NCR Voyix Corp (VYX) 2005 Q4 法說會逐字稿

Good morning.

My name is Lisa and I will be your conference operator today.

At this time I would like to welcome everyone to the Retalix fourth-quarter and full-year 2005 results conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks there will be a question-and-answer session. (OPERATOR INSTRUCTIONS).

Thank you.

Mr. [Jordan], you may begin the conference.

Thank you, Lisa.

Welcome to the Retalix fourth quarter and fiscal year 2005 earnings call.

Leading the call is Retalix's Chairman and CEO, Barry Shaked.

Joining him is Danny Moshaioff, the Company's Chief Financial Officer, and Victor Hamilton, President and CEO of Retalix USA.

Before I turn the call over to them I would like to remind our listeners that management's remarks may contain forward-looking statements.

These statements include comments regarding anticipated demand for Retalix's enterprise software products; expectations with regard to implementation and rollout of existing license agreements; the integration of Retalix's supply chain management applications into Retalix's overall solution; and management's expectations as to the Company's future financial performance.

Such forward-looking statements are subject risks and uncertainties and therefore Retalix claims the protection for such statements contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today and we'd like to refer you to a more detailed discussion of all these risks and uncertainties contained in the Company's filings with the SEC and in particular on Form 20-F.

For those of you who are unable to listen to the entire call at this time, we're going to make a recording available and it will be available on the Retalix website at www.Retalix.com in the Investor Relations section.

With those formalities out of the way, it's my pleasure to turn the call over to Barry Shaked.

Thank you, Alan.

Good morning to our listeners in the U.S.; good evening to those of you joining us in Israel and welcome to all of you. 2005 was a year of explosive growth and enormous operational achievements for Retalix.

I think all of you are aware of our many successes during the year and by now you have seen our press release announcing our 2005 financial results.

The highlights of 2005 include -- we achieved our goals both at the top and bottom line; we strengthened our position as the key technology partner for many of our most successful food and fuel retailers and distributors around the world; we won new customers in new territories; and we acquired and integrated companies that expand our product offering and market presence.

We made tremendous progress in realizing our vision of fully synchronized set of enterprise software solutions and we experienced excellent customer acceptance of our next-generation enterprise software platform.

These accomplishments contribute to our strong financial results.

Revenues for the fourth quarter grew by 52% to $54.5 million.

Net income for the quarter was $6.3 million or $0.32 per diluted share.

For the full year revenue grew by 54% to $191.3 million and net income was $15.5 million or $0.79 per diluted share.

We generated $12.4 million in cash from operations.

And we ended the year with a strong balance sheet with $66.6 million in cash and securities and $206.2 million in shareholder's equity.

I'm pleased to be able to say that we are -- that we've begun 2006 ideally positioned to build on the successes of 2005 and our leadership as the only end-to-end software provider focused on the needs of the food and fuel retailers and distributors.

We see strong growth opportunities in our markets.

The acquisitions we made in 2005 contributed to the stronger position we are in today, but also meant we were a large and more complex organization.

In turn, that required more time than originally anticipated to complete our year-end financial audit and presented new considerations.

As you have seen in our release today, we also announced changes to our reported results in the second and third quarters of 2005.

This is due to changes in the allocation of the purchase price paid attributed to the acquisition of IDS and TCI during 2005.

These restatements are not operational issues and they will not impact our outlook for 2006 and beyond.

In a moment Vic and I will discuss the markets and the strong opportunities that we believe are ahead.

But first I will ask Danny to provide a financial review.

Thanks, Barry.

I would like to thank everyone for the understanding and patients during the past few weeks while we worked on our year-end audit and the rescheduling of our reporting that it necessitated.

As Barry mentioned, 2005 was a year of tremendous growth and operational achievement for Retalix.

Our U.S. operation expanded considerably with significant acquisitions which in turn required more time than originally anticipated to audit.

We are also determined that the Company should change allocation of the purchase price paid as part of the acquisition of IDS and TCI.

As you recall, we announced both of these acquisitions in April of 2005.

During the year end audit the (indiscernible) auditors took the position under accounting rule FAS 141 that certain items such as open contracts and deferred revenue should have been recorded at fair value and thus amortized over the estimated life in conjunction with attributed fair value.

The primary impact of these restatements on the results of the second quarter were reductions of revenues of $147,000 and the cost of sale of $2.5 million and a reduction of net income of $1.6 million and the primary impact of these restatements on the third quarter were a result of the reduction of revenues of $128,000, an increase in cost of sales of $373,000, and a reduction of net income of $301,000.

These changes will also be detailed in or filing with the U.S. SEC.

The restatements will not impact our operation or our position in the market and the fourth quarter -- the fourth quarter of 2005 and year-end results demonstrate our strength.

I'd like to note that during the 2006 we will report our net income and earnings per share on both a GAAP basis and non-GAAP bases that excludes the amortization of intangibles related to acquisition and allocation of employee option expenses resulting from FAS 123.

This non-GAAP presentation of net income and earnings per share will enhance the understanding of our historical financial performance and it will facilitate analysis of the business and meaningful period-to-period comparisons.

Now to the results.

Net revenues for the fourth quarter amounted to $54.5 million compared to $35.9 million in Q4 of 2004, an increase of 52%.

For the year revenues were 193, an increase of 54% over 2004.

In terms of geographical break down, in 2004 the U.S. operations revenues were about 64% of the operations and international were 36%.

In 2005 U.S. sales amounted to 57% of our revenues while the international operations amounted to 43%.

Gross margin for the quarter was 63.9 and 63.7% for the year compared to 66.1% in 2004.

Part of this decline is attributed to a onetime amortization of costs related to the IDS and TCI acquisitions.

Operating profit for the fourth quarter amounted to $8.6 million compared to a profit of $2.4 million in the fourth quarter of 2004 and operating profits for 2005 were $21 million compared to a profit of $7.4 million last year.

Net profits for the quarter were $6.3 million compared to $2.1 million last year and net quotas for the year were about $15.5 million compared to $6 million in 2004.

Earnings per share for the quarter were $0.32 fully diluted and $0.79 for the year.

The non-GAAP operating profit for 2005 was $27 million or 14.1% while non-GAAP net income was $19.6 million or 10.2% of sales.

There were 19,000,884 fully diluted shares in the last quarter and 19,000,674 fully diluted shares for the year.

Net cash and marketable securities amounted to $64.7 million on December 31st compared to $104.3 million on December 31st of last year and that difference was due in connection to the cash portion of our acquisition of IDS and TCI.

Our cash flow position remains strong with positive operating cash flows of about $2.2 million for the quarter and 12.4 for the year.

Our DSO for December 31st was 70 days.

Shareholders equity amounted to $206 million out of $274 million, about 75%.

That completes the financial review.

Now back to Barry.

Thank you, Danny.

Now let me address what is driving our success.

Food retailers and distributors are in the midst of a shift in their information technology requirements and usage.

As they think about investing in next-generation technology they realize that internal development is no longer an economical justifiable option.

They are looking for a staged transition from legacy and home-grown applications to modern fully-integrated end-to-end service-oriented solutions that deliver measurable value to the bottom line and they want to see solutions that incorporate deep domain expertise in their industries.

As a result, IT budgets that used to be spent in-house on home-grown systems are now directed at external independent software vendors.

Billions of dollars in annual spending is at stake.

These conditions put Retalix in an excellent position.

Over the past 18 months we have rearchitected the supply chain and warehouse management solutions that we acquired with OMI in 2004.

We have also been enhancing our new platforms and applications with the unique functionalities found in the enterprise applications that were developed by IDS and TCI and acquired by Retalix in April of 2005.

I am pleased to report that this expensive development work has been very productive.

Since we launched Retalix InSync six months ago, our next-generation enterprise platform has attracted a great deal of interest from food retailers and distributors who understand the benefits of Retalix's approach.

Some of them have already decided to become early adapters of Retalix InSync and many others are evaluating it as the next-generation enterprise solution.

The retail software industry is undergoing consolidation and globalization as the big enterprise software vendors realize the needs of retailers and distributors for an integrated enterprise enterprisewide solution.

In this competitive landscape Retalix is uniquely positioned as the only end-to-end solution provider that puts food and fuel retailers and distributors at the focus of its attention.

This focus gives us substantial lead on our competitors and the industry is well aware of it.

Now we'd like to ask Vic Hamilton, CEO of Retalix USA, to review our activities in North America which accounted for 57% of our overall sales there in 2005.

Thanks, Barry, and hello to all of our listeners.

The fourth quarter and 2005 as a whole have been very good for Retalix USA.

As Barry mentioned, customer acceptance for our new suite of Retalix InSync applications has been very strong.

No less than five retailers and distributors have already signed up for various parts of our synchronized enterprise and supply chain platform.

Earlier this month we made the first public announcement of a Retalix InSync implementation by associated grocers of Baton Rouge, Louisiana.

Our latest two wins with Retalix InSync combined our new Retalix InSync offering with our classic supply chain applications.

One of the largest wholesalers in the U.S., who operates dozens of distribution centers and is rapidly growing, will deploy our classic supply chain solutions in combination with the Retalix InSync master data management.

Another win for Retalix InSync in the fourth quarter was a Tier 1 supermarket chain that will be installing the Retalix InSync master data management to connect their existing classic Retalix supply chain and headquarters systems into a single repository of data for these and future applications.

Just as exciting as the acceptance of Retalix DemandAnalytX, or DAX, our demand forecasting and order optimization solution.

During the fourth quarter we announced that Wesco on the Go, a self distributed operator of 51 convenience stores in Michigan, will deploy DAX to achieve demand driven distribution to their stores.

In addition, two other convenience store chains that are fully rolled out with Retalix StorePoint in more than 1,500 sites will also -- have decided to implement DAX as well.

We feel this is tremendous potential for cross selling these applications which will bring additional value to our existing customers.

I believe that DAX will be an engine of growth for many years to come for our Company.

As you know, point-of-sale upgrades among grocery chains in the U.S. were delayed in 2005, but we believe the situation will be improving going forward.

Last year we made significant progress in our ongoing projects with two Tier 1 chains, Publix and Hy-Vee.

They both selected Retalix Store Line as their next-generation store solution.

However, other leading chains deferred the inevitable decision of the store solution to replace their aging systems.

The situation will not last for long since the incumbent providers of point-of-sale systems, such as IBM and NCR, are more focused on maintaining their hardware presence instead of investing in POS software.

With our excellent reputation as the point-of-sale software provider for huge multinational food retailers, Retalix is perfectly positioned to be the vendor of choice for most of America's leading grocery retailers.

So when will this happen?

Experts are pointing to 2006 and 2007.

For example, IHL Consulting Group recently conducted a store system study that focused on retail technology spend trends.

The study was published by retail information systems news and according to the survey 28% of grocery retailers plan to make a POS software decision in 2006.

Another leading consultancy group that covers our industry, AMR Research, has recently estimated that 2006 will be the year of marketed increase in POS projects.

With heavy rollouts throughout 2007 and beyond.

We are definitely positioned to fill this potential in North America as we do in other parts of the globe, and we have a great team of professionals that are experts in what the food and fuel industries need.

We continue our targeted sales and marketing efforts and we feel very confident about the coming year.

Thank you.

Thank you, Vic.

National activity accounted for 43% of our revenues in the full year of 2005.

The international markets hold great potential for us and we made strong progress in 2005 in all international segments.

For example, during the fourth quarter we announced that Woolworth's Australia has begun rolling out Retalix Store Line across all its retail chains commencing with 750 Woolworth supermarkets and 120 Big Y general merchandise stores.

In Japan we accomplished our first win in the grocery market.

The supermarket chain Zen Nippon Shokuhin selected Retalix store headquarters and loyalty solutions for 1,000 of it stores across Japan.

Also in Japan we completed the rollout of Retalix Store Line in more than 150 Drug-Eleven stores.

In Europe we are running a pilot at three Tier 1 grocery retailers that will be rolling out Retalix Store Line as the next-generation software solution.

In the fuel segment our multi country rollout for a major global petroleum chain is progressing well.

A new territory that we entered during the fourth quarter is Russia where we won a deal to deploy Retalix StorePoint fuel and headquarters to a chain of 600 sites across the country.

This win makes us a significant player in one of the fastest-growing retail markets in the world.

In India, which is another fast-growing retail market, Retalix solutions have already been installed in 750 convenience and fuel sites operated by Reliance Industries.

As pleased as we are with our results in 2005, we believe that we are only beginning to realize the full market opportunities available to Retalix.

We see good growth opportunities and look forward for another strong year for Retalix in 2006.

We expect revenues for 2006 to be between $215 and $225 million.

Traditionally our revenues are weighted towards the second half of the year and we expect this trend will continue.

And we will record about 45% of our revenues in the first half of 2006 and about 55% in the second half.

Our non-GAAP operating income is expected to be between $30.5 million and $26 million and non-GAAP operating income -- and the non-GAAP operating income does not include $4.7 million of amortization of intangibles related to acquisitions and $2.9 million due to allocation of employee stock option expenses.

Non-GAAP net profit is expected to be between $21.7 and $25.7 million.

Our GAAP net profit is expected to be between $16 and $20 million.

Before I close I would like to thank all the Retalix employees for their efforts in 2005 and thank our customers and shareholders for their trust and support.

We were especially proud to have our leadership position and our potential publicly acknowledged by Red Herring Magazine which named Retalix in its select list of 100 small cap companies during the fourth quarter of 2005.

We believe our company has many strengths and is ideally positioned for another strong year in 2006.

Now we'd like to pass the call back to the operator and we will be happy to answer your questions.

(OPERATOR INSTRUCTIONS).

Raghavan Sarathy.

A few questions on the auditing.

Is the audit of the U.S. operations now complete?

And I was also wondering if the fourth quarter numbers you published are audited.

We did not publish audit numbers.

It will take us another couple of weeks.

We plan to file our 20-F when we complete the audit that should take place in about a month or so.

And is the audit still going on?

You said --.

There are still things that are looked at.

But as I said, these are unaudited numbers which we feel very comfortable with.

Can you give us some sense on how much is yet to be complete?

The main issues were done; it's a lot of paperwork that has to be still completed.

Okay.

Was there any impact on cash flows that you reported in the second or the third quarter?

If so how much?

No, none.

All of them were non-cash items.

Okay.

And in terms of the -- you mentioned that the cost of sales increased by $2.5 million in the second quarter -- $2.5 million in the second quarter.

Was the impact on costs related to product sales or services or both?

Yes.

On products.

On products?

Okay.

Yes.

And just a couple more questions.

Was the impact on non-GAAP the same as GAAP income or was it different?

No, non-GAAP it doesn't appear.

We take it out.

Okay.

These are related to -- so these are related --

These are related to the acquisitions that one time non-GAAP adjustment.

Okay.

What was the contribution from IDS and TCI during 2005?

We don't -- we look at the whole business now.

We don't really break it down because we integrated quite a few operations and so we really don't look at it as on a company level.

We look at it more as products and services and we do not look at it as company.

Okay.

Now in your prepared comments you mentioned that gross margin was impacted by a one-time amortization expense related to IDS.

How much was the onetime cost and could you give us some sense on what to expect to in terms of gross margin going forward?

We think it will be about 65% which is the number I think you're using, that's the number I'd use.

Okay thanks.

I'll let others ask questions and I'll come back.

Jim Yin, EKN.

Your operating expense was a little bit lower than expected and it also shows a sequential decline in all three line items -- R&D, sales and marketing, and G&A.

Can you explain the decline (multiple speakers) can you explain the decline and what do you expect going forward?

The decline is a result of really continuing integrating TCI and IDS.

We are at the more or less final stages of integration of G&A sales and marketing and some of the R&D and I think the fourth-quarter numbers would be an indication.

They may still decline a bit more, but that's more less what we're talking about.

Do you expect though that through headcount reduction as it is how much the headcount reduction occurred in Q4?

Yes, we reduced our headcount in Q2, Q3 and Q4 and may continue doing so in 2006 too.

I also have a question about your guidance.

It seems like you maintained revenue guidance but your non-GAAP earnings is slightly lower than your prior guidance.

Right.

The only thing is in prior guidance we didn't take into account the tax effect these guidances are net of tax.

Net of taxes?

Yes.

Is there a change in the tax rate?

No, we just didn't include them in our previous announcement.

Okay, because previously 23 to 27 million?

Right.

The other assumptions are the same?

Yes.

Back to the question about the gross margin.

Do you expect the gross margin to increase back up to the previous level of 66%?

Yes, 65 -- I would view the 65%, as I said, some onetime items here because of the treatment of the acquisition.

So they will creep up a bit.

Okay.

Do you provide a revenue breakdown by different -- the three product categories?

No.

Okay.

Do you provide a revenue breakdown by existing and new customers?

No, we don't do that.

Okay.

That's all the questions.

Thank you.

Roni Biron, Oscar Gruss.

I have a couple of questions.

First some follow ups regarding the P&L.

You mentioned that OpEx is expected to stay relatively the same.

Do you refer in absolute terms or as a percentage of revenues?

In absolute terms and you know there may be a variation from quarter-to-quarter because we have some work that's done by outsourcing elements.

Not all the employees we use are ours; so we may -- so the cost may shift a bit between the quarters, but the reduction that we have in the fourth is really, as I said, the result of the integration and I think we reached -- we finished most of the integration benefits here.

And regarding the tax rate, what should we be expecting in '06?

Same as you did in the past.

For modeling purposes I would use 28 -- between 28 and 30%.

Okay.

And another question regarding the InSync platform and the DAX, it seems that there are more geared towards the U.S. market.

Do you see any potential for these applications also in the international market?

This is Barry.

No doubt that there's potential in the international market.

However, we have first focused on the U.S. market as 60% of the top 100 retailers in the U.S. are using Retalix intellectual property has been a good launching market and we will see in 2006 adopting -- some retailers adopting DAX and [low to see] in the international market world.

Okay, thank you.

David [Kaplan], UBS.

Another quick question on the gross margin.

In Q4 the gross margins were down more significantly in the services and projects.

Were they more affected by the accounting -- by the accounting changes?

They were affected I think by about $1.7 million in the fourth quarter.

So that's the amount that was affected.

You can calculate in terms of percentages.

Also you have to remember that IDS and TCI did bring our margins down from before the acquisitions.

So you have to compare the gross margin to our gross margin after the acquisition, but the impact on the cost of sale in the fourth quarter was about $1.7 million in terms of the percentages.

But as far as being broken down between products and services and projects, did it have more of an effect on the service in the project?

No, I think it had an equal effect.

I don't have the breakdown here.

Maybe we can take it off line.

Okay.

And just going forward as far as the continuing of the effect on -- the accounting changes on the revenues and cost of goods sold.

About how many quarters going forward can we continue to expect to see that effect?

There will be a minor effect in Q1 and that's it.

That's the end of it.

Okay.

And then one last question as far as R&D is concerned.

We talked a little bit about how the operating expenses were down in all three aspects of operating expense, that R&D was not down as much or if at all.

Can you give me a little bit of -- give us an idea of what the R&D is going to look like going forward?

I think it will stay at more or less this level.

Okay, great.

Thanks very much.

[Oren Robinson], [Excelon].

I just want to understand something.

Your estimate for 2006 for the net income is about $16 to $20 million, right?

Right.

And in 2005 actually the net income was about $15 million and with other reduction it was about $17.4 million.

So if your estimate is about $16 to $20 million I -- can you explain to me why you see (multiple speakers)?

Yes, because we have not -- what you have to compare is the non-GAAP element.

And what you have to compare is the non-GAAP net revenue, net income because we have an additional expense because of the options that we mentioned before and if you look at the amortization of other assets, not the one time effect, but the continuous effect, you have in 2006 four quarters compared to only three quarters in 2005 and that's the main issue.

That's the main reason we have really provided the non-GAAP figures.

So if you really compare the non-GAAP figures you get the growth that you're really looking -- and we all are looking for.

Thank you, guys.

Devang Kothari, C.E.

Unterberg, Towbin.

I just had a quick question.

It seems like you reduced your net -- non-GAAP net income guidance not much, just slightly from when you last issued it a couple of weeks ago.

And I just wanted to understand what might have changed in your thinking.

Well, actually, the only thing we changed, we put the net tax effect which we omitted or didn't mention last time.

So the figures now are net of tax.

Actually, we didn't change the guidance; we just corrected the tax issue regarding them.

Again, it is a theoretical tax that we are taking on our computation.

Alan Doft, Doft & Company.

I would very much appreciate it if you could share with us your vision for the Company going forward, where you hope to be let's say five years from now and what you expect to be doing.

We have been talking today about the recent past and a little bit about the future, but if you could just take us past the horizon a little bit and share with us some of your thinking, I would very much appreciate it.

We see the retail industry as an industry that is retail is detail, and detail needs a lot of technology to handle it.

And we see ourselves definitely providing end-to-end solutions for retailers in the food, fuel, feed stores, distribution and foodservice industries where we are providing full optimization and execution of the enterprise, the way out and the store.

But more so, we see a lot of inefficiencies between the retailers and the distributors and suppliers, and we see the connection of supplying some method of communicating far better visibility, things that you see Wal-Mart doing with its suppliers, for the entire industry through Retalix technology which will bring a lot of efficiencies.

And, of course, around efficiencies people are willing to pay a lot of money for them.

So we see ourselves playing here with the retailers, the distributors, the suppliers and the connection between them, and we see that we will take it to other industries once we master the grocery industry, which is probably the most complex industry.

Thank you.

You mentioned Wal-Mart.

How do they handle their stuff?

Is that all done in-house, or do they have outside suppliers for their systems?

Wal-Mart's traditionally, and the way it seems like, will continue to build everything in-house.

They have got budgets that other retailers haven't got, and they are trying to take that advantage which is driving the other retailers to go to packaged solutions, which actually incorporate the business rules of the whole industry to be good or better than what Wal-Mart has got.

And that is why you can see a shift from in-house development with the other retailers to packaged solutions, and that is why you can see a lot of companies growing.

Actually, the industry is just going around 6%, but companies like ours are growing 50% plus today a year.

And a lot of it was taken not only from competition but from budgets that have been released from internal to external.

And at what point in time would you guess you could start transferring your knowledge from supermarket retailing gasoline to general retailing?

How far down the horizon is that?

Look, we've got in some markets, very specific markets we are testing our technology.

But I would stay at the right timing -- I wouldn't give it a specific date, but as there is consolidation in the market and the competition between the different vendors -- software vendors is becoming harder and stronger -- becoming stronger and weaker being consolidated or they vanish, upon the correct opportunity we see ourselves moving into other verticals inside retail.

Thank you.

(OPERATOR INSTRUCTIONS).

Raghavan Sarathy, Ferris Baker Watts.

Vic, you mentioned that you're expecting point-of-sale upgrades in the U.S. to happen in 2006, probably 2007, and you mentioned two studies.

Looking at your guidance here, it just seems to me that doesn't seem to reflect your optimism here.

Can you guys talk about how much you believe this is going to happen in 2006?

I truly believe that 2006 and 2007 are going to be years -- great years for us in point-of-sale.

I mean, the studies show this.

We've got a lot of activity in the marketplace right now.

Our pipeline has never been stronger.

And we'll wait and see.

But I mean we truly do believe that 2006 and 2007 are going to be the turning points for us regarding point-of-sale.

Can you give us some color on some of the pilots probably you're doing here in the U.S.?

You mentioned the names but --.

Rag, you know we don't give that information.

Yes, you don't have to give the names, but can you give us some color on what sort of pilots you're running?

No, no.

We do not list the pilots that we have in place.

Okay.

In terms of your guidance, it's largest in the revenue guidance as well as your non-GAAP EPS and GAAP -- it's kind of larger -- the range is larger than usual.

Could you comment on whether that was related to the new accounting or was it related to project rollouts that may or may not happen?

Can you give us some color on that?

You know, it's just as we grow we'd like to be a bit more conservative.

We saw that that's more or less a standard in the industry of giving margins and we just joined that standard.

But do you anticipate having projects that may or may not happen to backup the year?

But that always happens and we always take that into account.

I also wanted to raise one more point that most of the revenues that we are accounting for in 2006 are from existing customers.

And when we get new customers the majority of the revenue we will see in 2007 and 2008.

So the things that Vic was talking about are just emphasizing our future growth in the years to come.

Right.

So on that if I could follow up.

So given that the majority of the revenue is coming from existing customers and sort of pilots going into deployment, why do we see such a large range in the guidance now?

You know, it's just being a bit more conservative.

We'll be an over $200 million company.

If you look at other companies in our area, our comps are giving ranges and we just decided to give ranges.

I assume you'll take the midpoint, right?

All right.

Now just one more question.

You talked about a lot of the projects; you know, in France you're making -- you had a pretty good year last year in terms of Tier 1 wins.

Can you, just (indiscernible) point out what projects or what's going to drive growth this year among all the things you mentioned?

High-level?

Again, in Europe it will be a lot of store solutions and I mean in the international markets -- the international market is having a tremendous growth.

If you look at the figures they grew in 2005 by huge numbers.

We gave you the numbers when I gave you the percentages so you can do the calculation.

And we have quite a lot of projects in place that will continue to generate revenues for us in '06 and '07.

All right, thank you.

Arnon Rubinstein, Shore Capital.

I think the one issue haven't talked about is if you can tell us a little bit more about StoreNext USA.

We talked about the big wins, but how is this venture going on?

Looking at StoreNext, which is connecting our retailers to our [server phones] in the intention to connect them to our -- to the suppliers and distributors looking at our long-term vision and the execution upon that, we definitely see an increase in the online connected stores that we've grown over 2,000 stores that are on a reliable basis connected to our server phone.

We continue to sell licensed software to this industry and I believe that in 2006 we'll see our first dollar revenues from those suppliers which was a vision of StoreNext.

Thank you.

(OPERATOR INSTRUCTIONS).

Roni Biron, Oscar Gruss.

Just one follow-up regarding your balance sheet -- cash flow to be more surprising precise.

You recorded an investment of $3.4 million in subsidiaries and other assets.

Can you explain the nature of this item?

In 2005 I think it's mainly a -- let me see.

An acquisition we did in Italy.

We completed and we bought 100% of a company in Italy from Tektronix and that's an investment.

Okay, thank you.

At this time there are no further questions.

Thank you for your time today.

We believe Retalix is ideally positioned for a strong year in 2006 and we look forward to speaking with you again next quarter.

Thank you very much.

This concludes today's Retalix fourth-quarter and full-year 2005 results conference call.

You may now disconnect.