When the analysts pore over Hortonworks financial results this morning, company President Herb Cunitz thinks he knows what they will say. Some will note that the Hadoop distro provider beat the street. But others will say it missed the mark when it comes to revenues, as much of the tech press suggested yesterday.
“The street thought we’d come in at $13.5 million and we brought in $16.7 million,” he said.
So why are articles on the web at the moment suggesting that Hortonworks’ fourth quarter revenues were $12.7 million. Fuzzy math?
Not really. It might just be a difference between GAAP — the acronym for generally accepted accounting principles — and non-GAAP figures, said Cunitz.
Where’s the gap between the two? It’s the contra-revenue impact of $4 million from the 2011 Yahoo Warrant that became exercisable upon Hortonworks IPO. (This came to pass because Yahoo is both a Hortonworks customer and an investor.)
“Our operational revenue came in well ahead of plan,” said Cunitz. “We beat the street significantly.”
But it’s not only revenues that make Hortonworks’ future look bright. According to the company’s Fourth Quarter and Fiscal Year 2014 Financial results report, it added 99 new support subscription customers in the past quarter. Given that the company was founded in June 2011 and has 332 total support subscription customers to date, the last three months of 2014, by a customer acquisition metric, is quite impressive.
If you compare Hortonworks’ new support billings for HDP, its Hadoop distro, to competitor Cloudera’s Enterprise Data Hub (EDH) support billings, Hortonworks’ grew more than 65 percent faster on those particular metrics. Cloudera, which has not yet gone public, self-reported its growth at 85 percent for the fiscal year that ended in January in a statement it released last Tuesday.
Good news for @hortonworks is customer count climbing - added 99 new subscription customers Q4 for total of 332— Jeff Kelly (@jeffreyfkelly) February 24, 2015
The Race Isn't Over
This doesn’t, however, suggest that Hortonworks has become the king of Hadoop. “No one has won,” said Cunitz. “We’re still in the early phases of the market.”
But he did add that he likes Hortonworks’ momentum, is confident in its business model (which Cloudera’s CTO Amr Awadallah claims is unsustainable) and believes in his company’s ability to execute.
“Execution is vital,” according to Holger Mueller, a vice president and principal analyst at Constellation Research. He said we might see some overly optimistic expectations post IPO, adding, “It will be key for the Hortonworks team to deliver in the next quarters."
When it comes to the first quarter of 2015, Cunitz doesn’t seem worried. He predicts billings of between $27 million and $29 million, representing year-over-year growth of 98 percent at the midpoint, and total revenue between $17.5 million and $18.5 million, representing year-over-year growth of 70 percent at the midpoint.
Meeting Market Needs
Why so bullish? “Because we’re seeing proof that the market believes in our business model,” said Cunitz. “Companies want open source, not lock-in.”
It’s something that Pivotal Software has come to believe and testify about. Last week it chose to open source its proprietary software like Greenplum, GemFire and HAWQ. “It has to be open source or the conversation doesn’t begin,” explained Michael Cucchi, a product manager at Pivotal.
While Cloudera and MapR’s big data solutions are based largely on Apache open source software, they also develop and sell proprietary software that enterprises would generally need to buy if they want to manage, protect and secure their enterprise data platforms.
Not only that, but EMC, GE, Hortonworks, IBM, Pivotal, SAS, Teradata, VMware and seven other companies all signed-on to the Open Data Platform (ODP) initiative, which uses only open source components like Apache Hadoop and Apache Ambari. This was a big win for Hortonworks for one primary reason, it is the only 100 percent open source Hadoop distro provider in the mix and its 66 engineers have written a good part of the code.
Who better to call for joint engineering, providing production-level technical support and so on? That’s Hortonworks’ line of thinking and Microsoft via Azure HDInsight and Pivotal via its Big Data Suite and Hitachi Data Systems, among others, have all validated it through their partnerships.
There’s also last month's Data Governance Initiative to take into account, as well as Hortonworks’ new certification for and availability on the Google Cloud Platform.
Last, but not least, according to Cunitz, Hortonworks is winning business from companies that started their big data journeys with other Hadoop distro providers like Cloudera and MapR and have now come to them. “We can talk about companies like Macy’s, Expedia, Spotify and Blackberry as Cloudera defectors on the record,” said Cunitz. “And that’s around 10 percent of the list.”
MapR has defectors as well, but we haven’t been able to verify the number thus far.
Cunitz says that Hortonworks hasn’t lost any customers post-IPO.
With all of this being said, isn’t Cunitz worried at all?
“My job is to wake up every day and worry,” he said. “But I’m very comfortable with our execution.”