Actuate Reports First Quarter 2008 Financial Results

Net Income Doubles Year-Over-Year, Record Operating Cash Flow of $12.2 Million, BIRT Momentum Continues with Strong Open Source Business and Downloads

 

San Mateo, Calif. – April 28, 2008 – Actuate Corporation (NASDAQ: ACTU), the leader in delivering Rich Internet Applications Without Limits™, today announced its financial results for the first quarter of 2008.

First Quarter 2008 Financial and Operational Highlights

    --  Record cash flow from operations of $12.2 million

    --  Net Income up over 100% year-over-year

    --  BIRT related business of over $2.5 million

    --  Performance management product revenues up 15% year-over-year

    --  International revenues up 20% year-over-year

    --  Closed transactions greater than $100,000 with 68 customers
        and one over $1 million

"We are pleased with the continued growth of BIRT. Total downloads exceeded the 3 million mark during the quarter and we generated strong BIRT related business. We believe that in challenging macroeconomic times such as these, the message of open source resonates well with enterprises seeking cost-effective ways to manage their IT
infrastructure," said Pete Cittadini, Actuate's president and CEO.

Revenues for the first quarter of 2008 were $29.5 million, compared to $32.0 million in the first quarter of 2007. License revenues for the first quarter of 2008 were $7.6 million, compared to $12.0 million in the year-ago quarter. Services revenues for the first
quarter of 2008 totaled $21.9 million, compared to $20.0 million in the first quarter of 2007.

Net income for the first quarter of 2008, as reported in accordance with U.S. generally accepted accounting principles (GAAP), was $2.9 million, or $0.04 per diluted share, compared with net income of $1.4 million or $0.02 per diluted share in the first quarter of
2007.

Cash flow from operations was a record $12.2 million for the first quarter of 2008, compared to $11.7 million in the year-ago quarter.  Cash, cash equivalents and investments totaled $72.8 million at March 31, 2008 compared to $68.4 million as of December 31, 2007. During the quarter the company repurchased $10 million of shares.

Non-GAAP net income for the first quarter of 2008 was $1.1 million, or $0.02 per diluted share, compared with non-GAAP net income of $3.4 million, or $0.05 per diluted share in the first quarter of 2007. Non-GAAP operating margin for the first quarter of 2008 was
6.8%, compared with non-GAAP operating margin of 13.0% in the first quarter of 2007.

First Quarter Business Highlights

    --  Actuate released iServer Express to meet the report deployment
        needs of Eclipse BIRT developers. The server deploys, manages,
        schedules, secures, runs and shares BIRT and e.Spreadsheet
        reports. Actuate brought iServer Express to market and closed
        the first sale within the first quarter.

    --  Actuate OnPerformance was brought to market, the company's
        first Software-as-a-Service (SaaS) offering, designed to
        minimize the risk and cost associated with traditional
        Performance Management application deployments. The service
        was launched and first deal closed within 90 days.

    --  Total BIRT and Actuate BIRT downloads grew to over 3 million.

    --  The BIRT Exchange community gained traction throughout Q1 on a
        number of key metrics such as number of Web site visitors and
        registrants as well as key activities such as demo access and
        downloads of commercial products.

    --  Actuate named 2008 CODiE Awards finalist for "Best Business
        Intelligence Solution" and "Best Open Source Solution".

    --  Actuate e.Spreadsheet named a "Product of the Year" by
        SearchDataManagement.com.

    --  Actuate and BIRT Exchange were a gold sponsor of EclipseCon
        2008, the premier technical and user conference focusing on
        the power of the Eclipse platform. BIRT Exchange and Actuate
        presented 13 BIRT-focused sessions, ongoing BIRT demos and
        unveiled advance reader copies of new editions of the popular
        BIRT books, BIRT: A Field Guide to Reporting and Integrating
        and Extending BIRT.

First Quarter Customer Highlights

During the first quarter, Actuate received significant new and repeat business from, among others: Citicorp Investment Bank (Singapore) Limited, UBS AG Singapore, Sun Hung Kai Securities Limited, DOMCURA AG, Banco Bilbao Vizcaya Argentaria, S.A., Nomura
International PLC, UBS Fund Services (Luxemburg) S.A., Union Service-Gesellschaft mbH, Brewin Dolphin Securities, Unigraphics Solutions Inc., Xlsoft Corporation, Verizon Business, Liberty Mutual Insurance Group, Parsons Corporation, Bank of America Corporation, Deltek, Inc., Emptoris, Inc., Primavera Software, Inc., Siebel Systems
Inc./Oracle, Niku Corp./CA, Kaiser Permanente, IPCC (Independent Police Complaints Commission UK) and Natural England.

2008 Outlook

The company is reiterating the 2008 outlook provided on its previous earnings call. Specifically the company expects to post total revenue of approximately $140 million, with license revenues of approximately $48 million, non-GAAP operating margins in the range of 20% - 21% and non-GAAP EPS of $0.33.

"Q1 was exactly as we expected, given the challenging macroeconomic backdrop," said Dan Gaudreau, Actuate's senior vice president, Operations and CFO. "However, we generated record cash flow from operations, in addition to seeing strong performance in our international operations, Performance Management Group and in BIRT related business. We were also pleased with the double-digit growth in our services business. I remain confident that our strategic and financial foundations remain intact for 2008, therefore we are reaffirming our guidance for 2008."

Non-GAAP financial measures discussed in this release exclude the following items: a) amortization charges for purchased technology and other intangible assets resulting from the company's acquisition transactions; b) stock-based compensation expense; c) restructuring charges; and d) an adjustment to the income tax provision. All of these expenses are included in Actuate's GAAP results. The income tax rate used to compute non-GAAP net income was 30%.

Conference Call Information

 Actuate will be holding a conference call at 2:00 p.m. Pacific Time, today, April 28, 2008 to further discuss these results. The dial-in number for the call is 866 294-4490 (706 643-0468 for international participants) and the conference identification number is 42618689. 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 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 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, merger and acquisition charges, restructuring charges, equity plan-related compensation expenses and other charges and gains which management does not consider reflective of our core operating business. Intangible assets consist primarily of purchased technology, trade names, customer relationships, employment agreements and other intangible assets issued in connection with acquisitions. Merger and acquisition charges represent in-process research and development charges related to products in development that had not reached technological feasibility at the time of acquisition. 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, as required under SFAS No. 123 (revised 2004), "Share-Based Payment" (SFAS 123R). 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.

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 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 excluded from 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 calculated in accordance with SFAS 123R 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) Merger and acquisition charges are in-process R&D charges which are excluded because they often vary significantly in size and amount, and are disregarded when acquisition decisions are made;

e) 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. Prior
to the quarter ended September 30, 2005, the Company used a normalized effective tax rate of 37.5%. Starting in the quarter ended September 30, 2005, the company began to use a normalized effective tax rate of 30%. This item is excluded because the rate remains subject to change based on several factors, including variations over time in the
geographic business mix and statutory tax rates.

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 stock option and 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 under SFAS 123R.

    --  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 30% 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 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 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 future 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, specifically Actuate's 2007 Annual Report on Form 10-K filed on March 17, 2008 and Quarterly Reports on Form 10-Q filed on May 10, 2007, August 9, 2007 and November 9, 2007.

Copyright(C) 2008 Actuate Corporation. All rights reserved. Actuate and the Actuate logo are registered trademarks of Actuate Corporation and/or its affiliates in the U.S. and certain other countries. All other brands, names or trademarks mentioned may be trademarks of their respective owners.

ACTUATE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 
    March 31,   December 31,
2008   2007
 
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 57,005 $ 68,415
Accounts receivable, net 21,754 38,575
Other current assets   10,773     5,278
Total current assets 89,532 112,268
Property and equipment, net 5,412 5,269
Goodwill and other intangibles, net 39,087 39,242
Investments 15,747 -
Other assets   13,319     13,129
$ 163,097   $ 169,908
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,091 $ 2,667
Current portion of restructuring liabilities 3,055 3,201
Accrued compensation 3,920 6,326
Other accrued liabilities 4,353 5,677
Deferred revenue   40,270     40,352
Total current liabilities   52,689     58,223
 
Long term liabilities:
Deferred rent 1,385 1,124
Deferred revenue 3,267 3,499
Tax liabilities 483 483
Restructuring liabilities   5,028     5,606
Total long term liabilities   10,163     10,712
 
Stockholders' equity   100,245     100,973
$ 163,097   $ 169,908

ACTUATE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

     
Three Months Ended
March 31,
2008 2007
Revenues:
License fees $ 7,610 $ 11,990
Services   21,911     19,985
Total revenues   29,521     31,975
 
Costs and expenses:
Cost of license fees 326 460
Cost of services 6,275 6,290
Sales and marketing 13,138 13,106
Research and development 5,631 5,468
General and administrative 4,721 4,537
Amortization of other intangibles 237 237
Restructuring charges   142     297
Total costs and expenses   30,470     30,395
Income (loss) from operations (949 ) 1,580
Interest and other income (expense), net   (378 )   752
Income (loss) before income taxes (1,327 ) 2,332
Provision (benefit) for income taxes   (4,234 )   936
Net income $ 2,907   $ 1,396
Basic net income per share $ 0.05   $ 0.02
Shares used in basic per share calculation.   60,904     60,798
Diluted net income per share $ 0.04   $ 0.02
Shares used in diluted per share calculation   67,277     68,389

ACTUATE CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share data)

(unaudited)

       
Three Months Ended
March 31, (a)
2008 2007 Notes
GAAP income (loss) before income taxes (1,327 ) 2,332
Non-GAAP adjustments:
Amortization of purchased technology 36

 

143 (b)
Amortization of other intangibles 237 237 (c)
Stock compensation expense under FAS123R 2,552 1,897 (d)
Restructuring charges   142     297 (e)
Non-GAAP income before income taxes 1,640 4,906
Non-GAAP tax provision   492     1,472 (f)
Non-GAAP net income   1,148     3,434
Basic non-GAAP net income per share $ 0.02   $ 0.06
Shares used in basic per share calculation   60,904     60,798 (g)
Diluted non-GAAP net income per share $ 0.02   $ 0.05
Shares used in diluted per share calculation   68,033     69,181 (g)
 

(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 measure; 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 the Performancesoft and Nimble acquisition transactions in January of fiscal year 2006, and July of fiscal year 2003, respectively. 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) As of January 1, 2006 Actuate accounts for stock compensation expense under the fair value method. Actuate adopted the modified prospective transition method under FASB 123R, “Share-Based Payment” (“SFAS 123(R)”. Actuate is presenting a non-GAAP adjusted net income per diluted share financial measure which excludes stock based compensation expense for all periods presented. For the three months ended March 31, 2008, stock-based expense included approximately (in thousands): $1, $366, $741, $438, and $1,006, related to cost of license revenues, cost of services revenues, sales and marketing expense, research and development expense, and general and administrative expense, respectively.

 

(e)These costs were directly related to the closure of various office facilities including South San Francisco, CA, Iselin, NJ, and consolidations of Vienna, VA as well as three UK facilities into one. The charges primarily consisted of early termination of these facility leases.

 

(f) 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 uses a normalized effective tax rate of 30%. This item is excluded because the rate remains subject to change based on several factors, including variations over time in the geographic business mix and statutory tax rates.

 

 

(g) Shares used in calculating basic and 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)

     
 
Operating activities Q1'08   Q1'07
Net income 2,907 1,396

Adjustments to reconcile net income to
net cash from operating activities:

Stock compensation expense 2,552 1,897
Amortization of other intangibles 382 489
Depreciation 559 550
Net operating loss utilizations associated with prior acquisitions (228 ) 7
Restructuring charges 142 297
Accretion of discount on short-term investments 45 (177 )
Changes in operating assets and liabilities:
Accounts receivable 16,821 8,974
Other current assets (4,665 ) 422
Accounts payable (1,576 ) (507 )
Accrued compensation (2,406 ) (1,595 )
Other accrued liabilities (1,324 ) (272 )
Deferred tax assets (48 ) (1,570 )
Deferred tax liabilities - 1,565
Income taxes payable - 26
Deferred rent liabilities 261 (23 )
Restructuring liabilities (866 ) (824 )
Deferred revenue   (314 )     1,061  
Net cash provided by operating activities   12,242       11,716  
 
Investing activities
Purchases of property and equipment (702 ) (172 )

Proceeds from maturity of investments

35,542 11,124

Purchases of investments

(27,157 ) (15,930 )
Net change in other assets   -       (10 )
Net cash provided by (used in) investing activities   7,683       (4,988 )
 
Financing activities
Tax benefit from exercise of stock options - 492
Proceeds from issuance of common stock 2,130 1,194
Stock repurchases   (10,000 )     (4,552 )
Net cash used in financing activities   (7,870 )     (2,866 )
Net increase in cash and cash equivalents 12,055 3,862
Effect of exchange rate on cash 1,366 93
Cash and cash equivalents at the beginning of the period   21,468       31,113  
Cash and cash equivalents at the end of the period $ 34,889     $ 35,068  

                        

Actuate - The BIRT Company™

Actuate founded and co-leads the BIRT open source project, which is used by more than 2.5 million developers around the globe and serves as the foundation of the ActuateOne® platform. Applications built on ActuateOne deliver more business and consumer insights to more people than all BI companies combined — ensuring organizations are ready for the exponential growth of Big Data and the proliferation of touch devices.

The ActuateOne platform empowers developers to rapidly develop custom, BIRT-based business analytics and customer communications applications. ActuateOne applications built with one BIRT design can access and integrate any data, including unstructured sources. They provide one user experience regardless of skill level and are supported by one platform for any cloud, hybrid, on-premise, web or touch device deployment.

Headquartered in Silicon Valley, Actuate has over 5,000 customers globally in a diverse range of business areas including financial services, technology and the public sector. Actuate is listed on NASDAQ under the symbol BIRT. For more information, visit www.actuate.com or engage with the BIRT community at www.birt-exchange.com.

Copyright © 2013 Actuate Corporation. All rights reserved. Actuate, ActuateOne, and the Actuate logo are registered trademarks of Actuate Corporation and/or its affiliates in the U.S. and certain other countries. All other brands, names or trademarks mentioned may be trademarks of their respective owners.