Darktrace’s market value has fallen to its lowest level since its IPO almost two years ago, after the British cybersecurity firm warned that the number of customers signing up for products is slowing.
The warning led to a fall in the share price of the Cambridge-based company, which is positioning itself as a potential European superpower in the US-dominated cybersecurity space but whose business model has come under criticism over the past year.
Shares in Darktrace, whose co-founder Mike Lynch continues to fight US extradition amid allegations of fraud, fell as much as 18% on Wednesday, below the 250p level at which the company debuted on the London Stock Exchange in April 2021 of the biggest fallers on the FTSE.
The company, whose £1.8 billion market cap is a far cry from heady highs of almost £7 billion months after its IPO, said it underestimated the impact of economic uncertainty on its business.
Cathy Graham, Chief Financial Officer, said: “The current macroeconomic environment is challenging new customer acquisition as prospects are reluctant to conduct product trials and in regions with historically higher conversion rates, those rates are beginning to decline. Against this backdrop of weaker trends and ongoing uncertainty, we are cautious and are revising our full-year guidance.”
Darktrace is run by Poppy Gustafsson, a former Autonomy executive who co-founded it in 2013 at the age of 30.
Analysts at Bank Berenberg pointed out that while the 421 new customers added in the three months ended December represented a 31% increase from the previous quarter, the number was nearly a quarter lower than the 556 new enrollments in the same period in 2021.
Darktrace, whose fiscal year ends June 30, said, “Late in the second quarter it became clear that the impact on new customer growth was greater than anticipated.”
The company said it’s focused on acquiring larger customers and selling existing ones, which has resulted in new customer accounts generating 17% more revenue on average than those signed in 2021 and contract renewals up 12%.
However, the slowdown has prompted Darktrace to lower full-year guidance for growth in annual recurring revenue, recurring spend by existing customers and total revenue.
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Analysts at Bank Jefferies and Berenberg said the cybersecurity sector is facing similar growth problems, with shares down 45% in value over the past year.
Graham said: “Despite expectations that growth will remain slower for the remainder of the fiscal year, we expect to emerge from this uncertain period in an even stronger position. [We will] Seize our very large market opportunity and show clients and investors that a period of economic adversity has not hampered what we believe to be our unique and sustainable value proposition.”
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