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Actuate Reports Third Quarter 2014 Financial Results

+ $24.4 million in total non-GAAP revenue;

+ $1.8 million of subscription bookings;

+ $18.2 million in non-GAAP services revenue;

+ Non-GAAP fully diluted EPS of $0.01;

+ Over 15,000 BIRT iHub F-Type downloads since July 10, 2014 launch;

+ Ranked #1 by Dresner Advisory Services in their Embedded Business Intelligence Market Study published October 29, 2014.

SAN MATEO, Calif.Actuate Corporation (NASDAQ: BIRT), The BIRT Company™ and the leader in personalized analytics and insights, today announced financial results for the third quarter 2014:

Third Quarter 2014 Financial and Operational Highlights:

  • Total non-GAAP revenue of $24.4 million;
  • Total license revenue of $6.2 million;
  • Subscription bookings of $1.8 million;
  • Booked 28 subscription deals;
  • Non-GAAP operating income of $334,000;
  • Non-GAAP fully diluted EPS of $0.01;
  • Total cash and short-term investments of $58.3 million on September 30, 2014.

"We saw steady progress in the third quarter as we continued our transition to a subscription business,” said Pete Cittadini, President and CEO of Actuate. “Actuate has a unique opportunity to combine the growing open-source community of over 3.5 million BIRT developers with our new freemium BIRT iHub F-Type, therefore building the foundation to create ubiquity of the complete BIRT stack for the industry. Since its launch on July 10, F-Type has more than 15,000 downloads and over 6,000 registrations, which has exploded Actuate’s online presence and generated new opportunities across a variety of industries.”

Revenues as reported in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2014 were $24.3 million, compared with $32.3 million in the third quarter of 2013. License revenues for the third quarter of 2014 were $6.2 million, compared with $14.3 million in the third quarter of 2013. Service revenues for the quarter were $18.1 million, compared with $18.0 million reported in the same quarter last year.

GAAP operating loss was $3.1 million for the third quarter of 2014, compared with operating income of $1.6 million in the third quarter of 2013. GAAP net loss for the third quarter of 2014 was $2.0 million, or $(0.04) per share, compared with net income of $1.2 million, or $0.02 per diluted share, in the third quarter of 2013.

Non-GAAP net income for the third quarter of 2014 was $265,000, or $0.01 per diluted share, compared with non-GAAP net income of $3.6 million, or $0.07 per diluted share in the third quarter of 2013.

Cash and short term investments totaled $58.3 million on September 30, 2014 down from $59.4 million as of June 30, 2014.

Third quarter 2014 Business Highlights:

  • Announced the launch of BIRT iHub F-Type™ on July 10, new software that provides free access to the features and power of the commercial BIRT iHub™ enterprise-grade deployment platform, with metered output capacity;
  • Over 15,000 downloads of BIRT iHub F-Type and over 6,000 registrations since July 10 launch;
  • Ranked #1 by Dresner Advisory Services in their Embedded Business Intelligence Market Study published October 29;
  • Phototype, an Actuate customer, was recognized by Ventana Research with an Information Technology Innovation Award for Location Intelligence;
  • Announced the availability of BIRT PowerDocs™ for the Salesforce1 Mobile App, empowering companies to run their business from their phone;
  • Announced an alliance with Versiant Corporation, a leading provider of IT professional services and marine terminal solutions support, allowing marine terminal customers to benefit from structured data integration and normalization solutions that promise to increase the effectiveness of their terminal operating systems (TOS);
  • Announced the availability of BIRT Analytics™ 4.4 with powerful new background algorithms and foreground functionalities, comprising a complete toolbox of data mining techniques that are fast and easy to use for self-service, advanced analytics;
  • Record setting number of unique visitors to the new BIRT developer web site (developer.actuate.com), up over 88% from a year ago;
  • Over 130,000 total registrations to date on developer.actuate.com, up 18% or approximately 20,000 from a year ago.

Customers:

During the third quarter, Actuate received significant new and repeat business from, among others: BayernInvest Kapitalanalagegesellschaft bmH, CGI Group Inc., Cgi Immobilier Sa, Comerica Bank, Deloitte LLP, Deutsche Bank Trust Company Americas, JobVite, Manhattan Software, Inc., Maryland Procurement Office, Olm Systems Ltd., PG&E Corporation, Swift & Staley, TASC (Total Administrative Services Corporation), The Dun & Bradstreet Corporation, Tripwire Inc., Washington Headquarters Services (WHS) and Wells Fargo Advisors, LLC.

Conference Call Information:

Actuate’s management team will host a conference call to discuss the company’s third quarter 2014 financial results on November 4, 2014, at 2:00 p.m. PDT (5:00 p.m. EDT). To access the call, please dial +1-877-407-8035 (+1-201-689-8035 for international participants) and use conference ID number 13592396. A live webcast of the third quarter 2014 financial results conference call, with an accompanying slide presentation, will also be available at the investor relations section of the Actuate website at http://www.actuate.com/investor, and will be available in the same location on an archived basis 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 (loss), which we refer to as non-GAAP net income (loss). We further consider various components of non-GAAP net income (loss) such as non-GAAP gross margin and non-GAAP operating expense. Non-GAAP net income (loss) 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 (loss) consists of net income (loss) excluding amortization of intangible assets, equity plan-related compensation expenses, acquisition related expenses, restructuring charges, one-time termination costs, one-time professional services fees, foreign currency exchange gains and losses related to the revaluation of monetary assets and liabilities and other one-time charges and gains which management does not consider reflective of our core operating business. Non-GAAP net income (loss) also includes an adjustment to add back revenue that could not be recognized due to the impact of purchase accounting on the acquired legodo and Quiterian 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 one-time compensation and benefits, excess facilities and asset-related charges resulting from 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 and awards recognized during the period. For purposes of comparability across other periods and against other companies in our industry, non-GAAP net income (loss) 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 (losses) 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 (loss) 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 (loss), operating income (loss), 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 (loss) because we consider it an important supplemental measure of our performance.

Management excludes from non-GAAP net income (loss) 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; they are non-operational, or they are related to 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 (loss) 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 one-time compensation benefits 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) The deferred revenue adjustments relate to our acquisitions of legodo and Quiterian, which were concluded in January 2014 and October 2012, respectively. In accordance with the fair value provisions of Accounting Standards Codification ("ASC") 805, Business Combinations, acquired deferred revenue which was lower than the historical carrying value was recorded on the opening balance sheet. 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.

e) 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.

f) Income tax expense (benefit) 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%. 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.

g) Acquisition-related costs are costs incurred in concluding our acquisition transactions. 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.

h) One-time termination costs consist of severance payments related to reductions in force. As a consequence of reductions in force, the Company was required to pay out certain severance benefits. In accordance with the applicable FASB Codification, these payments were required to be classified as compensation expense in the Condensed Consolidated Statements of Operations, rather than as a restructuring expense because they are consistent with the Company’s past practice in regards to ongoing benefits arrangements as well as statutorily-required benefits that are provided in the event of involuntary termination. The Company is excluding these costs in the Non-GAAP financial measures because the charges are not included in the Company’s annual operating plan and related budget. These charges are inherently variable in size and are directly impacted by the timing and magnitude of the Company’s acquisition transactions. We analyze and measure our operational 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.

i) During the second quarter of 2014 the Company incurred one-time professional services fees related to the adoption of a Shareholder Rights Agreement. During the second quarter of 2013 the Company incurred professional services fees in connection with considerations regarding strategic alternatives. These costs are excluded because the charges are unrelated to the ongoing operation of the business in the ordinary course. Because these costs are unrelated to the Company's core operations, they are not included In the Company's annual operating plan. We analyze and measure our operating results without these charges when evaluating our core performance.

j) Other one-time charges represents a one-time write off totaling approximately $188,000 for the remaining unamortized costs related to our credit facility as we terminated our Line of Credit agreement with Wells Fargo Foothill (“WFF”) and re-negotiated a more favorable agreement with U.S. Bank in the second quarter of 2013. Also during the second quarter of 2013, we wrote-off leasehold improvements totaling approximately $155,000 associated with our Toronto, Canada idle facility as part of our plan of restructuring the Performance Management Group.

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 (loss) 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 (benefit) will be ultimately based on its GAAP taxable income (loss) 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, our transition to a subscription license model, the general spending environment for information technology products and services in general and application development, business intelligence, business analytics, output management and customer communications management 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 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, including Actuate 2013 Annual Report on Form 10-K filed on March 7, 2014 as well as its quarterly reports on Form-10Q.

  
ACTUATE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30,December 31,
20142013
ASSETS
Current assets:
Cash, cash equivalents and short-term investments$58,336$79,900
Accounts receivable, net15,38027,418
Other current assets 9,143 8,251
Total current assets82,859115,569
Property and equipment, net4,9296,119
Goodwill and other intangibles, net66,67060,550
Other assets 13,887 13,843
$168,345$196,081
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable$140$-
Accounts payable6321,586
Restructuring liabilities245262
Accrued compensation5,3825,795
Other accrued liabilities5,0665,420
Deferred revenue 36,088 46,293
Total current liabilities 47,553 59,356
 
Long term liabilities:
Notes payable190889
Other liabilities3,1003,177
Deferred revenue1,6041,640
Tax liabilities 2,059 2,177
Total long term liabilities 6,953 7,883
 
Stockholders' equity 113,839 128,842
$168,345$196,081

 
ACTUATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
    
Three Months EndedNine Months Ended
September 30,September 30,
2014201320142013
Revenues:
License fees$6,164$14,338$19,717$45,973
Services 18,105  17,953  55,151  56,138 
Total revenues 24,269  32,291  74,868  102,111 
 
Costs and expenses:
Cost of license fees4835391,4791,663
Cost of services3,6764,19611,11213,610
Sales and marketing11,34113,86234,24241,952
Research and development5,8836,42219,16219,364
General and administrative5,4225,15617,45917,204
Amortization of other purchased intangibles3643011,071865
Restructuring charges 212  246  519  837 
Total costs and expenses 27,381  30,722  85,044  95,495 
(Loss) Income from operations(3,112)1,569(10,176)6,616
Interest income and other income/(expense), net566(159)881158
Interest expense (24) (37) (52) (157)
(Loss) Income before income taxes(2,570)1,373(9,347)6,617
Provision for (benefit from) income taxes (547) 138  (1,622) 1,050 
Net (loss) income$(2,023)$1,235 $(7,725)$5,567 
Basic net (loss) income per share$(0.04)$0.03 $(0.16)$0.12 
Shares used in basic per share calculation 46,883  48,175  47,088  48,046 
Diluted net (loss) income per share$(0.04)$0.02 $(0.16)$0.11 
Shares used in diluted per share calculation 46,883  51,428  47,088  50,851 
 

 
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)
20142013Notes20142013Notes
GAAP revenue$24,269$32,291$74,868$102,111
Non-GAAP adjustments:
Deferred revenue adjustments 109  2 (g) 557  37 (g)
Total non-GAAP revenues$24,378 $32,293 $75,425 $102,148 
 
 
Three Months EndedNine Months Ended
September 30,(a)September 30,(a)

Operating expense reconciliation:

20142013Notes20142013Notes
 
GAAP operating expenses$27,381$30,722$85,044$95,495
Non-GAAP adjustments:
Amortization of purchased technology(430)(333)(b)(1,260)(1,043)(b)
Amortization of other intangibles(364)(301)(c)(1,071)(865)(c)
Stock-based compensation expense(1,911)(1,701)(d)(5,236)(5,792)(d)
Restructuring charges(212)(246)(e)(519)(837)(e)
Acquisition related costs(345)(252)(f)(1,096)(774)(f)
One-time termination costs(75)(665)(h)(991)(665)(h)
One-time professional services fees -  - 

 

 (167) (327)(j)
Total non-GAAP operating expenses$24,044 $27,224 $74,704 $85,192 
 
 
Three Months EndedNine Months Ended

Operating income reconciliation:

September 30,(a)September 30,(a)
20142013Notes20142013Notes
Total non-GAAP revenues$24,378$32,293$75,425$102,148
Total non-GAAP operating expenses (24,044) (27,224) (74,704) (85,192)
Total non-GAAP operating income$334 $5,069 $721 $16,956 
 
 
Three Months EndedNine Months Ended

Net income reconciliation:

September 30,(a)September 30,(a)
20142013Notes20142013Notes
GAAP (loss) income before income taxes$(2,570)$1,373$(9,347)$6,617
Non-GAAP adjustments:
Amortization of purchased technology430333(b)1,2601,043(b)
Amortization of other intangibles364301(c)1,071865(c)
Stock-based compensation expense1,9111,701(d)5,2365,792(d)
Restructuring charges212246(e)519837(e)
Acquisition related costs345252(f)1,096774(f)
Deferred revenue adjustments1092(g)55737(g)
One-time termination costs75665(h)991665(h)
Other one-time charges---343(i)
One-time professional services fees--167327(j)
Foreign currency exchange (497) 213 (k) (717) 76 (k)
Non-GAAP income before income taxes3795,08683317,376
Non-GAAP tax provision 114  1,526 (l) 250  5,213 (l)
Non-GAAP net income 265  3,560  583  12,163 
Basic non-GAAP net income per share$0.01 $0.07 $0.01 $0.25 
Shares used in basic per share calculation 46,883  48,175  47,088  48,046 
Diluted non-GAAP net income per share$0.01 $0.07 $0.01 $0.24 
Shares used in diluted per share calculation 49,270  52,217 (m) 49,622  51,505 (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, 2014, stock-based expense included approximately (in thousands): $114, $438, $304, and $1,055, related to cost of services revenues, sales and marketing expense, research and development expense and general and administrative expense, respectively.

 
(e) The restructuring expense consists of one-time benefit payments to terminated Actuate employees. Also included in fiscal 2014 are charges related to Actuate's idle facilities in North America, and China.
 
(f) Costs associated with our acquisition transactions.
 

(g) The deferred revenue adjustment relates to our acquisition of legodo ag, which was concluded in January 31, 2014. The deferred revenue adjustment in the prior year relates to our acquisition of Quiterian, which was concluded in October of 2012. In accordance with the fair value provisions of Accounting Standards Codification ("ASC") 805, Business Combinations, acquired deferred revenues were recorded on the opening balance sheet, which were 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) Represents severance and benefits associated with termination of Actuate employees during restructuring that were classified as on-going employee benefits arrangements.
 

(i) Represents a one-time write off totaling approximately $188,000 for the remaining unamortized costs related to our credit facility as we terminated our Line of Credit agreement with Wells Fargo Foothill (“WFF”) and re-negotiated a more favorable agreement with U.S. Bank in the second quarter of 2013. Also during the second quarter of 2013, we wrote-off leasehold improvements totaling approximately $155,000 associated with our Toronto, Canada idle facility as part of our plan of restructuring the Performance Management Group.

 

(j) During the second quarter of 2014, the Company incurred professional services fees in connection with a one-time adoption of the Shareholders Rights Agreement. During the second quarter of 2013, the Company incurred professional services fees related to considerations regarding strategic alternatives. These costs are excluded because the charges are unrelated to the ongoing operation of the business in the ordinary course. Because these costs are unrelated to the Company's core operations, they are not included in the Company's annual operating plan. We analyze and measure our operating results without these charges when evaluating our core performance.

 

(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 use a normalized effective tax rate of 30%.

 
(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 activities2014 2013
Net (loss) income$(7,725)$5,567
Adjustments to reconcile net (loss) income to net cash from operating activities:
Share-based compensation expense related to stock options and employee stock purchase plan5,2365,792
Excess tax benefits from exercise of stock options(86)(1,118)
Amortization of other purchased intangibles2,3311,908
Amortization of debt issuance cost1544
Bad debt expense(87)(119)
Write-off of unamortized debt issuance costs-188
Depreciation1,3971,609
Impairment and write-offs66155
Change in valuation allowance on deferred tax assets(111)(28)
Gain on liquidation of investments-(416)
Accretion /amortization on short-term debt securities89(208)
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:
Accounts receivable13,2452,769
Other current assets(403)610
Accounts payable(1,046)(212)
Accrued compensation(690)(149)
Other accrued liabilities(1,822)(1,398)
Deferred tax assets29375
Deferred tax liabilities(25)43
Income tax receivable(135)(1,819)
Income tax payable(649)1,169
Other deferred liabilities(25)(47)
Restructuring liabilities(69)(275)
Deferred revenue (10,624)  (2,422)
Net cash (used in) provided by operating activities (1,089)  12,018 
 
Investing activities
Purchases of property and equipment(193)(508)
Proceeds from maturity of investments28,67231,877
Purchases of short-term investments(25,582)(34,471)
Acquisitions, net of cash acquired(3,945)-
Security deposits and other (22)  10 
Net cash used in investing activities (1,070)  (3,092)
 
Financing activities
Pay-down of other loan obligations(4,866)-
Credit facility related payments-(93)
Excess tax benefit from exercise of stock options861,118
Proceeds from issuance of common stock2,6838,879
Stock repurchases(12,896)(16,153)

Tax withholdings related to net share settlements of restricted stock awards and units

 (94)  (50)
Net cash used in financing activities(15,087)(6,299)
Effects of exchange rates on cash and cash equivalents (1,098)  92 
Net (decrease) increase in cash and cash equivalents(18,344)2,719
Cash and cash equivalents at the beginning of the period 41,750   37,483 
Cash and cash equivalents at the end of the period$23,406  $40,202 

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 Communication 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 © 2017 Actuate Corporation. All rights reserved. Actuate, legodo, BIRT iHub, BIRT iHub F-Type, BIRT Analytics, Actuate Customer Communication 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:

Samantha Singh, Director, Corporate Communications, Actuate
ssingh@actuate.com +1.650.645.3078
Jacob Moelter, Market Street Partners
ir@actuate.com +1.415.571.4956 (mobile)