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Actuate Reports Third Quarter 2012 Financial Results

+ Q3 license revenue up 13% year-over-year to $13.3 million

+ Year-to-date license revenue up 18% year-over-year

+ Non-GAAP Operating margin of 18%

+ Q3 non-GAAP fully diluted EPS of $0.08

+ Acquisition of Quiterian adds visual data mining, social media analytics and predictive analytics for non-technical users

SAN MATEO, Calif.-- October 29th, 2012 --Actuate Corporation (NASDAQ: BIRT), The BIRT Company and the leader in open source business intelligence (BI), today announced financial results for the third quarter 2012.

Third Quarter 2012 Financial and Operational Highlights:

  • License revenue up 13% year-over-year to $13.3 million;
  • Revenue included 2 transactions with a license component in excess of $1.0 million;
  • Total revenue of $32.2 million;
  • Non-GAAP operating margin of 18% and non-GAAP operating income of $5.7 million;
  • Non-GAAP fully diluted EPS of $0.08;
  • Total cash and short-term investments of $74.6 million on September 30, 2012, an increase of $11.1 million from a year ago;
  • The Company repurchased $6.0 million worth of stock during the quarter.

"Our mixed third quarter results reflect some macroeconomic uncertainty particularly in Europe. However, our core BIRT-based business continues to drive a strong medium to long term outlook for Actuate. Our focus remains upon hiring sales-generating headcount and investing in research and development, to take advantage of the growing pipeline of opportunities for commercial BIRT," said Pete Cittadini, President and CEO of Actuate. "We believe our recent acquisition of Quiterian fits very well into Actuate’s core business and strengthens our unique ability to help more end users identify and operationalize insights derived from any data source. Quiterian’s analytics capabilities will empower business users far beyond the capabilities of existing data discovery and business intelligence technologies, to present them with a powerful combination of analysis, visualization and information delivery options."

Tweet this: #Actuate NASDAQ: $BIRT: License revenue +13% YOY; Non-GAAP diluted EPS $0.08; Non-GAAP Op Margin 18%

Revenues as reported in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2012 were $32.2 million, down 5% when compared with $33.8 million in the third quarter of 2011. License revenues for the third quarter of 2012 were $13.3 million, up 13% when compared with $11.8 million in the year-ago quarter. Service revenues for the quarter were $18.9 million, compared with $22.0 million reported in the same quarter last year. For the nine months ended September 30, 2012, GAAP revenues were $103.2 million compared to GAAP revenues of $99.6 million for the comparable period of 2011. License revenues for the nine months ended September 30, 2012 were $42.4 million, up 18% when compared with $35.9 million for the comparable period of 2011. Services revenues for the nine months ended September 30, 2012 were $60.9 million compared to $63.7 million for the comparable period of 2011.

GAAP operating income was $2.7 million for the third quarter of 2012, compared with $6.8 million in the third quarter of 2011. GAAP net income for the third quarter of 2012 was $107,000, or $0.00 per diluted share, compared with net income of $4.7 million, or $0.09 per diluted share, in the third quarter of 2011. For the nine months ended September 30, 2012, GAAP operating income was $15.2 million compared with $13.1 million in the comparable period of 2011. GAAP net income for the nine months ended September 30, 2012 was $9.5 million, or $0.18 per diluted share, compared with $7.0 million, or $0.14 per diluted share, in the comparable period of 2011.

Non-GAAP net income for the third quarter of 2012 was $4.0 million, or $0.08 per diluted share, compared with non-GAAP net income of $6.8 million, or $0.13 per diluted share in the third quarter of 2011. Non-GAAP operating margin and net income margin for the third quarter of 2012 was 18% and 12%, respectively. Non-GAAP net income for the nine months ended September 30, 2012 was $16.2 million, or $0.30 per diluted share, compared with $17.5 million, or $0.34 per diluted share, in the comparable period of 2011. Non-GAAP operating margin and net income margin for the nine months ended September 30, 2012 was 22% and 16%, respectively.

Cash flow from operations for the nine months ended September 30, 2012 was $16.6 million, an increase of 16% from the same period a year ago. Cash and short term investments totaled $74.6 million on September 30, 2012, an increase of $11.1 million from September 30, 2011.

Share Repurchases

In August 2012, the Board of Directors approved a $30 million share repurchase program. During the third quarter of 2012 the Company repurchased $6.0 million worth of stock. The share repurchase authorization does not have an expiration date and the pace and timing of repurchases will depend on factors such as cash generation from operations, the volume of employee stock plan activity, cash requirements for acquisitions, economic and market conditions, stock price and legal and regulatory requirements.

Quiterian Acquisition

On October 22nd, Actuate announced that it acquired Quiterian S.L., a privately held software company that provides visual data mining, social media analytics and predictive analytics for business and other non-technical users. Quiterian is an established player in Business Intelligence as noted by leading analyst firms. It has a well established customer base that includes public and private organizations in Telco, eCommerce, Financial Services, Healthcare and Gaming. Notable customers with massive data sets include Telefonica, Vodafone, Orange, La Caixa, Deutsche Bank, Volkswagen, BBVA, Renault, Bayer and several governmental bodies in Spain and Latin America including security and police forces, healthcare, public transportation and tax agencies.

Quiterian Analytics will be integrated into Actuate’s flagship product, ActuateOne, and will be known as BIRT Analytics. A product overview is available at: http://www.youtube.com/watch?v=iSaG7KbdLc0.

For more information, visit http://www.actuate.com/quiterian.

Third Quarter 2012 Business Highlights:

Big Data:

  • Launched Xenos Repository, a document indexing, storage and multi-channel delivery system specifically designed to address traditional and emerging business and regulatory requirements associated with high volume customer communications;
  • Alliance with VoltDB enabling ActuateOne customers to speed processing of Big Data and deliver faster insights;
  • Partnership with DataStax for IT departments to organize and analyze data from Big Data workloads and traditional data sources, accelerating time to insight for business decision makers.

BIRT:

  • The BIRT community has grown to 2 million BIRT developers worldwide;
  • Set records for BIRT license business from Open Source BIRT users for three consecutive quarters in 2012;
  • Significantly higher average license order size from open sources BIRT users in 2012;
  • Over 95,000 total registrations to date on BIRT Exchange, up from 72,000 a year ago;
  • "BIRT Dash for Gold Contest" proved the ease of building Analytics Dashboards with BIRT;
  • Expansion of reach in Asia by inking alliances with India’s TechTreeIT Systems and Aaum Analytics.

During the third quarter, Actuate received significant new and repeat business from, among others:

Amazon.com, Inc., Air Company Limited, Audit Bureau of Circulations, Bank of America Corporation, Callidus Software Inc., CGI Group Inc., Cisco Systems, Computer Word Processing Systems, Inc., Enel Servizi SRL, Hankyu Travel International Co., Ltd., J.P. Morgan Chase & Co., CA, Inc., Peoplefluent, Sircon Corporation - a Vertafore Company, Toshiba Finance Corporation, US Department of the Army HQDA and Washington Headquarters Services (DOD).

Conference Call Information

Actuate’s management will be holding a conference call at 2:00 p.m. PT (5:00 p.m. ET) today, October 29, 2012 to further discuss these results. The dial-in number for the call is 877-407-8035 (201-689-8035 for international participants) and the conference ID is #400905. The conference call will be broadcast live on the Investor Relations section of Actuate’s web site at http://www.actuate.com/investor and will be available as an archived replay for a limited time thereafter.

Discussion of Non-GAAP Financial Measures

This press release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). Actuate management evaluates and makes operating decisions using various performance measures. In addition to our GAAP results, we also consider adjusted net income, which we refer to as non-GAAP net income. We further consider various components of non-GAAP net income such as non-GAAP gross margin and non-GAAP operating expense. Non-GAAP net income is generally based on the revenues of our product, maintenance and services business operations and the costs of those operations, such as cost of revenue, research and development, sales and marketing and general and administrative expenses, that management considers in evaluating our ongoing core operating performance. Non-GAAP net income consists of net income excluding amortization of intangible assets, equity plan-related compensation expenses, acquisition related expenses, restructuring charges, asset impairment costs, non-recurring facilities adjustments, other one-time termination costs, foreign currency exchange gains and losses related to the revaluation of monetary assets and liabilities and other charges and gains which management does not consider reflective of our core operating business. Non-GAAP net income also includes an adjustment to add back revenue that could not be recognized due to the impact of purchase accounting on the acquired Xenos revenue contracts. Intangible assets consist primarily of purchased technology, in-process research and development, trade names, customer relationships, employment agreements and other intangible assets issued in connection with acquisitions. Restructuring charges consist of severance and benefits, excess facilities and asset-related charges and include strategic reallocations or reductions of personnel resources. Equity plan-related compensation expenses represent the fair value of all share-based payments to employees, including grants of employee stock options recognized during the period. For purposes of comparability across other periods and against other companies in our industry, non-GAAP net income is adjusted by the amount of additional taxes or tax benefit that the Company would accrue using a normalized effective tax rate applied to the non-GAAP results. Our non-GAAP earnings per share calculation also includes an adjustment to total outstanding shares to reflect what the share amount would have been if it were calculated using non-GAAP results.

Non-GAAP net income is a supplemental measure of our performance that is not required by, nor presented in accordance with, GAAP. Moreover, it should not be considered as an alternative to net income, operating income, or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of our liquidity. We present non-GAAP net income because we consider it an important supplemental measure of our performance.

Management excludes from non-GAAP net income certain recurring items to facilitate its review of the comparability of the Company's core operating performance on a period-to-period basis because such items are not related to the Company's ongoing core operating performance as viewed by management. Management uses this view of its operating performance for purposes of comparison with its business plan and individual operating budgets and allocations of resources. Additionally, when evaluating potential acquisitions, management excludes the items described above from its consideration of target performance and valuation.

The Company believes that, in general, these items possess one or more of the following characteristics: their magnitude and timing is largely outside of the Company's control; they are unrelated to the ongoing operation of the business in the ordinary course; they are unusual and the Company does not expect them to occur in the ordinary course of business; or they are non-operational, or non-cash expenses involving stock option grants.

The Company believes that the presentation of these non-GAAP financial measures is warranted for several reasons:

1) Such non-GAAP financial measures provide an additional analytical tool for understanding the Company's financial performance by excluding the impact of items that may obscure trends in the core operating performance of the business;

2) Since the Company has historically reported non-GAAP results to the investment community, the Company believes the inclusion of non-GAAP numbers provides consistency and enhances investors' ability to compare the Company's performance across financial reporting periods;

3) These non-GAAP financial measures are employed by the Company's management in its own evaluation of performance and are utilized in financial and operational decision making processes, such as budget planning and forecasting;

4) These non-GAAP financial measures facilitate comparisons to the operating results of other companies in our industry, which use similar financial measures to supplement their GAAP results, thus enhancing the perspective of investors who wish to utilize such comparisons in their analysis of the Company's performance.

Set forth below are additional reasons why specific items are adjusted in the Company's non-GAAP financial measures:

a) Amortization charges for purchased technology and other intangible assets are excluded because they are inconsistent in amount and frequency and are significantly impacted by the timing and magnitude of the Company's acquisition transactions. We analyze and measure our operating results without these charges when evaluating our core performance. Generally, the impact of these charges to the Company's net income tends to diminish over time following an acquisition.

b) While stock-based compensation constitutes an ongoing and recurring expense of the Company, it is not an expense that typically requires or will require cash settlement by the Company. We therefore exclude these charges for purposes of evaluating our core performance as well as with respect to evaluating any potential acquisition.

c) Restructuring charges are primarily related to severance costs and/or the disposition of excess facilities driven by modifications of business strategy. These costs are excluded because they are inherently variable in size, and are not specifically included in the Company's annual operating plan and related budget due to the rapidly changing facts and circumstances typically associated with such modifications of business strategy.

d) Other one-time termination costs relate to benefits provided to the estate of one of Actuate’s senior executives who passed away on December 31, 2010. The benefits were approved by the Compensation Committee of the Board of Directors in February 2011. These costs are excluded because they are non-recurring and are not specifically included in the Company’s annual operating plan and related budget. Management believes that these costs are unrelated to the ongoing operation of its business in the ordinary course and are non-operational.

e) The deferred revenue adjustment relates to our acquisition of Xenos Group, Inc, which was concluded in February 2010. In accordance with the fair value provisions of Accounting Standards Codification ("ASC") 805, Business Combination, acquired deferred revenue of approximately $1.5 million was recorded on the opening balance sheet, which was approximately $3.3 million lower than the historical carrying value. This purchase accounting requirement adversely impacts the Company's reported GAAP revenue primarily for the first twelve months post-acquisition. In order to provide investors with financial information that facilitates comparison of both historical and future results, the Company has provided non-GAAP financial measures which exclude the impact of the purchase accounting adjustment. The Company believes that this non-GAAP financial adjustment is useful to investors because it allows investors to (a) evaluate the effectiveness of the methodology and information used by management in its financial and operational decision-making and (b) compare past and future reports of financial results of the Company as the revenue reduction related to acquired deferred revenue will not recur when related terms are renewed in future periods.

f) Foreign currency exchange gains and losses represent the net gain or loss that Actuate has recorded for the impact of currency exchange rate movements on monetary assets and liabilities denominated in foreign currencies related to the revaluation of these assets and liabilities. Actuate presents non-GAAP financial information excluding foreign exchange gains and losses for several reasons. These foreign currency gains and losses are generally unpredictable and can cause Actuate’s reported results to vary significantly. The magnitude and timing of these gains and losses are largely outside of Actuate’s control because Actuate has not engaged in hedging or taken other actions to reduce the likelihood of incurring a sizeable net gain or loss in future periods. Management believes that these gains and losses are unrelated to the ongoing operation of its business in the ordinary course and are non-operational. Management therefore excludes these items for the purposes of evaluating core performance and they are not specifically included in the Company’s annual operating plans, budgets or management compensation structure. Actuate believes that investors benefit from a supplemental non-GAAP financial measure that excludes these items because it allows more meaningful comparability of results between periods and enables investors to compare Actuate’s core operating results in different periods without this variability.

g) The Facilities Adjustment relates to the Company’s new and old headquarters facilities and their related leases. In the second quarter of fiscal 2012 the Company initiated a lease for its new headquarters in the BayCenter facility, which the Company occupied in July 2012. As a result of this new lease, the Company incurred duplicate rent during a portion of the second quarter of fiscal 2012 as it was paying rent on both the old Bridgepointe campus and the new BayCenter facility. The Facilities Adjustment compensates for this duplicate rent. In addition, as part of the old lease, Actuate was required to restore the facility back to its original condition upon expiration of the lease period. The Facilities Adjustment serves to add restoration costs on the old headquarters facility back to income.

The Facilities Adjustment is made for non-GAAP purposes because the underlying costs are non-recurring in nature, are unrelated to the Company's core operations in the ordinary course, and are not included in our annual operating plan and related budget. They are directly impacted by the timing of the Company's lease transactions and we analyze and measure our operating results without these charges when evaluating our core performance. Actuate believes that investors benefit from a supplemental non-GAAP financial measure that excludes these items because it allows more meaningful comparability of results between periods and enables investors to compare Actuate’s core operating results in different periods without this variability.

h) Asset impairment costs are excluded because they inherently vary in size and are not specifically included in the Company's annual operating plan. Furthermore, asset impairment charges do not typically require any cash outlay and the timing of such impairments is largely outside of the Company's control.

i) Income tax expense is adjusted by the amount of additional expense or benefit that we would accrue if we used non-GAAP results instead of GAAP results in the calculation of our tax liability, taking into consideration the Company's long-term tax structure. The Company is using a normalized effective tax rate of 30% for 2012. Prior to 2012 the Company used a normal non-GAAP tax rate of 20%. This adjustment is made because the rate remains subject to change based on several factors, including variations over time in the geographic business mix and statutory tax rates. This non-GAAP estimated tax rate is reviewed annually.

j) Acquisition-related costs are costs incurred during the third quarter of 2012 related to our acquisition of Quiterian. The acquisition was closed in October 2012. These costs are excluded because they are inconsistent in amount and frequency and are directly impacted by the timing and magnitude of the Company’s acquisition transactions. We analyze and measure our operating results without these charges when evaluating our core performance. These acquisition-related costs are unrelated to the Company’s core operations in the ordinary course and are not included in our annual operating plan and budget.

In the future, the Company expects to continue reporting non-GAAP financial measures excluding items described above and the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above. Accordingly, exclusion of these and other similar items in our non-GAAP presentation should not be construed as an inference that these costs are unusual, infrequent or non-recurring.

As stated above, the Company presents non-GAAP financial measures because it considers them to be important supplemental measures of performance. However, non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for the Company's GAAP results. In the future, the Company expects to incur expenses similar to the non-GAAP adjustments described above and expects to continue reporting non-GAAP financial measures excluding such items. Some of the limitations in relying on non-GAAP financial measures are:

  • Amortization of intangibles, though not directly affecting our current cash position, represent the loss in value as the technology in our industry evolves, is advanced or is replaced over time. The expense associated with this loss in value is not included in the non-GAAP net income presentation and therefore does not reflect the full economic effect of the ongoing cost of maintaining our current technological position in our competitive industry, which is addressed through our research and development program.
  • The Company may engage in acquisition transactions in the future. Merger and acquisition related charges may therefore continue to be incurred and should not be viewed as non-recurring.
  • The Company's employee equity incentive and employee stock purchase plans are important components of our incentive compensation arrangements and will be reflected as expenses in our GAAP results for the foreseeable future.
  • The Company's income tax expense will be ultimately based on its GAAP taxable income and actual tax rates in effect, which may differ significantly from the rate assumed in our non-GAAP presentation.
  • Other companies, including other companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting their usefulness as a comparative measure.

Pursuant to the requirements of SEC Regulation G, a detailed reconciliation between the Company's GAAP and non-GAAP financial results is provided in this press release and is available in the investor relations section of the Company's web site for a limited time at http://www.actuate.com/investor. Investors are advised to carefully review and consider this information strictly as a supplement to the GAAP results that are contained in this press release and in the Company's SEC filings.

Cautionary Note Regarding Forward Looking Statements: The statements contained in this press release that are not purely historical are forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These include statements regarding Actuate’s expectations, beliefs, hopes, intentions or strategies regarding the future. All such forward-looking statements are based upon information available to Actuate as of the date hereof, and Actuate disclaims any obligation to update or revise any such forward-looking statements based on changes in expectations or the circumstances or conditions on which such expectations may be based. Actual results could differ materially from Actuate’s current expectations. Factors that could cause or contribute to such differences include, but are not limited to, the general spending environment for information technology products and services in general and Rich Internet Application, performance management, business intelligence and print stream software in particular, quarterly fluctuations in our revenues and other operating results, our ability to expand our international operations, our ability to successfully compete against current and future competitors, the impact of acquisitions including the acquisition of Quiterian on the Company’s financial and/or operating condition, the ability to increase revenues through our indirect distribution channels, general economic and geopolitical uncertainties and other risk factors that are discussed in Actuate’s Securities and Exchange Commission filings, specifically Actuate 2011 Annual Report on Form 10-K filed on March 9, 2012 as well as its quarterly reports on Form-10Q.

ACTUATE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
  
September 30,December 31,
 2012 2011
ASSETS
Current assets:
Cash, cash equivalents and short-term investments$74,600$67,428
Accounts receivable, net20,14026,844
Other current assets 10,012 7,131
Total current assets104,752101,403
Property and equipment, net7,9661,927
Goodwill and other intangibles, net56,15757,845
Other assets 13,735 15,729
$182,610$176,904
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$1,345$1,521
Restructuring liabilities10898
Accrued compensation5,3555,992
Other accrued liabilities4,6125,872
Deferred revenue 37,073 43,045
Total current liabilities 48,493 56,528
 
Long term liabilities:
Other deferred liabilities3,15820
Deferred revenue1,3051,717
Tax liabilities1,3501,670
Restructuring liabilities 27 106
Total long term liabilities 5,840 3,513
 
Stockholders' equity 128,277 116,863
$182,610$176,904

ACTUATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
      
Three Months EndedNine Months Ended
September 30,September 30,
 2012  2011  2012  2011 
Revenues:
License fees$13,304$11,815$42,389$35,914
Services 18,875  21,994  60,854  63,721 
Total revenues 32,179  33,809  103,243  99,635 
 
Costs and expenses:
Cost of license fees4824241,4391,366
Cost of services5,1874,99815,26715,653
Sales and marketing12,06710,42335,81131,819
Research and development6,0605,83017,66818,480
General and administrative5,3604,88516,91815,623
Amortization of purchased intangibles2892898671,007
Asset impairment---1,681
Restructuring charges 21  158  54  889 
Total costs and expenses 29,466  27,007  88,024  86,518 
Income from operations2,7136,80215,21913,117
Interest income and other income/(expense), net174982763(840)
Interest expense (55) (136) (255) (781)
Income before income taxes2,8327,64815,72711,496
Provision for income taxes 2,725  2,926  6,182  4,514 
Net income$107 $4,722 $9,545 $6,982 
Basic net income per share$0.00 $0.10 $0.19 $0.15 
Shares used in basic per share calculation 49,207  48,058  49,156  46,873 
Diluted net income per share$0.00 $0.09 $0.18 $0.14 
Shares used in diluted per share calculation 52,794  52,285  52,794  51,224 

ACTUATE CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
(unaudited)
      
Three Months EndedNine Months Ended
Revenue reconciliation:September 30,(a)September 30,(a)
 2012  2011 Notes 2012  2011 Notes
GAAP revenue$32,179$33,809$103,243$99,635
Non-GAAP adjustments:
Deferred revenue adjustment - Xenos -  16 (g) -  83 (g)
Total non-GAAP revenues$32,179 $33,825 $103,243 $99,718 
 
 
Three Months EndedNine Months Ended
September 30,(a)September 30,(a)
Operating expense reconciliation: 2012  2011 Notes 2012  2011 Notes
 
GAAP operating expenses$29,466$27,007$88,024$86,518
Non-GAAP adjustments:
Amortization of purchased technology(273)(273)(b)(820)(820)(b)
Amortization of other intangibles(289)(289)(c)(867)(1,007)(c)
Stock-based compensation expense(2,210)(974)(d)(5,604)(4,496)(d)
Restructuring charges(21)(158)(e)(54)(889)(e)
Acquisition related costs(168)-(f)(168)-(f)
Other one-time termination costs---(148)(h)
Facilities adjustment--(380)-(i)
Asset impairment -  -  (89) (1,681)(j)
Total non-GAAP operating expenses$26,505 $25,313 $80,042 $77,477 
 
 
Three Months EndedNine Months Ended
Operating income reconciliation:September 30,(a)September 30,(a)
 2012  2011 Notes 2012  2011 Notes
Total non-GAAP revenues$32,179$33,825$103,243$99,718
Total non-GAAP operating expenses (26,505) (25,313) (80,042) (77,477)
Total non-GAAP operating income$5,674 $8,512 $23,201 $22,241 
 
 
Three Months EndedNine Months Ended
Net income reconciliation:September 30,(a)September 30,(a)
 2012  2011 Notes 2012  2011 Notes
GAAP income before income taxes$2,832$7,648$15,727$11,496
Non-GAAP adjustments:
Amortization of purchased technology273273(b)820820(b)
Amortization of other intangibles289289(c)8671,007(c)
Stock-based compensation expense2,210974(d)5,6044,496(d)
Restructuring charges21158(e)54889(e)
Acquisition related costs168-(f)168-(f)
Deferred revenue adjustment - Xenos-16(g)-83(g)
Other one-time termination costs---148(h)
Facilities adjustment--380-(i)
Asset impairment--891,681(j)
Foreign currency exchange (gain)/loss (72) (812)(k) (505) 1,314 (k)
Non-GAAP income before income taxes5,7218,54623,20421,934
Non-GAAP tax provision 1,716  1,709 (l) 6,961  4,387 (l)
Non-GAAP net income 4,005  6,837  16,243  17,547 
Basic non-GAAP net income per share$0.08 $0.14 $0.33 $0.37 
Shares used in basic per share calculation 49,207  48,058  49,156  46,873 
Diluted non-GAAP net income per share$0.08 $0.13 $0.30 $0.34 
Shares used in diluted per share calculation 53,238  52,724 (m) 53,318  51,756 (m)
 
 

(a) This table contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). Such measures are intended to serve as a supplement to the GAAP results presented elsewhere in this press release, and should not be considered in isolation or as a substitute for such GAAP results. See the section entitled Discussion of Non-GAAP Financial Measures in this press release for additional information regarding: the manner in which management uses these non-GAAP financial measures; the economic substance behind management's decision to use such measures; the material limitations associated with use of these non-GAAP financial measures as compared to the use of the most directly comparable GAAP financial measures; the manner in which management compensates for these limitations when using these non-GAAP financial measures; and the substantive reasons why management believes these non-GAAP financial measures provide useful information to investors.

 

(b) Amortization of purchased technology acquired in prior acquisitions. Purchased technology is amortized over the estimated life of the underlying asset.

 

(c) Amortization of other intangibles includes identifiable intangible assets including trade names, employment agreements and customer relationships acquired through various acquisition transactions. Other identified intangibles are amortized over the estimated remaining life of the underlying intangibles.
 
(d) Actuate accounts for stock-based compensation expense under the fair value method in accordance with the authoritative guidance issued by the Financial Accounting Standards Board ("FASB") related to the measurement and disclosure of stock-based compensation expense. Stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period. For the three months ended September 30, 2012, stock-based expense included approximately (in thousands): $231, $618, $196, and $1,165, related to cost of services revenues, sales and marketing expense, research and development expense and general and administrative expense, respectively.
 
(e) The restructuring expense for the third quarter of 2012 consists primarily of idle facilities charges related to a Xenos facility in Europe. The restructuring expense for the second quarter of 2011 consists of severance payments, payroll taxes and extended medical benefits related to a reduction-in-force.
 
(f) Costs associated with the acquisition of Quiterian.
 

(g) The deferred revenue adjustment relates to our acquisition of Xenos, Inc, which was concluded in February of 2010. In accordance with the fair value provisions of Accounting Standards Codification ("ASC") 805, Business Combination, acquired deferred revenue of approximately $1.5 million was recorded on the opening balance sheet, which was approximately $3.3 million lower than the historical carrying value. This purchase accounting requirement adversely impacts the Company's reported GAAP revenue primarily for the first twelve months post-acquisition. In order to provide investors with financial information that facilitates comparison of both historical and future results, the Company has provided non-GAAP financial measures which exclude the impact of the purchase accounting adjustment.

 
(h) Other one-time termination costs relate to benefits provided to the estate of one of Actuate's senior executives who passed away on December 31, 2010. The benefits were approved by the Compensation Committee of the Board of Directors in February 2011.
 

(i) The lease on our new headquarters located at 951 Mariners Island Boulevard commenced on June 1, 2012. However, we relocated to this new facility on July 23, 2012. During the second quarter and as a result of our contractual commitments, we incurred rent expenses on both the Bridgepointe and the Mariners Island facilities. The rent adjustment above prorates and adjusts the rent expenses during the quarter to only include rent for the occupied Bridgepointe facility. We also incurred a one-time lease restoration charge associated with the Bridgepointe facility during the second quarter of 2012.

 
(j) Represents the impairment of the remaining balance of Xenos In-process Research and Development ("IPR&D").
 
(k) Foreign currency exchange gains and losses represent the net gain or loss that Actuate has recorded for the impact of currency exchange rate movements on monetary assets and liabilities denominated in foreign currencies related to the revaluation of these assets and liabilities.
 

(l) Income tax expense is adjusted by the amount of additional expense or benefit that we would accrue if we used non-GAAP results instead of GAAP results in the calculation of our tax liability, taking into consideration the company's long-term tax structure. The Company used a normalized effective tax rate of 30% in 2012. Prior to fiscal 2012, the Company used a normalized effective rate of 20%.

 
(m) Shares used in calculating diluted earnings per share have been adjusted to reflect what the share amounts would have been if they were calculated using non-GAAP results.

ACTUATE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended
September 30,
Operating activities 2012  2011 
Net income$9,545$6,982
Adjustments to reconcile net income to net cash from operating activities:
Share-based compensation expense related to stock options and employee stock purchase plan5,4543,888
Tax benefits from exercise of stock options(2,440)(2,729)
Amortization of other purchased intangibles1,6871,827
Amortization of debt issuance cost51216
Depreciation1,5871,524
Change in valuation allowance on deferred tax assets1641
Impairment of assets891,681
Accretion of discount (premium) on short-term debt securities189(294)
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:
Accounts receivable, net6,7046,650
Other current assets(2,635)96
Accounts payable(241)(388)
Accrued compensation(637)(1,329)
Other accrued liabilities(521)(363)
Deferred tax assets, net of liabilities1,773584
Income tax receivable/payable, net(872)(2,187)
Other deferred liabilities3,138(247)
Restructuring liabilities(69)(1,069)
Deferred revenue (6,384) (555)
Net cash provided by operating activities 16,582  14,288 
 
Investing activities
Purchases of property and equipment(5,038)(509)
Proceeds from maturity of investments22,69459,366
Purchases of short-term investments(29,286)(33,176)
Security deposits and other (55) 115 
Net cash provided by (used in) investing activities (11,685) 25,796 
 
Financing activities
Credit facility related payments(34)(40,000)
Tax benefit from exercise of stock options2,4402,729
Proceeds from issuance of common stock9,22311,698
Stock repurchases (15,993) (4,999)
Net cash used in financing activities(4,364)(30,572)
Effects of exchange rates on cash and cash equivalents 161  633 
Net increase in cash and cash equivalents69410,145
Cash and cash equivalents at the beginning of the period 38,759  33,269 
Cash and cash equivalents at the end of the period$39,453 $43,414 

About Actuate (NASDAQ:BIRT) – The BIRT Company ™

Actuate provides software to more than 3.5 million BIRT developers and OEMs who build scalable, secure solutions that save time and improve brand experience by delivering personalized analytics and insights to over 200 million of their customers, partners and employees. Actuate founded and supports BIRT – the open source IDE – and develops BIRT iHub™ – the world-class deployment platform – to significantly improve productivity of developers working on customer facing applications. Actuate's BIRT Analytics™delivers self-service predictive analytics to enhance customer engagement using Big Data. The Actuate Customer Communications Suite™ empowers organizations to easily transform, process, personalize, archive and deliver high volume content and individualized correspondence. Actuate is headquartered in Silicon Valley with more than 5,000 enterprise customers in financial services, technology and government. Visit actuate.com and developer.actuate.com.

Copyright © 2014 Actuate Corporation. All rights reserved. Actuate, legodo, BIRT iHub, BIRT iHub F-Type, BIRT Analytics, Actuate Customer Communications Suite, The Actuate Document Accessibility Appliance, BIRT onDemand, BIRT Viewer Toolkit, and the Actuate logo are trademarks or registered trademarks of Actuate Corporation and/or its affiliates in the U.S. and certain other countries. The use of the word "partner" or "partnership" does not imply a legal partnership relationship between Actuate and any other company. All other brands, names or trademarks mentioned may be trademarks of their respective owners.

Contacts:

Kate Lynch, Corporate Communications, Actuate
klynch@actuate.com +1.650.678.8658 (mobile)
Jacob Moelter, Market Street Partners
ir@actuate.com +1.415.571.4956 (mobile)