Actuate Corp. Q3 2008 Earnings Call Transcript

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 |  About: Actuate Corporation (BIRT)
by: SA Transcripts

Actuate Corp. (NASDAQ:ACTU)

Q3 2008 Earnings Call Transcript

October 27, 2008, 5:00 pm ET

Executives

Tom McKeever - General Counsel and VP

Pete Cittadini - President and CEO

Dan Gaudreau - CFO

Analysts

Nathan Schneiderman – Roth Capital Partners

Justin Cable - Global Hunter Securities

Pat Walravens - JMP Securities

Kevin Liu - B. Riley & Co.

Frank Sparacino - First Analysis

Jeremy Hellman - Singular Research

Operator

Good day, ladies and gentlemen, and welcome to the quarter 2008 Actuate Corporation Earnings Conference Call. My name is Geri, and I’ll be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session toward the end of this conference. (Operator Instructions).

I’d now like to turn the call over to Mr. Tom McKeever, General Counsel for Actuate Corporation. Please proceed, sir.

Tom McKeever

Thank you very much and welcome everyone to Actuate’s third quarter 2008 financial results conference call. I’m Tom McKeever, Actuate’s General Counsel. Joining me today is Pete Cittadini, our President and CEO, and Dan Gaudreau, our CFO.

Before I turn the call over to Pete, I’d like to remind everybody that the statements contained in this presentation 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 in this presentation are based upon information now known by Actuate. 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, Rich Internet Application and Performance Management 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 or future competitors, the impact of 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 discussed in Actuate’s filings with the Securities and Exchange Commission, specifically Actuate’s annual report on Form 10-K for 2007 fiscal year filed on March 17th, 2008, and quarterly reports on Form 10-Q filed on May 9th and August 8th, 2008.

I’d also like to advise everyone that during this call we will be discussing certain financial measures that have not been calculated in accordance with GAAP. These non-GAAP financial measures such as non-GAAP operating margin percentages, non-GAAP net income, and non-GAAP earnings per share are presented as a supplement to, and not a substitute for, our GAAP financial results.

This afternoon’s press release contains complete set of GAAP financial results, as well as the reconciliation between our GAAP and non-GAAP results. That press release is posted on our Investor Relations website at www.actuate.com. I’d also like to note, this call is being webcast live on our Investor Relations website, accompanied by a set of slides and will be available on an archive basis following the call.

Now, I’d like to turn the call over to Pete.

Pete Cittadini

Okay. Thank you, Tom, and good afternoon, ladies and gentlemen. Welcome to Actuate’s Q3 2008 earnings call. And better yet, welcome to unprecedented times. What a set of unforeseen market conditions for all of us to be doing business in.

Clearly a challenging time for all global corporations because of the unpredictable nature of doing business due to the potentially curbed spending in all of our futures. However, I must say there are leadership opportunities in good times and in bad. And at Actuate we feel that we are well positioned here due to our open-source business model, our ability to focus on profitability, and our continued strong cash flows from our customers due to the highly differentiated and mission-critical nature of what we do for them.

So indeed, we are hopeful and optimistic that there is a silver lining, though we do see the challenges ahead for all of us. So, I’m going to take you through my presentation, and if you move to page 4, I’ll just give you the facts behind third quarter.

Revenues ended up at $33.7 million, license revenue of $10 million, non-GAAP EPS of $0.08 per share, and $7.6 million in cash flow from operations. When you look at it from a year-to-date standpoint, cash flows were up 36% year on year.

Moving on to slide 5, let’s take a look at some of the third quarter transactions. And once again, I continue to be impressed with all of the blue-chip logos that we have coming to Actuate and returning to Actuate to do business with.

The exciting part about the logo screen this quarter and -- I think you’ll see this on a going forward basis, is the logos are becoming much, much more horizontal. In Q3, our OEM business was the largest contributor to sales, followed by the financial services sector, and followed by the government sector.

This is all of good news for us since open source was a great stimulant to new OEM customers. We also believe that this fact tells us that this particular economic slowdown will be less tax sensitive than the last one we went through in 2001 through 2004/05, specifically for Actuate.

So, we are encouraged with our OEM business and we’re encouraged by the much more horizontal nature of the contributors during the course of Q3. Of course, any rebound in the financial services sector and related spending is also very good for Actuate on a moving-forward basis. Just hard to forecast and predict exactly when that will happen.

Moving on to slide 6, I wanted to just expose a CNET article from October 10th, basically tying open source as a great innovation during a recession times, and we really believe that’s the case. So, as the matter of fact, if you believe open resource is recession-friendly and OEM business is good for any enterprise software company to have then you actually theorize that Actuate is in decent shape.

As a matter fact the cycle that we are seeing right now with the OEMs, we believe is the cycle we saw in ‘96 to 2000 with new and big OEMs making commitments to Actuate Software that then set the pace for large corporations to do the same. Because again, all of these OEMs that are incorporating are open-source technology or bringing their applications to the global corporate market and what we saw happened in the last cycle was the large global corporate market follow suit with similar technologies that are embedded and incorporated within the OEMs that they are doing business with. So, we are actually quite pleased with the OEM progression thus far.

Moving on to page 7, I want to tell you a little bit about the BIRT adoption and revenues associated with BIRT because they continue to accelerate. So during the quarter we exceeding 5 million downloads of BIRT that’s live-to-date downloads. We exceeded again 4 million in BIRT related business within the confines of Q3 and extremely exciting is this is the first quarter that Actuate had over 100 BIRT driven transactions within the confines of the quarter.

And I don’t know exactly how many transactions we do maybe somewhere between 300 to 400 to 500, but when you are doing a 100 transactions associated with your news strategy and your new product through a open source conduit to a very large and important market share of developers, that’s very-very gratifying to see and obviously said that our business model is definitely on it’s way regardless of the current economic climate. Thus we continue to feel that we will mean to/or exceed the $16 million target for BIRT driven business during the course of 2008.

Moving on to chart number 8, let’s look at BIRT exchange statistics. And again you will see that they continue to grow. We have good growth in number of visitors to the exchange breaking through the 50,000 barriers for Q3. The number of registrants that, again, feel compelled to give us their information, so they can get higher value information from BIRT exchange associated with what they are doing with BIRT, that broke through the 2500 registration level during the confines of Q3. And also severe spike in commercial downloads, again both very well for forward progress in an environment that lack luster but really creates a true footing for growth in the future with over 4000 commercial downloads with little over 2000 commercial downloads in Q1 and Q2. So a dramatic increase in commercial downloads which is again very tangible forward progress in sort of lack luster times.

Moving onto slide number 9, we remain committed to our hybrid enterprise open source business model. And again it’s there to expand our global markets and our horizontal nature associated with our business. It’s there to accelerate revenues not only through new channels but existing customers and primarily from a business model if they are to reduce sales and marketing cost, and we all do believe that increased profitability, earnings per share, positive cash flow from operations will become a paramount importance to software companies on a going forward basis.

So you look at our open source momentum mean by growth in the community, increased open source revenues and a more diverse revenue base associated with that product line is all happening for us. You look at our solid maintenance base due to a highly differentiated and mission critical application that we bring to our client, applications like cash management, wealth management, merchant reporting application again primarily customer facing extranet types of applications that need to be maintained if not invested in even in these downtimes. And a very strong and tested management team that’s been through this cycle before again between the year’s of ‘01 and ‘04 and ‘05 with multiyear downturn that we believe was much-much more tech-oriented than it is today in the driver seat at Actuate Corporation. We are very-very committed and optimistic about this new enterprise open source business model that we have.

Now moving forward into the future, and we apologize for having to have to go to wider ranges than normal. However, we believe that circumstances dictated, and when looking at 2008 we are fine-tuning downward our projections as follows. For total revenue for the year we now believe that the range of revenues will be $131 million to $135 million of top line revenue, associated with license revenues, $38 million to $43 million of license revenues for the year.

For the 2008 non-GAAP earnings per share $0.26 to $0.28 as the range there. And then finally the 2008 non-GAAP operating margin should be in the range of 17% to 20%. And again just a bit of comment on the ranges, and I am sure it will be a follow-up question. We did expect a stronger second half than first half, obviously that is not the case with the unforeseen market conditions and changes. As you could look at the ranges as follows. The lower end of the range pretty much assumes no budget flush and pretty much a repeat of Q3 during the confines of Q4. On the higher end of the range I don’t know what budget flushes looks like under these market conditions, but it assumes somewhat of a budget flush to get to the higher end of the range here.

So I did want to give you some additional pro-active color on a numbers and now I would like to hand it over to Dan.

Dan Gaudreau

Thanks Pete. So I am on chart number 12. Total revenues for Q3 totaled $33.7 million that’s down 3% from the third quarter of 2007. Licensed revenues totaled $10 million down 25% from a year ago. Services revenues aggregated $23.7 million for the quarter that was up 11% year-over-year. And I want to point out that services revenues, maintenance and support revenues themselves totaled $20.4 million up 18% year-over-year.

Non-GAAP operating income totaled $6.9 million with corresponding operating margin about 21%. Non-GAAP earnings per share totaled $0.08, the same as second quarter of ‘08 but down a penny from a year ago. We had another good cash flow generation quarter at $7.6 million which brings the 9 months cumulative total to a record $24.4 million cash flow from operations.

Next slide. On the left slide of this chart is the first half of ‘08 revenue growth versus the first half of ‘07. Our revenues overall declined 4% during the first six months. We experienced good growth internationally that is they were up 18%, but it wasn’t sufficient enough to offset the 12% decline in the U.S. markets.

At the end of Q2 ‘08, we are not seeing weakness in the international financial sector like we were seeing in the U.S., however, as you noticed on the right side in Q3 that changed. In our international markets, specifically Europe, we experienced an abrupt shift in pipeline similar to the pipeline shift that we experienced in the US in Q4 of ‘07. About 10 million of our European opportunities were delayed or postponed.

Resulting revenue impact on Actuate in Q3 is shown on the right. Total revenues declined about 3% year-over-year as a result of a 16% decline in our international business. On a bright note, however, is that the revenues in the US grew by 2% year-over-year.

Next slide. On the left side of this chart is the first half ‘08 services revenue growth versus first half of ‘07. Overall the first half services revenues grew about 9%, professional services grew 2%, while maintenance revenues grew 11%. The strength in our MRS stream, maintenance renewal stream that i.e., continued in Q3 with maintenance revenues growing 18% year-over-year as shown on the right side of this chart.

Professional services revenue declined 19% in Q3 as a result of less demand, and the fact that we have -- we have the management of the Professional Services group focused on profitability rather than growth at this point. It should be pointed out, however, that about $300,000 of services were performed in Q3 but were not recorded because a formal contract did not exist. This amount will be recorded in Q4.

Slide 15, on a GAAP business, operating income was down 11% to 3.4 million, net income was reported at $3.1 million compared with $4.6 million a year ago; about a million of that decrease was attributable to an increase in the tax provision. Earnings per share were reported at $0.05 in Q3 ‘08, down $0.02 from a year ago. GAAP operating income, net income and earnings per share were also down for the nine months of 2008 as shown on this exhibit.

Slide 16, from a bouncy perspective, cash and investments totaled $81.3 million as of September 30, 2008, an increase of $12.9 million from year end 2007, and in excess of $6 million from June 30, 2008. Accounts receivables ended the quarter at about $22 million, down over $16 million from December 31, 2007. Despite AR being somewhat higher at December ‘07, due to back-end loading of revenues, we have experienced good cash collections this year. Deferred revenue totaled $41.8 million at September ‘08, down $2.7 million from December ‘07, but about 5% from a year ago.

Slide 17, other Q3 highlights. We closed transactions over a $100,000 of 64 customers. We closed one license transaction in excess of a $ 1 million that we will receive either or not from a US financial institution. As I mentioned previously, our Professional Services group and Customer Support groups have been focused on profitability and its working. Non-GAAP services margin were at 78% in Q3, a 500 basis points improvement from a year ago. Non-GAAP operating margin for Q3, I mentioned before, was about 21%. That was down 2 percentage points from third quarter a year ago, but up a 150 basis points sequentially.

Accounts receivables was down $16 million from year end 2007, and there was a corresponding drop in DSOs of 30 days down to 61 days. Cash flow from operations year-to-date 2008 totaled $24.5 million, up 36% from the same period in 2007.

Slide 18, to reiterate the guidance Pete gave, because of the uncertainty in the financial services sectors, especially in the international markets, we are guiding to a wider range of revenues and earnings. Total revenues are forecast to be in the range of $131 million to $135 million, and the license revenues in the $38 million to $43 million range.

At the low end, this would imply that total revenues for Q4 would be slightly down sequentially. The resulting non-GAAP earnings per share should be in the range of $0.26 to $0.28 and the operating margins within the year in the 17% to 20% range. That concludes the formal remarks. We will now open up the floor for questions.

Question-and-Answer Session

Operator

(Operator Instructions). And your first question comes from the line of Nathan Schneiderman, please proceed.

Nathan Schneiderman – Roth Capital Partners

Hi. Thanks very much. Hi Pete. Hi Dan.

Peter Cittadini

Hello.

Nathan Schneiderman – Roth Capital Partners

I wanted to just clarify on the guidance -- the guidance for the year would imply just kind of ballpark Q4 license $6 million to $10 million or so plus or minus a little bit, and I am just curious to hear you, you speak to that. It seems rather Draconian to think that license might be down sequentially that much versus the seasonally weak Q3?

Daniel Gaudreau

Hi, Nathan. Sure it would imply, I believe, Pete to…

Peter Cittadini

$8 million to $11 million imply is what it implies. And Nate, please don’t forget that, I believe it was last Q4 that we had a sequentially down license line. Thus, it -- and I think that clearly times are a bit more uncertain than they were in Q4 of ‘07, though -- this is our best guess at the time.

Nathan Schneiderman – Roth Capital Partners

Okay, back -- I gather from your comments we should not interpret your overall guidance as a worst case outlook?

Peter Cittadini

I think our guidance is an accurate outlook based on the information that we have right now with regards to the license revenue guidance we are giving for the year. It could be in the range of $8 to $11 million for the quarter.

Nathan Schneiderman – Roth Capital Partners

Okay. Any -- I know you are not out with anything specific in terms of 2009, but do you have any gross modeling advice for us? Do you -- would you think of 2009, at this point, as maybe -- do you think a license would be down again in 2009 or do you think that’s unlikely or just what is your general sense for a license outlook for 2009 relative to 2008?

Peter Cittadini

That’s the crazy thing about the current climate and conditions. Any sense we have, we would be reluctant to tell you right now. We would like at least another quarters’ worth of data and data points before we come up with sort of a meaningful statement on a going forward basis with regards to ‘09. So, at this point, I just don’t think we are going to comment on ‘09, Nate.

Nathan Schneiderman – Roth Capital Partners

Okay. And you did reference shift out that you saw in the deal pipe for Europe. I was wondering if you can drill in to give us a little more detail around that. And then also if you could speak to the specific business conditions you saw in the second half of September and just what the selling environment has been like given that we’re almost through October what if you all seen in Europe and any -- in the month of October and any shifts relative to what you were saying in the second half of September?

Dan Gaudreau

So, I don’t know, if I give you a lot more color on Q3. But it was very similar to in Europe, to what we saw -- and it’s just Europe, Asia Pac was fine. We saw in the fourth quarter in US, the last week or too or likely the last week an abrupt shift in pipeline, not that deals -- not we didn’t lose the competitors. The deals are getting postponed or delayed. They haven’t been canceled. Mostly have been just delayed or postponed.

Pete Cittadini

Right, and further comment, Nate, there was indeed a flurry of activity towards the tail end of September. So it was the typical enterprise software company, flurry of activity at the end. If just that we weren’t able to secure, reasons beyond us coming the terms with clients, enough business to really get the license line over the $10 million that it resulted in.

So the good news is or was there was a flurry of activity. Some of the pipeline pushed however we’re deeming a lot of that closable during the confines of Q4. What Dan said is absolutely right. What we saw happen in the US, happened the quarter earlier this year internationally more specifically in EMEA nothing happened in Asia Pac. So if you are looking sort of tending metrics, if it took basically nine months to cycle from the US to Europe and now it looks like the US, from a spending standpoint, at least plateauing, not going down any further, we did fairly decently in US sales. If you think the EMEA cycle get in three quarters cycle to Asia for the last cycle in its entirety, I mean someone could be arise that you know by the tail end of ‘09 we are going to be in much better shape.

Now 15 does cycle to Asia when you analyze the revenues that Actuate Corporation that we don’t do a lot in Asia. So that would be the least hurtful to our performance. So an ideal set of circumstances, this EMEA cycle will be very similar to what transpired in Q4 of ‘07 in the US and within sort of mid-’09 will be through the cycle and if it moves to Asia, moves to Asia, sorry for the companies that do a lot of business in Asia. We don’t think that will be hurtful to us. And that just the way we see it right now, Nate.

Nathan Schneiderman – Roth Capital Partners

Okay. And final question for you, just any comment you could make about October have you been able to close much business or just an impossible environment given what’s going on, and then also where there any one time benefits from the maintenance line perhaps from catch-up payment that you would anything unusual in that line item, that would not recur? Thanks guys.

Pete Cittadini

Well, we can’t make long comments on October since it’s a Q4 matter, that we’ll discuss with you in January. However, as with any quarter, there is catch-up on the maintenance renewal side every quarter. So I would say it was status quote from a maintenance catch-up standpoint. In the confines of Q3.

Operator

And your next question comes from the line of Justin Cable with Global Hunter Securities, please proceed.

Justin Cable - Global Hunter Securities

Thank you, good afternoon, guys.

Pet Cittadini

Hi Justin.

Justin Cable - Global Hunter Securities

Have a few questions here. First off, you mentioned the OEM and financial services percentage of revenues at earlier in the prepared comments, can you give us exact number?

Dan Gaudreau

I will give you rough numbers, the OEM business was in the mid-30s from a percentage standpoint, financial services in the mid-20s from a percentage standpoint.

Justin Cable - Global Hunter Securities

Okay, and that compares historically to OEM, correct me, if I am wrong, is traditionally more like a 20%

Dan Gaudreau

Yes, OEM in more of a 20% number and financial services anywhere from sort of 50-60%.

Justin Cable - Global Hunter Securities

Okay, it was interesting to see Lehman Brothers in the press release for customers won during the quarter. I was curious on that particular customer what opportunity you saw with them, but also – it also brings up a question of how should be view your installed base of customers. Should we see any kind of risk at all, in terms of the maintenance paying customers especially with the financial services group?

Pet Cittadini

Okay, so yeah, Lehman well I guess no longer an entity. As you know their prime brokerage business continues to take on just part of another entity. So the cool thing about Actuate with the current climate and consolidation associated with financial services firm as long as the constituency base that they are servicing doesn’t go away, the consumers that they are actually making money from don’t go away then the Actuate application typically does not go away. Thus, again, this has been something we’ve been preaching for years. I guess haven’t been communicating it as well as we should. So maybe we’ll revisit that in the not too distant future but there is an incredible amount us seeking us associated with a prime brokerage application for instance that’s moving from Lehman Brothers to Barclays, if you will as an example. So again the consolidation is not hurtful, it actually in a lot of cases is helpful. Because you’ve got two financial services company that both have committed to Actuate. And it’s just further consolidation of the defector standard within the firm, both intranet and extra net oriented. We see that as a good thing and again maintenance renewals are all time high continue to grow continue to stay it high percentage of renewals us we are not anticipating any issues on the maintenance or service side of the revenues.

Dan Gaudreau

Just support was Pete saying, Justin, if you look at our history and after the bubble burst and we saw license declines in ‘02, ‘03, ‘04, I would like 26%, 18%, 10% respectively. Our maintenance revenues continue to grow at 26, 20, 15% respectively.

Justin Cable - Global Hunter Securities

Right.

Dan Gaudreau

So, it’s very, very sticky very mission-critical projects. They -- the decline rate very small.

Pete Cittadini

And that was in the tech-oriented recession if you will, if you believe this is less tech oriented than the risk in ‘08 and ‘09 for us should be less than it was in ‘02 to ‘04.

Justin Cable - Global Hunter Securities

Right. And the growth margins on the maintenance side, if we were to break that out from the professional services side, what would the gross margins look like?

Dan Gaudreau

Approximately 90%.

Justin Cable - Global Hunter Securities

Okay. Good. In terms of the million dollar-plus transaction during the quarter, was that -- was that in the range of $1 million to $2 million, or was that any bigger than normal?

Pete Cittadini

You guys continue to try. Yeah -- it was a seven-figure deal. So you know, you can pencil it in wherever you want.

Dan Gaudreau

Well, we would have to disclose it if it was a 10% deal, and it wasn’t.

Justin Cable - Global Hunter Securities

Okay. And is that on the license side?

Dan Gaudreau

That we’ve said it was a license transaction, yes.

Justin Cable - Global Hunter Securities

Okay. And then just a -- just a few questions around BIRT. At what point -- I know you mentioned this in the past, but maybe -- maybe you can reiterate, at what point would you expect BIRT to drive all of your license business?

Pete Cittadini

2010.

Justin Cable - Global Hunter Securities

Okay. And the types of transactions that occurred with BIRT in Q3, what kind of transactions are they in terms of product and dollar size?

Pete Cittadini

Again the ASP is pretty much the same because the layon’s share of the product that the BIRT application drives is the same product line that the RD Pro product line would drive. So it’s I server, I server express, I portal business reports, interactive viewing. Well, interactive viewing and business report are specific to BIRT. So there are a few new modules that are unique to BIRT that we can monetize that we can’t on the RD Pro application side of the fence. But basically, it just shows a nice conversion of ERD Pro-based applications within the customer base, and more importantly, with new customers converting over to BIRT-based applications.

Justin Cable - Global Hunter Securities

And are you seeing the reduction, the average sales cycle as a result of this BIRT?

Pete Cittadini

Yes. Especially on the OEM side of the fence.

Justin Cable - Global Hunter Securities

Okay. Okay. Last question. Then I’ll hop off, allow some other questions. In the press release, there was the extra cost during the quarter of professional services in considering strategic alternatives. I obviously probably can’t comment too much on that but would like any kind of color you can provide. And maybe if I could ask, was this a proactive or reactive process?

Pete Cittadini

Well, since nothing came to [fruition], and Justin, we are not going to comment on it. Only that we incurred the fees, you know. In consideration of various, all strategic transactions and alternatives and nothing came to fruition and so at the end of the day there’s really nothing to comment on.

Justin Cable - Global Hunter Securities

Okay, so we shouldn’t see any kind of repeat expenses in Q4?

Pete Cittadini

That’s correct.

Justin Cable - Global Hunter Securities

Okay. Alright, thank you.

Operator

Your next question comes from the line of Pat Walravens with JMP Securities. Please proceed.

Pat Walravens - JMP Securities

Great. Thank you. Hi, guys.

Dan Gaudreau

Hey, Pat, how you doing?

Pat Walravens - JMP Securities

I am good. Thanks. On your million dollar deal, did it relate to one of those situations that -- that had a complaint or some kind of not really litigation, but some sort of a legal aspect to it?

Dan Gaudreau

Not at all.

Pat Walravens - JMP Securities

No, okay good.

Dan Gaudreau

Very happy client. And just more apps and more users, and more, more, more. Imagine that within the financial services industry.

Pat Walravens - JMP Securities

No, it’s great. And then secondly, in -- not to dwell on this, but, you know how we are. So when you used to talk about your $0.33 we would say, well, even if the market falls apart, and you guys would say, yeah, you know, we would cut costs appropriately to get to the $0.33. Even if the license revenue fell off. So it seems like you chose to go a different route. But can you just talk about how you thought about that.

Dan Gaudreau

I think the past comment were primarily revolving around operating margins versus, you know, a pinpoint EPS number. But needless to say, you know, we think it’s a respectable showing given the license revenue line scenario. We also believe that it is a tough time for a lot of us, but we don’t believe that we’re in as dire a situation as we were with the high-tech bubble busting at the end of ‘01, the beginning of ‘02, specifically, for Actuate thus dismantling from a cost perspective all of the good work that we’ve done thus far. I think you will see us become more cost conscious, and you’ll see us posting better EPS. And -- better operating margins on a going forward basis regardless of revenue. But we don’t really believe that things are so dire that we need to dismantle a lot of good work and investment that we’ve done in the recent past, right now. If you look at us from an enterprise software standpoint especially considering our size, our margins, our best in class. To tell you that truth when you look at someone’ s portfolio there is probably other companies with more severe issues when you look at EPS and operating margins return to that portfolio. So again we absolutely believe we are doing the right thing on behalf of the shareholder the way we are running the company right now.

Pat Walravens - JMP Securities

Okay. So as I look at your share count, I am trying to figure out did you buy any stock back in the quarter?

Dan Gaudreau

No, because of the strategic transaction we were looking at which were non-public material events we suspended the buy back during the course of the quarter.

Pat Walravens - JMP Securities

Okay. Is I get it now the enterprise value which like it’s round $80 million which is about what your maintenance revenue is. So how do you guys feel about whether the market evaluating your stock appropriately now? Are you going to bring the buyback back?

Dan Gaudreau

Absolutely. The buyback is in place as it was previous to the suspension and we will be ready to roll.

Pat Walravens - JMP Securities

Okay. How big is that just to remind us?

Dan Gaudreau

It was 50 million over eight quarters, so $6.25 million worth of stock buyback per quarter.

Pat Walravens - JMP Securities

6.5 per quarter?

Dan Gaudreau

6.25%.

Pat Walravens - JMP Securities

6.25 per quarter. All right. Thank you.

Operator

And your next question comes from the line of Kevin Liu with B. Riley & Co. please proceed.

Kevin Liu - B. Riley & Co.

Hi, good afternoon guys.

Pete Cittadini

Hi, Kevin.

Kevin Liu - B. Riley & Co.

First off, just on the August reduction in force, it looks like lot of that effective probably the cost to services line. Just wondering if there is any head account taken out across any parts of organization?

Pete Cittadini

Sales and marketing.

Kevin Liu - B. Riley & Co.

Okay. And was that related to any quota carrying headcount or was the mostly on the marketing side?

Pete Cittadini

No, some was quota carrying as well.

Kevin Liu - B. Riley & Co.

Okay. And then just looking at may be 2009 and beyond I mean you guys have some long-term relationship with companies like Banc of America and Chase. So curious if given the consolidation activity that taken place. What kind of initial conversations have had with them about, you know, potentially expanding some of the applications they might be working on or just getting it to some of these newer organization that they have acquired?

Pete Cittadini

Well, it’s really hard to have tangible conversation with them as to what their are plans are. They are so sort of focusing on doing the consolidation themselves as phase one and doing the deals and what’s organization look like internally. After the consolidation before they get to sort of the game plan with the new team in place. So to tell you the truth we just haven’t had a lot of those conversation and thus at -- we are at loss to tell you what to extract out of them. I am, intuitively, we know that they are consolidating multitude of different applications where the consumers of those applications stay intact. Otherwise why do the consolidation at all. We tangibly believe that we will have a business bearing proposition with them in ‘09 and beyond. However, having really set down with them to see what it looks like when the projects are earmarked to go in to fruition. Obviously we have some of that knowledge not as much knowledge because they are in a frenzy of figuring out what to do internally, first before they did with their strategic suppliers.

Kevin Liu - B. Riley & Co.

Okay. And then moving over it. I think you mentioned government as vertical that hold that fairly well for you guys. So he does little bit about the performance soft application and the traction you’ve seen there. And whether or not there’s been any sort of falloff in demand given the economic conditions?

Pete Cittadini

Absolutely. It was a double digit performer. I’d say you could -- consider it sort of mid sort of teens contributor from a percentage stand point to the quarter. Lot of it was the actually used applications. A lot of it was lot of a BIRT-based extensions to the Actuate Views application as well as just BIRT digestion within government. As, you know, they do have formal initiative for open source. I mean open source brings down the cost of doing IT. And thus we are going to be the positive recipient of that whole scenario. What else can I tell you about government? I think it’s going to continue being very steady and possibly growing sector in our future short medium and long term.

Kevin Liu - B. Riley & Co.

Thanks a lot.

Operator

(Operator Instructions). And your next question comes from the line of Mr. Frank Sparacino with First Analysis. Please proceed.

Frank Sparacino - First Analysis

Hi, guys. Just two questions probably for you Dan. First is, Dan, can you give me the ending headcount for the quarter?

Dan Gaudreau

554.

Frank Sparacino - First Analysis

And can you give the license break down by geography?

Dan Gaudreau

For the quarter?

Frank Sparacino - First Analysis

For the quarter, yes.

Dan Gaudreau

So, $8.2 million out of North America, $1.5 million out EMEA, $300,000 call out of APEX

Frank Sparacino - First Analysis

APEX? Perfect. Thanks guys.

Dan Gaudreau

Thanks.

Operator

And your next question comes from the line of Jeremy Hellman with Singular Research. Please proceed.

Jeremy Hellman - Singular Research

Hi, good afternoon everybody.

Pete Cittadini

Hi, Jeremy.

I wanted to kind of speak at a macro level about what may come of the regulatory environment, particularly with respect to financial services. Do you guys see that as an intermediate term driver of a lot of reporting needs and that might be something that could also be viewed as bleeding over to the government space because of, I guess, can you, kind of, speak to that a little bit

Pete Cittadini

That’s a very good question, Jeremy. And I think we’re going to be a lot more prepared to give you a more tangible look at the specifics behind that at Actuate in the January earning’s call. However, it’s clearly the financial services companies have already been doing a lot of regulatory reporting, application with Actuate. As a matter of fact, publicly, I guess, as JPMorgan Chase has talked about Actuate associated with FCC reporting, IRS reporting, things of that nature.

The whole regulatory aspects of credit and when credit is due, when it’s not due, things of that nature, is an emerging regulatory avenue and potential formal initiative for us to perceive, and again credible passion because of what we already do with a lot of these firms for regulatory reporting applications. Again it’s not fully fixed by us, we have an initiative right now within the company to see whether we can turn the lemons into lemonade, if you will, associated with more formal pursuit of the emerging applications there, but very astute question. And -- and one that’s sort of forward thinking. And hopefully within three to four months, I’ll tell you exactly what are our plan is there.

Jeremy Hellman - Singular Research

Okay. Thanks. And kind of a part B to that, do you see any kind of a sea change in, you know, risk and analytics? Are people -- you would think that there is obviously a much keener awareness in risk analytics or are they -- is there a lot of rewriting the models so to speak, or what kind of color can you provide on that side of the equation?

Pete Cittadini

Yes. There is probably going to be lot of predicted -- predictive analytics that happen to be associated with the new regulation. Our portion of where we’ve add value there is not necessarily the predictive analytics, but it is operation analyzing the data that comes out of the predicted analytics research, so as wide a population of employees associated with that business process on a global basis aware of the end results. So, again what Actuate does extremely, extremely well is operational analyzing and getting to the right people across the globe, all of that information in the right format for them to act on.

Jeremy Hellman - Singular Research

Okay, great. Thanks guy.

Pete Cittadini

Okay.

Operator

And we have a follow-up question from Mr. Nathan Schneiderman with Roth Capital Partners. Please proceed.

Nathan Schneiderman - Roth Capital Partners

Hi, just a real quick one here. I was hoping you could give us -- you gave us license revenue by geography, but I was hoping if you can give us the total revenue by geography and the ending number of sales reps. Thanks very much.

Dan Gaudreau

Yes, Nate. About $25 million North America, total revenue $7.7 million of EMEA, and about $1 million in APEX -- Japan and APEX. And the total number of reps we ended the quarter at was about -- pushing 48, I believe. APEX without overlay so that’s a direct carrying field --

Nathan Schneiderman - Roth Capital Partners

Okay. I am sorry, in my notes I have 65 from last quarter. But what would -- what would kind of the apples-to-apples there?

Dan Gaudreau

That includes the overlay. So the budget it had count as of Q3, after we ran through sort of the planning exercise of what the right cost structure is on a going-forward basis associated with sales and marketing. The budgeted it headcount is roughly 50.

Nathan Schneiderman - Roth Capital Partners

Okay.

Dan Gaudreau

That’s not apples and apples to the 65.

Nathan Schneiderman - Roth Capital Partners

Right, or maybe if you could give us, if it was 48, just the pure reps, what would that be with overlay so we could compare it with the 65.

Dan Gaudreau

With overlay, you probably would add about 8 to 10 inside reps to that.

Nathan Schneiderman - Roth Capital Partners

Okay. Thank you very much.

Operator

At this time, there are no additional questions. I would now like to turn the conference over to Mr. Pete Cittadini. Please proceed sir.

Pete Cittadini

Okay. I just want to thank everyone for attending the call and we’ll see you in about 90 days. Thank you.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.

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