Retek Announces Continued Strong Growth in Third Quarter; Software License Revenues up 103%

Business Wire, Oct 17, 2001

Business Editors

MINNEAPOLIS--(BUSINESS WIRE)--Oct. 17, 2001

Retek Inc. (Nasdaq:RETK), the leading provider of software to help retailers create, manage, and fulfill consumer demand, announced that its third quarter sales rose 80% to $47.5 million compared with the year earlier quarter. Software license revenue rose 103% to $35.1 million. After tax operational income, which excludes non-cash and other charges, was $0.03 per share in the third quarter compared with a loss of $0.12 per share in the year earlier quarter. Compared with the second quarter of 2001, total revenue rose 9% and software license revenue rose 11%. In the third quarter, the Company took an $8 million charge related to impairment and lease termination costs connected with the move of its headquarters into a new leased facility in Minneapolis.

The Company added seven new customers in the third quarter and expanded relationships with several others. New customers included Toys'R'Us, Boot's, one of the U.K.'s top health and beauty products retailers, and Nexcom, the U.S. Navy's retail operation with annual revenues of over $2 billion. Key recent mid-market competitive wins include Lindex, one of Sweden's top apparel retailers, and Country Road, a leading Australian retailer.

The Company's financial metrics continued to be solid with days sales outstanding (DSO) at 75 and cash flow from operations remained very strong at $8 million.

Commenting on the results, Steve Ladwig, President and CEO of Retek said, "In these challenging times, Retek has again delivered solid financial results which reflect the underlying strength of our business. We continue to see good demand for our solutions and the breadth of our solution set gives us many ways to help retailers address their business problems, problems that are made worse by the slowing worldwide economy. I am especially pleased with the performance of our non-U.S. business, which secured key competitive wins at a number of new customers and effectively built on existing relationships. In the U.S., we added several strong new names and moved sales cycles along at a host of other retailers.

In this difficult period for the software industry, the combination of Retek's product and market focus, the strength of our technology, and the size and quality of our customer base give me confidence we can continue to meet the guidance we have provided to the financial community. We have entered the fourth quarter with over 75% of our software license objective under contract for the quarter and have over 65% of that objective under contract for the next six months."

The Company maintains its guidance for revenues of $180 to $185 million for 2001 and after tax operational income, which excludes non-cash and other charges, of $0.08 to $0.11 per share. For 2002, the company is maintaining its guidance for revenues of $245 to $270 million and after tax operational income, which excludes non-cash and other charges, of $0.40 to $0.50 per share.

About Retek Inc.

Retek Inc. is a leading provider of software solutions and services to the retail industry. Retek's collaborative solutions help the retail industry create, manage and fulfill consumer demand. Many of the world's leading retailers use Retek solutions, including A&P, Tesco, Best Buy, Family Dollar Stores, Eckerd Corp., Kohl's Department Stores and Gap Inc. For more information, visit http://www.retek.com, or call 1-888-61-RETEK. Retek can be contacted in Europe at 44 20 7563 4646.

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. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Such factors are described from time to time in the company's Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission.

                              Retek Inc.
                 Consolidated Statements of Operations
          (Unaudited, in thousands, except per share amounts)

                             Three Months Ended    Nine Months Ended
                                September 30,        September 30,
                              2001        2000     2001       2000
                              ----        ----     ----       ----
Revenue:
    License and maintenance  $ 35,121   $ 17,291  $ 92,942   $ 35,229
    Services and other         12,400      9,071    35,245     24,686
                               ------     ------    ------     ------
       Total revenue           47,521     26,362   128,187     59,915
Cost of revenue:
    License and maintenance     8,750      6,942    24,335     16,415
    Services and other          9,137      6,605    25,920     17,992
                               ------     ------    ------     ------
       Total cost of revenue   17,887     13,547    50,255     34,407
                               ------     ------    ------     ------
Gross profit                   29,634     12,815    77,932     25,508
Operating expenses:
    Research and development   10,227      9,404    29,445     26,198
    Sales and marketing        14,060      9,923    38,487     28,236
    General and
     administrative             3,499      2,876     9,795      7,894
                               ------     ------    ------     ------
Total operating expenses
 excluding non-cash,
 impairment and lease
 termination charges           27,786     22,203    77,727     62,328
                               ------     ------    ------     ------

Operating income/(loss),
 excluding non-cash,
 impairment and lease
 termination charges            1,848     (9,388)      205    (36,820)
Acquisition and compensation
 non-cash charges               5,862      5,235    14,189     17,201
Impairment and lease
 termination charges            8,197          -     8,197          -
                              -------    -------   -------    -------
Operating loss                (12,211)   (14,623)  (22,181)   (54,021)
Other income, net                 568         75     1,116      1,526
                              -------    -------   -------    -------
Loss before income tax
 benefit                      (11,643)   (14,548)  (21,065)   (52,495)
Income tax benefit             (4,788)    (5,041)   (6,292)   (16,488)
                             --------   --------   -------   --------

Net loss                    $  (6,855)  $ (9,507) $(14,773)  $(36,007)
                            =========  =========  ========  =========

Basic and diluted net loss
 per share                  $   (0.14)   $ (0.20) $  (0.30)  $  (0.77)
Weighted average shares used
 in computing basic and
 diluted net loss per common
 share                         50,712     47,441    49,504     46,995

Reconciliation to
 operational EPS:
Operating loss              $ (12,211)  $(14,623) $(22,181)  $(54,021)
Acquisition and compensation
 non-cash charges               5,862      5,235    14,189     17,201
Impairment and lease
 termination charges            8,197          -     8,197          -
Other income, net                 568         75     1,116      1,526
                            ---------  ---------  --------  ---------
Net operational
 income/(loss) before income
 tax/(benefit)                  2,416     (9,313)    1,321    (35,294)
Operational tax
 provision/(benefit)              906     (3,492)      495    (13,235)
                            ---------  ---------  --------  ---------
Operational income/(loss)   $   1,510  $  (5,821) $    826  $ (22,059)
                            =========  =========  ========  =========

Basic and diluted net loss
 per share, operational                 $  (0.12)            $  (0.47)
                                        ========             ========
Shares used in computing
 basic and diluted
 operational net loss per
 share                                    47,441               46,995
                                         =======              =======
Diluted net income per
 share, operational           $  0.03              $  0.02
                              =======              =======
Shares used in computing
 diluted operational net
 income per share              54,851               53,804
                              =======              =======


                              Retek Inc.
                 Consolidated Condensed Balance Sheet
                       (Unaudited, in thousands)


                                           September 30,  December 31,
Assets                                           2001         2000
                                                 ----         ----
  Cash, cash equivalents and investments     $   75,272   $   51,775
  Accounts receivable, net                       39,739       27,972
  Deferred income taxes                          62,923       49,818
  Other assets                                   15,009       11,275
  Property and equipment, net                    26,452       26,249
  Intangible assets, net                         60,583       28,094
                                             ----------       ------
            Total assets                      $ 279,978    $ 195,183
                                              =========    =========

Liabilities and Stockholders' Equity
  Accounts payable                           $   12,672    $  11,089
  Accrued liabilities                            16,065        6,022
  Deferred revenue                               69,706       53,024
  Note payable                                      254          453
                                             ----------   ----------
             Total liabilities                   98,697       70,588

Stockholders' equity
     Total stockholders' equity                 181,281      124,595
                                              ---------    ---------
Total liabilities and stockholders' equity    $ 279,978    $ 195,183
                                              =========    =========