Actuate Corporation (NASDAQ:ACTU), the leader in Business Intelligence, Performance Management and Reporting Applications, today announced its financial results for the quarter ended September 30, 2007.

License revenues for the third quarter of 2007 were $13.4 million, a 16% increase from the year-ago quarter. Total revenues for the third quarter of 2007 were $34.7 million, an increase of 9% compared with the third quarter of 2006.

Net income for the third quarter of 2007, as reported in accordance with U.S. generally accepted accounting principles (GAAP), was $4.6 million, or $0.07 per diluted share, an increase of 83% compared with net income of $2.5 million or $0.04 per diluted share in the third quarter of 2006.

Non-GAAP operating margin for the third quarter of 2007 was 23% compared with a non-GAAP operating margin of 18% for the third quarter of 2006. Non-GAAP net income for the third quarter of 2007 was a record $6.0 million, or $0.09 per diluted share, an increase of 35% compared with non-GAAP net income of $4.5 million, or $0.07 per diluted share in the third quarter of 2006.

For the first nine months of 2007, revenues totaled a record $101.4 million, an increase of 9% compared with the first nine months of 2006. License revenues totaled $39.5 million, an increase of 21% compared with the first nine months of 2006. For the first nine months of 2007, GAAP operating income was a record $9.5 million, GAAP net income was a record $9.4 million and GAAP diluted earnings per share was a record $0.14. Non-GAAP net income for the first nine months of 2007 totaled a record $14.8 million, or $0.21 per diluted share, an increase of 53% compared with non-GAAP net income of $9.7 million, or $0.14 per diluted share reported for the first nine months of 2006. For the first nine months of 2007, cash flow from operations was a record $18.1 million, compared with $9.5 million for the first nine months of 2006.

Cash, cash equivalents and short-term investments at September 30, 2007 totaled $69.5 million, an increase of $9.4 million from December 31, 2006. This amount is net of a $14.2 million cash outlay during the first nine months of 2007 in furtherance of Actuate's ongoing open-market share repurchase program.

“Actuate extended the number of consecutive quarters of double digit year-over-year growth for both license revenue and non-GAAP net income to seven in the third quarter,” said Pete Cittadini, Actuate’s president and CEO. “Growth in license revenue continues to be fueled by extranet customer self-service applications and intranet strategic and operational performance management applications.”

“At the end of September, we launched BIRT Exchange (www.birt-exchange.com), a dedicated resource for the Eclipse BIRT developer community and the Actuate BIRT product line. BIRT Exchange is gaining traction in terms of registered users and software downloads including trial versions of commercial products.”

Third Quarter Financial Highlights

• Grew license revenues by 16% on a year-over-year basis, the seventh consecutive quarter of double-digit year-over-year license growth;
• Revenues outside the U.S. represented a record 32% of total revenues;
• Grew non-GAAP operating income 37% on a year-over-year basis;
• Achieved a 23% non-GAAP operating margin, an increase of five percentage points over the third quarter of 2006 and a quarterly record for the company;
• Increased non-GAAP services margin to a record 73%;
• Repurchased approximately 666,000 shares at a total cost of approximately $4.6 million.

Third Quarter Customer Highlights

During the third quarter, Actuate received significant new and repeat business from, among others, Ameriprise Auto and Home Insurance, AT&T, AXA Rosenberg, Bank Fund Staff Federal Credit Union, Bridgepoint Health, Cayenta, Defence Estates, Deltek Systems, DWS Holding & Service GmbH, E.ON U.S, First Health Group, FundWorks, Genentech, Good Samaritan Society, Gottschalks, IBM UK, Lawrence Livermore National Laboratory, Lehman Brothers Holdings, MFS Investment Management, Northwest Airlines, Odyssey Asset Management, Olm Systems, PayPal, Primavera Systems and Wells Fargo.

Third Quarter Business Highlights

• Launched BIRT Exchange (www.birt-exchange.com), where BIRT developers can easily share code and knowledge with peers, find solutions to their deployment challenges and learn about Actuate’s product, support and service offerings for Eclipse BIRT;
• 11th annual Actuate International User Conference (AIUC) took place on August 13 to 15 in Las Vegas. It was the biggest gathering of Actuate customers ever with attendees from over 180 organizations and featured 60 customer presentations. The conference featured the first BIRT Live Day, focused on Eclipse BIRT and Thought Leadership Day focused on Sustainable Performance Management;
• Outlined a potential differentiated business model that expands Actuate’s market and accelerates revenues. By harnessing open source disruption to advance the company’s leadership in the Business Intelligence (BI) market, the company can substantially lower its cost of sales and marketing to drive overall earnings growth;
• Shipped Actuate 9 Service Pack 2, the only platform that meets the entire range of reporting requirements from pixel-perfect reporting, through ad hoc query and web-based collaborative reporting, to spreadsheet and analytics reporting. Actuate 9 SP2, like other Actuate products, provides full support for the Eclipse BIRT (Business Intelligence and Reporting Tools) open source development framework;
• Announced that version 7 of the Actuate Performancesoft Suite has added over 280 customers to its customer base, predominantly in areas across the public sector, including over 130 Federal, State and Local Government, Departments and Agencies, as well as Government Services and Education organizations.

Conference Call Information

Actuate will be holding a conference call at 2:00 p.m. Pacific Time, today, October 29, 2007 to further discuss these results. The dial-in number for the call is 866-294-4490 (706-643-0468 for international participants), passcode 19155359. A listen-only live webcast of the third quarter 2007 earnings conference call, with an accompanying slide presentation, will 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, duplicate rent on new corporate headquarters facilities 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 individuals, including grants of employee stock options, as required under SFAS No. 123 (revised 2004), "Share-Based Payment" (SFAS 123R). Duplicate rent expense represents rent payments for the old headquarters that the Company has vacated and the new headquarters that the Company has occupied. 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) equity plan-related compensation expense; c) restructuring charges; d) in-process research and development charges related to the Company’s acquisition transactions; e) duplicate rent expense, and f) 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 equity plan-related 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) Duplicate rent expense is excluded because we have recognized rent expense on both of our old and new corporate headquarters. Accounting rules require that we recognize rent expense on our new headquarters even though our landlord provides us with a rent holiday for the period during the transition period to the new lease. We therefore exclude the duplicate rent expense for purposes of evaluating our core performance.

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.

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. 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 San Mateo, 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 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 and Quarterly Reports on Form 10-Q filed on May 10, 2007 and August 9, 2007.

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