Matrikon(TM) releases results for the first quarter of 2009; announces share buyback program



    
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    Highlights
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    -   Total revenue of $19.58 million in Q1-09, compared to $19.89 million
        in Q1-08 and $20.16 million in Q4-08.

    -   Record net income of $2.76 million or $0.09 per share in Q1-09, an
        increase of 23% over Q1-08.

    -   Gross margin in Q1-09 was 61%, compared to 56% in Q1-08

    -   Matrikon is granted regulatory approval to acquire up to 1,547,595
        common shares under a new share buyback program
    -------------------------------------------------------------------------
    

    EDMONTON, Jan. 14 /CNW/ - Matrikon Inc. (TSX:MTK), a leading provider of
solutions for industrial intelligence, today reported financial results for
the first quarter of fiscal year 2009 and announced that it has obtained
regulatory approval for a normal course issuer bid (the "Bid") to purchase its
common shares.
    Matrikon president and CEO Nizar J. Somji commented on the quarter:
"Against the backdrop of a global economic slowdown, I'm pleased with our
results for Q1-09 and our outlook for the remainder of the year. While current
conditions contributed to lower than expected software license revenue in the
quarter, they have also presented our Solutions division with opportunities to
win new business from companies looking to enhance efficiencies and reduce
operating costs."
    Revenue for the first quarter, which ended November 30, 2008, was $19.58
million compared to $19.89 million in Q1-08 and $20.16 million in Q4-08. Net
income in the first quarter was a record $2.76 million or $0.09 per share
compared to $2.24 million or $0.07 per share in Q1-08 and $2.58 million or
$0.09 per share in Q4-08.
    Pursuant to the Bid, Matrikon is entitled to acquire up to 1,547,595
common shares, representing not more than 5% of the 30,951,918 common shares
issued and outstanding as of January 14, 2009. The Bid will commence January
16, 2009 and end January 15, 2010. Daily purchases will be limited to 23,679
common shares, other than block purchase exceptions until March 31, 2009 and
thereafter shall be limited to 11,839 common shares, other than block purchase
exceptions.
    Matrikon believes that the current market price for its common shares
does not at times accurately reflect the value of its business or its future
prospects.
    Somji commented on the buyback: "Given our healthy financial position, we
believe that a share buyback program represents another opportunity to enhance
shareholder value without impairing our ability to capitalize on future growth
opportunities."
    Any common shares purchased by Matrikon under the Bid will be purchased
on the open market through the facilities of the Toronto Stock Exchange
("TSX") pursuant to the rules of the TSX governing normal course issuer bids.
The price that Matrikon will pay for any common shares purchased pursuant to
the Bid will be the prevailing market price of such shares on the TSX at the
time of such purchase. The common shares to be purchased will be cancelled.
Matrikon has not made any other purchases in the past 12 months under any
other Normal Course Issuer Bid.

    
    The Toronto Stock Exchange has neither approved nor disapproved of the
    information contained herein.


    Additional Highlights

    -   Software license sales in Q1-09 shrank by 12% compared to Q1-08 and
        26% compared to Q4-08 as certain orders were delayed.

    -   Foreign currency translation gains amounted to $1.14 million in
        Q1-09, compared to a loss of $0.47 million in Q1-08, as the Canadian
        dollar weakened against other currencies in which we do business.

    -   Support revenue was a record $2.52 million, an increase of 20%
        compared to Q1-08.

    -   Quarterly gross margin was 61%, comprised of 97% gross margin on
        software license revenue, 98% on support revenue, 45% on consulting
        revenue and 25% on equipment revenue.

    -   Overhead expenses for Q1-09 were $9.32 million or 48% of revenue and
        included third-party consulting costs and professional fees of
        $0.32 million. Sales and marketing expenses were up 35% from Q1-08,
        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 Wednesday, January
14, 2009 at 5:00 pm ET (3:00 pm MT). To participate live, call 416-644-3414 in
the Toronto area and 1-800-733-7571 in all other areas.
    A replay will be available until midnight, February 4, 2009. To access
the playback service, please dial 416-640-1917 in Toronto or 1-877-289-8525
elsewhere. The reservation number is 21291281 followed by the pound sign.
    The conference call will also be webcast at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2498980

    
    Matrikon is a registered trademark of Matrikon Inc.

    Forward Looking Statements
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    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 news 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 2009 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, beginning on page 52 of Matrikon's 2008 Annual Report.
    The assumptions in this news release and MD&A pertaining to: our positive
outlook for the remainder of 2009, 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 & Analysis

    January 14, 2009
    -------------------------------------------------------------------------
    
    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, 2008 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,
2008.
    Matrikon's Board of Directors, on the recommendation of the Audit
Committee, approved the content of this MD&A on January 14, 2009.
    All dollar amounts included in this MD&A are Canadian dollars unless
otherwise specified.
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    Non-GAAP Measures
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    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.
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    Comparative Figures
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    We have reclassified certain figures for FY-08 and Q1-08 to reflect the
financial presentation adopted in the current quarter.
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    Strategic Progress Update
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    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 52 - 56 of our 2008 Annual Report).
    -------------------------------------------------------------------------

    The following table shows our progress against the fiscal year 2009
objectives laid out in our annual report.

    -------------------------------------------------------------------------
    2009 Objectives          On          3 Month Results
                             Track?
    -------------------------------------------------------------------------
    Grow top line while      In          -  Q1-09 revenue was consistent
     maintaining             Progress       with Q1-08
     profitability                       -  Net income increased 23% compared
                                            to Q1-08 with a significant
                                            contribution from foreign
                                            currency translation gains
    -------------------------------------------------------------------------
    Improve employee         Yes         -  Annualized employee turnover at
     retention                              the end of Q1-08 is below FY-08
                                            levels
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    Increase sales via       Yes         -  Q1-09 sales by Matrikon's
     Reseller Partners                      reseller partners grew by 60%
                                            compared to Q1-08
    -------------------------------------------------------------------------
    Increase sales volume    Yes         -  Q1-09 revenue from off-the-shelf
     of off-the-shelf                       products (Alarm Manager,
     products                               Operational Insight, Control
                                            Performance Monitor, and OPC)
                                            grew by 13% compared to Q4-08 and
                                            decreased by 5% compared to
                                            Q1-08.
    -------------------------------------------------------------------------
    One significant new      Yes         -  Two major product upgrades were
     product upgrade each                   released in Q1-09.
     quarter
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    Revenue from licenses    In          -  Software license and support
     & support of 33%-35%    Progress       revenue was 32% of total revenue
     of total revenue                       in Q1-09
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    Continue to sell and     In          -  One new Well Performance Monitor
     deploy industry         Progress       (WPM) client was added during
     applications                           Q1-09.
                                         -  As strategic enterprise
                                            initiatives, our industry
                                            applications typically have a
                                            longer sales cycle. Our fiscal
                                            2009 objectives have not been
                                            changed as our outlook remains
                                            positive on this area of our
                                            business.
    -------------------------------------------------------------------------
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    Items of Note in Q1-09

    -   Foreign exchange: In Q1-09, the Canadian dollar lost strength
        relative to the US dollar and the Euro, favorably impacting results.
        Foreign exchange gains resulted in an after-tax EPS contribution of
        $0.03 in Q1-09 compared to $(0.01) in Q1-08.

    -   Gross margin: In Q1-09, we achieved overall gross margin of 61%,
        compared to 56% in Q1-08. Gross margin in Q1-09 was positively
        impacted by improved consulting margins.

    -   Weak software revenue: Software license revenue was at its lowest
        level since Q4-07 due to a slowdown in some of the industries in
        which we work, which has resulted in delays of some software orders.
        As we engage in larger industry application solutions, the sales
        cycle and implementation timeline increase and may result in lumpy
        software license revenue. Our outlook on software license sales for
        the remainder of FY-09 remains positive. Our extended support revenue
        continues to grow, with a record $2.52 million in revenue in Q1-09.

    -   Sales and marketing investment: We continued to invest strategically
        in our sales and marketing initiatives to support top line growth.
        Sales and marketing expenses grew 35% compared to Q1-08 along with
        headcount increasing 14%.

    -   SR&ED: In Q1-09, the Canada Revenue Agency approved a Scientific
        Research and Experimental Development ("SR&ED") income tax credit
        related to a prior year, reducing current year R&D expenses by
        $0.50 million.


    Summary of Results
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    3 Months       30-Nov-08       30-Nov-07       31-Aug-08    Q1-09  Q1-09
     Ended                 %               %               %      vs     vs
    (CAD $000s) (Q1-09) revenue (Q1-08) revenue (Q4-08) revenue Q1-08  Q4-08
    -------------------------------------------------------------------------
    Total
     Revenue   $19,579   100%  $19,889   100%  $20,162   100%     -2%    (3%)
    -------------------------------------------------------------------------
    Consulting
     fees       12,152    62%   12,024    60%   11,503    57%      1%     6%
    -------------------------------------------------------------------------
      Margin on
       consulting
       fees        45%             41%             37%
    -------------------------------------------------------------------------
    Equipment
     sales       1,016     5%    1,282     7%    1,142     6%    (21%)  (11%)
    -------------------------------------------------------------------------
      Margin on
       equipment
       sales       25%             28%             36%
    -------------------------------------------------------------------------
    Total
     Solutions
     revenue    13,168    67%   13,306    67%   12,645    63%     (1%)    4%
    -------------------------------------------------------------------------
    Software
     license
     fees        3,693    19%    4,211    21%    5,006    25%    (12%)  (26%)
    -------------------------------------------------------------------------
      Margin on
       software
       license
       fees        97%             92%             96%
    -------------------------------------------------------------------------
    Support      2,521    13%    2,101    11%    2,471    12%     20%     2%
    -------------------------------------------------------------------------
      Margin on
       support     98%             91%             96%
    -------------------------------------------------------------------------
    Total
     Products
     revenue     6,214    32%    6,312    32%    7,477    37%     (2%)  (17%)
    -------------------------------------------------------------------------
    Interest
     income        197     1%      271     1%       40     0%    (27%)  393%
    -------------------------------------------------------------------------
      Consulting
       headcount   275             279             266            (1%)    3%
    -------------------------------------------------------------------------
      Gross
       margin      61%             56%             59%
    -------------------------------------------------------------------------
    Total
     Expenses    9,324    48%    7,820    39%    9,061    45%     19%     3%
    -------------------------------------------------------------------------
    Consulting
     G&A         1,668     9%    1,496     8%    1,492     7%     11%    12%
    -------------------------------------------------------------------------
    Sales &
     marketing   1,836     9%    1,359     7%    1,632     8%     35%    13%
    -------------------------------------------------------------------------
    Research &
     development 1,410     7%    1,621     8%    1,668     8%    (13%)  (15%)
    -------------------------------------------------------------------------
    General &
     admini-
     strative    3,716    19%    2,798    14%    3,639    18%     33%     2%
    -------------------------------------------------------------------------
      Operations
       headcount   270             251             255             8%     6%
    -------------------------------------------------------------------------
    Stock-based
     compensation  318     2%      242     1%      290     1%     31%    10%
    -------------------------------------------------------------------------
    Amortization   376     2%      304     2%      340     2%     24%    11%
    -------------------------------------------------------------------------
    Foreign
     exchange
     translation
     gain (loss) 1,144     6%     (474)   (2%)     768     4%   (341%)   49%
    -------------------------------------------------------------------------
    Net income   2,757    14%    2,239    11%    2,583    13%     23%     7%
    -------------------------------------------------------------------------
    Earnings
     per share
     - basic      0.09            0.07            0.09            29%     0%
    -------------------------------------------------------------------------
    Earnings
     per share
     - diluted    0.09            0.07            0.08            29%    13%
    -------------------------------------------------------------------------
    Weighted
     average
     shares
     outstanding
     (000s)     30,949          30,598          30,636             1%     1%
    -------------------------------------------------------------------------
    Total
     assets     64,454          66,434          67,768            (3%)   (5%)
    -------------------------------------------------------------------------
    Total
     long term
     liabilities
     (Future
     income
     taxes)        134             546             316           (75%)  (58%)
    -------------------------------------------------------------------------
    Deferred
     revenue     8,573           8,419           8,909             2%    (4%)
    -------------------------------------------------------------------------
    Contracts in
     progress    6,070           5,601           6,246             8%    (3%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    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 52 - 56 of our 2008 Annual Report).
    -------------------------------------------------------------------------
    

    Revenue

    Our products revenue decreased by 2% compared to Q1-08 and 17% compared
to Q4-08. Despite this, we continue to make progress against our Products
strategy as off-the-shelf product sales grew 13% compared to Q4-08. Sales by
our Reseller Partners have also grown by 60% compared to Q1-08. Products
revenue has remained consistent with Q1-09 in relation to the overall revenue
mix, representing 32% of total revenue in Q1-09.
    Revenues from our industry applications decreased in comparison to
previous quarters due to the long sales cycle associated with these large
value projects. Delays at certain client sites also contributed to lower
revenues relating to Mobile Equipment Monitor (MEM). Production Management
revenues grew 118% compared to Q1-08 as we continue to gain traction with this
industry application. Our Industry Solutions contributed $0.61 million to
product revenue in Q1-09 compared to $1.71 million in Q4-08 and $0.04 million
in Q1-08.
    Our Solutions revenue remained consistent with Q1-08. Based on the value
that our solutions deliver during an economic downturn and our global and
industry diversification, we believe the opportunities for our Solutions
remain strong.
    Compared to Q4-08, Solutions revenue grew by 4% as a result of improved
utilization rates and a 3% increase in billable headcount. Equipment sales are
ancillary to our business and will continue to fluctuate period-by-period.

    Gross Margin

    Gross margin in Q1-09 was 61%, compared to 56% in Q1-08 and 59% in Q4-08.
Gross margin in Q1-09 was positively impacted by improved consulting margins,
which were 45% in Q1-09 as a result of higher revenues, reduced benefits
costs, realignment of staff to overhead, and recoveries of bad debt that were
previously written-off. This was slightly offset by an increase in lower
margin equipment sales, which had margins of 25% in Q1-09.

    Overhead Expenses

    Combined overhead expenses in Q1-09 were $9.32 million (48% of revenue),
compared to $9.06 million (45% of revenue) in Q4-08 and $7.82 million (39% of
revenue) in Q1-08. Overhead expenses in Q1-09 included higher third party
consulting costs and professional fees of $0.32 million.
    During Q1-09, we have continued our investment in sales and marketing to
support top line growth. Sales and marketing costs increased by 35% due to
salary increases and to support selling activities such as travel compared to
Q1-08. Headcount also grew 14% over the same period as we executed against our
strategy to hire product managers to grow our products business. Compared to
Q4-08, our sales and marketing costs increased 13% with headcount increasing
14% over the same period.
    Consulting G&A increased due to realignment of staff based on new roles.
    R&D decreased 13% compared to Q1-08 and 15% compared to Q4-08 as we
continue to realize the benefits of the Canadian Scientific Research and
Experimental Development ("SR&ED") program. During Q1-09, a 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 increased 27% compared to
Q1-08 as a result of an 11% increase in headcount and costs associated with
investment in developers in India. Compared to Q4-08, R&D expenses increased
15% due to a 3% increase in headcount and costs associated with India as we
continue to ramp up our resources.

    Net Income

    Record net income of $2.76 million resulted in a strong net margin of 14%
in Q1-09, compared to 13% in Q4-08 and 11% in Q1-08.
    The following factors contributed to the Q1-09 net margin:

    
    -   Foreign currency translation gain of $1.14 million in Q1-09, compared
        to a loss of $0.47 million in Q1-08, as the Canadian dollar continued
        to weaken relative to certain currencies in which we do business. Net
        of tax, this resulted in a $0.03 increase in EPS for Q1-09 compared
        to $(0.01) in Q1-08.

    -   Improved consulting gross margins due to lower benefits costs for
        billable staff and bad debt recoveries in Q1-09.

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

    -   Recovery of income tax credits associated with the Canadian SR&ED
        program.
    

    These positive net income influences were offset by increases in
stock-based compensation expenses compared to FY-08 as the Restricted Share
Unit program fully replaced legacy stock-based compensation programs. Other
income which includes interest income relating to cash and cash equivalents
and gains relating to the sale of assets also decreased 24% in comparison to
Q1-08 and 78% compared to Q4-08.
    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
                                                       Rate for $1.00 CAN
    ---------------------------------------------- --------------------------
                          Q1-09    Q1-08    Q4-08    Q1-09    Q1-08    Q4-08
    ---------------------------------------------- --------------------------
    Australian Dollar       28%      25%      23%   0.8129   0.8749   0.9138
    ---------------------------------------------- --------------------------
    British Pound           13%      19%      13%   1.9071   2.0499   1.9390
    ---------------------------------------------- --------------------------
    Canadian Dollar         17%      19%      16%        -        -        -
    ---------------------------------------------- --------------------------
    Euro                     5%       7%       8%   1.5747   1.4644   1.5625
    ---------------------------------------------- --------------------------
    United States Dollar    37%      30%      39%   1.2402   0.9900   1.0645
    ---------------------------------------------- --------------------------
    Other Currencies          -        -       1%        -        -        -
    ---------------------------------------------- --------------------------
    ---------------------------------------------- --------------------------
    

    Comprehensive Income

    In FY-08, we began to report other comprehensive income. Other
comprehensive income accounts for currency translation related to our
self-sustaining foreign operations and resulted in a foreign currency loss of
$0.61 million in the quarter as the Canadian dollar gained strength against
the Australian dollar and British pound.

    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 labour.

    
    -------------------------------------------------------------------------
    3 Months Ended
     30-Nov-08       North     Asia-
     CAN$ (000s)   America   Pacific      EMEA  Products  Corporate    Total
    -------------------------------------------------------------------------
    External
     revenue         8,103     4,918     4,552     2,006         -    19,579
    -------------------------------------------------------------------------
    Intercompany
     revenue (cost
     of sales)        (877)     (194)     (496)    1,567         -         -
    -------------------------------------------------------------------------
    % of external
     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
    -------------------------------------------------------------------------
    External revenue
     change % (Q1-09
     vs Q1-08)         10%       (7%)     (15%)       3%         -       (2%)
    -------------------------------------------------------------------------
    Employees at
     30-Nov-08         144       137        84       113        67       545
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    3 Months Ended
     30-Nov-07       North     Asia-
     CAN$ (000s)   America   Pacific      EMEA  Products  Corporate    Total
    -------------------------------------------------------------------------
    External
     revenue         7,354     5,260     5,328     1,947         -    19,889
    -------------------------------------------------------------------------
    Intercompany
     revenue (cost
     of sales)        (697)     (268)     (765)    1,730         -         -
    -------------------------------------------------------------------------
    % of external
     revenue           37%       26%       27%       10%         -      100%
    -------------------------------------------------------------------------
    Gross profit     2,903     2,630     2,616     3,051         -    11,200
    -------------------------------------------------------------------------
    Gross margin       44%       53%       57%       83%         -       56%
    -------------------------------------------------------------------------
    Expenses        (1,655)   (1,419)     (938)   (1,843)   (1,965)   (7,820)
    -------------------------------------------------------------------------
    Other income
     (loss) &
     foreign
     exchange gain
     (loss)             18        38        81         -      (433)     (296)
    -------------------------------------------------------------------------
    Income (loss)
     before taxes    1,266     1,249     1,759     1,208    (2,398)    3,084
    -------------------------------------------------------------------------
    Employees at
     30-Nov-07         145       118        71       122        74       530
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    North America: Revenue in the North America segment increased by 10%
compared to Q4-08. Consulting revenue increased 29% as a result of a 14%
increase in average daily rate and a marginal increase in billable headcount.
Higher maintenance and support revenues also contributed to the overall growth
in revenue. Software revenue was down by 36% as a result of a reduced number
of ongoing industry applications projects.
    Compared to Q1-08, North America's external revenue increased by 10% as a
result of significant increases in software license and support revenue. These
increases were offset by a 5% fall in consulting revenue resulting from a 15%
reduction in billable staff and a decline of 68% in equipment revenue. Reduced
office rent expense contributed to a 12% reduction in expenses compared to
Q1-08.
    First quarter gross margin in this segment was positively impacted by
recoveries of bad debt that were recorded in Q4-08 in addition to a reduction
in lower margin equipment sales. The strengthening of the US dollar relative
to the Canadian dollar during Q1-09 also had a positive impact on margins in
this region as a significant portion of revenues are realized in US dollars,
while the majority of costs are incurred in Canadian dollars.

    Asia-Pacific: First quarter results were impacted by the strengthening of
the Canadian dollar relative to the Australian dollar, the currency in which
we transact in Asia-Pacific (0.9138 at August 31, 2008, compared to 0.8129 at
November 30, 2008). In natural currencies, consulting revenues increased 2%
compared to Q4-08 and 7% compared to Q1-08.
    Revenue in Asia-Pacific decreased by 8% compared to Q4-08. Consulting
revenue was down 12% and software license revenue also declined 22%, while
equipment revenue significantly increased 106%. With the larger proportion of
low margin equipment revenue in the revenue mix compared to Q4-08,
Asia-Pacific had a gross margin of 47% in Q1-09. This compares to gross
margins of 51% in Q4-08 and 53% in Q1-08. Expenses in Asia-Pacific decreased
by 3% mainly as a result of currency fluctuations while headcount increased by
5%.
    Compared to Q1-08, external revenue in Asia-Pacific declined by 5%
primarily as a result of lower software license and support revenue. The use
of contractors and employee recruitment fees as a result of the high demand
for skilled labour in this region contributed to an increase of 15% in
overhead expenses compared to Q1-08.

    EMEA: EMEA's external revenue decreased by 17% compared to Q4-08. This
decrease is a result of a 5% decline in consulting revenue and a 27% decline
in software license revenue. We have continued to strategically invest in this
region from a sales perspective as well as increasing our presence in the
Middle East region. Overhead expenses in EMEA increased 37% compared to Q4-08,
primarily related to employee relocation and salary costs. Headcount in EMEA
increased 17% compared to Q4-08.
    External revenue also decreased by 15% compared to Q1-08 as a result of
significantly lower software license, support and equipment sales. Compared to
Q1-08, expenses were up 72% as a result of relocation expenses, higher travel
costs and an 18% increase in headcount.
    Gross margin for EMEA was 65% in Q1-09, compared to 61% in Q4-08 and 57%
in Q1-08. The increase in gross margin during Q1-09 was due to lower third
party equipment sales and a reclassification of sales costs that were
previously recorded as part of cost of sales.

    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 by 3% compared to Q1-08, but was down by 1%
compared to Q4-08. Total revenue, including intercompany revenue, decreased 3%
compared to Q1-08 and 7% compared to Q4-08 as a result of lower software
license sales in all regions.
    Compared to Q4-08, expenses in the Product segment decreased 16% as we
continue to find cost efficiencies in this area of our business.
    In Q1-09, off-the-shelf software license revenue increased 13% compared
to Q4-08 and declined 5% compared to Q1-08. At the beginning of FY-09, we
included Control Performance Monitor in our off-the-shelf products as it had
achieved the characteristics of our definition (simple to use and install with
less than two weeks implementation and training required). Control Performance
Monitor revenue is not included in the off-the-shelf product revenue in the
comparable period.

    Corporate: The Corporate segment includes all shared corporate services
(including executive management, finance, information technology and human
resources) that is 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 15% compared to Q4-08 due to higher employee
expenses, third party consultancy fees, and administration costs. This was
offset by SR&ED tax credits received during the quarter, which are recorded as
an expense recovery. The Corporate segment was also positively impacted by a
favorable shift in foreign exchange in Q1-09, which resulted in a translation
gain of $1.14 million, compared to a gain of $0.77 million in Q4-08 and a loss
of $0.47 in Q1-08.
    Corporate expenses increased 21% compared to Q1-08 due to higher third
party consultancy fees and stock-based compensation expense.

    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                              FY 07
    except per share amounts        Q2       Q3       Q4
    -------------------------------------------------------
    Revenue                       17,247   19,009   18,435
    -------------------------------------------------------
    Gross profit                  10,011    9,789    9,361
    -------------------------------------------------------
    Gross margin                     58%      51%      51%
    -------------------------------------------------------
    Operating income                 (73)  (1,531)    (227)
    -------------------------------------------------------
    Net income (loss)                307   (2,085)    (245)
    -------------------------------------------------------
    Net margin                        2%     (11%)     (1%)
    -------------------------------------------------------
    Shares outstanding (000s)     30,637   30,191   30,308
    -------------------------------------------------------
    Diluted shares
     outstanding (000s)           31,006   30,691   31,574
    -------------------------------------------------------
    EPS - basic                     0.01    (0.07)   (0.01)
    -------------------------------------------------------
    EPS - diluted                   0.01    (0.07)   (0.01)
    -------------------------------------------------------
    Headcount                        605      582      530
    -------------------------------------------------------
    -------------------------------------------------------


    -------------------------------------------------------------------------
    CAN $000s                                   FY 08                 FY 09
    except per share amounts        Q1       Q2       Q3       Q4       Q1
    -------------------------------------------------------------------------
    Revenue                       19,889   19,444   20,536   20,162   19,579
    -------------------------------------------------------------------------
    Gross profit                  11,200   10,533   11,533   11,903   11,867
    -------------------------------------------------------------------------
    Gross margin                     56%      54%      56%      59%      61%
    -------------------------------------------------------------------------
    Operating income               3,380    2,617    3,103    2,842    2,543
    -------------------------------------------------------------------------
    Net income (loss)              2,239    1,809    2,467    2,583    2,757
    -------------------------------------------------------------------------
    Net margin                       11%       9%      12%      13%      14%
    -------------------------------------------------------------------------
    Shares outstanding (000s)     30,598   30,440   30,548   30,636   30,949
    -------------------------------------------------------------------------
    Diluted shares
     outstanding (000s)           31,549   31,340   31,467   31,494   31,649
    -------------------------------------------------------------------------
    EPS - basic                     0.07     0.06     0.08     0.09     0.09
    -------------------------------------------------------------------------
    EPS - diluted                   0.07     0.06     0.08     0.08     0.09
    -------------------------------------------------------------------------
    Headcount                        530      501      506      521      545
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Management has not noted any change to the seasonality of our business as
reported in the 2008 annual MD&A.

    Liquidity & Capital Resources

    -------------------------------------------------------------------------
    At                                                   Q1-09 vs   Q1-09 vs
    (CAN $000s except                                       Q4-08      Q1-08
     ratios)           30-Nov-08  30-Nov-07  31-Aug-08   % Change   % Change
    -------------------------------------------------------------------------
    Cash & equivalents    10,551     14,894     15,721       (33%)      (29%)
    -------------------------------------------------------------------------
    Accounts receivable   25,067     20,655     22,782        10%        21%
    -------------------------------------------------------------------------
    Trade receivables     19,690     17,732     17,407        13%        11%
    -------------------------------------------------------------------------
    Average collection
     period (trade
     receivables)        81 days    84 days    78 days     3 days    (3 days)
    -------------------------------------------------------------------------
    Contracts in
     progress              6,070      5,601      6,246        (3%)        8%
    -------------------------------------------------------------------------
    Deferred revenue       8,573      8,419      8,909        (4%)        2%
    -------------------------------------------------------------------------
    Current liabilities   19,763     17,803     22,269       (11%)       11%
    -------------------------------------------------------------------------
    Cash flow from
     operations             (554)     2,512      4,267      (113%)     (122%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    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 52 - 56 of our 2008 Annual Report).
    -------------------------------------------------------------------------
    

    The rolling 12-month average collection period (on trade receivables) was
81 days at the end of Q1-09, an improvement of 3 days compared to the end of
Q1-08. This improvement is the result of an increased focus on collections.
The average collection period at the end of Q1-09 is three days longer
compared to the end of Q4-08. This was caused by a higher trade receivables
balance as a result of increased invoicing in preparation for the
implementation of our new ERP on December 1, 2008.
    Current liabilities decreased to $19.76 million at the end of Q1-09,
compared to $22.27 million at the end of Q4-08 and $17.80 million at the end
of Q1-08. Compared to Q4-08, this decrease is a result of decreases in
accounts payable ($1.33 million) primarily related to payment of FY-08 profit
sharing plans and management bonuses, payment of income taxes relating to
income earned in FY-08 ($0.55 million), and a decrease in deferred revenue
($0.34 million). Deferred revenue at the end of the Q1-09 includes $4.21
million in deferred support revenue and $4.36 million in unearned software
license, services and equipment revenue.
    Cash used by operating activities was $0.55 million in Q1-09, compared to
cash provided by operations of $4.27 million in Q4-08 and $2.51 million in
Q1-08. The decrease over the prior quarter is a result of the significant
increase in accounts receivable and decrease in accounts payable. In
comparison to the same quarter of FY-08, cash provided by operations decreased
due to unrealized foreign exchange gains and a significant increase in
accounts receivables.
    In the Q1-09, we paid a special dividend of $0.07 per common share to our
shareholders in addition to the regular quarterly dividend of $0.03 per common
share. Subsequent to the quarter, our board of directors declared a dividend
of $0.03 per common share to shareholders of record on December 31, 2008,
payable on January 14, 2009.
    Our effective income tax rate was 27.9% in Q1-09 compared to 27.4% in
Q1-08. This is within our expected range of 27% - 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.

    Financial Instruments

    Forward Contracts: We periodically enter into forward contracts to
partially manage our exposure to currency fluctuations between United States
(US) and Canadian dollars. Forward contracts are entered into based on our
projected requirements for converting US cash to Canadian dollars. Forward
contracts are recorded at fair value and are not designated as hedges for
accounting purposes. Changes to the market value are recorded into income or
expense. The fair value of these contracts is included in accounts receivable
for a gain or accounts payable for a loss.
    At November 30, 2008, the fair value of forward contracts was $(0.35)
million, compared to $(0.01) million at November 30, 2007.
    At November 30, 2008, we were committed to sell $1.25 million in US
dollars each month at a rate of $1.08-$1.12 through to January 2009.
Subsequent to the quarter, we committed to sell $1.00 million in US dollars at
a rate of 1.26 in February 2009.

    Foreign Currency Translation

    During Q1-09, we determined that our British subsidiary, Matrikon UK
Limited ("MUK") is a self-sustaining entity due to a change in economic
circumstances. The British pound is the functional currency of MUK. As a
self-sustaining entity, MUK's operations are translated using the current rate
method, which means that assets and liabilities are translated at the exchange
rate in effect at the balance sheet date, while revenues and expenses are
translated using the average exchange rates over the period. Translation gains
and losses related to MUK are included in accumulated other comprehensive
(loss) income in shareholders' equity.
    Foreign exchange gains or losses from our integrated international
operations are taken into income in the Consolidated Statement of Income.

    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 November 30, 2008   Total     1 year  2-3 years  4-5 years    5 years
    -------------------------------------------------------------------------
    Operating lease
     obligations
     (CAN $000s)           5,996      1,963      3,147        876         10
    -------------------------------------------------------------------------
    Other long term
     obligations
     (CAN $000s)             200        100        100          -          -
    -------------------------------------------------------------------------
    Foreign exchange
     forward contracts
     (US $000s)            3,500      3,500          -          -          -
    -------------------------------------------------------------------------
    Total contractual
     obligations           9,696      5,563      3,247        876         10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Share Data

    Matrikon is listed on the Toronto Stock Exchange under the trading symbol
"MTK". As at January 12, 2009 there were 30,951,918 common shares of the
corporation issued and outstanding and 353,050 options and 639,253 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 2008. Please see pages 50-51
of Matrikon's annual MD&A for the fiscal year ended August 31, 2008 dated
November 5, 2008 for a discussion of these estimates.

    
    Recent Accounting Pronouncements Issued and Not Applied

    Convergence with International Financial Reporting Standards ("IFRS")
    

    Canada's Accounting Standards Board ratified a strategic plan that will
result in GAAP, as 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 on or after January 1, 2011. For Matrikon
this will be the period started September 1, 2011. We are currently assessing
the impact of the ultimate adoption of IFRS on our future financial reporting.
    We have established a Financial Reporting Team to review the adoption of
IFRS. The team has provided updates to management and the Audit Committee. We
plan to engage an external expert advisor. We are closely monitoring
regulatory developments made by the Canadian Institute of Chartered
Accountants and the Canadian Securities Administrator that may affect the
timing, nature or disclosure of our adoption of IFRS. We are also monitoring
developments in accounting made by the Accounting Standards Board of Canada
(AcSB) and the International Accounting Standards Board (IASB) to ensure that
on adoption of IFRS, we are compliant with IFRS as issued by the IASB.

    Goodwill and Intangible Assets

    In February 2008, the CICA issued Handbook Section 3064 - "Goodwill and
Intangible Assets" which will replace Handbook Section 3062 - "Goodwill and
Other Intangible Assets" and Section 3450 - "Research and Development Costs".
This revision aligns Canadian GAAP with IFRS and establishes standards for the
recognition, measurement, presentation and disclosure of goodwill and
intangible assets. This section applies to fiscal years beginning on or after
October 1, 2008. We are currently in the process of determining the impact of
adopting this new standard. This standard applies to our interim and annual
financial statements beginning September 1, 2009.

    
    Change in Accounting Policies and Recently Adopted Canadian Accounting
    Pronouncements

    Capital Disclosures
    

    In November 2006, the CICA issued the new handbook Section 1535, "Capital
Disclosures," effective for annual and interim periods beginning on or after
October 1, 2007, specifically September 1, 2008 for our company. This section
establishes standards for disclosing information about a company's capital and
how it is managed in order that a user of the financial statements may
evaluate the company's objectives, policies, and processes for managing
capital. The adoption of this standard did not have an impact on our financial
position or the results of our operations.

    Financial Instruments

    In March 2007, the CICA issued Handbook Section 3863 - "Financial
Instruments - Presentation" to enhance financial statement users'
understanding of the significance of financial instruments to an entity's
financial position, performance and cash flows. This section establishes
standards for presentation of financial instruments and non financial
derivatives. It deals with the classification of financial instruments from
the perspective of the issuer, between liabilities and equity, the
classification of related interest, dividends, gains and losses, and the
circumstances in which financial assets and financial liabilities are offset.
This standard harmonizes disclosures with International Financial Reporting
Standards.
    CICA Handbook Section 3862 "Financial Instruments - Disclosures"
complements CICA Handbook Section 3861 with expanded disclosure requirements
for financial assets and liability categories. This standard harmonizes
disclosures with IFRS.
    These new standards apply to fiscal years beginning on or after October
1, 2007. This applies to our interim and annual financial statements beginning
September 1, 2008. The adoption of these standards did not have an impact on
the disclosure, classification or valuation of our financial instruments.

    General Standards of Financial Statement Presentation

    An amended Canadian standard requires an assessment of an entity's
ability to continue as a going concern and requires disclosure of any material
uncertainties that cast doubt on its ability to continue as a going concern.
In assessing the appropriateness of the going concern assumptions, the
standard requires us to consider all available information about the future,
which is at least, but not limited to twelve months from the balance sheet
date. The new standard applies to fiscal years beginning on or after January
1, 2008. This applies to our interim and annual financial statements beginning
September 1, 2008. The adoption of this standard did not have an impact on our
consolidated financial statements.

    Risks Related to Our Business

    There has been no significant change in our risk factors from those
described in our 2008 Annual Report. Please see pages 52-56 of Matrikon's 2008
Annual Report.

    Internal Control over Financial Reporting and Disclosure Controls

    There were no changes during Q1-09 that materially affected or are
reasonably likely to materially affect our internal control over financial
reporting and disclosure controls. Please see page 57 of Matrikon's 2008
Annual Report for a discussion of internal controls over financial reporting
and disclosure controls.
    At August 31, 2008, 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 Q1-09,
we began to implement procedures that require all material contracts to be
reviewed, prior to commencement, to identify projects that require contract
accounting treatment. During the remainder of fiscal 2009, we will continue to
take steps to remediate this weakness and monitor the effectiveness of the
procedures management has put in place.

    Subsequent Events

    Subsequent to the quarter, our Board of Directors declared a dividend of
$0.03 per common share payable on January 14, 2009 to shareholders of record
as of December 31, 2008. The dividend is an eligible dividend for Canadian
income tax.
    We also announced that we obtained regulatory approval to make a normal
course issuer bid to purchase our common shares. Pursuant to the Bid, Matrikon
is entitled to acquire up to 1,547,595 common shares, representing not more
than 5% of the 30,951,918 common shares issued and outstanding as of January
14, 2009. The Bid will commence January 16, 2009 and end January 15, 2010.
Daily purchases will be limited to 23,679 common shares, other than block
purchase exceptions until March 31, 2009 and thereafter shall be limited to
11,839 common shares, other than block purchase exceptions.

    
    -------------------------------------------------------------------------
    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, 2008, Matrikon had 545 employees, including 103 in
corporate and administrative services, 66 in sales and marketing, 110 in
product development and support and 266 in professional services (Solutions).
    -------------------------------------------------------------------------
    





For further information:

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

Organization Profile

MATRIKON INC.

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