Total Revenues Were $53.9 Million; Adjusted Net Income (Non-GAAP) Was $1.2 Million; Cash Flow From Operations Turned Positive
RA'ANANA, Israel, May 21, 2008 -- Retalix(r) Ltd. (Nasdaq:RTLX), a leading provider of software solutions for retailers and distributors, today announced results for the first quarter ended March 31, 2008.
Summarized financial highlights of the 2008 first quarter results:
* Total Revenues for the period were $53.9 million, compared to
$52.7 million in the first quarter of 2007, and $55.2 million
in the fourth quarter of 2007.
* GAAP Net Loss for the period was $(0.5) million, or $(0.03)
per diluted share, compared to net income of $0.02 million, or
$0.00 per diluted share in the first quarter of 2007, and a net
loss of $(1.7) million, or $(0.09) per diluted share, in the
fourth quarter of 2007.
* Adjusted Net Income (Non-GAAP)* for the period was $1.2 million,
or $0.05 per diluted share, compared to $1.9 million, or $0.10
per diluted share, in the first quarter of 2007, and a net loss
of $(0.9) million, or $(0.05) per diluted share, in the fourth
quarter of 2007.
Barry Shaked, President and Chief Executive Officer of Retalix, said, "We are pleased by the progress we are making in addressing the challenges in our operations. After recording losses in the fourth quarter, we restored non-GAAP profitability in the first quarter while also again generating cash flow from operations without factoring our receivables. As we have stated, our primary focus for 2008 is to improve our profitability and our cash flow, not merely top line growth. The results of the first quarter demonstrate initial signs of progress on our turnaround plan and we believe we can continue to build on these results throughout 2008."
Business and operations highlights:
* Recent selections of Retalix by leading grocery retailers in
Europe and Asia further strengthen the position of Retalix as
the leading point-of-sale (POS) solution for Tier 1 grocery
retailers.
* Food Lion, a tier-1 grocery chain and a part of the Delhaize
Group, started deploying the Retalix Yard Management solution at
its distribution centers, which serve approximately 1,300 stores
in the United States.
* The Pantry, one of the largest convenience store chains in the
United States, began rolling out Retalix StorePoint, Retalix
Fuel, and Retalix HQ-Convenience software solutions to more than
1,600 sites.
* Retalix broadened its relationship with IBM's Retail Store
Solutions division, announcing partnerships in the petroleum and
convenience segment and in the SMB grocery segment.
* Retalix announced three new product releases -- Retalix
DemandAnalytX 6.0, Retalix HQ/Store 7.1 and Retalix Power
Analyzer 1.2.
Shaked added: "We continue to be positive about the business outlook, but, as we have previously stated, we also continue to monitor our expenses carefully to ensure they are in line with our overall business plan. As new products matured in the development cycle, we have reassigned resources to Professional Services, prioritized the Product Development efforts and restructured our R&D teams. We have taken these steps following a study of our expense structure as well as the resources we need to be able to serve our clients, bring new products to the market and seize available opportunities. As a consequence, since the beginning of 2008, the number of Retalix employees worldwide has been reduced by approximately 120. While a reduction in force was part of our plan for 2008, we estimate that it also provides cost savings that mitigate the effect of the continued weakness of the US dollar during the first quarter."
Hugo Goldman, the Company's Chief Financial Officer, said: "We are making progress with our financial plan for 2008. During the first quarter we returned to being cash flow positive, generating $0.4 million from operations, in spite of the fact that we discontinued the factoring of receivables. As of March 31, 2008, our balance sheet had $29.4 million in cash, cash equivalents and marketable securities. We continue to monitor closely the impact of currency exchange rates on our financial outlook for the coming quarters."
Outlook for FY 2008
In spite of the continued weakness of the US Dollar, Retalix expects it will meet its financial goals for FY 2008, of total revenues exceeding $232 million, GAAP net income exceeding $8 million, and adjusted, non-GAAP* net income exceeding $15 million.
Shaked concluded: "Demand for our software solutions remains strong, as retailers and distributors cautiously proceed with their long-term technology investments. Retalix is uniquely positioned in the retail software market with a broad offering of software solutions tailored specifically to the requirements of the food retail industry. We continue to believe that our investments in product development and in penetration into new territories will pay off in the coming years."
Conference Call and Webcast Information
The Company will be holding a conference call to discuss results for the first quarter 2008 on Wednesday, May 21, 2008 at 9:00am EDT (4:00pm Israeli Time). This conference can be accessed by all interested parties through the Company's web site at http://www.retalix.com/conference-call.cfm. For those unable to participate during the live broadcast, a replay will be available shortly after the call on the Retalix site.
* Note on Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Retalix uses non-GAAP measures of operating income, net income and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity based compensation in accordance with SFAS 123(R), amortization of intangibles related to acquisitions, and charges in connection with expenses relating to acquisitions that did not materialize. Retalix's management believes the non-GAAP financial information provided in this release is useful to investors' understanding and assessment of the Company's on-going core operations and prospects for the future. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Management also uses both GAAP and non-GAAP information in evaluating and operating business internally and as such deemed it important to provide all this information to investors. Reconciliations between GAAP measures and non-GAAP measures are contained following the GAAP financial statements in this press release. Reconciliation between GAAP to non-GAAP outlook for 2008 is provided in the table below.
FY 2008 Outlook
U.S. $ Thousands
GAAP Net Income (Loss) 8,000
(a) The effect of stock- based compensation -
SFAS 123(R), net of tax effect 4,900
(b) The effect of amortization of intangible
assets and acquisition related expenses, net
of tax effect 2,100
Non-GAAP Net Income (Loss) 15,000
About Retalix
Retalix is an independent provider of software solutions to retailers and distributors worldwide. Retalix solutions serve the needs of grocery chains, convenience and fuel retailers, food and consumer goods distributors and independent grocers. The Company offers a portfolio of software applications that automate and synchronize essential retail and supply chain operations, encompassing stores, headquarters and warehouses. The company's International headquarters are located in Ra'anana, Israel, and its American headquarters are located in Dallas, Texas. For more information about Retalix, please visit www.retalix.com.
Retalix is a registered trademark of Retalix Ltd. in the United States and in other countries. The names of actual companies, products and services mentioned herein may be the trademarks of their respective owners.
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 other U.S. federal securities laws. For example, the statements regarding our "Outlook for FY 2008" including our expected results and reactions to changes in our markets, as well as our statements regarding continuing to build on our first quarter progress, the business outlook, and expected cost savings from our reduction in force, all involve forward-looking statements. 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 or other guidance or outlooks expressed or implied by such forward-looking statements. Such factors include risks relating to Retalix's anticipated future financial performance and growth, the performance of the US dollar relative to other currencies, continued roll-outs with existing customers, continued interest in Retalix's new platforms, the perception by leading retailers of Retalix's reputation, the potential benefits to food and fuel retailers and distributors, expansion into new geographic markets, 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, 2006, 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.
RETALIX LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2008
Three months ended Year
March 31, ended
-------------------- Dec. 31,
2008 2007 2007
-------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
-------- -------- --------
U.S. $ in thousands
(except share and per share data)
REVENUES:
Product sales 15,559 17,448 80,511
Service and projects 38,374 35,277 140,900
-------- -------- --------
Total revenues 53,933 52,725 221,411
-------- -------- --------
COST OF REVENUES:
Cost of product sales 9,790 8,792 39,132
Cost of service and projects 21,953 13,779 65,281
-------- -------- --------
Total cost of revenues 31,743 22,571 104,413
-------- -------- --------
GROSS PROFIT 22,190 30,154 116,998
-------- -------- --------
OPERATING EXPENSES:
Research and development - net 10,775 15,445 58,653
Selling and marketing 5,952 7,961 31,617
General and administrative 6,342 5,866 27,539
Other (income) expenses - net -- (104) 643
-------- -------- --------
Total operating expenses 23,069 29,168 118,452
-------- -------- --------
INCOME (LOSS) FROM OPERATIONS (879) 986 (1,454)
FINANCIAL INCOME, net 143 136 1,032
-------- -------- --------
INCOME (LOSS) BEFORE TAXES ON
INCOME (736) 1,122 (422)
TAX BENEFIT 447 965 435
-------- -------- --------
INCOME (LOSS) AFTER TAXES ON INCOME (289) 157 13
SHARE IN GAINS (LOSSES) OF AN
ASSOCIATED COMPANY 12 (4) (3)
MINORITY INTERESTS IN GAINS OF
SUBSIDIARIES (257) (133) (508)
-------- -------- --------
NET INCOME (LOSS) (534) 20 (498)
======== ======== ========
EARNINGS (LOSSES) PER SHARE -
in U.S. $:
Basic (0.03) -- (0.02)
======== ======== ========
Diluted (0.03) -- (0.02)
======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION OF EARNINGS
PER SHARE - in thousands:
Basic 20,106 19,646 19,851
======== ======== ========
Diluted 20,106 20,190 19,851
======== ======== ========
RETALIX LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2008
March 31,
-------------------- Dec. 31,
2008 2007 2007
-------- -------- --------
(Unaudited) (Unaudited)
-------------------- --------
U.S. $ in thousands
--------------------------------
Assets
CURRENT ASSETS:
Cash and cash equivalents 24,340 52,173 22,484
Marketable securities 3,823 13,041 3,454
Accounts receivable:
Trade 81,757 58,824 81,429
Other 5,777 5,519 5,535
Inventories 1,089 1,146 1,289
Deferred income taxes 8,858 5,873 8,305
-------- -------- --------
Total current assets 125,644 136,576 122,496
-------- -------- --------
NON-CURRENT ASSETS:
Marketable debt securities 1,265 1,232 1,657
Deferred income taxes 5,827 4,436 4,548
Long-term receivables 5,116 3,360 5,673
Amounts funded in respect of
employee rights upon
retirement 9,949 7,020 8,806
Other 912 795 795
-------- -------- --------
23,069 16,843 21,479
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, net 12,233 10,710 12,568
-------- -------- --------
GOODWILL 113,205 107,544 113,055
-------- -------- --------
OTHER INTANGIBLE ASSETS, net of
accumulated amortization
Customer relationship 15,960 17,356 16,300
Other 4,095 5,301 4,379
-------- -------- --------
20,055 22,657 20,679
-------- -------- --------
Total assets 294,206 294,330 290,277
======== ======== ========
RETALIX LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2008
March 31,
-------------------- Dec. 31,
2008 2007 2007
-------- -------- --------
(Unaudited) (Unaudited)
-------------------- --------
U.S. $ in thousands
--------------------------------
Liabilities and shareholders'
equity
CURRENT LIABILITIES:
Short-term bank credit -- 11,581 11
Current maturities of long-term
bank loans 277 229 258
Accounts payable and accruals:
Trade 12,732 11,465 15,410
Employees and employee
institutions 9,752 8,792 8,937
Accrued expenses 5,875 6,205 6,393
Other 3,554 8,690 2,586
Deferred revenues 16,865 20,263 16,763
-------- -------- --------
Total current liabilities 49,055 67,225 50,358
-------- -------- --------
LONG-TERM LIABILITIES:
Long-term bank loans, net of
current maturities 852 954 786
Employee rights upon retirement 15,740 11,728 14,362
Deferred tax liability 1,020 961 1,004
Institutions 1,423 -- 1,516
Deferred revenues -- 206 --
-------- -------- --------
Total long-term
liabilities 19,035 13,849 17,668
-------- -------- --------
Total liabilities 68,090 81,074 68,026
-------- -------- --------
MINORITY INTERESTS 3,048 2,426 2,791
-------- -------- --------
SHAREHOLDERS' EQUITY:
Share capital - Ordinary shares of
NIS 1.00 par value (authorized:
March 31, 2008 (unaudited),
December 31, 2007 (unaudited) and
March 31, 2007 (unaudited)
30,000,000 shares; issued and
outstanding: - March 31, 2008
(unaudited) 20,206,699 Shares;
December 31,2007 (unaudited) -
20,001,382 shares; March 31, 2007
(unaudited) - 19,668,409 shares 5,329 5,191 5,273
Additional paid in capital 171,621 158,651 167,694
Retained earnings 45,661 46,848 46,195
Accumulated other comprehensive
income 457 140 298
-------- -------- --------
Total shareholders'
equity 223,068 210,830 219,460
-------- -------- --------
Total liabilities and
shareholders' equity 294,206 294,330 290,277
======== ======== ========
(Continued) - 1
RETALIX LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2008
Three months ended Year ended
March 31, Dec. 31,
-------------------- --------
2008 2007 2007
-------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
-------- -------- --------
U.S. $ in thousands
--------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) (534) 20 (498)
Adjustments required to
reconcile net income (loss) to
net cash provided by (used in)
operating activities:
Minority interests in gains of
subsidiaries 257 133 508
Depreciation and amortization 1,572 1,761 6,790
Share in losses (gains) of an
associated company (12) 4 3
Stock based compensation
expenses 1,318 1,357 3,889
Changes in accrued liability for
employee rights upon retirement 1,217 313 2,739
Gains on amounts funded in
respect of employee rights upon
retirement (664) (140) (950)
Deferred income taxes - net (1,818) (189) (3,302)
Net decrease (increase) in
marketable securities (75) 61 (216)
Amortization of discount on
marketable debt securities -- 5 11
Other (186) 1 50
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable:
Trade (including the
non-current portion) 553 (10,289) (34,536)
Other (360) (4) --
Increase (decrease) in accounts
payable and accruals:
Trade (2,849) (101) 3,491
Employees, employee
institutions and other 1,718 (888) (5,916)
Decrease (Increase) in
inventories 214 11 (118)
Increase (decrease) in
long-term institutions (93) -- 1,516
Increase in deferred revenues
(including the non-current
portion) 101 6,516 2,810
-------- -------- --------
Net cash provided by (used in)
operating activities - forward 359 (1,429) (23,729)
======== ======== ========
(Continued) - 2
RETALIX LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2008
Three months ended Year ended
March 31, Dec. 31,
-------------------- --------
2008 2007 2007
-------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
-------- -------- --------
U.S. $ in thousands
--------------------------------
Net cash provided by (used in)
operating activities -
brought forward 359 (1,429) (23,729)
-------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Maturity of marketable debt
securities held to maturity -- 500 9,743
Investment in marketable debt
securities held to maturity -- (9,046) (9,047)
Acquisition of subsidiaries or
activities consolidated for
the first time (a) -- -- (1,370)
Additional investment in
subsidiary (625) -- --
Purchase of property, plant,
equipment and other assets (363) (388) (4,676)
Proceeds from sale of property,
plant and equipment -- -- 69
Amounts funded in respect of
employee rights upon
retirement, net (339) (121) (1,097)
Long-term loans collected from
(granted to) employees 17 21 17
-------- -------- --------
Net cash used in investing
activities (1,310) (9,034) (6,361)
-------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment of long-term bank loans 17 (110) (351)
Issuance of share capital to
employees resulting from
exercise of options 2,662 725 2,401
Short-term bank credit - net (11) 6,839 (4,731)
-------- -------- --------
Net cash provided by (used in)
financing activities 2,668 7,454 (2,681)
-------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 139 (4) 69
-------- -------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,856 (3,013) (32,702)
BALANCE OF CASH AND CASH
EQUIVALENTS AT BEGINNING OF
PERIOD 22,484 55,186 55,186
-------- -------- --------
BALANCE OF CASH AND CASH
EQUIVALENTS AT END OF PERIOD 24,340 52,173 22,484
======== ======== ========
(Concluded) - 3
RETALIX LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2008
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Three months ended Year ended
March 31, Dec. 31,
-------------------- --------
2008 2007 2007
-------- -------- --------
Unaudited Unaudited Unaudited
U.S. $ in thousands
--------------------------------
(a) Supplementary disclosure of
cash flow information -
Fair value of assets acquired
and liabilities assumed of
subsidiaries and activities
acquired at the date of
acquisition:
Working capital (excluding
cash and cash equivalents) -- -- 278
Property plant and equipment,
net -- -- (8)
Goodwill and other intangible
assets arising on acquisition -- -- (1,640)
-------- -------- --------
-- -- (1,370)
======== ======== ========
RETALIX LTD.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
The following tables reflect selected Retalix's non-GAAP results
reconciled to GAAP results:
Three months ended Year ended
March 31, Dec. 31,
-------------------- --------
2008 2007 2007
-------- -------- --------
Unaudited Unaudited Unaudited
U.S. $ in thousands
(except share and per share data)
--------------------------------
OPERATING INCOME (LOSS)
GAAP Operating income (loss) (879) 986 (1,454)
Plus:
Amortization of acquisition-
related intangible assets 831 929 3,576
Stock based compensation
expenses 1,318 1,357 3,889
Other acquisition-related
operating expenses (**) -- -- 700
-------- -------- --------
Non-GAAP Operating income 1,270 3,272 6,711
======== ======== ========
NET INCOME (LOSS)
GAAP Net income (loss) (534) 20 (498)
Plus:
Amortization of acquisition-
related intangible assets 831 929 3,576
Stock based compensation
expenses 1,318 1,357 3,889
Other acquisition-related
operating expenses (**) -- -- 700
Less:
Income tax effect of
amortization of acquisition-
related intangible assets (325) (316) (1,287)
Income tax effect of stock
based compensation expenses (115) (71) (70)
Income tax effect of other
acquisition-related operating
expenses -- -- (161)
-------- -------- --------
Non-GAAP Net income 1,175 1,919 6,149
======== ======== ========
NET INCOME (LOSS) PER DILUTED SHARE
GAAP Net income (loss) per
diluted share (0.03) 0.00 (0.02)
Plus:
Amortization of acquisition-
related intangible assets 0.04 0.05 0.18
Stock based compensation
expenses 0.07 0.07 0.19
Other acquisition-related
operating expenses (**) -- -- 0.03
Less:
Income tax effect of
amortization of acquisition-
related intangible assets (0.02) (0.02) (0.06)
Income tax effect of stock
based compensation expenses (0.01) (0.00) (0.00)
Income tax effect of other
acquisition-related operating
expenses -- -- (0.01)
-------- -------- --------
Non-GAAP Net income per
diluted share 0.05 0.10 0.31
======== ======== ========
Shares used in computing
diluted net income per share 20,175 20,190 20,150
======== ======== ========
(**) Pre-acquisition costs from potential transactions that have not
materialized.
RETALIX LTD.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
The following table shows the classification of stock-based
compensation expense:
Three months ended Year ended
March 31, Dec. 31,
-------------------- --------
2008 2007 2007
-------- -------- --------
Unaudited Unaudited Unaudited
U.S. $ in thousands
--------------------------------
Cost of product sales 42 15 60
Cost of services and projects 493 232 707
Research and development - net 315 545 1,407
Selling and marketing 115 151 450
General and administrative 353 414 1,265
-------- -------- --------
Total 1,318 1,357 3,889
======== ======== ========
The following table shows the classification of amortization of
acquisition-related intangible assets:
Three months ended Year ended
March 31, Dec. 31,
-------------------- --------
2008 2007 2007
-------- -------- --------
Unaudited Unaudited Unaudited
U.S. $ in thousands
--------------------------------
Cost of product sales 553 557 2,260
Cost of services and projects 197 261 962
Selling and marketing 1 56 92
General and administrative 80 55 262
-------- -------- --------
Total 831 929 3,576
======== ======== ========
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