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 8, 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 office) (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 February 8, 2018, the Company issued a press release announcing financial results for the fourth quarter and full year ended December 31, 2017. 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 fourth quarter and full year ended December 31, 2017 (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 8, 2018.
99.2	Prepared Remarks dated February 8, 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: February 8, 2018	By:	/s/ Scott Davidson
		Scott Davidson Chief Financial Officer and Chief Operating Officer

EX-99.1

Exhibit 99.1

Hortonworks Reports Fourth Quarter and 2017 Annual Revenue

Record 2017 Revenue of $261.8 Million and Fourth Quarter Revenue of $75.0 Million

Company Also Delivers $6.4 Million in Fourth Quarter Operating Cash Flow

SANTA CLARA, Calif.—February 8, 2018—Hortonworks, Inc.^® (NASDAQ: HDP), a leading provider of global data management solutions, today announced financial results for the fourth quarter and full year 2017.

“We completed 2017 with a significant amount of momentum, resulting in record revenue of $261.8 million for the year and achievement of operating cash flow break-even exiting the fourth quarter,” said Rob Bearden, chief executive officer and chairman of the board of directors of Hortonworks. “The breadth of our product portfolio, the execution of our team and the focus of our business strategy creates a strong foundation for us and our customers as we enter 2018.”

Fourth Quarter and Full Year 2017 Financial Highlights

Revenue

• Total revenue was $75.0 million for the fourth quarter of 2017, an increase of 44 percent compared to the fourth quarter of 2016.

• Total revenue was $261.8 million for the full year of 2017, an increase of 42 percent compared to the prior year.

Gross Profit

• Total GAAP gross profit was $53.6 million for the fourth quarter of 2017, compared to $34.0 million for the same period last year. Non-GAAP gross profit was $55.8 million for the fourth quarter of 2017, compared to $35.6 million for the same period last year. GAAP gross margin was 71 percent for the fourth quarter of 2017, compared to 65 percent for the same period last year. Non-GAAP gross margin was 74 percent for the fourth quarter of 2017, compared to 68 percent for the same period last year.

• Total GAAP gross profit was $180.7 million for the full year of 2017, compared to $112.3 million for the prior year. Non-GAAP gross profit was $188.4 million for the full year of 2017, compared to $118.0 million for the prior year. GAAP gross margin was 69 percent for the full year of 2017, compared to 61 percent for the prior year. Non-GAAP gross margin was 72 percent for the full year of 2017, compared to 64 percent for the prior year.

Operating Loss

• GAAP operating loss was $45.8 million for the fourth quarter of 2017, compared to $57.2 million for the same period last year. Non-GAAP operating loss was $14.6 million for the fourth quarter of 2017, compared to $30.7 million for the same period last year. GAAP operating margin was negative 61 percent for the fourth quarter of 2017, compared to negative 110 percent for the same period last year. Non-GAAP operating margin was negative 19 percent for the fourth quarter of 2017, compared to negative 59 percent for the same period last year.

• GAAP operating loss was $198.8 million for the full year of 2017, compared to $251.2 million for the prior year. Non-GAAP operating loss was $87.5 million for the full year of 2017, compared to $147.1 million for the prior year. GAAP operating margin was negative 76 percent for the full year of 2017, compared to negative 136 percent for the prior year. Non-GAAP operating margin was negative 33 percent for the full year of 2017, compared to negative 80 percent for the prior year.

Net Loss

• GAAP net loss was $48.2 million for the fourth quarter of 2017, or $0.68 per basic and diluted share, compared to a GAAP net loss of $57.1 million, or $0.94 per basic and diluted share, for the same period last year. Non-GAAP net loss was $17.0 million for the fourth quarter of 2017, or $0.24 per basic and diluted share, compared to a non-GAAP net loss of $30.6 million, or $0.50 per basic and diluted share, for the same period last year.

• GAAP net loss was $204.5 million for the full year of 2017, or $3.08 per basic and diluted share, compared to a GAAP net loss of $251.7 million, or $4.40 per basic and diluted share, for the prior year. Non-GAAP net loss was $93.1 million for the full year of 2017, or $1.40 per basic and diluted share, compared to a non-GAAP net loss of $147.6 million, or $2.58 per basic and diluted share, for the prior year.

Deferred Revenue

• Deferred revenue was $275.2 million as of December 31, 2017, a 20 percent increase over the $229.8 million reported as of September 30, 2017 and a 48 percent increase over the $185.4 million reported as of December 31, 2016.

Cash & Investments

• Cash and investments totaled $72.5 million as of December 31, 2017, compared to $63.2 million as of September 30, 2017 and $89.2 million as of December 31, 2016.

Operating Cash

• Operating cash flow was $6.4 million for the fourth quarter of 2017, compared to operating cash used of $0.6 million for the same period last year.

• Operating cash used was $29.8 million for the full year of 2017, compared to $82.4 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 is Named to the Deloitte Technology Fast 500 as One of the Fastest Growing Technology Companies. In December, we announced that we had been named by Deloitte as one of the fastest growing technology companies in North America. This recognition comes as part of the release of Deloitte’s Technology Fast 500 annual rankings, which include the fastest growing companies in the technology, media, telecommunications, life sciences and energy technology sectors.

• Hortonworks Data Platform Selected by Nissan Motor Company to Power Its Data Lake. In October, we announced that Hortonworks Data Platform (HDP^®) was selected by Nissan Motor Company Ltd. to power its data lake. HDP will power Nissan Motor’s data lake infrastructure and will enable the collection of all data across the business, including data related to driving and vehicle quality. Powered by Apache Hadoop and enabled by a robust ecosystem, HDP enables Nissan Motor to use big data applications that require cross-functional data analysis, such as analyzing the battery usage in electric vehicles and quality management of vehicles to ensure users have a smooth and seamless enhanced driving experience.

Financial Outlook

Hortonworks implemented accounting standards ASC 606 and ASC 340-40 beginning on January 1, 2018, following a modified retrospective approach and will disclose the final financial impacts commensurate with first quarter 2018 results. The Company’s preliminary estimates relating to this accounting change are as follows: an unfavorable impact of approximately $15.0 million on total revenue for 2018, with approximately $2.0 million to $3.0 million of that within the first quarter, and an unfavorable impact of approximately 1 percent to 2 percent on non-GAAP operating margin for 2018. These impacts are addressed in the guidance below.

As of February 8, 2018, Hortonworks is providing the following financial outlook for its first quarter and full year 2018:

For the first quarter of 2018, we expect:

Total revenue of $75.0 million.

GAAP operating margin between negative 63 percent and negative 58 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 29 percent and negative 24 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $26.0 million.

For the full year 2018, we expect:

Total revenue between $322.0 million and $327.0 million.

GAAP operating margin between negative 53 percent and negative 48 percent, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $101.0 million.

Non-GAAP operating margin between negative 23 percent and negative 17 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $101.0 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 2017 Earnings Conference Call and Webcast Details

Hortonworks will hold a conference call and webcast to discuss the Q4 and FY 2017 results, Q1 and FY 2018 outlook and related matters at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) on Thursday, February 8, 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.

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.

Use of Forward-Looking Statements

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

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

Further information on these and other factors that could affect our financial results and the forward-looking statements in this press release are included in our Form 10-K filed on March 15, 2017, our Quarterly Report on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017 and September 30, 2017 filed on May 9, 2017, August 8, 2017 and November 7, 2017, 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 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 and HDP 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 Consolidated Statements of Operations

(in thousands, except share and per share data)

	Three Months Ended December 31,						Years Ended December 31,
	2017			2016			2017			2016
Support subscription and professional services revenue:
Support subscription	$	57,847		$	35,569		$	198,935		$	126,689
Professional services		17,159			16,390			62,875			57,772
Total support subscription and professional services revenue		75,006			51,959			261,810			184,461
Cost of revenue:
Support subscription		8,593			5,849			30,741			23,030
Professional services		12,837			12,129			50,354			49,140
Total cost of revenue		21,430			17,978			81,095			72,170
Gross profit		53,576			33,981			180,715			112,291
Operating expenses:
Sales and marketing		51,267			46,477			200,188			183,542
Research and development		23,576			25,569			101,094			99,202
General and administrative		24,538			19,131			78,282			80,723
Total operating expenses		99,381			91,177			379,564			363,467
Loss from operations		(45,805	)		(57,196	)		(198,849	)		(251,176	)
Other (expense) income, net		(1,038	)		625			(3,172	)		712
Loss before income tax expense		(46,843	)		(56,571	)		(202,021	)		(250,464	)
Income tax expense		1,385			482			2,486			1,224
Net loss	$	(48,228	)	$	(57,053	)	$	(204,507	)	$	(251,688	)
Net loss per share of common stock, basic and diluted	$	(0.68	)	$	(0.94	)	$	(3.08	)	$	(4.40	)
Weighted-average shares used in computing net loss per share of common stock, basic and diluted		71,132,432			60,606,303			66,356,474			57,203,067

Hortonworks, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except share and per share data)

	December 31, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	62,739		$	53,332
Short-term investments		9,773			31,764
Accounts receivable, net		112,013			82,368
Prepaid expenses and other current assets		10,809			4,831
Total current assets		195,334			172,295
Property and equipment, net		16,383			19,381
Long-term investments		—			4,084
Goodwill		34,333			34,333
Intangible assets, net		2,242			3,121
Other assets		1,559			1,306
Restricted cash		882			1,316
Total assets	$	250,733		$	235,836
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	6,134		$	6,749
Accrued compensation and benefits		22,483			17,978
Accrued expenses and other current liabilities		10,948			11,752
Deferred revenue		194,901			129,840
Total current liabilities		234,466			166,319
Long-term deferred revenue		80,269			55,550
Other long-term liabilities		1,034			2,605
Total liabilities		315,769			224,474
Stockholders’ (deficit) equity:
Preferred stock, par value of $0.0001 per share—25,000,000 shares authorized; none issued or outstanding as of December 31, 2017 and December 31, 2016		—			—
Common stock, par value of $0.0001 per share—500,000,000 shares authorized; 72,830,962 shares issued and 72,607,893 shares outstanding as of December 31, 2017 and 61,161,029 shares issued and 61,122,863 shares outstanding as of December 31, 2016		8			7
Additional paid-in capital		842,875			714,960
Accumulated other comprehensive loss		(219	)		(1,063	)
Accumulated deficit		(907,700	)		(702,542	)
Total stockholders’ (deficit) equity		(65,036	)		11,362
Total liabilities and stockholders’ (deficit) equity	$	250,733		$	235,836

Hortonworks, Inc.

Unaudited Consolidated Statements of Cash Flows    

(in thousands)    

	Three Months Ended December 31,						Years Ended December 31,
	2017			2016			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(48,228	)	$	(57,053	)	$	(204,507	)	$	(251,688	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		2,262			2,007			8,786			7,244
Amortization of premiums from investments		45			135			308			856
Amortization of intangible assets		222			221			879			881
Stock-based compensation expense		30,881			23,263			110,036			98,823
Impairment of promissory note and related interest receivable		—			1,966			—			2,683
Deferred income taxes		(330	)		27			(330	)		27
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies		486			(440	)		1,802			(335	)
Loss on early exit of lease		—			—			349			—
Provision for losses on accounts receivable		74			105			176			514
Other		111			32			333			(43	)
Changes in operating assets and liabilities:
Accounts receivable		(31,188	)		(5,217	)		(26,885	)		(29,584	)
Prepaid expenses and other current assets		(1,681	)		1,506			(5,294	)		29
Other assets		1,283			(407	)		(1,035	)		(464	)
Accounts payable		583			(2,335	)		(767	)		1,773
Accrued expenses and other current liabilities		3,110			2,877			(1,151	)		2,334
Accrued compensation and benefits		4,713			2,729			3,978			5,630
Deferred revenue		44,201			29,830			84,564			79,493
Other long-term liabilities		(191	)		129			(992	)		(613	)
Net cash provided by (used in) operating activities		6,353			(625	)		(29,750	)		(82,440	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments		(5,765	)		—			(7,069	)		(80,519	)
Proceeds from sales of investments		—			5,840			—			13,156
Proceeds from maturities of investments		5,300			15,928			32,865			89,248
Purchases of property and equipment		(822	)		(1,716	)		(5,223	)		(12,781	)
Change in restricted cash		411			—			437			(11	)
Net cash (used in) provided by investing activities		(876	)		20,052			21,010			9,093
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		4,479			645			19,464			9,466
Repurchase of unvested shares and tax withholding shares		(1,494	)		(46	)		(2,666	)		(520	)
Proceeds from the disgorgement of short-swing profit		176			—			176			—
Payment of contingent consideration related to an acquisition		—			—			—			(1,625	)
Payment of acquisition-related liability		—			(1,651	)		—			(3,526	)
Payments of capital lease liability		(85	)		(69	)		(396	)		(172	)
Payment of fees for line of credit		—			(243	)		(79	)		(243	)
Proceeds from follow-on public offering, net of issuance costs		—			—			—			88,153
Net cash provided by (used in) financing activities		3,076			(1,364	)		16,499			91,533
Effect of exchange rate changes on cash and cash equivalents		309			(561	)		1,648			(602	)
Net increase in cash and cash equivalents		8,862			17,502			9,407			17,584
Cash and cash equivalents—Beginning of period		53,877			35,830			53,332			35,748
Cash and cash equivalents—End of period	$	62,739		$	53,332		$	62,739		$	53,332

Hortonworks, Inc.

Unaudited Reconciliation of GAAP to Non-GAAP

(in thousands, except share and per share data)

	Three Months Ended December 31,						Years Ended December 31,
	2017			2016			2017			2016
Non-GAAP Gross Profit and Margin:
Gross profit	$	53,576		$	33,981		$	180,715		$	112,291
Stock-based compensation expense		2,187			1,593			7,676			5,700
Non-GAAP gross profit	$	55,763		$	35,574		$	188,391		$	117,991
Gross margin percentages:
GAAP		71	%		65	%		69	%		61	%
Non-GAAP		74	%		68	%		72	%		64	%
Non-GAAP Operating Loss and Margin:
Operating loss	$	(45,805	)	$	(57,196	)	$	(198,849	)	$	(251,176	)
Stock-based compensation expense		30,881			23,263			110,036			98,823
Impairment of promissory note and related interest receivable		—			1,966			—			2,683
Litigation and legal related expenses		—			852			—			1,452
Loss on early exit of lease		—			—			349			—
Amortization of intangible assets		222			221			879			881
Advisory fees		100			200			100			200
Non-GAAP operating loss	$	(14,602	)	$	(30,694	)	$	(87,485	)	$	(147,137	)
Operating margin percentages:
GAAP		(61	)%		(110	)%		(76	)%		(136	)%
Non-GAAP		(19	)%		(59	)%		(33	)%		(80	)%
Non-GAAP Net Loss and Net Loss per Share:
Net loss	$	(48,228	)	$	(57,053	)	$	(204,507	)	$	(251,688	)
Stock-based compensation expense		30,881			23,263			110,036			98,823
Impairment of promissory note and related interest receivable		—			1,966			—			2,683
Litigation and legal related expenses		—			852			—			1,452
Loss on early exit of lease		—			—			349			—
Amortization of intangible assets		222			221			879			881
Advisory fees		100			200			100			200
Non-GAAP net loss	$	(17,025	)	$	(30,551	)	$	(93,143	)	$	(147,649	)
Weighted-average shares outstanding		71,132,432			60,606,303			66,356,474			57,203,067
Non-GAAP net loss per share	$	(0.24	)	$	(0.50	)	$	(1.40	)	$	(2.58	)
Stock-based compensation expense by function:
Cost of revenue	$	2,187		$	1,593		$	7,676		$	5,700
Sales and marketing		8,604			6,479			35,210			25,787
Research and development		8,370			10,148			38,771			36,540
General and administrative		11,720			5,043			28,379			30,796
Total stock-based compensation expense	$	30,881		$	23,263		$	110,036		$	98,823

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 2017

SANTA CLARA, Calif. – February 8, 2018 – Hortonworks, Inc.^® (NASDAQ: HDP), a leading provider of global data management solutions, today announced financial results for the fourth quarter and full year 2017. 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’ Q4 and full year 2017 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 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, 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 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 support. They are the driving force behind our open source global data management solutions that enable customers to deploy a modern data architecture to power data lakes, streaming analytics and data science applications. These solutions support a wide variety of new value drivers for our customers to leverage the type of insights not available to them previously. For today’s call, I will begin with a review of our business highlights from 2017 and conclude with a review of our opportunity in 2018. Then, Scott will discuss our financial highlights for the fourth quarter and full year 2017 and provide our outlook for the first quarter and full year 2018.

Business Highlights

2017 was a pivotal year for us. Entering the year, our focal points were to meet our commitments to our customers, investors and employees while operating within an open source business model to generate positive, value-driven results. Over the course of the year, we scaled revenue, delivered margin expansion and generated positive cash flow within the fourth quarter. This resulted in another company record, with fourth-quarter GAAP revenue growing 44 percent year-over-year to $75.0 million and full year GAAP revenue growing 42 percent to $261.8 million. I am very proud of our team’s continued discipline and execution against our market opportunity by delivering balanced results within the open source model.

During our four years as a public company, we have evolved from the leading Hadoop provider focused on the big data market to the leading global data management platform company with over 1,300 customers throughout the world. Continued data volume growth and accelerating velocity remain the core drivers of growth in our business, and delivering actionable, real-time insights for our customers around their data remains our mission. In the last few years, the total addressable market for our platforms has continued to expand and has been fueled by the evolution of data science opportunities, the cloud, hybrid operating models and internet of things (IoT) industrial use cases.

Industry analysts, including International Data Corporation (IDC), point to these markets growing to approximately $1.9 trillion in aggregate size within the next five years. Each of these markets relies on large amounts of data being stored, processed and managed without compromising speed, governance or security. And looking across these markets, we believe the total addressable markets for our specific global data management solutions and services is approximately $49 billion by 2021¹.

As the only company that offers 100 percent open source global data management solutions, we understand that our customers’ success is a foundational element of our own success, and that we must deliver sustained value every year to earn their business. Our model yields a faster time to value for customers and fosters a cycle of innovation, which is creating an ecosystem that has yielded many meaningful industry partnerships including IBM, Microsoft and Accenture, just to name a few.

Our customers benefit from best-in-class support and a steady cadence of new innovations. In 2017, we continued to execute upon our model and delivered new platform releases of Hortonworks Data Platform (HDP) and Hortonworks DataFlow (HDF), and late in the year, we raised the bar again by introducing Hortonworks DataPlane Services (DPS). Hortonworks DPS enables a seamless hybrid data architecture with a common set of enterprise services that bridges on-premises and cloud infrastructure with consistent security, management and governance across all data assets. Companies across every sector are recognizing the value of their data and the opportunity to create significant value by transforming their business models.

This requires managing data throughout its entire lifecycle, from point of origin at the edge to where it comes to rest, and accessing data at every tier across their architecture.

Banks and financial services institutions are recognizing data as a strategic resource for analytics, machine learning and artificial intelligence. They are using big data analytics to unlock insights, make more meaningful decisions and manage risk. Eagle Investment Systems has selected Hortonworks to enable the next generation of their data management solutions in support of the largest investment managers. Lloyds Banking Group, Societe Generale and ATB Financial have all chosen Hortonworks to address similar challenges. Leading manufacturers, like Daimler Trucks North America, are in the midst of change as they digitally transform their entire value chains. Our solutions are enabling them to optimize real-time decision making across product development, manufacturing, supply chain and customer experience operations. In the public and education sectors, where our customers are challenged with extracting actionable intelligence from their data sources, organizations like Carnegie Mellon University and California State Department of Water Resources are also leveraging our platforms.

2018 Plans and Growth Opportunities

Heading into 2018, we see the market functioning well and see continued opportunity for growth within our core business of managing data in motion and data at rest. We continue to see new opportunities and emerging use cases related to managing high velocity data in the IoT and data streaming space. We also see a continued shift as large enterprise companies realize that a hybrid data architecture is required to pursue these new use cases. This ongoing shift in customer focus was largely the driver leading to the development of the Hortonworks DPS platform, and we are seeing significant interest in Hortonworks DPS for 2018 and beyond.

Similar to the way YARN changed the game by enabling batch, real-time and streaming analytics to become reality on the Hadoop platform and how HDF re-defined data in motion, Hortonworks DPS extends these capabilities to hybrid and multi-cloud environments with common security, management and governance. Hortonworks DPS represents a natural and important evolution of our offerings. We are proud to be recognized by Noel Yuhanna, an analyst at Forrester Research Inc., as the first in our industry to introduce a service that truly connects data platforms on multiple tiers and on a global scale². As the industry’s understanding of our capabilities and expertise has grown, so has partnership interest among well-established industry leaders. This past year, we jointly announced with IBM an expanded partnership designed to help businesses accelerate data-driven decision-making. Additionally, we jointly announced with NEC an expanded partnership to deliver a single distributed processing platform for big data and we expect this partnership trend to continue into 2018.

From a broader market perspective, we see several secular trends that will impact our business in 2018. The most significant are emerging within the realms of data governance and IoT. As organizations seek to manage their increasing data and compute requirements, they will be challenged by deploying multiple clouds or hybrid cloud environments – cost and governance being the two most imperative obstacles. Hortonworks DPS is situated squarely in this area.

Recent high-profile data breaches illuminated the importance of data governance and indicated that we have reached the data governance tipping point. Data governance creates a notion of traceability, contextual data access, privacy and security – or collectively, the provenance of the data. In years past, data governance was a specified process and one that was easy to implement. Today, in an IoT world, this is no longer the case. Data can now be created outside of our firewalls, without specific controls, and the non-sensitive data can now be shared and viewed with fewer restrictions outside of organizations’ strict guidelines.

Additionally, we believe IoT deployments will have a significant impact on data trends in 2018, stemming from the significant investments being made in expanding the industrial internet. Many companies are currently realizing value by deploying transformative use cases, which are impacting multiple vertical industries such as oil and gas sensors connected on a drilling rig, connected utilities, smart factories and connected cars. Companies will need to be ready to manage multiple and hybrid cloud footprints, ensuring they are ready for changes to governance and regulatory mandates and ensure they are prepared for the next wave of IoT.

We believe that we are very well positioned to benefit from these trends in 2018 and beyond. We are just at the start of several significant transitions in the market that will transform how our customers and partners manage the lifecycle of their data for years to come.

Summary

I am proud of the execution by our entire Hortonworks team and am pleased to see the ecosystem continue to rally around Hortonworks because of our open and collaborative approach, as evidenced by the customer and go to market momentum we saw throughout 2017. 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 financial highlights. Scott?

Scott Davidson (COO and CFO)

Thanks, Rob. I will start by providing details on our fourth quarter and full year 2017 performance and conclude with our outlook for the first quarter and full year 2018.

As Rob mentioned, our Q4 2017 total GAAP revenue was $75.0 million, up 44 percent compared to the prior year. Support subscription GAAP revenue was $57.8 million for the fourth quarter, up 63 percent compared to the prior year. In the fourth quarter, 77 percent of total GAAP revenue was comprised of subscription revenue a 9 percentage point increase year-over-year, which is consistent with our long-term target mix of 80 percent.

For full year 2017, total GAAP revenue was $261.8 million, up 42 percent compared to the prior year, and support subscription GAAP revenue was $198.9 million, up 57 percent compared to the prior year. Support subscription GAAP revenue for this same period represented 76 percent of total revenue, which is 7 percentage points higher year-over-year.

From a deal perspective, this quarter:

• We had 20 deals over $1 million, compared to 9 in Q4 last year, with 11 of those deals this quarter including HDF;

• Average deal size was approximately $207 thousand in Q4; this was the largest average deal size for any quarter in 2017, and it reflects some seasonality; and

• The average dollar-based net expansion rate was 122 percent over the trailing four-quarter period.

International GAAP revenue grew approximately 61 percent year-over-year in the fourth quarter of 2017 and accounted for approximately 30 percent of our total GAAP revenue in the quarter. For 2017, international GAAP revenue accounted for approximately 28 percent of our total GAAP revenue. Seven of the deals with total contract value greater than $1 million in the fourth quarter were with companies in the international market.

GAAP gross margin in the quarter was 71 percent, compared to 65 percent for the same period in 2016. Non-GAAP gross margin expanded by 6 percentage points to 74 percent, compared to 68 percent for the same period in 2016.

For 2017, total GAAP gross margin was 69 percent, compared to 61 percent for the prior year. For 2017, non-GAAP gross margin was 72 percent, compared to 64 percent for the prior year.

GAAP operating loss was $45.8 million for the fourth quarter, compared to $57.2 million for the same period last year. GAAP operating margin for the fourth quarter was a negative 61 percent, compared to a negative 110 percent for the same period last year. Non-GAAP operating loss was reduced by more than half to $14.6 million for the fourth quarter versus $30.7 million for the same period in 2016. Non-GAAP operating margin for Q4 was a negative 19 percent, a 40 percentage point improvement when compared to a negative 59 percent for the same period in 2016.

For 2017, total GAAP operating loss was $198.8 million compared to $251.2 million for the prior year. GAAP operating margin for 2017 was a negative 76 percent, compared to a negative 136 percent for the prior year. For 2017, total non-GAAP operating loss was $87.5 million compared to $147.1 million for the prior year. Non-GAAP operating margin was a negative 33 percent for 2017, compared to a negative 80 percent for 2016.

For Q4 2017, GAAP net loss was $48.2 million, or $0.68 per basic and diluted share. This compares to a GAAP net loss of $57.1 million, or $0.94 per basic and diluted share, for the same period in 2016. Q4 2017 non-GAAP net loss was $17.0 million, or $0.24 per basic and diluted share. This compares to a non-GAAP net loss of $30.6 million, or $0.50 per basic and diluted share, for the same period in 2016.

For 2017, GAAP net loss was $204.5 million, or $3.08 per basic and diluted share. This compares to a GAAP net loss of $251.7 million, or $4.40 per basic and diluted share in 2016. For 2017, non-GAAP net loss was $93.1 million, or $1.40 per basic and diluted share. This compares to a non-GAAP net loss of $147.6 million, or $2.58 per basic and diluted share in 2016.

The deferred revenue balance was $275.2 million as of December 31, 2017, an increase of 20 percent over the $229.8 million reported as of September 30, 2017, and a 48 percent increase over the $185.4 million reported as of December 31, 2016.

Operating cash flow was $6.4 million for the fourth quarter of 2017. This was our first quarter of positive operating cash flow in the company’s history and compares to operating cash used of $0.6 million for the same period last year. Our operating cash used was $29.8 million for the full year of 2017, compared to $82.4 million for the same period last year, a reduction of cash flow burn by approximately $53 million on year-over-year basis. And, we expect to be operating cash flow positive for 2018.

We exited the fourth quarter with a total cash and investments balance of $72.5 million, an increase of approximately 15 percent from the third quarter of 2017, and have access to another $50.0 million under our revolving credit facility.

Before I get to guidance, I would like to remind you that we implemented the new accounting standards ASC 606 and ASC 340-40 beginning on January 1, 2018. We are following a modified retrospective approach and will disclose the final financial impacts commensurate with our first quarter 2018 results. At this point, we have contemplated preliminary estimates relating to this accounting change in our revenue and operating margin guidance. We currently estimate an unfavorable impact of approximately $15.0 million on total GAAP revenue for 2018, with approximately $2.0 million to $3.0 million of that within the first quarter, and an unfavorable impact of approximately 1 percent to 2 percent on non-GAAP operating margin for 2018.

Our Outlook

As of February 8, 2018, Hortonworks is providing the following financial outlook for the first quarter and full year 2018.

For the First Quarter of 2018

We expect

• Total GAAP revenue of $75.0 million.

• GAAP operating margin between negative 63 percent and negative 58 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 29 percent and negative 24 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $26.0 million.

For the Full Year 2018

We expect

• Total GAAP revenue between $322.0 million and $327.0 million.

• GAAP operating margin between negative 53 percent and negative 48 percent, which includes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $101.0 million.

• Non-GAAP operating margin between negative 23 percent and negative 17 percent, which excludes stock-based compensation and related expenses and amortization of purchased intangibles of approximately $101.0 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.

¹  Sources: IDC’s Worldwide Nonrelational Database Management Systems Software Forecast, 2017–2021, July, 2017; IDC’s Worldwide Storage for Big Data and Analytics Forecast, 2017–2021, September, 2017; Worldwide Big Data and Analytics Software Forecast, 2017–2021, July, 2017; Worldwide Big Data Technology and Services Forecast, 2016–2020, December, 2016.

²  Hof, Robert. “With DataPlane, Hortonworks Aims to Help Companies Drowning in Data Lakes.” Silicon Angle, 27 Sept. 2017, siliconangle.com/blog/2017/09/25/dataplane-hortonworks-aims-help-companies-drowning-data-lakes/.