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Darktrace shares glow as UK cyber group lifts 2022 outlook

Randy Mancini 10 Jan 11
FILE PHOTO: A lock icon, signifying an encrypted Internet connection, is seen on an Internet Explorer browser in Paris, France
FILE PHOTO: A lock icon, signifying an encrypted Internet connection, is seen on an Internet Explorer browser in a photo illustration in Paris, France April 15, 2014. REUTERS/Mal Langsdon

January 11, 2022

By Kate Holton

LONDON (Reuters) – Britain’s Darktrace lifted its full-year revenue and margin guidance on Tuesday after it enjoyed a near 40% jump in customers using its cyber security services, boosting its shares after a recent slump.

Darktrace, which uses artificial intelligence to detect attacks and vulnerabilities inside IT networks rather than building barriers at the perimeter, listed on the stock market in April and has endured a bumpy ride.

Initially a star performer, its shares rallied more than 300% in the first four months before they fell away, hit by a negative analyst note and in November by the end of a post-flotation lock-up that allowed some investors to sell.

On Tuesday its shares soared again, up 25% after the group upgraded both its 2022 forecast for revenue and the earnings margin it can make. The stock was trading at 494 pence at 0820 GMT, almost double the 250 pence listing price.

Cathy Graham, CFO, said the group had reduced the number of customers who left the service and improved its recurring revenue retention rates. The group ended 2021 with 6,531 customers, having grown its customer base by 39.6%.

It also delivered the first module of its new Prevent product line to some customers.

“This is the next logical step in fulfilling our vision of creating a Continuous AI Loop, a virtuous circle that equips customers with a suite of technologies that strengthen and reinforce each other,” she said.

Darktrace said it now expected its 2022 annual recurring revenue to rise by between 37% and 38.5%, up from previous guidance of 34% to 36%. It sees its earnings margin at between 3% and 6%, from previous guidance of 2% to 5%.

Darktrace said it expected first-half revenue of at least $190 million, reflecting organic growth of at least 50%.

Analysts at Berenberg, which have a Buy rating on the stock, also published a customer survey showing that a majority of businesses that have trialled, used or currently use Darktrace’s products expected to spend more with them.

(Reporting by Kate Holton; editing by Guy Faulconbridge and Susan Fenton)