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Hortonworks Reports Second Quarter 2017 Revenue of $61.8 Million, Up 42 Percent Year Over Year

Support Subscription Revenue Increased 48 Percent Year Over Year to $45.8 Million

 

SANTA CLARA, Calif., Aug. 3, 2017 — Hortonworks, Inc.® (NASDAQ: HDP), a leading innovator of open and connected data platforms, today announced financial results for the second quarter of 2017.

“The second quarter of 2017 was a significant milestone for Hortonworks, as we set another record revenue target by growing revenue 42 percent year over year,” said Rob Bearden, chief executive officer and chairman of the board of directors of Hortonworks. “The team executed very well and was focused on meeting a set of challenging goals, including significantly expanding our partnership with IBM. We have gained momentum each quarter this year by growing our footprint with existing customers and adding key new enterprise customers. We are on track for our most productive year ever.”

Second Quarter 2017 Financial Highlights

  • Revenue: Total GAAP revenue was $61.8 million for the second quarter of 2017, an increase of 42 percent compared to the second quarter of 2016.
  • Gross Profit: Total GAAP gross profit was $41.4 million for the second quarter of 2017, compared to $25.6 million for the same period last year. Non-GAAP gross profit was $43.4 million for the second quarter of 2017, compared to $27.0 million for the same period last year. GAAP gross margin was 67 percent for the second quarter of 2017, compared to 59 percent for the same period last year. Non-GAAP gross margin was 70 percent for the second quarter of 2017, compared to 62 percent for the same period last year.
  • Operating Loss: GAAP operating loss was $54.5 million for the second quarter of 2017, compared to $64.3 million for the same period last year. Non-GAAP operating loss was $27.0 million for the second quarter of 2017, compared to $41.6 million for the same period last year. GAAP operating margin was negative 88 percent for the second quarter of 2017, compared to negative 147 percent for the same period last year. Non-GAAP operating margin was negative 44 percent for the second quarter of 2017, compared to negative 95 percent for the same period last year.
  • Net Loss: GAAP net loss was $56.1 million for the second quarter of 2017, or $0.87 per basic and diluted share, compared to a GAAP net loss of $64.2 million, or $1.12 per basic and diluted share, in the second quarter of 2016. Non-GAAP net loss was $28.6 million for the second quarter of 2017, or $0.44 per basic and diluted share, compared to a non-GAAP net loss of $41.5 million, or $0.72 per basic and diluted share, for the same period last year.
  • Deferred Revenue: Deferred revenue was $216.2 million as of June 30, 2017, a 17 percent increase over the $185.4 million reported as of December 31, 2016 and a 64 percent increase over the $131.8 million reported as of June 30, 2016.
  • Cash & Investments: Cash and investments totaled $71.8 million as of June 30, 2017, compared to $89.2 million as of December 31, 2016 and $130.1 million as of June 30, 2016.
  • Operating Cash: Operating cash used was $11.7 million for the second quarter of 2017, compared to $14.1 million for the same period last year.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release.

Recent Business Highlights

  • Hortonworks Named a Leader in Big Data Warehouse Report by Independent Research Firm. In June, we announced that Hortonworks was among the select companies that Forrester Research, Inc. invited to participate in its June 2017 report titled The Forrester Wave™: Big Data Warehouse (BDW), Q2 2017. In this evaluation, Hortonworks was cited as a Leader. The Forrester Report noted, “Hortonworks delivers a viable open source BDW platform. Hortonworks delivers actionable intelligence from all kinds of data-in-motion and data-at-rest. Through its open source strategy, Hortonworks continually evolves its offering by working closely with partners across the Enterprise Data Warehouse ecosystem of tools and vendors. The vendor provides a cost-effective, nimble, and scalable architecture to implement big data warehouses, whether on-premises or in the cloud. All of the technology built into the Hortonworks Data Platform (HDPTM) is an Apache open source project. Enterprises like Hortonworks’ storage and compute processing, broad data ingestion, data governance, and open source support when deploying BDW.”
  • IBM, Hortonworks Expand Partnership to Help Businesses Accelerate Data-Driven Decision Making. In June, we announced an expansion of our relationship with IBM that is focused on extending data science and machine learning to more developers and across the Apache Hadoop ecosystem. The companies are combining HDP with IBM Data Science Experience and IBM Big SQL into new integrated solutions:
    • IBM is adopting HDP for its Hadoop distribution and will integrate it with Data Science Experience and machine learning. As a result, this solution will combine for users the rich data security, governance and operational functionality provided by HDP, and the advanced analytics and management of the Data Science Experience. IBM will migrate existing IBM BigInsights users to HDP.
    • Hortonworks will resell the IBM Data Science Experience with HDP and adopt it as its strategic data science platform, giving developers a fast on-ramp to data science capabilities, including machine learning, advanced analytics and statistics. Also, Hortonworks and IBM will create new solution bundles that integrate HDP with IBM Big SQL, IBM’s structured query language engine for Hadoop.
  • Hortonworks Congratulates 2017 Americas Data Heroes Award Winners. In June, we announced the winners of the 2017 Americas Data Heroes Awards. The awards recognized Hortonworks customers who significantly transformed their enterprises by leveraging connected data platforms, highlighting real business value derived from data. The winners were business leaders from TMW Systems, Inc., DHISCO, Inc., Walgreens Boots Alliance, Inc. and Yale New Haven Health System.
  • Hortonworks DataFlow 3.0 Simplifies Development of Streaming Analytics Applications. In June, we announced the general availability of Hortonworks DataFlow (HDFTM) 3.0, the next generation of our open source data-in-motion platform. HDF enables customers to collect, curate, analyze and act on all data in real time, across the data center and cloud. New features include Streaming Analytics Manager for simplifying the process and speeding a streaming application’s time to market, and a new shared repository of schemas which gives customers end-to-end data governance and increased operational efficiency.
  • Hortonworks Introduces First Unified Support Subscription Spanning Cloud and Data Center. In June, we announced Hortonworks Flex Support Subscription, a new software support subscription to provide seamless support that is transferable between cloud and on-premises deployments, allowing for simpler adoption of a connected data architecture.
  • Mitsubishi Fuso Selects Hortonworks To Power Real-Time Analytics. In May, we announced that Mitsubishi Fuso Truck and Bus Corporation has deployed Microsoft Azure HDInsight powered by HDP in the public cloud to power the company’s connected data architecture.

Financial Outlook

As of August 3, 2017, Hortonworks is providing the following financial outlook for its third quarter and full year 2017:

For the third quarter of 2017, we expect:

Total GAAP revenue of $63.0 million.

GAAP operating margin between negative 95 percent and negative 90 percent, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $32.0 million.

Non-GAAP operating margin between negative 43 percent and negative 39 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $32.0 million.

For the full year 2017, we expect:

Total GAAP revenue of $247.0 million.

GAAP operating margin between negative 95 percent and negative 90 percent, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $117.0 million.

Non-GAAP operating margin between negative 47 percent and negative 42 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $117.0 million.

GAAP operating margin outlook includes estimates of stock-based compensation and related expenses and amortization of purchased intangibles in future periods and assumes, among other things, the occurrence of no additional acquisitions, investments or restructuring and no further revisions to stock-based compensation and related expenses.

Second Quarter 2017 Earnings Conference Call and Webcast Details

Hortonworks will hold a conference call and webcast to discuss the Q2 2017 results, Q3 2017 and FY 2017 outlook and related matters at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) on Thursday, August 3, 2017. Interested parties may access the call by dialing (877) 930-7786 in the U.S. or (253) 336-7423 from international locations. In addition, a live audio webcast of the conference call will be available on the Hortonworks Investor Relations website at http://investors.hortonworks.com.

Shortly after the conclusion of the conference call, a replay of the audio webcast will be available on the Hortonworks Investor Relations website for approximately seven days.

Statement Regarding Use of Non-GAAP Financial Measures

Hortonworks reports non-GAAP results for gross profit and margins, operating loss and margins, net loss, basic and diluted net loss per share and expenses in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Hortonworks’ financial measures under GAAP include stock-based compensation expense, acquisition-related items, amortization of intangible assets, depreciation expense, and other income/expense, net. Management believes the presentation of operating results that exclude these items provides useful supplemental information to investors and facilitates the analysis of the Company’s core operating results and comparison of operating results across reporting periods. Management also believes that this supplemental non-GAAP information is therefore useful to investors in analyzing and assessing the Company’s past and future operating performance.

Non-GAAP cost of revenue is calculated as GAAP cost of revenue less stock-based compensation expense. Management believes non-GAAP cost of revenue offers investors useful supplemental information regarding the performance of our business, and will help investors better understand our business.

Non-GAAP gross profit is calculated as GAAP revenue less our non-GAAP cost of revenue. Management believes non-GAAP gross profit offers investors useful supplemental information to help compare our recurring core business operating results over multiple periods.

Non-GAAP gross margin is calculated as non-GAAP gross profit divided by GAAP revenue. Management believes that non-GAAP gross margin offers investors useful supplemental information in evaluating our ongoing operational performance, and will help investors better understand our underlying business.

Non-GAAP operating loss is calculated as GAAP operating loss plus non-GAAP cost of revenue and operating expense adjustments. The Company believes that non-GAAP operating loss is a useful metric for management and investors because it excludes the effect of stock-based compensation expense, acquisition-related retention bonus, amortization of intangibles and other nonrecurring items so that our management and investors have a greater visibility to the underlying performance of the business operations.

Non-GAAP operating margin is calculated as non-GAAP operating loss divided by GAAP revenue. Management believes that non-GAAP operating margin offers investors useful supplemental information in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods.

Non-GAAP net loss is calculated as GAAP net loss plus non-GAAP cost of revenue and operating expense adjustments. Management believes non-GAAP net loss offers investors useful supplemental information to help identify trends in our underlying business and perform related trend analyses.

Non-GAAP net loss per basic and diluted share is calculated as non-GAAP net loss divided by the weighted-average shares outstanding for the period. Management believes non-GAAP net loss per basic and diluted share offers investors useful supplemental information, and will help investors better understand our performance and return to shareholders.

Use of Forward-Looking Statements

This press release contains “forward-looking statements” regarding our performance within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements contain words such as “may,” “will,” “might,” “expect,” “believe,” “anticipate,” “could,” “would,” “estimate,” “continue,” “pursue,” or the negative thereof or comparable terminology, and may include (without limitation) information regarding our expectations, goals or intentions regarding future performance, expenses or activity in international markets, including the forward-looking statements, in the section titled “Financial Outlook.” Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.

The important factors that could cause actual results to differ materially from those in any forward-looking statements include, but are not limited to, the following: (i) we have a history of losses, and we may not become profitable in the future, (ii) we have a limited operating history, which makes it difficult to predict our future results of operations, and (iii) we do not have an adequate history with our support subscription offerings or pricing models to accurately predict the long-term rate of support subscription customer renewals or adoption, or the impact these renewals and adoption will have on our revenues or results of operations.

Further information on these and other factors that could affect our financial results and the forward-looking statements in this press release are included in our Form 10-K filed on March 15, 2017, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 filed on May 9, 2017, or in other filings we make with the Securities Exchange Commission from time to time, particularly under the caption Risk Factors.

All forward-looking statements in this press release are made as of the date hereof, based on information available to us as of the date hereof, and we undertake no obligation, and do not intend, to update these forward-looking statements.

About Hortonworks

Hortonworks is an industry-leading innovator that creates, distributes and supports enterprise-ready open data platforms and modern data applications that deliver actionable intelligence from all data: data-in-motion and data-at-rest. Hortonworks is focused on driving innovation in open source communities such as Apache Hadoop, Apache NiFi and Apache Spark. Along with its 2,100+ partners, Hortonworks provides the expertise, training and services that allow customers to unlock transformational value for their organizations across any line of business.

Hortonworks, HDP and HDF are registered trademarks or trademarks of Hortonworks, Inc. and its subsidiaries in the United States and other jurisdictions. For more information, please visit www.hortonworks.com. All other trademarks are the property of their respective owners.

Hortonworks, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
Support subscription and professional services revenue:
Support subscription $        45,792 $        31,018 $        87,890 $        58,652
Professional services 16,040 12,619 29,913 26,327
Total support subscription and professional services revenue 61,832 43,637 117,803 84,979
Cost of revenue:
Support subscription 7,227 5,880 13,383 10,781
Professional services 13,240 12,181 24,939 23,636
Total cost of revenue 20,467 18,061 38,322 34,417
Gross profit 41,365 25,576 79,481 50,562
Operating expenses:
Sales and marketing 50,526 46,175 100,745 88,258
Research and development 27,479 25,454 52,985 47,605
General and administrative 17,824 18,240 34,619 44,294
Total operating expenses 95,829 89,869 188,349 180,157
Loss from operations (54,464) (64,293) (108,868) (129,595)
Other (expense) income, net (1,149) 392 (1,348) 97
Loss before income tax expense (55,613) (63,901) (110,216) (129,498)
Income tax expense 463 296 695 451
Net loss $      (56,076) $      (64,197) $    (110,911) $    (129,949)
Net loss per share of common stock, basic and diluted $          (0.87) $          (1.12) $          (1.71) $          (2.37)
Weighted-average shares used in computing net loss per share of common stock, basic and diluted 64,356,873 57,314,715 64,834,719 54,716,430
Hortonworks, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
 June 30, 2017   December 31, 2016 
ASSETS
Current assets:
Cash and cash equivalents $                   55,458 $                   53,332
Short-term investments 16,371 31,764
Accounts receivable, net 75,641 82,368
Prepaid expenses and other current assets 7,143 4,831
Total current assets 154,613 172,295
Property and equipment, net 18,373 19,381
Long-term investments 4,084
Goodwill 34,333 34,333
Intangible assets, net 2,685 3,121
Other assets 2,015 1,306
Restricted cash 1,292 1,316
Total assets $                 213,311 $                 235,836
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $                     9,046 $                     6,749
Accrued compensation and benefits 18,863 17,978
Accrued expenses and other current liabilities 10,352 11,752
Deferred revenue 151,903 129,840
Total current liabilities 190,164 166,319
Long-term deferred revenue 64,336 55,550
Other long-term liabilities 2,091 2,605
Total liabilities 256,591 224,474
Stockholders’ (deficit) equity:
Preferred stock, par value of $0.0001 per share—25,000,000
shares authorized; none issued or outstanding as of June 30, 2017 and December 31, 2016
Common stock, par value of $0.0001 per share—500,000,000
shares authorized; 66,144,990 and 61,122,863 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively

 

7

 

7

Additional paid-in capital 771,386 714,960
Accumulated other comprehensive loss (569) (1,063)
Accumulated deficit (814,104) (702,542)
Total stockholders’ (deficit) equity (43,280) 11,362
Total liabilities and stockholders’ equity $                 213,311 $                 235,836
Hortonworks, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
 Three Months Ended June 30,   Six Months Ended June 30, 
2017 2016 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $      (56,076) $      (64,197) $    (110,911) $    (129,949)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 2,177 1,810 4,235 3,288
Amortization of premiums from investments 82 234 197 518
Amortization of intangible assets 219 219 436 438
Stock-based compensation expense 27,247 21,898 50,622 51,340
Impairment of promissory note and related interest receivable 717
Loss on early exit of lease 349
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies 772 (216) 934 3
Provision for losses on accounts receivable 66 443
Other 73 (25) 149 (50)
Changes in operating assets and liabilities:
Accounts receivable (6,522) 3,288 7,957 (7,859)
Prepaid expenses and other current assets 2,446 2,480 (2,366) (988)
Other assets 352 (107) (650) (197)
Accounts payable 1,365 6,680 1,475 6,769
Accrued expenses and other current liabilities (2,307) (1,794) (1,721) (1,459)
Accrued compensation and benefits 2,826 2,737 660 3,040
Deferred revenue 15,855 13,079 28,368 24,765
Other long-term liabilities (226) (240) (454) (575)
Net cash used in operating activities (11,717) (14,088) (20,720) (49,756)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (6,765) (80,519)
Proceeds from sales of investments 5,995 7,316
Proceeds from maturities of investments 6,000 18,780 19,300 40,979
Purchases of property and equipment (985) (4,916) (2,203) (7,275)
Change in restricted cash 26 26
Net cash provided by (used in) investing activities 5,041 13,094 17,123 (39,499)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,245 1,240 5,588 5,852
Tax withholding shares (562) (97) (562) (97)
Payment of contingent consideration related to an acquisition (1,625)
Payments of capital lease liability (113) (39) (203) (64)
Payment of fees for line of credit (26) (52)
Proceeds from follow-on public offering, net of issuance costs (615) 87,233
Net cash provided by financing activities 544 489 4,771 91,299
Effect of exchange rate changes on cash and cash equivalents 657 (190) 952 24
Net increase in cash and cash equivalents (5,475) (695) 2,126 2,068
Cash and cash equivalents—Beginning of period 60,933 38,511 53,332 35,748
Cash and cash equivalents—End of period $        55,458 $        37,816 $        55,458 $        37,816
Hortonworks, Inc.
Reconciliation of GAAP to Non-GAAP
(in thousands, except share and per share data)
 Three Months Ended June 30,   Six Months Ended June 30, 
2017 2016 2017 2016
Non-GAAP Gross Profit and Margin:
Gross profit $        41,365 $        25,576 $        79,481 $        50,562
Stock-based compensation expense 1,989 1,417 3,399 2,775
Non-GAAP gross profit $        43,354 $        26,993 $        82,880 $        53,337
Gross margin percentages:
GAAP 67% 59% 67% 59%
Non-GAAP 70% 62% 70% 63%
Non-GAAP Operating Loss and Margin:
Operating loss $      (54,464) $      (64,293) $    (108,868) $    (129,595)
Stock-based compensation expense 27,247 21,898 50,622 51,340
Impairment of promissory note and related interest receivable 717
Loss on early exit of lease 349
Amortization of intangible 219 219 436 438
Litigation expense 600 600
Non-GAAP operating loss $      (26,998) $      (41,576) $      (57,461) $      (76,500)
Operating margin percentages:
GAAP (88)% (147)% (92)% (153)%
Non-GAAP (44)% (95)% (49)% (90)%
Non-GAAP Net Loss and Net Loss per Share:
Net loss $      (56,076) $      (64,197) $    (110,911) $    (129,949)
Stock-based compensation expense 27,247 21,898 50,622 51,340
Impairment of promissory note and related interest receivable 717
Loss on early exit of lease 349
Amortization of intangible 219 219 436 438
Litigation expense 600 600
Non-GAAP net loss $      (28,610) $      (41,480) $      (59,504) $      (76,854)
Weighted-average shares 64,356,873 57,314,715 64,834,719 54,716,430
Non-GAAP net loss per share $          (0.44) $          (0.72) $          (0.92) $          (1.40)
Stock-based compensation expense by function:
Cost of revenue $          1,989 $          1,417 $          3,399 $          2,775
Sales and marketing 9,129 6,039 16,595 11,658
Research and development 11,060 8,778 20,938 16,582
General and administrative 5,069 5,664 9,690 20,325
Stock-based compensation expense $        27,247 $        21,898 $        50,622 $        51,340

For Additional Information Contact:
Reuben Gallegos
VP, Investor Relations and Corporate Development
rgallegos@hortonworks.com

 

For more information :

Michelle Lazzar
408-828-9681