Data Return Corporation Announces 372% Increase in Second Quarter Revenue.

DALLAS--(BUSINESS WIRE)--Nov. 22, 1999--

Data Return Corporation (Nasdaq: DRTN) today reported results for the second fiscal quarter and six months ended September 30, 1999.

Total revenue for the second fiscal quarter of 2000 was $1.7 million, a 372% increase over $366,000 in the comparable quarter of fiscal 1999, and a 41% increase from $1.2 million in the first fiscal quarter of 2000.

Revenue from new clients accounted for more than 80% of total revenue growth. New Data Return clients added during the second quarter include Pier One Imports, Fossil, Executive Software International, Sensormatic Electronics, Roseart, and Metabolife International and others. Existing customers who expanded their service relationships with the Company include First USA Bank, Berlitz Languages and KPMG.

"Our revenue growth this quarter is a reflection of the tremendous demand for high quality advanced hosting services for mission critical Internet operations, and our ability to meet the needs of the enterprise for managed services on the Microsoft platform," said Sunny Vanderbeck, Chairman and Chief Executive Officer. "We added more than 130 enterprise customers and "dot.com" companies bringing our total customer base to almost 800. Based on our client growth rate and our increasing visibility in the managed hosting space, we more than doubled our staffing in the second quarter to further enhance customer support and launch new managed hosting services for Microsoft Exchange."

Second quarter EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) was negative $1.7 million, or $0.06 per share, as compared to negative $226,000, or $0.01 per share, in the prior year period. The Company reported a net loss of $1.9 million, or $0.07 per share in the quarter ended September 30, 1999, compared to a loss of $337,000, or $0.02 per share, reported in the second fiscal quarter of 1999.

On November 4, 1999, Data Return completed its initial public offering of 6.25 million shares of common stock and the sale of an additional 937,500 shares of its common stock in the exercise of the underwriters' over-allotment option, at the public offering price of $13.00 per share.

"Each of our strategic partners, Microsoft, Compaq Computer, and Level 3 Communications, made significant financial investments in the Company through purchases of the Company's common stock totaling $13 million," Mr. Vanderbeck said. "This demonstrates that these leading providers of software, server hardware, and IP networking services share our confidence in Data Return's business model and market opportunity. We are pleased to count these companies not only as our partners, but also as our shareholders."

Data Return's strategic partnerships with Microsoft, Compaq, and Level 3 provide Data Return with a leveraged business model that creates competitive advantage in each of the following areas:

-- Extensive Data Center and Network Infrastructure. Through its

alliance with Level 3, the Company is provided with access to

Level 3's global IP network and over 25 existing Level 3 gateways

in the U.S. with significant planned expansion over the next 24

months. Data Return is also partnering with Level 3's sales force

to generate new business opportunities.

-- Joint Development with Microsoft Corporation. The Microsoft

investment was based in part upon Data Return's development of

installation tools for Microsoft Application Service Providers

and Microsoft customers. This partnership will provide both Data

Return and Microsoft better access to expertise from both

companies in the large scale deployment and management of

Microsoft BackOffice products in a hosted environment. Data

Return's sole focus on the Microsoft Platform allows Data Return

to provide customers more expertise in deploying and managing

scalable, high-performance and high-availability hosted

applications.

-- Closer Involvement in Compaq Server Technology. Through Data

Return's agreement with Compaq, Data Return has gained direct

access to product development engineers and marketing management

at Compaq. Compaq is the leading provider of server hardware for

enterprise customers, and many of these enterprise customers have

yet to outsource hosting services.

For the six months ended September 30, 1999, total revenue was $3.0 million, an increase of 357% over $647,000 for the same period last year. The net loss for the six-month period was $2.6 million, or a $0.10 loss per share.

Data Return will conduct a conference call on Tuesday, November 23, at 9:00 a.m. EST. To participate in the conference call, please dial 1-800-633-8494. If you are unable to participate in the conference call a replay will be made available. To access the replay, please dial 1-800-633-8284 and enter the passcode "13569993" from approximately two hours after the call until 11:59 p.m. EST  on November 30, 1999. The conference call will also be accessible on Data Return's web site at www.DataReturn.com.

About Data Return Corporation

Data Return Corporation is a leading provider of advanced Internet hosting services based on Microsoft technologies. The Company's advanced managed services include the hardware, software and network infrastructure and systems management expertise to implement and support high-end web-based applications. Data Return focuses on sophisticated enterprise customers and mature "dot.com" companies that deploy e-commerce and business-critical web sites, through which they can effectively conduct transactions and manage information over the Internet. Through its key partnerships, Data Return leverages a highly scalable deployment architecture and utilizes state-of-the-art data centers to cost-effectively manage its customers' web sites. More information is available by visiting the Company's web site at www.DataReturn.com.

This press release contains forward-looking statements, including statements related to expected financial results and other planned events. Actual results may differ materially due to a number of risks, including changes in external competitive market factors, changes in or an inability to execute Data Return's business strategy, unanticipated changes in the hosting industry, the economy in general and changes in the use of the Internet. Data Return cannot guarantee future results, levels of activity, performance or achievements. The matters discussed in this press release also involve risks and uncertainties summarized under the heading "Risk Factors" in Data Return's Prospectus dated October 27, 1999 and are updated from time to time through the filing of reports and registration statements with the Securities and Exchange Commission. Data Return does not assume any obligation to update the forward-looking information contained in this press release. -0-

                        DATA RETURN CORPORATION
                        STATEMENT OF OPERATIONS
                              (unaudited)


                          Three Months Ended        Six Months Ended
                              September 30,           September 30,
                             1999       1998         1999       1998

Revenues                 $1,725,600   $365,700   $2,953,100   $646,500
Costs and expenses:
 Cost of revenue          1,281,600    242,800    1,771,100    447,700
 Marketing and sales      1,067,200    165,100    1,451,700    270,200
 General and
  administrative          1,223,900    211,200    2,089,500    424,400
 Stock based compensation   157,700     85,800      297,200    170,400
Total costs and expenses  3,730,400    704,900    5,609,500  1,312,700
Loss from operations     (2,004,800)  (339,200)  (2,656,400)  (666,200)
Other income (expense):
 Interest income             88,600      5,400      111,500     11,600
 Interest expense            (5,500)    (2,700)     (11,600)    (3,800)
Net Loss                $(1,921,700) $(336,500) $(2,556,500) $(658,400)
                         ==========   ========    =========   ========
Net loss per common share:
 Basic and diluted           $(0.07)    $(0.02)      $(0.10)    $(0.04)
                             ======     ======       ======     ======
Shares used in computing
basic and diluted
net loss per share       26,537,493 17,592,600   24,427,167 17,592,600
                         ========== ==========   ========== ==========
Other Financial Data:
EBITDA (1)              $(1,667,300) $(225,800) $(2,090,100) $(454,100)


(1)  EBITDA consists of loss from operations plus depreciation and
     amortization, including amortization of unearned stock based
     compensation. EBITDA does not represent funds available for
     management's discretionary use and is not intended to represent
     cash flow from operations as measured under generally accepted
     accounting principles. EBITDA should not be considered as an
     alternative to net loss or net cash used in operating activities,
     but may be useful to investors as an indication of operating
     performance. Our calculations of EBITDA may not be consistent
     with calculations of EBITDA used by other companies.


                        DATA RETURN CORPORATION
                             BALANCE SHEET
                              (unaudited)


                                     September 30,  March 31,
                                         1999         1999
Assets
Current assets:
 Cash                                 $6,700,200    $842,800
 Restricted cash                          -          125,000
 Accounts receivable, net of allowance
  for doubtful accounts of $20,100
  and $154,400 at March 31, 1999 and
  September 30, 1999, respectively     1,128,300     368,400
 Prepaid and other                       155,200      28,200
Total current assets                   7,983,700   1,364,400
 Property and equipment, net           4,327,800     826,000
 Other assets                            574,400      23,300
Total assets                         $12,885,900  $2,213,700
                                     ===========  ==========
Liabilities and shareholders'
 equity Current liabilities:
 Accounts payable                     $2,837,400    $288,900
 Accrued expenses                      1,091,700     132,900
 Deferred revenue                        677,100     286,100
 Notes payable and capital
     lease obligations                   159,500      95,200
Total current liabilities              4,765,700     803,100

Notes payable and capital
  lease obligations                      260,000     166,000
Commitments and contingencies               -            -
Total Liabilities                      5,025,700     969,100

Shareholders' equity:
 Preferred stock, $.001 par value;
  20,000,000 shares authorized,
  none issued or outstanding                -             -
  Common stock, $.001 par value;
  100,000,000 shares authorized;
  20,551,600 and 27,755,958 issued
  and outstanding at March 31, 1999
  and September 30, 1999 respectively     27,800      20,600
Additional paid-in capital            13,635,000   3,893,100
Deferred stock compensation           (1,771,900) (1,194,900)
Accumulated deficit                   (4,030,700) (1,474,200)
Total shareholders' equity             7,860,200   1,244,600

Total liabilities and
shareholders' equity                 $12,885,900  $2,213,700
                                     ===========   =========