By Paul Sandle
LONDON (Reuters) -British cyber-security company Darktrace (LON:DARK) cut its earnings and cash guidance for the year on Wednesday after it decided to cease delaying part of its sales commission payments, a change it said was necessary to attract the best talent.
The switch will result in adjusted core earnings growth of 17% to 19% for the current year, down from its previous expectation of around 22%, and 25.5% achieved in the year to end-June, it said.
The change would also reduce free cash flow this year and early in its 2025 financial year because it will be paying all new commission and the final 50% of commission on previous sales. Previously 50% of commission was paid after 12 months.
Chief Financial Officer Cathy Graham told Reuters: "To align with the market and to attract better talent, we've decided to pay all commission upfront, which is market practice."
She said the change was a prudent measure that aligned better with revenue recognition and cash flow and earnings recognition going forward.
Shares in Darktrace, which have fallen 28% in the last 12 months, were trading down 4% in early deals as the changes overshadowed a set of results the company termed "robust".
Analysts at Jefferies said there was "more complexity" in the release than expected, but the "more fundamental messages" of robust demand, a growing product portfolio and investment in sales pointed to improving confidence in its growth.
Darktrace's Chief Executive Poppy Gustafsson said the company had not been immune to the tougher macro economic backdrop, which had caused a slowdown in new customer additions, but had continued to invest in new products, which like all Darktrace technology had AI at their core, and in its sales operation.
Darktrace reported a 31% rise in revenue to 545.4 million pounds ($684.8 million) for the year to end-June and a 52% rise in adjusted core earnings to 139.1 million pounds.
It confirmed its forecast for top-line growth of between 22% and 23.5% this year.
($1 = 0.7964 pounds)