Hortonworks, the true HORROR!
Some posters have tried to deny to themselves just how bad the situation is with Hortonworks, the real HORROR.
Let’s start with some 2016 figures:
They recognized Revenue of $184.5 million.
They had GAAP losses of $251.7 million or $4.40 per share
Do you realize what that means? It means they spent $184.5 million PLUS $251.7 million!!!
So they recognized revenue of $184.5 million and SPENT $436.2 million!!!
Let’s say that their growth comes in WAY better than guidance, and they grow revenue at a little over 40% both this year and next, and double their revenue in two years. Let’s just say… That would be $369 million (so after two years, and after doubling, revenue still wouldn’t come close to covering THIS YEAR’s expenses).
And let’s say they have REMARKABLE expense restraint, and over the two years, while they are growing revenue by 100%, they only grow expenses by 60%! (Everyone would congratulate them if they did that).
Let’s see: $436.2 times 1.6, so in two years expenses will equal $697.6 million!!!
And we figured doubling revenue to $369 million two years from now. Their $698 million expenses, minus $369 million revenue, means they’d have $329 million losses two years from now.
So in two years their losses will grow about 31%, from the current $252 million to $329 million, even allowing for doubling revenue and reducing expenses as a percent of revenue by 40%. If either of those remarkable assumptions doesn’t come through they will lose even more.
Just as a reality check, in 2016 their revenue DID increase 51%, and their total loss DID grow by 40% from $179 million to $252 million. It didn’t go down even with that 51% increase in revenue.
Now that’s interesting: with a 40% growth in net loss, they only showed a 6% growth in loss per share (from $4.13 to $4.40, year over year). How can that be? Well they are hiding the magnitude of their loss per share by inflating their shares so much, so there is less growth in loss for each share!
How much are they inflating? Chris pointed out that they gave out $99 million in stock based compensation. That’s stock based comp for an astounding 54% of revenue! Fifty-four percent of revenue!!!
Now they can’t keep diluting the stock like that forever, but what happens if they stop diluting their shares so much by giving out so much stock based compensation? Think about it! With the same growth in net losses, and without dilution of shares, their growth in loss per share would be much larger than it is now…And if they paid their employees in dollars instead of diluting the stock, non-GAAP expenses would rise to meet GAAP expenses, and non-GAAP losses would rise at an even faster RATE than GAAP losses.
So they are trapped:
They can’t ever get even close to breakeven and GAAP losses will continue to rise to extraordinary levels.
They can’t continue to dilute like this, but they can’t stop either.
And now they have a management crisis and fired their head of sales, on top of already slowing growth.
Do you really want to stay in this stock?
For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.
A link to the Knowledgebase is also at the top of the Announcements column
that is on the right side of every page on this board