Integral Sees Revenues Grow, Operating Income Decline

INTEGRAL SYSTEMS PRESS RELEASE

Integral Systems, Inc. (Nasdaq: ISYS) (“Company”) today reported financial results for the second quarter of fiscal 2009.

Revenue for the quarter was $42.8 million, up 13.4% over 2008. Gross margin for the quarter was 38.2% compared to 28.8% for the same period last year. Second quarter 2009 income from operations was $4.2 million compared to $4.4 million recorded in the second quarter of the last fiscal year. The decline in operating income reflects higher selling, general, and administrative (SG&A) costs. Diluted earnings per share for the second quarter of 2009 was $0.15 compared to $0.16 per share for the second quarter of fiscal 2008.

Year-to-date revenue was $81.2 million, up 13.4% over 2008. Gross margin for the first two quarters of 2009 was 36.6% compared to 32.7% for the same period last year. Year-to-date operating income declined $4.2 million over 2008 due to higher SG&A expenses. Year-to-date 2009 earnings per share was $0.21 compared to $0.43 per share in 2008.

The higher SG&A costs that the Company has experienced this year are the result of conscious efforts to solidify the Company’s infrastructure, build a robust business development function, and ensure compliance in all material respects in the Company’s financial, information systems, security, and quality control operations.

QUARTER HIGHLIGHTS

* Awarded contract with B-SAT to provide turnkey satellite control system
* Awarded contract with Mitsubishi Electronic Corporation to provide integrated environment for satellite operations and mission analysis
* Awarded NOAA contract modification to complete the modernization of the Polar Acquisition and Control Subsystem (PACS) command, control, and communications ground system
* Awarded CCS-C two-year contract extension
* Acquired satID intellectual property and assets
* Achieved CMMI Maturity Level 3 certification for Government Systems Group
* Completed contractor purchasing systems review (CPSR) resulting in approved purchasing system for government contracting
* Established Integral Systems Europe – United Kingdom, bringing earth station and antenna integration capability to the Integral Systems family

“We are encouraged by our revenue and gross profit growth given the current economic climate,” said John Higginbotham, Chief Executive Officer of Integral Systems. “The increased SG&A costs relate to nearly completed compliance initiatives and investments made to expand business development activities. We are diligently managing the Company’s cost structure to minimize discretionary expenditures and drive efficiency across the organization.”

Higginbotham concluded, “We continue to see significant new opportunities in our core markets and are making excellent progress in growing them both here and abroad. Looking ahead, the new business opportunity pipeline is robust and lays the foundation for solid bookings for the rest of this fiscal year and into fiscal year 2010.”