Retalix Revs Up Revenues, Net Income

Up 55%, 163%, respectively, in third quarter

RA'ANANA, Israel -- Retalix Ltd., a provider of integrated enterprisewide software solutions to global food and fuel retailers and U.S. grocery and convenience store distributors, has announced record quarterly operating results for the third quarter ended Sept. 30, 2005.

Revenues for the quarter were $52.5 million, an increase of 54.9% from $33.9 million in third-quarter 2004. The company reported net income for the quarter of $4.7 million, or 24 cents per diluted share, compared to net income of $1.8 million, or 10 cents per diluted share, in third-quarter 2004, [image-nocss] and $4 million, or 20 cents per diluted share in second-quarter 2005.

Quarterly highlights included:

Revenues increased 54.9 % to a quarterly record $52.5 million. Operating income for the quarter grew 191% to $6.8 million, or 12.9% of sales. New Retalix InSync platform launched as next-generation, fully integrated software platform for retailers and distributors. Integration of IDS and TCI organizations proceeding on track. First Retalix InSync applications being deployed with two U.S. customers. First two wins for Retalix InSync suite with North American midsized grocers. Fuel provider at premier U.S. discount retailer selected the Retalix StorePoint POS solution. A.S. Watson Retail Group expands the deployment of Retalix StoreLine to 1,500 stores in Asia. Rautakirja, leading convenience chain in Finland, rolls out an integrated POS-Head Office solution. Affiliated Foods Southwest and Berner Food Service selected the Retalix Power Enterprise suite to streamline and optimize their distribution operations.

During the third quarter, we took our Synchronized Retail and Distribution strategy to the next level of success by launching our next-generation, integrated suite of enterprise and supply chain solutions (Retalix InSync) and continuing to secure major customer wins for our enterprise software solutions with retailers and distributors across the grocery, convenience store, food service, and fuel verticals, said Barry Shaked, president and CEO of Ra'anana, Israel-based Retalix.

We have made tremendous progress with the integration of our IDS and TCI acquisitions, and are now uniquely positioned to provide a proven, end-to-end solution that addresses the business and technology needs of food retailers and distributors from the point-of-sale all the way to the warehouse. Our success in the marketplace is reflected in our very strong financial results for the first nine months of the year, with revenues up by 55% to $137 million and operating income up by 209% to $15.5 million year to date, he said.

During the quarter, we held our first international customer conference at which we presented our combined customer set with our full scope of software solutions and outlined a detailed technology roadmap for the Retalix InSync platform. Feedback from the hundreds of assembled customers and business partners confirmed that the direction in which we are driving our technology is aligned with the top business imperatives of our customers. And I am pleased to report that we have already won two deals for the Retalix InSync portfolio in the grocery segment, and we have already deployed key modules of the Retalix InSync suite with two different customers. We continue to make a robust level of investment in developing the next generation of solutions and enhancing the functionality of our existing applications, with nearly $33 million in R&D in the first nine months of 2005, added Shaked.

In North America, we secured additional customers for our synchronized retail and distribution solutions. In the third quarter, a regional fuel provider for a major discount retailer ordered StorePoint licenses for 1,000 stores. A regional convenience store chain with 51 stores selected our Retalix DemandAnalytix (DAX) solution. Also, a significant number of food and consumer goods distributors selected the Retalix Power Enterprise software suite for deployments.

During third-quarter 2005, revenues contributed by North America made up $31.1 million, or 59.2% of sales, with $21.4 million or 40.8% of sales, coming from the International and Israeli business divisions. Gross margin in third-quarter 2005 was 65.7% of sales, as compared to 66.1% in third-quarter 2004, and 64.9% in second-quarter 2005.

In third-quarter 2005, Retalix generated $2.8 million in cash flow from operations, or $10.2 million for the first nine months of 2005. As of Sept. 30, 2005, the company's balance sheet showed liquid financial resources (cash and equivalents, deposits and marketable securities) of $65.2 million, $1.2 million in long-term debt and shareholders' equity of $199.9 million.