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Darktrace
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=== Sales & Marketing expenses likely to remain elevated === Darktrace has reported scale efficiencies in its core non-T&E operating costs (excluding share-based compensation and associated employer tax charges) in recent years, with total non-T&E operating expenses as a % of revenue declining from 86% in 2020 to 74% in 1H22. This is primarily a function of some scale efficiencies the company has reported in its marketing function. Adding back share-based compensation and associated charges, non-T&E opex as % of revenue declined from 91% in 2020 to 84% in 1H22. Margin performance in 1H22 was helped by the following one-off components (these costs will likely return through 2H22/2023): * Impact from pandemic-related sales hiring delays; Darktrace is still getting back to its normal cadence of salesforce hiring and expects a catch-up in employee costs over the coming months; * Lower facilities/office costs as the return to office was delayed. While the company has not quantified the impact from these factors, it notes seeing some scale efficiencies, driven by a more efficient marketing function. The majority of sales and marketing expenses (salaries + 50% sales commissions) associated with revenue generated in a given period are incurred in prior periods (during contract acquisition) – this coupled with some improvement in marketing efficiency has translated to scale efficiencies. Darktrace sees a healthy pipeline of potential new customer opportunities and stable POV conversion rates (although the company has not disclosed this metric). However, JP Morgan believes it is too early to extrapolate this trend to outer years, given the increase in competitive intensity. Wage inflation is another factor to be considered in assessing the evolution of margin going forward.'''<br />Figure 28: Non-T&E operating expenses* (total) as % of revenue<ref name=":5">Source: Company data *includes share-based comp and associated employer tax charges; FY ends in Jun.</ref>''' [[File:Figure 28.png]] '''Figure 29: Non-T&E S&M expenses* as % of revenue<ref name=":5" />''' [[File:Figure 29.png]]
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