Darktrace in the clear after EY review; sees 31% growth in FY revenue

Darktrace said on Tuesday that an independent review by EY had not flagged any issues not already known to the cybersecurity firm and that it would not impact previous financial statements.

The company said EY reported "a number of areas already known to Darktrace where systems, processes or controls could be improved", adding that "there were no key findings arising from this inspection".

It also noted that Grant Thornton's audit opinions for prior years remain unchanged.

In January, short seller Quintessential Capital Management accused the group of irregular accounting practices, sending the shares to an all-time low.

Darktrace insisted that the review would have no impact on previously-filed public company financial statements or "change their belief that those financial statements fairly represent Darktrace's financial position and results".

The company also provided an update on trading for the fourth quarter and year to the end of June. Darktrace said it expects year-over-year revenue growth of at least 31% for FY23, and 29.2% at constant currency. It also expects 18.3% growth in customer numbers and an adjusted EBITDA margin of at least 22%, up from previous guidance of 19%.

For FY24, it expects annual recurring revenue growth of between 21% and 23%. Darktrace said it was expecting 2024 to be a "tale of two halves", with around 45% of net annualised recurring revenue to be added in the first half, and the rest in the second.

"It remains clear that macro-economic uncertainty is continuing to affect new customer acquisitions and some existing customer behaviour," it said.

"However, with early signs of recovery across the global economy, and with the opportunity to benefit from the recent and ongoing investments in its Go-To-Market strategy and wider organisation, Darktrace is framing its FY 2024 in terms of first half stabilisation and second half re-acceleration."

At 1220 BST, the shares were up 21% at 355.50p.

Victoria Scholar, head of investment at Interactive Investor, said: "The stock has surged today by almost 20% bringing its six-month rally to over 40%, reflecting the optimism towards the third party review that rebukes the short-seller concerns."

She added: "Shares had already been rebounding significantly this year after the company raised its 2023 guidance in April."

Danni Hewson, head of financial analysis at AJ Bell, said: "After coming under fire from a short seller about the state of its finances, Darktrace called in EY to review its books.

"Today we’ve had the findings from the report and they’ve essentially proved that the cybersecurity expert doesn’t have any skeletons in the closet, sending its share price soaring. Yes, there is some work to do with improving systems and controls, but nothing that impacts previous financial statements. Investors breathed a huge sigh of relief."