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Retalix Ltd. Announces Record Net Income and Revenues for the Second Quarter 2005


Net income triples to $4.0 million, or $0.20 per share
Revenues up 76.5% to $50.7 million

Ra’anana, Israel, August 9, 2005 -- Retalix Ltd. (Nasdaq: RTLX), a provider of integrated enterprise-wide software solutions for the food and consumer goods retail and distribution industries worldwide, today announced its operating results for the second quarter ended June 30th, 2005.

Revenues for the quarter were $50.7 million, an increase of 76.5% from $28.7 million in the second quarter of 2004 and up 50.1% from $33.8 million reported in the first quarter of 2005. The Company reported net income for the quarter of $4.0 million, or $0.20 diluted share, compared to net income of $1.3 million, or $0.08 per diluted share, in the second quarter of 2004, and $2.4 million, or $0.13 per share in the first quarter of 2005. 


Q2 2005 Highlights:

    * Revenues increased 76.5 % to a record $50.7 million
    * Record net income of $4.0 million, or $0.20 per share
    * Integration of IDS and TCI proceeding on track
    * Victor Hamilton, food industry veteran, appointed as President and CEO of
      Retalix USA
    * Tesco Begins Worldwide Upgrade of Stores to Retalix StoreLine V8 and
      Retalix PocketOffice
    * Kum & Go Selects Retalix DemandAnalytX as replenishment solution for 420
      Convenience Stores
    * The IJ Company, a top U.S. foodservice distributor, selects the Retalix
      Power Enterprise for a company-wide implementation
    * Partnered with Fujitsu Korea to market and support Retalix products in
      South Korea

“During the quarter we successfully completed the first integration stage of the IDS and TCI acquisitions, which augmented our competitive advantages and value proposition” said Barry Shaked, President and CEO of Retalix Ltd. “We continued to implement our Synchronized Retail strategy to establish Retalix as a leading provider of enterprise-wide solutions to the grocery, convenience, fuel and foodservice industries. The success of our strategy is reflected in the strongest results that we have ever reported.”

“To strengthen our North American team, we appointed Vic Hamilton as President and CEO of Retalix USA. As the former Chairman and CEO of IDS, Vic will play a crucial role in integrating IDS and TCI operations into Retalix. He brings very strong knowledge of the food industry and proven executive leadership capabilities to Retalix.”

North America

“In the North American market, we continued to extend our synchronized solutions into new markets, gain new customers and build relationships with existing customers seeking cost effective ways to improve their operating performance and profitability. During the second quarter, Hy-Vee supermarkets ordered Fuel licenses for additional 22 stores, several regional grocery chains chose our Retalix HQ and Retalix Store products, and two mid-market retailers licensed our warehouse and supply chain management products. Several food and consumer goods distributors, among them the IJ Company - one of the top ten foodservice distributors in the U.S., selected the Retalix Power Enterprise software suite for a company-wide implementation.”

“One of the major successes Retalix has recently achieved in the convenience store segment was our agreement with Kum & Go L.C., a leading convenience store chain operator with over 420 stores, to deploy our Retalix DemandAnalytix (DAX) solution for demand forecasting and computer assisted replenishment ordering across the chain.”

International

“Retalix continued to establish its footprint in the international market place and explore long-term growth opportunities worldwide. We are focusing great efforts on our ongoing projects in India and East Asia, and we are actively pursuing opportunities to expand our presence in Japan, China and Australia. We entered into an alliance with Fujitsu Korea Limited to market and support our products in the vast retail market in South Korea. We also partnered with Eniac, a software and services company based in Venezuela, to market and support StoreLine, StorePoint and PocketOffice products in Latin America.”

“In Europe, we are progressing with several major grocery and fuel chains. During the quarter, we announced that the Swiss cooperative fenaco has committed to roll out Retalix StorePoint solutions in all 640 existing stores and also in all future sites of its Volg chain throughout Switzerland. We are preparing for installations in a number of pilot stores of the Intermarche Group, which is a tier-1 European retailer based in France, to be followed by a rollout of our StoreLine solution to 3,000 stores. Finally, we are very pleased that Tesco has begun a worldwide upgrade of its store systems to Retalix StoreLine V8 with POS, Front Office, Back Office and mobile PocketOffice applications, starting with Kipa Hypermarkets in Turkey. This is the next phase in a multi-year partnership that has been very successful for both parties.”

Financial Highlights

In spite of the increased spending on R&D and marketing as part of Retalix’s efforts in integrating and upgrading its newly acquired supply chain management solutions, second quarter operating margin increased to 11.0%, compared with 6.0% in Q2 2004 and 9.4% in the first quarter of 2005. Gross margin in the second quarter of 2005 was 64.9% of sales, as compared to 65.9% in the second quarter of 2004, and 67.3% in the first quarter of 2005. The slight reduction in gross margin was expected as a result of the increased revenues attributable to professional services from our recent acquisitions in the U.S.

In the second quarter of 2005, Retalix generated $4.2 million in cash flow from operations. As of June 30, 2005, the Company’s balance sheet showed liquid financial resources (cash and equivalents, deposits and marketable securities) of $64.4 million, $1.3 million in long-term debt and shareholders’ equity of $190.4 million.

Business Outlook

For the full year 2005, Retalix reaffirms its expectations for revenues to exceed $185 million. The Company also expects that net income for 2005 will exceed $15 million.

Conference Call

The Company will be holding a conference call to discuss results for the second quarter of 2005 on Tuesday, August 9, 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. President and CEO Barry Shaked, Retalix Ltd. CFO Danny Moshaioff, and Retalix USA CEO Victor Hamilton.

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. provides integrated enterprise-wide software solutions for the food and consumer goods retail and distribution industries worldwide. Retalix solutions are installed in supermarkets, convenience stores, fuel stations, and quick service restaurants, as well as foodservice, grocery, convenience products, and fast moving consumer goods distribution organizations. The Company offers a full portfolio of software applications that automate essential retailing, distribution and supply chain management operations. These applications enable users to increase operating efficiencies, while improving customer acquisition, retention and profitability. With more than 34,000 installations across 50 countries, Retalix develops and supports its software through more than 1,200 employees in its various subsidiaries and offices worldwide.

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 and U.S. federal securities law. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Retalix, 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 Retalix's anticipated future financial performance and growth, the integration of Retalix's acquisitions of IDS and TCI, management of the anticipated increased market share of supply chain solutions and enterprise-wide solutions, continued roll-outs with existing customers, the market reception of its new e-marketplace and ASP services and broader integrated offerings and solutions, 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 continuing integration of Retalix'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 Retalix's Annual Report on Form 20-F for the year ended December 31, 2004, for a discussion of these and other important risk factors. Retalix 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.