UPDATED 16:28 EDT / NOVEMBER 03 2016

NEWS

Hortonworks shares jump as revenues top forecasts

Big data leader Hortonworks Inc. managed to win back at least some investors’ confidence today with third-quarter earnings that beat revenue expectations despite a somewhat higher-than-forecast loss.

The company, whose software helps companies collect and analyze massive amounts of data across networks of computers, reported a loss of $40.2 million, or 68 cents a share, not including certain costs such as stock compensation, compared with a loss of $33.6 million or 76 cents a share a year ago. Revenues rose 47 percent to $47.5 million.

Analysts on average had expected a loss of 66 cents a share on $45.1 million in revenues. On a net basis, the loss was $64.7 million, or $1.10 a share, up from a loss of $45.3 million, or $1.03 a share, a year ago.

Expected losses aside, the results represent a recovery from a disastrous second-quarter report that knocked Hortonworks’ stock down 22 percent in one day. But investor sentiment remains volatile. Shares fell more than 7 percent, to $6.57 a share, in regular trading today. Then in after-hours trading after the earnings report, shares were rising more than 14 percent before sliding back to about an 8 percent rise.

“Q3 was a milestone quarter for Hortonworks,” Chief Executive Rob Bearden (above) said in a statement. “We crossed the 1,000 customer count and our operating billings grew 66 percent year-over-year.”

In comments during the earnings conference call, Bearden added, “We continue to see the size and scope of our customer engagements grow,” with 10 deals of greater than $1 million for the first time.

A big question after the last quarter was the extent to which the sales shortfall might indicate a slowing of the market for big data software. The recovery this quarter suggests the market was less an issue than Hortonworks’ own sales issues.

The company said it expects fourth-quarter revenues to $48.0 million and expects operating billings, which it defines as the aggregate value of all invoices sent to customers in a given period, to be $81 million, up 66 percent. Chief Financial Officer Scott Davidson said he expects margins to improve as the impact of more profitable contract renewal dollars becomes a larger proportion of revenues.

For the year, Hortonworks forecast $180.5 million in revenues and $269.4 million in operating billings. It also reiterated Bearden’s promise that the company would reach break-even before costs such as interest, depreciation and amortization.

In the previous quarter, the company missed revenue expectations only slightly, but even that spooked investors. The shortfall, blamed on underperforming salespeople especially overseas, led to the departure of President and sales chief Herb Cunitz and some salespeople. Bearden said at the time that sales would now report to him “indefinitely.”

On Nov. 1, the company announced some steps toward solving that issue with the appointment of industry veterans Joe Morrissey as vice president of international and Kamal Brar as vice president and general manager of Asia Pacific. The company also recently announced some new customer wins, such as Lenovo Group Ltd. and Webtrends.

Hortonworks isn’t the only big data company facing challenges. For one, many large companies are still having trouble implementing Big Data systems such as those from Hortonworks, Cloudera Inc. and MapR Inc. because of the confusing array of options, the rapid changes in open source software most of the Big Data systems use, and a lack of people who know how to create and run the systems.

Big data software companies also face a never-ending challenge from new startups as well as more established players from Amazon Web Services to Oracle Corp. that are barging into the market. Bearden said the company was making progress in its cloud-based services, with 25 percent of its customers using Hortonworks in the cloud.

We view cloud as an onramp” to on-premises Hortonworks software, he said. He believes that AWS workloads, which he characterized as mostly “ephemeral,” will move to Hortonworks as companies need stronger management and security tools for bigger, longer-running workloads.

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