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): February 9, 2017

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))

Item 2.02. Results of Operations and Financial Condition.

On February 9, 2017, Hortonworks, Inc. (the “Company”) issued a press release announcing financial results for the fiscal fourth quarter and fiscal year ended December 31, 2016. 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 fiscal fourth quarter and fiscal year ended December 31, 2016 (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 February 9, 2017.
99.2	Prepared Remarks dated February 9, 2017.

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: February 9, 2017	By:	/s/ Scott Davidson
		Scott Davidson Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
99.1	Press Release dated February 9, 2017.
99.2	Prepared Remarks dated February 9, 2017.

EX-99.1

Exhibit 99.1

Hortonworks Reports Record 2016 Revenue of $184.5 Million

and Fourth Quarter Revenue of $52.0 Million

SANTA CLARA, Calif.—February 9, 2017—Hortonworks, Inc.^® (NASDAQ: HDP), a leading innovator of open and connected data platforms, today announced financial results for the fourth quarter and full year 2016.

“Our fourth quarter performance was highlighted by double-digit growth in support subscription revenue, clearly showing continued strong market demand for our open source platforms,” said Rob Bearden, chief executive officer and chairman of the board of directors of Hortonworks. “The combination of enterprise customers’ accelerating business transformations fueled by data and our continued financial discipline positions Hortonworks extremely well for growth and success in 2017.”

Fourth Quarter and Full Year 2016 Financial Highlights

Revenue

• Total GAAP revenue was $52.0 million for the fourth quarter of 2016, an increase of 39 percent compared to the fourth quarter of 2015.

• Total GAAP revenue was $184.5 million for the full year of 2016, an increase of 51 percent compared to the prior year.

Operating Billings

• Operating billings, the aggregate value of all invoices sent to our customers in a given period, were $81.4 million for the fourth quarter of 2016, an increase of 56 percent over operating billings of $52.1 million for the fourth quarter of 2015.

• Operating billings were $269.9 million for the full year of 2016, an increase of 63 percent over operating billings of $165.9 million for the prior year.

Gross Profit

• Total GAAP gross profit was $34.0 million for the fourth quarter of 2016, compared to gross profit of $21.7 million for the same period last year. Non-GAAP gross profit was $35.6 million for the fourth quarter of 2016, compared to $22.8 million for the same period last year. GAAP gross margin was 65 percent for the fourth quarter of 2016, compared to 58 percent for the same period last year. Non-GAAP gross margin was 68 percent for the fourth quarter of 2016, compared to 61 percent for the same period last year.

• Total GAAP gross profit was $112.3 million for the full year of 2016, compared to gross profit of $66.8 million for the prior year. Non-GAAP gross profit was $118.0 million for the full year of 2016, compared to $69.5 million for the prior year. GAAP gross margin was 61 percent for the full year of 2016, compared to 55 percent for the prior year. Non-GAAP gross margin was 64 percent for the full year of 2016, compared to 57 percent for the prior year.

Operating Loss

• GAAP operating loss was $57.2 million for the fourth quarter of 2016, compared to $50.6 million for the same period last year. Non-GAAP operating loss was $30.7 million for the fourth quarter of 2016, compared to $32.9 million for the same period last year.

• GAAP operating loss was $251.2 million for the full year of 2016, compared to $179.6 million for the prior year. Non-GAAP operating loss was $147.1 million for the full year of 2016, compared to $133.6 million for the prior year.

Net Loss

• GAAP net loss was $57.1 million for the fourth quarter of 2016, or $0.94 per basic and diluted share, compared to a GAAP net loss of $50.2 million, or $1.11 per basic and diluted share, for the same period last year. Non-GAAP net loss was $30.6 million for the fourth quarter of 2016, or $0.50 per basic and diluted share, compared to a non-GAAP net loss of $32.7 million, or $0.72 per basic and diluted share, for the same period last year.

• GAAP net loss for the full year of 2016 was $251.7 million, or $4.40 per basic and diluted share, compared to a GAAP net loss of $179.1 million, or $4.13 per basic and diluted share, for the prior year. Non-GAAP net loss for the full year of 2016 was $147.6 million, or $2.58 per basic and diluted share, compared to a non-GAAP net loss of $133.3 million, or $3.08 per basic and diluted share, for the prior year.

Adjusted EBITDA

We historically calculated Adjusted EBITDA as revenue plus change in deferred revenue minus non-GAAP expenses plus depreciation. We provided guidance for each element of Adjusted EBITDA through the fourth quarter of fiscal 2016, which we targeted for Adjusted EBITDA breakeven.

• For the fourth quarter of 2016, GAAP revenue was $52.0 million, change in deferred revenue was $28.6 million, non-GAAP expenses were $82.7 million, and depreciation was $2.0 million.

• For the full year 2016, GAAP revenue was $184.5 million, change in deferred revenue was $78.6 million, non-GAAP expenses were $331.6 million, and depreciation was $7.2 million.

Deferred Revenue

• Deferred revenue was $185.4 million as of December 31, 2016, an 18 percent increase over the $156.8 million reported as of September 30, 2016 and a 74 percent increase over the $106.8 million reported as of December 31, 2015.

Cash & Investments

• Cash and investments totaled $89.2 million as of December 31, 2016, compared to $95.6 million as of September 30, 2016 and $96.9 million as of December 31, 2015.

• Operating cash used was $0.6 million for the fourth quarter of 2016, compared to $18.8 million for the same period last year.

• Operating cash used was $81.5 million for the full year of 2016, compared to $99.3 million for the prior 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 Appoints Raj Verma as President and Chief Operating Officer. In January 2017, we announced the appointment of Raj Verma as president and chief operating officer. Verma is an experienced enterprise sales veteran who brings more than 20 years of enterprise sales and marketing leadership. Previously, Verma was chief operating officer of TIBCO Software Inc., where he was instrumental in taking TIBCO from $300 million to more than $1 billion in annual revenue.

• Hortonworks Enterprise Data Warehouse Optimization Solution Fast Tracks Customers to Modern Business Intelligence. In January 2017, we announced the Enterprise Data Warehouse (EDW) Optimization Solution, the industry’s only turnkey Hadoop-powered Business Intelligence solution. This is the first Hortonworks Solution powered by the Hortonworks Data Platform (HDP™) and technology from partners Syncsort and AtScale. With the EDW Optimization Solution, customers can extend the value of existing EDW investments and overcome challenges, risks and costs of introducing new solutions into legacy infrastructure.

• Hortonworks Celebrates 2016 Partnerworks Award Winners and Announces Record Ecosystem Growth. In January 2017, we announced our Partnerworks program had exceeded 2,100 members, illustrating strong demand for technologies that utilize data to transform business outcomes. In addition, we announced the winners of our inaugural Global Partner Awards for 2016: Microsoft, Accenture and Dell EMC.

• United Network for Organ Sharing Chooses Hortonworks Data Platform to Help Save Lives. In December 2016, we announced that the United Network for Organ Sharing, the private non-profit organization that manages the United States organ transplant system, is using HDP to help transplant professionals make more informed decisions when life-saving organs become available.

• Hortonworks Advances Cloud Strategy with Availability of Hortonworks Data Cloud for Amazon Web Services. In November 2016, we announced the availability of Hortonworks Data Cloud on the Amazon Web Services (AWS) Cloud. Hortonworks Data Cloud for AWS enables users to harness the agility and elasticity of Apache Hadoop and Apache Spark in the cloud for powering new workloads and analytic applications.

• Hortonworks Powers Modernization of Health Insurance Industry. In November 2016, we announced that the Health Care Service Corporation is using HDP to modernize its data architecture and unlock the value of analytics. With HDP, leading providers of health insurance can provide better service to millions of healthcare plan members.

• Hortonworks Celebrates 1,000 Customer Milestone. In November 2016, we announced that we had exceeded 1,000 customers worldwide. In the six years since our founding, we have rapidly built our customer base across industries—including healthcare, manufacturing, financial services, energy, telecommunications and public sector—by delivering the industry’s only open and connected data platforms to manage data-at-rest and data-in-motion in any environment.

• Hortonworks Accelerates Global Expansion with Appointment of Open Source Industry Sales Veterans. In November 2016, we announced the addition of Joe Morrissey as vice president of international and Kamal Brar as vice president and general manager of Asia Pacific to our rapidly expanding international team. Morrissey will be responsible for developing and executing our sales and expansion strategy across the entire international business, with Brar responsible for leading and developing the growth opportunities across the Asia Pacific region.

Financial Outlook

As of February 9, 2017, Hortonworks is providing the following financial outlook for its first quarter and full year 2017:

For the first quarter of 2017, we expect:

Total GAAP revenue of $52.0 million.

GAAP operating margin between negative 115 percent and negative 110 percent, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $26.0 million.

Non-GAAP operating margin between negative 65 percent and negative 60 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $26.0 million.

For the full year 2017, we expect:

Total GAAP revenue between $235.0 million and $240.0 million.

GAAP operating margin between negative 85 percent and negative 80 percent, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $105.0 million.

Non-GAAP operating margin between negative 50 percent and negative 45 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $105.0 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.

Fourth Quarter and Full Year 2016 Earnings Conference Call and Webcast Details

Hortonworks will hold a conference call and webcast to discuss the Q4 and FY 2016 results, Q1 and FY 2017 outlook and related matters at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) on Thursday, February 9, 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 and amortization of intangibles. 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 non-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 non-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 expenses is calculated as GAAP cost of revenue plus stock-based compensation expense and amortization of intangibles plus GAAP operating expenses plus stock-based compensation expense and amortization of intangibles. Management believes non-GAAP expenses offers investors useful supplemental information regarding the cost structure of our business, and will help investors better understand our business.

Non-GAAP operating loss is calculated as GAAP operating loss plus GAAP revenue adjustments and 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 non-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 GAAP revenue adjustments and 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.

Adjusted EBITDA is calculated as revenue plus change in deferred revenue minus non-GAAP expenses plus depreciation. Management uses adjusted EBITDA in conjunction with traditional GAAP operating performance measures as part of our overall assessment of our performance and for planning purposes, including the preparation of our annual operating budget, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance.

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, including 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, 2016, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016 filed on May 9, 2016, August 9, 2016 and November 8, 2016, respectively, or in other filings we make with the Securities and 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, NiFi and Spark. Along with its 2,000+ partners, Hortonworks provides the expertise, training and services that allow customers to unlock transformational value for their organizations across any line of business.

Hortonworks, Powering the Future of Data, 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 December 31,						Years Ended December 31,
	2016			2015			2016			2015
Support subscription and professional services revenue:
Support subscription	$	35,569		$	25,555		$	126,689		$	77,728
Professional services		16,390			11,866			57,772			44,216
Total support subscription and professional services revenue		51,959			37,421			184,461			121,944
Cost of revenue:
Support subscription		5,849			4,491			23,030			13,705
Professional services		12,129			11,206			49,140			41,466
Total cost of revenue		17,978			15,697			72,170			55,171
Gross profit		33,981			21,724			112,291			66,773
Operating expenses:
Sales and marketing		46,477			37,969			183,542			133,052
Research and development		25,569			20,407			99,202			66,645
General and administrative		19,131			13,901			80,723			46,669
Total operating expenses		91,177			72,277			363,467			246,366
Loss from operations		(57,196	)		(50,553	)		(251,176	)		(179,593	)
Other income, net		625			422			712			908
Loss before income tax expense		(56,571	)		(50,131	)		(250,464	)		(178,685	)
Income tax expense		482			103			1,224			432
Net loss	$	(57,053	)	$	(50,234	)	$	(251,688	)	$	(179,117	)
Net loss per share of common stock, basic and diluted	$	(0.94	)	$	(1.11	)	$	(4.40	)	$	(4.13	)
Weighted-average shares used in computing net loss per share of common stock, basic and diluted		60,606,303			45,384,975			57,203,067			43,318,044

Hortonworks, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

	December 31, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	53,332		$	35,748
Short-term investments		31,764			58,553
Accounts receivable, net		82,368			53,913
Prepaid expenses and other current assets		4,831			5,276
Total current assets		172,295			153,490
Property and equipment, net		19,381			15,422
Long-term investments		4,084			2,592
Goodwill		34,333			34,333
Intangible assets, net		3,121			4,002
Other assets		1,306			872
Restricted cash		1,316			1,308
Total assets	$	235,836		$	212,019
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,749		$	6,365
Accrued compensation and benefits		17,978			12,685
Accrued expenses and other current liabilities		11,752			14,989
Deferred revenue		129,840			90,407
Total current liabilities		166,319			124,446
Long-term deferred revenue		55,550			16,372
Other long-term liabilities		2,605			3,610
Total liabilities		224,474			144,428
Stockholders’ equity:
Preferred stock, par value of $0.0001 per share—25,000,000 shares authorized; none issued or outstanding as of December 31, 2016 and December 31, 2015		—			—
Common stock, par value of $0.0001 per share—500,000,000 shares authorized; 61,122,863 and 45,692,391 shares issued and outstanding as of December 31, 2016 and December 31, 2015, respectively		7			5
Additional paid-in capital		714,960			518,986
Accumulated other comprehensive loss		(1,063	)		(546	)
Accumulated deficit		(702,542	)		(450,854	)
Total stockholders’ equity		11,362			67,591
Total liabilities and stockholders’ equity	$	235,836		$	212,019

Hortonworks, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

	Three Months Ended December 31,						Years Ended December 31,
	2016			2015			2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(57,053	)	$	(50,234	)	$	(251,688	)	$	(179,117	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		2,007			1,438			7,244			4,499
Amortization of premiums from investments		135			193			856			949
Amortization of intangible assets		221			222			881			393
Stock-based compensation expense		23,263			17,220			98,823			40,939
Impairment of promissory note and interest receivable		1,966			—			2,683			—
Loss on disposal of assets		—			2			—			522
Deferred income taxes		27			(140	)		27			(140	)
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies		(440	)		60			(335	)		60
Provision for losses on accounts receivable		105			20			514			20
Other		32			(66	)		(43	)		(66	)
Changes in operating assets and liabilities:
Accounts receivable		(5,217	)		(8,370	)		(29,584	)		(21,629	)
Prepaid expenses and other current assets		1,506			783			949			(1,519	)
Other assets		(407	)		146			(464	)		(580	)
Accounts payable		(2,335	)		1,570			1,773			1,648
Accrued expenses and other current liabilities		2,877			2,083			2,334			6,154
Accrued compensation and benefits		2,729			1,272			5,630			2,801
Deferred revenue		29,830			15,233			79,493			44,381
Other long-term liabilities		129			(211	)		(613	)		1,349
Net cash used in operating activities		(625	)		(18,779	)		(81,520	)		(99,336	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments		—			(11,643	)		(80,519	)		(102,631	)
Proceeds from sales of investments		5,840			—			13,156			—
Proceeds from maturities of investments		15,928			41,493			89,248			118,510
Purchases of property and equipment		(1,716	)		(1,466	)		(12,781	)		(12,839	)
Acquisitions, net		—			—			—			(3,541	)
Issuance of promissory note receivable		—			—			—			(2,500	)
Change in restricted cash		—			—			(11	)		31
Net cash provided by (used in) investing activities		20,052			28,384			9,093			(2,970	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		645			1,665			9,466			10,417
Purchase of treasury stock		(46	)		—			(520	)		—
Payment of contingent consideration related to an acquisition		—			—			(1,625	)		—
Payments of acquisition-related liabilities		(1,651	)		—			(3,526	)		—
Payments of capital lease liability		(69	)		(170	)		(172	)		(170	)
Payment of fees for line of credit		(243	)		—			(243	)		—
Proceeds from follow-on public offering, net of issuance costs		—			—			87,233			—
Payments for deferred offering costs		—			—			—			(835	)
Net cash (used in) provided by financing activities		(1,364	)		1,495			90,613			9,412
Effect of exchange rate changes on cash and cash equivalents		(561	)		(442	)		(602	)		(442	)
Net increase (decrease) in cash and cash equivalents		17,502			10,658			17,584			(93,336	)
Cash and cash equivalents—Beginning of period		35,830			25,090			35,748			129,084
Cash and cash equivalents—End of period	$	53,332		$	35,748		$	53,332		$	35,748

Hortonworks, Inc.

Reconciliation of GAAP to Non-GAAP

(in thousands, except share and per share amounts)

	Three Months Ended December 31,						Years Ended December 31,
	2016			2015			2016			2015
Non-GAAP Revenue:
GAAP revenue	$	51,959		$	37,421		$	184,461		$	121,944
Contra-revenue		—			—			—			65
Non-GAAP revenue	$	51,959		$	37,421		$	184,461		$	122,009
Non-GAAP Gross Profit and Margin:
Gross profit	$	33,981		$	21,724		$	112,291		$	66,773
Stock-based compensation expense		1,593			1,086			5,700			2,702
Contra-revenue		—			—			—			65
Non-GAAP gross profit	$	35,574		$	22,810		$	117,991		$	69,540
Gross margin percentages:
GAAP		65	%		58	%		61	%		55	%
Non-GAAP		68	%		61	%		64	%		57	%
Non-GAAP Operating Loss and Margin:
Operating loss	$	(57,196	)	$	(50,553	)	$	(251,176	)	$	(179,593	)
Stock-based compensation expense		23,263			17,220			98,823			40,939
Contra-revenue		—			—			—			65
Acquisition-related retention bonus		—			210			—			4,048
Loss on asset write-off		—			—			—			503
Impairment of promissory note and interest receivable		1,966			—			2,683			—
Litigation and legal related expenses		852			—			1,452			—
Amortization of intangible		221			222			881			393
Advisory fees		200			—			200			—
Non-GAAP operating loss	$	(30,694	)	$	(32,901	)	$	(147,137	)	$	(133,645	)
Operating margin percentages:
GAAP		(110	)%		(135	)%		(136	)%		(147	)%
Non-GAAP		(59	)%		(88	)%		(80	)%		(110	)%
Non-GAAP Net Loss and Net Loss per Share:
Net loss	$	(57,053	)	$	(50,234	)	$	(251,688	)	$	(179,117	)
Stock-based compensation expense		23,263			17,220			98,823			40,939
Contra-revenue		—			—			—			65
Acquisition-related retention bonus		—			210			—			4,048
Loss on asset write-off		—			—			—			503
Impairment of promissory note and interest receivable		1,966			—			2,683			—
Litigation and legal related expenses		852			—			1,452			—
Amortization of intangible		221			222			881			393
Advisory fees		200			—			200			—
Tax benefit related to acquisitions		—			(140	)		—			(140	)
Non-GAAP net loss	$	(30,551	)	$	(32,722	)	$	(147,649	)	$	(133,309	)
Weighted-average shares		60,606,303			45,384,975			57,203,067			43,318,044
Non-GAAP net loss per share	$	(0.50	)	$	(0.72	)	$	(2.58	)	$	(3.08	)
Adjusted EBITDA:
GAAP revenue	$	51,959		$	37,421		$	184,461		$	121,944
Add: Change in deferred revenue		28,589			14,708			78,611			43,856
Less: Cost of revenue		(17,978	)		(15,697	)		(72,170	)		(55,171	)
Less: Operating expenses		(91,177	)		(72,277	)		(363,467	)		(246,366	)
Add: Non-GAAP cost of revenue and operating expense adjustments:
Stock-based compensation expense		23,263			17,220			98,823			40,939
Contra-revenue		—			—			—			65
Acquisition-related retention bonus		—			210			—			4,048
Loss on asset write-off		—			—			—			503
Impairment of promissory note and interest receivable		1,966			—			2,683			—
Litigation and legal related expenses		852			—			1,452			—
Amortization of intangible		221			222			881			393
Advisory fees		200			—			200			—
Depreciation expense		2,007			1,438			7,244			4,499
Adjusted EBITDA	$	(98	)	$	(16,755	)	$	(61,282	)	$	(85,290	)
Stock-based compensation expense by function:
Cost of revenue	$	1,593			1,086		$	5,700			2,702
Sales and marketing		6,479			4,806			25,787			11,688
Research and development		10,148			6,942			36,540			15,193
General and administrative		5,043			4,386			30,796			11,356
Stock-based compensation expense	$	23,263		$	17,220		$	98,823		$	40,939

For Additional Information Contact:

Reuben Gallegos

VP, Investor Relations and Corporate Development

rgallegos@hortonworks.com

EX-99.2

Exhibit 99.2

Hortonworks Prepared Financial Remarks for the Fourth Quarter and Full Year 2016

SANTA CLARA, Calif.—February 9, 2017—Hortonworks, Inc.^® (NASDAQ: HDP), a leading innovator of open and connected data platforms, today announced financial results for the fourth quarter and full year 2016. 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 for approximately seven days at http://investors.hortonworks.com.

Reuben Gallegos (VP, Investor Relations & Corporate Development)

Thank you. Good afternoon and welcome to Hortonworks’ Q4 2016 Earnings Question and Answer 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 and CEO), Scott Davidson (CFO), Raj Verma (President and COO) and Shaun Connolly (Chief Strategy Officer).

During the call, we will make forward-looking statements regarding future events and views about the future financial performance of the company. 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 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, and our partners, employees and shareholders for their support. Key open source data technologies like Apache Hadoop, Apache Spark and Apache NiFi would simply not have the market penetration that they do today without you. I am very proud of the entire team’s execution in Q4. They focused and delivered on operational excellence across the board, so thank you to all the Hortonworkers for all of your hard work.

I would also like to welcome Raj Verma, who recently joined us from TIBCO, where he was the Chief Operating Officer. He has been on the team for about three weeks as our President and Chief Operating Officer, and I am excited to have him at Hortonworks, as he brings strong enterprise IT sales, marketing and operations experience to the company. I look forward to working with him to continue expanding our business and driving the discipline that will help us scale and achieve our mission of managing the world’s data.

In the two years since taking the company public, we have advanced to a $200 million revenue run rate, scaled to over 1,000 customers and 2,100 partners and introduced multiple innovative products including most recently the industry’s first connected data architecture. We have been steadfast to our roots in delivering value for customers in a 100% open source model, which continues to be the cornerstone of our strategy. Our commitment to driving innovation through open source remains a distinct competitive advantage, and our customers are embracing this in the marketplace and voting with their dollars as is evidenced by our business results.

So, for today’s call, I will make some brief remarks on our Q4 and full year 2016 performance, our traction in the marketplace and the points of leverage we are experiencing in our business. Afterward, Scott will discuss our financial highlights for 2016 and our outlook for 2017.

Record Q4 Financial Results for the Company

• The fourth quarter was strong, with record quarterly revenue of $52.0 million, growing 39% year-over-year, and operating billings of $81.4 million, growing 56% year-over-year.

• We achieved our goal of Adjusted EBITDA breakeven in the fourth quarter and demonstrated the leverage in our business.

• We saw continued momentum of large deals during Q4 of 2016, including 9 with a contract value greater than $1 million. It is important to note that over half of those deals included both Hortonworks Data Platform (HDP) and Hortonworks DataFlow (HDF). Comparatively, in Q4 of 2015, we closed 5 subscription deals over $1 million.

• Finally, our competitive wins in Q4 have never been stronger, and in 2016, migrations from our competitors’ platforms to our connected data platforms have never been higher.

Market Penetration & Global Expansion

Today, Cloud Computing, IoT and Big Data Analytics are dramatically impacting IT architectures, and our connected data platforms operate at the convergence of these three massive growth markets. Specifically, HDP, HDF, Azure HDInsight and Hortonworks Data Cloud for AWS are all uniquely positioned to enable our customers to manage their data across the data center, in the cloud and in the hybrid architectures.

• We continue to see strong momentum carry through all the key verticals on a global basis. Just to touch on a few customer engagements from Q4:

a. Black Knight Financial Services, the premiere brand for technology in the mortgage industry, is using HDP and HDF for its LoanSphere Data Hub. This big data service enables its clients to optimize and measure underwriting risk. It is designed to collect and analyze data across many applications and systems where insights are utilized to improve financial performance by driving proactive decision making.

b. Clearsense, a Big Data-focused healthcare IT company, is leveraging HDF to ingest the data from several hospitals and health systems into HDP, where they run analytics to provide real-time intelligence to proactively address clinical, operational and financial challenges at the point of decision.

c. QSight IT, a customer from the Netherlands, is using both HDP and HDF to secure organizations against cyber threats and malicious activity on a global scale by parsing through massive amounts of data to then provide corrective information to remediate security incidents.

Points of Leverage

As we enter 2017, I think about points of leverage in terms of what can be done with some of the foundational work that has been developed previously. Let me touch on a few of them.

As you will recall, in the back half of 2016, we refined our sales go to market, including reallocating dollars between sales and marketing to yield better results. We also focused on hiring new international leaders and on improving the operational efficiency within our professional services organization. In 2017, we will continue to invest in and expand our presence across international markets and expand our channel relationships with SIs, ISVs and OEMs in order to drive more usage of our existing and new solutions.

On the product side, our transition to a multi-platform and cloud solutions company is solidly in place and enables new ways to engage with our customers to monetize on premise, either in the cloud or in a hybrid environment. Some notable product highlights include:

• Azure HDInsight: there was notable month-over-month usage growth in Q4 2016 for the HDInsight customers that we are actively engaged with.

• Hortonworks Data Cloud for AWS: our new cloud service, launched in Q4 2016, enables us to target the Amazon Web Services ecosystem with a connected data platform value proposition that drives new usage-based and hybrid cloud revenue streams.

• Hortonworks DataFlow: customer adoption accelerated significantly in 2016, growing approximately 6X year-over-year, and we see robust attach rates of HDF by existing HDP customers.

• Hortonworks EDW Optimization Solution: this solution, launched in February 2016, is targeted at the Enterprise Data Warehouse and Business Intelligence markets. It is an easy-to-implement modern BI solution built on Hadoop. The solution is powered by HDP and technology from partners Syncsort and AtScale and will enable customers to unlock actionable intelligence from data without heavy lifting or steep cost.

Looking ahead at developments in the big data market, we believe that we can further leverage our existing R&D investments for utilization across other data-intensive technology trends like Artificial Intelligence and Machine Learning where excitement and interest has grown significantly.

Summary

I am proud of the Hortonworks team for the strong Q4 performance and fantastic end to 2016. I believe Hortonworks is uniquely positioned at the intersection of the big data, cloud and IoT megatrends. And, we are working very hard to meet the demands from our customers who are deploying open source solutions into their next generation enterprise data architecture, spanning both the cloud and the data center.

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 Q4 and full year 2016 financial highlights. Scott?

Scott Davidson (CFO)

Thanks, Rob. I will start by providing details on our fourth quarter and full year 2016 performance and conclude with our outlook for the first quarter and full year 2017.

For Q4 2016, total revenue was $52.0 million, up 39% compared to the prior year, and support subscription revenue was $35.6 million, up 39% compared to the prior year. In the fourth quarter, 68% of total revenue was comprised of subscription revenue, which was similar to the prior year.

For full year 2016, total revenue was $184.5 million, up 51% compared to the prior year, and support subscription revenue was $126.7 million, up 63% compared to the prior year. Subscription revenue represented 69% of total revenue which was 5 points higher year-over-year.

In Q4 2016, total operating billings, an operating measure representing the collective value of our customer invoices for the period, were $81.4 million, up 56% year-over-year. For the year, total operating billings were $269.9 million, up 63% year-over-year.

We historically calculated Adjusted EBITDA as revenue plus change in deferred revenue minus non-GAAP expenses plus depreciation. We provided guidance for each element of Adjusted EBITDA through the fourth quarter of 2016, which we targeted for Adjusted EBITDA breakeven.

• For the fourth quarter of 2016, GAAP revenue was $52.0 million, change in deferred revenue was $28.6 million, non-GAAP expenses were $82.7 million, and depreciation was $2.0 million.

• For the full year 2016, GAAP revenue was $184.5 million, change in deferred revenue was $78.6 million, non-GAAP expenses were $331.6 million, and depreciation was $7.2 million.

From a deal perspective:

• We had 9 deals over $1 million in the fourth quarter; this was almost twice the number of million dollar deals in the same period in 2015.

• The dollar-based net expansion rate was 131% over the trailing four-quarter average.

• International revenue for Q4 2016 accounted for approximately 24% of total revenue and grew approximately 121% year-over-year.

For Q4 2016, GAAP gross margin was 65%, approximately 7 percentage points higher than the same period in 2015. The change was driven by mix, in terms of more subscription revenue, and also by efficiencies within our professional services organization. Q4 2016 non-GAAP gross margin was 68%, compared to 61% for the same period in 2015.

For the full year 2016, GAAP gross margin was 61%, with non-GAAP gross margin of 64%. Both improved year-over-year, by 6 percentage points and 7 percentage points, respectively.

Turning to the expenses, the operating leverage trend on an absolute basis continued to improve. In Q4 2016, non-GAAP operating margin improved by approximately 29 percentage points to a negative 59%. For the full year 2016, non-GAAP operating margin improved year-over-year by approximately 30 percentage points to a negative 80%.

In Q4 2016, non-GAAP sales and marketing expense was up 21% over the prior year versus revenue, which grew 39%. In Q4 2016, non-GAAP sales and marketing expense as a percent of revenue declined by 12 percentage points compared to the prior year. We continue to make targeted investments in this area, especially internationally to support sales coverage and associated solution engineers.

Q4 2016 non-GAAP research and development expense increased 16% year-over-year to $15.2 million, primarily driven by headcount, while non-GAAP general and administrative expense increased by 16% to $11.1 million.

For Q4 2016, total GAAP operating expense increased 26% compared to the prior year but declined as a percent of total revenue. For Q4 2016, total non-GAAP operating expense increased 19% compared to the prior year but declined as a percent of total revenue.

For 2016, total GAAP operating expense increased 48% compared to the prior year but declined as a percent of total revenue. For 2016, total non-GAAP operating expense increased 30% compared to the prior year but declined as a percent of total revenue.

Non-GAAP net loss was $30.6 million for the fourth quarter of 2016, or $0.50 per basic and diluted share. This compares to a non-GAAP net loss of $32.7 million, or $0.72 per basic and diluted share, for the same period last year.

Non-GAAP net loss was $147.6 million for the full year of 2016, or $2.58 per basic and diluted share. This compares to a non-GAAP net loss of $133.3 million, or $3.08 per basic and diluted share, for the prior year.

The deferred revenue balance was $185.4 million as of December 31, 2016, an increase of 18 percent over the $156.8 million reported as of September 30, 2016, and a 74 percent increase over the $106.8 million reported as of December 31, 2015. Short term deferred revenue increased 23% sequentially.

Operating cash flow was negative $0.6 million, which was better than plan and is a result of stronger collections and tighter expense control. For 2016, the operating cash flow was negative $81.5 million, compared to the negative $99.3 million used in 2015. In Q1 2017, we expect to see negative mid-teens operating cash flow, as Q1 expenses increase sequentially due to hiring within our sales organization and sales kick off, in addition to the impact from payroll taxes across our workforce. We also continue to target operating cash flow break even some time between Q3 and Q4 of 2017.

We exited 2016 with a total cash and investments balance of $89.2 million and have access to another $30.0 million revolving credit facility that we put in place to provide us with flexibility in managing working capital.

Now, Turning to Our Outlook

At this point, we would typically jump into guidance, but let me provide some additional commentary that will provide some context related to our guidance.

Since going public, our operating model has evolved. At that time, we offered a single Hadoop-based solution, which was deployed on premise and primarily linked to an annual support contract. For customers that required a fully managed service, there was HDI on Microsoft Azure.

Now, let’s fast forward to today, where we offer comprehensive connected data platforms. Customer use cases are varied and deployment options range from on-premise to hybrid environments that may also span multiple public clouds. Customer consumption behavior has evolved, requiring flexibility across our respective business relationships with them. This evolution has in fact shaped many of the larger deals that we executed in 2016, including several of the 9 deals over $1 million in Q4 2016. We are now operating at scale with a $200 million a year revenue run rate where these broader deployment and consumption trends impact traditional metrics. In particular, billings become less relevant when renewals and upsells get co-termed, durations change and usage models in the cloud become more prominent. In some cases, an isolated billings number may not adequately illustrate the economics of a particular transaction. Given these changes, for 2017, we are pivoting to guide upon the metrics of revenue and operating margin. We find that these metrics are consistent with our peer group, many of which are seeing similar trends in the market, and most importantly, consistent with how we have evolved to run the business today.

So, as of February 9, 2017, Hortonworks is providing the following financial outlook for the first quarter and full year 2017:

For the First Quarter 2017

We expect

• Total GAAP revenue of $52.0 million.

• GAAP operating profit margin between negative 115% and negative 110%, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $26.0 million.

• Non-GAAP operating profit margin between negative 65% and negative 60%, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $26.0 million.

For the Full Year 2017

We expect

• Total GAAP revenue between $235.0 million and $240.0 million.

• GAAP operating profit margin between negative 85% and negative 80%, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $105.0 million.

• Non-GAAP operating profit margin between negative 50% and negative 45%, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $105.0 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 up the line for Q&A. Thank you.

Supplemental Customer Mentions from Q4 2016

FINANCIAL SERVICES

Black Knight Financial Services, a trusted, long-standing business partner to many of the nation’s leading lenders and servicers, is using HDP and HDF capabilities to provide its clients with a Big Data technology solution, which Black Knight calls the LoanSphere Data Hub, that will enable its clients to better manage risk, improve financial performance and drive greater efficiency.

Scotiabank, the third largest bank in Canada, has been a Hortonworks customer since 2015. One of the bank’s strategic initiatives focuses on becoming a data-driven organization. To that end, Scotiabank began with Hortonworks by consolidating multiple data repositories into a shared HDP data lake to streamline the company’s data management processes. This has improved the efficiency of regulatory reporting, one of the multiple business benefits that a Scotiabank speaker shared in a keynote presentation at the Hortonworks Future of Data Roadshow in Toronto this past October 2016.

We recently highlighted LendingPoint’s use of HDP to build a modern, real-time loan request platform. LendingPoint and Hortonworks continue to partner and develop new use cases to enable LendingPoint to accept more applications and to price loans appropriately.

HEALTHCARE

Clearsense, a company dedicated to helping the healthcare industry unlock the power of Big Data, is leveraging HDF to ingest data from several hospitals and health systems across the United States. Data lands into HDP, where Clearsense runs analytics and data science for applications that provide for the real-time intelligence to proactively address clinical, operational, and financial challenges at the point of decision or influence. With the help of Apache NiFi, Clearsense is also using HDF for Sepsis Management by monitoring key vital signs to detect symptoms of this common life-threatening infection before it becomes fatal.

IT SERVICES

QSight IT leverages HDP and HDF to secure organizations against cyber threats and malicious activity on a global scale by creating information that allows customers to clearly understand and effectively remediate security incidents. Data is collected from log sources and network streams through sensors and securely sent to a central platform. It is enriched and correlated and, through intensive use of Artificial Intelligence, transformed into Actionable Intelligence which is presented through an online customer portal. Over a million events are collected per customer per day, resulting in terabytes of data pertaining to fraudulent user activity, cyber-attacks, data protection and company reputation indicators. For QSight IT, Hortonworks is the enabler for a flexible and scalable cybersecurity platform for its customers.

MEDIA AND ADVERTISING

Soleo Communications, a digital media company dedicated to connecting people to local businesses, adopted HDF to process up to 20 million calls per week. Soleo ingests this data from telecommunication data centers nationwide and analyses it in real time to identify patterns and to optimize their service. Soleo’s need to interact with this streaming data in myriad, simultaneous ways made HDF the ideal processing platform.

PUBLIC SECTOR

The California Natural Resources Agency’s mission is “To restore, protect and manage the state’s natural, historical and cultural resources for current and future generations using creative approaches and solutions based on science, collaboration and respect for all the communities and interests involved.” This mission requires increasingly detailed analysis, using ever-growing datasets and collaboration with its member Departments and with a wide variety of stakeholders, constituent groups and the public. HDP will be the core environment for this collaboration.