Actuate Q3 2007 Earnings Call Transcript

Oct.29.07 | About: Actuate Corporation (BIRT)

Actuate Corp (NASDAQ:ACTU)

Q3 2007 Earnings Call

October 29, 2007 5:00 pm ET

Executives

Pete Cittadini - President and CEO

Dan Gaudreau - SVP and CFO

Tom McKeever - General Counsel

Analysts

Kevin Liu - B. Riley& Company

Jeremy Hellman -Thompson, Davis

Kelly Pan with Pantheon Capital

Rouche Sutaria - Thomas Weisel

Ryan Randall - Randall Capital

Operator

Good afternoon. My name is Kristen and I will be yourconference operator today. At this time, I would like to welcome everyone tothe Q3 2007 Actuate Corporation Earnings Call. All lines have been placed onmute to prevent any background noise. After the speakers remarks, there will bea question and answer session. (Operator Instructions) Thank you. Mr. McKeever,you may begin your conference.

Tom McKeever

Thank you very much and welcome everyone to Actuate's thirdquarter 2007 financial results conference call. I'm Tom McKeever, Actuate'sGeneral Counsel. Joining me today is Pete Cittadini, our President and CEO, andDan Gaudreau, our CFO.

Before I turn the call over to Pete, I'd like to remindeverybody that the statements contained in this presentation that are notpurely historical are forward-looking statements within the meaning of Section21E of the Securities Exchange Act of 1934. These include statements regardingAcutate's expectations, beliefs, hopes, intensions or strategies regarding thefuture. All such forward-looking statements in this presentation are based uponinformation now known by Actuate, and Actuate disclaims any obligation toupdate or revise any such forward-looking statements based on changes andexpectations or the circumstances or conditions on which such expectations maybe based. Actual results could differ materially from Actuate's currentsexpectations.

Factors that could cause or contribute to such differencesinclude, but are not limited to, the general spending environment forinformation technology products and services in general. The businessintelligence, performance, management, and reporting application software inparticular, quarterly fluctuations in our revenues and other operating results,our ability to expand our international operations, our ability to successfullycompete against current and future competitors, the impact of acquisitions onthe Company's financial and/or operating condition, the ability to increaserevenues through indirect distribution channels, general economic andgeopolitical uncertainties and other risk factors that are discussed inActuates Securities and Exchange Commission filings. Specifically,Actuates annual report on Form 10-K forthe 2006 fiscal year that was filed on March 20th, 2007 and quarterly reportson Form 10-Q that were filed on May 10, 2007and August 9, 2007.

I also like to advise everyone that during this call, we'llbe discussing certain financial measures that have not been calculated inaccordance with generally accepted accounting principles or GAAP. Thesenon-GAAP financial measures such as non-GAAP operating margin percentages,non-GAAP net income, non-GAAP, earnings per share are presented in thesupplement too and were not a substitute for our GAAP financial results.

This afternoon’s press release contains a complete set ofGAAP financial results, as well as the reconciliation between our GAAP andnon-GAAP results. And that press release is posted on the investor relationssection of our website, actuate.com. I would also like to note that this callis being webcast live on our investor relations website, accompanied by a setof slides and will be available on an archive basis following the call.

Now, I would like to turn the call over to Pete.

Pete Cittadini

Okay. Thank you, Tom, and good afternoon ladies andgentlemen. Welcome to our Q3 '07 earnings call. I would like to start out witha little bit of commentary, wherein you know that Q3 was once again anextremely solid quarter for Actuate Corporation and a very important one ofcourse, because we do give the outside world the annual guidance and with thisQ3, we clearly will make, if not exceed, every forecast that we've given youduring the '07 year timeframe. And at the end of the day that's what Actuate isall about from a management standpoint, and from a shareholder standpoint is tomake sure that there are no surprises and that we're executing it against thestrategy as crisply as possible.

As a matter fact, I do want to remind everyone that thisquarter culminated or our 37th quarter as a Public Company. We went public inJuly of '98 and within those 37 quarters, there was one mishap within guidancewhere we felt it was necessary to preannounce. So again it's clear to us and wehope it's clear to you, that you have a company that is rock-solid based ontrack records, not only within the BI space, but when you compare that type oftrack record against any public software company in enterprise software.

Getting to our Q3 metrics, we look at revenue of $34.7million at the topline, an increase year-over-year of 9%. License revenues of$13.4 million, equates to a 16% year-over-year growth. Non-GAAP earnings pershare of $0.09, a record for us and year-to-year growth of 29%, that's createdfor us a staggering 23% operating margins, and I do accentuate the wordstaggering.

It's extremely important to us all because these types ofoperating margins at Actuate for its size, is extremely, extremely, extremelyunique and uncanny. The biggest thrill to us is, it allows us an extremelysolid foundation with which we can invest for our growing future. So, again avery, very solid financial scenario at Actuate at the end of this quarter. Thenof course $2 million in cash flows from operations, which again was a verysolid offering.

Moving to the next slide, and we are going to be movingthese slides for you. Just looking at most recent history, you will see thelast seven quarters all in double-digit, year-over-year growth percentages, forboth license revenue and non-GAAP incomes. So, not only have we been tried andproved over 37 quarters, we understand that some of those 37 quarters includeddouble quarters. This is reality over the past seven quarter. Again, a trackrecord that you would be pressed to find in any other public companies of thesize of Actuate.

Moving on, you will see third quarter transactions. Mostimportantly are the blue-chip logos and names associated with our transactions.So, this is always been the plan by design. Blue-chip companies that we cangroom very long-terms, long standing relationships with, very important for ourfuture, because of the depth of opportunity from a revenue growth standpointand the continued luxury of a maintenance renewal base from these longstandingcustomers, especially because of what they do with our software, which isinside and outside the firewall mission critical applications.

I hope you'll also notice that some of the names of thecompanies that we have transactions with are getting more horizontal. Thisclearly is due to more notoriety of Actuate in the marketplace, a lot of thatcoupled with our open source strategy and BIRT offering. So, not only will yousee financial services company names like Wells Fargo, Deutsche Bank, DWSetcetera. You will see First Health, you will see Northwest Airlines and youwill see Genentech. So again, this sort of expansion into once again what we deemas blue chip long-term, long-standing customers that we intend on doingbusiness with, very, very important to our future and thus very important toyour future returns.

Moving on, we just like to reiterate exactly what it lookslike from a technology and product offering from Actuate to these firms. Onescalable, open-source oriented and standards-compliant platform with which ourclients build reporting applications that are typically outside the firewallapplications that build loyalty and satisfaction within their customer base andbusiness intelligence applications which are inside the firewall types ofapplications that allow their employees the ability to run the business moreeffectively, more efficiently thorough business activity and performancemanagement characteristics.

Moving on, we would like to make a few comments associatedabout the BIRT business. Once again in Q3, we exceeded a $1 million of BIRTdriven business within the confines of the quarter, and most gratifying, wewere on track with a goal of $5 million to $7 million of BIRT driven businessto be happening within the 2007 fiscal year. As many of you will recall, thisforecast started at $3 million to $5 million. It was recently up to $5 millionto $7 million and again because of our three-quarter progress towards thatgoal, we clearly believe that that goal will be met by year end.

Another piece of information not on the slide that I'll giveyou is that at the end of Q3, we exceeded 1.5 million downloads life-to-date ofthe BIRT product. And on a going forward basis, as you know, especially thoseof you that have attended or listened in, in the August Financial Analyst Day,we intend on putting together a measurable model associated with that emergingpart of our business and share with you salient variables associated with thatmodel in an ongoing fashion.

One of our intuitions that we hope to quantify by the end ofthe year is that we clearly have many, many, many more BIRT developers todaythan we have ERD Pro developers, our first development environment that wasbrought to market in 1996 that we've taken the market in traditional enterprisesoftware fashion over the last 12 to 14 years.

So again, very exciting that we believe we will have somebig BIRT developer numbers for you at the Q4 earnings call in January.

Also moving on to the next slide, one of the latest majorinvestments we've made is this new online community brought to you by ActuateCorporation call BIRT Exchange. It was launched on September 24th of last month.It's a dedicated resource for the BIRT user community and Actuate BIRT productlines. It's absolutely chockfull of the broadest range of BIRT-relatedknowledge on the planet. It is a very complimentary to eclipse.org which wasthe site that we have gotten started on, and we will continue to collaborateextremely, extremely closely with, but again chockfull of the information andsupport-oriented services for BIRT.

The great sayings that BIRT Exchange does for Actuate andrunning our business on a going forward basis is as we get and we have gottengood traction for registered users and software downloads thus far, it gives usa highly measurable way of creating a significant model, if you will, that hassort of kept behind us that we can share with you and sort of model the futureopportunity for Actuate through the open-source strategy for ourselves and ofcourse for our shareholders.

So very exciting that the investments made in BIRT Exchangehas launched in late September and through late October. We are seeing goodtraction of registered users and software downloads for our commerciallyavailable products for BIRT developers.

Moving on to the next slide, we just wanted to again showyou at a very high level the business model and how it capitalizes on thatubiquity -- fast growing ubiquity of BIRT developers and there's three prongsthat you should look for to in the coming years from Actuate Corporation.

Number one, revenue acceleration from the installed base.Again if we have a Citi for instance, a Citigroup on a global basis where wehave 300 developers today, we believe if we have 3,000 developers theretomorrow we would do much better at revenue acceleration at a Citigroup on aglobal basis, a company that we obviously cater to on a day-to-day basis andhave for many, many years.

Global expansion of our market, from these eclipsedevelopers, they reside in many, many more financial services companies thatare important to us and will emerge very important crucial sector as to ourfuture that we will also want to invest in for revenue acceleration for ourfuture. So, global market expansion associated with that growing developer basecrucial to our ongoing strategy. And then ultimately, lowering the sales andmarketing costs because of a more self-serve model associated with anopen-source strategy, and again self served through the BIRT Exchangedcommunity site as far as blogs, forums, DivX portions of that site where youcan get yourself through the substantial part of the technical evaluation of whyyou should be using BIRT at your enterprise, at your division, at yourdepartment on this particular project. All of those aspects of the strategyculminate in higher earnings growth for Actuate and its future.

Now looking at guidance, the annual guidance has been finetuned to the top of the range. As you know, our range as of the end of our lastquarter was $136 million to $140 million and now we are pretty convinced thatwe are targeting in on approximately $140 million as the outcome for our companyat the end of 2007.

When we look at license revenue associated with this year,we are guiding up from our previous forecast of $53 million to $54 million inlicense revenues, no, that is our guidance. We started with an initial guidanceof $50 million to $52 million at the beginning of the year and we are guiding onefinal time here at the end of Q3 to a range of $53 million to $54 million forthe year.

As far as non-GAAP EPS, we are guiding up from the previous$0.31 to $0.32 per share, and again we started the year at $030 as our initialforecast of the year, so that's up $0.02 of earnings pre share, and againnon-GAAP operating margin we believe will culminate in the range of 19% and 21%when you look it for the complete year.

So again, some fine tuning of guidance, some raising ofguidance and reiteration of non-GAAP operating margins.

So with that, I will hand it over to Dan before the Q&A.Dan?

Dan Gaudreau

Thanks Pete. As Pete mentioned, we experienced anotherstrong performance in Q3. We continued to hit new record highs in many areas.For those of you following the presentation on line, I have highlighted all thenew record highs in green. Those of you who are just listening, I will try todo my best to tell you which one is a record high.

On chart number 13, similar to Q1 and Q2 we have continuedto achieve strong growth metrics. Licensed revenues grew 16% year-over-year.This is the 7th consecutive quarter of double-digit year-over-year growth. Wereported total revenues of $34.7 million, up 9% year-over-year. Once again, weachieved record levels of non-GAAP profitability, specifically non-GAAPoperating income was a record $7.9 million, up 37% year-over-year and non-GAAPearnings per share had a record $0.09, up 29% year-over-year. GAAP net incomeand earnings per share also grew significantly at 83% and 75% respectively.

Chart 14, we booked three orders in excess of $1 million,one was with a company in the medical sector, another with a financial servicescompany and a third, with a foreign OEM.

International mix was a record 32%, the first time inActuate's history that we exceeded 30%. We also continued to achieve recordlevels of services margins, as well as operating and net margins of 23% and 17%respectively.

Next slide. For nine months, 2007, license revenues total$39.5 million and were up 21% compared with the first nine months of 2006.Total revenues increased 9% to $101.4 million.

We set new record highs in both GAAP and non-GAAP income andearnings metrics. Specifically, non-GAAP operating income at $18.9 million up51%, non-GAAP earnings per share were a record $0.21 for 2007 year-to-date, a50% growth over the nine months of 2006. GAAP net income and earnings per shareincreased a 159% and 180%over the comparable 2006 period.

Slide 16. We ended the quarter with about $70 million incash. Accounts receivable increased $1.4 million from September of '06, andover $9 million from June of '07. As I mentioned in the Q2 conference call, Q2revenues were significantly more front-end loaded, so we are able to bill andcollect more AR during that quarter. Deferred revenue ended the quarter at$39.2 million up $2.8 million or 8% from September of '06.

Next slide. As I said, cash increased significantly duringthe past twelve months up $22 million. Our ability to generate cash flow fromoperations has increased this year. For the nine months of 2007, cash flow fromoperations totaled $18.1 million, another record, and almost double the $9.5million generated in the first nine months of 2006.

DSOs ended the quarter at 78 days, that's down three daysfrom September 30th of '06 and we continued our stock repurchase program. Webought back another $4.6 million of Actuate common stock during Q3, bringingthe buyback to over $14 million during 2007.

Just to reiterate the guidance that Pete already talkedabout, we're again increasing license revenue and earnings per share guidancefor 2007.

At about $114 million, we believe total revenues will hitthe high end of the range we'd previously communicated to the street. We areentering Q4 with a very strong license pipeline. Given that fact, we feelcomfortable in increasing the license range from the previous $51 million to$53 million to the new range of $53 million to $54 million.

Non-GAAP earnings per share will benefit from the increasein license revenues. So we are up in EPS guidance by a penny to $0.32. Non-GAAPoperating margin for the full year should be in the 19% to 21% range, higherthan our much larger competitors Business Objects, Cognos and MicroStrategy.

In the final chart, I want to give some final commentsregarding Q4 2007. The large increase in AR during Q3 should result in verystrong Q4 collections and strong cash flow from operations. We have settled theearn-out amount due to former performancesoft shareholders and have paid out$5.4 million, essentially as we have forecasted to the street previously.

And finally our Board has authorized an accelerated stockbuyback program, and that was due to the knowledge that given our growth,profitability, and future prospects, we continue to believe our stock isundervalued.

With that, that concludes the formal presentation, we willnow open up the floor to questions.

Question-and-AnswerSession

Operator

(OperatorInstructions) The first quarter is from Kevin Liu with B. Riley & Company.

Kevin Liu - B. Riley & Company

Hi, good afternoonand congratulation.

Pete Cittadini.

Thanks Kevin.

Dan Gaudreau

Thanks Kevin.

Kevin Liu - B. Riley & Company

Just wanted you to touchon the guidance first, just looking at it, it kind of anticipates a relativelyflat slightly up in terms of new license guidance? I'm just wondering was itbecause you had particularly strong Q4 last year or it just seemed to matchwith what you are seeing in terms of pipeline from license growth this year?

Pete Cittadini

We had a very strongQ4 last year.

Kevin Liu - B. Riley & Company

Yeah.

Pete Cittadini

It's a tough compfor sure.

Kevin Liu - B. Riley & Company

And then, so thatwould mean in terms of getting to the 140 number there you would see somestrong sequential growth in the services line. I am just wondering if that'swhat you're anticipating on that front or why that is?

Pete Cittadini

There we usually inQ4 also pretty substantial catch-up in back maintenance if you were to move[forward], which you don't know. If were to know our history, we do actuallycollect a lot of maintenance revenues in Q4 that has been due for quite awhile. People tend to flush out their budgets.

Kevin Liu - B. Riley & Company

Okay, and thenturning to performances of, I am just curious if you can share any sort ofmetrics regarding the growth around that business or other trends you might beseeing?

Pete Cittadini

The trends over thisyear are very positive. They continue to improve quarter-over-quarter from alicense revenue standpoint, which is the largest aspect of that business thatwe'd like drive. As you know or you may not know when we did acquire them, theyhad a business model that was rather top-oriented where they were sellingstrategic performance management once and only once, and then sort of leavingthe accounts and what we have tried to bring to them over the past sevenquarters is the ability to go deep and sell performance management not only atthe strategy level, but at the operational level thus allowing the ability for100s, if not 1000s of transactions associated with business processes thatrequire performance management and I will tell you we are seeing repeat ordersacross different projects within the customer base and it is culminating inappropriate positive progress where we are well placed.

Kevin Liu - B. Riley & Company

Okay and then justlastly you mentioned a big deal in the medical sector. I am just wondering ifyou guys have a more focused selling effort going into that vertical and alsoif you could share the types of applications and thing deployed there and kindof how they differ from your core financial services?

Pete Cittadini

We have always donefairly well with health care. I don't believe that it's ever driven a double-digitpercentage contributor to any quarter. But we do indeed have lots of the pharmacompanies health sites, health services companies and things of that nature. Asfar as the type of applications, it's an outside the firewall, extranetapplication that goes to their suppliers.

Kevin Liu - B. Riley & Company

Great thanks.

Operator

Your next questionis from Jeremy Hellman with Thompson, Davis.

Jeremy Hellman - Thompson, Davis

Hi. Good afternooneverybody. Pete, I was wondering if you can, just touching on BIRT a little bit,when you talk about 1.5 million downloads. Can you segregate that out in termsof where you see in a lot of unique or a lot more repeat downloads from thesmaller number of users. Is there any kind of color you can give on that?

Pete Cittadini

Well Jeremy, we can'tbecause those downloads have been exclusively from eclipse.org, which has thatwhole host of three million BIRT developers that were leveraging and addingvalue to, but we don't have any cognizance into what's behind those downloads.The only thing we do get is the download number. But if you start intuitivelythinking through, how many times a developer would downloads stuff. If you willover, let's say, a 24 month period, I think a conservative look at what thatdeveloper community could look like is dividing that 1.5 million downloads by afactor of ten and saying there could realistically be a 150,000 developersversus what we thought we had with ERD Pro products we use to market as atraditional enterprise software company of 10,000.

Now, I am not sayingthat there is a 150,000 developers, I am saying that's practical way ofthinking through what's the true value of those download is, from a developeraccount standpoint. As I said, we can diligently continue to work and get moreessential data to our future out of birt-exchange.com and I think we'll be muchbetter prepared in January and earnings call beyond January to give you bettercolor on what those downloads really mean.

Jeremy Hellman - Thompson, Davis

Okay. And then kindof speaking about BIRT Exchange, are you guys, is that something that you are reallymaking any kind of a marketing push around or is it more of a viable thing interms of trying to get more eyeballs on the page?

Pete Cittadini

It's definitely islittle bit above if you bump into any Actuate employee on a global basis, andyou are looking for new business cards. They'd not only say actuate.com is thewebsite, but they'd also say birt-exchange.com as the website on everyone'sbusiness card.

So, we will employsome marketing techniques to get that brand made more aware, but we don'tanticipate it's going to cost us a ton of money to do that, because of the [various]instances of forums and things of that nature, probably and most likelysuggesting you go to birt-exchange.com to gets some additional healthassociated with your BIRT-based questions.

Jeremy Hellman - Thompson, Davis

Right, okay. So, I mean, do you foresee any things, I'veread things about instances like the Super Happy Dev House or even or somethingthinking IBD today about coding competitions via OC seeding so to speak andthose kind of things where you kind of have a mole, for lack of a better word,its kind of they are speaking up behind your back kind of things?

Pete Cittadini

Well, we do have Evangelist, we have an Evangelist that isexclusively associated with the Eclipse Star Award. And then we have anotherEvangelist that is specifically associated with the Actuate BIRT product line,if you will, that include some of the commercial products. So we'll beevangelizing BirtExchange.com substantially if it is the right repository andcommunity site with which you can get your issues resolved.

Jeremy Hellman - Thompson, Davis

Great, okay. One last one for me, then I'll jump out. JustPete, could you give any color in terms of adding any headcount in terms ofsales?

Pete Cittadini

Well, certainly we are going through the budgeting processfor us and 2008 will be an investment year for Actuate. We believe that thetime is right for us to turn to investment. As I've said, our operating marginperformance is really solid and staggering again if you could find any otherenterprise software companies in the $140 million range that are popping out23% operating margins that would be held an opportunity for you. So, we aregoing to take some of that money and make sure that we do the right thingbecause our long-term opportunity and trajectory associated with that opportunityis extremely exciting.

Jeremy Hellman - Thompson, Davis

Great, I appreciate. Keep up the good work.

Pete Cittadini

Thank you.

Operator

Your next question from Kelly Pan with Pantheon Capital.

Kelly Pan withPantheon Capital

Hi.

Pete Cittadini

Hi, Kelly.

Kelly Pan withPantheon Capital

Hi, very good quarter.

Pete Cittadini

Thank you, Kelly.

Kelly Pan withPantheon Capital

I want to ask earn out, the $5.4 million I wasn't clearwhether that's already been paid, or yet to be paid?

Dan Gaudreau

It has been paid, Kelly. It was not paid before the end ofQ3, it was paid in Q4.

Kelly Pan withPantheon Capital

Okay. So the numbers I am looking at for September 30 willgo down because of the $5.4 million.?

Dan Gaudreau

Hopefully, we will generate enough cash to more than offsetthat.

Kelly Pan withPantheon Capital

Right, now I understand. Okay, very good.

Dan Gaudreau

We generate cash because that check was cut early inOctober.

Kelly Pan withPantheon Capital

Very good. Thank you.

Dan Gaudreau

Okay.

Operator

Your next question is from [Rouche Sutaria] with ThomasWeisel.

Rouche Sutaria -Thomas Weisel

Hi, good afternoon guys. I have a quick question on macrooutlook, with lot of acquisition and consolidation going on. One, are you seeingany changes or opportunities? And has your business strategy changed for yourconditional product deals? Or if you just give us a little bit sense aboutmarket dynamics after lot of consolidations?

Pete Cittadini

Sure, Rouche this is Pete. We have been predicting thisconsolidation and the traditional BI Company is being primarily BusinessObjects and Cognos, either having to get acquired or reinventing themselvesinto application companies now for a number of years.

Clearly, we have always been a different type of BI from thebeginning of Actuate invention and we continue one of the large luxuries thathopefully culminating in these numbers is the large luxury that we have had ofnot having the reinvent to ourselves.

So again, we have a platform in a development environmenttoday that development environment used by many more developers than previouslythrough our open-source strategy that are interested in creating inside thefirewall BI applications, if you will, not a pre-packaged interactive BI toolsthat slices and dices data out of a data warehouse which is more of what BO andCognos do, but truly an application that you log onto as an enterprise user andgarner value.

A very unique part of what we do that was never overlappingwith traditional BIs, the outside the firewall extranet application where youare building applications that are solely web-based for loyalty customersatisfaction ultimately for driving revenues for your enterprise.

So the acquisition was -- of course the acquisitions orconsolidations was foreseen by Actuate because we knew that there was no moretarmac associated with selling power user products, that what people want tobuy is more of an application metaphor that is exactly what we bring to themarket, both for inside and outside the firewall types of applications. And theacquisitions and consolidation quite frankly we believe create a better stagefor us on a going forward basis. So, we see it as all positive to ActuateCorporation, its employees and its shareholders.

Rouche Sutaria -Thomas Weisel

It's great. I mean that's what kind of expected, but do yousee gaining market share given there will be a set of consumers which will beconfused or probably uncertain whether to buy BO products or just go forActuate. So probably do you plan to gain market share or do you plan tocapitalize on this opportunity?

Pete Cittadini

Of course, but I see that as the more obvious scenario. Soyou may not indeed want to do business with SAP on a going forward basis, thusthat creates a market share opportunity for us. There is no question aboutthere will be synergies associated with market shares that also consolidatesout of SAP because they didn't want to do business necessarily with SAP. Soindeed, there will be market share opportunities for us.

We do have specific training and up-trade programs that aregoing on. So be the more salient element, however, is SAP has just taken outone of the largest players and they are going to buy definition of havingsubstantial acquisitions, take many steps back before they take a baby stepforward and none of us know what that baby step forward is going to look like,it could be very, very tightly integrated with an SAP applications strategy, inwhich case that would create an even larger market share opportunity forActuate Corporation.

Rouche Sutaria -Thomas Weisel

Okay, great. And just one question on your internationalrevenue, it was quite a strong, can you give us a little bit sense oninternational revenue and on the flip side as well, maybe it's little too harshbut are you seeing any weakness in your U.S. market?

Pete Cittadini

I will take the international question and the answer is,no, in the U.S.market by the way.

Dan Gaudreau

We made the comment that we're going into Q4 with verystrong pipeline and that's obviously heavily US-based.

Pete Cittadini

But in terms of the international side, the strength in Q3primarily came out of EMEA, the European market. I did mention that there wasone other large deal was a foreign OEM, and therefore that also contributed tothat strong growth.

Rouche Sutaria -Thomas Weisel

Okay.

Pete Cittadini

But we have been working at international operations andmaking it a more substantial part of the company now, for many years you haveheard the comments, for many, many quarter and have probably been anxious inseeing the results. And I was actually pretty gratifying seeing it in whattypically is a seasonal down Q3 especially in the European continent. So, it'sdefinitely movement in the right direction.

Rouche Sutaria -Thomas Weisel

Okay. And just one last question and I will get back in thequeue. You mentioned about your commercial software downloads and trials of --trial basically on a trial basis, can you give us some kind of numbers ornumber of registered users or number of commercial software download et cetera?

Pete Cittadini

Yeah, I don't have the number of registered users, I will onthe next earnings call but it's obviously a super set of the number of trialdownloads or e-mail downloads which very excited about. So within the lastapproximately 30 days, I think we've had 500 downloads of products to beevaluated on the commercial side. To me that's very gratifying in the firstmonth of BirtExchange.com existence.

Rouche Sutaria -Thomas Weisel

Okay. So 500 commercial software downloads?

Pete Cittadini

Yes.

Rouche Sutaria -Thomas Weisel

Okay, great. Thank you. That's all for me.

Pete Cittadini

You're welcome.

Operator

(Operator Instructions) Your next question from Ryan Randallwith Randall Capital.

Pete Cittadini

Hi, Ryan.

Ryan Randall -Randall Capital

Hi, thanks for taking my question.

Pete Cittadini

Sure, thanks.

Ryan Randall -Randall Capital

Can you talk a little bit about the share buyback programand how it's going to change to become a little more aggressive?

Pete Cittadini

Sure, well, the specific metric would be that we are goingto be stepping it up to about well somewhere in excess of $6 million a quarter.

Ryan Randall -Randall Capital

Okay.

Pete Cittadini

Which is significantly greater, if you look at the averageover the last eight quarters, for example.

Ryan Randall -Randall Capital

Right. Because previously you were limited by somecalculations of free cash flow?

Dan Gaudreau

We were -- yes,limited by cash flow and in this quarter we generated $2 in cash and felt thatwas inadequate for a buy back at that level.

Ryan Randall - Randall Capital

And…

Dan Gaudreau

I think the Boardactually authorized a more longer term to our plan.

Ryan Randall - Randall Capital

Funny, you've got cashon your balance sheet, and things like that are possible.

Dan Gaudreau

Yeah, I know.

Ryan Randall - Randall Capital

And can you talk alittle bit about what we can expect from the BIRT guidance in January? Or doyou want it favored for them?

Pete Cittadini

Definitely we aregoing to save this January Ryan.

Ryan Randall - Randall Capital

Okay, okay, andthat's all I have. Thanks very much.

Pete Cittadini

Okay.

Dan Gaudreau

Thank you.

Ryan Randall - Randall Capital

Bye, bye.

Operator

Now we havefollow-up question from the line of Jeremy Hellman with Thompson, Davis.

Jeremy Hellman - Thompson, Davis

Yeah, just goingback to the last question I had in terms of -- I think for the sale force fornext year. Have you heard any kind of early indications in terms ofdislocations of sales people from SAP and BO?

Pete Cittadini

We do have ourrecruiters on that. I am assuming there will be a lot less from SAP and a lotmore from BO, but again since they are so traditional in what they've sold overthe years, there at times are not the best people for us to pick up, butclearly we will be scouring that as sort of low hanging fruit and potentialemployees to throttle up with.

Jeremy Hellman - Thompson, Davis

Okay and actuallyone last one that pops to my head. In terms of your existing sales force, soyou're making any changes to your what business you expect they're going to bebrining in, any thoughts in terms of increased quotas, increased territories oranything like that?

Pete Cittadini

Yeah, it's more on focusitems. One of the latest initiative that we are working on right now, whichwill hit real strong in 2008 is this whole concept of pursuing a substantialextranet application, because again this whole phenomenon of web 2.0user interfaces is a very strong suite for us and when you do the analysis ofwho is the top-dog or star within the sales force, they always have one or twowith multiple extranet applications that they've sold along with the deploymentplatforms.

So we are thinking about some innovative techniques toreally make the sales force as successful as they can be. So it's stuff likethat that we are sort of working on. We've made no decisions on 2008 quotas oranything along those lines at this point.

Jeremy Hellman - Thompson, Davis

Okay great. Thanks again.

Pete Cittadini

Yeah.

Operator

(Operator Instructions) At the moment we have no otherquestions in the queue. So I would turn it back over to you for closingcomments.

Dan Gaudreau

Okay. This is Dan Gaudreau. We are going to sign off withthe rest of Actuate team and we look forward to a successful Q4 andcommunicating that with you in January.

Operator

This concludes today's Actuate Corporation Conference Call.You may now disconnect.

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