was primarily a result
of a $4.4 million increase in finance income owing to increased
interest receivable on the Group's cash deposits, and a $6.5
million reduction in additions to property, plant and equipment
(PPE) cash outflows. The reduction in PPE was primarily due to
lower capex on appliances, as more customers chose to have products
deployed virtually, and as Darktrace offers more products that are
only deployed virtually. Darktrace also incurred office-related PPE
in the period, having completed office fit outs for its new offices
in London, New York and Los Angeles in prior periods.
Cash outflow
from financing activities
Cash outflows from financing activities
increased $8.1 million on the prior period owing to a $10.5 million
increase in share buyback costs.
For more details please see consolidated
interim statement of cash flows below.
Going Concern
The Directors are of the view that the
preparation of the consolidated interim financial statements on a
going concern basis continues to be appropriate. Refer to the
consolidated interim financial information reported below for more
details.
Principal and Emerging Risks
The principal risks and uncertainties faced by
Darktrace and its approach to internal control and risk management
are set out on pages 66 to 73 of the 2023 Annual Report which is
available on the Group's website at www.darktrace.com. The
principal risks and uncertainties, have been reassessed and the
Directors expect them to remain as those reported in the 2023
Annual Report during the remaining six months of the financial
year.
Risk
Title
|
Risk
Description
|
Inability to
innovate Darktrace products
|
If the Group is unable to innovate, develop
and enhance the AI Cyber Loop, to adapt to the increasingly
sophisticated and changing nature of cyber-attacks, or fails to
innovate against the market's current requirements, it could
negatively impact the Group's business, results of operations,
financial condition and prospects.
|
Customer
service delivery failure
|
The Group may fail to anticipate and understand
customer needs appropriately and in a timely manner, therefore
risking failure to deliver value to the customers.
|
Inadequate
channel sales and support
|
The Group relies on channel partners,
including resellers and referral partners, to generate a
significant portion of its revenue. If the Group fails to maintain
successful relationships with its channel partners, or if its
channel partners fail to perform, its ability to market, sell and
distribute its solution will be limited, and its business,
financial position and results of operations will be
harmed.
|
Cloud service
providers downtime
|
The Group relies on Cloud Service Providers,
such as Amazon Web Services ("AWS"), and its own data servers to
host and operate an increasing number of deployments for the
Darktrace product line, and any disruption of or interference with
its use of these facilities may negatively affect its ability to
maintain the performance and reliability of its Cyber AI Platform
which could cause its business to suffer.
|
Failure to
retain and attract employees
|
The Group relies on the performance of highly
skilled personnel including the senior management team. The Group's
future success depends, in part, on its ability to continue to
identify, hire, develop, motivate, and retain highly skilled
personnel for all areas of the organisation, particularly technical
professionals.
|
Darktrace
cyber incident
|
Failure of its systems and the compromise of its
data, through cyber-attack, or failure to responsibly collect,
process and store data, together with ensuring an appropriate
standard of cybersecurity, could have a negative reputational,
operational, and financial impact on the business.
|
Intellectual
property theft, loss or exposure
|
The Group may be unable to adequately protect
its intellectual property proprietary rights and prevent others
from making unauthorised use of its platform and technologies,
which could harm the Group's financial results.
|
Autonomy
related matters
|
The Autonomy related litigation represents a
potential risk for Darktrace from both a reputational and a legal
perspective.
|
Statement of Directors'
Responsibility
The Directors confirm that these unaudited
interim financial statements have been prepared in accordance with
UK adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and
that the interim management report includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an
indication of important events that have occurred during the first
six months and their impact on the condensed set of financial
statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
· related-party transactions in the first six months and that
have materially affected the financial position or the performance
of the Group during that period and any changes in the
related-party transactions described in the last annual report that
could have a material effect on the financial position or
performance of the Group in the first six months of the current
financial year.
The maintenance and integrity of the Darktrace
plc website is the responsibility of the Directors; the work
carried out by the authors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for
any changes that might have occurred to the interim financial
statements since they were initially presented on the
website.
The Directors of Darktrace plc are
listed in the Darktrace plc annual report for 30 June 2023.
From 7 December 2023, Mr Jacob is no longer on the
Board. A list of current Directors is
maintained on the Darktrace plc website:
www.darktrace.com/en/board-of-directors.
On behalf of the Board
Catherine Graham
Chief Financial Officer
6 March 2024
Independent auditor's review report on
Interim Financial Information to Darktrace plc
Conclusion
We have reviewed the condensed set
of financial statements in the half-yearly
financial report of Darktrace plc (the 'Group') for the six months
ended 31 December 2023 which comprises the
consolidated interim statement of comprehensive income,
consolidated interim statement of financial position,
consolidated interim statement of changes
in equity, consolidated interim statement of cash flows, and
related explanatory notes.
Based on our review, nothing has
come to our attention that causes us to believe that the condensed
set of financial statements in the half-yearly financial report for
the six months ended 31 December
2023 is not prepared, in all material
respects, in accordance with UK-adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for
conclusion
We conducted our review in
accordance with International Standard on Review Engagements (UK)
(ISRE (UK)) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" (ISRE (UK)
2410). A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual
financial statements of the group are prepared in accordance with
UK-adopted IFRSs. The condensed set of financial statements
included in this half yearly financial report has been prepared in
accordance with UK-adopted International Accounting Standard 34,
"Interim Financial Reporting".
We have read the other information
contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
Conclusions
relating to going concern
Based on our review procedures,
which are less extensive than those performed in an audit as
described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or
that management have identified material uncertainties relating to
going concern that are not appropriately disclosed.
This conclusion is based on the
review procedures performed in accordance with this ISRE UK,
however future events or conditions may cause the entity to cease
to continue as a going concern.
In our evaluation of the
directors' conclusions, we considered the inherent risks associated
with the group's business model including effects arising from
current macro-economic uncertainties, we assessed and challenged
the reasonableness of estimates made by the directors and the
related disclosures and analysed how those risks might affect the
group's financial resources or ability to continue operations over
the going concern period.
Directors' responsibilities
The half-yearly financial report
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly
financial report, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic
alternative but to do so.
Auditor's
Responsibilities for the review of the financial
information
Our responsibility is to express a
conclusion to the group on the condensed set of financial
statements in the half-yearly financial report based on our
review.
Our conclusion, including our conclusions
relating to going concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report.
Use of our report
This report is made solely to the
group, as a body, in accordance with ISRE (UK) 2410. Our review
work has been undertaken so that we might state to the group those
matters we are required to state to it in an independent review
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the group as a body, for our review work, for this report, or for
the conclusion we have formed.
Grant Thornton UK LLP
Statutory Auditor, Chartered
Accountants
London
6 March 2024
Consolidated Unaudited Interim Statement of
Comprehensive Income
|
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
|
Notes
|
$000
|
$000
|
Revenue
|
4
|
330,303
|
259,259
|
Cost of sales
|
|
(35,422)
|
(26,630)
|
Gross profit
|
|
294,881
|
232,629
|
Sales and marketing costs
|
|
(176,584)
|
(139,583)
|
Research and development
costs
|
|
(23,799)
|
(25,710)
|
General and administrative
costs
|
|
(50,305)
|
(63,867)
|
Foreign exchange
differences
|
|
(12)
|
(3,618)
|
Other operating income
|
|
1,807
|
726
|
Operating profit
|
|
45,988
|
577
|
Finance costs
|
|
(3,015)
|
(1,733)
|
Finance income
|
|
7,483
|
3,091
|
Profit before taxation
|
|
50,456
|
1,935
|
Taxation
|
|
2,062
|
(1,354)
|
Net
profit attributable to shareholders of Darktrace
plc
|
|
52,518
|
581
|
Items that are, or may be, subsequently reclassified to
profit or loss:
|
|
|
|
Other comprehensive
(loss)/income
|
|
-
|
-
|
Total comprehensive profit for the period
|
|
52,518
|
581
|
|
|
|
|
Earnings per share
|
|
|
|
Basic earnings per share
|
6
|
$0.08
|
$0.00
|
Diluted earnings per
share
|
6
|
$0.08
|
$0.00
|
Consolidated Unaudited Interim Statement of
Financial Position
|
|
31-Dec-23
Unaudited
|
30-Jun-23
Audited
|
31-Dec-22
Unaudited
|
|
Notes
|
$000
|
$000
|
$000
|
Non-current assets
|
|
|
|
|
Goodwill
|
|
38,164
|
38,164
|
38,164
|
Intangible Assets
|
13
|
11,654
|
12,571
|
13,455
|
Property, plant and
equipment
|
|
60,136
|
65,789
|
63,743
|
Right-of-use assets
|
|
40,961
|
44,439
|
53,738
|
Capitalised commission
|
|
41,827
|
42,182
|
35,601
|
Deferred tax
|
17
|
23,978
|
19,849
|
1,799
|
Deposits
|
|
6,317
|
8,234
|
5,728
|
|
|
223,037
|
231,228
|
212,228
|
|
|
|
|
|
Current assets
|
|
|
|
|
Inventory
|
|
93
|
100
|
-
|
Trade and other
receivables
|
11
|
121,102
|
123,595
|
98,373
|
Capitalised commission
|
|
43,165
|
34,471
|
27,971
|
Tax receivable
|
|
5,743
|
5,485
|
1,757
|
Cash and cash equivalents
|
14
|
383,150
|
356,986
|
374,915
|
|
|
553,253
|
520,637
|
503,016
|
|
|
|
|
|
Total assets
|
|
776,290
|
751,865
|
715,244
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
|
(88,781)
|
(109,959)
|
(78,449)
|
Deferred revenue
|
|
(292,770)
|
(283,678)
|
(229,005)
|
Lease liabilities
|
|
(1,621)
|
(4,873)
|
(6,063)
|
Provisions
|
12
|
(6,410)
|
(6,927)
|
(7,604)
|
|
|
(389,582)
|
(405,437)
|
(321,121)
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Deferred revenue
|
|
(24,529)
|
(28,439)
|
(30,429)
|
Lease liabilities
|
|
(58,530)
|
(52,735)
|
(58,301)
|
Provisions
|
12
|
(1,166)
|
(1,741)
|
(1,201)
|
|
|
(84,225)
|
(82,915)
|
(89,931)
|
|
|
|
|
|
Total liabilities
|
|
(473,807)
|
(488,352)
|
(411,052)
|
|
|
|
|
|
Net
Assets
|
|
302,483
|
263,513
|
304,192
|
|
|
|
|
|
Equity
|
|
|
|
|
Share capital
|
7
|
9,736
|
9,779
|
10,030
|
Share premium
|
7
|
16,308
|
16,308
|
16,117
|
Share Capital redemption
reserve
|
|
298
|
255
|
-
|
Merger reserve
|
|
305,789
|
305,789
|
305,789
|
Foreign currency translation
reserve
|
|
(8,126)
|
(8,126)
|
(8,126)
|
Stock compensation
reserve
|
|
60,570
|
50,333
|
43,829
|
Treasury shares
|
|
(121,285)
|
(104,946)
|
(40,139)
|
Retained earnings
|
|
39,193
|
(5,879)
|
(23,308)
|
Total equity attributable to equity shareholders of Darktrace
plc
|
|
302,483
|
263,513
|
304,192
|
These financial statements were approved by
the Board of Directors and authorised for issue on 6 March
2024. They were signed on its behalf by:
Catherine Graham
Chief Financial Officer
Company No. 13264637
Consolidated Unaudited Interim Statement of
Changes in Equity
|
|
Share
capital
|
Share
premium
|
Share capital redemption
reserve
|
Merger
reserve
|
Foreign currency translation
reserve
|
Stock compensation
reserve
|
Treasury
Shares
|
Retained
earnings
|
Total
equity
|
|
Note
|
$000
|
$000
|
$000
|
$000
|
$000
|
$000
|
$000
|
$000
|
$000
|
1-Jul-22
Audited
|
|
9,812
|
16,117
|
-
|
305,789
|
(8,126)
|
74,883
|
(11,683)
|
(72,104)
|
314,688
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
581
|
581
|
Other comprehensive
(loss)/income
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Total comprehensive profit
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
581
|
581
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised
|
7
|
218
|
-
|
-
|
-
|
-
|
(57,019)
|
5,487
|
48,215
|
(3,099)
|
Shares buyback
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(33,943)
|
-
|
(33,943)
|
SBP* charge
|
|
-
|
-
|
-
|
-
|
-
|
25,965
|
-
|
-
|
25,965
|
Transactions with shareholders
|
|
218
|
-
|
-
|
-
|
-
|
(31,054)
|
(28,456)
|
48,215
|
(11,077)
|
|
|
|
|
|
|
|
|
|
|
|
31-Dec-22
Unaudited
|
|
10,030
|
16,117
|
-
|
305,789
|
(8,126)
|
43,829
|
(40,139)
|
(23,308)
|
304,192
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
58,377
|
58,377
|
Other comprehensive
(loss)/income
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Total comprehensive loss
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
58,377
|
58,377
|
|
|
|
|
|
|
|
|
|
|
|
Share cancellation
|
7
|
(255)
|
-
|
255
|
-
|
-
|
-
|
43,665
|
(43,665)
|
-
|
Shares buyback
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(111,271)
|
(284)
|
(111,555)
|
Options exercised/awards
vested
|
7
|
4
|
191
|
-
|
-
|
-
|
(4,572)
|
2,799
|
3,001
|
1,423
|
SBP* charge
|
|
-
|
-
|
-
|
-
|
-
|
11,076
|
-
|
-
|
11,076
|
Transactions with shareholders
|
|
(251)
|
191
|
255
|
-
|
-
|
6,504
|
(64,807)
|
(40,948)
|
(99,056)
|
|
|
|
|
|
|
|
|
|
|
|
30-Jun-23
Audited
|
|
9,779
|
16,308
|
255
|
305,789
|
(8,126)
|
50,333
|
(104,946)
|
(5,879)
|
263,513
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
52,518
|
52,518
|
Other comprehensive
(loss)/income
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Total comprehensive profit
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
52,518
|
52,518
|
|
|
|
|
|
|
|
|
|
|
|
Share buyback
|
|
(43)
|
-
|
43
|
-
|
-
|
-
|
(42,113)
|
(2,308)
|
(44,421)
|
Share cancellation
|
|
-
|
-
|
-
|
-
|
-
|
-
|
12,066
|
(12,066)
|
-
|
Options exercised/awards
vested
|
|
-
|
-
|
-
|
-
|
-
|
(11,484)
|
13,708
|
6,928
|
9,152
|
SBP* charge
|
|
-
|
-
|
-
|
-
|
-
|
21,721
|
-
|
-
|
21,721
|
Transactions with shareholders
|
|
(43)
|
-
|
43
|
-
|
-
|
10,237
|
(16,339)
|
(7,446)
|
(13,548)
|
|
|
|
|
|
|
|
|
|
|
|
31-Dec-23
Unaudited
|
|
9,736
|
16,308
|
298
|
305,789
|
(8,126)
|
60,570
|
(121,285)
|
39,193
|
302,483
|
*SBP: share-based
payment.
Consolidated Unaudited Interim Statement of
Cash Flows
|
|
Six-months ended
31-Dec-23
Unaudited
|
Six-months ended
31-Dec-22
Unaudited
|
|
Note
|
$000
|
$000
|
Cash generated from operations
|
|
|
|
Profit for the period after
tax
|
|
52,518
|
581
|
Depreciation of PPE* and Right of
Use Assets
|
5
|
20,721
|
17,676
|
Amortisation of intangible
assets
|
13
|
2,134
|
3,336
|
Amortisation of capitalised
commission
|
|
20,616
|
14,502
|
Impairment of capitalised commission
and Right of Use Assets
|
|
1,989
|
1,983
|
Loss on disposal of PPE*
|
|
432
|
616
|
Unrealised foreign exchange
differences
|
|
(3,328)
|
197
|
Credit loss charge
|
|
3,588
|
1,401
|
Share-based payment
charge
|
8
|
22,697
|
27,670
|
Net settled share-based
payments
|
|
-
|
(9,696)
|
Finance costs
|
|
3,015
|
1,733
|
Finance income
|
|
(7,483)
|
(3,091)
|
Other operating income
|
|
(1,807)
|
(726)
|
Taxation
|
|
(2,062)
|
1,354
|
Operating cash flows before movements in working
capital
|
|
113,030
|
57,536
|
Decrease/(increase) in trade and
other receivables
|
|
2,422
|
(2,406)
|
Increase in capitalised
commission
|
|
(30,620)
|
(21,798)
|
Decrease in trade and other
payables
|
|
(22,822)
|
(5,019)
|
Decrease in provisions from
payments
|
|
(1,092)
|
(8,487)
|
Increase in deferred
revenue
|
|
5,182
|
7,583
|
Decrease in inventory
|
|
7
|
-
|
Net
cash flow from operating activities before tax
|
|
66,107
|
27,409
|
Tax paid
|
|
(518)
|
(315)
|
Net
cash inflow from operating activities
|
|
65,589
|
27,094
|
Investing activities
|
|
|
|
Development costs
capitalised
|
|
(1,020)
|
(691)
|
Purchase of property, plant and
equipment
|
|
(7,003)
|
(13,552)
|
Finance income
|
|
7,483
|
3,091
|
Cash outflow from investing activities
|
|
(540)
|
(11,152)
|
Financing activities
|
|
|
|
Proceeds from share issues and
exercises
|
|
9,152
|
6,596
|
Shares buyback
|
|
(44,421)
|
(33,943)
|
Repayment of lease
liabilities
|
|
(2,527)
|
(2,099)
|
Payment of interest on lease
liabilities
|
|
(1,483)
|
(1,733)
|
Cash outflow from financing activities
|
|
(39,279)
|
(31,179)
|
Net
changes in cash and cash equivalents
|
|
25,770
|
(15,237)
|
Cash and cash equivalents, beginning of
period
|
|
356,986
|
390,623
|
Unrealised exchange difference on
cash and cash equivalents
|
|
394
|
(471)
|
Cash and cash equivalents, end of period
|
|
383,150
|
374,915
|
*Property, plant and
equipment.
Notes to the Consolidated Unaudited Interim
Financial Statements
1
General information
These unaudited interim financial
statements were approved for issue on 6 March 2024.
These interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 30 June 2023 were
approved by the Board of Directors on 5 September 2023 and
delivered to the Registrar of Companies. The independent audit
report on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006. The interim results
for the six months ended 31 December 2023 and the comparatives are
unaudited, yet have been reviewed by the independent
auditor.
Company information
Darktrace plc (the Company) is a
company incorporated in England and Wales under company number
13264637. The principal place of business is Maurice Wilkes
Building, St John's Innovation Park, Cowley Road, Cambridge, CB4
0DS. Its shares are listed on the London Stock Exchange.
The Company
and Group information
The parent company, Darktrace plc has been
defined as 'the Company' and Darktrace plc group as 'the Group' or
'Darktrace'.
Basis of preparation
This consolidated interim financial report for
the half-year reporting period ended 31 December 2023 has been
prepared in accordance with the UK-adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
The interim report does not include all of the
notes of the type normally included in an annual financial report.
Accordingly, this report is to be read in conjunction with the
annual report for the year ended 30 June 2023, which has been
prepared in accordance with both UK-adopted International
Accounting Standards and with the requirements of the Companies Act
2006, and any public announcements made by Darktrace plc during the
interim reporting period.
The accounting policies adopted are consistent
with those of the previous financial year and corresponding interim
reporting period.
New
standards, amendments, IFRIC interpretations and new relevant
disclosure requirements adopted by the Group
A number of new or amended standards became
applicable for the current reporting period. The Group did not have
to change its accounting policies or make retrospective adjustments
as a result of adopting these standards.
New standards
and interpretations not yet adopted
Certain new accounting standards and
interpretations have been published that are not mandatory for 31
December 2023 reporting periods and have not been early adopted by
the Group. These standards, amendments or interpretations are not
expected to have a material impact on the Group in the current or
future reporting periods an on foreseeable future
transactions.
Going concern assessment
At the end of the reporting period the Group
had $383.2 million of cash and cash equivalents. After considering
the first half FY 2024 performance, the Group's principal risks and
uncertainties in the current operating environment, and the
continued relevance of the scenario analyses designed, as part of
the FY 2023 year-end audit, to evaluate the capacity of the Group
to withstand a prolonged period of adverse financial conditions,
the Directors are satisfied that the Group has adequate resources
to continue in operational existence for at least 12 months from
the date of approval of the interim financial statements.
Accordingly, the Directors are of the view that the preparation of
the consolidated interim financial statements on a going concern
basis continues to be appropriate.
2 Key
judgements and estimates
The preparation of interim
financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income
and expense. Actual results might differ from these
estimates.
In preparing these interim
financial statements, the significant judgements made by management
in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 30 June
2023.
3
Operating segment
The Group has concluded that it operates only
one operating segment as defined by IFRS 8 Operating Segments being
the development and sale of cyber-threat defence technology. The
information used by the Group's Chief Operating Decision Makers
(CODMs) to make decisions about the allocation of resources and to
assess performance is presented on a consolidated Group basis.
Accordingly, no segment analysis is presented. Refer to note 4 for
disaggregated analysis on revenue from contracts with customers.
The non-current assets presented below exclude any deferred tax
assets and deposits.
|
31-Dec-23
|
30-Jun-23
|
31-Dec-22
|
|
Unaudited
|
Audited
|
Unaudited
|
Non-current assets by geographical market
|
$000
|
$000
|
$000
|
USA
|
63,598
|
62,827
|
63,855
|
United Kingdom
|
69,157
|
76,743
|
79,670
|
Europe
|
34,068
|
36,355
|
34,097
|
Rest of World
|
25,920
|
27,220
|
27,079
|
|
192,743
|
203,145
|
204,701
|
4
Revenue from contracts with customers
Disaggregation of revenue
Revenue recognised at a point in
time is not significant to the reported results in any
period. This includes revenue generated by separate contracts for
training and sale of appliances. For the period this revenue
amounted to $0.4 million (1H FY 2023 $0.2 million).
|
Six-months
ended
31-Dec-23
Unaudited
|
|
Six-months
ended
31-Dec-22
Unaudited
|
|
|
$000
|
% of
revenue
|
$000
|
% of
revenue
|
USA
|
115,157
|
34.9%
|
89,354
|
34.5%
|
United Kingdom
|
46,193
|
14.0%
|
40,874
|
15.8%
|
Europe
|
86,885
|
26.3%
|
63,845
|
24.6%
|
Rest of World
|
82,068
|
24.8%
|
65,186
|
25.1%
|
|
330,303
|
100.0%
|
259,259
|
100.0%
|
Revenue from customers has been
attributed to the geographic market based on contractual location.
No single customer accounted for more than 10% of revenue in the
periods presented.
Contract assets and liabilities related to contracts with
customers
The following table provides
information on accrued income and deferred revenue from contracts
with customers.
|
|
|
|
|
31-Dec-23
|
30-Jun-23
|
31-Dec-22
|
|
Unaudited
|
Audited
|
Unaudited
|
|
$000
|
$000
|
$000
|
Accrued income
|
4,362
|
3,445
|
4,692
|
Total accrued income
|
4,362
|
3,445
|
4,692
|
|
|
|
|
Current deferred revenue
|
292,770
|
283,678
|
229,005
|
Non-current deferred
revenue
|
24,529
|
28,439
|
30,429
|
Total deferred revenue
|
317,299
|
312,117
|
259,434
|
Deferred revenue has continued to increase as
the number of customers has grown, resulting in additional revenue
combined with an ongoing shift towards annual invoicing.
Contracts are invoiced between one month and
more than three years in advance, with the majority of contracts
being invoiced annually in advance. Deferred revenue reflects the
difference between invoicing and associated payment terms, and
fulfilment of the performance obligation.
Revenue recognised in relation to
deferred revenues (Contract Liabilities)
The following table shows how much
revenue recognised in each reporting period related to
brought-forward contract liabilities:
|
Six-months
ended
31-Dec-23
Unaudited
|
Six-months
ended
31-Dec-22
Unaudited
Restated
|
|
$000
|
$000
|
Revenue recognised that was included
in the contract liability balance at the beginning of the
period
|
211,304
|
161,662
|
% of revenue
|
64.0%
|
62.4%
|
The prior period revenue
recognised that was included in the contract liability balance at
the beginning of the period was incorrectly disclosed as the full
amount of current deferred revenue balance at 30 June 2022 equal to
$222.4 million. The prior period disclosure has been updated to
reflect only the deferred revenue recognised in the first six
months ended 31 December 2022.
Future contracted revenue
(formerly revenue expected to be recognised)
Prior period adjustment to the disclosure
As described in the annual report for the year
ended 30 June 2023, subsequent to the publication of its FY 2022
Annual Report, Darktrace identified that ''Revenue expected to be
recognised'' i.e. future contracted revenue mistakenly included
expected revenue after the opt-out date, inconsistent with IFRS 15
paragraph 11. This error accounts for $20.3 million mistakenly
disclosed in the expected future revenue to be recognised as at 31
December 2022. Darktrace has corrected the error in its disclosure
of the FY 2023 Annual Report and in the comparative period ended 31
December 2022 to these financial statements. This did not affect
any reported numbers in the primary financial statements and the
error was limited to this disclosure only.
|
31-Dec-22
Unaudited
Reported
|
Restatement
|
31-Dec-22
Unaudited
Restated
|
|
$000
|
$000
|
$000
|
Due within 12 months
|
518,009
|
(17,567)
|
500,442
|
Due within 1-2 years
|
359,063
|
(1,646)
|
357,417
|
Due within 2-3 years
|
195,872
|
(737)
|
195,135
|
Due within 3-4 years
|
65,014
|
(330)
|
64,684
|
Due over 4 years
|
5,626
|
(54)
|
5,572
|
|
1,143,584
|
(20,334)
|
1,123,250
|
|
31-Dec-23
Unaudited
|
30-Jun-23
Audited
|
31-Dec-22
Unaudited
Restated
|
|
$000
|
$000
|
$000
|
Due within 12 months
|
620,967
|
576,326
|
500,442
|
Due within 1-2 years
|
389,682
|
397,783
|
357,417
|
Due within 2-3 years
|
204,147
|
216,513
|
195,135
|
Due within 3-4 years
|
43,768
|
72,263
|
64,684
|
Due over 4 years
|
1,395
|
3,552
|
5,572
|
|
1,259,959
|
1,266,437
|
1,123,250
|
5
Material profit and loss items
The Group has identified a number
of items which are material due to the significance of their nature
and/or amount. These are listed separately here to provide a better
understanding of the financial performance of the Group.
The profit for the period for the Group is stated after charging/(crediting):
|
Six-months
ended
31-Dec-23
Unaudited
|
Six-months
ended
31-Dec-22
Unaudited
|
|
$000
|
$000
|
Hosting fees
|
13,834
|
10,581
|
Legal and professional fees
|
8,216
|
6,966
|
Software implementation
costs
|
1,302
|
1,471
|
Accounting advice costs
|
1,776
|
1,322
|
Hosting fees related to customer contracts are
classified within Cost of sales for an amount of $11.5 million (1H
FY 2023 $8.2 million) and those related to POV (Proof of Value) are
classified to sales and marketing costs for an amount of $2.3
million (1H FY 2023 $2.4 million). Professional and
legal fees increased as a result of costs spent on new commission
and pricing projects as well as continued spending related to
corporate activities and some legal litigation cost.
Commission plans impact to the income
statement:
|
Six-months
ended
31-Dec-23
Unaudited
|
Six-months
ended
31-Dec-22
Unaudited
|
|
$000
|
$000
|
Commission expense
|
49,208
|
36,837
|
Commission amortisation and
impairment
|
22,281
|
15,380
|
Capitalised commission
|
(30,588)
|
(21,799)
|
With effective date 1 July 2023, Darktrace
introduced updated commission plans for all members of the GTM
team. The new commission plans vary depending on the individual and
commission can be calculated on several metrics, however sales
commissions are now paid fully upfront once the target is met. This
change in commission plans has resulted in an increase in
commission that can be capitalised and therefore an increase in
related amortisation.
The depreciation and amortisation
charges for Right-of use assets and Property, plant and equipment,
have been made in the consolidated unaudited interim statement of
comprehensive income within the following functional
areas:
|
Six-months
ended
31-Dec-23
Unaudited
|
Six-months
ended
31-Dec-22
Unaudited
|
|
$000
|
$000
|
Property, plant and equipment
|
|
|
Cost of sales
|
9,312
|
8,254
|
Sales and marketing
|
2,296
|
2,490
|
Research and development
|
682
|
659
|
General and
administrative
|
1,787
|
1,072
|
|
14,077
|
12,475
|
Right-of-use assets
|
|
|
Sales and marketing
|
4,687
|
3,135
|
Research and development
|
993
|
793
|
General and
administrative
|
964
|
1,273
|
|
6,644
|
5,201
|
6
Earnings per share ("EPS")
Basic earnings
per share
The calculation of basic EPS has
been based on the following profit attributable to ordinary
shareholders and weighted-average number of ordinary and preference
shares outstanding. Preference shares have been included in
EPS as they rank pari-passu with ordinary shares in respect of
dividend and voting rights.
|
Six-months
ended
31-Dec-23
Unaudited
|
Six-months
ended
31-Dec-22
Unaudited
|
|
$000
|
$000
|
Profit attributable to ordinary
shareholders
|
52,518
|
581
|
|
|
|
Weighted-average number of ordinary
shares
|
704,359,305
|
715,550,399
|
Effect of treasury shares
|
(63,305,900)
|
(46,885,424)
|
Weighted-average number of shares for calculating basic
earnings per share at period end
|
641,053,405
|
668,664,975
|
Add dilutive effect of share-based
payment plans
|
11,004,585
|
24,613,273
|
Weighted-average number of shares for calculating diluted
earnings per share at period end
|
652,057,990
|
693,278,248
|
|
|
|
Basic earnings per share
|
$0.08
|
$0.00
|
Diluted earnings per share
|
$0.08
|
$0.00
|
7 Share
capital and share premium
|
Number of ordinary shares of
£0.01 each
|
Number of preference shares
of £1 each
|
Number of deferred shares of
£0.01 each
|
Total number of
shares
|
Share capital
$000
|
Share premium
$000
|
Share capital redemption
reserve
$000
|
At
1-Jul-22 - Audited
|
701,785,353
|
50,000
|
120,063
|
701,955,416
|
9,812
|
16,117
|
-
|
Shares issued in the
period
|
17,920,294
|
-
|
-
|
17,920,294
|
218
|
-
|
-
|
At
31-Dec-22 - Unaudited
|
719,705,647
|
50,000
|
120,063
|
719,875,710
|
10,030
|
16,117
|
-
|
Share issued in the year
|
329,945
|
-
|
-
|
329,945
|
4
|
191
|
-
|
Preference and deferred shares
cancellation
|
-
|
(50,000)
|
(120,063)
|
(170,063)
|
(71)
|
-
|
71
|
Ordinary shares
cancellation
|
(13,280,100)
|
-
|
-
|
(13,280,100)
|
(184)
|
-
|
184
|
At
30-Jun-23 - Audited
|
706,755,492
|
-
|
-
|
706,755,492
|
9,779
|
16,308
|
255
|
Ordinary shares
cancellation
|
(3,087,576)
|
-
|
-
|
(3,087,576)
|
(43)
|
-
|
43
|
At
31-Dec-23 - Unaudited
|
703,667,916
|
-
|
-
|
703,667,916
|
9,736
|
16,308
|
298
|
Shares
issued
During the periods certain employees have
exercised their options (see Note 8 for details on share-based
payment transactions). These have been satisfied through either the
issuance of new shares or following the share buyback programme
from newly held Treasury shares. This is only where the Darktrace
Employee Benefit Trust (see below) could not satisfy the request
for legal reasons.
Treasury
shares
FY 2023 Share Buyback Programme
and Cancellation
On 1 February 2023, Darktrace commenced a
share buyback programme of up to 35 million of its ordinary shares
to be completed no later than 31 October 2023. The maximum amount
allocated to the Programme was £75.0 million.
The purpose of the Programme was to reduce
Darktrace's issued share capital and the majority of purchased
shares have subsequently been cancelled. As at 31 December 2023
18,349,541 shares have been bought back and 16,367,676 have been
cancelled. At cancellation a capital redemption reserve equal to
the nominal amount of ordinary shares cancelled is created. The
shares were acquired at an average price of £3.27 ($4.12) per
share, with prices ranging from £2.84 ($3.61) to £3.50 ($4.27). The
total cost of $2.3 million, including transaction costs, was
deducted from equity. The shares not cancelled were held in
treasury to satisfy future employee equity grants.
At 31 December 2023 the company holds
3,405,136 shares in treasury (30 June 2023: 3,621,634; 31 December
2022: 1,490,066).
The Directors have determined that they
control a company called Darktrace Employee Benefit Trust ('EBT'),
even though Darktrace plc owns 0% of the issued capital of this
entity. Darktrace Employee Benefit Trust holds shares of Darktrace
plc for the purpose of fulfilling the grants made under stock
option plans in place prior to the IPO. Those shares are treated as
treasury shares in the consolidated financial
statements.
EBT Market Purchase
Programme
During the period Equiniti Trust (Jersey)
Limited, as Trustee of the Darktrace Employee Benefit Trust
('EBT'), completed market purchases of ordinary shares of £0.01
each in the Company. The November 2023 EBT Market Purchase
Programme completed on 20 December 2023 with the purchase of
6,977,239 shares for a total aggregate consideration of £25.0
million. Shares purchased under the November 2023 EBT Market
Programme will be used to satisfy existing, planned and anticipated
options and awards under Darktrace's employee share schemes, or as
otherwise permissible within the terms of the EBT trust deed. The
shares were acquired at an average price of £3.56 ($4.32) per
share, with prices ranging from £3.42 ($4.15) to £3.73
($4.72).
At 31 December 2023 the EBT holds 60,979,791
shares (30 June 2023: 63,121,031; 31 December 2022:
45,694,709).
8
Share-based payments
Share-based payment (SBP) charges
have been made in the consolidated unaudited interim statement of
comprehensive income within the following functional
areas.
|
Six-months
ended
31-Dec-23
|
Six-months
ended
31-Dec-22
|
|
Unaudited
|
Unaudited
|
|
$000
|
$000
|
Cost of sales
|
1,363
|
-
|
Sales and marketing
|
12,943
|
10,404
|
Research and development
|
3,084
|
4,650
|
General and
administrative
|
5,307
|
12,616
|
Total share-based payment expense
|
22,697
|
27,670
|
In 1H FY 2024 Darktrace concluded that the
share-based payment expense together with the employer related tax
charges should be proportionately attributed to Cost of sales for
those functions where an attributed to Cost of sales is made for
labour related costs. Darktrace believes this change better
represents the true cost of a sale to the business, however it has
not applied this change retrospectively due to the impact of this
reclassification being immaterial on the prior period ($1.8
million).
G&A SBP expense includes $1.2 million (31
December 22: $3.2 million) related to shares granted in connection
with the acquisition of Cybersprint, treated as remuneration
under IFRS 2 - Share-based payments.
During the period $0.2 million (31 December 22: $0.4 million) of
the SBP expense has been capitalised as intangible
assets.
SBP are calculated in accordance
with IFRS 2 - Share-based payments. The Company has used a
Black-Scholes valuation model to value the options granted up to
the IPO and a Monte Carlo Model for the awards granted at and after
IPO. Where an option scheme has no market-based performance
conditions attached to the award, a Black-Scholes model is
typically appropriate.
Option schemes in place before IPO
Movements in the number of share
options outstanding and their related weighted average exercise
prices ("WAEP") are as follows:
|
WAEP
|
Six-months
ended
31-Dec-23
Options
|
WAEP
|
Six-months
ended
31-Dec-22
Options
|
|
$
|
Number
|
$
|
Number
|
Outstanding at 1 July -
Audited
|
2.23
|
28,641,281
|
1.94
|
38,886,044
|
Lapsed
|
0.01
|
(1,000)
|
4.95
|
(104,948)
|
Exercised
|
1.27
|
(7,043,952)
|
0.95
|
(7,916,311)
|
Outstanding at 31 Dec - Unaudited
|
2.54
|
21,596,329
|
2.16
|
30,864,785
|
Exercisable at 31 Dec - Unaudited
|
3.20
|
20,660,913
|
2.15
|
27,543,951
|
The table below presents the
weighted average remaining contractual life ('WACL') and the price
range for the options outstanding at each period end:
Range of exercise prices
|
WACL
|
31-Dec-23
Unaudited
Options
number
|
WACL
|
30-Jun-23
Audited Options
number
|
WACL
|
31-Dec-22
Unaudited
Options
number
|
$0.00 - $0.23 (£0.00 -
£0.18)
|
1.13
|
4,909,103
|
1.40
|
7,577,970
|
1.90
|
8,503,556
|
$0.41 - $0.67 (£0.32 -
£0.53)
|
2.68
|
1,310,561
|
3.19
|
2,647,949
|
3.68
|
2,995,449
|
$1.37- $1.45 (£1.07 -
£1.13)
|
3.94
|
1,468,985
|
4.45
|
1,703,785
|
4.94
|
1,993,785
|
$2.09 - $2.21 (£1.61 -
£1.70)
|
4.39
|
1,292,210
|
4.89
|
2,059,364
|
5.39
|
2,111,031
|
$2.76 - $2.87 (£2.06 -
£2.14)
|
5.47
|
6,972,214
|
5.98
|
8,818,333
|
6.47
|
9,373,958
|
$5.20 (£3.73)
|
7.21
|
5,643,256
|
7.72
|
5,833,880
|
8.21
|
5,887,006
|
|
5.29
|
21,596,329
|
5.72
|
28,641,281
|
6.22
|
30,864,785
|
Share awards
outstanding
|
Six-months
ended
31-Dec-23
Awards
number
|
Six-months
ended
31-Dec-22
Awards
number
|
Outstanding at 1 July -
Audited
|
16,954,694
|
23,903,647
|
Granted
|
13,850,736
|
7,506,525
|
Lapsed
|
(729,257)
|
(720,110)
|
Exercised
|
(1,424,873)
|
(19,033,298)
|
Outstanding at 31 December - Unaudited
|
28,651,300
|
11,656,764
|
Exercisable at 31 December - Unaudited
|
196,402
|
258,534
|
Awards
granted during the period
The fair value of share-based payments has
been calculated using the Monte Carlo option pricing model. Monte
Carlo models are used to simulate a distribution of TSRs/share
prices. The model utilises random number generation with the
distribution determined by volatility, risk free rate and expected
life.
The Performance Awards carry market-based
vesting criteria which must be incorporated into the valuation.
Vesting is dependent upon the Company's TSR performance ranked
against the constituents of the FTSE 350 (ex. investment trusts)
('FTSE Index'). TSR is defined as the change in Net Return Index
for a company over a relevant period. The Net Return Index is equal
to the index that reflects movements in share price over a period,
plus dividends which are assumed to be reinvested on a net basis in
shares on the ex-dividend date.
TSR is calculated over the 'Performance
Period' using the following formula: (TSR2-TSR1)/TSR1.
· TSR1
is the Net Return Index at admission date.
· TSR 2
is the average Net Return Index over each weekday during the three
months period ending on the last day of the TSR performance
period.
Up to 80% of the Awards will vest in
accordance with the conditions of the TSR Tranche and up to 20% in
accordance with the conditions of the ARR Tranche.
The Company's Annualised recurring revenue
(ARR) growth is measured between the basis year (year ended 30 June
rolling) and the year ending on the performance period end
date.
A correlation coefficient is included to model
the way in which the price of a listed company's stock tends to
move in relation to the stock of other listed companies. Expected
volatility was determined based on the historic volatility of
comparable companies. The expected life is the expected period from
grant to exercise based on Management's best estimate.
The following assumptions were used in the
valuation of the awards issued in the current period:
|
Six-months
ended
31-Dec-23
Unaudited
|
Six-months
ended
31-Dec-22
Unaudited
|
|
Time based
awards
|
Performance
awards
|
Time based
awards
|
Performance
awards
|
Grant dates
|
19/07/23 - 09/11/23
|
19/07/23 - 09/11/23
|
21/09/22 - 21/12/22
|
21/09/22 - 21/12/22
|
Share price at grant date
|
£3.53
($4.28) - £3.94 ($5.00)
|
£3.53
($4.28) - £3.94 ($5.00)
|
£2.71
($3.28) - £3.69 ($4.25)
|
£2.71
($3.28) - £3.69 ($4.25)
|
Exercise price
|
-
|
-
|
-
|
-
|
Fair value per option
|
£3.53
($4.28) - £3.94 ($5.00)
|
£2.30
($2.79) - £3.94 ($5.00)
|
£2.71
($3.28) - £3.69 ($4.25)
|
£2.71
($3.28) - £3.69 ($4.25)
|
Expected life in years
|
N/A
|
2.73 -
3.03
|
N/A
|
1.78 -
3.00
|
Expected volatility
|
N/A
|
55%
|
N/A
|
50%
|
Risk free interest rate
|
N/A
|
4.30% -
4.56%
|
N/A
|
3.07% -
3.94%
|
Cancellation rate
|
N/A
|
10%
|
N/A
|
10%
|
Dividend yield
|
N/A
|
0%
|
N/A
|
0%
|
Correlation
|
N/A
|
20%
|
N/A
|
25%
|
Number of awards
|
9,867,980
|
3,982,756
|
4,063,215
|
3,443,310
|
Time-based awards vest according
to time only. There is no strike price, no market-based vesting
criteria and no expectation of dividends. The fair value of the
time-based awards will simply be the value of the underlying equity
at the time they were granted.
9
Capital management policies and procedures
The Group's objectives when
managing capital are to:
• safeguard the ability to continue as a going concern, to
provide adequate returns for shareholders, and
• maintain an optimal capital structure to reduce the cost of
capital.
In order to maintain or adjust the
capital structure, the Group may issue new shares or sell assets to
reduce debt. The Group monitors capital based on the carrying
amount of the equity less cash and cash equivalents as presented on
the face of the statement of financial position.
|
31-Dec-23
Unaudited
|
30-Jun-23
Audited
|
31-Dec-22
Unaudited
|
|
$000
|
$000
|
$000
|
|
Capital
|
|
|
|
|
Total equity
|
302,483
|
263,513
|
304,192
|
|
Less cash and cash equivalents
|
(383,150)
|
(356,986)
|
(374,915)
|
|
Total
|
(80,667)
|
(93,473)
|
(70,723)
|
|
|
|
|
|
|
Overall
financing
|
|
|
|
|
Total equity
|
302,483
|
263,513
|
304,192
|
|
Plus leasing liabilities, borrowings and other
financing liabilities
|
(60,151)
|
(57,608)
|
(64,364)
|
|
Total
|
242,332
|
205,905
|
239,828
|
|
|
|
|
|
|
| |
10
Capitalised commission
Commission costs are all recognised as S&M
costs. The Group pays commissions to sales staff and to referral
partners. IFRS 15 requires that certain costs incurred in both
obtaining and fulfilling customer contracts be deferred on the
statement of financial position where recoverable and amortised
over the period that an entity expects to benefit from the customer
relationship. The only significant cost falling within the remit of
IFRS 15 is the portion of commission costs classified as a cost of
contract acquisition.
Prior to 1 July 2023, depending on their role,
sales staff were eligible to receive either the first 50% or 100%
of commission at the point of contract signing, which was deemed to
meet the criteria of being incurred solely to acquire the contract.
These transaction related commission costs, including related
social security and similar contributions, were therefore
capitalised and amortised over the customer contract term, with the
amortisation being recognised as S&M costs. For the majority of
sales staff, 50% of commission was eligible for payment at the
point of contract signing, with the remaining 50% of commission
eligible for payment on either the earlier of the full contract
value being paid, or, most frequently, after one year, as these
commissions had additional service and performance requirements.
Therefore, this portion of the commission was not eligible to be
capitalised under IFRS 15. Instead, the commission and associated
social security costs accrue based on the expected period between
the sale and payment. The accrual is released when the commission
is paid or earlier if commission is recouped due to the customer
defaulting on payments, or salesperson ceases to be employed prior
to the commission becoming payable. Commissions paid to referral
partners were fully capitalised and amortised to S&M costs over
the life of the related contracts.
On 1 July 2023, as part of changes to its GTM
compensation structures, Darktrace transitioned to paying 100% of
all future sales commissions upfront. This change was made to align
Darktrace's compensation structures to market practice, better
supporting Darktrace's ability to hire and retain key experienced
talent. As noted above, prior to FY 2024, approximately 50% of
sales commissions were paid at signing with the remaining 50% being
paid upon the earlier of the full contract value being paid, or,
most frequently, after one year. As a result of the change in July
2023, Darktrace is required, under IFRS 15, to capitalise
substantially all new sales commissions for FY 2024 onwards, with
substantially all commissions deemed to meet the criteria of being
incurred solely to acquire the contract. Together with related
social security and similar contributions, commissions are
therefore capitalised and amortised over the customer contract
term, with the amortisation being recognised as a S&M cost.
Sales staff commission is therefore no longer accrued based on the
expected service period between the sale and the payment going
forward.
|
31-Dec-23
|
30-June-23
|
31-Dec-22
|
|
Unaudited
|
Audited
|
Unaudited
|
By
Geographic market
|
$000
|
$000
|
$000
|
USA
|
27,673
|
23,303
|
9,621
|
United Kingdom
|
10,688
|
10,933
|
18,852
|
Europe
|
25,496
|
23,742
|
18,616
|
Rest of World
|
21,135
|
18,675
|
16,483
|
|
84,992
|
76,653
|
63,572
|
Current
|
43,165
|
34,471
|
27,971
|
Non-current
|
41,827
|
42,182
|
35,601
|
|
84,992
|
76,653
|
63,572
|
Amortisation in the
period
|
20,616
|
32,471
|
14,502
|
Impairment in the period
|
1,665
|
1,555
|
878
|
11 Trade and
other receivables
|
31-Dec-23
Unaudited
|
30-Jun-23
Audited
|
31-Dec-22
Unaudited
|
|
$000
|
$000
|
$000
|
Trade receivables
|
95,557
|
93,744
|
69,287
|
Prepayments
|
17,751
|
22,961
|
19,046
|
Accrued income
|
4,362
|
3,445
|
4,692
|
Deposits
|
1,455
|
1,961
|
5,064
|
Other receivables
|
1,977
|
1,484
|
284
|
Total trade and other receivables
|
121,102
|
123,595
|
98,373
|
Trade receivables are presented net of the
expected credit loss provision of
$4.1 million (30 June 2023: $5.2 million, 31 December 2022:
$3.6 million). Deposits primarily relate to cash
deposits in connection to leases for the Group's
offices.
The decrease in prepayments is due primarily
to the unwinding of the equity-based bonus pre-payment arising from
the Cybersprint purchase.
12
Provisions
|
|
|
31-Dec-23
|
|
|
30-Jun-23
|
|
|
31-Dec-22
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
Unaudited
|
|
SBP tax
|
Other
|
Total
provision
|
SBP tax
|
Other
|
Total
provision
|
SBP tax
|
Other
|
Total
provision
|
|
$000
|
$000
|
$000
|
$000
|
$000
|
$000
|
$000
|
$000
|
$000
|
Opening provision
|
6,156
|
2,512
|
8,668
|
15,192
|
2,100
|
17,292
|
15,192
|
2,100
|
17,292
|
Accrual for the period
|
1,980
|
-
|
1,980
|
4,315
|
(316)
|
3,999
|
3,145
|
1,859
|
5,004
|
Reclassification from lease
liability
|
-
|
-
|
-
|
-
|
1,528
|
1,528
|
-
|
-
|
-
|
Utilisation
|
(2,117)
|
(955)
|
(3,072)
|
(13,351)
|
(800)
|
(14,151)
|
(12,831)
|
(660)
|
(13,491)
|
Closing provision
|
6,019
|
1,557
|
7,576
|
6,156
|
2,512
|
8,668
|
5,506
|
3,299
|
8,805
|
|
|
|
|
|
|
|
|
|
|
Current
|
5,425
|
985
|
6,410
|
5,943
|
984
|
6,927
|
4,305
|
3,299
|
7,604
|
Non-current
|
594
|
572
|
1,166
|
213
|
1,528
|
1,741
|
1,201
|
-
|
1,201
|
Total provision
|
6,019
|
1,557
|
7,576
|
6,156
|
2,512
|
8,668
|
5,506
|
3,299
|
8,505
|
|
|
|
|
|
|
|
|
|
| |
The Group accounts for a provision on tax
payments when the employer has primary liability to pay for social
security-type contribution on share-based payments at the time of
exercise.
Other provision includes:
· $1.0
million (30 June 2023: $1.0 million, 31 December 2022: $2.3
million) estimated of corporate tax charge and expected interests
and penalties related to permanent establishments in countries
where Darktrace plc does not currently have a subsidiary and is the
result of the assessment of the potential historical impact arising
as a consequence of Darktrace's continuous international expansion
into new jurisdictions.
· $0.6m
provision for dilapidations.
13 Intangible
assets
Software consists of capitalised development
costs, being internally generated intangible assets of $2.3 million
(30 June 2023: $2.2 million; 31 December 22: $3.6 million), and
acquired software from acquisition of $5.9 million (30 June 23:
$6.6 million; 31 December 22: $7.5 million) with a remaining useful
life of 3.2 years. The Group has not identified any impairments to
the intangibles.
|
Customer
relationships
|
Software
|
Software
under development
|
Total
|
|
$000
|
$000
|
$000
|
$000
|
Cost
|
|
|
|
|
1-Jul-22 Audited
|
869
|
25,535
|
1,517
|
27,921
|
Additions
|
-
|
-
|
1,142
|
1,142
|
Reclassification
|
-
|
1,034
|
(1,034)
|
-
|
31-Dec-22 Unaudited
|
869
|
26,569
|
1,625
|
29,063
|
Amortisation
|
|
|
|
|
1-Jul-22 Audited
|
(26)
|
(12,246)
|
-
|
(12,272)
|
Charge for the period
|
(36)
|
(3,300)
|
-
|
(3,336)
|
31-Dec-22 Unaudited
|
(62)
|
(15,546)
|
-
|
(15,608)
|
NBV* at 31-Dec-22 Unaudited
|
807
|
11,023
|
1,625
|
13,455
|
Cost
|
|
|
|
|
1-Jan-23 Unaudited
|
869
|
26,569
|
1,625
|
29,063
|
Additions
|
-
|
-
|
1,377
|
1,377
|
Reclassification
|
-
|
48
|
(48)
|
-
|
30-Jun-23 Audited
|
869
|
26,617
|
2,954
|
30,440
|
Amortisation
|
|
|
|
|
1-Jan-23 Unaudited
|
(62)
|
(15,546)
|
-
|
(15,608)
|
Charge for the period
|
(36)
|
(2,225)
|
-
|
(2,261)
|
30-Jun-23 Audited
|
(98)
|
(17,771)
|
-
|
(17,869)
|
NBV* at 30-Jun-23 Audited
|
771
|
8,846
|
2,954
|
12,571
|
Cost
|
|
|
|
|
1-Jul-23 Audited
|
869
|
26,617
|
2,954
|
30,440
|
Additions
|
-
|
-
|
1,217
|
1,217
|
Reclassification
|
-
|
1,472
|
(1,472)
|
-
|
31-Dec-23 Unaudited
|
869
|
28,089
|
2,699
|
31,657
|
Amortisation
|
|
|
|
|
1-Jul-23 Audited
|
(98)
|
(17,771)
|
-
|
(17,869)
|
Charge for the period
|
(36)
|
(2,098)
|
-
|
(2,134)
|
31-Dec-23 Unaudited
|
(134)
|
(19,869)
|
-
|
(20,003)
|
NBV* at 31-Dec-23 Unaudited
|
735
|
8,220
|
2,699
|
11,654
|
*Net book value
All amortisation of intangible assets is
charged to the consolidated unaudited interim statement of
comprehensive income and is included within research and
development costs.
Financial
risk management
14 Cash and
cash equivalents
|
31-Dec-23
|
30-Jun-23
|
31-Dec-22
|
|
Unaudited
|
Audited
|
Unaudited
|
|
$000
|
$000
|
$000
|
Cash at bank and in hand
|
99,724
|
132,396
|
204,230
|
Deposits at call
|
283,426
|
224,590
|
170,685
|
Cash and cash equivalents
|
383,150
|
356,986
|
374,915
|
Deposits at call are presented as cash
equivalents if they have a maturity of three months or less from
the date of acquisition and are repayable with 24 hours' notice
with no loss of interest.
15 Risk
management objectives and
policies
The Group's financial risk
management is controlled by a central treasury department ("Group
treasury") under policies approved by the Board of Directors. Group
treasury identifies and evaluates financial risks in close
co-operation with the Group's CFO and other Executive Directors and
Senior Managers. The Board authorises written principles for
overall risk management, as well as policies covering specific
areas, such as foreign exchange risk, interest rate risk, credit
risk, use of derivative and non-derivative financial instruments,
and investment of excess liquidity.
Market
risk
Foreign exchange risk
The table below details the Group's exposure
to foreign currency risk, in currencies different from the Group's
functional currency, for periods in which the functional currency
was USD:
|
AUD
|
CAD
|
EUR
|
GBP
|
JPY
|
Other
currencies
|
Total
|
|
$000
|
$000
|
$000
|
$000
|
$000
|
$000
|
$000
|
|
|
|
|
|
|
|
|
Trade receivable
|
1,967
|
4,849
|
24,157
|
15,525
|
313
|
1,431
|
48,242
|
Deposits
|
152
|
161
|
301
|
5,166
|
59
|
245
|
6,084
|
Cash and cash equivalents
|
3,957
|
3,469
|
11,868
|
24,561
|
1,166
|
8,326
|
53,347
|
Trade payables
|
(60)
|
(42)
|
(341)
|
(3,394)
|
(13)
|
(186)
|
(4,036)
|
31-Dec-23 - Unaudited
|
6,016
|
8,437
|
35,985
|
41,858
|
1,525
|
9,816
|
103,637
|
|
|
|
|
|
|
|
|
Trade receivable
|
1,840
|
2,756
|
18,211
|
11,614
|
17
|
962
|
35,400
|
Deposits
|
257
|
134
|
245
|
6,377
|
63
|
622
|
7,698
|
Cash and cash equivalents
|
1,226
|
1,584
|
6,483
|
40,471
|
164
|
1,698
|
51,626
|
Trade payables
|
(204)
|
(87)
|
(579)
|
(2,313)
|
(119)
|
(241)
|
(3,543)
|
31-Dec-22 - Unaudited
|
3,119
|
4,387
|
24,360
|
56,149
|
125
|
3,041
|
91,181
|
Aggregate net foreign exchange
losses recognised in the periods:
|
Six-months
ended
31-Dec-23
|
Six-months
ended
31-Dec-22
|
|
Unaudited
|
Unaudited
|
|
$000
|
$000
|
Net foreign exchange loss
|
(12)
|
(3,618)
|
As shown in the table above, the
Group is primarily exposed to changes in USD/GBP and USD/EUR
exchange rates. The sensitivity of profit or loss to changes in the
exchange rates arises mainly from USD or GBP denominated financial
assets and liabilities.
|
Six-months
ended
31-Dec-23
|
Six-months
ended
31-Dec-22
|
|
Unaudited
|
Unaudited
|
|
$000
|
$000
|
USD/EUR exchange +/- 10%
|
(3,271) /
3,998
|
(2,215) /
2,707
|
USD/GBP exchange +/- 10%
|
(3,805) /
4,651
|
(5,110) /
6,246
|
The Group operates a natural
hedging strategy where possible to mitigate its foreign exchange
risk.
Price risk
The Group has no significant
exposure to equity securities price risk.
Credit
risk
Credit risk arises from cash and
cash equivalents, contractual cash flows of debt investments
carried at amortised cost deposits with banks and financial
institutions, as well as credit exposures to customers, including
outstanding receivables.
Credit risk is managed on a Group
basis. Partners, through which Darktrace sells to end users, are
independently rated through credit agencies, if there is no
independent rating an internal review is carried out. The Credit
manager assesses the credit quality of the partner, taking into
account its financial position, as well as experience for customers
and partners in the same region. There are no significant
concentrations of credit risk, whether through exposure to
individual customers or partners, specific industry sectors or
regions.
The Group's main financial assets
that are subject to the expected credit loss model are trade
receivables from the sale of software products and, to a lesser
extent, related services. While cash and cash equivalents are also
subject to the impairment requirements of IFRS 9, the identified
impairment loss was immaterial.
The Board approved the Treasury
policy that governs the credit limits for deposits with banks and
financial institutions. Credit ratings and limits are reviewed on
monthly basis by Group Treasury.
Trade receivables are fully
provided where there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery
include, amongst others, the failure of a debtor to engage in a
repayment plan with the Group, and a failure to make contractual
payments for a period of greater than six months past due. The
general credit loss provision will begin to be provided from thirty
days past due based on the historic default rates adjusted for
regional performance. Impairment losses on trade receivables are
presented as net impairment losses within operating profit.
Subsequent recoveries of amounts previously written off are
credited against the same line item.
Liquidity
risk
Prudent liquidity risk management
involves maintaining sufficient cash and marketable securities, and
the availability of funding through an adequate amount of committed
credit facilities, to meet obligations when due and to close out
market positions. Due to the dynamic nature of the underlying
businesses, Group treasury maintains flexibility in funding by
maintaining both liquid cash and availability under committed
credit lines.
Maturity of financial
liabilities
The table below presents the
Group's financial liabilities by relevant maturity grouping, based
on their contractual maturities. The amounts disclosed in the table
are the contractual undiscounted cash flows. Balances due within 12
months equal their carrying balances as the impact of discounting
is not significant.
|
Less than 12 months
|
Between 1 - 2 years
|
Between 2 - 5 years
|
Over 5 years
|
Carrying amount
liabilities
|
|
$000
|
$000
|
$000
|
$000
|
$000
|
Trade payables
|
7,910
|
-
|
-
|
-
|
7,910
|
Accruals
|
11,426
|
-
|
-
|
-
|
11,426
|
Lease liabilities
|
14,431
|
13,176
|
29,399
|
14,957
|
71,963
|
31-Dec-23
Unaudited
|
33,767
|
13,176
|
29,399
|
14,957
|
91,299
|
|
|
|
|
|
|
Trade payables
|
14,965
|
-
|
-
|
-
|
14,965
|
Accruals
|
21,203
|
-
|
-
|
-
|
21,203
|
Lease liabilities
|
7,951
|
13,852
|
33,019
|
15,004
|
69,826
|
30-Jun-23
Audited
|
44,119
|
13,852
|
33,019
|
15,004
|
105,994
|
|
|
|
|
|
|
Trade payables
|
9,670
|
-
|
-
|
-
|
9,670
|
Accruals
|
15,089
|
-
|
-
|
-
|
15,089
|
Lease liabilities
|
9,354
|
13,422
|
35,127
|
18,687
|
76,590
|
31-Dec-22
Unaudited
|
34,113
|
13,422
|
35,127
|
18,687
|
101,349
|
16 Summary of
financial assets and liabilities by category
The carrying amounts of the assets
and liabilities as recognised at the statement of financial
position date of the years under review may also be categorised as
follows:
|
31-Dec-23
|
30-Jun-23
|
31-Dec-22
|
|
Unaudited
|
Audited
|
Unaudited
|
|
$000
|
$000
|
$000
|
Financial
assets at amortised cost
|
|
|
|
Deposits
|
7,772
|
10,195
|
5,728
|
Trade and other receivables
|
99,919
|
97,189
|
73,979
|
Cash and cash equivalents
|
383,150
|
356,986
|
374,915
|
Total financial
assets at amortised cost
|
490,841
|
464,370
|
454,622
|
|
|
|
|
Financial
liabilities at amortised cost
|
|
|
|
Trade payables
|
(7,910)
|
(14,953)
|
(9,670)
|
Accruals
|
(11,426)
|
(21,203)
|
(15,089)
|
Lease liabilities
|
(60,151)
|
(57,608)
|
(64,364)
|
Total financial
liabilities at amortised cost
|
(79,487)
|
(93,764)
|
(89,123)
|
The Group entered a new unsecured
multicurrency revolving credit facility agreement ("RCF") of $80.0
million on 12 December 2023. The RCF has an uncommitted accordion
feature allowing it to be increased in size by a further $50.0
million. The new RCF is for an initial three-year term, with an
option to extend the term by two further one-year periods, subject
to lender consent.
The new RCF is supported by
Citibank (N.A. London Branch), HSBC UK Bank PLC and
Barclays Bank Plc and replaces Darktrace's
previous $25.0 million secured multicurrency revolving credit
facility. No drawdowns have been made as of 31 December
2023.
Under the terms of the new RCF the
Group must report the following financial covenants.
· Interest Cover (ratio of Adjusted Consolidated EBITDA to
Consolidated Net Finance Charges) in respect of any Relevant Period
shall not be less than 4.00:1.
· Debt
Cover (ratio of Consolidated Total Net Debt to Adjusted
Consolidated EBITDA) in respect of any Relevant Period shall not
exceed 3.00:1.
The Group met both financial covenants as at
31 December 2023.
17 Tax
expense and deferred tax assets
Tax charged within the six-months ended 31
December 2023 has been calculated by applying the effective rates
of tax which are expected to apply to the Group for the year ending
30 June 2024 using rates substantively enacted by 31 December 2023
as required by IAS 34 'Interim Financial Reporting'. Where
appropriate, the Group has estimated and applied separate annual
effective income tax rates for each jurisdiction and category of
income. This results in a consolidated tax credit of $2.1
million representing an expected ETR of 25.5% once adjusted for
loss utilisation and ad hoc items.
At 31 December 2023, the Group has significant
tax losses in the UK available for offset against future taxable
profits. The latest Management forecasts have shown an uplift from
those used to determine deferred tax recognition as at the 30 June
2023 year-end and as such there has been a net increase to the
total deferred tax asset recognised at 31 December 2023 of $4.1
million to $24.0 million.
|
31-Dec-23
|
30-Jun-23
|
31-Dec-22
|
|
Unaudited
|
Audited
|
Unaudited
|
|
$000
|
$000
|
$000
|
Opening
|
19,849
|
1,799
|
1,041
|
|
|
|
|
(Charged)/credited through the
income statement:
|
|
|
|
|
|
|
|
Deferred tax asset movement
|
|
|
|
Movement of deferred tax asset
previously recognised
|
(7,588)
|
2,317
|
523
|
Recognition of previously
unrecognised deferred tax asset
|
12,734
|
16,437
|
-
|
|
|
|
|
Deferred tax liability movement
|
|
|
|
Movement in deferred tax liability
previously recognised
|
(1,017)
|
2,270
|
235
|
Recognition of previously
unrecognised deferred tax liability
|
-
|
(2,974)
|
-
|
|
|
|
|
Closing
|
23,978
|
19,849
|
1,799
|
The Group has not recognised a deferred tax
asset related to losses and share-based payments for approximately
$79.9 million (30 June 2023: $78.3 million) as there remains
sufficient uncertainty beyond the 2-year forecast period as to
whether the losses will be utilised in the foreseeable
future.
The tax rate applied for the
recognised and unrecognised deferred tax assets, considers 25.0%
for UK, 25.8% for Netherlands and 27.4% for US as these are the tax
rates expected to be applicable by the time the loss or temporary
difference will be unwound.
18 Related
Parties
Other than as described elsewhere in these
financial statements, there are no material related party
transactions requiring disclosure under IAS 24 'Related Party
Disclosures' except for compensation of key management personnel,
which will be disclosed in the Groups' Annual Report for the year
ended 30 June 2024.
19 Capital
commitments
The Group had no capital
commitments at 31 December 2023, 30 June 2023 or 31 December
2022.
20
Subsidiaries
Darktrace New Zealand Limited was
incorporated on 16 November 2023 and has its registered office at
Turner Hopkins, Floor 1, 1 The Strand, Takapuna, Auckland, 0622,
New Zealand. The subsidiary is 100% owned through Darktrace
Holdings Limited.
21 Post
balance sheet events
Darktrace has appointed Jill
Popelka and Paula Hansen as independent Non-Executive Directors
with effect from 1 January 2024.