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St. Louis, Missouri, July 22, 1999 -- Data Research Associates, Inc. (DRA) (Nasdaq: DRAI) announced today that revenues for its third quarter of fiscal 1999, ended June 30, were $7.7 million, compared with $8.3 million for the third quarter of fiscal 1998. Earnings for the third quarter of fiscal 1999 were $736,000, or 14 cents per share, compared with $973,000, or 18 cents per share, for the same period in fiscal 1998.

DRA President and CEO Michael J. Mellinger said that the earnings for the quarter were driven by add-on sales to existing customers, a new system installation in New Zealand and the shipment for revenue of one installation of DRA’s new Taos product. The company signed two contracts, both for the Taos system, during the third quarter, and expects additional Taos installations in the fiscal fourth quarter, which ends September 30.

The company’s revenues are derived from hardware sales, software licenses, and sales of a variety of support services. Mellinger attributed the decrease in revenue during the fiscal third quarter in part to a $432,000 decrease in software sales and in part to a $251,000 decrease in hardware sales. Service revenue increased very slightly, to $4.88 million in the third quarter of fiscal 1999 from $4.85 million in the third quarter of fiscal 1998.

The decrease in software sales was due primarily to a $600,000 sale to a single customer in the third quarter of fiscal 1998, with no similar large software sales recorded in the third quarter of fiscal 1999. Gross margin on software decreased from 85% in the third quarter of fiscal 1998 to 75% in the third quarter of fiscal 1999, primarily due to increased software amortization expenses resulting from the development of the Taos product.

The decrease in hardware sales resulted primarily because of a $500,000 hardware sale to the same customer that made the single large software purchase in the third quarter of fiscal 1998, with no similar large hardware sales recorded in the third quarter of fiscal 1999. The magnitude in the decrease in hardware revenues was lessened by a DRA marketing program to facilitate the migration of specific current customers to the Taos system, which resulted in add-on sales of upgraded hardware and related software.

"We are very pleased at the long-term commitment to DRA that is represented by the strong response to our efforts to prepare this segment of our existing customer base for migration to the Taos system," said Mellinger.

On the expense side, general and administrative (G&A) expenses fell 32%, from $1.9 million in the third quarter of fiscal 1998 to $1.3 million in the third quarter of fiscal 1999. Mellinger attributed this decline primarily to a decrease in travel and trade show expenses, and to a lesser extent to decreases in expenses for outside software and consulting.

Mellinger also noted that the company had completed all of the $3 million stock repurchase authorized by its board in October, 1998. An additional $2 million stock repurchase was authorized in March, 1999, and the company had completed approximately 30% of that repurchase as of June 30. As of that date, the company had $16 million in cash and cash equivalents (unaudited).

Data Research Associates, headquartered in St. Louis, is a leading systems integrator for libraries and other information providers, offering its own proprietary information services software; third-party software and hardware; Internet, World Wide Web and other networking services; and other related support services.

This news release contains forward-looking statements, including statements as to anticipated or expected results, beliefs, opinions and future financial performance. These forward-looking statements are based on current expectations and assumptions and involve risks and uncertainties that could cause DRA’s actual results to differ materially. Specific risk factors for the statements contained herein include, but are not limited to, the company’s ability to continue to enhance the Taos product; customer acceptance of that product; and timing of negotiations for sites who have selected Taos but have not yet signed a contract. Some of these risk factors, as well as additional risk factors, are discussed in detail in DRA’s Annual Report and in Exhibit 99-1 of its Form 10-K for fiscal year 1998. DRA does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.