Darktrace: Too much too young>
Investors’ Chronicle – Robin Hardy
Darktrace revenues and growth rates â £m Brokersâ forecasts are widely spread over the next three financial years but across the piece, losses are expected at the pre-tax level throughout this period and, broadly, losses look set to remain at close to current, adjusted levels through to 2024. In that time revenues are forecast to more than double (up 127 per cent vs 2021) to c.£450m/$560m.

For context, Gartner (a technology markets forecaster) reckons the cyber security industry produces annual revenues of $372bn and Darktrace estimates its own narrower part of this (its âaddressable marketâ) to be worth between $40bn (bottom-up) and $125bn (top-down).

Although custom numbers have risen by 33 per cent compound since 2018, the average revenue per customer has dropped by 11 per cent, despite significantly more customers buying more than one product from Darktrace (86 per cent of customer vs 27 per cent in 2018). This suggests that Darktraceâs early pricing power could already be waning.

While sales are rising, costs are also rising quickly. General expenses and R&D both doubled in the last financial year (excluding IPO related costs) while sales & marketing rose by 25 per cent. Staff costs in the premier league of the IT industry are rising sharply with in-vogue areas such as cyber security at the sharp end. Many jobs currently attract double digit percentage increases, some getting as high as 25 per cent. Staff poaching and staff churn are also unusually higher in this field.

R&D spend feels low at just 10 per cent of revenue while sales cost equal 67 per cent and general administrative costs stand at 20 per cent. This feels wrong for a business developing products in a rapidly evolving market segment and is likely to need to be expanded.
Link: https://www.investorschronicle.co.uk/education/2021/09/28/darktrace-too-much-too-young/