Actuate Corporation (NASDAQ:ACTU), the leader in Business Intelligence, Performance Management and Reporting Applications, today announced its financial results for the quarter ended March 31, 2007.

Revenues for the first quarter of 2007 were $32.0 million, a 7% increase compared with the first quarter of 2006. License revenues for the first quarter of 2007 were $12.0 million, a 20% increase from the year-ago quarter. Net income for the first quarter of 2007, as reported in accordance with U.S. generally accepted accounting principles (GAAP), was $1.4 million, or $0.02 per diluted share, compared with a net loss of $470,000 or $0.01 per share in the first quarter of 2006. First quarter 2007 results included a $1.9 million charge related to FAS 123R, which requires that stock-based compensation expense be included in GAAP results.

Non-GAAP net income for the first quarter of 2007 was $3.4 million, or $0.05 per diluted share, compared with non-GAAP net income of $2.0 million, or $0.03 per diluted share in the first quarter of 2006. Non-GAAP operating margin for the first quarter of 2007 was 13% compared with a non-GAAP operating margin of 8% for the first quarter of 2006.

Non-GAAP financial measures discussed in this release exclude the following items: a) amortization charges for purchased technology and other intangible assets related to the Company's acquisition transactions; b) stock-based compensation expense; c) restructuring charges; d) in-process research and development charges related to the Company’s acquisition transactions; and e) an adjustment to the income tax provision. All of these expenses are included in Actuate's GAAP results.

“Strong demand for BI, Performance Management and Reporting applications continued in Q1,” said Pete Cittadini, Actuate's president and CEO. “Our solid Q1 results, particularly the growth of license revenues, validate our new hybrid Open Source / Enterprise business model and puts us on track to meet our objectives for 2007.

“During the first quarter of 2007, we recorded our biggest quarter for BIRT downloads, putting us on course to exceed one million downloads by the middle of this year, and our BIRT-based commercial offerings continued to gain traction. We also experienced very strong demand for Extranet applications among our large Financial Services customers as they update their Customer Self Service sites with more interactive capabilities.”

First Quarter 2007 Financial Highlights

• Grew license revenues by 20% on a year-over-year basis, marking the fifth consecutive quarter of double-digit year-over-year license revenue growth;
• Increased cash, cash equivalents and short-term investments to a record $69.0 million at March 31, 2007;
• Generated a record $11.9 million in cash flow from operations;
• Increased deferred revenue 25% on a year-over-year basis, to a record $41.9 million at March 31, 2007;
• Maintained non-GAAP services margin at 70%;
• Repurchased approximately 830,000 shares at a total cost of approximately $4.6 million.

First Quarter Customer Highlights

During the first quarter, Actuate received significant new and repeat business from, among others, Affiliated Computer Services, Citigroup, Computer Associates, Deltek Systems, Deutsche Bank, DWS Holding and Service GmbH, IBM UK, Lifetime Group Ltd., Medco Health Solutions, Mellon Financial, Odyssey Asset Management, Riverside County Office of Education, Oracle Corporation, Standard Bank London Ltd., UBS AG, Unilever, Verid, Verisign, Watson Wyatt, XLsoft Corporation and York University.

First Quarter Business Highlights

• Exceeded 200,000 downloads of BIRT and Actuate BIRT during Q1, surpassing 850,000 downloads since introduction;
• The Franklin Institute (TFI), Philadelphia’s well known non-profit science museum, is using Actuate’s Enterprise Reporting software to measure attendance efficiently and immediately and adjust its operations accordingly;
• American Suzuki Motor Corporation, a distributor for Suzuki Motor Corporation, has implemented 16 centrally managed Actuate applications that enable the Company to increase profitability by providing web-based operational reports to the field and corporate offices to improve dealer performance and inventory management;
• Announced deployment of Actuate Performancesoft Suite at Achieve Healthcare Technologies, United Kingdom’s Wiltshire Police Constabulary and Florida Surplus Lines Service Office, increasing visibility and sharing of Performance Management information to facilitate better decision-making at those organizations.

Conference Call Information

Actuate will be holding a conference call at 2:00 p.m. Pacific Time, today, April 26, 2007 to further discuss these results. The dial-in number for the call is 877-502-9274 (+1 913-981-5584 for international participants) and the passcode is 6416624.

A listen-only live webcast of the first quarter 2007 earnings conference call, with an accompanying slide presentation, will also be available at the investor relations section of the Actuate website at http://phx.corporate-ir.net/phoenix.zhtml?c=64401&p=irol-irhome, and will be available in the same location on an archived basis 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, merger and acquisition charges, restructuring charges, equity plan-related compensation expenses and 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 also 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). Management does not consider these unusual expenses associated with a financial transaction to be part of core operating performance. 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 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. More specifically, management adjusts for the excluded items for the following reasons:

a) amortization charges for purchased technology and other intangible assets related to the Company's acquisition transactions; b) stock-based compensation expense; c) restructuring charges; d) in-process research and development charges related to the Company’s acquisition transactions; and e) an adjustment to the income tax provision.

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 which 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) In-process research and development charges 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.

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. 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.

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 also available in the investor relations section of the Company's web site at www.actuate.com. 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.

About Actuate Corporation

Actuate Corporation, the leader in Business Intelligence, Performance Management and Reporting Applications, enables organizations to develop solutions that optimize corporate performance. Applications built on Actuate’s open source-based platform provide all stakeholders inside and outside the firewall, including employees, customers, partners and citizens with information that they can easily access and understand to maximize revenue, cut costs, improve customer satisfaction, streamline operations, create competitive advantage and make better decisions.

Actuate has over 4,000 customers globally in a diverse range of business areas including financial services and the public sector. Founded in 1993, Actuate has headquarters in South San Francisco, California, with offices worldwide. Actuate is listed on NASDAQ under the symbol ACTU. For more information on Actuate, visit the Company's web site at www.actuate.com.

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 Business Intelligence, Performance Management and Reporting 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 (including the Performancesoft, Inc. acquisition) 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 2006 Annual Report on Form 10-K filed on March 20, 2007.

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