Actuate Corporation (NASDAQ: ACTU), the leader in delivering Rich Internet Applications Without Limits™, today announced its financial results for the third quarter of 2008.

Third Quarter 2008 Financial and Operational Highlights:

• Revenues of $33.7 million and fully diluted non-GAAP EPS of $0.08.
• Maintenance revenues of $20.4 million up 18.5% year-over-year.
• BIRT-related business exceeded $4 million in Q3.
• Nine-month operating cash flows of $24.4 million, up 36.0% year-over-year.
• Booked transactions greater than $100,000 with 64 customers.
• Closed one transaction with a license component in excess of $1 million.
• Record non-GAAP service margins of 78.0% and non-GAAP operating margin of 20.6%.

“In light of current turmoil in the financial markets, Actuate delivered respectable performance this quarter,” said Pete Cittadini, president and CEO of Actuate. “The growing momentum of our BIRT related business in the third quarter is evidence that we can continue to execute on our enterprise open source business model, even in these less than ideal macroeconomic conditions. Our ongoing commitment to open source, with its potential to expand our market reach and accelerate our revenue at lower cost, continues to make Actuate a compelling enterprise software firm for shareholders, customers and employees.”

Revenues for the third quarter of 2008 were $33.7 million, compared with $34.7 million in the third quarter of 2007. License revenues for the third quarter of 2008 were $10.0 million, compared with $13.4 million in the year-ago quarter. Services and maintenance revenues for the third quarter of 2008 totaled $23.7 million, compared with $21.3 million in the third quarter of 2007. Within this line item, maintenance revenues were $20.4 million for the third quarter, up 18.5% compared with $17.2 million in the same period last year. In addition, service margins for the third quarter came in at a record 78.0%.

Net income for the third quarter of 2008, as reported in accordance with U.S. generally accepted accounting principles (GAAP), was $3.1 million, or $0.05 per diluted share, compared with net income of $4.6 million or $0.07 per diluted share in the third quarter of 2007.

Cash flow from operations was $7.6 million for the third quarter of 2008. Cash flow from operations for the nine months ended September 30, 2008 totaled $24.4 million versus $17.9 million during the same period last year. Cash, cash equivalents and investments totaled $81.3 million at September 30, 2008 compared with $74.9 million as of June 30, 2008.

Non-GAAP net income for the third quarter of 2008 was $5.3 million, or $0.08 per diluted share, compared with non-GAAP net income of $6.0 million, or $0.09 per diluted share, in the third quarter of 2007. Non-GAAP operating margin for the third quarter of 2008 was 20.6%, an increase of 150 basis points from the second quarter of 2008.

2008 Outlook

The Company is updating its outlook for the full year 2008. Specifically, the Company expects to post total revenue of approximately $131 million - $135 million, with license revenues of approximately $38 million - $43 million, non-GAAP operating margins in the range of 17% - 20% and fully diluted non-GAAP EPS of approximately $0.26 - $0.28.

Third Quarter 2008 Business Highlights

• Exceeded 5 million BIRT downloads through the third quarter.
• Actuate initiated an Open Source Advisory Board.
• Previewed Actuate 10, the company’s next generation platform, which reached its Beta milestone during the third quarter.
• Actuate Performancesoft Views 8.0 was launched, tightly integrating BIRT into the Views product.
• Actuate for Sustainability Management launched to help enterprises create enduring best practices and take sustainability beyond environmentalism.
• Actuate hosted its 12th Annual International User Conference, with over 250 customers and partners in attendance.
• The 3rd Actuate Annual Open Source Survey findings demonstrated that open source software is entering the mainstream.
• Actuate agreed to resell Webalo’s Mobile dashboard to deliver real-time information to a growing mobile workforce using BlackBerry, Windows Mobile, Palm, Symbian, or Java-enabled smartphones.
• The Company signed its first significant Actuate OnPerformance software-as-a-service (SaaS) transaction in the healthcare industry.

Third Quarter Customer Highlights

During the third quarter, Actuate received significant new and repeat business from, among others: Singapore Ministry of Education, Vereinsbank Victoria Bauspar A.G., ACS State and Local Solutions, Lincoln Financial Advisors Corporation, National Account Service Co. LLC, The Bank of New York Mellon Corporation, PayPal, Caremark Inc., Lehman Brothers Inc., Federal Aviation Administration, Emptoris, Inc., Computer Associates, Primavera Software, Inc., Siebel Systems Inc (Oracle), American Bureau of Shipping, City of Chicago, Home Office (United Kingdom), Barking and Dagenham Primary Care Trust, Citizens Bank, City Of Dallas and St. Louis Children’s Hospital.

Conference Call Information

Actuate will be holding a conference call at 5:00 p.m. Eastern Time, today, October 27th, 2008 to further discuss these results. The dial-in number for the call is 866-713-8562 (617-597-5310 for international participants) and the conference identification number 44979691. 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 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, 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. 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 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 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) Operating expenses related to idle facilities are excluded because the charges relate to a facility that was abandoned in late 2007 and therefore 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;

e) During the quarter 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;

f) The facilities rent adjustment 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 provided us with a rent holiday for the period during the transition period to the new lease. We therefore excluded the duplicate rent expense for purposes of evaluating our core performance;

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. 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.

About Actuate Corporation

Actuate Corporation is dedicated to increasing the richness, interactivity and effectiveness of enterprise data, for everyone, everywhere. Actuate delivers the next generation RIA-ready information platform for both customer and employee-facing applications. The Actuate platform boasts unmatched scalability, high-performance, reliability and security. Its proven RIA capabilities and highly collaborative development architecture are backed by the world’s largest open source information application developer community, grounded in BIRT, the Eclipse Foundation’s only top level Business Intelligence and reporting project.

Global 9000 organizations use Actuate to roll out RIA-enabled customer loyalty and Performance Management applications that improve customer satisfaction and employee productivity. The company has over 4,200 customers globally in a diverse range of business areas including financial services and the public sector, many of which have a long history of deploying Actuate-based solutions for dozens, or even hundreds of their mission-critical applications. 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 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 (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 2007 Annual Report on Form 10-K filed on March 17, 2008 and Quarterly Reports on Form 10-Q filed on May 9, 2008 and August 8, 2008.

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