US$(454)4.01--utionpputionppH2)6.0xEV/Salesmultiple,re?ectingbroadercybersecuritysoftwarepeervaluationlevelsorganStanleyEstimates945p(+193.84%)1000750500425p(+32.15%)2500SEPMARSEPSEP'23rowthcybersecurityvendorwithabroadproductportfoliocoveringAI/ML-ectionresponseinvestigationgreen?eldopportunity(c.7.4kcurrents?DifferentiatedapproachtocybersecurityusingAI/MLtechniquestoidentifyanomalieswithinthecustomers'ITenvironment.?Historyofdeliveringstronggrowthsincesigni?cantmid-termorganicgrowth,aswellasmarginelevationfrommid-singledigitsonids60%OverweighthteighttanleyResearchtanleyResearchViewdescriptionsofRiskRewardsThemeshereDarktraceexecutesstronglyonbothingcustomersaswellasnewcustomeracquisition.Newproductfamilies(e.g.Prevent,Heal)arewelladdressablecompanypenetrationwitha2xrginsexapplya3%terminalgrowthrate.OurDCF-EV/Sales.executesstronglyonnewbusinessgrowthacontinualexpansionoftheproductsuitengleveragecomesthrough,Darktracesigni?cantlyrampsupitsadj.EBITmarginpro?tabilitytowardstypicalenterprisesoftwarelevelsatmaturity(MSec.24%interminalstate).growthslowsdownmorerapidlythanourorymaturesandproductexpansionfailstogainhighercostintensitysubsequentlydrivesadjustedEBITmarginsmateriallylowerthanalsoapplylower2%terminalgrowth.HLevelofnetretentionrateLevelandtrajectoryofconstantcurrencynetionsProductlaunchesandmarketreceptiontoPreventand(future)HealproductareasPotentialM&Aleveragingnetcashbalancesheetposition1H23resultsganStanleyResearchEstimateViewexplanationofregionalhierarchieshereImprovementsinexistingcustomereconomics(viahighernetretentionrate,orcross-sell)HigherrateofnewcustomeracquisitionthanRaddsM&Awhichexpandsaddressablemarketandcross-sellopportunityLower-than-expectedimprovementsinpro?tabilitytrajectoryIntensifyingcompetitionincorenetworkdetectionXDRmarketgrowthcannibalisespartofNDRCyberbreachstanleyResearch$50m$79m E C DG B M N An 10.0%n 10.0%bnbn11.0%bn10.1%bn$287.6bn14.0%bn8.0%50bn$0bn$0bn5.0%bn2021-26 $90bn$70bn$50bn$30bn$10bn$1237bn7.0bnProjectswithLargestSpendIncreasein2022(%TotalResponses)12%14%202020212022202320242025994629257258548205162925725854820518658622922051118315258147516612424644415110194 $248m$176mFY19FY20FY21FY22 8%6%4%2%FY18FY19FY20FY21FY22ts05,629FY18FY19FY20FY21FY22h FY20FY21FY22ΔΔ h, Yee 10.0V?00OEEEOUEOOUEEUOEO 8.3% 4%3 4%.6%8 8.9% 8YE30thJun-USDmAnnualisedrecurringrevenue(ARR)inY-1FXMSeannualisedrecurringrevenue(ARR)inYFXARRpercustomeratYFX 2% -27.7% -7.3%9.0%.0% 2.5%0Grossprofitas%ofsales 08%0 as%ofsales.5%.5% 0as%ofsales1155as%ofsales38)38)38)30)317)3 9 5 830)13)668543854854 357596000016070000002120754000055003003Totalnetcapex0000000000000000000000000000000001000000000003000000000000000000000000byentStanleyResearchat1585Broadway,(Attention:ResearchManagement),NewYork,NY10036USA.AnalystCertificationyMorganStanleyResearchhasbeenpublishedinaccordancewithourconflictmanagementpolicy,whichisavailable/institutional/research/conflictpolicies.APortugueseversionofthepolicycanbefoundat.brImportantRegulatoryDisclosuresonSubjectCompaniesithhasCMorganStanley&Co.LLCmakesamarketinthesecuritiesofSAPSE.MorganStanley&Co.InternationalplcisacorporatebrokertoEurowag,Sage,Trustpilot.ombtastockshoulddependonindividualcircumstances(suchastheinvestor'sexistingholdings)andotherconsiderations.GlobalStockRatingsDistribution(asofAugust31,2022)m Not-Rated/Hold00%00%0%00%100percent.AnalystStockRatingsUnlessotherwisespecified,thetimeframeforpricetargetsincludedinMorganStanleyResearchis12to18months.AnalystIndustryViews