Dendrite Reports First Quarter Financial Results; Revenues of $103.1 Million, Up 4%, Driven by 25% Growth in Marketing Solutions Revenues

Revenues of $103.1 million for the first quarter were up 4% versusprior year. Excluding foreign currency movements, which adverselyimpact comparisons to prior year by approximately $3 million, or 3%,revenues increased by 7%. See Table 2 included with this press releaseand footnote (1) below for further information.

The Company reported its revenues consistent with the newcategorization presented during its Analyst and Investor Day inFebruary 2006. Sales solutions were $66.3 million in the first quarterof 2006, down 3% compared to $68.4 million in the first quarter of2005. The primary driver of the decrease in revenues was reducedspending by the Company's largest customer. Marketing solutionsrevenue increased 25% to $30.8 million from the prior year. Thisgrowth was led by strong performance in the US market, where theincreased adoption of the Company's persistency and compliancecampaigns drove strong revenue growth. In Emerging solutions, stronggrowth of 40% in the compliance business was offset by a previouslyreported contraction in clinical revenues, resulting in an overalldecline of 7% from the prior year to $6.0 million.

"We made good progress in several key areas this quarter," statedChairman and CEO John Bailye. "Within Sales solutions, if we excludethe negative impact of spending reductions from our largest customer,we saw good growth from the US business. Our European operations alsosigned several new SFA deals. In Marketing solutions, I am pleasedwith the strong growth that came largely from new products andsolutions we introduced into the marketplace. Our Compliance businesscontinues to prosper and reinforces the value that Dendrite canprovide to our clients across a broad spectrum of needs. All of thisprogress occurred in parallel with the Operational Effectivenessprogram we also commenced in the first quarter."

Operating income in the first quarter 2006 was $0.8 million,compared to a loss of ($2.4) million in the first quarter of 2005.First quarter 2006 operating income included $1.4 million ofcompensation expense related to stock options and shares issued underthe Company's employee stock purchase plan as a result of the adoptionof Statement of Financial Accounting Standards No. 123 (revised 2004),"Share-Based Payment" ("FAS 123R"), which was first effective forthe Company as of January 1, 2006. First quarter 2005 operating incomeincluded $9.4 million of accounting charges that related to therationalization of surplus facilities and severance. Excluding theimpact of these items, first quarter 2006 adjusted operating incomedecreased approximately $4.7 million, to $2.3 million, compared to$6.9 million in first quarter 2005. See Table 2 included with thispress release and footnote (1) below for further information.

Dendrite reported first quarter 2006 earnings per diluted share of$0.02, compared to a loss of ($0.03) per diluted share in the firstquarter of 2005. First quarter 2005 earnings per diluted shareincluded $0.13 of expense related to the rationalization of surplusfacilities and severance. First quarter 2006 earnings per dilutedshare included a total of approximately $0.02 of compensation expenseFAS 123R related to stock options and shares issued under the employeestock purchase plan. Excluding the impact of each of these items,adjusted earnings per diluted share decreased $0.07, to $0.03 in thefirst quarter 2006 compared to $0.10 in the first quarter 2005. SeeTable 2 included with this press release and footnote (1) below forfurther information.

Stated President and Chief Operating Officer Joe Ripp, "As weindicated during our fourth quarter earnings call and February Analystand Investor Day, our priority is to grow our revenue, while at thesame time, improve our margins and see top-line growth translated tothe bottom-line. We are taking the necessary actions to reduce costswhile continuing to position the Company to capitalize on theopportunity presented by the evolving sales and marketing needs of thepharmaceutical industry."

Dendrite also reported that its 2006 annual effective tax rateincreased to 45.7%, compared to 38.5% in the first quarter of 2005 anda full year 2005 effective tax rate of 41.7%. The increase in the 2006effective rate is primarily driven by a less favorable distribution ofprofits between low and high tax rate jurisdictions, the impact of FAS123R, and increased permanent non-deductible items on a lowerestimated pre-tax profit. In addition, Dendrite believes that itseffective tax rate could increase as certain cost initiatives areexecuted.

Summary of Key Balance Sheet Items

Dendrite generated $13.8 million of cash from operations in thefirst quarter of 2006. This strong operating cash flow was driven byimprovements in days sales outstanding (DSO) which decreased to 62days from 67 days in the fourth quarter of 2005.

Dendrite ended the first quarter 2006 with $77.4 million in cashand cash equivalents.

Capital expenditures for the first quarter 2006 totaled $2.4million.

Business Highlights
-- Increasing the Company's global sales force effectiveness
(SFE) base by approximately 3000 additional users, worldwide:

-- In the US, upgrading several emerging pharmaceutical
companies to Mobile Intelligence(TM), the Company's
flagship, Microsoft's(R) .NET based SFE solution that
incorporates innovative and user-centered navigation that
has been reengineered to mirror the workflow of the sales
representative.

-- In Europe, adding over 1,000 new users across the region
through new agreements, and completing the Company's first
successful Mobile Intelligence(TM) implementation with
Valeant Pharmaceuticals GmbH, for three countries
(Germany, Austria and Switzerland).

-- In Japan, signing an agreement with sanofi aventis KK to
implement j-forceNET(TM) SFE solution for the company's
Japanese sales force, driving Dendrite's Japanese market
share to approximately 45%.

-- In China, signing an agreement with SINE Pharmaceutical
Laboratories, the Company's first Chinese-owned
pharmaceutical customer in the country, to provide
components of Dendrite's SFE solution, j-forceNET -
Express(TM) and j-force Analyzer(TM). The agreement with
SINE reflects Dendrite's strategy to expand its presence
in the growing Asian market, at a time when China's
pharmaceutical market is experiencing tremendous growth.

-- Seeing a greater demand for the Company's Marketing solutions
across the globe with large, multi-channel, integrated
programs to drive prescriber behavior and patient loyalty,
including:

-- In the US, securing over 50 custom loyalty programs
serving 42 distinct brands for 22 pharmaceutical
companies, over the last 12 months.

-- Signing the first full-scale channel optimization program
for a major US brand that integrates recently acquired
Optas campaign management tool, with Dendrite's marketing
execution services and the client's sales channel. The
insights obtained through this program will enable the
customer to develop the right combination of channels and
messages to enhance prescriber communication effectiveness
over time.

-- In Europe, continuing to experience the momentum
established with Physician Connect(TM) in Q4, closing 28
new agreements in Q1 as customers in the region look for
new ways to target prescribers that influence adoption.

-- In Japan, following success in Europe, the Company
introduced a Marketing solutions suite tailored
specifically to the local market.

-- Experiencing continued strong growth in Dendrite's Sample and
Compliance Division.

-- Increasing outsource agreements for the Company's
comprehensive sample management solutions, including
Sample Guardian(TM), a solution that provides
pharmaceutical companies with a flexible and
cost-effective alternative to tracking, analyzing and
storing all sampling activity in order to comply with
Federal Drug Administration's (FDA) Prescription Drug
Marketing Act (PDMA) regulations.

-- Expanding the relationship with a top tier pharmaceutical
company through a multi-year, full outsourcing compliance
solutions agreement in the US.

-- Launching State Guardian(TM) and State Monitor(TM) to
equip pharmaceutical companies with the tools and
resources necessary to comply with the ever changing state
regulatory environment, including state and federal
promotional spend disclosure requirements.

Outlook

Dendrite confirmed its 2006 revenue outlook of approximately $437to $463 million. Further, the Company confirmed its 2006 revenueoutlook within its three revenue categories: Sales solutions ofapproximately $270 to $285 million, Marketing solutions ofapproximately $142 to $148 million, and Emerging solutions ofapproximately $25 to $30 million.

"Our Company-wide Operational Effectiveness program is well underway and tracking according to plan," stated EVP and CFO Jeff Bairstow."We believe we have identified numerous opportunities to reduceexpenses and we believe we are on track to achieve our cost reductionobjectives. We plan to share further details during our second quarterearnings release and conference call regarding the timing of variousactions and their expected impact to our bottom line," Mr. Bairstowconcluded.

To participate in Dendrite's earnings call to be telecast on May3, 2006 at 5 p.m. EDT, or to obtain replay information, please visitthe Investors' Highlights Section of our website at www.dendrite.com.

About Dendrite

Founded in 1986, Dendrite International (NASDAQ: DRTE) enablessales, marketing, clinical and compliance solutions for the global,pharmaceutical industry. The Company's clients are located in morethan 50 countries and include the world's top 20 pharmaceuticalcompanies. For more information, please visit www.dendrite.com.

Note: Dendrite is a registered trademark of DendriteInternational, Inc.

(1) NON-GAAP FINANCIAL MEASURES:

To supplement the Company's financial results presented inaccordance with U.S. Generally Accepted Accounting Principals("GAAP"), the Company uses, and has included in this press release andattached unaudited financial tables, the following non-GAAP financialmeasures: adjusted operating income, adjusted net income (loss) perdiluted share, and revenues excluding the impact of foreign currencyfluctuations.

Prior to January 1, 2006, the Company accounted for stock-basedcompensation under Accounting Principles Board, Opinion No. 25,"Accounting for Stock Issued to Employees" ("APB 25"). In accordancewith APB 25 the Company historically used the intrinsic value methodto account for stock-based compensation expense. Under APB 25, stockoptions and shares issued under the Company's employee stock purchaseplan were not an expense for accounting purposes and, as a result, nocompensation expense is included in the 2005 reporting period relatedto these items. As of January 1, 2006, the Company accounts forstock-based compensation expense, including expense related to stockoptions and shares issued under the employee stock purchase program,under the fair value method of Statement of Financial Accounting No.123R, "Shared-Based Payment" ("FAS 123R"). As the Company adopted themodified prospective method, results for prior periods have not beenrestated under the fair value method for GAAP purposes.

Management has historically reviewed its operating performanceusing a number of metrics. In connection with the adoption of FAS 123Ras of January 1, 2006, one measure which management is using toevaluate its operating results is to exclude compensation expenserelated to stock options and shares issued under the employee stockpurchase program in assessing period-to-period results, preparing itsfinancial goals and internal budgets and forecasts, evaluatingperformance against targets and budget, assessing managementperformance and establishing employee incentive compensation, andcomparing operating results against other companies. Management viewsthis non-GAAP exclusion of these expenses as a supplement tofacilitate internal planning, comparisons and performance assessments.Management also believes it provides investors an additional metric,consistent with what management uses internally, to analyze andevaluate our operating business. However, the non-GAAP financialmeasures which exclude compensation expense related to stock optionsand shares issued under the employee stock purchase plan should not beviewed as a substitute or replacement of GAAP, as these expenses arean essential part of the Company's compensation program and under GAAPall forms of cash and non-cash compensation must be valued andincluded (and not excluded) in the Company's results of operations.Also, stock options and the employee stock purchase plan are animportant element of employee incentive compensation and arerecurring. Management accounts for this exclusion of compensationexpense related to stock options and shares issued under the employeestock purchase plan by regularly reviewing the amount of the excludedexpense and its impact on its results of operations on a GAAP basisand by regularly reviewing its total cash and non-cash share-basedcompensation programs.

Management also uses the non-GAAP financial measure which excludescertain charges for surplus facilities and severance, in preparing itsfinancial goals and internal budgets and operating plans, assessingmanagement performance and determining, in part, managementcompensation, evaluating performance against targets and budget,assessing performance over reporting periods, and assessing operatingperformance against other companies. This information has also aidedmanagement and the Board of Directors in its decision-making andallocation of resources. A limitation of this financial measure isthat some or all of such special charges represent actual cash outlaysand, in addition, such measure does not reflect actual GAAP expense.Management compensates for this by clarifying that this is only oneoperating metric, is used for internal financial analysis and planningpurposes and should not be considered in isolation, and by providingas part of its disclosure the corresponding GAAP financial measure aswell as the detailed reconciliation.

The Company also discloses, and management internally monitors,the sales performance of international operations on a basis thateliminates the positive or negative effects that result fromtranslating international sales into U.S. dollars. Management usesthis constant Dollar measure because it believes that it enhances theassessment of the sales performance of its international operationsand the comparability between reporting periods.

These non-GAAP financial measures should not be considered inisolation, or as a substitute for, or superior to, financial measurescalculated in accordance with GAAP. Also, these non-GAAP financialmeasures as disclosed by the Company may be calculated differentlyfrom similar measures disclosed by other companies. To ease the useand understanding of these non-GAAP financial measures, the Companyhas included the most directly comparable GAAP financial measures anda detailed reconciliation between the GAAP and non-GAAP financialmeasures.

FORWARD LOOKING INFORMATION: This document containsforward-looking statements that may be identified by suchforward-looking terminology as "expect," "believe," "anticipate,""will," "intend," "plan," "target," "outlook," "guidance," and similarstatements or variations. Such forward-looking statements are based onour current expectations, estimates, assumptions and projections andinvolve significant risks and uncertainties, including risks which mayresult from our dependence on the pharmaceutical industry;fluctuations in quarterly revenues due to lengthy sales andimplementation cycles for our products; our fixed expenses in relationto fluctuating revenues and variations in customers' budget cycles;dependence on certain major customers; changes in demand for ourproducts and services attributable to any weakness experienced in theeconomy or mergers, acquisitions and consolidations in thepharmaceutical industry; successful and timely development andintroduction of new products and versions; rapid technologicalchanges; risks associated with foreign currency fluctuations as theyaffect our non-U.S. operations; increased competition; risksassociated with our expanded international operations and our abilityto adopt and respond successfully to the unique risks involved in ournon-U.S. operations; risks associated with acquisitions; our abilityto effectively manage our growth; the protection of our proprietarytechnology; our ability to compete in the Internet-related productsand services market; the continued demand for Internet-relatedproducts and services; the ability of our third party vendors torespond to technological change; our ability to maintain ourrelationships with third-party vendors; any difference betweenestimated and actual stock option expense; less favorable thananticipated results from strategic relationships or acquisitions;dependence of data solutions on strategic relationships; events whichmay affect the U.S. and world economies; and catastrophic events whichcould negatively affect our information technology infrastructure.Other important factors that should be reviewed and carefullyconsidered are included in the Company's 10-K under "Factors That MayAffect Future Results" and its 10-Qs and other reports filed with theSEC. Actual results may differ materially. The Company assumes noobligation for updating any such forward-looking statements to reflectactual results, changes in expectations or assumptions or otherchanges affecting such forward-looking statements, even if suchresults or changes make it clear that any such projected results willnot be achieved. Any outlook and other forward-looking information isas of the date of this release only. At any such time in the future asthe Company may provide revenue, earnings and other outlookinformation, prior related outlook should no longer be consideredcurrent. Our outlook and other forward-looking information does nottake into account or reflect any possible future acquisitions,dispositions or similar transactions which may occur.
TABLE 1
DENDRITE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP

(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)


Three Months Ended March 31,
----------------------------------------------
2006 % 2005 % Change
--------- ------ --------- ------ ------
Revenues:

Services & Technology:
Sales solutions $ 66,340 64.3% $ 68,354 68.7% (3)%
Marketing solutions 30,795 29.9% 24,662 24.8% 25%
Emerging solutions 5,994 5.8% 6,431 6.5% (7)%
--------- ---------
Total revenues 103,129 100.0% 99,447 100.0% 4%

Operating Costs &
Expenses:
Operating costs
(including shipping) 59,751 (1) 57.9% 53,651 53.9% 11%
Selling, general and
administrative 39,796 (2) 38.6% 35,788 (4) 36.0% 11%
Research and
development 1,734 (3) 1.7% 1,818 1.8% (5)%
Facility and other
charges - 0.0% 9,372 (5) 9.4% (100)%
Amortization of
acquired intangible
assets 1,022 1.0% 1,250 1.3% (18)%
--------- ---------
Total operating
costs & expenses 102,303 99.2% 101,879 102.4% 0%

Operating income (loss) 826 0.8% (2,432) (2.4)% 134%

Interest income, net (454) (0.4)% (141) (0.1)% 222%
Other income, net (25) 0.0% (23) 0.0% 9%
--------- ---------

Income (loss) before
income tax expense
(benefit) 1,305 1.3% (2,268) (2.3)% 158%

Income tax expense
(benefit) 596 0.6% (873) (0.9)% 168%
--------- ---------

Net income (loss) $ 709 0.7% $ (1,395) (1.4)% 151%
========= =========

Net income (loss) per
share:
Basic $ 0.02 $ (0.03) 167%
========= =========
Diluted $ 0.02 $ (0.03) 167%
========= =========

Shares used in computing
net income (loss) per
share:
Basic 43,548 42,470
--------- ---------
Diluted 44,279 42,470
--------- ---------

(1) Includes $139 of stock-based compensation expense from the
adoption of FAS 123R
(2) Includes $1,219 and $494 of stock-based compensation expense from
the adoption of FAS 123R and restricted stock expense,
respectively
(3) Includes $69 of stock-based compensation expense from the
adoption of FAS 123R
(4) Includes $14 of restricted stock expense
(5) Includes $7,649 of facility related charges and $1,723 of
severance expense



TABLE 2
DENDRITE INTERNATIONAL, INC.

SUPPLEMENTAL FINANCIAL INFORMATION (SEE NOTES)

THREE MONTHS ENDED MARCH 31, 2006 AND 2005

(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

----------------------------------------------------------------------
2006 2005 % Change
--------- --------- ---------

Total revenue - GAAP $103,129 $ 99,447 4%

Impact of foreign exchange rates (1) 2,970 -
--------- ---------

Total revenue - Adjusted $106,099 $ 99,447 7%
========= =========

---------------------------------------------------------------------

---------------------------------------------------------------------
2006 2005
--------- ---------
Operating income (loss) - GAAP $ 826 $ (2,432)

Stock option expense (2) 1,427 -
Surplus facility charges (3) - 7,649
Severance charges (4) - 1,723
--------- ---------

Operating income - Adjusted $ 2,253 $ 6,940
========= =========

---------------------------------------------------------------------

---------------------------------------------------------------------
2006 2005
--------- ---------
Net income (loss) per share:
Diluted - GAAP $ 0.02 $ (0.03)

Stock option expense (2) 0.02 -
Surplus facility charges (3) - 0.11
Severance charges (4) - 0.02
--------- ---------

Diluted - Adjusted $ 0.03 $ 0.10
========= =========

---------------------------------------------------------------------

Note: 2006 EPS does not foot down due to the mathematical rounding of
the individual calculations.

(1) The impact of exchange rates are calculated by taking 2006 local
currency revenue and applying the 2005 exchange rates for
comparison purposes.

(2) Prior to January 1, 2006, the Company accounted for stock-based
compensation under Accounting Principles Board, Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). In
accordance with APB 25, the Company historically used the
intrinsic value method to account for stock-based compensation
expense. Under APB 25, stock options and shares issued under the
Company's employee stock purchase plan were not an expense for
accounting purposes and, as a result, no compensation expense is
included in the 2005 reporting period related to these items. As
of January 1, 2006, the Company accounts for stock-based
compensation expense, including expense related to stock options
and shares issued under the employee stock purchase program, under
the fair value method of Statement of Financial Accounting No.
123R, "Shared-Based Payment" ("FAS 123R"). As the Company
adopted the modified prospective method, results for prior periods
have not been restated under the fair value method for GAAP
purposes.

(3) The surplus facility charges relates to vacating a New Jersey
facility and for additional facilities vacated in previous periods
due to changes in market conditions, as well as the write-off of
leasehold improvements associated with the exit of our New Jersey
facility.

(4) The severance charges relates to the elimination of certain senior
and mid-level management positions.



TABLE 3
DENDRITE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

March 31, December 31,
2006 2005
------------ ------------
Assets

Current Assets:
Cash and cash equivalents $ 77,374 $ 66,145
Accounts receivable, net 71,089 80,167
Prepaid expenses and other current assets 8,852 8,544
Deferred income taxes 8,848 8,848
------------ ------------
Total current assets 166,163 163,704
------------ ------------

Property and equipment, net 51,429 52,592
Other assets 9,499 8,856
Goodwill 90,182 90,440
Intangible assets, net 23,785 24,638
Purchased capitalized software, net 293 445
Capitalized software development costs, net 10,270 10,341
Deferred income taxes 12,114 11,991
------------ ------------
$ 363,735 $ 363,007
============ ============
Liabilities and Stockholders' Equity

Current Liabilities:
Accounts payable $ 7,389 $ 7,677
Income taxes payable 9,298 9,518
Capital lease obligations 1,373 1,383
Accrued compensation and benefits 17,400 17,950
Accrued professional and consulting fees 6,990 5,690
Accrued facility and other charges 1,205 1,490
Other accrued expenses 16,473 17,468
Purchase accounting restructuring accrual 1,243 1,601
Deferred revenues 17,521 18,680
------------ ------------
Total current liabilities 78,892 81,457
------------ ------------

Capital lease obligations 1,234 1,648
Purchase accounting restructuring accrual 2,635 3,009
Accrued facility and other charges 3,988 4,143
Deferred rent 5,635 5,740
Other non-current liabilities 5,697 5,595

Stockholders' Equity:
Preferred stock, no par value, 15,000,000
shares authorized, none issued - -
Common stock, no par value, 150,000,000
shares authorized, 46,467,805 and
46,353,252 shares issued; 43,606,502
and 43,491,949 shares outstanding at
March 31, 2006 and December 31, 2005,
respectively 148,699 149,947
Retained earnings 149,657 148,948
Deferred compensation - (4,419)
Accumulated other comprehensive loss (965) (1,324)
Less treasury stock, at cost (31,737) (31,737)
------------ ------------

Total stockholders' equity 265,654 261,415

------------ ------------
$ 363,735 $ 363,007
============ ============


TABLE 4
DENDRITE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)
(UNAUDITED)

Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Operating activities:
Net income (loss) $ 709 $ (1,395)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 5,872 5,402
Write-off of property and equipment - 1,030
Stock-based compensation 1,921 14
Deferred income taxes (1) (3,006)
Excess tax benefits from stock-based awards (216) -
Changes in assets and liabilities, net of
effects from acquisitions:
Decrease in accounts receivable 9,471 1,492
(Increase) decrease in prepaid expenses and
other current assets (282) 779
Increase in other assets (615) (24)
Decrease in accounts payable and accrued
expenses (975) (1,094)
(Decrease) increase in accrued facility and
other charges (440) 8,291
Decrease in purchase accounting
restructuring accrual (469) (1,102)
Increase (decrease) in income taxes payable 5 (1,495)
Decrease in deferred revenue (1,248) (1,308)
Increase (decrease) in other non-current
liabilities 94 (287)
--------- ---------

Net cash provided by operating
activities 13,826 7,297
--------- ---------

Investing activities:
Acquisitions, net of cash acquired - (9,918)
Purchases of property and equipment (2,353) (7,887)
Additions to capitalized software development
costs (1,126) (1,407)
--------- ---------

Net cash used in investing activities (3,479) (19,212)
--------- ---------

Financing activities:
Payments on capital lease obligations (424) (390)
Excess tax benefits from stock-based awards 216 -
Issuance of common stock 1,034 1,493
--------- ---------

Net cash provided by financing
activities 826 1,103
--------- ---------

Effect of foreign exchange rate changes on cash 56 71

Net increase (decrease) in cash and cash
equivalents 11,229 (10,741)
Cash and cash equivalents, beginning of year 66,145 64,020
--------- ---------

Cash and cash equivalents, end of period $ 77,374 $ 53,279
========= =========