Actuate Management Discusses Q4 2012 Results - Earnings Call Transcript

Feb. 5.13 | About: Actuate Corporation (BIRT)

Actuate (NASDAQ:BIRT)

Q4 2012 Earnings Call

February 04, 2013 5:00 pm ET

Executives

Thomas E. McKeever - Chief Compliance Officer, Senior Vice President of Corporate Development, General Counsel and Secretary

Peter I. Cittadini - Chief Executive Officer, President and Director

Daniel A. Gaudreau - Chief Financial Officer, Principal Accounting Officer and Senior Vice President of Operations

Analysts

Kevin Liu - B. Riley & Co., LLC, Research Division

Greg McDowell - JMP Securities LLC, Research Division

James N. Gilman - Drexel Hamilton, LLC, Research Division

Shebly Seyrafi - FBN Securities, Inc., Research Division

Shawn Yuan - Roth Capital Partners, LLC, Research Division

Frank Sparacino - First Analysis Securities Corporation, Research Division

Operator

Greetings, and welcome to the Actuate Corporation Fourth Quarter Fiscal 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Tom McKeever, Senior Vice President and General Counsel. Thank you, Mr. McKeever, you may begin.

Thomas E. McKeever

Thank you. Good afternoon, everyone and welcome to Actuate's Corporation's quarterly conference call. Joining me to discuss our Q4 to fiscal year 2012 results, is our President and CEO, Pete Cittadini; and our SVP Operations and CFO, Dan Gaudreau. Earlier today, we posted a copy of our financial press release and earnings call financial slides for both Q4 and fiscal year 2012 on the Investor Relations portion of Actuate.com.

During the course of this call, we'll be making projections and other forward-looking statements. These include statements regarding Actuate's expectations, beliefs, hopes, intentions or strategies regarding the future, including the performance of Quiterian, which we acquired in October. Our actual results may be very different from our current expectations.

Factors that could cause or contribute to such differences include, but are not limited to, quarterly fluctuations in revenues, other operating results and cash flows, our ability to successfully integrate Quiterian, general economic and geopolitical uncertainties and other risk factors discussed in Actuate's Securities and Exchange Commission filings, including Actuate's annual report on Form 10-K filed on March 9, 2012, as well as its quarterly reports on Form 10-Q. We do not currently intend to update these projections or forward-looking statements except as required by law.

Now, I'd like to turn it over to Pete.

Peter I. Cittadini

Okay. Thank you, Tom, and welcome, ladies and gentlemen, to our Q4 and FY 2012 conference call. Just a couple of upfront statements before I start my presentation for those of you following on the web on Slide #4, but it was a very solid quarter for Actuate ending out the year and it was actually a very good rebound from the numbers that we had posted in Q3 of this year. And as promised, what you'll see as part of the presentation is additional information and, thus, color on the business, both the new emerging BIRT business at Actuate Corporation, as well as the legacy business associated with Actuate Corporation for 2012. We'll also give you some perspective statements on that legacy business on a going forward basis to help you out with your models and things of that nature.

So with that, why don't I start? The numbers associated with Q4, our non-GAAP revenues of $35.7 million, that was up slightly year-over-year and up 11% sequentially from Q3. License revenues of $15.5 million, and that was up sequentially and year-over-year, both at 17%. Non-GAAP fully diluted EPS of $0.09 for the quarter and cash flow from operations at $3.8 million.

When looking at the full year, the non-GAAP revenues were $138.9 million, that was up 3% from '11. License revenues of $57.9 million were up 18% year-over-year. Non-GAAP fully diluted EPS for the year came in at $0.39 and cash flow from operations came in at $20.3 million for the year.

Moving on to Slide #6. A look at some of the fourth quarter transactions from a logo standpoint and the thing that we'd like to draw your attention to is because of the ubiquity of BIRT and our open source strategy as part of an enterprise software company

[Audio Gap]

again, because of the BIRT vector through Open Source in the marketplace. So you'll see companies like Cisco, Delta Airlines, Verizon, Cigna Insurance, Riverside Publishing -- so again, much, much more horizontal than the mainstayed financial services only depiction of who we're doing business with.

Moving on to Slide #7. Let's look at what we've been working diligently at Actuate with regards to, and that is a unique hybrid model that brings together enterprise software that leverages an open-source model associated with one of its products. In our particular case, it's our development environment called BIRT.

A couple of highlights and important gains that we've made. This year, we've exceeded $100 million in life to date BIRT business, which is substantial. We've started commercializing that business in 2008, so in a fairly short period of time, 5 years, we have greater than $100 million to show in life to date revenue associated with that business line. We also have over 2 million developers utilizing BIRT on a global basis and we have very aggressive plans during the confines of 2013 to grow that.

I think the most modest forecast of growth would be 2.5 million. However, I truly think that the range at the end of 2013 would be that we find developers in the 2.5 million to 3 million range, which is a dramatic increase to where we are today, but certainly doable based on the premium nature of BIRT, which really has garnered a better-than-expected developer community based on what we specifically were expecting as management.

Today, we have over 12 million downloads of the product and the registrations are up from 78,000 1 year ago to 99,000 total registrations on birt-exchange.com, which is our Open Source storefront where we get to know the developers a bit better and are able to assist them with products and services that could indeed be helpful to their BIRT-based applications.

We also will give you more color on these 2 last bullets on Slide #7, but we've set records for BIRT license business from open-source users for 4 consecutive quarters in 2012, and that again is defined as people who were freeware users. And that's the way they got started with the BIRT experience, and they've gravitated over to commercial Actuate BIRT users, having done business with Actuate Corporation.

And also, we've seen significantly higher average license order sizes from the open-source BIRT users in 2012, which again is instrumental to our overall model. And this is because we have indeed designed BIRT to be extremely useful in creation and deployment of mission-critical applications. And thus, if you're focused on adding value to mission-critical applications, you're less cost-sensitive in your enabling characteristics, thus driving ASP up, which is indeed what we've experienced. Moving on to Slide #8. We're giving you a bit of an expanded view associated with the BIRT business over the years. So here you see the top line of the chart, starts in FY '09, where we did total BIRT license business at $7 million going to $10 million in '10, going to $16 million in '11 and ending up at $20 million for '12. The year-over-year growth associated with those numbers improved 33% in '10, 70% in '11 and 21% in '12. When you just look at the total BIRT license business in and of itself.

When we look at the baseline business, and again, this is something that we indeed look at on an ongoing basis as management, not always related to the Street, but this time, we indeed are relaying that to you, and I'll tell you what exactly baseline means for us. We had 2 anomalous transactions that were associated with BIRT and BIRT only license and they were $1 million-plus transactions. We took the anomalous deal out of 2011. We also took an anomalous deal out of 2012 to come up with baseline business.

So thus, if you look at the revenue growth rates associated with baseline business, and one could make a case that baseline business is more relevant, more important to the future, what you're after and the reality of what you're building within the confines of that given year, you'll see that in '10, baseline business was up 33% year-over-year. In '11, it was up 30%, and in '12, it was up 40%. And again, the delta in those percentages are due only to the fact that we took out 1 anomalous deal in 2011 and 1 anomalous deal in 2012. It also tells you that we didn't have an anomalous deal in 2010.

Again, when we look at the baseline business highlights, this is more appropriate to what we're intending on doing even though we do get large transactions. So as we've always said at the Street, they're large and lumpy. Especially with BIRT being a new license business for us, we're not going to do anything crazy, which circumvents additional revenues and profits associated with those revenues on a going forward basis. Thus, we get them when they're only mutually agreeable terms. So again, pleased with the baseline business.

If you look at the 2 charts, and again, these are more selected highlights that we're sharing with you, on the left-hand chart, it's all about BIRT license business. And a few of the stats that we want to give you that are highlight stats is between Q1 and Q2 sequentially, the business grew 68% associated with BIRT license. Between Q3 and Q4, the business grew 36%. And year-over-year in Q4, the BIRT license business grew at 214%. And for the combined years, as we already said, it grew at 21% from a license business standpoint.

Now a deeper dive on the subset of those numbers associated with open-sourced BIRT license business. Again, this is where they download it for free and we ultimately have a commercial relationship with that company and that developer. There was a 21% increase sequentially between Q3 and Q4 of '12, and when you look at Q3 to Q3 year-over-year, that aspect of the business grew at 324%. Q4 over Q4, year-over-year, 652%, increases for those quarters, and for the complete year, when you look at open-source-driven BIRT license business, it was up 221% year-over-year. So again, extremely, extremely important because it really is the Open Source-driven BIRT license business, which will give us those "better than world-class" margins in the later years of our business.

Moving on to Slide #9. I'd like to talk a little bit about the BIRT iHub because it becomes of paramount importance to us in 2013 and beyond, and I'll explain a little bit more about that. But the BIRT iHub is sort of this information hub that sits between the world of Big Data and mobile touch devices and very efficiently allows access to all data sources securely without preprocessing the data. Again, extremely and highly differentiated aspect of the BIRT iHub associated with our Big Data strategy. This means, for IT organizations that we do business with, there's no new data warehousing costs or requirements in order to tie Big Data to touch devices associated with that IT strategy or that IT infrastructure.

And again, also on Slide #9, you'll see aspects of our technology in the past that are paramount to tying the world of Big Data to touch devices, which is performance, scalability, reliability and security.

So again, the BIRT iHub becomes the linchpin of the strategy now going forward in 2013 and beyond.

If you move over to Slide #10, this is sort of an architecture slide that you may have seen at the last earnings call, but it shows how the BIRT iHub is really the linchpin of our strategy. It ties the world of Big Data to these 3 genres of applications, which are Big Data business analytics, customer-facing applications and customer communications management. The other thing that was subtle, but I really want you to take a closer look at, is within the confines of the BIRT information hub, you'll see that 2013, we have initiatives of integrating in, not only the BIRT engine, which obviously exists there today, but the Xenos enterprise server engine, because the iHub will be crucial to our customer communications management solution, that we did the Xenos acquisition for. You'll see a calculation engine being integrated into the BIRT iHub, that will also happen in 2013, as well as the BIRT analytics engine.

For those of you listening in that were aware of Quiterian, an acquisition that we did in October of '12, the calc engine is associated with an acquisition the we did of Performancesoft in '06, and Xenos, I believe, we did in early '09, that is in the world of enterprise content management and is our way of extending the BIRT iHub to add value to unstructured content. All of those initiatives are currently in full fervor as far as the integration of those engines into the BIRT iHub. They should be there somewhere between the middle of '13, worst case the end of Q3 of '13. And thus, the world becomes a lot more simplistic for Actuate, our customers and our shareholders. And what that basically means is on a going-forward basis, when we do give you a look at legacy versus other, the other will be associated with BIRT iHub and everything that is going to be integrated in with the iHub. That's not only traditional BIRT, but Xenos Performance Analytics group and BIRT Analytics technologies.

What that means in the future is you only get those aspects of the BIRT solution associated with a BIRT iHub deployment. Thus, we're just going to make it much, much simpler for customers, for people on the street, both on the sell and buy side, as well as ourselves.

I mean, the iHub is the commercial entity and technology base that you'll be acquiring if you're going to be doing business with Actuate Corporation. So again, very key scenario that hopefully I'm doing an adequate job in explaining it to you folks and we'll certainly welcome as much Q&A as you require associated with the consolidation of everything Actuate into the iHub, of course, except for the legacy technologies.

Moving on to Slide #11. Again, a little bit more color on our acquisition of Quiterian today, being introduced to the world as BIRT Analytics. Again, it's visual data mining for business users and it provides analysts and business users with advanced visual data mining and predictive analytics to measure better, more timely decisions in the age of big data. It's extremely synergistic with what we have today from a technology offering and again, is a "1 plus 1 equals 3" additive technology as far as we're concerned. And it really combines the ease of use of data discovery tools with the power and sophisticated analytical products typically reserved for the data scientists.

So today, a lot of people don't have data scientists, don't want to have data scientists but they don't want to give up the power and sophistication of analytical products. BIRT Analytics gives you very powerful sophisticated, analytical algorithms but in a very user-friendly way.

So BIRT Analytics, also from a synergy standpoint, gives you insights that can be -- that indicate PI, dashboards, reports, customer communications and mobile content, which again will be shared across the complete ActuateOne suite of products via the BIRT iHub. And thus, the complete synergy with the solutions that we're all bringing -- already bringing to bear across a myriad of different markets.

And then my final slide before I hand it over to Dan is just some of the feedback that we've gotten from launching BIRT Analytics in the marketplace just a couple of weeks ago, and you'll see comments from IT Business Edge, and Katana Research [ph], Boris Evelson, Alice Woodward [ph] as well as Krishna Roy from the 451 Group. And basically, the feedback is very consistent, very powerful analytics that are extremely easy-to-use and very, very fast from a performance standpoint, perfectly pointed at sort of the dilemma associated with Big Data.

So for us, we are looking at the activity levels of showing the BIRT Analytics product to current customers and new prospects and it's pretty exciting. The activity levels are extremely high and we do indeed believe that BIRT Analytics should be a good contributor to Actuate's success in the market in 2013.

So with that, I'm going to hand it over to Dan for a little bit more color on the numbers.

Daniel A. Gaudreau

Thanks, Pete. I am on Slide #14. Total revenues aggregated $35.7 million, up $400,000 or about 1% year-over-year. Although license revenues continued to grow double-digit, this growth was offset by a decline in maintenance revenues. License revenues totaled $15.5 million, an increase of 17% year-over-year, as well as sequentially. This is our ninth consecutive quarter of double-digit license revenue growth.

Services revenues of $20.2 million declined $1.8 million or 8% from 1 year ago. The decrease was primarily due to lower renewals of our legacy e.Report support contracts and fewer deals with catch-up or back maintenance amounts. As I mentioned on the last call, we expected maintenance revenues to increase sequentially and they did. $1 million increase from $17.2 million to $18.2 million.

Non-GAAP operating expenses totaled $29 million in Q4 2012, an increase of $3.4 million or 13% year-over-year, primarily driven by our continued investment in sales, marketing and R&D, as well as the impact of the Quiterian acquisition, an acquisition which was closed on October 16, 2012. Our licensed pipelines continued to increase throughout 2012, reflecting a higher overall demand for our products. And as a result, we added 16 sales reps, a 30% increase from December 2011, and we ended the year at our planned level of 70 reps. Non-GAAP operating income totaled $6.7 million with a corresponding operating margin of 19% and non-GAAP earnings per share of $0.09.

Next chart. For the year, total revenues aggregated $138.9 million, up 3% compared with 2011. License revenues totaled $57.9 million, an increase of $8.7 million or 18% year-over-year while services revenues were down 6% at $81 million.

As mentioned in our last conference call, we expected fiscal 2012 services revenues to be down from 2011.

Within the services category, professional services revenues totaled $7.5 million, down slightly from 2011. Maintenance revenues totaled $73.5 million, down 6%, or $4.7 million from 2011. The decrease was primarily attributable to a $3 million negative impact from lower maintenance renewals, primarily legacy product-related, $700,000 negative foreign exchange impact, and a $500,000 decrease related to a switch from perpetual to subscription revenue recognition of our Performance Analytics product sales.

Non-GAAP operating expenses totaled $109 million during 2012, that's an increase of $6.9 million or 6% year-over-year, primarily driven by our investment in sales-generating headcount. Non-GAAP operating income totaled $29.9 million with a corresponding operating margin of 22%. As a result of the substantial investment we made in sales-generating heads, we were able to grow license revenues significantly, while meeting our profitability commitment of 20-plus percent operating margin.

Non-GAAP earnings per share were $0.39 for 2012, that was a decrease of $0.10 or 20% from 2011. The decrease in operating income accounted for about 4% of the decrease in earnings per share, while the other $0.06 negative impact was the result of a change in our non-GAAP tax rate from 20% in 2011 to 30% to 2012.

Slide 16. This chart shows our quarterly license revenue performance over the past 3 years. We've seen double-digit license revenue growth for the past 9 quarters and 11 of the past 12 quarters. We believe that this is a testament to the success of BIRT in the market and a bellwether of good things to come.

Next chart. After discussions with numerous investors, we will be providing more transparency into our multi-year transition away from our legacy e.Report business to the modern BIRT iHub, which incorporates BIRT and other acquired technologies. We will periodically present our revenue split between legacy, that is e.Report, and BIRT iHub, defined as BIRT and all other technologies within the iHub suite of products.

As you can see from this chart, BIRT iHub revenues grew 26% year-over-year while legacy revenues declined 12%. The decrease in legacy revenues has been and will continue to be driven by lower maintenance revenues -- renewals as projects or applications come to their natural end of life. This is to be expected.

However, the lifespan of the remaining $50 million in legacy services revenues is difficult to predict, but we believe it'll be around for many years, albeit at a declining rate.

What's important to note, as evidenced by the 2012 legacy license revenues, our customer base continues to add capacity to many of their existing apps. This will continue to add new maintenance contracts to the legacy pool and will add to the longevity of its life cycle.

Our primary focus has been and will continue to be on BIRT iHub revenue growth. We are pleased with the 38% license growth in 2012 and continue to expect solid double-digit growth going forward as we gain new customers and existing customers start new projects using BIRT iHub.

Next slide. The North America-international revenue split was 76%-24%, respectively. We saw license revenue growth in all regions for the year. We closed transactions greater than $100,000 with 291 customers during 2012 and that compares with 249 in 2011. There were 3 license fee transactions greater than $1 million in Q4, 2012 and 10 for the full year. We had an annual non-GAAP operating margin of 22% to non-GAAP earnings per share of $0.39.

Moving on to the balance sheet. Cash ended the quarter at $66.5 million, that was a decrease of $900,000 from 12/31, 2011, but down $8.1 million sequentially. The sequential decrease was primarily the result of a $9.6 million stock repurchase during the fourth quarter, as well as the Quiterian acquisition, partially offset by a $4 million increase in operating cash flow. We still have over $14 million remaining of the previously authorized stock repurchase amount of $30 million and we will continue to repurchase stock opportunistically in future quarters.

Accounts receivable ended the quarter at $33.1 million, up $6.3 million from 1 year ago and up $13 million sequentially. The sequential increase was due to strong bookings and billings compared with Q3 2012. As a result, day sales outstanding ended the year unusually high at 85 days. However, we expect Q1 2013 to be a large collections quarter, resulting in a significant drop in DSOs by March 31, 2013.

Deferred revenues totaled $46.4 million at 12/31/12, that's up $1.8 million from the prior year end, and up $8 million from September 30, 2012, also reflecting stronger Q4 license and maintenance bookings and billings. Cash flow from operations totaled over $20 million in 2012, essentially about the same level as in 2011.

Slide #20. The 2012 wrap-up is as follows. We increased investment in line with growth of pipelines. We grew sales reps by 30%. The result, total license revenue growth of 18%. Positive growth and increased mix of BIRT iHub, 26% year-over-year total revenue growth. The BIRT iHub, the license revenues now account for approximately 60% of our total license revenues. There was a negative 6% maintenance revenue growth rate of legacy-related impact.

Comments regarding 2013, assuming that macro conditions remain stable, our internal plans have assumed continued double-digit license revenue growth led by growth in our BIRT iHub product suite. This growth will come despite the loss of the Oracle litigation revenue stream, which ends this quarter, Q1 2013. Relative to 2012, we need to overcome a $4 million or 3% negative impact on total revenue, $3.6 million in license, and $400,000 in maintenance.

We also believe that 2013 will see another single-digit services revenue decline. However, 2013 should be the last year of declining maintenance revenues. Our models show that we will return to positive year-over-year maintenance growth in 2014. Our plans also assume another year of investment in sales and marketing and R&D to drive revenue growth. We intend to maintain best-in-class, non-GAAP operating margins for a company our size of 20-plus percent. And we will continue to repurchase stock opportunistically throughout the year.

My final slide, some upcoming conferences: We will be attending 2 conferences this quarter. First, on February 11, we will have a full day of one-on-one meetings at the Barclays Big Data Conference in San Francisco. And in March, we will be presenting at the always popular ROTH Conference in Laguna Niguel. We look forward to seeing you and you're obviously invited.

That concludes the formal remarks. We now open it up to Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Kevin Liu of B. Riley & Company.

Kevin Liu - B. Riley & Co., LLC, Research Division

First question here, just if you could talk a little bit about the strength of within Q4 and particularly on the license line? Just wondering if how much of that you would attribute to bounce back or slipped deals from Q3 versus general increased demand for the solutions, and how well you can sustain that double-digit growth through the early part of '13 here?

Peter I. Cittadini

Kevin, it was all of those variables. There was some slipped deals that we weren't able to get by September 30. It was a slightly better buying environment associated with IT that was there. Now we don't know whether it was there because the IT spending is going to be better on a going-forward basis. I'm not going to make any comments associated with the climate in Q1, I'll do that in April at the earnings call. And there was probably seasonality that was upwardly available to us because of it being the end of a budget year for a lot of the IT budgets as well. So I think it was a combination of better IT spend environment, but that's 1 data point during the confines of the 90-day period, sort of budget year coming to an end and a number of slipped deals for us.

Daniel A. Gaudreau

Kevin I would also add that you will see when we report in the K, it was an amazing turnaround in the international side for license growth. Very strong license growth.

Peter I. Cittadini

But again, we'll give you the caveat that, that was a 90-day experience. It really has no bearing on what we're seeing or sort of disclosing to you on a going-forward basis.

Kevin Liu - B. Riley & Co., LLC, Research Division

Got it. And I mean, given the 30% increase in the sales reps over the course of '12, how are you thinking about adding to headcount over this coming year?

Peter I. Cittadini

A think I've stated this publicly, already. We had sort of a down Q3, a good Q4. We've budgeted to add, but I'd like to look at another data point, maybe 2, before we decide exactly what we're going to do. So it's not going to be stagnant. I mean, there's still hiring to be done and obviously everyone that we've hired won't make the cut. Thus, at a minimum, we need to keep hiring just to replace the ones that won't make the cut with, ideally, ones that will make the cut on a going-forward basis. But I'm in no position at this point without just being thoughtful and looking at another data point or 2 before we throttle up with the budgeted increase in investment for 2013.

Kevin Liu - B. Riley & Co., LLC, Research Division

And I appreciate all the extra disclosure around the different legacy-versus-iHub products. Just curious, when you talk about '13 being the last year of maintenance declines, does that just kind of assume the legacy piece continues to decline at a similar clip to what we saw here in '12?

Daniel A. Gaudreau

Yes, more or less, Kevin.

Operator

Our next question is from Greg McDowell of JMP Securities.

Greg McDowell - JMP Securities LLC, Research Division

Pete, maybe my first question is for you. The guidance to double-digit percentage license revenue growth for '13, I was just wondering what gives you that confidence so early in the year that you're going to be able to hit double-digit license growth again?

Peter I. Cittadini

Well, it's knowing what we've been engineering, right? We've been working on the BIRT platform for numerous years, we've also done some various acquisitions with the score-carding technology, the enterprise content management technology and now the analytics technology. We've had many meetings from an engineering and R&D standpoint that shows the integration plan and the output of an extremely elegant, desirable deployment platform associated with BIRT iHub. Unless the macro just sort of goes lethargic for a long business cycle, which we're hopeful that it's not, I'm just giving you the story based on what we've built. And we haven't built it in the vacuum. We've really built it in great collaboration with customers and prospects. It's going to be a very highly differentiated, very attractive, very elegant, very elegantly integrated platform with which you can do a lot of different types of applications. And when you have that type of technology as an independent software vendor, that gives you the credence to say that license will continue to hit double digits on a going-forward basis. Unless no one's spending with anybody, but knowing what we've engineered over the last half a decade and it's really getting ready for prime time with the other pieces being incorporated in, I think it's time to go up and to the right. As I said, if there's a macro snafu, I still believe with what we have will be more attractive than everyone else's offering. Thus, our performance should be better than most other technology vendors associated with our markets.

Greg McDowell - JMP Securities LLC, Research Division

And maybe 1 quick follow-up for Dan. You mentioned the rebound in Europe and I was just wondering if you could talk about whether that was influenced by any sort of mega transactions or was it broad-based strength across Europe and sort of across vertical -- different verticals in Europe?

Daniel A. Gaudreau

It was actually Europe, as well as APAC. They both grew well year-over-year. Now we're coming off of I would argue or you could argue low comps. But in fact, we made a management change back at the end of Q3 and we believe that, that person, as well as what he's been doing there, he's creating the infrastructure and the people to continue that growth, I believe.

Peter I. Cittadini

Yes, Greg, I think based on the operational changes we've made, it showed its merits in Q4 and I think it'll continue to show its merits throughout 2013. We are not making any statements that the macro environment and the economy, especially in EMEA, has rebounded substantially, or...

Daniel A. Gaudreau

Correct.

Peter I. Cittadini

It's just we'll do better even in a lackluster economy and IT spend environment because of better operational execution during the confines of Q4 '12 and during the course of the full year 2013, that's...

Daniel A. Gaudreau

It's not a macro comment.

Peter I. Cittadini

That's what I would say is in store for Actuate Corporation, specifically.

Operator

Our next question is from James Gilman of Drexel Hamilton.

James N. Gilman - Drexel Hamilton, LLC, Research Division

I wanted to ask you a little bit about the DSOs and then also maybe you can talk about deferred revenue just a little bit. So I was wondering, was there any discounting near the end of the quarter to close the deals? And then also maybe in that same breath, I notice you have a nice -- you have the long-term deferred -- you grew long-term deferred revenue and I was wondering what was the driver there? I mean, it's a small amount but it's more than you've had in the past. And a follow-up on that is that we've seen other companies have -- software companies give, have long-term deferred revenue growth. And I was wondering if that's, maybe the customers are anticipating possibly inflation and going ahead and buying stuff now before maybe cost of goods -- cost of solutions go up? It's a multi-faceted question there, I appreciate any information you can give.

Daniel A. Gaudreau

Repeat the first part of that question.

Peter I. Cittadini

He was talking about inflation.

James N. Gilman - Drexel Hamilton, LLC, Research Division

So we ended up with inflation. I was trying to see if, you know, concerns about inflation...

Daniel A. Gaudreau

The discounting.

James N. Gilman - Drexel Hamilton, LLC, Research Division

Yes, the discounting. But there's the discounting -- were you discounting the closed deals? Did you discount to have long-term deferred? Or I was trying to also think, was there something else that may be driving customer buying behavior there?

Peter I. Cittadini

Okay. James, I'm just going to give you a quick half a sentence before Dan goes into the details. I don't think nor see customers stocking up on enterprise software because of their concern of inflation.

James N. Gilman - Drexel Hamilton, LLC, Research Division

Fine.

Peter I. Cittadini

Now it's over to David.

Daniel A. Gaudreau

In terms of discounting, James, no, there was no and never has been in my lifetime here any unusually large discounting that has gone on. I think I've given out this metric before and I'm not sure if it's exactly still true because I haven't seen the number. But we average historically somewhere in the neighborhood of 20%, 22% off-list, which is unusually low relative to other software companies in terms of discounting. Q4 was not a quarter where we discounted heavily at all. That's number one. Number two, in terms of long-term deferred. I believe that the long-term deferred was primarily the result of some extended multi-year maintenance contracts. I think there also may have been a license transaction that has gone -- was taken for a two-year period or is extended beyond 1 year. But I think it had to do with a couple of multi-year maintenance transactions.

Operator

The next question is from Shebly Seyrafi of FBN Securities.

Shebly Seyrafi - FBN Securities, Inc., Research Division

So can we start with -- I guess we have moving parts in the revenue. The services side is going to decline in single digits and license is going to grow at double digits. So when you net that out, do you expect positive revenue growth in 2013 overall?

Daniel A. Gaudreau

Yes.

Shebly Seyrafi - FBN Securities, Inc., Research Division

Okay. And 1 more push, do you think it'll be high single digits or low single digits?

Daniel A. Gaudreau

I think it will be either/or. I'm not sure we want to commit to that kind of a number but I think, clearly, it would be positive.

Shebly Seyrafi - FBN Securities, Inc., Research Division

Okay. It sounds like mid-single digits sounds reasonable. And in your OpEx was -- what of the $26 million from, like, $23 million to $24 million the prior 2 quarters? Should we think about OpEx coming down as you go through the beginning part of 2013, or -- and maybe you can also talk about the number of employees you have and your intentions there?

Peter I. Cittadini

You were garbled, unfortunately, [indiscernible] on the first part of that question.

Shebly Seyrafi - FBN Securities, Inc., Research Division

I can repeat that. I said that the OpEx ended the year at around $26 million or -- well, it was higher than -- I do it a little differently than what you report. But it was a higher, $2 million higher than you were in prior quarters. So my question is, do you think it'll stay at this level in the first part of 2013 or do you think it'll come down?

Daniel A. Gaudreau

Oh, okay. Good question. No, I believe that Q1, typically -- well, Q4, calendar Q4 is generally a high-commissions quarter based on the higher level of bookings and billings. And therefore, from a sales and marketing perspective, even though we added heads, I believe that, that will trend down in Q1 and then start trending back up. In terms of like G&A, typically, Q1 is higher because our audit fees, usually the annual audit cost is in there, as well as our directors fees, all hit in Q1. So you would normally see that go up and in Q2 drop, Q3 up slightly and then back slightly up again in Q4. In terms of R&D, I would think that, that would be at or about the same level and increasing because we do intend to increase investment in R&D.

Shebly Seyrafi - FBN Securities, Inc., Research Division

Okay. And nice breakout between legacy and BIRT services on calculating that for all of fiscal '12. Legacy services was about, what, 61% of the total? And so can you talk about how you ended the year? Was legacy services roughly in line with BIRT services? Or any kind of statement toward the end of the year, fiscal Q4.

Daniel A. Gaudreau

Fiscal Q4. No, legacy services were still higher at about -- hold on. Same percentage, about.

Shebly Seyrafi - FBN Securities, Inc., Research Division

Okay. So the crossover is when in your estimation?

Daniel A. Gaudreau

In 2014, the annual crossover. I'm not going to predict the quarter. But it's 2014, that's what my models suggest.

Shebly Seyrafi - FBN Securities, Inc., Research Division

Okay. And final one for me, you announced just recently, the availability of BIRT Analytics from Quiterian. Can you talk about the expected timing of the revenue ramp on that product?

Peter I. Cittadini

Yes. As I said, the activity levels are high. We're doing 1 to 2 demonstrations a day and that's on a global basis. So I do expect it to be a good contributor to 2013. However, I also expect revenue to happen in the second half of the year.

Operator

Our next question is from Nathan Schneiderman from Roth Capital Partners.

Shawn Yuan - Roth Capital Partners, LLC, Research Division

This is Shawn Yuan for Nathan, Pete. Just a follow-up on that BIRT Analytics revenue, the Quiterian acquisition, how much revenue and profit did Quiterian contribute in this -- in the past Q4?

Daniel A. Gaudreau

We are actually not going to disclose it and it's really not material and therefore, we don't disclose it and we won't.

Shawn Yuan - Roth Capital Partners, LLC, Research Division

Okay. From an operating margin standpoint, I mean, I look at another year here. You're guiding currently for 20% of non-GAAP operating margin for 2013. It is the lowest in the past since 2009. Do you think the operating margin will trough in 2013 and then ramp up going forward?

Peter I. Cittadini

No. We believe that '13 and '14 continue to be investment years. So for us, we'll have good growth, good operating margins that will continue to be best-in-class. But the investment is really there for '15 and '16 to be breakout years. So we really do see a great market in front of us that we want to continue to invest to get dramatic market share associated with the opportunity while still running an extremely solid business from both a growth and profitability standpoint. If the markets start tightening up because of macroenvironments or we've just misjudged the market that's in front of us, I don't think that's the case, but if we did, we can certainly focus back in on margins and grow those margins very easily at the appropriate point in the future. Right now, with everything that we see, we want to invest in growth and appropriate operating margins, again, defined as 20% plus for the next 2 years with some very, very big top line growth years in '15 and '16 with equally impressive operating margin growths in the '15, '16 timeframe as well.

Daniel A. Gaudreau

One other comment I would make on Quiterian, although the revenue is not material or has not been material at least, we -- I wanted to repeat the fact that it will be dilutive to our earnings this year. Somewhere in the neighborhood, I think I gave at $0.03 to $0.05 in the last call. I still believe that to be true.

Shawn Yuan - Roth Capital Partners, LLC, Research Division

My last question here is regarding fuel and the maintenance renewals. I understand that [indiscernible] renewals are -- well, there are customer churns in the [indiscernible] in terms of maintenance. That was a -- that actually was a problem in Q3 and it continued in Q4. Can you tell us about magnitude in Q4 of the customer churns compared to Q3? And how do you think of that in 2013, '14?

Daniel A. Gaudreau

Actually, Q4, the overall maintenance renewal rate, that is, dollars renewed as a percentage of the potential pool of dollars, was somewhere in the neighborhood of 87%. That was an improvement from Q3, as well as an improvement from Q4. But the way the revenue layers into the P&L or the bookings layer into the P&L, it has to do with the historical declines that are impacting us on the revenue side. But that is -- Q4 was a much better quarter in terms of people renewing their maintenance than prior quarters. So that could be -- if that continues, obviously, that will also contribute to a more favorable or less unfavorable change in maintenance renewals and also leading into a positive 2014.

Operator

Our next question is from Frank Sparacino of First Analysis.

Frank Sparacino - First Analysis Securities Corporation, Research Division

Dan, did you give the head count at year-end?

Daniel A. Gaudreau

I did. We ended the year at 617, 30 of which were -- that came with the acquisition. So on a relatively similar basis, we were up 10 from 577 to 587.

Frank Sparacino - First Analysis Securities Corporation, Research Division

Dan, does your guidance for 2013 on the maintenance side of things, is the maintenance renewal rate similar to what we experienced in 2012?

Daniel A. Gaudreau

No. It assumes an improvement.

Frank Sparacino - First Analysis Securities Corporation, Research Division

It does assume an improvement. Okay. Material?

Daniel A. Gaudreau

Overall, for the whole company. So we have and hopefully continue to experience higher renewal rates in the BIRT iHub type of maintenance pool and continued declines in the legacy side. But as that mix continues to shift and more, we're seeing more licenses and first-year maintenance from the iHub side at higher renewal rates, I think the overall renewal rate will improve.

Frank Sparacino - First Analysis Securities Corporation, Research Division

Okay. And will you quantify what the attrition or renewal rate was for the entire year?

Daniel A. Gaudreau

I think I just -- for -- by product?

Frank Sparacino - First Analysis Securities Corporation, Research Division

No. So the 87% you just talked about, that was for Q4 or was that for the full year?

Daniel A. Gaudreau

Oh, that was not for the full year. Yes, for the full year -- well, it was higher, Frank. I don't know off the top of my head what it was. I believe that the earlier quarters were in the mid-80s, the 84, 85, 83, somewhere in that neighborhood, percent.

Operator

We have no further questions in queue at this time. I would like to turn the floor back over to management for any closing remarks.

Peter I. Cittadini

Okay. Well, we appreciate everyone's time and attention on the earnings call and we'll be back to you within about 90 days. Thank you very much.

Operator

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!