Library Technology Guides

St. Louis, Missouri, January 20, 2000—Data Research Associates, Inc. (DRA) (NASDAQ: DRAI) announced today that revenues for its first quarter of fiscal 2000, ended December 31, 1999, were $6.5 million, compared with $6.4 million for the first quarter of fiscal 1999. Earnings for the first quarter of fiscal 2000 were $206,000, or four cents per share basic and diluted, compared with $125,000, or two cents per share basic and diluted, for the same period in fiscal 1999.

DRA President and CEO Michael J. Mellinger described the first quarters of both fiscal 2000 and fiscal 1999 as having comparable operating results total revenues, expenses and margins did not vary materially between the two quarters. The increased profit in the current-year quarter included a one-time event: the company sold stock that it had received from the demutualization of an insurance company in which DRA was a policyholder. The gain realized from DRA's sale of the stock amounted to $127,000 before taxes.

Mellinger stated that hardware revenues were virtually unchanged at $508,000 in the current quarter versus $474,000 in the prior year, and software revenues declined $468,000 in the current quarter to $746,000 from $1.2 million in the same quarter in 1999. Although the company had software revenue related to one new contract in the first quarter of fiscal 2000 compared to none in fiscal 1999, the first quarter of fiscal 1999 had significant add-on software sales to existing customers which resulted in greater total software revenue in that quarter. This decrease in software revenues was offset by a $500,000 increase, in service and other revenues to $5.2 million in the first quarter of fiscal 2000 from $4.7 million in the prior year. This increase was generated in part by additional outsourcing services, services related to new contract installations and an increase of approximately $80,000 in Internet services.

At December 31, 1999, DRA maintained its strong cash position of $16.7 million despite having used existing cash throughout the quarter to repurchase the company's stock on the open market.

Mellinger noted that the first quarter of the fiscal year is traditionally the slowest season for DRA. "Although this quarter's financial results are similar to the results of the first fiscal quarter of 1999, we nevertheless had a productive quarter from the standpoint of the number of Taos conversions and installations that we completed in the October – December period," he said. "Several customers took delivery of Version 1.0 of our new software in the fourth quarter of fiscal 1999. In this group were some customers who were running non-DRA systems that were not Y2K compliant and had to have their data converted and their system live prior to December 31. We are pleased that we were able to accomplish this for all these customers."

There are currently nine sites using Taos for production on either the Unix or Windows NT operating system, including academic, public, special, and K-12 libraries. Additional installations are planned for late in the second fiscal quarter of 2000.

Mellinger further noted that subsequent to the end of the first quarter he and other DRA representatives met with representatives of a large academic customer to discuss issues raised by the customer regarding its implementation of Taos. At that meeting DRA and the customer developed a mutually agreeable plan to resolve the outstanding issues. "That customer has implemented Taos Circulation and Cataloguing and has now begun a phased public introduction of its Taos online catalog. We believe we are able to complete the remainder of the plan," added Mellinger.

Mellinger continued: "In fiscal 2000, DRA is focused on refining the performance and capability of the Taos system – enhancing functionality and adding new features, such as the Serials and Acquisitions modules. We expect these investments to bolster the growing acceptance of Taos for both potential new customers and libraries that are already DRA users. Until the use of the Taos product becomes more widespread, we are cautious about our near-term growth prospects. DRA's solid service revenues combined with a strong balance sheet will continue to act as critical foundations during this transitional period."

Data Research Associates, Inc., 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; DRA's ability to meet installation schedules; 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 1999. 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.