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(Sharecast News) - Cyber security firm Darktrace posted a slump in first-half operating profit on Wednesday and cut its free cash flow guidance, as new customer additions slowed and it was hit by a jump in employer tax charges.
In the six months to the end of December 2022, operating profit slid 91.6% to $577,000. This was primarily due to "elevated share-based payment and associated employer tax charges related to vesting of a significant block of grants made at IPO," the company said. It added that share-based payment charges are expected to normalise in the second half of this year.
Revenue was ahead 35.8% at $259,259. Darktrace said this was achieved despite a noticeable second-quarter slowdown in new customer additions due to the current macro-economic environment.
"To offset this new customer slowdown, the group leveraged its past and ongoing investments in customer success, and increased focus on larger account sales and upsells, to drive increases in both average new contract and existing customer contract ARR," it said.
Chief executive Poppy Gustafsson said: "Our business continues to deliver against a challenging macro-economic backdrop, with continued strong year-on-year revenue growth.
"Although there has been a slowdown in new customer wins, I am pleased that our investments in retaining customers and increasing the value of both new and existing contracts are paying off. Our strong cash position and ongoing cash generation means that we can continue to invest in expanding our product pipeline and evolving our go-to-market strategies."
The company also said on Wednesday that it was cutting its free cash flow guidance to 50% to 55% of adjusted EBITDA, from 60% to 65% previously. This is to reflect the accounting treatment for the net settlement of tax obligations that arose in H1 FY2023 from the vesting of certain IPO-related share awards for its two executive directors.
Darktrace shares slumped earlier this year after short-seller Quintessential Capital Management took an active short position and questioned the validity of its financial statements. In response, the company hired Ernst & Young to review its finances.
