The Darktrace PLC (LON: DARK) share price plunged 18.6% after releasing the trading update for the first half of its 2023 financial year, which is the six months ending December 31, 2022. The company generated annual recurring revenue (ARR) of $556.3 million, representing a 36.5% improvement compared to last year.
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The cybersecurity AI company attributed its high ARR to its multi-year contract model, despite a noticeable slowdown in customer acquisition during the latter part of its second quarter. As a result, the firm added at least $71.4 million of net constant currency ARR in the first half of its fiscal year.
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The average size of contracts signed by the company rose by 9.7% across its customer base. However, the new customers added had a lower net ARR primarily because they are new to the company’s products and are still building their trust in its products.
Darktrace grew its customer base by 24.4% during H1 2023 compared to last year by adding 741 new customers to end the period with 8,178. The company expects to generate $258.0 million in revenues during the first half of its fiscal year.
The firm’s customer and ARR bases remained largely stable during the period, given the company’s multi-year investments in its customer success function. The company expects its annual customer churn rate to remain at about 6.6% and its net ARR retention rate to remain at 105%.
However, despite reporting excellent results during the just-ended six-month period, Darktarce revised its full-year forecasts citing the current challenging macroeconomic climate. The company noted that potential clients are more reluctant to run product trials.
Darktrace further noted that clients’ conversion rates in regions with historically high conversion rates had started declining due to the harsh economic and operating climate.
Therefore, the company has taken the proactive step of appointing Denise Walter as its new Chief Revenue Officer, who will be based in the United States. Denise will lead the firm’s customer acquisition efforts in the US while deepening relations with existing customers globally.
Investors were unhappy to see the company downgrade its full-year forecasts, which triggered the plunge in Darktrace’s share price.
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Darktrace share price.
The Darktrace share price plunged 18.57% to trade at 237.7p, from Tuesday’s closing price of 291.9p.
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