Retalix Announces Record Fourth Quarter and 2004 Revenues
Annual revenues climb 35.1% to a record $124.4 million
Ra’anana, Israel, February 16, 2005 – 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 results for the fourth quarter and fiscal year ended December 31, 2004.
Revenues for fourth quarter of 2004 were $35.9 million, an increase of 40.0% from $25.6 million reported in the fourth quarter of 2003. Net income for the fourth quarter of 2004 was $2.1 million. Earnings for the fourth quarter of 2004 were $0.11 per fully diluted share, as compared to earnings of $0.26 per fully diluted share in the fourth quarter of 2003.
For the year ended December 31, 2004, the Company reported record revenues of $124.4 million, an increase of 35.1% as compared to revenues of $92.1 million in 2003. Net income for 2004 was $6.0 million, a decrease of 28% compared to net income of $8.3 million for 2003. Earnings for 2004 were $0.36 per fully diluted share, as compared to earnings of $0.63 per fully diluted share for 2003. Net income and earnings per share were both impacted by the substantial investment made by Retalix during 2004 in developing the next generation of supply chain management applications and in their integration with the Retalix’s product suite.
Fourth Quarter 2004 Highlights:
* Revenues up by 40% to a record $35.9 million
* Net income of $2.1 million, or $0.11 per fully diluted share
* Retalix acquired remaining 49% of UNIT S.p.A from Getronics, and launches
Retalix Italia
* French-based Mousquetaires-Intermarché Group selected StoreLine as its
in-store solution for its 3,000 supermarkets and specialty stores across
Europe
* Japanese Drug-Eleven health and beauty chain selected StoreLine and ReMA
for its 169 stores
* ALON USA, largest 7-Eleven licensee, selected StorePoint for its 168
C-store and fuel sites
* Delhaize America rolls out StoreLine to its Sweetbay chain
* Redner’s Warehouse Markets selected Retalix DemandAnalytx demand forecast
and order optimization system
* Major US grocery chain ordered Retalix breakthrough COOL and BIO
application
* Supersol, Israel’s largest grocery chain, deploys Retalix B2B retail
exchange
Additional Select Highlights for the FY 2004:
* Acquired OMI International, a leader in supply chain execution and
management applications for grocery retailers.
* Successfully completed follow-on offering, which generated proceeds of
approximately $59 million
* In China, Lotus Supermarkets selected Retalix StoreLine for rollout
throughout the chain
* Tesco selected Retalix BackOffice for rollout across all sites in UK,
Europe and Asia
* Casey’s Convenience Stores selected the Retalix Pocket Office suite of
mobile applications
* Unified Western Grocers rolls out TRICEPS warehouse management solution
“2004 was a year of explosive growth and enormous operational achievements for Retalix,” said Barry Shaked, President and CEO of Retalix. “We significantly expanded our global footprint, winning major customers in France, China, Japan, and India for the first time, and acquiring a subsidiary focused in Italy. We also made tremendous progress in realizing our vision of providing a fully synchronized set of Enterprise Solutions from Warehouse to Checkout. We are experiencing excellent customer acceptance of our next-generation solutions, and believe that our technological leadership continues to grow over our competitors. These accomplishments position Retalix to become the global leader in providing integrated software solutions for the food and fuel retailing industry.”
“The acquisition of OMI International, Inc. rounded out our offering, and we now have a suite of mature enterprise applications spanning all the strategic business processes of food retail chains including: Merchandising, Customer Relations Management, and Supply Chain Management. When combined with our market leading, multi-concept in-store solutions, and common Retalix Enterprise Architecture, this results in a powerful suite of solutions to support key decisions and drive efficiencies across a retailer’s operations. Our technology leadership and commitment to high quality services resulted in numerous customer wins around the world during 2004.”
International
“We continue to make strategic in-roads into Europe, which we see as a very attractive market for Retalix, and an important launch pad into regions such as Latin America and Asia, given that many of the leading global retailers are headquartered in Europe. We recently announced that StoreLine had been selected as the in-store solution for the French-based Mousquetaires-Intermarché Group, with 3,000 franchisees across France, Spain, Portugal, Belgium and Poland. Tesco selected Retalix Back Office solution for inventory management, to be rolled out in full integration with the Retalix Front Office and POS already installed in 1,300 Tesco stores world-wide. Additionally, we are progressing with new country pilots for StorePoint with a major global petroleum retailer, following the initial Europe and USA pilots. In Italy, we acquired UNIT S.p.A. from Getronics, and are relaunching it as Retalix Italia. This new subsidiary provides us with an Italian client base and the local expertise for sales, deployment and support of the Retalix solutions in the Italian food and fuel retail market, ” Shaked continued.
“We are also experiencing excellent success entering new markets and winning our first major customers in Asia, whose retail sector is positioned for tremendous growth and modernization in the coming years. In China, Lotus Supermarkets, with 124 stores planned by 2006, has selected Retalix Storeline as its in-store solution throughout the chain. We also entered the Japanese retail market by signing a contract with Drug Eleven, a leading Japanese health and beauty chain, to install StoreLine and the Retalix chain management and loyalty solutions across their 169 stores. And we went live with our first customer in India in the fourth quarter.”
US Grocery and Convenience
“As more companies in the U.S. realized operational benefits of Retalix’s Synchronized Retail suite of solutions, the pipeline of tier-one grocery chains that are evaluating our products is growing consistently. Delhaize America rolls out StoreLine to its Kash n’Karry subsidiary as it converts its 103 supermarkets to the Sweetbay format. Following a successful rollout at Market Basket, we had another win for our DemandAnalytx (DAX) application with Redner’s Warehouse Markets, and have seen dramatic improvements in both the reduction of stockouts and increased returns on inventory investment from customers that have deployed our demand forecast and order optimization solution. And our new Country of Origin and Bioterrorism (“COOL and BIO”) application has been approved for delivery with a major grocery chain”.
“In the convenience store segment, ALON USA, the largest 7-Eleven licensee in North America, rolls out StorePoint to its 168 locations, and plans to make it available to the 1,200 FINA-branded fuel oulets it supplies. Roll out of StorePoint with Casey’s General Stores continued, and the chain has now selected Retalix Pocket Office to deliver key operating in-store efficiencies on wireless PDAs. The pipeline of customers evaluating Retalix as their next-generation enterprise software solution remains very strong across the grocery, convenience and fuel segements.”
“StoreNext USA, our joint venture with Fujitsu that focuses on the independent grocery sector, is showing good momentum as dealers and operators embrace our subscription-based model of delivering in-store solutions and Connected Services. Significant signups for Connected Services during 2004 included 90-store Food Giant, 65-store Lowe’s Food Stores, and UWG, a retail-owned wholesale grocery distributor, who signed an agreement to promote StoreNext Connected Services to its 2,500 independent grocers,” Shaked concluded.
Financial Highlights
Gross profit in the fourth quarter of 2004 increased by 32.2% to $23.8 million, up from $18 million in the fourth quarter of 2003. Gross margin in the fourth quarter of 2004 was 66.5% of sales, as compared to 70.4% in the fourth quarter of 2003. This reflects the increased hardware content in the StoreNext revenue.
R&D expenses in the fourth quarter of 2004 increased by 101.1% to $10.3 million, as compared to $5.1 million in the fourth quarter of 2003. The increase in R&D reflects the continued investment being made in developing the next generation of supply chain management applications and their integration with the Company’s suite of products.
Sales and marketing expenses increased 12.9% to $6.7 million in the fourth quarter of 2004, as compared to $6.0 million in the corresponding quarter in 2003.
Fourth quarter operating margin was 6.6%, down from 12.7% in the prior year’s quarter. The Company expects that operating margin will recover during 2005, as Retalix begins to realize a return on the significant investment made in building and integrating the next generation supply chain products with the Retalix product suite. In 2004, Retalix generated over $6.2 million in cash flow from operations. As of December 31, 2004 the Company had cash and equivalents and marketable securities of $111.9 million, $1.5 million in long-term debt and shareholders’ equity of $157.3 million.
In April 2004 Retalix completed an offering of 3,450,000 ordinary shares, generating net proceeds of approximately $59 million to the Company.
Business Outlook
Retalix expects revenues for 2005 to exceed $150 million. The Company also expects that net income for 2005 will exceed $13 million.
Conference Call
The Company will be holding a conference call to discuss results for the fourth quarter and of FY 2004 on Wednesday, February 16, 2005 at 10:30 AM Eastern Time (7:30 AM Pacific Time 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, 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 33,000 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, 2003, 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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