Actuate Reports First Quarter 2013 Financial Results

Actuate Reports First Quarter 2013 Financial Results

+ Q1 license revenue up 16% year-over-year to $15.5 million

+ Total BIRT iHub-based business and iHub-based license business growth accelerating

+ Growth in BIRT developers to over 2.5 million worldwide

+ Over 100,000 total registrations on the BIRT Exchange

SAN MATEO, Calif.--(BUSINESS WIRE)-- Actuate Corporation (Nasdaq: BIRT) , The BIRT Company^™- delivering more insights to more people than all BI companies combined,today announced financial results for the first quarter 2013.

First Quarter 2013 Financial and Operational Highlights:

• License revenue up 16% year-over-year to $15.5 million;

• Total revenue of $34.9 million;

• Booked 4 transactions with a license component in excess of $1.0 million;

• Non-GAAP operating margin of 16% and non-GAAP operating income of $5.5 million;

• Non-GAAP fully diluted EPS of $0.08;

• Total cash and short-term investments, net of debt, of $67.3 million on March 31, 2013;

• Operating cash flow of $9.6 million;

• Repurchased $10.0 million worth of stock during the quarter.

"Our first quarter marks a solid start to 2013 with 16% year-over-year growth in our overall license revenue," said Peter Cittadini, President and CEO of Actuate. "Our recently launched BIRT iHub consolidates our key offerings and helps our customers to harness Big Data Business Analytics, Customer Communications Management and Customer Facing Applications and their intersection with touch devices, for maximum benefit. BIRT iHub is being well received by our customers and accelerating and is the future growth driver for Actuate."

Tweet this: #Actuate NASDAQ: $BIRT: License revenue +16% YOY; Non-GAAP diluted EPS $0.08; Non-GAAP Op Margin 16%

Revenues as reported in accordance with U.S. generally accepted accounting principles (GAAP) for the first quarter of 2013 were $34.9 million, compared with $34.8 million in the first quarter of 2012. License revenues for the first quarter of 2013 were $15.5 million, up 16% when compared with $13.4 million in the first quarter of 2012. Service revenues for the quarter were $19.4 million, compared with $21.4 million reported in the same quarter last year.

GAAP operating income was $2.8 million for the first quarter of 2013, compared with $6.3 million in the first quarter of 2012. GAAP net income for the first quarter of 2013 was $3.0 million, or $0.06 per diluted share, compared with net income of $3.9 million, or $0.07 per diluted share, in the first quarter of 2012.

Non-GAAP net income for the first quarter of 2013 was $4.2 million, or $0.08 per diluted share, compared with non-GAAP net income of $5.9 million, or $0.11 per diluted share in the first quarter of 2012. Non-GAAP operating margin and net income margin for the first quarter of 2013 was 16% and 12%, respectively.

Cash and short term investments, net of debt, totaled $67.3 million on March 31, 2013, an increase of $1.7 million from December 31, 2012.

Share Repurchases

In August 2012, the Board of Directors approved a $30.0 million share repurchase program, of which $4.4 million remains as of March 31, 2013. During the first quarter of 2013 the Company repurchased $10.0 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.

First Quarter 2013 Business Highlights:

Big Data & Analytics:

• Expanded Big Data application deployment options built on Amazon web services;

• Launched connector with YASH Technologies for SAP BW to provide easy access, retrieval and integration with BIRT;

• Launched BIRT Analytics™, a visual data mining and predictive analytics product that dramatically streamlines sophisticated data analysis and puts it in the hands of business users;

• Joined the Eclipse LocationTech Industry Working Group, the leading community for individuals and organizations to collaborate on commercially-friendly open source software that is location aware.

International:

• Alliance with Carrington Associates Asia Pacific Pty Ltd in Australia, a software service business, that sources and manages IT solutions for organizations;

• Alliance with NuVista Technologies Pte Ltd in Singapore, a leading provider of integrated outsourcing and consulting services in IT, engineering, human resources, Cloud ERP and BI solution.

BIRT/iHub:

• Total BIRT iHub-based business and iHub-based license business growth is accelerating;

• The BIRT community includes over 2.5 million BIRT developers worldwide;

• BIRT license business from open source BIRT users continues strong growth;

• Significantly higher average license order size from open source BIRT users;

• Over 103,000 total registrations to date on BIRT Exchange, up from 85,000 a year ago.

Customers:

• During the first quarter 2013 Actuate booked 4 deals with a license component greater than one million dollars;

• Booked 66 deals greater than $100,000 during the first quarter 2013;

• BIRT used by FAA, Department of Defense and EEOC to build future-proof BI applications and deliver insights to better serve citizens;

• DNB Finans puts car lease customers in the driver's seat with online business intelligence from Actuate.

During the first quarter, Actuate received significant new and repeat business from, among others: AEP Energy Inc., APL Limited, Blue Cross and Blue Shield of Alabama, Capital One Financial Corporation, Catamaran Corporation, Cisco Systems (ACS), Farmers Group, Inc., Integrated Data Service, Lincoln National Life Insurance Company, Maxor National Pharmacy Services Corporation, Nationale-Nederlanden, Niku / CA, Inc., Odyssey Logistics & Technology Corporation, Photo-Type Engraving Company, Taleo Corporation - An Oracle Company, USAA Life Insurance Company, Virtus LLC.

Conference Call Information

Actuate's management will be holding a conference call at 2:00 p.m. PT (5:00 p.m. ET) today, April 29, 2013 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 #412204. 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.

Actuate - The BIRT Company^™

Actuate founded and co-leads the BIRT open source project, which is used by 2 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 analyticsand 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.

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, and 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 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 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) The deferred revenue adjustment relates to our acquisition of Quiterian, which was concluded in October 2012. In accordance with the fair value provisions of Accounting Standards Codification ("ASC") 805, Business Combinations, acquired deferred revenue was recorded on the opening balance sheet, which was 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.

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) 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.

g) 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%. 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.

h) Acquisition-related costs are costs incurred in concluding 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.