Cybersecurity firm Darktrace trims outlook despite revenue bump

London  — British cybersecurity company Darktrace cut its earnings and cash guidance for the year on Wednesday after it decided to resume part of its sales commission payments, a change it said was necessary to attract talent.

The switch will result in adjusted core earnings growth of 17% to 19% for the current year, down from its previous expectation of about 22%, and 25.5% achieved in the year to end-June, it said.

The change would also reduce free cash flow this year and early in its 2025 financial year because it will be paying all new commissions, as well as the final 50% of commission on previous sales. Previously, 50% of commission was paid after 12 months.

CFO Cathy Graham said: "To align with the market and to attract better talent, we’ve decided to pay all commissions upfront, which is market practice."

She said the change was a prudent measure that aligned better with revenue recognition and cash flow and earnings recognition going forward.

Shares in Darktrace, which have fallen 28% in the past 12 months, were trading down 4% in early deals as the changes overshadowed a set of results the company termed "robust".

Analysts at Jefferies said there was "more complexity" in the release than expected, but the "more fundamental messages" of robust demand, a growing product portfolio and investment in sales pointed to improving confidence in its growth.

Darktrace CEO Poppy Gustafsson said the company had not been immune to the tougher global economic backdrop, which had caused a slowdown in new customer additions, but had continued to invest in new products, which like all Darktrace technology had AI at their core, and in its sales operation.

Darktrace reported a 31% rise in revenue to £545.4m for the year to end-June and a 52% rise in adjusted core earnings to £139.1m.

It confirmed its forecast for top-line growth of between 22% and 23.5% this year.

Reuters