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Darktrace
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=== Customer base === Darktrace’s customer base has expanded from 1,659 in 2018 (period ending in Jun- 18) to 6,531 as of Dec-21 (growing 40% YoY during 1H22), with products deployed in more than 110 countries. The customers span all industries and sizes – Financial Services, Darktrace’s biggest industry vertical by number of customers, represented 19% of total customers as of Feb-21. No single customer accounted for more than 10% of revenue in 1H22, 2021 and 2020. By geography (based on contractual location), US and Canada account for the biggest portion of total revenue (38% in 1H22, of which US was 34%), followed by Europe (24%), UK (17%) and Rest of the World (21%). Some Darktrace customers include City of Las Vegas, FarFetch, McLaren Group, Micron, Samsung, Ted Baker, Kohl’s, Coca Cola, NHS, Serco, Funding Circle, etc. '''Figure 4: Customer split % (by volume) by industry vertical (as of Feb-21)'''<ref name=":2">Source: Company data.</ref> [[File:Figure 4.png]] '''Figure 5: Period-end number of customers<ref>Source: Company data; FY ends in Jun.</ref>''' [[File:Figure 5.png]] '''Figure 6: Revenue split by geography (%)<ref>Source: Company data; revenue from customers has been attributed to the geographic market based on contractual location; FY ends in Jun.</ref>''' [[File:Figure 6.png]] ==== Churn ==== The majority of Darktrace customers fall in the SMB/mid-market category, with ~85% of customers with contract size up to $100k in ARR. This portion has remained fairly consistent in recent years. Customers with contract size less than $100k in ARR contributed 51% of total ARR during 1H22. The company has demonstrated a track record of driving higher platform adoption across new and existing customers. The portion of customers purchasing more than one product has increased from 47% in 2019 to 88% in 1H22 (with the portion of customers purchasing four or more products (out of a possible 10 currently) rising from 5% in 2019 to 43% in 1H22). The majority of Darktrace customers buy multiple products at the initial point of purchase. '''Figure 7: Customer split by contract ARR size<ref>Source: Company data; FY ends in Jun.</ref>''' [[File:Figure 7.png]] '''Figure 8: % of customers using more than one Darktrace product<ref>Source: Company data; FY ends in Jun.</ref>''' [[File:Figure 8.png]] Darktrace reported 1-year gross ARR churn of 6.4% as of end-1H22 (six-month period ending in Dec-21) vs. 7.6% exiting Jun-21. As expected, Darktrace sees higher churn among customers with contract size less than $100k in ARR. Darktrace’s 1-yr gross ARR churn is higher compared to other cybersecurity vendors (such as Crowdstrike, which reported 1-yr gross ARR churn of ~2% in FY21) given its SMB/mid-market heavy customer base. Darktrace reported net ARR retention rate of 105.1% in 1H22 (increasing from 99.1% in 2020 and 102.9% in 2021) – the increase in net ARR retention rate is a function of higher product upsell/cross-sell and stabilizing churn. Darktrace is investing in its customer success function, which should help stabilize churn and drive higher upsells/cross-sells at the point of renewal. That said, given the SMB/mid-market heavy customer base (which is characterized by higher churn compared to larger enterprise customers) and multiple products purchased at the initial point of sale (which limits the scope of cross-sells), Darktrace does not expect to see a significant improvement in net ARR retention rate going forward (the improvement, if any, is likely to be more gradual). '''Figure 9: Period-end 1-year gross ARR churn (%)<ref>Source: Company data; one-year gross ARR churn rate is defined as the 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 metric reflects only customer losses and does not reflect expansions or contractions); FY ends in Jun.</ref>''' [[File:Figure 9.png]] '''Figure 10: Period-end net ARR retention rate (%)<ref>Source: Company data; net ARR retention rate is defined as the current ARR value for all customers that were customers one year prior to the measurement date, divided by their ARR one year prior to the measurement date (this metric reflects customer losses, expansions and contractions); FY ends in Jun.</ref>''' [[File:Figure 10.png]]
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