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Darktrace
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=== Shifting the focus to profitability === Darktrace has delivered ‘beat and raise’ results in its short reporting history since IPO in Apr-21. In the near term, JP Morgan expects demand for AI-led detection and response offerings to remain high – this coupled with Darktrace’s brand awareness (a function of its high marketing spend), investment in additional salesforce hiring and the roll-out of the new ‘Prevent’ product offering should translate to healthy new customer acquisition and thus ARR growth, in JP Morgan's view. That said, unless the quality and stickiness of the customer base acquired is high, focus on new customer acquisition will not translate to sustainable profitable growth, in JP Morgan's view, even though the company may deliver healthy growth in the near term. In JP Morgan's view, Darktrace needs to demonstrate a decoupling between ARR growth and new customer acquisition & investment in sales headcount – this will be a function of a sustained increase in average contract ARR per new customer and continued improvement in net ARR retention rate (a function of lower churn and higher upsell/cross-sell). Sustained improvement in these metrics would allow the market to be more convinced of the company’s competitive positioning and moat. JP Morgan's estimates for 2022/23/24 revenue stand 1%/2%/5% higher than Bloomberg consensus estimates; JP Morgan expects the company to deliver adjusted EBITDA margin at the high end of its guidance range in 2022; however, JP Morgan's estimates for 2023/24 adjusted EBITDA stand 22%/4% below consensus estimates. {| class="wikitable" |+Table 1: Darktrace Revenue and adjusted EBITDA: FY22-24E - JPMe vs. consensus<ref>Source: J.P. Morgan estimates, Bloomberg Finance L.P.</ref> !FY ends in Jun ! colspan="3" |FY22 ! colspan="3" |FY23 ! colspan="3" |FY24 |- !$ (m) !JPMe !Cons. !Diff. (%) !JPMe !Cons. !Diff. (%) !JPMe !Cons. !Diff. (%) |- |Revenue |415.5 |409.6 |1.4% |548.1 |536.5 |2.2% |701.5 |670.2 |4.7% |- |Adj. EBITDA |49.2 |48.6 |1.3% |47.2 |60.4 |<nowiki>-21.9%</nowiki> |81.0 |84.6 |<nowiki>-4.3%</nowiki> |- |margin (%) |11.8% |11.9% |<nowiki>-2bps</nowiki> |8.6% |11.3% |<nowiki>-265bps</nowiki> |11.5% |12.6% |<nowiki>-108bps</nowiki> |}
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