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November 10, 2014

Hortonworks Files for IPO, Will Trade Under ‘HDP’

Hortonworks today announced that it plans to go public on the NASDAQ Global Select Market using the ticker symbol HDP, the name of its flagship product, Hortonworks Data Platform. The Silicon Valley firm did not reveal how much stock it will sell or at what price. But as the first Hadoop distributor with concrete initial public offering (IPO) plans, HDP is sure to grab a lot of attention.

Unlike the dot-com boom that last from 1998 to 2000, few, if any, big data startups have sold shares to the public, instead relying on venture capitalists to fund operations. Tens of billions of dollars have flowed into the big data space over the past few years, leading to questions about a big data bubble.

Hortonworks has been a participant in that VC-fueled big data boom, hauling in $225 million since Yahoo spun it out in 2011. In May, it snagged $100 million more to go along with a valuation north of $1 billion.

It’s hard to say how that valuation figure will change when Hortonworks goes public next year. The Form S-1 that Hortonworks submitted today to the Securities and Exchange Commission didn’t say how many of the 69.7 million shares outstanding (as of September 30) will be offered in the sale. However, the S-1 did contain some clues about Hortonworks’ business, and it’s a mixed bag, particularly if you don’t like red ink.

In terms of revenue, Hortonworks brought in just $1.6 million in total subscription and professional services revenue for fiscal 2012, which ended April 30, 2012. For fiscal 2013, the company’s revenues jumped to $11.0 million, a 568 percent increase.


Hortonworks revealed some financial data in its S-1 filing to go public

Revenue growth has continued so far in 2014, although not at that incredible pace of late 2012 and early 2013. From January through September of 2014, Hortonworks has reported $33.4 million in revenue, compared to $16.0 million through the first three quarters of 2013, or a 109 percent increase. (At the end of 2013, the company moved the end of its fiscal year from April 30 to December 31.)

There have not yet been any profits at Hortonworks, which has been adding employees rapidly and ramping up its overall business over the past year in anticipation of future profits. It recorded an $11.5 net loss for fiscal 2012 and a net loss of $36.6 million for fiscal 2013, which corresponds with an 218 percent increase. So far for 2014, it has lost $86.7 million through the first nine months, a 79 percent increase over the first three quarters of 2013. It has an accumulated deficit of $181.1 million, according to the S-1.

In the S-1, Hortonworks shared the number of customers it has. On September 30, 2013, it had 54 customers with support subscriptions. That grew to 233 customers on paid support as of September 30 of 2014.

The S-1 goes on to list all of the usual qualifications and dangers you would expect to threaten Hortonworks business plan, including the stiff competition from other pure-play Hadoop distributors like Cloudera  MapR Technologies; Hadoop solutions from IBM, Oracle, and Pivotal; data warehousing products from Teradata, SAP, and EMC; and the NoSQL databases from MongoDB and DataStax. It mentioned the need for the Hortonworks Data Platform (HDP) to be adopted, and the danger of relying so much on the open source development model, where key contributors are employed by competitors. Then there’s the danger of Hadoop itself, which is “technically very complicated” and tough to get value out of without proper implementation and training, the company says in the filing.

Employee compensation for the top HDP executives–including CEO Rob Bearden, president Herb Cunitz, VP of corporate strategy Shaun Connolly, and VP of engineering Greg Pavlik–is also spelled out in the S-1. Only Bearden had total annual compensation in excess of $1 million. All of the executives hold stock options, and the company relies heavily on stock options to compensate employees. It lists about 12 million of the outstanding shares as being used for this purpose.

A Hortonworks IPO was greeted with cheers by Chad Carson, co-founder of Hadoop performance optimization software developer Pepperdata. “The fact that one of the Hadoop platform pioneers is in a position to go public is a great point of validation for Hadoop adoption in the enterprise and for the future of big data analytics,” he says. “This is not altogether surprising given the number of Hadoop deployments we have seen go from pilot into production in 2014.”

It’s unclear how Hortonworks going public will affect the overall Hadoop market or the positions of the players within. After all, VC firms had been falling all over themselves to get in on funding rounds for Hadoop distributors, including Cloudera, which has hauled in more than $900 million to date and is valued at north of $2 billion, and MapR, which brought in $110 million from Google in June. Money hasn’t been an issue. But at some point, the capitalists need to get paid, and apparently that time is close for the investors in Hortonworks.

Related Items:

MapR Announces $110M Investment Led by Google

Hortonworks Snags $100M, Says It’s Worth $1B

Cloudera Valuation Tops $2B After Latest Funding Round