Matrikon(TM) releases record results for the first quarter of fiscal 2010 and
declares $0.03 quarterly dividend

    
    -------------------------------------------------------------------------
    Highlights
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    -  Record revenue of $25.45 million in Q1-10, representing growth of 30%
       compared to Q1-09 revenue of $19.58 million

    -  Record consulting revenue of $13.19 million in Q1-10 compared to
       $12.15 million in Q1-09

    -  Q1-10 net income of $2.77 million or $0.09 per share compared to
       $2.76 million or $0.09 per share in Q1-09

    -  Several significant recent wins, including both high value consulting
       and industry applications, along with a growing pipeline, indicate
       strategy is bearing results and are expected to fuel growth throughout
       the year

    -  Board of directors declares quarterly dividend of $0.03 per common
       share
    

EDMONTON, Jan. 11 /CNW/ - Matrikon Inc. (TSX:MTK), a leading provider of solutions for industrial intelligence, today reported financial results for the first quarter of fiscal year 2010 which ended November 30, 2009.

Matrikon president and CEO Nizar J. Somji commented on the quarter: "Riding on the momentum from activity that started to pick up late in Q4-09, our first quarter places us back on track. Some of our recently announced contract wins resulted in record consulting and equipment revenue and strong software revenue in the quarter. We expect that as we continue to execute these contracts and close other opportunities in our pipeline, we will continue to grow our top line and profitability throughout this fiscal year and beyond.

"These record results demonstrate the turning point we have reached as a company; we have built a sustainable business model based on high value consulting engagements and our integrated industry solutions. As a long-term business strategy, we expected it to bear fruit in the last fiscal year. However, the global economic downturn set things back by a year. Our results are now back on track and we expect projects of the magnitude we have announced recently to become the new norm rather than one-off occurrences as we continue to execute our strategy."

Revenue for the first quarter was a record $25.45 million compared to $19.58 million in Q1-09 and $17.62 million in Q4-09. Net income in the first quarter was $2.77 million or $0.09 per share compared to $2.76 million or $0.09 per share in Q1-09 and $0.49 million or $0.01 per share in Q4-09.

Matrikon's board of directors declared a quarterly dividend of $0.03 per common share to all shareholders of record on January 20, 2010, payable on January 29, 2010. The dividend is an eligible dividend for Canadian tax purposes.

    
    Additional Highlights:

    -  Consulting revenue increased by $1.04 million over Q1-09 and by
       $2.32 million compared to Q4-09 as a result of new project wins which
       led to improved utilization and a 6% increase in average daily rate
       compared to Q1-09 and 18% compared to Q4-09.

    -  Record Equipment revenue: Equipment revenue was a record $5.63 million
       in Q1-10 as we delivered a significant portion of the equipment (third
       party hardware and software) on our major industrial security project.
       We continue to work on the consulting components of this project. With
       a lower margin than other revenue lines, this significant increase in
       equipment revenue shifted our revenue mix and impacted both gross and
       net margin.

    -  Subsequent to the quarter, we won and announced a US$15.7 million
       contract to build a remote oil field monitoring program for a Middle
       East oil company based on Matrikon's Well Performance Monitor industry
       application. Also subsequent to the quarter, we announced a (euro)4.2
       million contract win with Statoil to deliver Well Performance Monitor
       to 35 offshore assets on the Norwegian Continental Shelf. These recent
       wins, along with ongoing work with other global clients, establish
       Matrikon as the vendor of choice for intelligent field solutions.

    -  During the quarter, we received additional change orders totaling
       US$2.13 million on the US$14.61 million contract to deliver the
       network foundation for cyber security for a major United States
       electricity producer. We also entered a corporate license agreement
       for our Control Performance Monitor and Alarm Manager products with a
       major European chemicals company. The contract is worth approximately
       (euro)1.36 million in software and services.

    -  Products revenue (comprised of software license and support revenue)
       increased 4% compared to Q1-09 and 14% compared to Q4-09. Off-the-
       shelf product sales grew 38% and support revenue increased 4% compared
       to Q1-09. The new corporate license agreement with the major European
       chemicals company mentioned above comprised the majority of this
       increase. Industry application sales, which were depressed throughout
       the latter half of FY-09 due to economic conditions, have begun to
       gain traction again. While revenue from industry applications was
       minimal in the quarter, we expect it to pick up significantly as we
       begin to implement recently won projects.

    -  Gross margin was 54% in Q1-10, compared to 61% in Q1-09 and 54% in
       Q4-09. Gross margin was significantly impacted by elevated equipment
       revenue in Q1-10, which has a lower gross margin than other revenue
       lines. The impact was a 7 percent point reduction, compared to a
       typical gross margin impact of 1 to 2 percent. Combined overhead
       expenses in Q1-10 were $9.58 million compared to $9.32 million in Q1-
       09 and $8.92 million in Q4-09. Sales and marketing expenses were up
       27% from Q1-09, as we continue to invest in sales and marketing to
       drive top-line growth.
    

MD&A and Financial Statements

The MD&A and Financial Statements for the current quarter can be found on Matrikon's website at http://www.matrikon.com/about/corporate/investors/financial/q-reports.aspx or by contacting Nicole Sayler at 1-877-628-7456 extension 4010.

Conference Call and Webcast

Matrikon President and CEO, Nizar J. Somji and CFO Jonathan Chia will hold a conference call to discuss first quarter results on Tuesday, January 12, 2010 at 8:30am EST (6:30am MST). To participate live, call 647-427-7450 in the Toronto area and 1-888-231-8191 in all other areas.

A replay will be available until midnight EST, February 7, 2010. To access the playback service, please dial 416-849-0833 in Toronto or 1-800-642-1687 in all other areas. The passcode is 44764484.

The conference call will also be webcast and podcast (live and archived) at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2904880

About Matrikon

Matrikon (www.matrikon.com) provides industrial software solutions to process control industries, empowering their clients to achieve operational excellence. Matrikon products transform production data into knowledge and action that enable users to maximize performance while managing risk. With offices throughout North America, Australia, Europe and the Middle East and a client base that includes industry leaders in a wide range of process industries, Matrikon's reach is global. Empowering excellence since 1988, Matrikon is traded on the Toronto Stock Exchange under the symbol MTK.

Matrikon is a registered trademark of Matrikon Inc.

    
    Forward Looking Statements
    -------------------------------------------------------------------------
    

In order to provide our investors with an understanding of our current results and future prospects, our communications often include written or oral forward-looking statements. This new release, our MD&A, and other materials filed with the Canadian securities regulators contain statements that are forward-looking. These statements are made pursuant to the "safe harbor" provisions of applicable Canadian securities legislation. These statements represent Matrikon's intentions, plans, expectations and beliefs and are based on our experience and our assessment of historical and future trends and the application of key assumptions relating to future events and circumstances. These statements may include, but are not limited to, comments about: our objectives and priorities for 2010 and beyond, our strategies, expectations for our financial condition, the outlook for our operations, and external factors that may impact results, including global economies and industry trends.

Forward-looking statements require assumptions and involve risks and uncertainties related to our business and the general economic environment, many beyond our control. There is significant risk that the predictions, forecasts, conclusions or projections we make will not prove to be accurate and that our actual results will be materially different from the targets, expectations, estimates or intentions expressed in the forward-looking statements. We caution readers of this news release and our MD&A not to place undue reliance on our forward-looking statements. The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic conditions in the countries in which we operate; currency fluctuations; market demand for our products and services; our ability to execute projects and deliver solutions; our ability to execute our strategic plans and to complete and integrate acquisitions; the degree of competition in the geographic and business areas in which we operate; our ability to attract and retain qualified employees and contain payroll costs; our ability to contain expenses; technological changes and research and development; the length of the sales cycle required to close larger solution contracts; availability of financial resources to carry out our strategy; our ability to protect our intellectual and intangible properties; legal claims; critical accounting estimates; the possible effects on our business of war or terrorist activities; disease or illness that affects local, national or international economies; and disruptions to public infrastructure, such as transportation, communications, power or water supply. We caution that this list is not exhaustive of all possible factors.

Other factors could adversely affect our results. For more information, please see the discussion on the principal risks that could affect our results on pages 45 - 48 of Matrikon's 2009 Annual Report.

The assumptions in this news release and MD&A pertaining to: our positive outlook for the remainder of 2010, our belief that business opportunities remain strong, and our expected effective tax rate to be in the range of 27% to 32% include: global economic and political stability at current levels, that certain opportunities in our pipeline will materialize as contracts, that our clients will continue to invest in initiatives that support efficiency and reduce costs, foreign exchange rates do not fluctuate excessively, and that we will continue to be able to inspire, motivate and maintain our employee base at a sufficient level to deliver on our objectives.

When relying on forward-looking statements to make decisions with respect to Matrikon, investors should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Unless required by law, we do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by the company or on its behalf.

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Management's Discussion and Analysis

    
    January 11, 2010
    -------------------------------------------------------------------------
    

The following Management's Discussion & Analysis should be read in conjunction with the financial statements and notes to the consolidated financial statements for the quarter ended November 30, 2009 and the Management's Discussion & Analysis and notes to the consolidated financial statements appearing in the Annual Report for the fiscal year ended August 31, 2009.

Matrikon's Board of Directors, on the recommendation of the Audit Committee, approved the content of this MD&A on January 11, 2010.

All dollar amounts included in this MD&A are Canadian dollars unless otherwise specified.

    
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    Non-GAAP Measures
    -------------------------------------------------------------------------
    

We refer to terms that are not specifically defined in the CICA Handbook and do not have any standardized meaning prescribed by GAAP. These non-GAAP measures may not be comparable to similar measures presented by other companies.

We believe that these non-GAAP measures are useful in assisting investors in understanding components of our financial results. The non-GAAP terms that we refer to in this analysis are defined below.

Gross margin is our total revenue minus the cost of sales, divided by the total revenue, and is expressed as a percentage. This measure is used to indicate the relative efficiency with which we earn revenue. Gross margin is a percentage based on two GAAP measures and as such has no quantitative reconciliation. Gross margin within our segmented reporting includes intercompany revenue/expenses as part of total revenue.

Net margin is our total net income (loss) divided by total revenue and is expressed as a percentage. This measure is used to indicate the relative efficiency with which we earn net income. Net margin is a percentage based on two GAAP measures and as such has no quantitative reconciliation.

Utilization or utilization rate measures the billable time for each employee against the total available time, based on a standard 260 work days per year and is expressed as a percentage. Utilization is used to demonstrate capacity to increase output rate in our Solutions business without adding resources. Utilization is a measure of working capacity and not a financial measure and therefore has no reconciliation to GAAP.

Average daily rate is consulting revenue divided by billable people multiplied by utilization rate divided by working days available in the period described. This measure is used by management to monitor overall project profitability and as an indication of progress in the transition of our business to higher margin engagements based on Matrikon technology. Average daily rate is based on non-financial measures and has no reconciliation to GAAP.

    
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    Other Information
    -------------------------------------------------------------------------
    

Additional information about Matrikon, including our annual information form, information circular and quarterly reports, is available on SEDAR at www.sedar.com and in the investor relations section of our website at www.matrikon.com/investors.

    
    Comparative Figures
    -------------------------------------------------------------------------
    

We have reclassified certain figures for FY-09 and Q1-09 to reflect the financial presentation adopted in the current quarter.

    
    Strategic Progress Update
    -------------------------------------------------------------------------
    

Note: This section is forward-looking by nature. It is qualified entirely by the Forward-Looking Statements disclaimer at the beginning of this MD&A. It is also qualified by the principal risks that could affect our business (see pages 45 - 48 of our 2009 Annual Report).

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Each year, we present a set of performance indicators to communicate our priorities and serve as a benchmark to measure our progress against our strategy. The following table shows our progress on the performance indicators and objectives we set for 2010.

    
    -------------------------------------------------------------------------
    2010 Objectives          On          3 Month Results
                             Track?
    -------------------------------------------------------------------------
    Grow top line while      Yes         -  Revenue increased 44% to
     maintaining                            $25.45 million in Q1-10
     profitability                          compared to Q4-09
                                         -  Net income increased 466%
                                            compared to Q4-09 as a result of
                                            record Solutions revenue
    -------------------------------------------------------------------------
    Continue building        In          -  Intuition integration with
     Matrikon Suite          Progress       Matrikon Suite applications
     applications on the                    continues
     Intuition platform
    -------------------------------------------------------------------------
    Revenue from licenses    In          -  Software license and support
     & support at 35-40%     Progress       revenue was 25% of total revenue
     of total revenue                       in Q1-10 (significant equipment
                                            revenue skewed Q1- 10 results)
    -------------------------------------------------------------------------
    Continue to sell and     In          -  Well Performance Monitor: one new
     deploy industry         Progress       corporate client
     applications                        -  Mobile Equipment Monitor: one new
                                            pilot site
    -------------------------------------------------------------------------

    Items of Note in Q1-10

    -  Record Consulting revenue: In Q1-10, we achieved record consulting
       revenue of $13.19 million compared to $12.15 in Q1-09 million and
       $10.87 million in Q4-09 as a result of higher utilization in our North
       America region and increased average daily rates globally. Average
       daily rate increases are a result of our shifting focus to high value
       consulting engagements and integrated industry application
       development.

    -  Record Equipment revenue: Equipment revenue was a record $5.63 million
       in Q1-10 as we delivered a significant portion of the equipment (third
       party hardware and software) on our major industrial security project.
       We continue to work on the consulting components of this project. With
       a lower margin than other revenue lines, this significant increase in
       equipment revenue shifted our revenue mix and impacted both gross and
       net margins.

    -  Significant contracts: During the quarter we received change orders,
       adding US$2.13 million to the US$14.61 million contract to deliver the
       network foundation for cyber security for a major United States
       electricity producer. We also entered a corporate license agreement
       for our Control Performance Monitor and Alarm Manager products with a
       major European chemicals company. The contract is worth approximately
       (euro)1.36 million in software and consulting. Subsequent to the
       quarter, we won and announced a US$15.7 million contract to build a
       remote oil field monitoring program for a Middle East oil company
       based on Matrikon's Well Performance Monitor industry application.
       Also subsequent to the quarter, we announced a (euro)4.2 million
       contract win with Statoil to deliver Well Performance Monitor to 35
       offshore assets on the Norwegian Continental Shelf. These recent wins,
       along with ongoing work with other global clients, establish Matrikon
       as the vendor of choice for intelligent field solutions.

    -  Costs in line with expectations: Overhead expenses represented 38% of
       our revenue, compared to 48% in Q1-09 and 51% in Q4-09.

    -  Foreign exchange: In Q1-09, the Canadian dollar gained strength
       compared to the US dollar, which resulted in a $0.21 million loss,
       compared to a $1.14 million gain in Q1-09 and a $0.005 million gain in
       Q4-09.

    -  Gross margin: Gross margin was 54% in Q1-10, compared to 61% in Q1-09
       and 54% in Q4-09. Gross margin was significantly impacted by elevated
       equipment revenue in Q1-10, which has a lower gross margin than other
       revenue lines. The impact was a 7 percent point reduction to gross
       margin, compared to a typical gross margin impact of 1-2 percent
       points.

    Summary of Results
    -------------------------------------------------------------------------
    3 Months       30-Nov-09       30-Nov-08       31-Aug-09    Q1-10  Q1-10
     Ended                 %               %               %      vs     vs
    (CAD $000s) (Q1-10) revenue (Q1-09) revenue (Q4-09) revenue Q1-09  Q4-09
    -------------------------------------------------------------------------
    Total
     Revenue   $25,450   100%  $19,579   100%  $17,622   100%     30%    44%
    -------------------------------------------------------------------------
    Consulting
     fees       13,190    52%   12,152    62%   10,866    61%      9%    21%
    -------------------------------------------------------------------------
      Margin on
       consulting
       fees        44%             45%             34%
    -------------------------------------------------------------------------
    Equipment
     sales       5,632    22%    1,016     5%      993     6%    454%   467%
    -------------------------------------------------------------------------
      Margin on
       equipment
       sales       31%             25%             22%
    -------------------------------------------------------------------------
    Total
     Solutions
     revenue    18,822    74%   13,168    67%   11,859    67%     43%    59%
    -------------------------------------------------------------------------
    Software
     license
     fees        3,738    14%    3,693    19%    3,041    17%      1%    23%
    -------------------------------------------------------------------------
      Margin on
       software
       license
       fees        99%             97%             99%
    -------------------------------------------------------------------------
    Support      2,729    11%    2,521    13%    2,653    15%      8%     3%
    -------------------------------------------------------------------------
      Margin on
       support     89%             98%             88%
    -------------------------------------------------------------------------
    Total
     Products
     revenue     6,467    25%    6,214    32%    5,694    32%      4%    14%
    -------------------------------------------------------------------------
    Interest
     income        161     1%      197     1%       69     1%    (18%)  133%
    -------------------------------------------------------------------------
      Consulting
       headcount   295             275             269             7%    10%
    -------------------------------------------------------------------------
      Gross
       margin      54%             61%             54%
    -------------------------------------------------------------------------
    Total
     Expenses    9,579    38%    9,324    48%    8,919    51%      3%     7%
    -------------------------------------------------------------------------
    Consulting   1,299     5%    1,668     9%    1,653     9%    (22%)  (21%)
    -------------------------------------------------------------------------
    Sales &
     marketing   2,329     9%    1,836     9%    2,007    11%     27%    16%
    -------------------------------------------------------------------------
    Research &
     development 1,560     6%    1,410     7%    1,235     7%     11%    26%
    -------------------------------------------------------------------------
    General &
     admini-
     strative    3,822    15%    3,716    19%    3,360    19%      3%    14%
    -------------------------------------------------------------------------
      Operations
       headcount   275             270             254             2%     8%
    -------------------------------------------------------------------------
    Stock-based
     compensation   92     0%      318     2%      369     2%    (71%)  (75%)
    -------------------------------------------------------------------------
    Amortization   477     2%      376     2%      295     2%     27%    62%
    -------------------------------------------------------------------------
    Foreign
     exchange
     translation
     gain (loss)  (208)   -1%    1,144     6%        5     0%  (118%) (4260%)
    -------------------------------------------------------------------------
    Net income   2,768    11%    2,757    14%      489     3%      0%   466%
    -------------------------------------------------------------------------
    Earnings
     per share
     - basic      0.09            0.09            0.02             0%   350%
    -------------------------------------------------------------------------
    Earnings
     per share
     - diluted    0.09            0.09            0.02             0%   350%
    -------------------------------------------------------------------------
    Weighted
     average
     shares
     outstanding
     (000s)     31,298          30,949          30,936             1%     1%
    -------------------------------------------------------------------------
    Total
     assets     67,269          64,454          62,119             4%     8%
    -------------------------------------------------------------------------
    Total
     long term
     liabilities   500             134             129           273%   288%
    -------------------------------------------------------------------------
    Deferred
     revenue     6,670           8,573           8,292           (22%)  (20%)
    -------------------------------------------------------------------------
    Contracts in
     progress    7,049           6,070           6,894            16%     2%
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Note: This section is forward-looking by nature. It is qualified entirely
    by the Forward-Looking Statements disclaimer at the beginning of this
    MD&A. It is also qualified by the principal risks that could affect our
    business (see page 45 - 48 of our 2009 Annual Report).
    -------------------------------------------------------------------------
    

Revenue

Total Solutions revenue (comprised of Consulting and Equipment revenue) increased by $5.65 million compared to Q1-09 and by $6.96 million compared to Q4-09. This increase is primarily attributed to strong equipment revenue as the majority of the third party hardware and software associated with our cyber security project was delivered in the quarter. Equipment revenues are ancillary to our business and will continue to fluctuate period-by-period. Our consulting fees were a record $13.19 million, an increase of 9% or $1.04 million over Q1-09 and 21% or $2.32 million compared to Q4-09. This increase is a result of additions to consulting staff along with higher utilization rates and increases in average daily rates of 6% compared to Q1-09 and 18% compared to Q4-09.

The increase in our consulting fees is mainly attributed to our North American region as our Network Security business unit began executing on two large contracts won in Q4-09.

Total Products revenue (comprised of Software License and Support revenue) increased by 4% compared to Q1-09 and 14% compared to Q4-09. Off-the-shelf product sales increased by 38%. We entered a corporate license agreement with a major European chemicals company for Control Performance Monitor and Alarm Manager in the quarter, which contributed to this increase. Industry application sales, which were depressed throughout the latter half of FY-09 due to economic conditions, have begun to regain traction. While revenue from industry applications was minimal in the quarter, with recent large wins, we expect this revenue stream to grow throughout FY2010 as we execute these projects and close other opportunities in our pipeline. Support revenue grew by 8% compared to Q1-09 and by 3% compared to Q4-09.

Gross Margin

Gross margin in Q1-10 was 54%, compared to 61% in Q1-09 and 54% in Q4-09. Gross margin in Q1-10 was heavily influenced by exceptionally strong equipment sales of $5.63 million, which represented 22% of revenue. Equipment sales typically make up approximately 7% of revenue. The impact was a 7 percent point reduction, compared to a typical gross margin impact of 1 to 2 percent points.

Quarterly gross margin of 54% was comprised of 99% gross margin on software license revenue, 89% on support revenue, 44% on consulting revenue and 31% on equipment revenue.

Overhead Expenses

Combined overhead expenses in Q1-10 were $9.58 million (38% of revenue) compared to $9.32 million (48% of revenue) in Q1-09 and $8.92 million (51% of revenue) in Q4-09. Overhead expenses in Q1-10 included slightly higher amortization expense, salaries and general office expenses.

Despite a slight increase in headcount, consulting G&A decreased compared Q1-09 and Q4-09 due to a reduction in travel, general employee expenses and office expenses.

We have continued our investment in sales and marketing to support top line growth. We increased sales and marketing headcount by 12 compared to Q1-09 and 10 compared to Q4-09. Sales and marketing costs increased by 27% compared to Q1-09 and 16% compared to Q4-09 due to added staff and related rent allocations.

Research and development increased 11% compared to Q1-09 and 26% compared to Q4-09. During Q1-09, a Canadian Scientific Research and Experimental Development ("SR&ED") claim from a prior year was approved, resulting in an incremental reduction of R&D expenses of $0.50 million. Excluding SR&ED credits, R&D expenses decreased 17% compared to Q1-09 as a result of a 13% decrease in headcount and the non-recurring start up costs associated with Matrikon SoftDel India last year. Compared to Q4-09, R&D expenses decreased 4% due to a decrease in professional fees, offset by an increase in salaries.

General and administrative expenses had a small increase of 3% compared to Q1-09, but increased by 14% compared to Q4-09 as a result of increased general office expenses and professional fees.

Net Income

With record net income of $2.77 million, we achieved a strong net margin of 11% in Q1-10, compared to 3% in Q4-09 and 14% in Q1-09.

The following factors contributed positively to the Q1-10 net margin:

    
    -  Record total revenue as we continue to shift our business model to
       high value consulting engagements. This shift, evidenced by several
       recent large project wins, contributed to improvements in utilization
       and average daily rate, strong consulting revenue margins of 44% and
       overhead expenses that are in-line with our target range as a
       percentage of revenue.

    -  Continued growth in high margin support revenue in the quarter.

    -  Recovery of income tax credits associated with research and
       development programs in Canada and the United Kingdom.

    -  Decreases in stock-based compensation expenses compared to Q1-09 and
       Q4-09 as the majority of Restricted Share Units (RSUs) have vested.
    

These positive influences to net income were offset by the significant increase in lower margin equipment revenue and a foreign exchange loss of $0.21 million as the Canadian dollar strengthened against the US dollar. Other income which includes interest income relating to cash and cash equivalents and gains relating to the sale of assets also decreased 108% to an expense of $0.01 million in comparison to income of $0.14 million in Q1-09.

The following tables show the percentage of revenue by the various currencies in which we do business, and the period-end exchange rates.

    
                        -------------------------- --------------------------
                          % Billings by Currency       Period End Exchange
                             (3 Months Ended)          Rate for $1.00 CAN
                        -------------------------- --------------------------
                          Q1-10    Q1-09    Q4-09    Q1-10    Q1-09    Q4-09
    ---------------------------------------------- --------------------------
    Australian Dollar       31%      21%      26%   0.9638   0.8129   0.9190
    ---------------------------------------------- --------------------------
    British Pound           10%      11%      20%   1.7538   1.9071   1.7772
    ---------------------------------------------- --------------------------
    Canadian Dollar          7%      18%      20%   1.0000   1.0000   1.0000
    ---------------------------------------------- --------------------------
    Euro                     5%       2%       2%   1.5926   1.5747   1.5625
    ---------------------------------------------- --------------------------
    United States Dollar    46%      47%      32%   1.0620   1.2402   1.0920
    ---------------------------------------------- --------------------------
    Other Currencies         0%       1%       0%        -        -        -
    ---------------------------------------------- --------------------------
    

Comprehensive Income

Other comprehensive income accounts for currency translation related to our self-sustaining foreign operations and resulted in a foreign currency gain of $0.25 million in the quarter as the Australian dollar gained strength against the Canadian dollar, while the British pound and the Euro remained consistent with the prior period.

Segment Results

We report four strategic business segments based on how we monitor and assess performance internally: North America; Asia-Pacific; Europe, Middle East & Africa (EMEA); and Products. A fifth segment, Corporate, captures corporate expenses. External revenue represents sales derived from arms-length customers. Intercompany revenues and expenses represent the product commissions that are payable to the region that owns the intellectual property and fees for borrowed consulting labor.

    
    -------------------------------------------------------------------------
    3 Months Ended
     November 30,
     2009
                     North     Asia-
     CAN$ (000s)   America   Pacific      EMEA  Products  Corporate    Total
    -------------------------------------------------------------------------
    External
     revenue        12,537     5,435     5,425     2,053          -   25,450
    -------------------------------------------------------------------------
    Intercompany
     revenue (cost
     of sales)        (473)     (177)   (1,133)    1,783          -        -
    -------------------------------------------------------------------------
    % of revenue       49%       21%       21%        8%          -     100%
    -------------------------------------------------------------------------
    Gross profit     5,605     2,245     2,717     3,226          -   13,793
    -------------------------------------------------------------------------
    Gross margin       46%       43%       63%       84%                 54%
    -------------------------------------------------------------------------
    Expenses        (1,659)   (1,833)   (1,452)   (2,144)    (2,491)  (9,579)
    -------------------------------------------------------------------------
    Other income
     (loss) &
     foreign
     exchange gain
     (loss)             (3)      (12)       15         -       (219)    (219)
    -------------------------------------------------------------------------
    Income (loss)
     before taxes    3,943       400     1,280     1,082     (2,710)   3,995
    -------------------------------------------------------------------------
    Employees at
     November 30,
     2009              146       138       127       107         52      570
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    3 Months Ended
     November 30,
     2008
                     North     Asia-
     CAN$ (000s)   America   Pacific      EMEA  Products  Corporate    Total
    -------------------------------------------------------------------------
    External
     revenue         8,103     4,918     4,552     2,006          -   19,579
    Intercompany
     revenue
     (expenses)       (877)     (194)     (496)    1,567          -        -
    % of revenue       41%       25%       23%       10%          -     100%
    Gross profit     3,960     2,197     2,643     3,067          -   11,867
    Gross margin       55%       47%       65%       86%          -      61%
    Expenses        (1,770)   (1,633)   (1,615)   (1,922)    (2,384)  (9,324)
    Other income
     (loss) &
     foreign
     exchange gain
     (loss)           (162)      125       161         -      1,155    1,279
    Income (loss)
     before taxes    2,028       689     1,189     1,145     (1,229)   3,822
    Employees at
     November 30,
     2008              144       137        84       113         67      545
    -------------------------------------------------------------------------
    

North America: External revenue in the North America segment made up 49% of the global revenue in Q1-10, compared to 41% in Q1-09 and 32% in Q4-09. Revenue increased 55% compared to Q1-09 and 123% compared to Q4-09.

In Q1-10 we began execution on the large contracts with the power and utility companies won in Q4-09 which has resulted in record Solutions (consulting & equipment) revenue. The increase in revenue is primarily attributed to equipment sales of $4.84 million. Consulting fees also increased 6% compared to Q1-09 and 47% compared to Q4-09 as a result of increased utilization of 4% compared to Q1-09 and 15% compared to Q4-09. Average daily rate also increased 4% compared to Q1-09 and 13% compared to Q4-09.

Software revenue increased by 13% compared to Q1-09 and 11% compared to Q4-09, due to strong sales of our off-the-shelf products.

Gross margin was lower at 46% compared to 55% in Q1-09 and 48% in Q4-09 as equipment sales made up 39% of the sales mix. The lower gross margin was offset by lower direct salaries as we are now utilizing the bench strength from our Professional Development Excellence program for which we began investment in Q3-09. Gross margins also decreased slightly compared to Q4-09 as commissions expense increased.

Overhead expenses have remained consistent with prior quarters.

Asia-Pacific: First quarter results were positively impacted by the strengthening of the Australian dollar compared to the Canadian dollar (0.9190 at August 31, 2009 compared to 0.9638 at November 30, 2009) as external revenue increased 8% from Q4-09. In natural currency, revenue decreased by 6% compared to Q1-09 and remained consistent with Q4-09.

In natural currency, consulting revenue remained consistent compared to Q1-09 and Q4-09. Utilization increased 4% compared to Q1-09 and 15% compared to Q4-09, while the daily average rate increased 12%. On September 1, 2009, we completed the acquisition of IAC, which contributed AUD$0.48 million in consulting revenue.

Gross margin declined compared to Q1-09 as software revenue declined 41%, while all other costs of sales remained consistent with prior periods.

Overhead expenses remained consistent compared to prior periods in natural currency as we integrated the IAC business with existing Asia-Pacific operations; however, in Canadian dollars, overhead expenses increased 12% compared to Q1-09 and 13% compared to Q4-09 due to currency fluctuations.

EMEA: EMEA's external revenue increased 19% compared to Q1-09 and 18% compared to Q4-09. In natural currencies, external revenue increased 7% and 10%, respectively.

Strong software sales in Germany contributed to this revenue growth following a corporate license agreement with a major chemical company. Sales of off-the-shelf software increased by 187% compared to Q1-09 and 195% compared to Q4-09.

Consulting margins declined by 11 percent points compared to Q1-09 and was consistent with Q4-09. Consulting revenue remained consistent throughout EMEA in natural currencies.

Overhead expenses declined 10% compared to Q1-09 and increased by 12% compared to Q4-09 due to lower salary expenses, and non-recurring employee and professional expenses related to relocation costs to support growth in the Middle East.

Products: External revenue in the Products segment represents direct software license and support sales and implementation services executed by the Products group. Intercompany revenue represents the software license and support fees paid by the other segments.

External revenue increased 2% compared to Q1-09, but was down 13% compared to Q4-09. Total revenue, including intercompany revenue, increased 7% compared to Q1-09 and 6% compared to Q4-09 as a result of increased software license sales in North America and EMEA, particularly off-the-shelf products.

Overhead expenses increased 12% compared to Q1-09 as result of increases in marketing investments and rent. Compared to Q4-09, overhead expenses decreased 8% as a result of a decrease in headcount.

In Q1-10, off-the-shelf software license revenue increased 38% compared to Q1-09 and 19% compared to Q4-09.

Corporate: The Corporate segment includes all shared corporate services (including executive management, finance, information technology and human resources) that are not allocated to other segments. In addition, the Corporate segment includes stock-based compensation, other income or expenses, foreign exchange translation gains and losses and amortization. Expenses in this segment fluctuate period by period based on corporate activity and foreign exchange rate fluctuations.

Corporate expenses increased 4% compared to Q1-09 and 15% compared to Q4-09. Corporate expenses in the comparative periods were reduced by SR&ED tax credits, which are recorded as an expense recovery in the quarter they are received. Excluding SR&ED credits, overhead expenses decreased 13% compared to Q1-09 and by 2% compared to Q4-09. Headcount since Q1-09 has decreased by 22%, contributing to the reduction in expenses.

The Corporate segment was impacted by a shift in foreign exchange in Q1-10, which resulted in a translation loss of $0.21 million, compared to a gain of $1.14 million in Q1-09 and a gain of $0.005 million in Q4-09.

While amortization increased slightly, the increase was more than offset by a significant reduction in stock-based compensation expense as historic stock option programs near the end of their vesting periods.

Quarterly Results

The following table presents a summary of our unaudited consolidated operating results for the past eight quarters. This information should be read in conjunction with the applicable interim financial statements, notes to the financial statements and management's discussion and analysis.

    
    -------------------------------------------------------------------------
    CAN $000s
    except per
     share             FY 08                        FY 09              FY 10
     amounts     Q2      Q3      Q4      Q1      Q2      Q3      Q4      Q1
    -------------------------------------------------------------------------
    Revenue    19,444  20,536  20,162  19,579  19,661  16,376  17,622  25,450
    -------------------------------------------------------------------------
    Gross
     profit    10,533  11,533  11,903  11,867  11,635   8,107   9,446  13,793
    -------------------------------------------------------------------------
    Gross
     margin       54%     56%     59%     61%     59%     50%     54%     54%
    -------------------------------------------------------------------------
    Operating
     income
     (loss)     2,617   3,103   2,842   2,543   1,943  (1,770)    528   4,214
    -------------------------------------------------------------------------
    Net income
     (loss)     1,809   2,467   2,583   2,757   2,027  (2,959)    489   2,768
    -------------------------------------------------------------------------
    Net margin     9%     12%     13%     14%     10%    -18%      3%     11%
    -------------------------------------------------------------------------
    Shares
     outstand-
     ing
     (000s)    30,440  30,548  30,636  30,949  30,968  30,932  30,936  31,298
    -------------------------------------------------------------------------
    Diluted
     shares
     outstand-
     ing
     (000s)    31,340  31,467  31,494  31,649  31,622  30,932  31,302  31,524
    -------------------------------------------------------------------------
    EPS (loss)
     - basic     0.06    0.08    0.09    0.09    0.07   (0.10)   0.02    0.09
    -------------------------------------------------------------------------
    EPS (loss)
     - diluted   0.06    0.08    0.08    0.09    0.06   (0.10)   0.02    0.09
    -------------------------------------------------------------------------
    Headcount     501     506     521     545     542     559     523     570
    -------------------------------------------------------------------------

    Management has not noted any change to the seasonality of our business as
reported in the 2009 annual MD&A.

    Liquidity & Capital Resources
    -------------------------------------------------------------------------
    At                                                    Q1-10 vs  Q1-10 vs
    (CAN $ 000s except                                       Q4-09     Q1-09
     ratios)             30-Nov-09  30-Nov-08  31-Aug-09  % Change  % Change
    -------------------------------------------------------------------------
    Cash & equivalents       5,165     10,551      8,734      (41%)     (51%)
    -------------------------------------------------------------------------
    Accounts receivable     29,287     25,067     23,456       25%       17%
    -------------------------------------------------------------------------
    Trade receivables       22,133     19,690     15,790       40%       12%
    -------------------------------------------------------------------------
    Average collection
     period (trade
     receivables)          88 days    81 days    92 days   -4 days    7 days
    -------------------------------------------------------------------------
    Contracts in progress    7,049      6,070      6,894        2%       16%
    -------------------------------------------------------------------------
    Deferred revenue         6,670      8,573      8,292      (20%)     (22%)
    -------------------------------------------------------------------------
    Current liabilities     21,417     19,763     18,328       17%        8%
    -------------------------------------------------------------------------
    Cash flow from
     operations               (932)      (554)     1,180      179%      (68%)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Note: This section is forward-looking by nature. It is qualified entirely
    by the Forward-Looking Statements disclaimer at the beginning of this
    MD&A. It is also qualified by the principal risks that could affect our
    business (see pages 45 - 48 of our 2009 Annual Report).
    -------------------------------------------------------------------------
    

The rolling 12-month average collection period (on trade receivables) was 88 days at the end of Q1-10, an improvement of 4 days compared to the end of Q4-09. This improvement is the result of a continued focus on collections. The average collection period at the end of Q1-10 is 7 days longer compared to the end of Q1-09. This is a result of increased revenues and the trend toward longer payment cycles that many of our clients adopted during the global economic slowdown.

Current liabilities increased to $21.42 million at the end of Q1-10, compared to $19.76 million at the end of Q1-09 and $18.33 million at the end of Q4-09. Compared to Q1-09, this increase is a result of increases in accounts payable of $2.16 million as a direct result of the activity with our large projects and our dividends payable. These increases are offset by a decrease in deferred revenue of $1.90 million. Deferred revenue at the end of the Q1-10 includes $4.58 million in extended support revenue, compared to $4.21 million in Q1-09 and $2.09 million in unearned software license, services and equipment revenue, compared to $4.36 million in Q1-09.

Cash used in operations was $0.93 million in Q1-10, compared to cash provided by operations of $1.18 million in Q4-09 and cash used in operations of $0.55 million in Q1-09. The decrease over the prior quarters is a result of the significant increase in accounts receivable.

Our overall cash position declined $3.57 million compared to Q4-09, primarily as a result of the two business acquisitions we completed in the first quarter of 2010. We purchased IAC for $1.81 million and acquired the remaining shares of Matrikon-SoftDel India Pvt Ltd. for $0.53 million.

Our effective income tax rate was 30.7% in Q1-10 compared to 27.9% in Q1-09. This is within our expected range of 27% to 32%.

Management believes that we have the capital resources and liquidity necessary to meet our commitments, support our operations and finance our current growth strategies.

Acquisitions

Acquisitions completed subsequent to August 31, 2009 are accounted for under the acquisition method of accounting, unless otherwise stated, and the results of earnings since the respective dates of acquisition are included in the consolidated statements of income.

On September 1, 2009, we acquired all of the issued and outstanding shares of Integration Automation and Control Pty Ltd. (IAC), an automation and information systems service company located in Newcastle, Australia, for consideration of $1.81 million in cash. The acquisition of IAC further establishes Matrikon's automation and information systems expertise within Hunter Valley's coal industry.

On November 11, 2009, we acquired the remaining 51% of the issued and outstanding shares of Matrikon-SoftDel India Pvt Ltd. (MSPL), a joint entity based in Pune, India, for consideration of $0.53 million in cash. Matrikon Industrial Solutions India Private Ltd. provides us with a steady supply of qualified engineers to further optimize operational efficiencies and growth opportunities. We have assessed the acquisition of MSPL, being renamed to Matrikon Industrial Solutions India Private Ltd., as an equity transaction. The transaction resulted in the elimination of previously reported non-controlling interest of $0.04 million and a reduction in equity of $0.48 million.

Off Balance Sheet Arrangements

Matrikon is a lessee under several operating type leases for office space, office equipment and motor vehicles and is also a party to research funding arrangements with educational institutions in Canada and Australia. The future cash flow impacts of these arrangements are summarized in the table below. Matrikon is not party to any undisclosed off balance sheet arrangements.

    
                          ---------------------------------------------------
                                               Payment Due
                                  Less than                            After
    At Nov 30, 2009        Total     1 year  2-3 years  4-5 years    5 years
    -------------------------------------------------------------------------
    Operating lease
     obligations
     (CAN $000s)           5,974      2,451      3,233        290         -
    -------------------------------------------------------------------------
    Other long term
     obligations
     (CAN $000s)             100        100          -
    -------------------------------------------------------------------------
    Foreign exchange
     forward contracts
     (US $000s)                -          -
    -------------------------------------------------------------------------
    Total contractual
     obligations           6,074      2,551      3,233        290          -
    -------------------------------------------------------------------------
    

Normal Course Issuer Bid

Matrikon announced a normal course issuer bid on January 14, 2009. Under the bid, Matrikon may acquire up to 1,547,595 common shares, representing 5% of current issued and outstanding shares as at January 14, 2009. The bid commenced January 16, 2009 and will end January 15, 2010.

During the three months period ended November 30, 2009, we did not repurchase any of our common shares.

Share Data

Matrikon is listed on the Toronto Stock Exchange under the trading symbol "MTK". As at January 8, 2010 there were 31,302,236 common shares of the corporation issued and outstanding and 197,550 options and 483,054 restricted share units outstanding, each convertible into one common share upon exercise or exchange.

Critical Accounting Estimates

These interim financial statements were prepared with the same critical accounting estimates and methods as fiscal year 2009 (please see pages 42 - 44 of Matrikon's annual MD&A for the fiscal year ended August 31, 2009 dated November 6, 2009 for a discussion of these estimates), along with the adoption of the CICA Handbook section:

    
    -  1582 - Business Combinations
    -  1601 - Consolidated Financial Statements
    -  1602 - Non-Controlling Interests
    -  3251 - Equity
    -  1506 - Accounting Changes
    -  3855 - Financial Instruments - Recognition and Measurement
    

Recent Accounting Pronouncements Issued and Not Applied

Comprehensive Revaluation of Assets and Liabilities

In August 2009, the CICA amended Handbook Section 1625, "Comprehensive Revaluation of Assets and Liabilities" as a result of issuing Section 1582, "Business Combinations," Section 1601, "Consolidated Financial Statements," and Section 1602, "Non-Controlling Interests" in January 2009. The amendments apply prospectively to comprehensive revaluations of assets and liabilities occurring in fiscal years beginning on or after January 1, 2011. Earlier adoption is permitted provided that section 1582 is also adopted. We are currently evaluating the impact of the amendments to the standard.

Financial Instruments - Disclosure

In June 2009, the CICA amended Handbook Section 3862, "Financial Instruments - Disclosures," to include additional disclosure requirements about fair value measurements of financial instruments and to enhance liquidity risk disclosure requirements. The amendments apply to annual financial statements relating to the fiscal years ending after September 30, 2009. We are currently evaluating the impact of the amendments to the standard.

Convergence with International Financial Reporting Standards

Canada's Accounting Standards Board ratified a strategic plan that will result in GAAP, as currently used by Canadian public companies, being evolved and converged with IFRS over a transitional period to be completed by 2011. The official changeover date to IFRS is for interim and annual financial statements related to fiscal years commencing on or after January 1, 2011, specifically September 1, 2011 for our company.

In addressing the impact and implementation of IFRS, we have completed preliminary planning and scoping and are currently working with external consultants to establish a detailed assessment of the conversion process. As of November 30, 2009, we have completed a high-level assessment of the major differences between Canadian GAAP and IFRS that is relevant to us, along with preliminary position papers on accounting policy choices. We currently understand that we will be affected by the following standards: IAS 16 (Property, Plant, and Equipment), IAS 21 (The Effects of Changes in Foreign Currency Exchange Rates), IAS 39 (Financial Instruments: Recognition and Measurement), IFRS 2 (Stock-based Compensation, and Other Stock-based Payments), and IFRS 3(Business Combinations).

We expect the implementation process and solutions development to be finalized before the end of fiscal 2010 in time to enable the recording of transactions under IFRS for comparative reporting purposes in 2012. At this time, we are not able to quantify the full financial reporting impact of the differences between Canadian GAAP and IFRS on our operations, except for the adoption of CICA Handbook section 1582. We will continue to assess the impact of the proposed standards on the consolidated financial statements and disclosure as additional information becomes available.

Risks Related to Our Business

There has been no significant change in our risk factors from those described in our 2009 Annual Report. Please see pages 45 - 48 of Matrikon's 2009 Annual Report.

Internal Control over Financial Reporting and Disclosure Controls

Management has evaluated whether there were changes in our Internal Controls over Financial Reporting (ICFR) during the three month period ended November 30, 2009 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

At August 31, 2009, we reported that we did not sufficiently design and maintain effective controls over the identification of projects that should be accounted for using Contract Accounting as defined by SOP 81-1. During Q1-10, we began to implement procedures that require certain contracts to be reviewed, prior to commencement, to identify projects that require contract accounting treatment. During the remainder of fiscal 2010, we will continue to take steps to remediate this weakness and monitor the effectiveness of the procedures management has put in place.

Please see pages 45 - 48 of Matrikon's 2009 Annual Report for a discussion of internal controls over financial reporting and disclosure controls.

Subsequent Events

Subsequent to the quarter, our Board of Directors declared a dividend of $0.03 per common share payable on January 29, 2010 to shareholders of record as of January 20, 2010. The dividend is an eligible dividend for Canadian tax purposes.

    
    About Matrikon
    -------------------------------------------------------------------------
    Founded in 1988, Matrikon is a growing international provider of
    integrated industrial intelligence solutions that enable our industrial
    customers to improve operating efficiency. Solutions include data
    acquisition and storage, data analysis for plant optimization, decision
    support systems, data connectivity and web delivered data presentation
    for improved collaboration.

    Matrikon is one of the largest industrial solution integrators in North
    America with a client base diversified across a number of industries,
    including oil and gas, power, forestry pulp and paper, refining and
    petrochemicals and mining and mineral processing.

    At November 30, 2009, Matrikon had 570 employees, including 98 in
    corporate and administrative services, 78 in sales and marketing, 101 in
    product development and support, and 293 in professional services
    (Solutions).
    -------------------------------------------------------------------------
    

SOURCE MATRIKON INC.

For further information: For further information: Nicole Sayler, Corporate Communications Director, (780) 945-4010, (877) 628-7456 x 4010, email: nicole.sayler@matrikon.com

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MATRIKON INC.

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