<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File No. 0-24607
Actuate Corporation
(Exact name of Registrant as specified in its charter)
Delaware 94-3193197
(State of incorporation) (I.R.S. Employer Identification No.)
701 Gateway Boulevard
South San Francisco, California 94080
(650) 837-2000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
______________
Former name, former address and former fiscal year, if changed since last
report:
999 Baker Way, Suite 200
San Mateo, California 94404
(650) 425-2300
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Title of Class Outstanding as of March 31, 2000
-------------- --------------------------------
Common Stock, par value $.001 per share 28,161,055
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Actuate Corporation
Table of Contents
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements:
<S> <C>
Condensed Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999........................................................................ 3
Condensed Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999 .......................................................... 4
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999........................................................... 5
Notes to Condensed Consolidated Financial Statements...................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................... 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .................................................................. 23
Item 6. Exhibits and Reports on Form 8-K ................................................... 23
Signature ................................................................................... 24
</TABLE>
2
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Part I. Financial Information
Item 1. Financial Statements
ACTUATE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999 (1)
(unaudited)
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 9,051 $ 6,604
Short-term investments............................... 7,450 17,549
Accounts receivable, net............................. 17,896 17,229
Other current assets................................. 1,769 1,107
------- --------
Total current assets................................... 36,166 42,489
Property and equipment, net............................ 7,104 2,438
Goodwill and other purchased intangible assets, net.... 28,867 8,024
Other assets........................................... 1,553 430
------- --------
$73,690 $ 53,381
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loan............................................ $ 250 $ -
Accounts payable..................................... 5,977 1,749
Accrued compensation................................. 1,727 3,694
Other accrued liabilities............................ 4,762 4,134
Deferred revenue..................................... 15,281 12,168
------- -------
Total current liabilities.............................. 27,997 21,745
------- -------
Long-term obligations.................................. 2,033 -
------- -------
Stockholders' equity:
Common stock......................................... 28 28
Additional paid-in capital........................... 58,694 47,844
Deferred stock compensation.......................... (123) (142)
Cumulative translation adjustment.................... 174 159
Accumulated deficit.................................. (15,113) (16,253)
------- -------
Total stockholders's equity........................ 43,660 31,636
------- -------
$73,690 $53,381
======= =======
</TABLE>
(1) The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date, but does not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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ACTUATE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
2000 1999
------ ------
<S> <C> <C>
Revenues:
License....................................................... $13,487 $ 6,622
Services...................................................... 5,328 1,691
------- -------
Total revenues.................................................. 18,815 8,313
------- -------
Costs and expenses:
Cost of license fees......................................... 421 254
Cost of services............................................. 2,966 964
Sales and marketing.......................................... 8,707 3,751
Research and development..................................... 3,225 2,027
General and administrative................................... 1,380 732
Amortization of goodwill and other purchased intangibles..... 966 -
------ ------
Total costs and expenses................................... 17,665 7,728
------ ------
Income from operations......................................... 1,150 585
Interest and other income, net................................. 249 376
------ ------
Income before income taxes .................................... 1,399 961
Provision for income taxes..................................... 259 115
------ ------
Net income .................................................... $ 1,140 $ 846
======= =======
Basic income per share......................................... $ 0.04 $ 0.03
======= =======
Shares used in basic per share calculation..................... 27,631 26,544
======= =======
Diluted income per share ...................................... $ 0.04 $ 0.03
======= =======
Shares used in diluted per share calculation................... 32,292 29,708
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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ACTUATE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
----------------------------
<S> <C> <C>
Operating activities
Net income ......................................................... $ 1,140 $ 846
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Amortization of deferred compensation.......................... 19 48
Amortization of goodwill and other purchased intangibles....... 966 -
Depreciation................................................... 381 214
Changes in operating assets and liabilities:
Accounts receivable.......................................... 710 (2,143)
Other current assets......................................... (662) 87
Accounts payable............................................. 2,615 291
Accrued compensation......................................... (1,967) (287)
Other accrued liabilities.................................... 689 (910)
Income taxes payable......................................... (61) 99
Deferred revenue............................................. 3,113 368
------ ------
Net cash provided by (used in) operating activities ................ 6,943 (1,387)
------ ------
Investing activities
Purchases of property and equipment ................................ (5,047) (311)
Proceeds from maturity of short-term investments.................... 10,099 1,482
Acquisition of Open Software Technology, LLC ....................... (7,300) -
Acquisition of EnterpriseSoft business ............................. (2,450) -
Net change in other assets.......................................... (1,110) 77
------ ------
Net cash provided by (used in) investing activities ................ (5,808) 1,248
------ ------
Financing activities
Proceeds from issuance of common stock.............................. 1,297 604
------ ------
Net cash provided by financing activities .......................... 1,297 604
------ ------
Net increase in cash and cash equivalents .......................... 2,432 465
Effect of foreign exchange rate changes on cash .................... 15 -
Cash and cash equivalents at the beginning of the period ........... 6,604 21,808
------ ------
Cash and cash equivalents at the end of the period.................. $ 9,051 $22,273
======= =======
Non cash financing activities
Common stock issued in connection with the acquisitions............. $ 9,553 $ -
======= =======
Consideration payable in future in connection with the
acquisition of Open Software Technology, LLC........................ $ 2,033 $ -
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
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ACTUATE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated financial statements of
Actuate Corporation are unaudited, but include all normal recurring adjustments
which we believe to be necessary for the fair presentation of the financial
position, results of operations, and changes in cash flows for the periods
presented. The preparation of the financial statements in conformity with
generally accepted accounting principles requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Despite our best effort to establish good
faith estimates and assumptions, and to manage the achievement of the same,
actual results may differ.
The interim financial statements should be read in conjunction with the
financial statements and related notes included in our Annual Report on Form
10-K for the year ended December 31, 1999 as filed with the Securities and
Exchange Commission on March 30, 2000. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
Interim results of operations for the three months ended March 31, 2000 are not
necessarily indicative of operating results for the full fiscal year.
On February 29, 2000, we completed the acquisition of Open Software
Technology, LLC ("OST"). On March 16, 2000, we acquired all the assets and
business of EnterpriseSoft. These acquisitions were accounted for under the
purchase method of accounting. In accordance with the purchase method of
accounting, the Condensed Consolidated Statements of Operations include these
companies' operating results from the date of acquisition.
Revenue Recognition
Revenue from license fees from sales of software products directly to end
user customers or indirect channel partners is recognized as revenue after
execution of a license agreement or receipt of a definitive purchase order, and
shipment of the product, if no significant vendor obligations remain, there are
no uncertainties surrounding product acceptance, the license fees are fixed or
determinable, and collection of the license fee is considered probable. Our
products do not require significant customization. The majority of end user
license revenues are derived from end user customer orders for specific
individual products. These types of transactions are recognized as revenue upon
shipment of product. Advance payments from end users, in arrangements in which
the end user customer has the right to future unspecified products, are deferred
and recognized as revenue ratably over the estimated term of the period,
typically one year, during which the end user is entitled to receive the
products.
License arrangements with e.Business application vendors, resellers and
distributors generally take the form of either (a) fixed price arrangements in
which the contracting entity has the right to the unlimited usage, unspecified
future products, and sublicensing of the licensed software for a specified term
and pursuant to which license fee revenue is deferred and recognized on a
straight-line basis over the term of the license agreement or (b) arrangements
pursuant to which a royalty is paid to us and is recognized as revenue based on
the sell-through of our software.
Service revenues are primarily comprised of revenue from maintenance
agreements, training and
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consulting fees. Revenue from maintenance agreements is deferred and recognized
on a straight-line basis as service revenue over the life of the related
agreement, which is typically one year. Service revenues from training and
consulting are recognized upon completion of the work to be performed.
Net Income Per Share
Net income per share is presented under Financial Accounting Standards
Board's ("FASB") Statement of Financial Accounting Standards No. 128 "Earnings
Per Share" ("SFAS 128"). SFAS 128 requires the presentation of basic earnings
per share and diluted earnings per share, if more dilutive, for all periods
presented.
In accordance with SFAS 128, basic net income per share has been computed
using the weighted-average number of shares of common stock outstanding during
the period. Diluted net income per share is computed using the weighted-average
number of common and dilutive common equivalent shares outstanding during the
period. Common equivalent shares consist of the shares issuable upon the
exercise of stock options (using the treasury stock method).
A reconciliation of shares used in the calculation of basic and diluted net
income per share follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
<S> <C> <C>
Numerator:
Net income ................................................... $ 1,140 $ 846
------- -------
Denominator:
Weighted-average common shares outstanding.................... 27,908 27,640
Weighted-average shares subject to repurchase................. (277) (1,096)
------- -------
Denominator for basic income per share - weighted-average
common shares .............................................. 27,631 26,544
Weighted-average shares subject to repurchase................. 277 1,096
Employee stock options ....................................... 4,384 2,068
------- -------
Denominator for diluted income per share ....................... 32,292 29,708
====== ======
Basic income per share.......................................... $ 0.04 $ 0.03
======== =======
Diluted income per share........................................ $ 0.04 $ 0.03
</TABLE>
Comprehensive Income
During 1998, we adopted FASB's Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130 establishes
new rules for the reporting and display of comprehensive income and its
components. Comprehensive income includes foreign currency translation gains
and losses and other unrealized gains and losses that have been previously
excluded from net income and reflected instead in equity. A summary of
comprehensive income follows (in thousands):
7
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
-------- -------
<S> <C> <C>
Net income ................................................... $1,140 $ 846
Unrealized gain on short-term investments .................... 1 -
Foreign currency translation adjustment ...................... 15 -
------ -----
Comprehensive income ............................................ $1,156 $ 846
====== =====
</TABLE>
2. Acquisitions
In February 2000, we acquired all of the outstanding stock of OST for cash
and shares of Actuate stock. The total purchase price was $13.1 million,
consisting of $7.3 million in cash, $3.2 million in stock, future cash payments
of $2.4 million over two years from the acquisition date, and approximately
$200,000 of qcquired net liabilities. The acquisition was accounted for as a
purchase. The results of operations of OST and the fair value of assets
acquired and liabilities assumed are included in our financial statements from
the date of acquisition. Goodwill and other intangibles arising from the
acquisition are being amortized on a straight-line basis over periods not
exceeding four years.
The following unaudited pro forma financial information assumes the
acquisition occurred at the beginning of the periods in which the acquisition
took place and, for comparative purposes, at the beginning of the immediately
preceding year. These results have been prepared for information purposes only
and are not necessarily indicative of the operating results that would have
occurred had the acquisition been made as discussed above. In addition, they
are not intended to be a projection of future results (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
2000 1999
------ ------
<S> <C> <C>
Revenues .......................... $20,120 $9,623
Net income ........................ $ 323 $ 236
Diluted income per share $ 0.01 $ 0.01
</TABLE>
In March 2000, we purchased all the assets and business of EnterpriseSoft
for $8.8 million in cash and stock. The results of operations of EnterpriseSoft
and the estimated fair value of assets acquired are included in our financial
statements from the date of acquisition. Goodwill and other intangibles arising
from the acquisition are being amortized on a straight-line basis over periods
not exceeding four years. Pro forma information related to the purchase of
EnterpriseSoft has not been presented due to immateriality.
3. Subsequent Events
In April 2000, we purchased additional shares of our distributor located in
Japan from existing shareholders for approximately $548,000 raising our equity
ownership in that entity to 67%. Based on our current equity ownership, we will
begin to consolidate our distributor's financial statements in future periods as
prescribed by generally accepted accounting principles.
8
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with the historical
financial information and the notes thereto included in Item 1 of this Quarterly
Report on Form 10-Q and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in our Annual Report on Form 10-K
for the year ended December 31, 1999 as filed with the Securities and Exchange
Commission on March 30, 2000.
Except for historical information, the discussion in this Form 10-Q
contains forward-looking statements that involve risks and uncertainties. These
statements refer to our future plans, objectives, expectations and intentions.
These statements may be identified by the use of words such as "expect",
"anticipate", "believe", "intend", "plan" and similar expressions. Our actual
results could differ materially from those anticipated in such forward-looking
statements. Factors that could contribute to these differences include, but are
not limited to, the risks discussed in the section titled "Risk Factors" in this
Form 10-Q.
Overview
We are a leading provider of e.Reporting solutions for e.Business. Our
e.Reporting solutions enable organizations to publish high-value business
information on e.Business Web sites for use by customers, employees and
partners.
We sell software products through two primary means: (i) directly to end
user customers through our direct sales force and (ii) through indirect channel
partners such as e.Business application vendors, resellers and distributors.
e.Business application vendors generally integrate our products with their
applications and either provide hosting services or resell them with their
products. Our other indirect channel partners resell our software products to
end user customers. Our revenues are derived primarily from license fees for
software products and, to a lesser extent, fees for services relating to such
products, including software maintenance and support, training and consulting.
In June 1999, we acquired all of the outstanding shares of Actuate Holding, B.V.
("BV"), the parent company of our distributors based in France, Germany and the
United Kingdom. In February 2000, we acquired all of the outstanding shares of
Open Software Technology, LLC ("OST"), a software consulting firm. In March
2000, we acquired all the assets of EnterpriseSoft, a developer of Java software
products. The results of operations of BV, OST and EnterpriseSoft, and the fair
value of assets acquired and liabilities assumed are included in the
consolidated financial statements from the date of acquisition.
We were incorporated in California in November 1993 and reincorporated in
Delaware in July 1998. In March 2000, we relocated our headquarters and our new
offices are located at 701 Gateway Boulevard, South San Francisco, California
94080 and our telephone number is 650-837-2000.
Results of Operations
The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated.
9
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
2000 1999
----------------------
<S> <C> <C>
Revenues:
License fees............................................. 72% 80%
Services................................................. 28 20
---- ----
Total revenues......................................... 100 100
---- ----
Cost of revenues:
License fees.............................................. 2 3
Services.................................................. 16 12
---- ----
Total cost of revenues ................................ 18 15
---- ----
Gross profit ............................................... 82 85
---- ----
Operating expenses:
Sales and marketing ...................................... 46 45
Research and development ................................. 17 24
General and administrative ............................... 7 9
Amortization of goodwill and other purchased
intangibles.............................................. 6 -
---- ----
Total operating expenses .............................. 76 78
---- ----
Income from operations ..................................... 6 7
Interest and other income, net ............................. 1 4
Provision for income taxes ................................. 1 1
---- ----
Net income ................................................. 6% 10%
==== ====
</TABLE>
Revenues
Total revenues increased 126% from $8.3 million for the quarter ended March 31,
1999 to $18.8 million for the quarter ended March 31, 2000. During the first
quarter of 2000, one U.S. customer accounted for 13% of total revenues. Sales
outside North America were $2.0 million, or 11% of total revenues for the first
quarter of 2000, compared to $1.1 million, or 13% of total revenues for the
first quarter of 1999. Revenues generated by OST and EnterpriseSoft subsequent
to the acquisitions were not material.
License fees. Revenues from license fees increased 104% from $6.6 million for
the first quarter of 1999 to $13.5 million for the first quarter of 2000. The
increase in license fees in absolute dollars was primarily due to increased
sales to new customers and follow-on sales to existing customers resulting from
the expansion of our direct sales organization and increased acceptance of the
Actuate e.Reporting System.
Services. Service revenues increased 215% from $1.7 million for the first
quarter of 1999 to $5.3 million for the first quarter of 2000. The increase in
service revenues was primarily due to the increases in professional services
revenues related to increases in demand for our professional services and, to a
lesser extent, increases in the installed base of customers receiving ongoing
maintenance and support and revenue generated by OST. As a percentage of total
revenues, service revenues increased from 20% in the first quarter of 1999 to
28% in the first quarter of 2000. We expect that service revenues as a
percentage of total revenues will increase in the future as a result of the
acquisition of OST.
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Cost of revenues
License fees. Cost of license revenues consists primarily of production and
packaging costs, personnel and related costs, and facility costs. Cost of
license revenues increased from $254,000, or 4% of revenues from license fees,
for the first quarter of 1999 to $421,000, or 3% of revenues from license fees,
for the first quarter of 2000. The increase in absolute dollars was primarily
due to fulfilling more orders during the quarter. We expect cost of license
revenues to increase in absolute dollars and as a percentage of revenues from
license fees in future periods due to increasing sales, new product releases,
localization costs, royalties to third party software vendors, new packaging of
our products and printing costs associated with revised documentation materials.
Services. Cost of service consists primarily of personnel and related costs,
facilities costs incurred in providing software maintenance and support,
training and consulting services, as well as third-party costs incurred in
providing training and consulting services. Cost of service increased from
$964,000, or 57% of revenues from service fees, for the first quarter of 1999 to
$3.0 million, or 56% of revenues from service fees, for the first quarter of
2000. The increase in absolute dollars was due primarily to the continued
expansion of our customer support and professional service organizations. We
expect that cost of services will continue to increase in absolute dollars in
the future as we continue to expand both our customer support and professional
services organizations to meet customer demands for our services. We expect
that cost of services as a percent of revenues from service fees will increase
in future periods as we build the infrastructure to support our growing service
organizations.
Operating Expenses
Sales and marketing. Sales and marketing expenses consist primarily of
compensation, promotional expenses, travel and entertainment, and facility
costs. Sales and marketing expenses increased from $3.8 million, or 45% of
total revenues for the first quarter of 1999 to $8.7 million, or 46% of total
revenues for the first quarter of 2000. The increase in absolute dollars was
primarily due to hiring additional sales and marketing personnel, higher sales
commissions associated with increased revenues and increased marketing program
expenses. We expect that sales and marketing expenses will continue to increase
in absolute dollars in future periods as we continue to hire additional sales
and marketing personnel, establish additional sales offices, expand
international distribution channels and increase promotional activities.
Research and development. Research and development expenses are expensed as
incurred and consist primarily of personnel and related costs associated with
product development. Research and development expenses increased from $2.0
million, or 24% of total revenues for the first quarter of 1999 to $3.2 million,
or 17% of total revenues for the first quarter of 2000. The increase in
research and development expenses in absolute dollars was primarily due to the
hiring of additional engineering personnel. The decrease as a percentage of
total revenues was due to revenues increasing at a faster rate than research and
development expenses. We believe that a significant level of investment for
research and development is essential to maintain product and technical
leadership and we anticipate that we will continue to devote substantial
resources to research and development and that these expenses will increase in
absolute dollars in future periods.
General and administrative. General and administrative expenses consist
primarily of personnel and related costs for finance, human resources,
information systems and general management, as well as legal and accounting
expenses and amortization of deferred compensation related to certain stock
option grants. General and administrative expenses increased from $732,000, or
9% of total revenues for the first quarter of 1999 to $1.4 million, or 7% of
total revenues for the first quarter of 2000. The increase
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in general and administrative expenses in absolute dollars was due primarily to
increased personnel and related costs and professional fees necessary to manage
and support our growth. We believe that general and administrative expenses will
increase in absolute dollars in future periods as we continue to expand our
facilities and personnel staff to meet our growing operations.
Amortization of goodwill and other purchased intangibles and merger related
costs. In June 1999, we acquired all of the outstanding stock of BV for cash.
This acquisition was accounted for as a purchase and we recognized $9.6 million
of goodwill and other intangible assets. In February 2000, we acquired all of
the outstanding stock of OST for cash and stock. This acquisition was also
accounted for as a purchase and we recognized $13.1 million of goodwill and
other intangible assets. In March 2000, we acquired all the assets of
EnterpriseSoft for cash and stock and recognized $8.7 million of goodwill and
other intangible assets. In the first quarter of 2000, we recorded a charge of
$966,000 for amortization of goodwill and other purchased intangibles relating
to the three acquisitions. Goodwill and other purchased intangibles arising
from these acquisitions are being amortized on a straight-line basis over
periods not exceeding four years.
Interest and Other Income, Net
Interest and other income, net, is comprised primarily of interest income
earned by us on cash and short-term investments. Interest and other income,
net, for the three months ended March 31, 1999 was $376,000 as compared with
interest and other income, net of $249,000 for the three months ended March 31,
2000. The decrease was due primarily to lower cash and investment balances from
which interest is earned.
Provision for Income Taxes
We recorded an income tax provision of $115,000 in the three months ended
March 31, 1999 and $259,000 in the three months ended March 31, 2000. The
effective tax rates used are based on our current estimates and forecasts of our
taxable income in multiple domestic and foreign jurisdictions. The estimated
annual effective tax rate is relatively sensitive to the results of operations
in various jurisdictions, and because actual results may differ from such
projections in future periods, the actual effective tax rate could differ
materially from this estimate.
Liquidity and Capital Resources
As of March 31, 2000, we had cash and cash equivalents of $9.1 million and
short-term investments of $7.5 million in highly liquid, high quality debt
securities and a certificate of deposit classified as available-for-sale. As
part of our acquisition of OST, we assumed their bank line of credit with an
outstanding balance of $250,000. In addition, we obtained a letter of credit
through our bank in the amount of $3.1 million as security deposit to lease our
new facilities in South San Francisco.
Net cash provided by operating activities was $6.9 million in the three
months ended March 31, 2000, compared to net cash used in operating activities
of $1.4 million in the three months ended March 31, 1999. For the three months
ended March 31, 2000, cash provided by operating activities was primarily due to
increases in accounts payable and deferred revenues, and net income as adjusted
for amortization and depreciation that were offset by decreases in accrued
compensation. Net cash used in operating activities in the three months ended
March 31, 1999 was due primarily to increase in accounts receivable.
From December 31, 1999 to March 31, 2000, deferred revenue increased by
approximately $3.1 million to $15.3 million. The increase in deferred revenue
was due to the expansion of our customer
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base under maintenance contracts in addition to the signing of several
agreements with future obligations, which require us to defer revenue in
accordance with SOP 97-2
Net cash used in investing activities was $5.8 million in the three months
ended March 31, 2000, compared to net cash provided by investing activities of
$1.2 million in the three months ended March 31, 1999. For the three months
ended March 31, 2000, net cash used in investing activities was primarily due to
the acquisitions of OST and EnterpriseSoft, and to a lesser extent, the purchase
of property and equipment for our new South San Francisco facilities that was
partially offset by the maturity and sale of short-term investments. For the
1999 period, net cash was provided by proceeds from maturity of short-term
investments.
Net cash provided by financing activities was $1.3 million and $0.6 million
in the three months ended March 31, 2000 and 1999, respectively. During both
periods, net cash provided by financing activities was primarily from the
proceeds from issuance of common stock under the employee stock purchase plan.
We believe that current cash balances and any cash generated from
operations and from available debt financing, will be sufficient to meet our
cash needs for working capital and capital expenditures for at least the next
twelve months. Thereafter, if cash generated from operations is insufficient to
satisfy our liquidity requirements, we may seek to sell additional equity or
obtain credit facilities. The sale of additional equity could result in
additional dilution to our stockholders. A portion of our cash may be used to
acquire or invest in complementary businesses, including the purchase of the
remaining interest of our distributor in Japan, or products or to obtain the
right to use complementary technologies. From time to time, in the ordinary
course of business, we evaluate potential acquisitions of such businesses,
products or technologies.
Year 2000 Readiness
Computer systems and software must accept four digit entries to distinguish
21/st/ century dates from 20/th/ century dates. As a result, many software and
computer systems that accepted only two digit entries needed to be upgraded in
order to accept dates beginning January 1, 2000. To date, we have not
experienced any date related problems with our software. In addition, we have
not been made aware of, nor have we experienced, date related problems with any
third-party software. Also, we do not believe that we will incur material costs
in the future because of date related problems.
13
<PAGE>
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
Investors should carefully consider the following risk factors and warnings
before making an investment decision. The risks described below are not the
only ones facing Actuate. Additional risks that we do not yet know of or that
we currently think are immaterial may also impair our business operations. If
any of the following risks actually occur, our business, operating results or
financial condition could be materially adversely affected. In such case, the
trading price of our common stock could decline and you may lose all or part of
your investment. Investors should also refer to the other information set forth
in this Report on Form 10-K, including the financial statements and the notes
thereto.
OUR OPERATING RESULTS MAY BE VOLATILE AND DIFFICULT TO PREDICT. IF WE FAIL TO
MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE MARKET PRICE
OF OUR STOCK MAY DECREASE SIGNIFICANTLY.
The susceptibility of our operating results to significant fluctuations
makes any prediction of future operating results unreliable. In addition, we
believe that period-to-period comparisons of our operating results are not
necessarily meaningful and you should not rely on them as indications of our
future performance. Our operating results have in the past, and may in the
future, vary significantly due to factors such as the following:
- demand for our products;
- the size and timing of significant orders for our products;
- sales cycles of our indirect channel partners;
- changes in pricing policies by us or our competitors;
- changes in our level of operating expenses and our ability to control
costs;
- budgeting cycles of our customers;
- ability to make new products commercially available in a timely manner;
- failure to successfully manage acquisitions made by us;
- defects in our products and other product quality problems;
- failure to meet hiring needs and unexpected personnel changes;
- the management and expansion of our international operations;
- changes in our sales incentive plans;
- continued successful relationships and the establishment of new
relationships with e.Business application vendors;
- the impact of consolidation by competitors and indirect channel
partners; and
- general domestic and international economic and political conditions.
Because our software products are typically shipped shortly after orders
are received, total revenues in any quarter are substantially dependent on
orders booked and shipped throughout that quarter. Furthermore, several factors
may require us, in accordance with generally accepted accounting principles in
the United States, to defer recognition of license fee revenue for a significant
period of time after entering into a license agreement, including:
- whether the license agreement includes both software products that are
then currently available and software products or other enhancements
that are still under development;
- whether the license agreement relates entirely or partly to then
currently undeliverable software products; and
- whether the license agreement includes acceptance criteria that may
preclude revenue recognition prior to customer acceptance.
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<PAGE>
In addition, we may in the future experience fluctuations in our gross and
operating margins due to changes in the mix of our domestic and international
revenues and changes in the mix of our direct sales and indirect sales, as well
as changes in the mix among the indirect channels through which our products are
offered.
A significant portion of our total revenues in any given quarter is derived
from existing customers. Our ability to achieve future revenue growth, if any,
will be substantially dependent upon our ability to increase revenues from
license fees and services from existing customers, to expand our sales force and
to increase the average size of our orders. To the extent that such increases
do not occur in a timely manner, our business, operating results and financial
condition would be harmed. Our expense levels and plans for expansion,
including plans to significantly increase our sales and marketing and research
and development efforts, are based in significant part on our expectations of
future revenues and are relatively fixed in the short-term. If revenues fall
below our expectations and we are unable to quickly reduce our spending in
response, our business, operating results and financial condition are likely to
be harmed.
Based upon all of the factors described above, we have a limited ability to
forecast future revenues and expenses, and it is likely that in some future
quarter our operating results will be below the expectations of public market
analysts and investors. In the event that operating results are below
expectations, the price of our common stock could decline.
IF WE DO NOT SUCCESSFULLY EXPAND OUR DISTRIBUTION CHANNELS AND DEVELOP AND
MAINTAIN RELATIONSHIPS WITH E.BUSINESS APPLICATION VENDORS OUR BUSINESS WOULD BE
SERIOUSLY HARMED.
To date, we have sold our products principally through our direct sales
force, as well as through indirect sales channels, such as e.Business
application vendors, resellers and distributors. Our revenues from license fees
resulting from sales through indirect channel partners were approximately 38% in
the first quarter of 2000, 39% in fiscal 1999 and 41% in fiscal 1998. Our
ability to achieve significant revenue growth in the future will depend in large
part on our success in expanding our sales force and in further establishing and
maintaining relationships with e.Business application vendors, resellers and
distributors. In particular, a significant element of our strategy is to embed
our technology in products offered by e.Business application vendors for resale
or as a hosted application to such vendors' customers and end users. We intend
to seek additional distribution arrangements with other e.Business application
vendors to embed our technology in their products and expect that these
arrangements will continue to account for a significant portion of our revenues
in future periods. Our future success will depend on the ability of our
indirect channel partners to sell and support our products. If the sales and
implementation cycles of our indirect channel partners are lengthy or variable
or our e.Business application vendors experience difficulties embedding our
technology into their products or we fail to train the sales and customer
support personnel of such indirect channel partners in a timely fashion, our
business, operating results and financial condition would be harmed.
Although we are currently investing, and plan to continue to invest,
significant resources to expand and develop relationships with e.Business
application vendors, we have at times experienced and continue to experience
difficulty in establishing and maintaining these relationships. If we are
unable to successfully expand these distribution channels and secure license
agreements with additional e.Business application vendors on commercially
reasonable terms and extend existing license agreements with existing e.Business
and application vendors on commercially reasonable terms our operating results
would be harmed. Any inability by us to maintain existing or establish new
relationships with indirect channel partners or, if such efforts are successful,
a failure of our revenues to
15
<PAGE>
increase correspondingly with expenses incurred in pursuing such relationships,
would harm our business, operating results and financial condition.
IF THE MARKET FOR WEB BASED REPORTING SOFTWARE DOES NOT GROW AS WE EXPECT OUR
BUSINESS WOULD BE SERIOUSLY HARMED.
The market for Web based reporting software products is still emerging and
we cannot be certain that it will continue to grow or that, even if the market
does grow, businesses will adopt our products. If the market for Web based
reporting products fails to grow or grows more slowly than we expect, our
business, operating results and financial condition would be harmed. To date,
all of our revenues have been derived from licenses for our reporting software
and related products and services, and we expect this to continue for the
foreseeable future. We have spent, and intend to continue to spend,
considerable resources educating potential customers and indirect channel
partners about Web based reporting and our products. However, if such
expenditures do not enable our products to achieve any significant degree of
market acceptance our business, operating results and financial condition would
be harmed.
WE MAY MAKE FUTURE ACQUISITIONS AND ACQUISITIONS INVOLVE NUMEROUS RISKS
The Web reporting software business is highly competitive, and as such, our
growth is dependent upon market growth and our ability to enhance our existing
products, introduce new products on a timely basis and expand our distribution
channels and professional services organization. One of the ways we have
addressed and will continue to address the need to expand our distribution
channels, develop new products and expand our professional service organization
is through acquisitions of other companies. Acquisitions involve numerous risks,
including the following:
- difficulties in integration of the operations, technologies, and
products of the acquired companies;
- the risk of diverting management's attention from normal daily
operations of the business;
- risks of entering markets in which we have no or limited direct prior
experience; and
- the potential loss of key employees of the acquired company.
Mergers and acquisitions of high-technology companies are inherently risky,
and no assurance can be given that any acquisition will be successful and will
not materially adversely affect our business, operating results or financial
condition. Failure to manage growth effectively and successfully integrate
acquisitions made by us could harm our business and operating results.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE
COMPETITORS.
The market in which we compete is intensely competitive and characterized
by rapidly changing technology and evolving standards. Our competition comes in
five principal forms:
- direct competition from current or future vendors of reporting solutions
such as Seagate Software, Inc. (a division of Seagate Technology, Inc.),
MicroStrategy Incorporated and Brio Technology, Inc.;
- indirect competition from vendors of OLAP and query tools such as
Hyperion Solutions Corp., Business Objects S.A., Cognos, Inc. and
Microsoft that integrate reporting functionality with such tools;
16
<PAGE>
- indirect competition from e.Business software vendors such as SAP and
Oracle, to the extent they include reporting functionality in their
applications;
- competition from e.Business software vendors and Web development tool
vendors; and
- competition from the information systems departments of current or
potential customers that may develop reporting solutions internally
which may be cheaper and more customized than our products.
Many of our current and potential competitors have significantly greater
financial, technical, marketing and other resources than us. These competitors
may be able to respond more quickly to new or emerging technologies and changes
in customer requirements or devote greater resources to the development,
promotion and sales of their products than us. Also, most current and potential
competitors, including companies such as Oracle and Microsoft, have greater name
recognition and the ability to leverage significant installed customer bases.
These companies could integrate competing Web based reporting software with
their products, resulting in a loss of market share for us. We expect
additional competition as other established and emerging companies enter the Web
based reporting software market and new products and technologies are
introduced. Increased competition could result in price reductions, fewer
customer orders, reduced gross margins, longer sales cycles and loss of market
share, any of which would harm our business, operating results and financial
condition.
Current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties,
thereby increasing their ability to address the reporting needs of our
prospective customers. Also current or future indirect channel partners have in
the past, or may in the future, establish cooperative relationships with our
current or potential competitors, thereby limiting our ability to sell our
products through particular distribution channels. It is possible that new
competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share. Such competition could harm our ability
to obtain revenues from license fees from new or existing customers and service
revenues from existing customers on terms favorable to us. If we are unable to
compete successfully against current and future competitors our business,
operating results and financial condition would be harmed.
IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGES, OUR PRODUCTS COULD BECOME
OBSOLETE AND OUR BUSINESS COULD BE SERIOUSLY HARMED.
The market for our products is characterized by rapid technological
changes, frequent new product introductions and enhancements, changing customer
demands and evolving industry standards. Any of these factors can render
existing products obsolete and unmarketable. We believe that our future success
will depend in large part on our ability to support current and future releases
of popular operating systems, databases and e.Business software applications, to
timely develop new products that achieve market acceptance, and to meet an
expanding range of customer requirements. If the announcement or introduction
of new products by us or our competitors or any change in industry standards
causes customers to defer or cancel purchases of existing products our business,
operating results and financial condition would be harmed. As a result of the
complexities inherent in Web based reporting, major new products and product
enhancements can require long development and testing periods. In addition,
customers may delay their purchasing decisions in anticipation of the general
availability of new or enhanced versions of our products. As a result,
significant delays in the general availability of such new releases or
significant problems in the installation or implementation of such new releases
could harm our business, operating results and financial condition. If we fail
to successfully develop, on a timely and cost effective basis, product
enhancements or new products that respond to technological change, evolving
industry standards or customer requirements or such new products and product
enhancements fail to achieve market acceptance, our business, operating results
and financial condition may be harmed.
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<PAGE>
IF WE DO NOT RELEASE NEW PRODUCTS AND ENHANCEMENTS TO EXISTING PRODUCTS IN A
TIMELY MANNER OR IF SUCH NEW PRODUCTS AND ENHANCEMENTS FAIL TO ACHIEVE MARKET
ACCEPTANCE OUR BUSINESS COULD BE SERIOUSLY HARMED.
We believe that our future success will depend in large part on the success
of new products and enhancements that we make generally available. Prior to the
release of any new products or enhancements, the software must undergo a long
development and testing period. To date, the development and testing of new
products and enhancements have taken longer than expected. In the event the
development and testing of new products and enhancements continue to take longer
than expected, the release of new products and enhancements will be delayed. If
we fail to release new products and enhancements in a timely manner, our
business, operating results and financial condition may be harmed. In addition,
if such new products and enhancements do not achieve market acceptance our
business, operating results and financial condition may be harmed.
BECAUSE THE SALES CYCLES OF OUR PRODUCTS ARE LENGTHY AND VARIABLE, OUR QUARTERLY
RESULTS MAY FLUCTUATE.
The purchase of our products by our end user customers for deployment
within a customer's organization typically involves a significant commitment of
capital and other resources, and is therefore subject to delays that are beyond
our control. These delays can arise from a customer's internal procedures to
approve large capital expenditures, budgetary constraints and the testing and
acceptance of new technologies that affect key operations. The sales cycle for
an initial order of our products is typically 3 to 6 months and the sales cycle
associated with a follow-on large scale deployment of our products typically
extends for another 6 to 9 months or longer. We may experience longer sales
cycles in the future. Additionally, sales cycles for sales of our products to
e.Business application vendors tend to be longer, ranging from 6 to 24 months or
more and involve convincing the vendor's entire organization that our products
are the appropriate reporting solution for the vendor's application. This time
period does not include the sales and implementation cycles of such vendors' own
products, which are typically significantly longer than our sales and
implementation cycles. Certain of our customers have in the past, or may in the
future, experience difficulty completing the initial implementation of our
products. Any difficulties or delays in the initial implementation by our end
user customers or our indirect channel partners could cause such customers to
reject our software or lead to the delay or non-receipt of future orders for the
large-scale deployment of our products.
IF WE FAIL TO EXPAND OUR INTERNATIONAL OPERATIONS OUR BUSINESS WOULD BE
SERIOUSLY HARMED.
During the first quarter of 2000 and fiscal 1999 and 1998, we derived 11%,
14% and 6% of our total revenues, respectively, from sales outside North
America. Our ability to achieve revenue growth in the future will depend in
large part on our success in increasing revenues from international sales. We
intend to continue to invest significant resources to expand our sales and
support operations outside North America and to enter additional international
markets. In order to expand international sales, we must establish additional
foreign operations, expand our international channel management and support
organizations, hire additional personnel, recruit additional international
distributors and increase the productivity of existing international
distributors. If we are not successful in expanding international operations in
a timely and cost-effective manner, our business, operating results and
financial condition could be harmed.
18
<PAGE>
THERE ARE MANAGEMENT AND OPERATIONAL RISKS ASSOCIATED WITH OUR INTERNATIONAL
OPERATIONS THAT COULD SERIOUSLY HARM OUR BUSINESS.
We have wholly owned subsidiaries in the United Kingdom, France, Germany
and Australia and a majority owned subsidiary in Japan whose sole business
purpose is the marketing, sale and distribution of our software products. We
have very limited experience in the management of international operations. We
also have a number of other distributors located worldwide. International
operations are subject to a number of risks including the following:
- costs of localizing products for foreign countries;
- difficulty in hiring employees in foreign countries;
- trade laws and business practices favoring local competition;
- dependence on local vendors;
- compliance with multiple, conflicting and changing government laws and
regulations;
- longer sales and payment cycles;
- import and export restrictions and tariffs;
- difficulties in staffing and managing foreign operations;
- greater difficulty or delay in accounts receivable collection;
- foreign currency exchange rate fluctuations;
- multiple and conflicting tax laws and regulations; and
- political and economic instability.
Because the majority of our international revenues have been denominated to
date in U.S. dollars, increases in the value of the United States dollar could
increase the price of our products so that they become relatively more expensive
to customers in the local currency of a particular country, and result in a
reduction in sales and profitability in that country. We believe that an
increasing portion of our revenues and costs will be denominated in foreign
currencies. To the extent such denomination in foreign currencies does occur,
gains and losses on the conversion to U.S. dollars of accounts receivable,
accounts payable and other monetary assets and liabilities arising from
international operations may contribute to fluctuations in our results of
operations. Any of the foregoing factors could harm our business, operating
results and financial condition. Although we may from time to time undertake
foreign exchange hedging transactions to cover a portion of our foreign currency
transaction exposure, we currently do not attempt to cover any foreign currency
exposure. If we are not successful in any future foreign exchange hedging
transactions that we engage in, our business, operating results and financial
condition could be harmed.
TO MANAGE OUR GROWTH AND EXPANSION, WE NEED TO IMPROVE AND IMPLEMENT OUR
INTERNAL SYSTEMS, PROCEDURES AND CONTROLS. IF WE ARE UNABLE TO DO SO
SUCCESSFULLY, OUR BUSINESS WOULD BE SERIOUSLY HARMED.
Our rapid expansion in the number of employees and the scope of operations
has placed and will continue to place a significant strain on our management,
information systems and resources. Any acquisitions made by us will also put a
significant strain on our management, information systems and resources. In
addition, we expect that an expansion of our international operations will lead
to increased financial and administrative demands associated with managing our
operations in Europe and managing an increasing number of relationships with
foreign partners and customers and expanded treasury functions to manage foreign
currency risks. Our future operating results will also depend on our ability to
further develop indirect channels and expand our support organization to
accommodate growth in our installed base. If we fail to manage our expansion
effectively our business, operating results and financial condition would be
harmed.
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<PAGE>
OUR INABILITY TO ATTRACT AND RETAIN HIGHLY QUALIFIED PERSONNEL IN THE FUTURE
WOULD SERIOUSLY HARM OUR BUSINESS.
From January 1999 through March 2000, we increased our headcount from 149
to 418 full-time employees. Furthermore, significant increases in the number of
employees are anticipated during the remainder of 2000 and 2001. In particular,
we currently plan to significantly expand the number of employees in sales,
customer support and marketing. Our success depends to a significant degree
upon the efforts of certain key management, sales, customer support and research
and development personnel. We believe that our future success will depend in
large part upon our continuing ability to attract and retain highly skilled
managerial, sales, marketing, customer support and research and development
personnel. Like other software companies, we face intense competition for such
personnel, and we have experienced and will continue to experience difficulty in
recruiting and retaining qualified personnel, particularly in the San Francisco
Bay Area, where the employment market for qualified sales, marketing and
engineering personnel is extremely competitive.
OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS
AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE.
Our future success depends upon the continued service of our executive
officers and other key engineering, sales, marketing and support personnel and
none of our officers or key employees is bound by an employment agreement for
any specific term. If we lose the service of one or more of our key employees,
or if one or more of our executive officers or employees decide to join a
competitor or otherwise compete directly or indirectly with us, this could have
a significant adverse effect on our business.
THERE ARE RISKS ASSOCIATED WITH THE SOFTWARE INDUSTRY
The software industry has historically experienced significant periodic
downturns, often in connection with, or in anticipation of, declines in general
economic conditions during which management information systems budgets often
decrease. Such a change in economic conditions could result in a slow down of
the purchase of Web based reporting products. If this occurs, our business,
operating results and financial condition may in the future reflect substantial
fluctuations from period to period as a consequence of buying patterns and
general economic conditions in the software industry.
IF OUR PRODUCT CONTAINS MATERIAL DEFECTS, OUR BUSINESS COULD BE SERIOUSLY
HARMED.
Software products as complex as those offered by us often contain errors or
defects, particularly when first introduced, when new versions or enhancements
are released and when configured to individual customer computing systems. We
currently have known errors and defects in our products. Despite testing
conducted by us, if additional defects and errors are found in current versions,
new versions or enhancements of our products after commencement of commercial
shipment this could result in the loss of revenues or a delay in market
acceptance. The occurrence of any of these events could seriously harm our
business, operating results and financial condition.
IF A SUCCESSFUL PRODUCT LIABILITY CLAIM IS MADE AGAINST US, OUR BUSINESS WOULD
BE SERIOUSLY HARMED.
Although license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims, it is
possible that such limitation of liability provisions may not be effective as a
result of existing or future laws or unfavorable judicial decisions. We have
not
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experienced any product liability claims to date. However, the sale and support
of our products may entail the risk of such claims, which are likely to be
substantial in light of the use of our products in business-critical
applications. A product liability claim brought against us could seriously harm
our business, operating results and financial condition.
IF THE PROTECTION OF OUR PROPRIETARY RIGHTS IS INADEQUATE, OUR BUSINESS COULD BE
SERIOUSLY HARMED.
We have two issued and two pending U.S. patents and we rely primarily on a
combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect our proprietary technology.
For example, we license our software pursuant to shrink-wrap or signed license
agreements, which impose certain restrictions on licensees' ability to utilize
the software. In addition, we seek to avoid disclosure of our intellectual
property, including requiring those persons with access to our proprietary
information to execute confidentiality agreements with us and restricting access
to our source code. We seek to protect our software, documentation and other
written materials under trade secret and copyright laws, which afford only
limited protection.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of many countries do not protect our proprietary
rights to as great an extent as do the laws of the United States. If our means
of protecting our proprietary rights is not adequate or our competitors
independently develop similar technology, our business could be seriously
harmed.
INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND COULD RESULT IN THE
LOSS OF SIGNIFICANT RIGHTS.
To date, we have not been notified that our products infringe the
proprietary rights of third parties, but we cannot be certain that third parties
will not claim infringement by us with respect to current or future products.
We expect Web based reporting software product developers will increasingly be
subject to infringement claims as the number of products and competitors in our
industry segment grows and the functionality of products in different industry
segments overlaps. Any such claims, with or without merit, could be time-
consuming to defend, result in costly litigation, divert management's attention
and resources, cause product shipment delays or require us to enter into royalty
or licensing agreements. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to us or at all. A successful claim of
product infringement against us and our failure or inability to license the
infringed or similar technology could harm our business, operating results and
financial condition.
OUR COMMON STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES
FOR STOCKHOLDERS.
The market price of shares of our common stock has been and is likely to
continue to be highly volatile and may be significantly affected by factors such
as the following:
- actual or anticipated fluctuations in our operating results;
- announcements of technological innovations;
- new products or new contracts announced by us or our competitors;
- developments with respect to copyrights or proprietary rights;
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- conditions and trends in the software and other technology industries;
- changes in corporate purchasing of e.Business application software;
- the announcement of mergers or acquisitions;
- adoption of new accounting standards affecting the software industry;
- changes in financial estimates by securities analysts;
- changes in the economic conditions in the United States and abroad; and
- the purchase or sale of our common stock by "day traders".
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have particularly affected the market prices
for the securities of technology companies. In the past, following periods of
volatility in the market price of a particular company's securities, securities
class action litigation has often been brought against such company. If we are
involved in such litigation, it could result in substantial costs and a
diversion of management's attention and resources and could harm our business,
operating results and financial condition.
CERTAIN OF OUR CHARTER PROVISIONS AND DELAWARE LAW, MAY PREVENT OR DETER A
CHANGE IN CONTROL OF ACTUATE.
Actuate's Certificate of Incorporation, as amended and restated (the
"Certificate of Incorporation"), and Bylaws, as amended and restated ("Bylaws"),
contain certain provisions that may have the effect of discouraging, delaying or
preventing a change in control of Actuate or unsolicited acquisition proposals
that a stockholder might consider favorable, including provisions authorizing
the issuance of "blank check" preferred stock and eliminating the ability of
stockholders to act by written consent. In addition, certain provisions of
Delaware law and our 1998 Equity Incentive Plan may also have the effect of
discouraging, delaying or preventing a change in control of Actuate or
unsolicited acquisition proposals. The anti-takeover effect of these provisions
may also have an adverse effect on the public trading price of our common stock.
22
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Part II. Other Information
Item 1. Legal Proceedings
We are not involved in any legal proceedings that are material to our
business or financial condition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
On March 10, 2000 and May 9, 2000, the Company filed a report on Form
8-K and Form 8-K/A relating to the acquisition of Open Software
Technology, LLC.
On March 27, 2000, the Company filed a report on Form 8-K relating to
the purchase of all the assets of EnterpriseSoft.
23
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on May 11, 2000.
Actuate Corporation
(Registrant)
By: /s/ DANIEL A. GAUDREAU
----------------------------
Daniel A. Gaudreau
Chief Financial Officer, Senior Vice
President of Finance (Principal
Financial and Accounting Officer)
24
<PAGE>
ACTUATE CORPORATION
<TABLE>
<CAPTION>
INDEX OF EXHIBITS
EXHIBIT # EXHIBIT TITLE
- --------- -------------
<S> <C>
27.1 Financial Data Schedule - March 31, 2000
</TABLE>
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,051
<SECURITIES> 7,450
<RECEIVABLES> 19,872
<ALLOWANCES> 1,976
<INVENTORY> 0
<CURRENT-ASSETS> 36,166
<PP&E> 9,249
<DEPRECIATION> 2,145
<TOTAL-ASSETS> 73,690
<CURRENT-LIABILITIES> 27,997
<BONDS> 0
0
0
<COMMON> 28
<OTHER-SE> 43,632
<TOTAL-LIABILITY-AND-EQUITY> 73,690
<SALES> 13,487
<TOTAL-REVENUES> 18,815
<CGS> 421
<TOTAL-COSTS> 3,387
<OTHER-EXPENSES> 14,278
<LOSS-PROVISION> 14
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,399
<INCOME-TAX> 259
<INCOME-CONTINUING> 1,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,140
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
