Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2018

 

 

Hortonworks, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-36780   37-1634325

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

5470 Great America Parkway

Santa Clara, California 95054

(Address of principal executive offices) (Zip Code)

(408) 916-4121

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On August 7, 2018, Hortonworks, Inc. (the “Company”) issued a press release announcing financial results for the quarter ended June 30, 2018. A copy of the press release is furnished as Exhibit 99.1 to this report. The Company also released prepared remarks regarding its financial results for the quarter ended June 30, 2018 (the “Prepared Remarks”). The full text of the Prepared Remarks is furnished as Exhibit 99.2 to this report. The information in this Item 2.02 (including Exhibits 99.1 and 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01. Financial Statements and Exhibits. 

(d) Exhibits

 

Exhibit
No.

  

Description of Exhibit

99.1    Press Release dated August 7, 2018.
99.2    Prepared Remarks dated August 7, 2018.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   

HORTONWORKS, INC.

Dated: August 7, 2018

   

By:

 

/s/ Scott Davidson

     

Scott Davidson

Chief Financial Officer and Chief Operating Officer

EX-99.1

Exhibit 99.1

 

LOGO

Hortonworks Reports Second Quarter 2018 Revenue of $86.3 Million

Support Subscription Revenue Increased 42 Percent Year over Year to $65.0 Million

SANTA CLARA, Calif.—August 7, 2018—Hortonworks, Inc.® (NASDAQ: HDP), a leading provider of global data management solutions, today announced financial results for the second quarter of 2018.

“Our entire team executed extremely well in the second quarter to deliver another fantastic result, with total revenue growth of 40 percent year over year,” said Rob Bearden, chief executive officer of Hortonworks. “We attribute our continued growth to the rapid adoption of our open source global data management platforms, which help customers manage the entire lifecycle of their data from point of origin to point of rest and across hybrid and multi cloud architectures, all with common security and data governance.”

Second Quarter 2018 Financial Highlights

 

   

Revenue: Total GAAP revenue was $86.3 million for the second quarter of 2018, an increase of 40 percent compared to the second quarter of 2017.

 

   

Gross Profit: Total GAAP gross profit was $62.4 million for the second quarter of 2018, compared to $41.4 million for the same period last year. Non-GAAP gross profit was $65.4 million for the second quarter of 2018, compared to $43.4 million for the same period last year. GAAP gross margin was 72 percent for the second quarter of 2018, compared to 67 percent for the same period last year. Non-GAAP gross margin was 76 percent for the second quarter of 2018, compared to 70 percent for the same period last year.

 

   

Operating Loss: GAAP operating loss was $42.0 million for the second quarter of 2018, compared to $54.5 million for the same period last year. Non-GAAP operating loss was $10.4 million for the second quarter of 2018, compared to $27.0 million for the same period last year. GAAP operating margin was negative 49 percent for the second quarter of 2018, compared to negative 88 percent for the same period last year. Non-GAAP operating margin was negative 12 percent for the second quarter of 2018, compared to negative 44 percent for the same period last year.

 

   

Net Loss: GAAP net loss was $41.2 million for the second quarter of 2018, or $0.52 per basic and diluted share, compared to a GAAP net loss of $56.1 million, or $0.87 per basic and diluted share, in the second quarter of 2017. Non-GAAP net loss was $9.5 million for the second quarter of 2018, or $0.12 per basic and diluted share, compared to a non-GAAP net loss of $28.6 million, or $0.44 per basic and diluted share, for the same period last year.

 

   

Contract Liabilities: Total contract liabilities, which is comprised of short-term deferred revenue, other contract liabilities and long-term deferred revenue, were $259.1 million as of June 30, 2018, compared to $249.5 million as of March 31, 2018, $252.5 million as of January 1, 2018 and $275.2 million as of December 31, 2017. The balance as of January 1, 2018 reflects a reduction to contract liabilities of $22.7 million from December 31, 2017 as a result of our adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).


LOGO

 

   

Cash & Investments: Cash and investments totaled $86.0 million as of June 30, 2018, compared to $72.5 million as of December 31, 2017 and $71.8 million as of June 30, 2017.

 

   

Operating Cash: Operating cash flow used was $2.0 million for the second quarter of 2018, compared to operating cash flow used of $11.7 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 Data Platform 3.0 Enables Containerization and Deep Learning Workloads. In June, we announced Hortonworks Data Platform (HDP®) 3.0, which delivers significant new enterprise features, including containerization for faster and easier deployment of applications and increased developer productivity. The new version of HDP is optimized for hybrid cloud architectures and enables customers to more quickly, reliably and securely get value from their data at scale to drive business transformation.

 

   

Hortonworks and Google Cloud Expand Partnership to Accelerate Big Data Analytics in the Cloud. In June, we announced enhancements to our existing partnership with Google Cloud. These enhancements further optimize HDP and Hortonworks DataFlow (HDF) for Google Cloud Platform (GCP) to deliver next-gen big data analytics for hybrid cloud deployments. This partnership will enable customers to achieve faster business insights by leveraging ongoing innovations from the open source community via HDP and HDF on GCP. HDP now integrates with Google Cloud Storage, which offers consistent cloud storage for running big data workloads.

 

   

Hortonworks Extends Collaboration with Microsoft to Drive Big Data Workloads to Azure. In June, we announced that we renewed and extended our long-standing relationship with Microsoft to give enterprise customers greater agility and flexibility when moving big data workloads to the cloud. The collaboration now gives customers more choices as to where their analytic and Internet of Things (IoT) data workloads run. Customers can deploy HDP, HDF and Hortonworks DataPlane Service (DPS) products natively on Microsoft Azure infrastructure as a service (IaaS) to extract value from data of all types. Additionally, customers can also use Microsoft Azure HDInsight, a fully managed service powered by HDP, which delivers Apache Hadoop and Apache Spark.

 

   

Hortonworks Congratulates 2018 Americas Data Heroes Award Winners. In June, we announced the winners of the 2018 Americas Data Heroes Awards, recognizing Hortonworks customers who have significantly transformed their enterprises by leveraging connected data platforms and highlighting real business value derived from data. The winners were PayPal, Claro Colombia, Symantec, Universal and TRAC Intermodal.

 

 

Hortonworks Named a Strong Performer in Big Data Fabric Report by Independent Research Firm. In June, we were among the select companies that Forrester Research, Inc. invited to participate in its June 2018 report titled The Forrester Wave™: Big Data Fabric, Q2 2018. In this evaluation, Hortonworks was cited as a Strong Performer. HDP, HDF and DPS were evaluated for the report and received scores of five out of five in the Ability to Execute and Customer Base subcategories.

 

   

Hortonworks IoT Solution Helps American Water Improve Operational Efficiency. In June, we announced that American Water, the United States’ largest publicly traded water utility company, is leveraging global data management platforms from Hortonworks to modernize its data architecture. Using HDP and HDF, American Water is enhancing its ability to deliver critical data and insights to its field workers in a matter of minutes.


LOGO

 

Financial Outlook

As of August 7, 2018, Hortonworks is providing the following financial outlook for its third quarter and full year 2018:

For the third quarter of 2018, we expect:

Total GAAP revenue of $87.0 million.

GAAP operating margin between negative 45 percent and negative 40 percent, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $27.0 million.

Non-GAAP operating margin between negative 14 percent and negative 10 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $27.0 million.

For the full year 2018, we expect:

Total GAAP revenue between $338.0 million and $343.0 million.

GAAP operating margin between negative 48 percent and negative 43 percent, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $110.0 million.

Non-GAAP operating margin between negative 16 percent and negative 10 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $110.0 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 2018 Earnings Conference Call and Webcast Details

Hortonworks will hold a conference call and webcast to discuss the Q2 2018 results, Q3 and FY 2018 outlook and related matters at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) on Tuesday, August 7, 2018. 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.


LOGO

 

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, amortization of intangible assets, advisory fees and other expense items that are nonrecurring. 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 effects of stock-based compensation expense, amortization of intangible assets, advisory fees and other expense items that are nonrecurring 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.


LOGO

 

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, activity, or adoption of our solutions in our domestic and in international markets, our expectations regarding HDP 3.0 and our partnerships, 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 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, 2018, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 filed on May 9, 2018, 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 a leading provider of enterprise-grade, global data management platforms, services and solutions that deliver actionable intelligence from any type of data for over half of the Fortune 100. Hortonworks is committed to driving innovation in open source communities, providing unique value to enterprise customers. Along with its partners, Hortonworks provides technology, expertise and support so that enterprise customers can adopt a modern data architecture. For more information, visit www.hortonworks.com.

Hortonworks, HDP, HDF and DPS 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,
 
     2018     2017     2018     2017  

Support subscription and professional services revenue:

        

Support subscription

   $ 65,019     $ 45,792     $ 126,553     $ 87,890  

Professional services

     21,324       16,040       38,851       29,913  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total support subscription and professional services revenue

     86,343       61,832       165,404       117,803  

Cost of revenue:

        

Support subscription

     9,155       7,227       17,498       13,383  

Professional services

     14,762       13,240       28,679       24,939  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     23,917       20,467       46,177       38,322  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     62,426       41,365       119,227       79,481  

Operating expenses:

        

Sales and marketing

     54,541       50,526       103,443       100,745  

Research and development

     25,373       27,479       49,507       52,985  

General and administrative

     24,526       17,824       49,119       34,619  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     104,440       95,829       202,069       188,349  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (42,014     (54,464     (82,842     (108,868

Other income (expense), net

     1,527       (1,149     616       (1,348
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax expense

     (40,487     (55,613     (82,226     (110,216

Income tax expense

     710       463       1,026       695  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (41,197   $ (56,076   $ (83,252   $ (110,911
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share of common stock, basic and diluted

   $ (0.52   $ (0.87   $ (1.07   $ (1.71
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares used in computing net loss per share of common stock, basic and diluted

     79,507,114       64,356,873       77,830,240       64,834,719  


Hortonworks, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

                                           
     June 30,
2018
    December 31,
2017
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 47,634     $ 62,739  

Short-term investments

     33,811       9,773  

Accounts receivable, net

     89,787       112,013  

Contract assets

     304        

Deferred costs

     23,773        

Prepaid expenses and other current assets

     11,979       10,809  
  

 

 

   

 

 

 

Total current assets

     207,288       195,334  

Long-term investments

     4,533        

Property and equipment, net

     13,546       16,383  

Goodwill

     34,333       34,333  

Intangible assets, net

     1,806       2,242  

Deferred costs - noncurrent

     28,207        

Other assets

     1,655       1,559  

Restricted cash

     9       882  
  

 

 

   

 

 

 

Total assets

   $ 291,377     $ 250,733  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

    

Current liabilities:

    

Accounts payable

   $ 5,554     $ 6,134  

Accrued compensation and benefits

     19,926       22,483  

Accrued expenses and other current liabilities

     9,501       10,948  

Deferred revenue

     167,461       194,901  

Other contract liabilities

     10,028        
  

 

 

   

 

 

 

Total current liabilities

     212,470       234,466  

Long-term deferred revenue

     81,633       80,269  

Other long-term liabilities

     846       1,034  
  

 

 

   

 

 

 

Total liabilities

     294,949       315,769  
  

 

 

   

 

 

 

Stockholders’ deficit:

    

Preferred stock, par value of $0.0001 per share—25,000,000 shares authorized; none issued or outstanding as of June 30, 2018 and December 31, 2017

            

Common stock, par value of $0.0001 per share—500,000,000 shares authorized as of June 30, 2018 and December 31, 2017; 81,034,445 shares issued and 80,566,039 shares outstanding as of June 30, 2018 and 72,830,962 shares issued and 72,607,893 shares outstanding as of December 31, 2017

     9       8  

Additional paid-in capital

     910,616       842,875  

Accumulated other comprehensive loss

     (877     (219

Accumulated deficit

     (913,320     (907,700
  

 

 

   

 

 

 

Total stockholders’ deficit

     (3,572     (65,036
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity (deficit)

   $ 291,377     $ 250,733  
  

 

 

   

 

 

 


Hortonworks, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

                                                                                       
     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2018     2017     2018     2017  

CASH FLOWS FROM OPERATING ACTIVITIES:

        

Net loss

   $ (41,197   $ (56,076   $ (83,252   $ (110,911

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

        

Depreciation

     2,134       2,177       4,269       4,235  

Amortization of deferred costs

     8,347             15,423        

Amortization of discounts and premiums

     (13     82       17       197  

Amortization of intangible assets

     219       219       436       436  

Stock-based compensation expense

     31,440       27,247       57,730       50,622  

Loss on early exit of lease

                       349  

Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies

     (1,033     772       (414     934  

Provision for losses on accounts receivable

     182             189        

Other

     40       73       256       149  

Changes in operating assets and liabilities:

        

Accounts receivable

     (19,045     (6,522     21,282       7,957  

Contract assets

     1,990             2,151        

Prepaid expenses and other current assets

     3,746       2,446       (1,414     (2,366

Deferred costs

     (8,776           (15,308      

Other assets

     (38     352       109       (650

Accounts payable

     (182     1,365       (566     1,475  

Accrued expenses and other current liabilities

     1,748       (2,307     (1,012     (1,721

Accrued compensation and benefits

     5,384       2,826       (2,394     660  

Deferred revenue

     15,915       15,855       11,740       28,368  

Other contract liabilities

     (2,736           (3,009      

Other long-term liabilities

     (100     (226     (253     (454
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (1,975     (11,717     5,980       (20,720
  

 

 

   

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

        

Purchases of investments

     (20,390           (39,289      

Proceeds from maturities of investments

     6,680       6,000       10,680       19,300  

Purchases of property and equipment

     (636     (985     (1,665     (2,203
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (14,346     5,015       (30,274     17,097  
  

 

 

   

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

        

Proceeds from issuance of common stock

     1,034       1,245       10,691       5,588  

Proceeds from exercise of warrants

                 4,062        

Tax withholding shares

     (212     (562     (4,861     (562

Payments of capital lease liability

     (87     (113     (173     (203

Payment of fees for line of credit

     (276     (26     (302     (52
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by financing activities

     459       544       9,417       4,771  
  

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

     (1,276     656       (1,101     954  

Net (decrease) increase in cash, cash equivalents and restricted cash

     (17,138     (5,502     (15,978     2,102  

Cash, cash equivalents and restricted cash—Beginning of period

     64,781       62,252       63,621       54,648  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash, cash equivalents and restricted cash—End of period

   $ 47,643     $ 56,750     $ 47,643     $ 56,750  
  

 

 

   

 

 

   

 

 

   

 

 

 


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,
 
     2018     2017     2018     2017  

Non-GAAP Gross Profit and Margin:

        

Gross profit

   $ 62,426     $ 41,365     $ 119,227     $ 79,481  

Stock-based compensation expense

     2,949       1,989       4,976       3,399  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit

   $ 65,375     $ 43,354     $ 124,203     $ 82,880  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin percentages:

        

GAAP

     72     67     72     67

Non-GAAP

     76     70     75     70

Non-GAAP Operating Loss and Margin:

        

Operating loss

   $ (42,014   $ (54,464   $ (82,842   $ (108,868

Stock-based compensation expense

     31,440       27,247       57,730       50,622  

Loss on early exit of lease

                       349  

Amortization of intangible assets

     219       219       436       436  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating loss

   $ (10,355   $ (26,998   $ (24,676   $ (57,461
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating margin percentages:

        

GAAP

     (49 )%      (88 )%      (50 )%      (92 )% 

Non-GAAP

     (12 )%      (44 )%      (15 )%      (49 )% 

Non-GAAP Net Loss and Net Loss per Share:

        

Net loss

   $ (41,197   $ (56,076   $ (83,252   $ (110,911

Stock-based compensation expense

     31,440       27,247       57,730       50,622  

Loss on early exit of lease

                       349  

Amortization of intangible assets

     219       219       436       436  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net loss

   $ (9,538   $ (28,610   $ (25,086   $ (59,504
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     79,507,114       64,356,873       77,830,240       64,834,719  

Non-GAAP net loss per share

   $ (0.12   $ (0.44   $ (0.32   $ (0.92

Stock-based compensation expense by function:

        

Cost of revenue

   $ 2,949     $ 1,989     $ 4,976     $ 3,399  

Sales and marketing

     8,990       9,129       14,999       16,595  

Research and development

     9,123       11,060       17,289       20,938  

General and administrative

     10,378       5,069       20,466       9,690  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation expense

   $ 31,440     $ 27,247     $ 57,730     $ 50,622  
  

 

 

   

 

 

   

 

 

   

 

 

 


LOGO

 

For Additional Information Contact:

Reuben Gallegos

VP, Investor Relations and Corporate Development

rgallegos@hortonworks.com

EX-99.2

Exhibit 99.2

 

LOGO

Hortonworks Prepared Financial Remarks for the Second Quarter of 2018

SANTA CLARA, Calif.—August 7, 2018—Hortonworks, Inc.® (NASDAQ: HDP), a leading provider of global data management solutions, today announced financial results for the second quarter of 2018. We are sharing our prepared financial remarks regarding our earnings results with the investment community on the Investor Relations portion of our website in advance of the call.

Today we will also host a live call with the investment community at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). 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 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.

Reuben Gallegos (VP, Investor Relations & Corporate Development)

Thank you. Good afternoon and welcome to Hortonworks’ Q2 2018 Earnings Call. Today we will discuss the results announced in our press release and prepared remarks issued after market close. With me are Rob Bearden (Chairman, President and CEO), Scott Davidson (COO and CFO) and Scott Gnau (CTO).

During the call, we will make forward-looking statements regarding future events and views about the future financial performance of the company, including our expectations regarding market opportunity and growth, future partnerships, future trends impacting our business and outlook. The statements that we make today are based on assumptions that we believe to be reasonable as of this date and are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks are described in our press release and are more fully detailed under the caption “Risk Factors” in our Form 10-K and our other periodic filings with the SEC. We undertake no obligation to update these statements as a result of new information or future events. We will also present both GAAP and non-GAAP financial measures. Non-GAAP measures should not be considered in isolation from, as a substitute for, or superior to our GAAP results. We encourage you to consider all measures when analyzing Hortonworks’ performance. A reconciliation of GAAP to non-GAAP measures is included in today’s press release.

So, with that said, I will turn the call over to Rob for some opening comments.

Rob Bearden (Chairman, President and CEO)

Thanks, Reuben. Good afternoon and thanks for joining our earnings call.

As always, I want to start off by thanking our customers, the open source community, our partners and shareholders for their continued support. For today’s call, I will review our business highlights and customer successes for the second quarter of the year and close with a discussion of what we see in the competitive landscape. Then, Scott will discuss our financials for the second quarter and our outlook for the third quarter and full year 2018.


LOGO

 

Business Highlights

We had another great result, with total GAAP revenue in the second quarter of 2018 growing 40 percent year-over-year to $86.3 million. This was driven by continued expansion within our existing customer base, strong growth internationally and a 70 percent year-over-year increase in the number of large deals with a total contract value greater than $1 million.

Our margins have also continued to improve as we drive leverage across the business. We believe that our R&D investments and strategic partnerships position us well to capitalize on the significant opportunities within our markets, including the internet of things (IoT), hybrid-cloud computing and big data. Our consistent strategy to manage the entire lifecycle of data, from point of origin to point of rest, across hybrid and multi-cloud architectures, was instrumental in delivering our growth for the second quarter.

The depth and breadth of our offerings continue to be of strategic significance and to differentiate us from the competition. Hortonworks DataFlow (HDFTM) platform was included in approximately 30 percent of our support subscription contract deals for the second quarter. The collection and processing of data at the edge is a core requirement for many customers where real-time insight is critical to their use cases. We are seeing increased requirements for hybrid and multi-cloud architectures emerge across many of our customers, and they are all in various stages of evaluating the use of Hortonworks DataPlane Services (DPSTM) to support these requirements.

In other areas of the business, we had more customers than ever before attend our annual DataWorks Summit® San Jose (the DataWorks Summit). Organizations like Hilton, Freddie Mac, Trimble and Symcor spoke to industry peers about the value of our open source platforms. In addition, through our customer awards program, we recognized teams from Symantec, Universal Parks and Resorts, Claro Colombia and TRAC Intermodal, who have all transformed their businesses using our solutions.

At the DataWorks Summit, we also announced a new version of our flagship product, Hortonworks Data Platform (HDP®) 3.0. We are now the first vendor to deliver containerization on Hadoop for the next generation of data-driven applications. HDP continues to evolve and also includes support and enablement for deep learning applications, real-time database capabilities and key optimizations for the hybrid cloud. And by using HDP 3.0, companies like Micron Technology have already begun optimizing their products to take advantage of these innovations to help their customers accelerate time to insights needed for critical decision-making.

Additionally, we recently announced expanded partnerships with Microsoft, Google and IBM. These partnerships create low friction approaches for customers to operationalize hybrid environments in support of an overall data strategy that provides consistent security and governance for all of their data assets. Our approach has always been to partner with technology leaders and grow the breadth of the ecosystem, enabling customer flexibility. With these partnerships, our customers can leverage the infrastructure as they see fit.

You may be curious about what these customers are doing. Well, a recent review of case log data from our support organization reveals that of our total unique customers who requested support in Q2 2018, at least 30 percent of those customers had cloud-related requests. We expect this percentage to grow as enterprises move certain ephemeral analytic workloads to the cloud for greater agility and flexibility and improved economics. Within this context, it is important to note an overwhelming majority of companies are adopting a hybrid architecture for their strategic data assets. A true hybrid architecture has three fundamental components: on-premises, multi-cloud and the edge. We uniquely offer solutions in each of these areas: HDP, DPS and HDF.


LOGO

 

As I noted, one component of hybrid is the multi-cloud environment. Our expanded partnership with Google is a further milestone in leveraging this opportunity and executing our strategy. With Google Cloud Storage (GCS) now supporting enterprise-class big data workloads on Hortonworks platforms, customers can mix and match workloads to meet their needs. HDP 3.0 has been architected with a state-of-the-art cloud storage connector for big data workloads like Spark, Hive and other engines making GCS fully integrated with our platforms, including HDF. This powerful architecture provides customers another choice in deploying a platform with the flexibility and scalability to deliver big data analytics across hybrid and multi-cloud deployments in a secure, governed and managed approach.

From a customer and use case perspective, we are seeing more companies leveraging data lakes to include ingestion and analysis of real-time data in combination with historical data. Combining the two, companies are increasing the speed and fidelity of the insights they gain using any deployment method.

Johns Hopkins University has built a centralized enterprise data platform using public cloud infrastructure to securely ingest, log and store disparate types of sensitive data in support of defense, security and medical research being conducted by their Applied Physics Laboratory and medical research teams.

TRAC Intermodal transformed its business from a traditional logistics environment to a cognitive powerhouse by leveraging predictive analytics and machine learning. The company manages multiple data sources for different lines of business and different analytic use cases on a shared HDP platform.

Symantec has improved its analytics to deliver actionable intelligence with HDP and has designed systems for distributed deep learning and artificial intelligence (AI).

American Water uses HDP and HDF to deliver critical data and insights to its field workers in real time. It uses a data lake as a single source to aggregate data from historical, traffic and real-time streaming sources.

As you can see, our platforms help enterprises transform how they acquire, analyze and respond to information in their environments. The insight gained after deploying our platforms is helping to provide benefits ranging from better patient care to safer companies, to improved logistics operations and 360-degree views of customers.

From a competitive perspective, we believe that we are uniquely positioned as the only software company that has delivered a complete, open source global data management solution for hybrid deployments. Customers choose us because they benefit from the innovation created within the open source community, avoid vendor lock in and lower their total cost of ownership. Furthermore, our distribution ensures best-in-class operations, security and governance for all of their data assets.

Today, there is a proliferation of analytical point solutions in the market, many of which are designed for ephemeral workloads. However, many fail to support hybrid environments and some lack enterprise capabilities related to security and governance. In contrast, we embrace, cultivate and extend the core capabilities of today’s industry-leading open source software and deliver a complete solution to the market. Today, many of our customers are leveraging the flexibility of our platforms to drive multiple analytic engines simultaneaously. For example, two of today’s most popular data processing analytical engines are Spark and Hive. They are both integrated into our distribution, thus enabling high-performance enterprise consumption with common security and governance across the environment. During the last year, in fact, Spark and Hive related to approximately 50 percent of the unique customer driven support requests tracked within our support organization. This exemplifies an important aspect of our platform’s breadth of capabilities to integrate data from multiple environments and the flexibility of deployment whether on premises, in the cloud or across multiple clouds to deliver analytical insights for enterprise-class workloads.


LOGO

 

In summary, we have not waivered from our goal of managing half of the world’s data by building a data management system that will facilitate these business insights from data of all types. Most importantly, we are not doing this alone – again, we want to thank our customers, the open source community, our partners, employees and shareholders.

That concludes my remarks, and now, Scott will recap the Q2 financial highlights. Scott?

Scott Davidson (COO and CFO)

Thanks, Rob. I will start by providing details on our second quarter 2018 performance and conclude with our outlook for the third quarter and full year 2018.

As Rob mentioned, our Q2 2018 total GAAP revenue was $86.3 million, up 40 percent compared to the same period in 2017. Support subscription revenue was $65.0 million, or 75 percent of total GAAP revenue for the second quarter, up 42 percent compared to the same period in 2017.

From a deal perspective:

 

 

We had 17 deals over $1.0 million this quarter, with 10 of those deals including HDF;

 

 

Within the last 12 months, we closed 59 deals with a total contract value greater than $1.0 million; and

 

 

International GAAP revenue grew approximately 67 percent year-over-year in the second quarter and accounted for approximately 34 percent of our total GAAP revenue in the quarter. Eight of the deals with a total contract value greater than $1 million in the second quarter were with companies in the international market.

GAAP gross margin was 72 percent for the second quarter of 2018, compared to 67 percent for the same period in 2017. Non-GAAP gross margin expanded by 6 percentage points to 76 percent, compared to 70 percent for the same period in 2017.

GAAP operating loss was $42.0 million for the second quarter of 2018, compared to $54.5 million for the same period last year. GAAP operating margin improved by 39 percentage points for the second quarter of 2018 to a negative 49 percent compared to the same period last year. Non-GAAP operating loss was reduced by $16.6 million to $10.4 million for the second quarter of 2018, compared to $27.0 million for the same period in 2017. Non-GAAP operating margin for the second quarter of 2018 was a negative 12 percent, a 32-percentage point improvement when compared to a negative 44 percent for the same period in 2017.

GAAP net loss was $41.2 million for the second quarter of 2018, or $0.52 per basic and diluted share. This compares to a GAAP net loss of $56.1 million, or $0.87 per basic and diluted share, for the same period in 2017. Non-GAAP net loss was $9.5 million for the second quarter of 2018, or $0.12 per basic and diluted share. This compares to a non-GAAP net loss of $28.6 million, or $0.44 per basic and diluted share, for the same period in 2017.

Total contract liabilities, which is comprised of short-term deferred revenue, other contract liabilities and long-term deferred revenue, was $259.1 million as of June 30, 2018, compared to $249.5 million as of March 31, 2018, $252.5 million as of January 1, 2018 and $275.2 million as of December 31, 2017.


LOGO

 

Turning to the cash flow statement, operating cash flow used was $2.0 million for the second quarter of 2018. This compares to operating cash flow used of $11.7 million for the same period last year. At the midpoint of the year, we are now operating cash flow positive and expect to be operating cash flow positive for the full year 2018.

We exited the second quarter of 2018 with a total cash and investments balance of $86.0 million, compared to $72.5 million as of December 31, 2017 and $71.8 million as of June 30, 2017. We maintain access to $50.0 million under our revolving credit facility.

Our Outlook

As of August 7, 2018, Hortonworks is providing the following financial outlook for the third quarter and full year 2018.

For the Third Quarter of 2018

We expect

 

 

Total GAAP revenue of $87.0 million.

 

 

GAAP operating margin between negative 45 percent and negative 40 percent, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $27.0 million.

 

 

Non-GAAP operating margin between negative 14 percent and negative 10 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $27.0 million.

For the Full Year 2018

We expect

 

 

Total GAAP revenue between $338.0 and $343.0 million.

 

 

GAAP operating margin between negative 48 percent and negative 43 percent, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $110.0 million.

 

 

Non-GAAP operating margin between negative 16 percent and negative 10 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $110.0 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. That concludes my financial recap. Operator, please open the line for Q&A. Thank you.