Retek Reports Higher Second Quarter Earnings
Improved Services Margins, Expense Control Drive Better Results
Minneapolis - July 22, 2004 - Retek Inc. (NASDAQ: RETK) today reported results for its second quarter ended June 30, 2004:
-- Total revenue was $45.5 million and software license and maintenance revenue was $25.6 million compared with total revenue of $42.9 million and software license and maintenance revenue of $21.7 million for the second quarter of 2003. For the first quarter of 2004, the Company reported total revenue of $47.6 million and software license and maintenance revenue of $26.1 million.
-- Services revenue was $20.0 million for the second quarter of 2004 compared with $21.2 million in the second quarter of 2003 and $21.6 million for the first quarter of 2004. Services gross margins improved significantly in the quarter as internal utilization rates increased and fewer third party resources were employed.
-- The contract value for software license fees signed during the second quarter was $6.4 million. Since the beginning of the third quarter, the Company has signed contracts with an aggregate contract value of over $14 million, a portion of which had been expected to close in the second quarter.
-- On a GAAP basis, the Company reported second quarter 2004 basic and diluted net income of $0.02 per share compared with a basic and diluted net loss of $0.11 per share for the second quarter of 2003 and basic and diluted net income of $0.01 per share for the first quarter of 2004.
-- On a non-GAAP operational basis, which excludes non-cash expenses for stock-based compensation, amortization of intangibles, accelerated depreciation, and certain other non-cash charges, and which includes an estimated provision for income taxes, the Company reported a net profit of $0.04 per share for the second quarter of 2004 compared with a net loss of $0.03 per share for the second quarter of 2003 and a net profit of $0.03 per share for the first quarter of 2004.
Among key financial metrics, compared to the first quarter of 2004, cash and investments were essentially flat at $92.5 million at the end of the second quarter of 2004 while deferred revenue declined $2.4 million to $46.2 million at the end of the second quarter. Days sales outstanding (DSO) was 77 days in the second quarter of 2004 compared with 75 days in the first quarter of 2004.
Commenting on the results, Retek`s President and CEO Marty Leestma said, "Our second quarter results reflect the challenging environment in the retail software market. Retailers remain very conservative in their spending and we do not see that changing significantly in the near term. Although the second quarter contract value of $6.4 million was below our guidance, we have closed significant business since the start of the third quarter. As a result, we do not expect the second quarter`s contract value number to materially impact our trend of reported revenue and earnings per share going forward.
We remain somewhat cautious on the outlook for our business in the second half of the year as the conservative tone of retailer spending makes it difficult to assess how conditions in our market may change. We have some important new products coming to market as part of the Retek Xi release in the third quarter and are excited about the opportunities they will bring to the table."
Looking ahead to the third quarter of 2004, the Company anticipates total revenue to be in the range of $44 million to $46 million, software license and maintenance revenue to be in the range of $24 million to $26 million and non-GAAP operational income to be in the range of $0.02 to $0.04 per share.
About Retek Inc.
Retek Inc. (Nasdaq: RETK) is a leading provider of mission-critical software and services to the retail industry. Retek 10 integrates collaborative software with patented predictive technologies, consulting services, and the best practices of customers and partners to help retailers create, manage and fulfill consumer demand. Leading global retailers, including Tesco, Best Buy, Gap, Sainsbury`s, Eckerds and Selfridges use Retek solutions. Retek is a trademark of Retek Inc. Other names may be trademarks of their respective owners.
Forward-looking statements contained in this press release are made under the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or future financial performance and may, in some cases, be identified by terminology such as "may", "will", "should", "expects", "intends", "plans", "anticipates", "believes", "estimates", "predicts", "potential", "continue", or the negative of these terms or other comparable terminology. Any such statements, including Mr. Leestma`s statements that the contract value of new software license fees signed in the second quarter will not materially impact reported revenue and earnings per share going forward, that new products will come to market on schedule in the third quarter and the Company`s estimates of revenue and non-GAAP operational income for the third quarter of 2004 are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, without limitation, fluctuations in our quarterly operating results, our restructuring plans and cost reduction measures failing to achieve the desired results, on-going litigation that may result in substantial costs and divert management`s attention and resources, the demand for and market acceptance of our software solutions, retailers spending allocated budgets, our ability to develop and market new products on a timely basis, general economic conditions in the retail industry and other risks and uncertainties that are described from time to time in the Company`s Annual Report on Form 10-K for year ended December 31,2003, and other reports filed with the Securities and Exchange Commission.
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