Library Technology Guides

St. Louis, Missouri, November 12, 1998 -- Data Research Associates, Inc. (DRA) (NASDAQ: DRAI) announced today that earnings for its fiscal fourth quarter, ended September 30, 1998, were $1.65 million, or 31 cents per share basic and 30 cents per share diluted, compared with $1.7 million, or 31 cents a share basic and diluted, for the same period in fiscal 1997. For fiscal 1998, earnings were $3.7 million, or 68 cents per share basic and 67 cents per share diluted, compared with $4.5 million, or 81 cents per share basic and diluted, in fiscal 1997.

In conjunction with the earnings announcement, the company announced that its Board of Directors had maintained its regular, annual cash dividend at 12 cents per share. The dividend has a record date of January 8, 1999 and a payment date of January 25, 1999.

Revenues for the fourth quarter of fiscal 1998 were $8.4 million, compared with $9.7 million in the same period last year. For all of fiscal 1998, revenues were $32.5 million, compared with $35.4 million for fiscal 1997.

Commenting on the year-end results, Michael J. Mellinger, president and CEO, noted optimism about increases in both the software and service components of the company's revenues. DRA is an automation systems integrator that derives its revenues from three sources: computer hardware sales, software licenses and sales of services. Software revenue increased 15% for the year, from $7.0 million in fiscal 1997 to $8.0 million in fiscal 1998, while service revenue increased 2%, from $18.6 million in fiscal 1997 to $19.1 million in fiscal 1998.

At the same time, Mellinger attributed the decreases in revenues and earnings for the fiscal year primarily to a 44% decrease in hardware sales for the year, from $9.8 million in fiscal 1997 to $5.4 million in fiscal 1998. The decrease in hardware sales was due in part to customers' increasing ability to buy high-performance hardware at lower prices.

"The increase in our software revenues is especially important given that we are in a transitional period from one generation of products to the next," said Mellinger. "Our strategy moving forward is to build upon the growing marketplace enthusiasm for our n ext-generation automation system, which is called Taos, while at the same time maintaining the highest standards of service and support. The numerous technological leaders in the library marketplace that have either selected or contracted for Taos during the past year are evidence of the product's growing acceptance." Mellinger added that the company had achieved its goal of initial revenue shipments of Taos during the fourth quarter of fiscal 1998, but that those revenues made up only a small fraction of total software revenues for the quarter and for the fiscal year.

Among expenses for the fiscal year, salaries and employee benefits rose 6%, from $9.2 million in fiscal 1997 to $9.7 million in fiscal 1998, due primarily to annual salary increases and to increases associated with the implementation of a formal pay-grade program. General and administrative expenses rose 13%, from $6.2 million in fiscal 1997 to $6.9 million in fiscal 1998, resulting primarily from non-recurring expenses related to discontinued use of a set of development tools. Depreciation and amortization rose 28%, from $1.3 million in fiscal 1997 to $1.7 million in fiscal 1998, in part due to expenses associated with expansion and improvements in the company's physical campus at its headquarters facility in St. Louis.

Other income rose 28%, from $788,000 in fiscal 1997 to $1 million in fiscal 1998, owing to an increase in interest income that reflected the company's increase in cash and cash equivalents and its deployment of some of these funds into higher-yield short-term investments.

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 1997. 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.