Regulatory News

Half-Year Results

RNS Number : 4556D
Darktrace PLC
03 March 2022
 

3 March 2022

Darktrace plc

 

Results for the Six-Months Ended 31st December 2021

 

Strong operating and financial performance resulting in significant growth

 

52.3% year-on-year revenue growth

39.6% year-on-year growth in customer base

Increasing expectations for FY 2022

 

 

Darktrace plc (DARK.L) (together with its subsidiaries, "Darktrace" or "the Group") a global leader in cyber security AI, today provides its results for the six months ended 31 December 2021.

Financial Performance

 

 

Six-months

ended

Six-months

ended

%

31-Dec-21

31-Dec-20

Unaudited

Unaudited

Revenue ($'000)

192,642

126,514

52.3%

Gross margin (%)

89.3%

90.2%

-0.9%

EBIT or operating profit/(loss) ($'000)

8,648

(4,881)

n/a

Net profit/(loss) ($'000)

5,917

(48,411)

n/a

EBITDA* ($'000)

34,845

14,268

144.2%

Adjusted EBITDA* ($'000)

46,702

20,797

124.6%

Cash inflow before financing activities ($'000)

43,298

16,732

158.8%

See "Alternative Performance Measures Definitions" below for the meanings of non-IFRS measures and other key performance indicators

 

·   Strong year-over-year revenue growth across all geographic markets and customer sizes.

· Scale efficiencies created by a multi-year contract model continued to drive improvement across all earnings measures.

· Operating expense growth remained below expectations largely because travel and entertainment, and return to office-related expenses, while increasing, have been doing so at a slower than planned rate. Consistent with its stated goal of expanding core research and product development capacity, however, Darktrace continued to increase its investment in R&D during the period.

· Recent growth in EBITDA and adjusted EBITDA have been higher than expected because of continuing pandemic-related suppression of key costs.  These costs are expected to return over the intermediate term, but scale efficiencies continue to support expected long-term steady state margins.

·   Increase in cash inflow before financing activities resulted from increases in all earnings measures combined with improvement in accounts receivables collections rates.

 

Operating Performance

 

 

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

%

 

Constant currency ARR at 31 Dec ($'000)

427,267

293,716

45.5%

Net constant currency ARR Added ($'000)

69,925

47,028

48.7%

One year constant currency ARR gross churn at 31 Dec

6.4%

8.0%

n/a

Net constant currency ARR retention rate at 31 Dec (%)

105.1%

99.9%

n/a

Number of customers at 31 Dec

6,531

4,677

39.6%

Remaining US$ performance obligations (RPO) at 31 Dec ($'000)

876,751

612,313

43.2%

See "Alternative Performance Measures Definitions" below for the meanings of non-IFRS measures and other key performance indicators

 

 

· Strong growth in constant currency ARR and net constant currency ARR added driven primarily by the year-over-year addition of 1,854 net new customers, 926 of which were added in the first six months of FY 2022. 

· Also contributing to ARR growth was a 4.2% year-over-year increase in average contract ARR. This increase was driven by both new and existing customer activity, with the average ARR of new contracts increasing by more than 15%, and average ARR uplift per existing customer more than tripling, compared to the prior year period.

· One-year constant currency gross ARR churn improved year-over-year by 1.6 percentage points, driven by continuing stabilisation in the customer base following early pandemic effects and the impact of consistent customer success efforts.

·  The combined impact of a reduction in one-year gross ARR churn and a continued focus on upsell activities resulted in a 5.2 percentage point year-over-year improvement in net ARR retention rate.

· RPO, representing contracted revenue backlog, continues to expand as Darktrace enters and expands multi-year contracts with new and existing customers.  A significant portion of Darktrace's revenue is already contracted and in RPO at the beginning of each period, providing significant revenue visibility.

 

 

FY 2022 Outlook (Unaudited)

Darktrace is increasing its expectations for FY 2022 from those presented in its 1H FY 2022 trading update on 11 January 2022. The Group now expects a year-over-year increase in constant currency ARR of between 38.5% and 40% (previously 37% to 38.5%), implying a year-over-year increase in net constant currency ARR added of between 24% and 29% (previously 19% to 24%). Driven in part by these increased ARR expectations, the Group now expects year-over-year revenue growth of between 44.5% and 46.5% (previously 42% to 44%). This increase is also partly driven by lower than previously predicted forecasts for foreign exchange headwinds, which accelerates the conversion of constant currency ARR to US dollar denominated revenue.

 

Following the recent acquisition of Cybersprint B.V., Darktrace has incorporated the expected impact of this transaction into its guidance. Given the size of the acquired company and timing of the acquisition, the business combination has no material impact on the Group's FY 2022 revenue expectations. However, approximately 1 percentage point of the increase in expected year-over-year ARR growth, and approximately 3.5 percentage points of the increase in expected net ARR added, are related to the acquisition of Cybersprint. The expected dollar value of the organic Net ARR to be added in 2H FY 2022 should be distributed according to the Group's normal quarterly seasonality patterns, including typically softer third-quarter sales within the second half of the financial year.

 

The Group continues to balance strong sales momentum trends with potential temporary sales productivity impacts that may occur as it evolves ways to expand and optimise its salesforce structure. These efforts, which are intended to support anticipated growth and continued scaling of its business, began in the second quarter of FY 2022 and are expected to continue through 2H FY 2022. Additionally, the Group continues to forecast an impact from having a salesforce with lower average tenure as it works to recover from pandemic-related salesforce hiring delays.

 

Consistent with prior expectations, Darktrace continues to forecast that, relative to 1H FY 2022, the Group's cost structure will increase as a percent of revenue in 2H FY 2022. This increase is largely due to the extrapolation of trends being seen related to the return of travel and entertainment expense. The Group is also incorporating into its expectations, the impact of recent and ongoing hiring, increases in facilities costs as employees return to the office and, in key locations, the Group moving to larger premises. While the return of these costs may temporarily flatten margin growth in the short to intermediate term, scale efficiencies continue to support expected long-term steady state margins.

 

Furthermore, Darktrace continues to expect higher-than-typical share-based payment and associated employer tax charges resulting from making the transition to listed company equity compensation plan structures, expected to continue through FY 2023. Incorporating its first half results and plans for the remainder of the year, Darktrace now expects an adjusted EBITDA margin for the year of between 10% and 12% (previously 3% to 6%). Given the size of Cybersprint, and timing of the acquisition, the business combination should not have a material impact on the Group's FY 2022 adjusted EBITDA expectations.

 

 

Analyst and Investor Webcast

Management will hold an analyst and investor webcast to review its 1H FY2022 results on 3 March 2022 at 13:00 GMT / 08:00 ET.

https://webcasting.brrmedia.co.uk/broadcast/621cfb9625681c6aa1cdb4b7

 

Prior to this webcast, management's results presentation will be available to view from 07:30 GMT / 02:30 ET at https://webcasting.brrmedia.co.uk/broadcast/621f2ca8fa16d9059b8401a8 or https://ir.darktrace.com/financial-results.

 

 

About Darktrace

Darktrace (DARK:L), a global leader in cyber security AI, delivers world-class technology that protects over 6,500 customers worldwide from advanced threats, including ransomware and cloud and SaaS attacks. Darktrace's fundamentally different approach applies Self-Learning AI to enable machines to understand the business in order to autonomously defend it. Headquartered in Cambridge, UK, Darktrace has over 1,700 employees and over 30 offices worldwide. Darktrace was named one of TIME magazine's 'Most Influential Companies' for 2021.

 

 

Cautionary Statement

This announcement contains certain forward-looking statements, including with respect to the Group's current targets, expectations and projections about future performance, anticipated events or trends and other matters that are not historical facts. These forwardlooking statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, include all matters that are not historical facts and reflect the directors' beliefs and expectations, made in good faith and based on the information available to them at the time of the announcement. Such statements involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forwardlooking statement and should be treated with caution. Any forward-looking statements made in this announcement by or on behalf of Darktrace speak only as of the date they are made. Except as required by applicable law or regulation, Darktrace expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

 

 

Important Information

This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation (EU) No. 596/2014 (as it forms part of UK law pursuant to the European Union (Withdrawal) Act 2018). Upon publication of this announcement, this information is now considered in the public domain. 

 

 

Alternative Performance Measures Definitions

Alternative Performance Measures (APMs) are used by Darktrace management and Board of Directors to understand and manage performance. These are not defined under IFRS and are not intended to be a substitute for any IFRS measures of performance but have been included as management considers them to be important measures, alongside the comparable IFRS financial measures, in assessing the underlying performance. Wherever appropriate and practical, we provide reconciliations to relevant IFRS measures.

 

The basis of calculation of the Alternative Performance Measures and a reconciliation to the IFRS measures, as applicable, is included in the financial review section below. Below is the definition of each APM.

 

ARR (see definition below) is a key alternative performance measure for Darktrace because as an indicator of future revenues it allows the growth of the business and the success of its sales strategy to be measured by the board in conjunction with metrics such as number of customers and net constant currency ARR added which allows performance to be compared period-over-period.

 

The use of other metrics such as one-year constant currency ARR gross churn rate and net constant currency ARR retention rate allows the board to measure both the success of the business in controlling customer churn and growing its retained customer base through product and coverage expansion. These measures are critical in assessing the efficiency of Darktrace to grow and maintain its customer base, and the resulting RPO or contract back log allows visibility of future revenues which gives additional support on the long-term stability of the business.

 

Definitions

EBIT

Earnings before interest and taxes, or EBIT is the Group's operating profit or (loss).

Adjusted EBIT

Adjusted EBIT is the Group's EBIT adjusted to remove share-based payment (SBP) charges and share option-related employer tax charges, both net of the amortisation on those charges.

EBITDA

EBITDA is the Group's earnings before interest, taxation, depreciation and amortisation.

Adjusted EBITDA

Adjusted EBITDA is the Group's EBITDA, but including appliance depreciation attributed to cost of sales, adjusted to remove share-based payment charges and employee share plan-related employer tax charges.

Annual Recurring Revenue (ARR)

The sum of all ARR, at the period's constant currency rate, for customers as of the measurement date. The ARR for each customer is the annual committed subscription value of each order booked for which it will be entitled to recognise revenue. In the small number of cases where a customer has an opt-out within six months of entering a contract, Darktrace does not recognise ARR on that contract until after that opt-out period has passed.

Net constant currency ARR added

New customer constant currency ARR added, plus the net impact of upsell, down-sell, and churn activity in the existing customer base, in the same constant currency, for a period.

One-year constant currency ARR gross churn rate

Constant currency ARR value of customers lost from the existing customer cohort one year prior to the measurement date, divided by the total ARR value of that existing customer cohort. This churn rate reflects only customer losses and does not reflect customer expansions or contractions.

Net constant currency ARR retention rate

Current constant currency ARR value for all customers that were customers one year prior to the measurement date, divided by their ARR in the same constant currency one year prior to the measurement date. This retention rate reflects customer losses, expansions, and contractions.

Constant currency rates

Rates established at the start of each year and used for reporting ARR and related measures without the impact of foreign exchange movements. For FY 2022, constant currency rates were 1.3835 and 1.1878 for the British Pound and the Euro, respectively.

Number of customers

Count of contracting entities that are generating ARR at the measurement date.

Remaining performance obligations (RPO)

Represents committed revenue backlog. RPO is calculated by summing all committed customer contract ARR values that have not yet been recognised as revenue, valued at the exchange rates on the last day of the reporting period.

 

 

Enquiries

Luk Janssens - Head of Investor Relations, Darktrace

Direct: +44 7811 027918

[email protected]

 

Powerscourt (Public Relations adviser to Darktrace)

Victoria Palmer-Moore/Robin O'Kelly  

Direct  +44 (0) 20 3328 9386

[email protected]

 

 

CEO Statement 

I am pleased to report that Darktrace has continued to deliver strong growth across our customer base, ARR and revenue, as well as strengthening our key customer and contract metrics. Further, we have done so while moving along the path to sustainable profitability, demonstrating our commitment to providing value to all our stakeholders.

 

Our business thrived during the first half of FY 2022. We achieved a key milestone during the period with an on-time pre-release of the first Attack Path Modelling module in our newest product family, Prevent. Further expanding our capabilities, both in Prevent and across our product platform, I was also excited to recently announce that we have completed the first acquisition in our history with the purchase of Netherlands-based Cybersprint, an attack surface management company that provides automated discovery and assessment of brand-specific vulnerabilities.

 

While Darktrace has historically built an "inside-out" understanding of an organization's digital infrastructure, Cybersprint's "outside-in" technology identifies online and internet-facing assets related to an organisation's brand. The combination of Darktrace's internal and Cybersprint's external views will allow us to provide customers with an even more comprehensive understanding of threats to their overall digital environment.

 

Further, by leveraging Darktrace's large customer base and global sales force, we can accelerate adoption of this vital technology across the broad range of customers who rely on us for cyber defence. We are also extremely pleased to be expanding the depth and breadth of our development function by welcoming a talented team of Cybersprint developers, who will continue to work out of what is now our new European R&D centre in The Hague.

 

The current geopolitical situation has heightened the urgency for businesses and governments to improve cyber resilience. We are laser-focused on our mission to protect organisations around the world from cyber-attacks, and on our ambition to create a continuous AI loop for our customers. Adding another AI-powered capability to our product suite with the first Prevent's module, and bringing Cybersprint's complementary capabilities to our platform, is moving us even closer to completing the loop. We continue to be driven by innovation at our core and are committed to delivering world-class technologies to address today's complex cyber challenges.

 

Strategic Performance Review

Key Performance Indicators (KPIs)

Darktrace's management and board regularly review metrics, including the following KPIs, to assess its performance, identify trends, develop financial projections and make strategic decisions. For a review of the key financial metrics, see the "Financial Review" below.

 

Annualised Recurring Revenue, or ARR, and related performance metrics are calculated on a constant currency basis and are reported using FY 2022 constant currency rates for 1H FY 2022 and all comparable periods.

 

Annualised recurring revenue (ARR) 

$'000

31-Dec-21

31-Dec-20

Annualised recurring revenue

427,267

293,716

Year over year growth

45.5%

38.6%

 

Darktrace increased its ARR by 45.5% year-over-year, driven primarily by the increase in customers from 4,677 to 6,531 over the same period. To a lesser extent, growth was also a result of an increase in upsells to existing customers and a 4.2% year-over-year increase in average contract ARR resulting from both new and existing customer activity. Furthermore, the average ARR of new contracts increased by more than 15%, and average ARR uplift per existing customer more than tripled, compared to the prior year period. Growth in ARR has been across all regions and customer sizes.

 

 

 

 

31-Dec-21

31-Dec-20

Less than $100,000

50.8%

52.1%

Greater than $100,000

49.2%

47.9%

 

Compared to the prior year, the distribution of customer contracts above and below $100,000 in ARR shifted slightly towards larger contract sizes. Whilst the Group continues to add new customers across the entire range of sizes and requirements, upsell sales strategies and increases in platform penetration across the customer base are having an impact.

 

Net ARR Added

$'000

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

Net ARR Added

69,925

47,028

Period-over-period growth

48.7%

33.1%

 

Net ARR added increased by 48.7% over the prior period. This was primarily driven by the addition of 926 net new customers in 1H FY 2022, a 13% increase over the net new customers added in 1H FY 2021, and with new customers added during the period having an average contract ARR more than 15% higher than those added in the prior year period. Darktrace also more than tripled the value uplift per existing customer it achieved during 1H FY 2022 compared to the prior year period.

 

For net ARR added, the relationship to hiring, productive sales force growth, proof of values (POVs) as part of the sales process, and conversion rate is influenced by seasonality factors, with Darktrace typically seeing the highest net ARR added in its second and fourth quarters.

 

 

One-year Gross ARR Churn Rate

 

31-Dec-21

Unaudited

30-Dec-20

Unaudited

One-year gross ARR churn rate

6.4%

8.0%

 

One-year gross ARR churn improved by 1.6 percentage points from the prior period end. This improvement has been the result of both continuing stabilisation in the customer base following early pandemic effects, particularly at the smaller end of the customer base, and customer success efforts to drive positive customer experience and increase retention made possible by the investments in that function over the past 18 months.

 

Net ARR Retention Rate

 

31-Dec-21

Unaudited

31-Dec-20

Unaudited

Net ARR retention rate

105.1%

99.9%

 

Net ARR retention rate improved by 5.2 percentage points from the prior period end. This reflects the reduction in one-year gross ARR churn as well as the results of a focus on upsell activity and pricing uplifts upon renewal.

 

Average Contract ARR

$'000

31-Dec-21

Unaudited

30-Dec-20

Unaudited

 

%

Average contract ARR

65,421

62,773

4.2%

 

Average contract ARR increased by 4.2% from the prior period end as Darktrace's products such as Antigena email progressed through the adoption cycle and are being purchased by larger customers with longer sales lead times, platform penetration rates continue to increase, and the Group maintains its focus on upsells to the existing customer base.

 

Number of customers

 

31-Dec-21

Unaudited

31- Dec-20

Unaudited

%

Number of customers

6,531

4,677

39.6%

 

Darktrace grew its customer base by 39.6% year-over-year. It added 926 net new customers in the six-months ended 31 December 2021, for a total of 1,854 net new customers added over the prior year period. Growth in new customers remains the primary driver of ARR and net ARR added growth.

 

Operating profit or (loss)/EBIT

$'000

Six-months ended
31-Dec-21
Unaudited

Six-months ended
31-Dec-20
Unaudited

%

EBIT

8,648

(4,881)

n/a

 

The $13.5 million period-over-period increase in operating profit was primarily due to a period-over-period increase in gross profit of $57.9 million, driven by revenue growth. This was partially offset by a period-over-period increase in operating costs of $44.9 million, largely resulting from a 27.4% increase in average headcount and the resulting 42.4% increase in non-equity related compensation costs, as well as a $9.4 million increase in share-based payment and related employment tax costs. 

 

Adjusted EBIT

$'000

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

%

Adjusted EBIT

28,880

7,451

287.6%

         

 

The $21.4 million period-over-period increase in adjusted EBIT was driven primarily by the factors driving the increase in EBIT described above. Reconciling EBIT to adjusted EBIT for 1H FY 2022, the Group added back $13.1 million of share-based payment charges, $5.8 million of associated employer tax charges and $1.4 million of amortisation related to capitalised share-based payments and associated tax charges. Please refer to the intangible asset paragraph for details.

 

EBITDA

$'000

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

%

EBITDA

34,845

14,268

144.2%

 

The $20.6million increase in EBITDA was driven primarily by the factors driving the increase in EBIT described above, with this measure adjusting for depreciation and amortisation charges of $26.2 million and $19.1 million in 1H FY 2022 and 1H FY 2021, respectively.

 

Adjusted EBITDA

$'000

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

%

Adjusted EBITDA

46,702

20,797

124.6%

 

The $25.9 million increase in adjusted EBITDA was driven primarily by the factors driving the increase in EBITDA described above. Reconciling EBITDA to adjusted EBITDA for 1H FY 2022, the Group added back $18.9 million in share compensation-related charges as described in adjusted EBIT above and deducted $7.0 million of appliance depreciation included in cost of sales for appliances used to deploy our software at customer sites.

 

Remaining Performance Obligations (RPO)

$'000

31-Dec-21

Unaudited

31-Dec-20

Unaudited

%

RPO

876,751

612,313

43.2%

 

At 31 December 2021, RPO was 43.2% higher than it was one year prior, with the increase driven primarily by new customer acquisition under long-term contracts.

 

Darktrace's multi-year contract strategy, and the resulting RPO, creates significant revenue visibility.

 

$'000

31-Dec-21

Unaudited

31-Dec-20

Unaudited

Within 12 months

377,695

263,724

Between 1 - 2 years

273,009

183,592

Between 2 - 3 years

167,195

109,085

Between 3 - 4 years

54,071

45,841

Over 4 years

4,781

10,071

Total

876,751

612,313

 

 

 

Financial Review

 

$'000

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

%

Revenue

192,642

126,514

52.3%

Gross profit

171,991

114,115

50.7%

Operating profit / (loss)

8,648

(4,881)

n/a

Net profit / (loss)

5,917

(48,411)

n/a

 

 

 

 

$'000

31-Dec-21

Unaudited

30-Jun-21

Audited

%

Cash and cash equivalents

365,766

342,358

6.8%

Total assets

574,960

555,415

3.5%

Deferred revenue

(197,439)

(187,864)

5.1%

Net assets

266,873

258,258

3.3%

 

 

 

 

Cash inflow before financing activities

43,298

16,732

158.8%

 

At 52.3%, Darktrace has delivered strong period-over-period revenue growth. This was driven primarily by growing the customer base 39.6% year-over-year which, along with a slight shift towards higher average contract values, resulted in a 45.5% year-over-year increase in constant currency ARR.

 

The Group continued to invest for future ARR and revenue growth by continuing to hire employees in its technical teams (63% increase in developers average headcount period-over-period) to drive research and development leading to new products. Similarly, to increase market penetration, investment in marketing and expanding the sales force continued. Group-wide, Darktrace's total number of employees increased by 22.0% from 1,441 at 31 December 2020 to 1,758 at 31 December 2021.

 

As a direct result of Darktrace's listing on the London Stock Exchange in May 2021, particular cost areas are either new or have notably increased. These include directors' and officers' insurance costs, audit and tax fees and other professional costs. Additionally, Darktrace recognised increased share-based payment charges and related employer tax charges that were either triggered by the IPO process or the result of transitioning its equity compensation plans to listed company structures.

 

Travel and Entertainment (T&E) costs remained lower than pre-pandemic levels as travel remained restricted and difficult, and customers and prospects continued to be out of offices. T&E expenses did increase period-over-period, however, as there was a notable increase in activity in the later part of calendar 2021.

 

In the period ended 31 December 2020, the Group recognised $42.7 million in non-cash finance costs for convertible loan notes issued to certain investors in July 2020; there were no comparable costs in the 1H FY 2022 period. The proceeds of these notes were primarily used to fund a share buy back as part of a restructuring of the Group's ownership ahead of the IPO. These charges were the primary reason for the Group's loss before taxation increasing to $47.9 million in that period. These finance costs ceased when the loan notes were converted shortly before the IPO and so do not impact the six months to December 2021.

 

Below a table with a reconciliation of the reported income statement for the periods and the adjusted results:

 

 $'000

Six-months ended
31-Dec-21 Reported
Unaudited

Total Adjustments

Six-months ended
31-Dec-21 Adjusted Unaudited

Six-months ended
31-Dec-20 Reported Unaudited

Total Adjustments

Six-months ended
31-Dec-20 Adjusted Unaudited

 

 

 

 

 

 

 

Revenue

192,642

-

192,642

126,514

-

126,514

Cost of sales

(20,651)

-

(20,651)

(12,399)

-

(12,399)

Gross Profit

171,991

-

171,991

114,115

-

114,115

 

 

 

 

 

 

 

Sales and marketing costs

(107,858)

21,514

(86,344)

(86,738)

15,128

(71,610)

Administrative expenses

 

 

 

 

 

 

- Research and development costs

(15,653)

5,171

(10,482)

(10,657)

5,553

(5,104)

- Other administrative expenses

(40,576)

11,369

(29,207)

(21,500)

4,997

(16,503)

- Expected credit loss charge

(103)

-

(103)

(423)

-

(423)

Other operating income

847

-

847

322

-

322

Operating profit/(loss)

8,648

38,054

 

(4,881)

25,678

 

Adjusted EBITDA

 

 

46,702

 

 

20,797

 

Revenue

Revenue increased by $66.1 million, or 52.3%, to $192.6 million for 1H FY 2022, as compared to $126.5 million for 1H FY 2021. This increase was primarily attributable to a 39.6% net increase in unique customers between 31 December 2020 and, to a lesser extent, a 4.2% year-over-year increase in average contract ARR resulting in 45.5% increase in constant currency ARR. Over 99.2% of all revenue is from recurring subscriptions contracts with customers, that typically average 36 months. This results in significant RPO of $876.8m, remaining to convert to revenue in future years. Subscription revenue is recognised on a straight-line basis over the service period, from commencement date to termination date. 

 

Cost of sales

Cost of sales increased by $8.3 million, or 66.6%, to $20.7 million for 1H FY 2022, as compared to $12.4 million for 1H FY 2021. This increase was primarily attributable to the increase in total customer deployments between the two financial periods; particularly hosting fees, which increased by $4.0 million in the period, from $0.9 million in 1H FY2021 to $4.9 million in 1H FY2022. The remaining components of cost of sales scaled largely in line with revenue growth, resulting in gross margins of 89.3% and 90.2% for 1H FY 2022 and 1H FY 2021, respectively. Cost of sales include all costs relating to the deployment of Darktrace's software, whether through physical appliances or in the cloud, and for providing both customer support and supplementary monitoring and response capabilities.

 

Below is a breakdown of operating costs by function:

 

$000

Six-months

ended

31-Dec-21

Unaudited

% of Revenue

Six-months

ended

31-Dec-20

Unaudited

% of Revenue

%

Sales and marketing costs

 

 

 

 

 

Non T&E operating

99,004

51.4%

81,529

64.4%

21.4%

Travel and Entertainment (T&E)

1,402

0.7%

782

0.6%

79.3%

Share-based payment (SBP) charges

6,216

3.2%

2,767

2.2%

124.6%

SBP related employer tax charges

1,236

0.6%

1,660

1.3%

-25.5%

Total sales and marketing costs

107,858

56.0%

86,738

68.6%

24.3%

 

 

 

 

 

 

Research and development costs

 

 

 

 

 

Non T&E operating

14,402

7.5%

6,628

5.2%

117.3%

Travel and Entertainment (T&E)

67

0.0%

28

0.0%

139.3%

Share-based payment (SBP) charges

491

0.3%

940

0.7%

-47.8%

SBP related employer tax charges

693

0.4%

3,061

2.4%

-77.4%

Total research and development costs

15,653

8.1%

10,657

8.4%

46.9%

 

 

 

 

 

 

Other administrative

 

 

 

 

 

Non T&E operating

29,198

15.2%

17,954

14.2%

62.6%

Travel and Entertainment (T&E)

1,243

0.6%

65

0.1%

1,812.3%

Share-based payment (SBP) charges

6,384

3.3%

2,103

1.7%

203.6%

SBP related employer tax charges

3,854

2.0%

1,801

1.4%

114.0%

Total other administrative

40,679

21.1%

21,923

17.3%

85.6%

 

 

 

 

 

 

Finance costs

1,360

 

43,044

 

-96.8%

 

Sales and marketing costs

Sales and marketing costs increased by $21.1 million, or 24.3%, to $107.9 million for 1H FY 2022, as compared to $86.7 million for 1H FY 2021. The increase was primarily attributable to a $13.4 million increase in staffing costs. There was a $5.9 million or 23.4% increase in salaries as a result of the 23.2% growth in the average number of employees in sales and marketing in 1H FY 2021. Growth in average number of employees was largely from increases in sales personnel to drive customer acquisition. There was an increase in bonus and commission of $9.4 million to $28.2 million in 1H FY 2022 mainly driven by the increase in commission cost from $17.9 million to $26.7 million due to the increase in sales. Furthermore, there was a $1.8 million increase in other employment costs. Sales and marketing cost includes appliances depreciation of $1.9 million ($1.8 million in 1H FY2021). For details of the commission cost capitalised and related amortisation for the period please refer to the capitalised commission paragraph.

 

Increase in direct recruitment expense also contributed to the increase in sales and marketing costs for 1H FY 2022. Direct recruitment expense increased by $2.0 million period-on-period, to $4.9 million as a result of increased head count in the period.

 

Research and development costs

Research and development costs increased by $5.0 million, or 46.9%, to $15.7million for 1H FY 2022, as compared to $10.7 million for 1H FY 2021. The increase in non-T&E operating expenses of $4.9 million included a $3.9 million or 70.6% increase in research and development staffing costs, made up of an increase of 61.1% or $2.7 million in gross pay as well as an increase in bonuses of $0.8 million or 196% to $1.2 million in 1H FY 2022. This was mainly driven by a 63.1% increase in average number of employees in the core development team, as the Group expanded its technical departments focused on research and new product development efforts to expand its product offerings, as well as an 10.7% increase in average salary per head. There was also a $2.4 million or 146.4% increase in amortisation costs compared to $1.6 million in H1 FY2021 due to the release of new features to the platform (version 5) in January 2021 following completion of the development phase. See note 6 for further details on the amounts capitalised during the period.

 

Other administrative expenses

Other administrative expenses increased by $18.8 million, or 86.5%, to $40.7 million for 1H FY 2022, as compared to $21.9 million for 1H FY 2021. There was a $11.2 million increase in non-T&E operating expenses, of which $9.0 million was a result of increased staff costs. Gross pay increased by $5.6 million, or 81% which was mainly driven by a 41.8% increase in average headcount period-on-period. The hiring of more senior team members of the legal, finance and HR functions as a result of the IPO process resulted in an increase of total gross pay by $3.0 million whilst the increase in the Customer Success team headcount resulted in an increase in the overall gross pay by $1.8 million. In these functions, the new hires resulted in an average salary increase of 5%. There was an increase in bonuses of $1.6 million, or 130.4%, to $2.9 million in H1 FY 2022. Employment costs includes payroll taxes, payroll fees, training costs, employee benefits and 100% of apprenticeship levy costs; they increased by $1.9 million, or 106.7%, to $3.7 million in the period. During H1 FY 2022, a receivable for an apprenticeship levy of $0.6 million has been written off as a result of the assessment of recoverability of the amount which has contributed to the increase in employment costs. The remaining increase in employment costs have moved in line with gross pay. Additionally, there was a $2.3 million increase in all other operating costs, including rents as well as professional and consultancy fees.

 

Share-based payment (SBP) and related employer tax charges increased significantly in the period as shown by the table below:

 

 

Six-months ended
31-Dec-21
Unaudited

Six-months ended

31-Dec-20

Audited

Variance

%

Sales and marketing costs

6,216

2,767

3,449

124.6%

Research and development costs

3,148

940

2,208

234.9%

  Capitalised development cost

(2,657)

-

(2,657)

n/a

Other administrative expenses

6,384

2,103

4,281

203.6%

Total Share-based payment (SBP) charges

13,091

5,810

7,281

125.3%

 

 

 

 

 

Sales and marketing costs

1,236

1,660

(424)

-25.5%

Research and development costs

896

3,061

(2,165)

-70.7%

  Capitalised development cost

(202)

-

(202)

n/a

Other administrative expenses

3,854

1,801

2,053

114.0%

Total SBP related employer tax charges

5,784

6,522

(738)

-11.3%

 

SBP charges for 1H FY2022 relate mainly to the new granted awards in the eight months since IPO, with a large portion of the charge from the 'top-up awards' granted at IPO which vest over a one-year vesting period which is shorter compared to most of the other awards granted under the Darktrace Awards Incentive Plan (AIP). The SBP-related employer tax charge recognised in 1H FY2021 related mainly to share options and growth shares awarded in previous years to UK employees for which the liability was recognised for the first time for in H1 FY 2021. The capitalised development cost includes $2.4 million of share-based payment and related tax charges linked to projects completed in prior years not previously capitalised. With the associated amortisation recognised in the period of $1.4 million, the net increase in intangible assets related to prior years' completed development projects is $1.0 million.

 

Finance costs

 $'000

Six-months ended
31-Dec-21
Unaudited

Six-months ended
31-Dec-20 Unaudited

 

 

 

%

Finance costs

(1,360)

(43,044)

-96.8%

 

Finance costs decreased by $41.7 million to $1.4 million for 1H FY 2022, as compared to $43.0 million for 1H FY 2021. This decrease was due to the conversion of $162.8 million of convertible loan notes (CLNs) concurrent with the IPO. The loan notes carried an annual interest rate of 9%, compounded monthly and were in place for the entire FY 2021 comparative period; there have been no CLN-related charges since the 4 May 2021 conversion date.

 

Operating profit/(loss) or EBIT, EBITDA and Adjusted EBITDA

$'000

Six-months

ended

31-Dec-21
Unaudited

 

Six-months

ended

31-Dec-20

Unaudited

 

 

 

 

Net Profit / (Loss)

5,917

(48,411)

 

 

 

Taxation

1,439

545

Finance income

(68)

(59)

Finance costs

1,360

43,044

Operating profit/ (loss)/EBIT

8,648

(4,881)

 

 

 

Depreciation & Amortisation

26,197

19,149

EBITDA

34,845

14,268

 

 

 

Appliance depreciation in Cost of sales

(7,018)

(5,803)

Share-based payment (SBP) charges

13,091

5,810

SBP related employer tax charges

5,784

6,522

Adjusted EBITDA

46,702

20,797

 

Darktrace generated a net profit of $5.9 million, compared to a net loss of $48.4 million in the prior period. For comparison, that prior period was impacted by $42.7 million of non-recurring finance costs largely related to convertible loan notes eliminated in the intervening period. At the EBIT, or operating profit level, the Group generated a profit of $8.6 million, a $13.5 million increase from a $4.9 million loss in the prior period. This improvement was primarily the result of increased head count and is driven by period-over-period revenue growth of over 52.3% outpacing the growth in operating costs.

 

EBITDA for the 1H FY 2022 period was $34.8 million compared to $14.3 million in the prior year period, an increase of $20.6 million. In calculating EBITDA from EBIT, Darktrace deducts depreciation and amortisation, which increased by $7.0 million period-over-period. Depreciation of property plant and equipment increased by $1.6 million, because of increased depreciation of appliances on customer sites, the deployment of which have scaled with the customer base. Amortisation of capitalised development costs increased by $2.2 million as additional internally generated software features were completed and amortisation over a three-year period begun. Amortisation of capitalised commissions increased by $3.4 million period-over- period as commissions scaled in line with ARR growth.

 

At $46.7 million, Adjusted EBITDA was $25.9 million greater than the prior period. In calculating Adjusted EBITDA from EBITDA, Darktrace deducts the depreciation related to appliances used to deliver Darktrace software to customers that is reflected in cost of sales. This is done to provide comparability to companies that may sell appliances for this purpose. For 1H FY 2022, there was a $1.2 million year-over-year increase in depreciation of appliances allocated to cost of sales, reflecting the increase in customer deployments. Darktrace also deducts share-based payment and related employer tax charges as a result of equity schemes in place prior to IPO and new schemes set up as part of the transition to being a public company. These charges increased by $6.5 million period-over-period.

 

Cash and cash equivalents

The Group had cash and cash equivalents at 31 December 2021 of $365.8 million, an increase of $23.4 million from 30 June 2021. The increase in cash was mostly as a result of the $57.1 million cash generated from operating activities in the period. This was somewhat offset by cash outflows on investing and financing activities, partially as a result of using $13.5 million to execute a share buyback in December 2021.

 

Intangible assets

The Group capitalises allowable costs related to the development of new products and related significant functional enhancements to its Cyber AI platform. In the period, the Group capitalised $3.5 million of development costs, in line with the previous period.

 

Of $3.5 million cost capitalised in the period ($2.5 million in H1 FY 2021), Darktrace has included share-based payment cost and related tax charges related to the employees working on development projects that meet capitalisation criteria. This includes $2.4 million of share-based payment and related tax charges linked to projects completed in prior years not previously capitalised, with associated amortisation of $1.4 million for a net increase in intangible assets of $1.0 million related to prior years completed development projects. As the directors consider the amount in relation to prior years to be immaterial, no prior year adjustment has been made but instead a catchup adjustment has been recognised in the current year.

 

Capitalised development costs are amortised on a straight-line basis over a three-year period, resulting in an amortisation charge in the period of $3.1 million, a year-over year increase of $2.2 million. At 31 December 2021, the Group had $7.4 million of intangible assets, increased by $0.3 million from $7.1 million at 31 June 2021.

 

Capitalised commission

Most sales commissions are paid in two instalments, the first being when the contract is signed and the second upon the earlier of payment for the entire contract value or one year from the date of sale. For the first instalment, the Group capitalises sales commissions and the associated payroll taxes, as required under IFRS 15, and amortises them over the related contract term. As there are continued employment and customer service obligations required to receive the second instalment, these commissions are not eligible for capitalisation. Capitalised commissions on the Group's Statement of Financial Position increased by 17.2% to $45.7 million at 31 December 2021 from $39.0 million at 30 June 2021, as a result of continuing sales growth. This increase was driven by additions of $17.2 million ($9.4 million in H1 FY 2021) offset by amortisation and impairment of $10.5 million ($6.4 million in H1 FY 2021).

 

Deferred revenue

Total deferred revenue increased by 5.1% to $197.4 million at 31 December 2021 from $187.9 million at 30 June 2021. This resulted from the increase in the Group's invoicing driven by a higher number of customers in the period and a continued transition to annual invoicing for customers.

 

Equity

As a result of transactions with shareholders, the Group had an increase in equity of $2.6 million during 1H FY 2022 driven by:

· $15.6 million increase in stock compensation reserve related to grants made under employee equity schemes.

·  $0.6 million increase in equity as a result of exercised options during the period.

· $13.6 million reduction in equity following the company purchasing 2,460,678 shares on-market in December 2021 to satisfy, in part, Darktrace's pre-existing obligations arising from its share incentive programmes. The shares were acquired at an average price of £4.11 ($5.47) per share, with prices ranging from £3.90 ($5.19) to £4.31 ($5.74). The total cost of $13.6 million, including transaction costs, was deducted from equity.

 

The share-premium cancellation received shareholder approval prior to the IPO on 29 April 2021. The share premium was cancelled on 28 September 2021 following the registration of the order of the High Court of Justice (Chancery Division) by the Registrar of Companies. The total amount of share premium at the time of cancellation has been reclassified to retained earnings.

 

Cash flow from operating and financing activities

The Group had cash flow from operating activities of $57.1 million in 1H FY 2022, a 126.0% increase from $25.3 million in 1H FY 2021.

 

Cash generated from operating activities before working capital movements has improved to $54.3 million, compared to $19.3 million in the prior period. Meanwhile working capital movements reflect the increased scale of the business and continuing sales growth with a $4.2 increase in cash from working capital. This movement was predominantly as a result of $9.6 million cash increase from deferred revenues and a $8.9 million cash increase in trade and other receivables, largely offset by a $17.2 million cash decrease from capitalised commissions.

 

Cash outflow from financing activities of $16.9 million was mostly as a result of the re-purchase of shares for $13.5 million in December 2021.

 

Going Concern

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. At the end of the reporting period, the Group had $365.8 million of available liquidity considering cash and cash equivalents and generating cash in the period after financing activities of $26.4 million. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of the interim financial statements. Accordingly, the Directors are of the view that the preparation of the consolidated interim financial statements on a going concern basis continues to be appropriate and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

 

 

Principal and Emerging Risks

The principal risks and uncertainties faced by Darktrace and its approach to internal control and risk management are set out on pages 57 to 59 of the 2021 Annual Report which is available on the Group's website at www.darktrace.com. The principal risks and uncertainties, as set out below, have been reassessed and the Directors expect them to remain materially the same as those reported in the 2021 Annual Report during the remaining six months of the financial year.

 

Risk Title

Risk Description

Technology and products

 

 

 

The Group's ability to penetrate its target market and continue to grow is based on the effectiveness of its products in protecting its customers against the impacts of a rapidly evolving cyber security threat environment.

 

The Group may be unable to develop and enhance its platform to adapt to the increasingly sophisticated nature of cyber-attacks.

Market and competitive environment

 

 

 

Darktrace operates in a competitive marketplace where other companies seeking to compete may be larger, better funded and have more resources.

 

If the Group is unable to develop and enhance its platform to adapt to the increasingly sophisticated nature of cyber-attacks, it could negatively impact the Group's business, results of operations, financial condition and prospects.

 

The Group may be unable to develop and enhance its platform to meet the changing cyber protection demands of its customers.

 

Failure by the Group or, in certain markets, its channel partners, to maintain sufficient levels of customer support could have a material adverse effect on its business, results of operations, financial condition and prospects.

 

People and partners

 

 

 

The Group relies on the talents of highly skilled personnel, including its senior management and its technologists.

 

Additionally, Darktrace relies on both its own employees and a network of reseller partners to acquire new customers, service existing customers and increase both market penetration and product uptake. 

 

The Group's customers depend on the continuous availability of its Cyber AI Platform. Darktrace-controlled cloud-hosted products are expected to grow in materiality and importance. Consequently, the Group may be subject to service disruptions as well as failures to provide adequate support for reasons from its third-party data centres that are outside of its direct control.

 

The global COVID-19 outbreak and the global response to this outbreak could affect the Group's business and operations.

Brand and reputation

 

 

 

The Group's brand and reputation relies on a variety of factors including the effectiveness of its products to protect its customers against risks, its ability to protect its intellectual property, the actions of its people and the nature of its business associations., e.g. such as coverage of criminal or civil litigation or related asset enforcement proceedings, or adverse comments in the civil judgment on the evidence of current, or past, Group directors or employees, could adversely affect the Group's reputation in the cyber security, financial, investment and other communities, and could also adversely affect the Group.

 

As a provider of security solutions, the Group has in the past been, and may in the future be, specifically targeted by bad actors for attacks intended to circumvent the Group's own security capabilities.

 

If the Group is unable to maintain and enhance its brand or if the Group's reputation and business is harmed by news or social media coverage it could negatively impact the Group's business, results of operations, financial condition and prospects

 

 

Statement of Directors' Responsibility

The directors confirm that these unaudited interim financial statements have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

· an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· related-party transactions in the first six months and that have materially affected the financial position or the performance of the Group during that period and any changes in the related-party transactions described in the last annual report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.

The maintenance and integrity of the Darktrace plc website is the responsibility of the Directors; the work carried out by the authors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that might have occurred to the interim financial statements since they were initially presented on the website.

 

The directors of Darktrace plc are listed in the Darktrace plc annual report for 30 June 2021.

 

A list of current Directors is maintained on the Darktrace plc website: www.darktrace.com/en/board-of-directors 

 

On behalf of the Board

 

Catherine Graham

Chief Financial Officer

2 March 2022

 

Independent auditor's review report to the members of Darktrace plc

Introduction

We have reviewed the condensed set of financial statements in the half-yearly financial report of Darktrace plc (the 'company') for the six months ended 31 December 2021 which comprises the Consolidated Unaudited Interim Statement of Comprehensive Income, Consolidated Unaudited Interim Statement of Financial Position, Consolidated Unaudited Interim Statement of Changes in Equity and Consolidated Unaudited Interim Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 the annual financial statements of the company are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting'.

Our responsibility

Our responsibility is to express a conclusion to the company on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

The impact of uncertainties arising from the UK exiting the European Union on our review

Our review of the condensed set of financial statements in the half-yearly financial report requires us to obtain an understanding of all relevant uncertainties, including those arising as a consequence of the effects of Brexit. Such reviews assess and challenge the reasonableness of estimates made by the directors and the related disclosures and the appropriateness of the going concern basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and the company's future prospects and performance.

 

Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty, with the full range of possible outcomes and their impacts unknown. We applied a standardised firm-wide approach in response to these uncertainties when assessing the company's future prospects and performance. However, no review of interim financial information should be expected to predict the unknowable factors or all possible future implications for a company associated with a course of action such as Brexit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2021 is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

This report is made solely to the company, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company as a body, for our review work, for this report, or for the conclusion we have formed.

 

 

Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants

London, United Kingdom

2 March 2022

 

 

Consolidated Unaudited Interim Statement of Comprehensive Income

 

 

 

Six-months ended

31-Dec-21

Unaudited

Six-months ended

31-Dec-20

Unaudited

 

Notes

$'000

$'000

Revenue

4

192,642

126,514

Cost of sales

 

(20,651)

(12,399)

 

 

 

 

Gross profit

 

171,991

114,115

 

 

 

 

Sales and marketing costs

 

(107,858)

(86,738)

Administrative expenses

 

 

 

  Research and development costs

 

(15,653)

(10,657)

  Other administrative expenses

 

(40,576)

(21,500)

  Expected credit loss charge

 

(103)

(423)

Other operating income

 

847

322

 

 

 

 

Operating profit /(loss)

6

8,648

(4,881)

 

 

 

 

Finance costs

5

(1,360)

(43,044)

Finance income

5

68

59

 

 

 

 

Profit/(loss) for the year before taxation

6

7,356

(47,866)

 

 

 

 

Taxation

7

(1,439)

(545)

 

 

 

 

Net profit / (loss) for the year attributable to the equity shareholders of Darktrace plc

 

5,917

(48,411)

 

 

 

 

Items that are, or may be, subsequently reclassified to profit or loss:

 

 

 

Other comprehensive income/ (loss)

 

-

-

 

 

 

 

Total comprehensive profit/ (loss) for the period

 

5,917

(48,411)

 

Earnings per share

 

 

 

Basic profit/(loss) per share

8

$0.01

$(0.10)

Diluted profit/(loss) per share

8

$0.01

$(0.10)

 

 

 

Consolidated Unaudited Interim Statement of Financial Position

 

 

31-Dec-21

Unaudited

30-Jun-21

Audited

 

Notes

$'000

$'000

Non-current assets

 

 

 

Intangible assets

 

7,438

7,087

Property, plant and equipment

 

54,334

52,896

Right-of-use assets

 

27,342

29,421

Capitalised commission

 

26,255

22,711

Deferred tax asset

 

691

544

Deposits

 

5,743

6,109

 

 

121,803

118,768

Current assets

 

 

 

Trade and other receivables

 

66,122

76,867

Capitalised commission

 

19,459

16,303

Tax receivable

 

1,810

1,119

Cash and cash equivalents

9

365,766

342,358

 

 

453,157

436,647

 

Total assets

 

574,960

555,415

Current liabilities

 

 

 

 

Trade and other payables

 

(49,768)

(51,100)

Deferred revenue

4

(167,957)

(158,265)

Lease liabilities

 

(4,486)

(4,285)

Provisions

10

(26,291)

(22,430)

 

 

(248,502)

(236,080)

Non-current liabilities

 

 

 

Deferred revenue

4

(29,482)

(29,599)

Lease liabilities

 

(28,514)

(30,963)

Provisions

10

(1,589)

(515)

 

 

(59,585)

(61,077)

 

Total liabilities

 

(308,087)

(297,157)

 

Net assets

 

266,873

258,258

 

 

 

 

Equity

 

 

 

Share capital

11

9,777

9,756

Share premium

11

335

224,782

Merger reserve

11

305,789

305,789

Foreign currency translation reserve

11

(4,398)

(4,398)

Stock compensation reserve

12

51,471

35,723

Treasury shares

11

(14,265)

(761)

Retained loss

 

(81,836)

(312,633)

Total equity attributable to equity shareholders of Darktrace plc

 

266,873

258,258

               

 

These financial statements were approved by the Board of Directors and authorised for issue on 2 March 2022.  They were signed on its behalf by:

 

Catherine Graham

Chief Financial Officer

Company No. 13264637  

 

 

Consolidated Unaudited Interim Statement of Changes in Equity

 

 

 

Share capital

Share premium

Merger reserve

Foreign currency translation reserve

Stock compensation reserve

Treasury Shares

Retained earnings

Total equity

 

Note

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Balance at
1 Jul 20
Audited

 

29

170,402

-

(4,398)

20,868

-

(163,045)

23,856

Net loss

 

 -

 -

 -

 -

 -

 -

(48,411)

(48,411)

Total comprehensive loss

 

 -

 -

 

 -

 -

 -

(48,411)

(48,411)

Shares issued

11

-

212

-

-

-

-

-

212

Share cancellation

11

(2)

(127,061)

-

-

-

-

-

(127,063)

Credit to equity for share based compensation

12

-

-

-

-

5,810

-

-

5,810

Transactions with shareholders

 

(2)

(126,849)

 -

-

5,810

-

-

(121,041)

Balance

at 31 Dec 20 Unaudited

 

27

43,553

 -

(4,398)

26,678

 -

(211,456)

(145,596)

Balance

at 1 Jan 21

 

27

43,553

 -

(4,398)

26,678

 -

(211,456)

(145,596)

Net loss

 

 -

 -

 -

 -

 -

 -

(101,177)

(101,177)

Total comprehensive loss

 

 -

 -

 -

 -

 -

 -

(101,177)

(101,177)

Convertible loan conversion

11

1,076

269,016

-

-

-

-

-

270,092

Shares issued

11

1,872

238,294

-

-

-

 

-

240,166

Transaction costs

11

-

(13,511)

 

 

 

 

 

(13,511)

Share for share exchange with Darktrace Holdings Limited

11

6,781

(312,570)

305,789

-

-

-

 -

Treasury shares

11

-

-

-

-

-

(761)

-

(761)

Credit to equity for share based compensation charge

12

-

-

-

-

9,045

-

-

9,045

Transactions with shareholders

 

9,729

181,229

305,789

 -

9,045

(761)

 -

505,031

Balance

at 30 Jun 21

Audited

 

9,756

224,782

305,789

(4,398)

35,723

(761)

(312,633)

258,258

Balance

at 1 Jul 21

 

9,756

224,782

305,789

(4,398)

35,723

(761)

(312,633)

258,258

Net profit

 

-

-

-

-

-

-

5,917

5,917

Total comprehensive profit

 

 -

 -

 -

 -

 -

 -

5,917

5,917

Shares issued

11

21

335

-

-

-

-

-

356

Share premium cancellation

11

-

(224,838)

-

-

-

-

224,838

-

Options exercised

11

-

56

-

-

-

21

131

208

Shares buyback

11

-

-

-

-

-

(13,525)

-

(13,525)

Transaction costs

11

-

-

-

-

-

-

(89)

(89)

Credit to equity for share based compensation charge

12

-

-

-

-

15,748

-

-

15,748

Transactions with shareholders

 

21

(224,447)

 -

 -

15,748

(13,504)

224,880

2,698

Balance

at 31 Dec 21

Unaudited

 

9,777

335

305,789

(4,398)

51,471

(14,265)

(81,836)

266,873

 

 

Consolidated Unaudited Interim Statement of Cash Flows

 

 

Six-months ended

31-Dec-21

Unaudited

Six-months ended

31-Dec-20

Unaudited

 

Notes

$'000

$'000

Cash generated from operations

 

 

 

Profit/(Loss) for the period after tax

6

5,917

(48,411)

Adjustments for:

 

 

 

Depreciation of PPE and Right-of-use Assets

 

13,241

11,795

Amortisation of intangible assets

 

3,138

949

Amortisation of capitalised commission

 

9,818

6,405

Impairment of capitalised commission

 

707

-

Impairment of PPE

 

-

90

Loss on disposal of PPE

 

1,399

244

Unrealised foreign exchange differences

 

5,032

(1,176)

Credit loss charge

 

103

423

Share based compensation charge

 

13,091

5,810

Finance costs

5

1,360

1,382

Charge for convertible loan (host contract)

5

-

14,302

Charge for convertible loan (embedded derivative)

5

-

27,360

Finance income 

5

(68)

(59)

Other operating income

 

(847)

(322)

Taxation

7

1,439

545

Operating cash flows before movements in working capital

 

54,330

19,337

Decrease/(Increase) in trade and other receivables

 

8,929

(7,248)

(Increase) in capitalised commission

 

(17,225)

(9,414)

(Decrease)/Increase in trade and other payables

 

(1,770)

6,960

Increase in provisions

 10

4,733

-

Increase in deferred revenue

 4

9,575

16,404

Net cash flow from operating activities before tax

 

58,572

26,039

Tax (paid)

 

(1,430)

(756)

Net cash inflow from operating activities

 

57,142

25,283

Investing activities

 

 

 

Development costs capitalised

 

(630)

(2,473)

Purchase of property, plant and equipment

 

(13,282)

(6,137)

Finance income

5

68

59

Cash outflow from investing activities

 

(13,844)

(8,551)

Financing activities

 

 

 

Proceeds from share issues

11

356

212

Proceeds for options exercised

11

187

-

Shares buy-back

11

(13,525)

-

Transaction costs paid in relation to shares buy-back

11

(89)

-

Repurchase of shares for cancellation

11

-

(127,063)

Proceeds from convertible loan

 5

-

162,821

Repayment of lease liabilities

 

(2,525)

(2,642)

Payment of interest on lease liabilities

 

(1,318)

(1,382)

Cash (outflow)/inflow from financing activities

 

(16,914)

31,946

Net changes in cash and cash equivalents

 9

26,384

48,678

Cash and cash equivalents, beginning of the period

 9

342,358

53,944

Unrealised exchange difference on cash and cash equivalents

 

(2,976)

1,292

Cash and cash equivalents, end of period

 9

365,766

103,914

 

 

Notes to the Consolidated Unaudited Interim Financial Statements

 

1  General information

 

These unaudited interim financial statements were approved for issue on 2 March 2022. These interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2021 were approved by the board of directors on 15 September 2021 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The interim results for the six months ended 31 December 2021 and the comparatives are unaudited, yet have been reviewed by the independent auditor.

 

Company information

Darktrace plc (the Company) is a company incorporated in England and Wales under company number 13264637. The principal place of business is Maurice Wilkes Building, St John's Innovation Park, Cowley Road, Cambridge, CB4 0DS. Its shares are listed on the London Stock Exchange.

 

Basis of preparation

This consolidated interim financial report for the half-year reporting period ended 31 December 2021 has been prepared in accordance with the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

The interim report does not include all of the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2021, which has been prepared in accordance with both "International Accounting Standards in conformity with the requirements of the Companies Act 2006" and "International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union", and any public announcements made by Darktrace plc during the interim reporting period.

 

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

 

New standards, amendments, IFRIC interpretations and new relevant disclosure requirements adopted by the Group

A number of new or amended standards became applicable for the current reporting period. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards.

 

New standards and interpretations not yet adopted 

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 reporting periods and have not been early adopted by the Group.

 

Going concern assessment

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facilities. At the end of the reporting period the Group had $365.8 million of available liquidity considering cash and cash equivalents and generating cash in the period after financing activities of $26.4 million.  After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for at least 12 months from the date of approval of the interim financial statements.

Accordingly, the Directors are of the view that the preparation of the consolidated interim financial statements on a going concern basis continues to be appropriate and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

 

 

2  Key judgements and estimates

 

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results might differ from these estimates.

 

In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 June 2021.

 

 

3  Operating segment

 

The Group has concluded that it operates only one operating segment as defined by IFRS 8 Operating Segments being the development and sale of cyber-threat defence technology. The information used by the Group's Chief Operating Decision Makers (the "CODMs"), which include the Executive Directors and certain Senior Managers, to make decisions about the allocation of resources and to assess performance is presented on a consolidated Group basis. Accordingly, no segment analysis is presented. Refer to note 4 for disaggregated analysis on revenue from contract with customers.

 

No single customer accounted for more than 10% of revenue in any of the periods presented.

 

 

31-Dec-21

Unaudited

30-Jun-21
Audited

Non-current assets by geographical market

$'000

$'000

United Kingdom

36,682

36,193

USA and Canada

44,426

39,286

Europe

19,771

17,712

Rest of world

20,924

25,033

 

121,803

118,224

USA non-current asset is $38.8 million (as at 30 June 2021 $38.4 million). 

 

 

4  Revenue from contract with customers

 

Disaggregation of revenue

Revenue recognised at a point in time is not significant to the reported results in any period. This includes revenue generated by separate contracts for training and sale of appliances. For the period this revenue amounted to $0.6 million (prior period ended 31 December 2020 $0.1 million).

 

Management has assessed that the single performance obligation that it is providing to customers is access to products, primarily software, within the Darktrace Cyber AI platform to protect customers' digital estates from the impact of cyber threats.

 

Six-months ended

31-Dec-21

Unaudited

 

Six-months ended

31-Dec-20

Unaudited

 

 

$'000

 

%

$'000

 

%

USA and Canada

 73,454 

38.1%

  49,908

39.5%

United Kingdom

32,932

17.1%

  22,907

18.1%

Europe

  45,618

23.7%

  25,961

20.5%

Rest of World

  40,638

21.1%

  27,738

21.9%

 

 192,642

100%

  126,514

100%

 

Revenue from customers has been attributed to the geographic market based on contractual location. USA generated $66.3 million (for the period ended 31 December 2020 $45.2 million) but above are the regions that the business is managed by. 

 

Contract assets and liabilities related to contracts with customers

The following table provides information on accrued income and deferred revenue from contracts with customers.

 

 

31-Dec-21

Unaudited

30-Jun-21

Audited

 

$'000

$'000

Accrued income

3,637

1,713

Total accrued income

3,637

1,713

 

 

 

Current deferred revenue

167,957

  158,265

Non-current deferred revenue

29,482

  29,599

Total deferred revenue

197,439

  187,864

 

Deferred revenue has continued to increase as the number of customers has increased resulting in increased revenue combined with an ongoing shift towards annual invoicing.

 

Contracts are invoiced between one month and more than three years in advance, with the majority of contracts being invoiced annually in advance. Deferred revenue reflects the difference between invoicing and associated payment terms, and fulfilment of the performance obligation.

 

Revenue recognised in relation to deferred revenues (contract liabilities)

The following table shows how much revenue recognised in each reporting period related to brought-forward contract liabilities:

 

 

Six-months ended

31-Dec-21

Unaudited

Six-months ended

31-Dec-20

Unaudited

 

 

$'000

$'000

Revenue recognised that was included in the contract liability balance at the beginning of the period

 

 

158,265

 

71,205

% of Revenue

 

82.2%

56.3%

 

 

Revenue expected to be recognised

The following are the aggregated amounts of future revenues that relate to contracts that are unsatisfied or partially unsatisfied:

 

 

Six-months ended

31-Dec-21

Unaudited

 

Six-months ended

31-Dec-20

Unaudited

 

 

$'000

$'000

Due within 12 months

 

385,074

261,264

Due within 1-2 years

 

275,783

184,585

Due within 2-3 years

 

169,902

109,575

Due within 3-4 years

 

55,383

46,465

Due over 4 years

 

5,072

10,036

 

 

891,214

611,925

 

 

5  Finance costs and finance income

 

Six-months

ended

31-Dec-21

Unaudited

Six-months ended

31-Dec-20

Unaudited

 

$'000

$'000

Finance costs

 

 

Total interest on financial liabilities measured at amortised cost (CLNs - host contract)

-

15,291

Fair value movement on derivative (CLNs - embedded derivative)

-

27,360

Interest on lease liabilities

1,360

1,382

Capitalised borrowing costs

-

(989) 

Total Finance costs

1,360

43,044

Finance income

 

 

 

Interest income from cash and cash equivalents

68

59

Total Finance income

68

59

           

 

As described in the 2021 Annual Report, the CLNs transaction was negotiated on the basis of an IPO in the short term, which took place on 6 May 2021 and for which the CLNs conversion happened on 4 May 2021, two days before the completion of the IPO. The fair value movement on derivative for prior period, represents the increase in value from 1 July 2020 (inception) to 31 December 2020, substantially due to the increase in likelihood of IPO and related weight in the calculation of the fair value.

 

The CLNs were recorded in the statement of financial position as follows:

 

 

31-Dec-20

Unaudited

01-Jul-20

Audited

 

 

$'000

$'000

Value of derivative

 

106,895

79,535

Host loan

 

98,577

83,286

Total loan note value

 

205,472

162,821

 

Fair value hierarchy

The following details the judgements and estimates made in determining the fair value of the CLN embedded derivative that was recognised and measured at fair value in the financial statements in the prior period. To provide an indication about the reliability of the inputs used in determining fair value, Darktrace classifies financial instruments into the three levels prescribed under the accounting standards.

 

Darktrace policy is to recognise transfers into and out of fair value hierarchy levels as at the end of the reporting period.

· Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price.

· Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques that maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

· Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.

 

 

Valuation inputs and relationships to fair value

The following table summarises the quantitative information about the significant unobservable inputs used in measuring the value of the CLN embedded derivative that is classified at level 3:

 

 

 

01 -Jul-20

Audited

 

 

31 -Dec-20

Unaudited

IPO Time period

Probabilities

Discount rate (Ke)

IPO Time period

Probabilities

Discount rate (Ke)

10.5 months

60%

40%

4.5 months

65%

40%

1.5 years

10%

Discount rate (Cash loan)

1 year

10%

Discount rate (Cash loan)

2 years

0%

40%

1.5 years

5%

40%

2.5 years

0%

EIR (Cash loan)

2 years

0%

EIR (Cash loan)

4 years

30%

41.60%

3.5 years

20%

41.60%

 

Valuation process used

·   Determine the cash-based return, and separately the equity-based return, over a spectrum of time between 10.5 months from the July Valuation Date (i.e. the expected IPO date as at the Valuation Date) and 4 years from the July Valuation Date,

·    Discount the cash redemption amount ($332.7 million) to the expected conversion date at a market yield that assumes there is no conversion feature. There are a number of observable IRRs depending upon the time period, ranging from c.20% to c.80%. Taking a mid-point of 40% is considered a reasonable market participant yield on a straight-debt position,

· Compute the notional gain on the equity conversion, being the additional return over and above the cash-based return. This notional gain is a function of

the lower interest rate (9%) accrued on an equity-conversion (compared to 18% on a cash-conversion), and

the gross-up of 35% on an equity-conversion (that beyond one year increases by 1% per month to a maximum gross-up of 55%),

· Discount the notional gain to its net present value, over the estimated time period using the discount rate noted above,

· Probability-adjust the outcomes based upon the following time horizon:  IPO or equity event after 10.5 months to 2 years; and Cash repayment after 4 years undiscounted, and

·     Take the weighted average outcome as the fair value of the embedded derivative.

 

6  Profit for the period before taxation

 

The Group has identified a number of items which are material due to the significance of their nature and or amount. These are listed separately here to provide a better understanding of the financial performance of the Group.

 

The profit for the period for the Group is stated after charging/(crediting):

 

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

 

$'000

$'000

Research and development:

 

 

  Payroll cost

9,479

8,619

  Share-based payment charge (note 12)

15,748

5,810

  Share-option related employer tax charges

5,986

6,522

  Capitalised cost (intangible assets)

 

(3,489)

(2,473)

Other legal and professional fees

3,417

3,486

Short term property and low value lease rentals

1,795

1,395

Depreciation and Amortisation:

 

 

  Intangible assets

3,138

949

  Right-of-use assets

2,789

2,919

  Capitalised commission

9,818

6,405

  Property, plant and equipment

10,453

8,876

Other:

 

 

US sales tax

52

1,294

Credit loss charge

103

423

Net foreign exchange losses

1,438

691

 

Research and development costs increase was primarily attributable to an increase in related staffing to expand the Group's technical departments focused on research and new product development efforts to enhance its existing product offerings.

 

Darktrace has included in the cost capitalised, the amount related to the share-based payment cost and related tax charges attributable to the people working on the development projects that meet the capitalisation criteria. The total amount capitalised in the current period includes a catch up of $2.4 million of share-based payment and related tax charges linked to projects completed in prior years not previously capitalised with associated amortisation of $1.4 million for a net increase in intangible assets of $1.0 million related to prior years completed development projects.

 

The depreciation and amortisation charges for Right-of use assets and Property plant and equipment, have been made in the consolidated statement of comprehensive income within the following functional areas:

 

Six-months ended
31-Dec-21
Unaudited

Six-months ended
31-Dec-20
Unaudited

 

$'000

$'000

Property, plant and equipment

 

 

Cost of sales

7,018

5,803

Sales and marketing

2,423

2,232

Research and development

440

194

Other administrative

572

647

 

10,453

8,876

Right-of-use assets

 

 

Cost of sales

  - 

-

Sales and marketing

  1,821

1,967

Research and development

  410

409

Other administrative

  558

542

 

2,789

2,918

 

US Sales tax was related to underpayment of sales taxes in previous years. The Group has now obtained, or is in the process of obtaining, registrations in the relevant US states in which historically an obligation to collect and remit taxes existed.

 

 

7  Tax expense

 

Six-months ended
31-Dec-21
Unaudited

Six-months ended
31-Dec-20
Unaudited

 

$'000

$'000

Profit / (Loss) for the period before taxation

 7,356

(47,866)

Tax using the UK corporation tax rate of 19 %

1,398

(9,095)

Effect of tax rates in foreign jurisdictions

236

176

Non-deductible expenses

171

449

Interest non-deductible on CLN

-

7,913

Research and development tax credit

161

60

Current year deferred tax asset not recognised

(211)

1,064

Foreign tax deducted at source being expensed

338

58

Fixed Asset Differences - Ineligible depreciation

(570)

15

Overprovided in prior years

(84)

(95)

Total tax expense

 1,439

545

 

Tax charged within the 6 months ended 31 December 2021 has been calculated by applying the effective rates of tax which are expected to apply to the Group for the period ending 30 June 2022 using rates substantively enacted by 31 December 2021 as required by IAS 34 'Interim Financial Reporting'. Where appropriate we have estimated and applied separate annual effective income tax rate for each jurisdiction and category of income, where appropriate.

 

At the end of December 2021, the Group has significant tax losses in the UK available for offset against future taxable profits. The Group has not recognised a deferred tax asset related to Fixed Asset timing differences, short term temporary differences, losses and share based payments of approximately $106.4m (30 June 2021: $97.2m) as there is sufficient uncertainty whether the losses will be utilised in the foreseeable future. The tax rate applied considers 25% for UK and 27% for US as these are tax rate expected to be applicable by the time the loss will be unwound.

 

 

8  Earnings per share ("EPS")

 

Basic earnings per share

The calculation of basic EPS has been based on the following profit/(loss) attributable to ordinary shareholders and weighted-average number of ordinary and preference shares outstanding.  Preference shares have been included in EPS as they rank pari-passu with ordinary shares in respect of dividend and voting rights. 

 

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

 

$'000

$'000

Profit/(Loss) attributable to ordinary shareholders (basic)

5,917

(48,411)

 

Weighted-average number of ordinary shares (basic)

Six-months ended
31-Dec-21
Unaudited

Six-months ended
31-Dec-20
Unaudited

Issued ordinary shares at beginning of the period (note 11)

697,680,127

531,470,750

Effect of share options exercised (shares issued during the period)

100,399

24,000

Effect of share buyback

(48,974)

 -

Shares cancelled during period

-

(41,299,000)

Weighted-average number of shares for calculating basic earnings per share at period end

697,731,552

490,195,750

Potentially dilutive share awards:

 

 

Outstanding awards at period end

22,406,412

-

Weighted-average number of shares for calculating diluted earnings per share at period end

720,137,964

490,195,750

 

The number of shares presented in prior year has been adjusted to reflect the conversion of shares that took place during the year, prior to IPO. See note 11 for further details.

 

 

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

 

$'000

$'000

Basic earnings/(loss) per share

$0.01

$(0.10)

Diluted earnings/(loss) per share

$0.01

$(0.10)

 

Diluted earnings per share

Options, growth shares and share awards

In 1H FY 2021 these were represented by growth shares and options while in 1H FY 2022 this considers the share awards under the 2021 AIP schemes (note 12). Growth shares converted into shares before IPO (note 11).

 

Awards granted after IPO

Awards granted to employees under the 2021 AIP Scheme are considered to be potential ordinary shares. They have been included in the determination of diluted earnings per share if the required TSR hurdles would have been met based on the company's performance up to the reporting date, and to the extent to which they are dilutive. The awards have not been included in the determination of basic earnings per share. Details relating to the awards are set out in note 12. The awards granted in the period are not included in the calculation of diluted earnings per share, because they are antidilutive for the period ended 31 December 2021. These awards could potentially dilute basic earnings per share in the future.

 

 

9   Cash and Cash equivalents

 

 

31-Dec-21

Unaudited

30-Jun-21

Audited

 

 

$'000

$'000

Cash at bank and in hand

 

285,737

278,208

Deposits at call

 

80,029

64,150

Cash and cash equivalents

 

365,766

342,358

 

Deposits at call are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition and are repayable with 24 hours' notice with no loss of interest.

 

 

10  Provisions

 

 

Provision for share-based payment tax

Other provision


31-Dec-21 Total

Unaudited

Provision for share-based payment tax


 30-Jun-21 Total

Audited

 

$'000

$'000

$'000

$'000

$'000

Opening provision

22,945

-

22,945

-

-

Reclassification from accruals

-

-

-

1,418

1,418

Accrual for the year

5,986

732

6,718

21,527

21,527

Utilisation

(1,783)

-

(1,783)

-

-

Closing provision

27,148

732

27,880

22,945

22,945

 

 

 

 

 

 

Current

26,291

-

26,291

22,430

22,430

Non-current

857

732

1,589

515

515

Total provision

27,148

732

27,880

22,945

22,945

 

The Group accounts for a provision on tax payments when employer has primary liability to pay for social security-type contribution on share-based payments at the time of exercise.

 

Other provision includes an estimate of tax charges related to new permanent establishments in countries where Darktrace does not currently have a subsidiary. The estimate includes an amount representing expected interest and penalty (total estimated penalty and interest amounts to $0.3 million) and is the result of the assessment of the potential historical impact arising as a consequence of Darktrace's continuous international expansion into new jurisdiction.

 

 

11  Share capital and share premium

 

Share capital

Number of ordinary shares of £0.01 each

Number of preference shares of £0.01 each

Number of deferred shares of £0.01 each

Number of growth shares of £0.01 each

Total number of shares

Share capital $'000

Share premium $'000

Merger reserve $'000

At 1 Jul 20

1,761,619

364,264

119,288

32,225

2,277,396

29

170,402

Share cancellation

(177,343)

-

-

-

(177,343)

(2)

(127,061)

 -

Shares issued in the period

225

-

-

37,100

37,325

-

212

 -

Transfers

-

-

575

(575)

-

-

-

 -

At

31 Dec 20

1,584,501

364,264

119,863

68,750

2,137,378

27

43,553

 -

At 1 Jan 21

1,584,501

364,264

119,863

68,750

2,137,378

27

43,553

-

Shares issued in the period

50

-

-

-

50

-

-

-

Growth shares issued in the period

-

-

-

38,325

38,325

-

-

-

Growth shares converted into preference shares

-

-

200

(200)

-

-

-

-

Conversion of preference shares into ordinary

364,264

(364,264)

-

-

-

5

-

-

Share subdivision

485,254,934

-

-

-

485,254,934

-

-

-

Conversion of growth shares into ordinary shares

3,101,843

-

-

(106,875)

2,994,968

43

-

-

Convertible loan conversion

77,475,499

-

-

-

77,475,499

1,076

269,016

-

Share issued at incorporation of Darktrace plc

1

50,000

-

-

50,001

69

-

-

Share for share exchange

-

-

-

-

-

6,733

(312,569)

305,789

Shares issued at IPO

-

-

-

129,849,035

1,803

224,782

 

At

30 Jun 21

697,630,127

50,000

120,063

-

697,800,190

9,756

224,782

305,789

At 1 Jul 21

697,630,127

50,000

120,063

-

697,800,190

9,756

224,782

305,789

Options exercised

-

-

-

-

-

-

56

-

Share premium cancellation

-

-

-

-

-

-

(224,838)

-

Shares issued

1,581,578

-

-

-

1,581,578

21

335

-

At

31 Dec 21

699,211,705

50,000

120,063

-

699,381,768

9,777

335

305,789

 

The preference shares are not redeemable. The holders of preference shares are not entitled to receive preferential dividends and are entitled to one vote per share.

 

All shares rank pari-passu in all respects except deferred shares hold no voting rights or rights to distribution and are entitled to receive £1.00 for the entire class in preference to any payment to the ordinary shares on liquidation, and preference shares have a liquidation preference up to their subscription price.

 

Share cancellation

On 14 July 2020 the share capital of Darktrace Holdings Limited was reduced with reference to the shares held by ICP Darktrace Holdings Limited.

 

CLNs conversion

On 30 April 2021, each of the Convertible Note Holders agreed that the CLNs would convert into ordinary shares in Darktrace Holdings Limited on 4 May 2021, two days prior to the Admission Date.

 

Group reorganisation

During the year, the Company carried out a reorganisation of its share capital to facilitate a listing to the premium segment of the official list of the Financial Conduct Authority and to trade on the London Stock Exchange Main Market for listed securities. This is described as follows:

 

Share conversion and CLN conversion

On 4 May 2021, the Preferred Shares and Growth Shares in Darktrace Holdings Limited automatically converted into ordinary shares in Darktrace Holdings Limited. Later on 4 May 2021, the CLNs converted into ordinary shares in Darktrace Holdings Limited as described above.

 

Shares Sub-Division

At 11.59pm on 4 May 2021, shortly following the Share Conversion and the Convertible Loan Note Conversion, the Ordinary Shares (being the entire outstanding Darktrace Holdings Limited Shares other than the Company Deferred Shares and the Company Redeemable Preference Shares) were sub-divided by 250.

 

As a result of the share sub-division and subsequent share exchange, the number of options outstanding at the time of share exchange has also been subdivided by 250 to mirror the new shares which issued in relation to the exercise of the options itself.

 

Share for share exchange

On 4 May 2021, after the share conversion and the subdivision, each of the Shareholders of Darktrace Holdings Limited transferred the Darktrace Holdings Limited Shares it held as at the Completion Date (as stated in the Company's register of members) to Darktrace plc, and Darktrace plc allotted and issued an equivalent number of shares, credited as fully paid, in consideration for the transfer of such Shares. The shares were exchanged as follows: 1 Darktrace plc Ordinary Share for 1 Darktrace Holdings Limited Ordinary Share and 1 Darktrace plc Deferred Share for 1 Company Deferred Share (as applicable).

 

As the Company issued equity shares in consideration for securing a holding of 100% of the nominal value of each class of equity in Darktrace Holdings Limited, the application of merger relief is compulsory. Merger relief is a statutory relief from recognising any share premium on shares issued. Instead, a merger reserve is recorded equal to the value of share premium which would have been recorded if the provisions of section 612 of the Companies Act 2006 had not be applicable. The value of the merger relief for the Company is $55.2 million.

 

As management has used the retrospective presentation method, the equity structure (that is, the issued shares capital) would reflect that of the new entity (Darktrace plc), with other amounts in equity (such as revaluation, retained earnings and cumulative translation reserve) being those from the consolidated financial statements of the previous Group holding entity (Darktrace Holding Limited). The resulting difference has been recognised as a component of the equity as a merger reserve ($250.6 million).

 

Share premium cancellation

The share-premium cancellation received shareholder approval prior to the IPO on 29 April 2021. The share premium was cancelled on 28 September 2021 following the registration of the order of the High Court of Justice (Chancery Division) by the Registrar of Companies. The total amount of share premium at the time of cancellation has been reclassified to retained earnings.

 

Share buy back

During December 2021 the company purchased 2,460,678 shares on-market to satisfy, in part, Darktrace's pre-existing obligations arising from its share incentive programmes. The shares were acquired at an average price of £4.11 ($5.47) per share, with prices ranging from £3.90 ($5.19) to £4.31 ($5.74). The total cost of $13.6 million, including transaction costs, was deducted from equity.

 

Treasury shares

The directors have determined that they do control a company called Equiniti Trust (Jersey) Limited, even though Darktrace plc owns 0% of the issued capital of this entity. Equiniti Trust (Jersey) Limited holds shares (53,299,571) of Darktrace plc for the purpose of fulfilling the requirement of the stock options plan issued before IPO. Those shares are treated as treasury shares in the consolidated financial statements.

 

 

12  Share based payments

 

Share based payment charges have been made in the Consolidated Statement of Comprehensive income within the following functional areas.

 

 

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

 

$'000

$'000

Sales and marketing

6,216

2,767

Research and development

3,148

940

Other administrative

6,384

2,103

Total share-based payment expense

15,748

5,810

 

$2.7 million of the share-based payment expense has been capitalised as intangible assets.

 

Option scheme issued before IPO

Movements in the number of share options outstanding and their related weighted average exercise prices ("WAEP") are as follows:

 

 

Six-months ended

31-Dec-2021

 

Six-months ended

31-Dec-2020

 

WAEP

Options

WAEP

Options

 

$

Number

$

Number

Outstanding at 1 Jul - Audited

1.56

54,970,631

0.92

55,719,575

Granted

-

-

2.87

2,939,003

Lapsed

4.09

(336,571)

2.87

(53,834)

Exercised

0.17

(3,138,725)

-

-

Outstanding at 31 Dec - Unaudited

1.63

51,495,335

 0.96

58,604,744

Exercisable at 31 Dec - Unaudited

1.12

43,267,210

0.66

49,932,333

 

The table below presents the weighted average remaining contractual life ('WACL') and the price range for the options outstanding at each period end:

 

 

31-Dec-21

 

30-Jun-21

Range of exercise prices

WACL
$

Options

Number

Unaudited

WACL
$

Options

Number

Audited

$0.00 to $0.23

1.39

19,924,978

1.40

22,627,078

$0.41 to $0.67

2.68

6,574,965

3.19

6,945,465

$1.37 to $1.45

3.94

3,627,845

4.45

3,654,320

$2.09 to $2.21

4.39

2,453,032

4.89

2,475,711

$2.76 to $2.87

3.33

12,389,515

3.84

12,549,307

$5.20 +

3.21

6,525,000

3.71

6,718,750

 

3.24

51,495,335

3.70

54,970,631

 

Awards issued at IPO

 

Tranche 1 Performance awards

Tranche 2 Performance awards

Executive Awards

Top Up Awards

 

Time based awards

Grant date

30-Apr-21

30-Apr-21

30-Apr-21

30-Apr-21

30-Apr-21

Share price at grant date

£2.5 ($3.46)

£2.5 ($3.46)

£2.5 ($3.46)

£2.5 ($3.46)

£2.5 ($3.46)

Exercise price

£0.0 ($0.0)

£0.0 ($0.0)

£0.0 ($0.0)

£0.0 ($0.0)

£0.0 ($0.0)

Fair value per option

£1.5 ($2.08)

£1.59 ($2.20)

£1.59 ($2.20)

£0.77 ($1.07)

£2.5 ($3.46)

Expected life in years

2.17

3.17

3.17

1

n/a

Expected Volatility

40%

40%

40%

50%

n/a

Risk free interest rate

0.03%

0.14%

0.14%

0.00%

n/a

Cancellation rate

10%

10%

10%

10%

n/a

Dividend yield

0%

0%

0%

0%

n/a

Correlation

10%

10%

10%

10%

n/a

Number of awards issued

450,656

  901,313

775,000

19,741,840

151,101

Number of awards outstanding at 31 Dec 21

450,656

  901,313

775,000

19,156,503

138,081

Number of awards exercisable at 31 Dec 21

-

-

-

-

13,000

 

Awards issued during the period

The fair value of share-based payments has been calculated using the Monte Carlo option pricing model. Monte Carlo models are used to simulate a distribution of TSRs/share prices. The model utilises random number generation with the distribution determined by volatility, risk free rate and expected life.

 

The Performance Awards carry market-based vesting criteria which must be incorporated into the valuation. Vesting is dependent upon the Company's TSR performance ranked against the constituents of the FTSE 350 (ex. investment trusts) ('FTSE Index'). TSR is defined as the change in Net Return Index for a company over a relevant period. The Net Return Index is equal to the index that reflects movements in share price over a period, plus dividends which are assumed to be reinvested on a net basis in shares on the ex-dividend date.

 

TSR is calculated over the 'Performance Period' using the following formula: (TSR2-TSR1)/TSR1.

·   TSR1 is the Net Return Index at admission date

·   TSR 2 is the average Net Return Index over each weekday during the three months period ending on the last day of the TSR performance period.

 

Given the same market-based criteria applies to both Tranche 2 of the Performance Awards and the Executive Awards, the same model and core inputs are used to value both of these Grants. A correlation coefficient is included to model the way in which the price of a listed company's stock tends to move in relation to the stock of other listed companies. Expected volatility was determined based on the historic volatility of comparable companies. The expected life is the expected period from grant to exercise based on management's best estimate.

 

The following assumptions were used in the valuation of the awards issued in August and November:

 

Tranche 1
Performance
awards

Tranche 2
Performance
awards

Tranche 1
Performance
awards

Tranche 2
Performance
awards

Time based awards

Grant date

23-Aug-21

23-Aug-21

05-Nov-21

05-Nov-21

05-Nov-21

Share price

at grant date

£5.78 ($7.87)

£5.78 ($7.87)

£5.78 ($7.84)

£5.78 ($7.84)

£5.78 ($7.84)

Exercise price

£0.0 ($0.0)

£0.0 ($0.0)

£0.0 ($0.0)

£0.0 ($0.0)

£0.0 ($0.0)

Fair value per option

£5.19 ($7.07)

£4.93 ($6.71)

£3.68 ($5.00)

£3.83 ($5.17)

£5.78 ($7.84)

Expected life in years

1.85

2.85

2.00

3.00

n/a

Expected volatility

40%

40%

40%

40%

n/a

Risk free interest rate

0.84%

0.70%

0.34%

0.40%

n/a

Cancellation rate

10%

10%

10%

10%

n/a

Dividend yield

0%

0%

0%

0%

n/a

Correlation

15%

15%

15%

15%

n/a

Number of awards

50,461

100,923

196,333

392,667

321,250

Number of awards outstanding

at 31 Dec 21

50,461

100,923

193,833

387,667

321,250

Number of awards exercisable

at 31 Dec 21

-

-

-

-

-

 

The following assumptions were used in the valuation of the awards issued in December:

 

 

Time based awards

Tranche 1
Performance
awards

Tranche 2
Performance
awards

 

Time based awards

Grant date

13-Dec-21

31-Dec-21

31-Dec-21

31-Dec-21

Share price

at grant date

£3.92 ($5.20)

£4.21 ($5.67)

£4.21 ($5.67)

£4.21 ($5.67)

Exercise price

£0.0 ($0.0)

£0.0 ($0.0)

£0.0 ($0.0)

£0.0 ($0.0)

Fair value per option

£3.92 ($5.20)

£2.72 ($3.67)

£2.78 ($3.75)

£4.21 ($5.67)

Expected life in years

n/a

2.00

3.00

n/a

Expected volatility

n/a

40%

40%

n/a

Risk free interest rate

n/a

0.60%

0.70%

n/a

Cancellation rate

n/a

10%

10%

n/a

Dividend yield

n/a

0%

0%

n/a

Correlation

n/a

15%

15%

n/a

Number of awards issued

1,400,190

24,482

 38,624

17,031

Number of awards outstanding

at 31 Dec 21

1,387,170

24,482

38,624

 

17,031

Number of awards exercisable

at 31 Dec 21

-

-

-

-

 

Time-based Awards vest according to time only. There is no strike price, no market-based vesting criteria and no expectation of dividends. The fair value of the time-based awards will simply be the value of the underlying equity at the time they were granted.

 

 

13  Changes in liabilities arising from financing activities

 

The changes in the Group's liabilities arising from financing activities can be classified as follows:

 

 

Lease liabilities

Convertible loan (host contract)

Convertible loan (embedded derivative)

Total

 

$'000

$'000

$'000

$'000

At 1 Jul 20 - Audited

(35,546)

-

-

(35,546)

Changes from financing cash flows

 

 

 

 

Proceeds from issue of convertible bonds

-

(83,286)

(79,535)

(162,821)

Repayment of lease liabilities

2,641

-

-

2,641

Interest payment

1,383

-

-

1,383

Other changes

 

 

 

 

Interest expense

(1,383)

-

-

(1,383)

New leases

(4,038)

-

-

(4,038)

Change in fair value

-

-

(27,360)

(27,360)

Effective interest rate on host loan

-

(15,291)

-

(15,291)

Foreign exchange movements

(1,768)

-

-

(1,768)

At 31 Dec 20 - Unaudited

(38,711)

(98,577)

(106,895)

(244,183)

At 1 Jul 21 - Audited

(35,248)

-

-

(35,248)

Changes from financing cash flows

 

 

 

 

Repayment of lease liabilities

2,525

-

-

2,525

Interest payment

1,318

-

-

1,318

Other changes

 

 

 

 

Interest expense

(1,318)

-

-

(1,318)

New leases

(708)

-

-

(708)

Foreign exchange movements

431

-

-

431

At 31 Dec 21 - Unaudited

(33,000)

-

-

(33,000)

 

The Group entered a multi-currency $25.0 million Revolving Credit Facility agreement with Silicon Valley Bank on 15 January 2021 with a maturity date of 15 January 2023. Borrowings under the Facility are secured pursuant to various security agreements, mortgages and other collateral granted to the Lender.  Interest is charged subject to an all-in floor of 3.75% and the facility contains a letter of credit sublimit of $10.0 million equivalent.  Letters of credit totalling $1.0 million have been provided in relation to lease agreements, which reduce the balance available to draw.  As at 31 December 2021, $24.0 million is available to draw on the facility.

 

 

14  Related party transactions and controlling related party

 

In line with the significant judgement documented in the 2021 Annual Report, the Directors consider that the Company and the Group had no ultimate controlling party.

 

There were no related party transactions with Directors to disclose in any of the years presented.

 

Key management remuneration

The Group considers to be part of the key management personnel the members of the board and three senior managers also executive directors of the Group, who exert control over the strategy and direction of the Group. Their costs in the period were as follows:

 

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

 

$'000

$'000

Wages and salaries

1,541

918

Social security costs

306

131

Pension costs

31

20

Share-based payment charge

3,397

1,049

Share-option related employer tax charges

2,281

-

 

7,556

2,118

 

Short term employee benefits of the Group's key management personnel include salaries and non-cash benefits. Long term benefits include payments to defined contribution pension scheme only.

 

Other related party disclosures

Management has disclosed details of all transactions with ICP London Limited and its affiliated companies, Luminance Technologies Ltd and Neurence Limited, as companies under common directorship up to 4 May 2021, for comparative reasons.

 

 

Transaction value

Balances outstanding

 

 

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

 

 

31-Dec-21

Unaudited

 

 

30-Jun-21 Audited

 

 

$'000

$'000

$'000

$'000

Fees for management support services

-

1,559

-

-

Recharge of staff expenditure

-

100

-

-

Income from recharge of office space

(270)

(92)

102

255

Revenue received

-

-

-

-

Recharge of legal fees

-

326

-

-

Hosting fees

3

-

-

1

 

(267)

1,893

(102)

256

               

 

Income from recharge of office space included income from Luminance Technologies Ltd. This contract has been terminated effective from 3 October 2021.

 

The Group has earned the following revenues from investors and affiliated companies:

 

 

Transaction value

Balances outstanding

 

Six-months

ended

31-Dec-21

Unaudited

Six-months

ended

31-Dec-20

Unaudited

 

 

31-Dec-21

Unaudited

 

 

30-Jun-21

Audited

 

 

$'000

$'000

$'000

$'000

 

Revenues received from investors

(197)

(113)

(265)

-

 

Revenues received from affiliated entities of investors

(418)

(14)

(903)

(154)

 

 

(615)

(127)

(1,168)

(154)

 

 

No guarantees have been provided to or received from these parties.

 

Please refer to the 2021 Annual Report and to note 18 for information in relation to the CLNs conversion into shares as at 4 May 2021.

 

 

15  Risk management objectives and policies

 

The Group's financial risk management is controlled by a central treasury department ("Group treasury") under policies approved by the Board of Directors. Group treasury identifies and evaluates financial risks in close co-operation with the Group's CFO and other Executive Directors and Senior Managers. The Board authorises written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments, and investment of excess liquidity.

 

Market risk

Foreign exchange risk

The table below details the Group's exposure to foreign currency risk, in currencies different from the Group's functional currency, for periods in which the functional currency was USD:

 

 

AUD

 

CAD

 

EUR

 

GBP

 

JPY

 

Other


 

Currencies

Total

 

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000 

At 31 Dec 21

Unaudited

 

 

 

 

 

 

 

Trade receivable

864

1,999

11,177

9,421

19

1,195

24,675

Deposits

257

107

157

3,829

74

615

5,039

Cash and cash equivalents

3,394

4,441

12,097

20,540

173

1,097

41,742

Trade payables

(81)

(88)

(1,163)

(2,819)

(152)

(229)

(4,532)

Total

4,4344

6,459

22,268

30,971

114

2,678

66,924

At 30 Jun 21
Audited

 

 

 

 

 

 

 

Trade receivable

1,386

1,302

14,485

12,280

30

1,360

30,843

Deposits

125

27

-

2,366

-

472

2,990

Cash and cash equivalents

1,328

2,332

15,045

20,174

600

1,551

41,030

Trade payables

(196)

(52)

(1,442)

(5,529)

(169)

(258)

(7,646)

Total

2,643

3,609

28,088

29,291

461

3,125

67,217

                       

 

The aggregate net foreign exchange loss recognised in other administrative expenses are:

 

 

30-Jun-21

Audited

 

 

$'000

$'000

Net foreign exchange gain/(loss)

 

 1,438

(845)

 

As shown in the table above, the Group is primarily exposed to changes in USD/GBP and USD/EUR exchange rates. The sensitivity of profit or loss to changes in the exchange rates arises mainly from USD or GBP denominated financial assets and liabilities.

 

31-Dec-21

Unaudited

30-Jun-21

Audited

 

$'000

$'000

USD/EUR exchange rate +/- 10% (loss)/gain

(2,024) / 2,474

 (2,553) / 3,121

USD/GBP exchange rate +/- 10% (loss)/gain

(2,816) / 3,441

 (2,663) / 3,255

 

The Group operates a natural hedging strategy where possible to mitigate its foreign exchange risk.

 

Price risk

The Group has no significant exposure to equity securities price risk.

 

Credit risk

Credit risk arises from cash and cash equivalents, contractual cash flows of debt investments carried at amortised cost deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables.

 

Credit risk is managed on a Group basis. Significant partners are independently rated through credit agencies, if there is no independent rating an internal review is carried out. The Credit manager assesses the credit quality of the partner, taking into account its financial position, as well as experience for customers and partners in the same region. There are no significant concentrations of credit risk, whether through exposure to individual customers or partners, specific industry sectors or regions.

 

The Group's main financial assets that are subject to the expected credit loss model are trade receivables from the sale of software products and, to a lesser extent, related services. While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.

 

The Board approved Treasury policy governs the credit limits for deposits with banks and financial institutions.  Credit ratings and limits are reviewed on monthly basis by Group Treasury.

 

Trade receivables are fully provided where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments for a period of greater than 6 months past due. The general credit loss provision will begin to be provided from thirty days past due based on the historic default rates adjusted for regional performance.  Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item.

 

Liquidity risk

Prudent liquidity risk management involves maintaining sufficient cash and marketable securities, and the availability of funding through an adequate amount of committed credit facilities, to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Group treasury maintains flexibility in funding by maintaining both liquid cash and availability under committed credit lines.

 

Maturity of financial liabilities

The table below presents the Group's financial liabilities by relevant maturity Grouping, based on their contractual maturities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Contractual maturities for financial liabilities 

Less than 12 months

Between 1 - 2 years

Between 2 - 5 years

Over 5 years

Carrying amount liabilities

 

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

Trade payables

10,094

-

-

-

10,094

Accruals

9,797

-

-

-

9,797

Lease liabilities

4,486

4,936

14,228

9,350

33,000

 At 31 Dec 21 - Unaudited

24,377

4,936

14,228

9,350

52,891

 

 

 

 

 

 

Trade payables

12,566

-

-

-

12,566

Accruals

6,053

-

-

-

6,053

Lease liabilities

4,285

5,202

13,897

11,864

35,248

 At 30 Jun 21 - Audited

22,904

5,202

13,897

11,864

53,867

 

 

16  Summary of financial assets and liabilities by category

 

The carrying amounts of the assets and liabilities as recognised at the statement of financial position date of the years under review may also be categorised as follows:

 

 

31-Dec-21

Unaudited

30-Jun-21

Audited

 

 

$'000

$'000

Financial assets at amortised cost

 

 

 

Deposits

 

5,743

6,109

Trade receivables

 

46,987

58,482

Accrued income

 

3,637

1,713

Cash and cash equivalents

 

365,766

342,358

Total financial assets at amortised cost

 

422,133

408,662

 

Financial liabilities at amortised cost

 

 

 

Trade and other payable

 

(10,094)

(18,619)

Lease liabilities

 

(33,000)

(35,248)

Total financial liabilities at amortised cost

 

(43,094)

(53,867)

 

 

17  Capital management policies and procedures

 

The Group's objectives when managing capital are to:

•  safeguard the ability to continue as a going concern, to provide adequate returns for shareholders, and

•  maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets to reduce debt. The Group monitors capital based on the carrying amount of the equity less cash and cash equivalents as presented on the face of the statement of financial position.

 

 

31-Dec-21

Unaudited

30-Jun-21

Audited

 

$'000

$'000

Capital

 

 

Total equity

266,873

258,258

Less cash and cash equivalents

(365,766)

(342,358)

Total capital

(98,893)

(84,100)

 

 

 

Overall financing

 

 

Total equity

266,873

258,258

Less leasing liabilities, borrowings and other financing liabilities

(33,000)

(35,248)

Total financing

233,873

223,010

 

 

18  Capital commitments

 

The Group had no capital commitments at 31 December 2021 or 30 June 2021.

 

 

19  Post balance sheet events

 

Cybersprint acquisition

On 22 February 2022 Darktrace entered into a definitive agreement to acquire the entire issued share capital of Cybersprint B.V. ("Cybersprint"), an attack surface management company that provides continuous, real-time insights from an outside-in perspective to eliminate blind spots and detect risks. The acquisition of Cybersprint is aligned with Darktrace's vision of delivering a 'Continuous Cyber AI Loop' and complements its Self-Learning technology and inside-out view.

 

Darktrace is acquiring Cybersprint for €47.5 million ($53.7 million) to be paid approximately 75% in cash and 25% in equity. The completion date of 1 March 2022 is when control has been obtained. Cybersprint's results of operations are not expected to be material to Darktrace's results for the remainder of FY 2022.

The Purchase Price Allocation exercise required under IFRS 3 (Business combinations) will be substantially completed by the year end.

New lease agreement

On 1 March 2022 a new lease agreement for around 28 thousand sq ft office space with a ten-year term, a break clause after 5 years and rental costs of approximately £2.2 million ($3.0 million) per year was agreed. This agreement is expected to result in the recognition of a right-of-use asset of £6.3 million ($8.5 million) million and the recognition of a lease liability of £7.3 million ($9.7 million) at inception date.

 

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