Retalix Ltd. Announces Record Revenues of $33.9 Million for Third Quarter 2004
Ra’anana, Israel, November 11, 2004 -- Retalix Ltd. (Nasdaq: RTLX) a provider of integrated enterprise-wide software solutions for the retail food and fuel industries worldwide, including supermarkets, convenience stores and fuel stations, today announced its operating results for the third quarter ended September 30th, 2004.
Revenues for the quarter were $33.9 million, an increase of 39.8% from $24.3 million in the third quarter of 2003, and up 18% from $28.7 million reported in the second quarter of 2004. The Company reported net income for the quarter of $1.8 million, or 10 cents per diluted share, compared to a net income of $2.1 million, or 16 cents per diluted share, in the third quarter of 2003. Net income reflects the intensive investment in developing the next generation of supply chain management applications and their integration with the Company’s suite of products – a process the Company committed to and announced as part of the OMI acquisition.
Q3 2004 Highlights:
* Revenues up by 39.8% to $33.9 million
* Net income of $1.8 million or 10 cents per diluted share
* Acquisition of a 51% stake in Italian UNIT S.p.A expands
presence in Italy
* Casey’s Convenience Stores selects the Retalix Pocket
Office suite of mobile applications
* Unified Western Grocers rolls out TRICEPS warehouse
management solution
* Lotus Supermarkets in China selects Retalix StoreLine for
installation throughout the chain
* ICI Paris, of the AS Watson group, installs its first pilot
store with StoreLine in Holland
* Good progress with two international oil companies running
pilots with StorePoint
* Food Giant, Dallo and Pro and Sons sign up for StoreNext
Connected Services in the USA
“I’m pleased to report another very strong quarter for Retalix, not only from a financial standpoint but also in making significant progress on a number of our key strategic initiatives,” said Barry Shaked, President and CEO of Retalix Ltd.
“Our growth is being driven by three primary factors. First, winning new customers in our focus retail verticals of grocery, convenience and fuel. Second, moving deeper into food retailers’ technology strategy as we realize our vision of Synchronized Retail that ties together all of a retailer’s critical data and operations, from the point of sale to the supply chain. And third, continuing to expand our presence in new geographic regions and markets based on our world-class global retailing capabilities.
International
“During the third quarter, we announced a contract with Lotus Supermarkets in which StoreLine will be rolled out to their 124 stores throughout China, giving us an excellent reference client to expand further into this exciting marketplace. ICI Paris, a 180-store leader of perfumery retail in Holland, Belgium and Luxembourg, and a subsidiary of the A.S. Watson group, successfully installed its first pilot store with StoreLine in Holland. We have also made good progress with two international oil companies running pilots with StorePoint.
“We are very focused on extending our sales and marketing reach into new global markets, through a combination of selective acquisitions, strong local partnerships and expansion of our internal sales organization,” Shaked added. “We announced the acquisition of a majority interest in UNIT S.p.A, which brings us an excellent customer list of leading Italian retailers and a highly professional local sales and support team that will provide for strong presence in the Italian market. And we have staffed up our senior sales team to address the substantial market opportunity in South America. As food retailing becomes increasingly global, Retalix offers the technology platforms required to manage international and global retailing enterprises across multiple regions, languages, currencies and fiscal regulations.”
US Grocery and Convenience
“We continue to grow our presence with existing customers, as they come to appreciate the contribution that our Synchronized Retail suite of solutions can make to their critical operational objectives. We have received an order for our new Country of Origin and Bioterrorism (“COOL and BIO”) application from a major grocery chain. This application, the first of its kind in our industry, enables our customers to accurately track produce back through the supply chain so as to assure the safety of these items and comply with proposed new Federal legislation,” Shaked continued.
“We continue to have a very robust pipeline of tier-one grocery chains that are evaluating Retalix as they select their next generation POS solution. As we move into 2005, we expect to begin to recognize the benefits of our substantial investment in reengineering OMI’s supply chain and warehouse applications, which will position us as the only truly integrated, end-to-end solution in the food retailing industry.
“We also continue to grow our share of the total installed system base in the convenience and fuel industries. We received contracts for full-chain rollouts of our Retalix Pocket Office suite of mobile applications from several of our existing C-store customers, including Casey’s. Casey’s continues its aggressive StorePoint rollout, marking its 750th site installed, and Cumberland Farms reached the 400-site milestone with StorePoint during the quarter. We are in active discussions with half a dozen sizable fuel/convenience chains, as that industry enters a major upgrade cycle comparable to what is occurring in the grocery segment.
"StoreNext USA, our joint venture with Fujitsu that focuses exclusively on the needs of the independent grocery sector, is showing good momentum as dealers and operators embrace our subscription based model of delivering sophisticated software functionality and connected services. Significant sign-ups for StoreNext Connected Services in the quarter include 90-store Food Giant in Alabama, as well as Dallo and Pro and Sons, both based in California,” Shaked concluded.
Financial Highlights
Gross margin in the third quarter of 2004 was 66.1% of sales, as compared to 70.2% in the third quarter of 2003, and 65.9% in the second quarter of 2004. Third quarter R&D expenses were $9.4 million, 27.8% of sales, as compared to 19.6% in the third quarter of 2003. The increase is attributed to the additional cost involved in next generation development of the OMI applications. Sales and marketing expenses increased 14.6% to $6.5 million, as compared to $5.6 million in the third quarter of 2003.
Third quarter operating margin was 6.9%, compared with 12.8% in Q3 2003, up from 6.0% in the second quarter of 2004. Operating margin continues to be impacted by increased R&D spending as the Company upgrades and integrates its recently acquired supply chain management solutions with its ReMA web-based architecture.
In the third quarter of 2004, Retalix generated $2.9 million in cash flow from operations. As of September 30, 2004, the Company’s balance sheet showed liquid financial resources (cash and short-term equivalents, deposits and marketable securities) of $95 million.
Business Outlook
Retalix reaffirmed its previous 2004 guidance, which included revenue growth of approximately 30% in 2004 and a net income of $5.5 million. This figure takes into account the expenses involved in the on-plan conversion of OMI's applications to new technology and their integration with the Retalix systems.
Conference Call
The Company will be holding a conference call to discuss results for the third quarter of FY 2004 on Thursday, November 11th, 2004, at 10:30 AM EDT (7:30 AM PDT and 17:30 Israeli Time). Participating in the call will be Retalix Ltd. CEO Barry Shaked and CFO Danny Moshaioff. This conference call will be broadcast live over the Internet and can be accessed by all interested parties at www.retalix.com. To listen to the live call, please go to the Web site at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call on the Retalix site for 90 days
About Retalix Ltd.
Retalix Ltd., with North American headquarters in Dallas, TX, provides integrated enterprise-wide software solutions for the global food and fuel retail industries, including supermarkets, convenience stores, fuel stations and restaurants. The Company offers a full suite of software applications that support a food retailer's essential retailing operations and enable retailers to increase their operating efficiencies while improving customer acquisition, retention and profitability. With installations in more than 30,000 stores and across 44 countries, the Company markets its software solutions through direct sales, distributors, local dealers and its various subsidiaries. For further information, please visit the Company's web site at www.retalix.com
Safe Harbor for Forward-Looking Statements: Except for statements of historical fact, the information presented herein constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, including revenues, income and expenses, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include risks relating to the Company’s anticipated future financial performance, continued roll-outs with existing customers, the market reception of its new e-marketplace and ASP services, the potential benefits to food and fuel retailers and suppliers, expansion into new geographic markets, the conversion of sales leads into customers and the ramp-up of ASP users, the integration of the Company’s acquisition of OMI and other factors over which Retalix may have little or no control. This list is intended to identify only certain of the principal factors that could cause actual results to differ. Readers are referred to the reports and documents filed by Retalix with the Securities and Exchange Commission, including the Company’s Annual Report on Form 20-F for the year ended December 31, 2002, for a discussion of these and other important risk factors. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.
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