Wednesday, October 24, 2001

Ontrack Data International, Inc. third quarter results exceed expectations

Data Recovery and DataTrail™ businesses benefit from new strategies

MINNEAPOLIS, October 24, 2001 - ONTRACK Data International, Inc. (NASDAQ: ONDI), today announced its financial results for the third quarter ended September 30, 2001. Revenue for the quarter totaled $13.2 million, a 15 percent increase compared to revenue of $11.4 million in the second quarter of 2001. Third quarter 2001 service revenue totaled $10.2 million, a 20 percent increase compared to $8.5 million in the second quarter of 2001. Third quarter software revenue totaled $3.0 million, about the same as the second quarter of 2001. Net income per diluted share, before amortization of goodwill and non-recurring charges, was five cents compared to a 16 cent loss during the second quarter of 2001.

"We are very pleased by the early results of our strategic initiatives and our return to profitability," stated Ben Allen, president and chief executive officer for Ontrack. "While we expect challenges in the near term, we are optimistic about our ability to expand opportunities in the electronic discovery and data recovery markets and achieve profitability in our consumer software utilities business."

Ontrack® DataTrail™ Electronic Discovery Solutions
DataTrail revenue totaled $1.3 million, a two-fold improvement over the second quarter. Ontrack's visibility continues to increase through continuing legal education seminars and targeted public relations activity. In addition, management is actively pursuing strategic alliances to expand access to the civil litigation market and is continuing to invest in product development.

Data Recovery
The Company achieved record Data Recovery revenue, processed a record number of jobs and increased the average job value over the previous quarter. Revenue from partners, a key strategic initiative, increased as a percentage of overall revenue for all offices worldwide. The Company is continuing its efforts to expand the distribution channel via volume partnering and geographic expansion. The Company expects to have additional subsidiaries in Spain, Italy and Switzerland prior to the end of the year.

Consumer Software
During the quarter Ontrack released upgrades to its best selling titles, Fix-It Utilities™ and Ontrack SystemSuite™. Due to the uncertainty in estimating returns, the Company has begun deferring revenue on sales into the domestic retail channel until payment has been received. In an attempt to improve profitability for the consumer software utility business, Ontrack will be placing significant emphasis on high-margin channels. As an alternative distribution test, Ontrack launched a Web-enabled utility offering to test consumer responsiveness to Web-enabled services and a subscription-billing model.

Based on the above factors, the company expects revenue for the fourth quarter to be in the range of $12.5 - $14 million and income per share before goodwill amortization to be in the range of zero to seven cents.

Ontrack will host a conference call to discuss third quarter results on Wednesday, October 24, 2001 at 4:00 PM Central Time. Investors may access the call by dialing 800-850-9878 or may listen to a replay beginning two hours following the conclusion of the call and available for one week after by dialing 800-633-8284 and entering the code - 19749219. Investors also may access a live Web cast of the conference call at

About Ontrack
Ontrack provides data availability software and service solutions, helping customers protect, manage, recover and discover their valuable data. Using its hundreds of proprietary tools and techniques, Ontrack can recover lost or corrupted data from virtually all operating systems and types of storage devices through its do-it-yourself, remote and in-lab capabilities. Ontrack DataTrail™ electronic discovery solutions helps companies, law firms and federal agencies quickly and cost-effectively recover electronic information for use in legal matters. Ontrack also offers award-winning PC utility software programs and services to help prevent critical data loss through a broad line of problem-solving, file-management and productivity utilities. Ontrack can be reached through its World Wide Web site at or by calling 800-872-2599. In addition to its Minneapolis headquarters, Ontrack operates other locations in Los Angeles, Boulder, CO., Washington D.C., New York, London, Paris and Stuttgart. Ontrack also makes its data recovery services available in Tokyo through its strategic alliance with Y-E Data, a company with over 25 years of experience in storage devices.

ONTRACK Data International, Inc.
Consolidated Condensed Balance Sheets
(In thousands)

Three Months Nine Months
Ended March 31, Ended September 20
2001 2000 2001 2000
Revenues: $10,238 $9,043 $29,250 $26,603
Services 2,964 4,284 10,120 11,435
Software 13,202 13,325 39,370 38,038

Total revenues

Cost of revenues:

2,488 2,308 7,259 6,565
Services 1,224 1,043 4,063 2,684
Software 3,712 3,351 11,322 9,249
Total cost of revenues

Gross margin

9,490 9,974 28,048 28,789

Operating expenses:

Sales and marketing 3,455 3,668 11,948 10,201
Research and development 2,629 2,442 7,684 6,822
General and administrative 2,998 2,300 8,841 6,583
Total operating expenses
excluding goodwill and

amertization and non-recurring items

9,082 8,410 28,473 23,606

Operating income excluding goodwill and terminated merger costs

408 1,564 (425) 5,183
Workforce reduction - - 850 -
Amortization of goodwill 401 463 1,244 1,388
Reimbursement of terminated merger costs - - - (579)

Operating income (loss)

7 1,101 (2,519) 4,374

Interest and other income

362 237 954 856

Income (loss) before income taxes

369 1,338 (1,565) 5,230

Provision for income taxes

107 408 (453) 1,595

Net income (loss)

$262 930 (1,112) 3,635

Diluted net income per share excluding goodwill amortization and terminated merger costs

$0.05 $0.12 $0.04 $0.41

Diluted net income per share

$0.03 $0.09 $(0.11) $0.35
Weighted average shares used in computation of diluted net income per share 10,357,000 10,698,000 10,194,000 10,518,000

ONTRACK Data International, Inc.
Consolidated Condensed Balance Sheets
(In thousands)

September 30, December 31,
ASSETS 2001 2000
Current assets:
Cash, cash equivalents and short-term
investments $31,979 $28,176
Accounts receivable, net 4,904 9,570
Prepaid expenses and other current assets 3,353 4,313
Total current assets 40,236 42,059
Long term investment – cash 3,328 4,868
Deferred taxes 1,432 1,432
Furniture and equipment, net 8,798 6,464
Intangibles, net 4,517 5,865
Total assets 58,311 $60,688
Total current liabilities $4,119 $6,017
Total shareholders' equity 54,192 54,671
Total liabilities and shareholders' equity $58,311 $60,688