By Paul Sandle
LONDON (Reuters) -British cybersecurity company Darktrace lowered its guidance for full-year cash flow on Wednesday due to an accounting change related to executive share awards when it listed, as it reported a 33% rise in first-half earnings.
The company said its 2023 guidance range for free cash flow would be about 50% to 55% of adjusted core earnings, down from a previous 60% to 65%. It confirmed other guidance.
That change reflected the accounting treatment for the net settlement of tax obligations from the vesting of IPO-related share awards to two executive directors, it said.
It reported revenue of $259.3 million for the six months to end-December, up 36%, underpinned by multi-year contracts and a focus on larger account sales despite a notable slowdown in new customer additions in the second quarter.
Adjusted core earnings rose 33% to $59.7 million, ahead of market expectations.
Chief Financial Officer Cathy Graham said it was a strong performance against a challenging economic backdrop.
Free cash flow would normalise after the period, she said.
Prospective customers were still reluctant to trial products, she said in an interview, continuing a trend identified in January.
But there were no surprises in January and February, she said, coming in “as we would have expected”.
Darktrace had stabilised its customer base so it was not fighting accelerating churn, she said. It signed it biggest ever contract, with a critical infrastructure provider, in the period.
Shares in Darktrace reversed early losses to trade up 0.9%.
Darktrace’s performance was questioned in January by short-seller Quintessential Capital Management, which said it was “deeply skeptical about the validity” of its financial statements.
The company, which listed in April 2021, rejected the claim, saying it was run with “the greatest integrity”.
As a sign of its confidence in its controls, it said last month it had commissioned EYE to review its finances.
Graham said EYE was working “quickly and diligently” on its report, but there was no deadline for delivery.
(Reporting by Paul Sandle; editing by James Davey and Jason Neely)
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