Hortonworks, the big data processing platform built on top of the open source Apache Hadoop filed its S-1 paperwork today as its first step toward an initial public offering. In doing so it beat competitors Cloudera and MapR to the punch.
Hortonworks offers a big data processing platform that includes the ability to process various types of data including SQL and NoSQL sources then search across data, or use various analytics tools to visualize the data. Hortonworks has a reputation for being a pure Hadoop offering without any proprietary extensions. They released their most recent version of the Hortonworks Data Platform, HDP Version 2.2 in October, which included more 100 new features, according to reports.
Hortonworks has also recently signed agreements with Rackspace to offer a private cloud version of HDP and with Microsoft to offer HDP on Azure as a Platform as a Service offering.
Hortonworks has collected $248M in venture funding to-date, with its most recent funding round coming in July for $50M. The company was launched in 2011 as a spin-off the Yahoo! Hadoop development team, offering an alternative to market leader at the time Cloudera. While both companies along with MapR have continued to push Hadoop and build on the open source product, it is Hortonworks that plans to IPO first.
Its investors include Benchmark , Yahoo!, Tenaya Capital, Index Ventures, BlackRock, Dragoneer Investment Group and Passport Capital. Its most recent investment was from Hewlett-Packard.
As more companies try to understand and process big data, companies who can provide solutions to help make that data understandable and do it quickly are going to have value in the market. According to a study conducted by Allied Market research, the Hadoop market is expected to grow from $2B in 2013 to more than $50B by 2020 with a CAGR of 58.2 percent over that time.
What’s somewhat surprising here though is that it’s Hortonworks that is filing and not Cloudera because as of last March, Cloudera had a valuation of more than $4B. Hortonworks on the other hand as of last spring had a $1B valuation, but regardless of valuations, it’s Hortonworks that goes to market first.
WHAT S-1 TELLS US
Hortonworks has quickly grown its revenue, but has also seen widening losses. For the first 9 months of 2013, the company’s revenue totaled $33.38 million, up 109.5 percent from its year-ago, 9 month tally of $15.93 million. Its Support Subscription revenue grew at a slower pace, up a slightly more modest 94.97 percent, to $19.19 in the most recent 9 months. Professional services revenue grew more quickly.
On the other side, the company’s losses have also greatly expanded. The company had a net loss of $86.73 million in the first 9 months of this year, up from, $48.40 million in the year-ago, 9 month period. That represents a 79.19 percent gain. That means that Hortonwork’s revenues are growing a faster percentage clip than its losses.
A large piece of the company’s Support Subscription revenue comes from Microsoft. As the company’s S-1 notes: “The largest contributor to the increases in quarterly revenue for the three months ended December 31, 2013, March 31, 2014, June 30, 2014 and September 30, 2014 was revenue from Microsoft, comprising $2.6 million, $2.5 million, $2.5 million and $2.5 million of support subscription revenue, respectively.”
When you compare the dollar increases in its revenue and loss, some distance appears: Revenues grew by $17.45 million year-over-year. Its losses widened by a far greater $37.33 million. That implies that its losses are suffering from far-greater law of large numbers-induced drag than its revenues. Put another way, while the delta in percentage growth between its revenue, and its net loss appears positive, it might not be as sunny as it might otherwise seem.
Handicapping the loss figures, we can yank out stock based compensation expenses. Doing so zips about $4.4 million in losses from its first 9 months 2014 net loss, or about 4.6 percent. The company’s Sales and Marketing costs, and its Research and Development expenses both roughly doubled year-over-year.
Billings for the first three quarters of 2014 rose 117.8 percent from the comparative period. That could imply stronger future revenue growth, but not too much more.
The company ended the third calendar quarter of 2014 with $111.61 million in cash. The company notes in its filing that it has enough cash for “at least” the next 12 months. The company burned $54.97 million in cash on operations in the first three quarters of this year, not including another $76.51 million that it used in “investing activities.”
Hortonworks is another quickly growing company with troubling losses, and only so much cash left. Will the market welcome it?