SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission File No. 0-23306
PROPHET 21, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 23-2746447
- ------------------------------------- -------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
19 West College Ave., Yardley, Pennsylvania 19067
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(215) 493-8900
-------------------------------
(Registrant's Telephone Number,
Including Area Code)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes: X No:
---- ----
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of November 1, 1999:
Class Number of Shares
----- ----------------
Common Stock, $.01 par value 3,607,544
<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION........................................ 1
Item 1. Financial Statements......................................... 1
Consolidated Balance Sheets
as of June 30, 1999 and
September 30, 1999 (unaudited)............................... 2
Consolidated Statements of Operations
for the three months ended
September 30, 1998 and 1999 (unaudited)...................... 3
Consolidated Statements of Cash Flows
for the three months ended
September 30, 1998 and 1999 (unaudited)...................... 4
Notes to Consolidated Financial Statements (unaudited)....... 5
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition................ 7
Results of Operations........................................ 8
Liquidity and Capital Resources.............................. 10
Year 2000 Compliance......................................... 10
PART II. OTHER INFORMATION............................................ 12
Item 6. Exhibits and Reports on Form 8-K............................. 12
SIGNATURES ................................................................ 13
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
- 1 -
<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares)
<TABLE>
<CAPTION>
June 30, September 30,
1999 1999
-------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................ $ 2,520 $ 4,060
Marketable securities.................................... 1,661 1,624
Accounts receivable, net of allowance for
doubtful accounts of $261 and $261, respectively....... 19,743 14,972
Billed and unearned maintenance contracts................ 2,140 2,266
Inventories.............................................. 666 1,110
Deferred income taxes.................................... 156 244
Prepaid and other current assets......................... 1,230 1,451
-------- --------
Total current assets................................ 28,116 25,727
Long-term marketable securities............................. 3,175 3,175
Equipment and improvements, net............................. 3,100 3,137
Software development costs, net............................. 2,131 1,812
Other assets................................................ 35 30
-------- --------
Total assets........................................ $ 36,557 $ 33,881
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $ 2,737 $ 2,411
Accrued expenses and other liabilities .................. 1,715 1,701
Commissions payable...................................... 708 244
Taxes payable............................................ 1,206 123
Profit sharing plan contribution payable ................ 403 265
Deferred income ......................................... 2,959 3,052
-------- --------
Total current liabilities .......................... 9,728 7,796
-------- --------
Deferred income taxes....................................... 728 816
-------- --------
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock -- $0.01 par value, 1,500,000
shares authorized; no shares issued or outstanding..... -- --
Common stock -- $0.01 par value, 10,000,000 shares
authorized; 4,193,603 and 4,207,534 shares issued,
respectively; 3,593,613 and 3,607,544 outstanding,
respectively........................................... 42 42
Additional paid-in capital............................... 10,734 10,812
Retained earnings ....................................... 19,339 18,429
Treasury stock at cost, 599,990 shares................... (4,014) (4,014)
-------- --------
Total stockholders' equity ......................... 26,101 25,269
-------- --------
Total liabilities and stockholders' equity ......... $ 36,557 $ 33,881
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
-----------------------------------
1998 1999
---- ----
<S> <C> <C>
Revenue:
Software and hardware sales............................ $ 6,504 $ 2,938
Service and support.................................... 4,661 6,348
--------- ---------
11,165 9,286
--------- ---------
Cost of revenue:
Software and hardware sales............................ 2,901 1,962
Service and support.................................... 2,757 3,772
--------- ---------
5,658 5,734
--------- ---------
Gross profit....................................... 5,507 3,552
--------- ---------
Operating expenses:
Sales and marketing.................................... 2,393 2,496
Research and development............................... 1,310 1,718
General and administrative............................. 660 777
--------- ---------
4,363 4,991
--------- ---------
Operating income (loss)............................ 1,144 (1,439)
Interest income.......................................... 72 60
--------- ---------
Income (loss) before taxes............................... 1,216 (1,379)
Provision (benefit) for income taxes..................... 389 (469)
--------- ---------
Net income (loss)........................................ $ 827 $ (910)
========= =========
Basic earnings (loss) per share:
Net income (loss) per share............................ $ 0.22 $ (0.25)
========= =========
Weighted average common shares outstanding............. 3,686 3,594
========= =========
Diluted earnings (loss) per share:
Net income (loss) per share............................ $ 0.21 $ (0.25)
========= =========
Weighted average common and common equivalent shares
outstanding.......................................... 4,023 3,594
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1998 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................ $ 827 $ (910)
--------- ---------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization........................... 589 750
Provision for losses on accounts receivable............. 67 49
(Increases) decreases in operating assets:
Accounts receivable..................................... 986 4,722
Advanced billings....................................... (210) (126)
Inventories............................................. 141 (444)
Prepaid expenses and other current assets............... (32) (221)
Other assets............................................ 26 5
Increases (decreases) in operating liabilities:
Accounts payable........................................ (1,196) (328)
Accrued expenses........................................ (948) (478)
Taxes payable........................................... 374 (1,083)
Profit sharing plan contribution payable................ (89) (138)
Deferred income......................................... 82 93
--------- ---------
Total adjustments....................................... (210) 2,801
--------- ---------
Net cash provided by operating activities.................... 617 1,891
--------- ---------
Cash flows from investing activities:
Cash purchases of equipment and improvements............... (253) (430)
Purchase of marketable securities.......................... (1,200) --
Maturity of marketable securities.......................... 1,000 --
--------- ---------
Net cash used by investing activities........................ (453) (430)
--------- ---------
Cash flows from financing activities:
Stock options exercised.................................... 52 24
Employee stock purchase plan............................... 62 55
--------- ---------
Net cash provided by financing activities.................... 114 79
--------- ---------
Net increase in cash and cash equivalents.................... 278 1,540
Cash and cash equivalents at beginning of period............. 2,206 2,520
--------- ---------
Cash and cash equivalents at end of period................... $ 2,484 $ 4,060
========= =========
Supplemental cash flow disclosures:
Income taxes paid.......................................... $ 15 $ 403
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Information for September 30, 1998 and 1999 is unaudited)
(dollars in thousands, except shares)
NOTE 1 -- BASIS OF PRESENTATION:
The information presented for September 30, 1999, and for the three-month
periods ended September 30, 1998 and 1999, is unaudited, but, in the opinion of
the Company's management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
accruals) which the Company considers necessary for the fair presentation of the
Company's financial position as of September 30, 1999 and the results of its
operations and its cash flows for the three-month periods ended September 30,
1998 and 1999. The financial statements included herein have been prepared in
accordance with generally accepted accounting principles and the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. These consolidated financial statements should be read in conjunction
with the Company's audited financial statements for the year ended June 30,
1999, which were included as part of the Company's Annual Report on Form 10-K.
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances have been
eliminated.
Certain items in prior period financial statements have been reclassified
for comparative purposes.
Results for the interim period are not necessarily indicative of results
that may be expected for the entire year.
NOTE 2 -- CAPITALIZED SOFTWARE DEVELOPMENT COSTS:
The Company has capitalized certain software development costs in
accordance with the Statement of Financial Accounting Standards Board ("SFAS")
No. 86. Such costs were capitalized after technological feasibility was
demonstrated. Beginning when the products were offered for sale, the software
development costs were and are continuing to be amortized to cost of revenue on
a straight-line basis over the lesser of three years or the estimated economic
lives of the products.
Amortization of capitalized software development amounted to $319 in the
three months ended September 30, 1999. All other research and development costs
have been expensed.
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<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Information for September 30, 1998 and 1999 is unaudited)
(dollars in thousands, except shares)
NOTE 3 -- STOCKHOLDERS' EQUITY:
Preferred Stock
The Company has an authorized class of 1,500,000 shares of Preferred Stock
which may be issued by the Board of Directors on such terms and with such
rights, preferences and designations as the Board of Directors may determine.
NOTE 4 -- STOCK REPURCHASE PROGRAM:
In fiscal 1997, the Company's Board of Directors approved resolutions to
repurchase up to 600,000 shares of the Company's Common Stock in open market
purchases. The Company has repurchased an aggregate of 599,990 shares at a total
cost of $4,014. Such shares are held in treasury. The Company's last Common
Stock repurchase occurred in the fourth quarter of fiscal 1999.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
GENERAL
The Company provides innovative software solutions that meet the changing
business demands of distribution operations within the extended supply chain.
Prophet 21 develops, markets and supports a complete suite of Year 2000
compliant, distribution-centric enterprise applications for either Windows NT,
UNIX or AS/4000 for finance, order management, inventory management, purchasing
and electronic commerce. In addition, Prophet 21 provides industry-specific,
distribution-centric enterprise solutions for select markets including
industrial manufacturer representative organizations, automotive, aerospace and
defense, electrical supply, electronics, medical and dental, tile, plumbing,
HVAC, hardware, janitorial and general distribution.
The Company's revenue is derived from the sale of either Prophet 21 Acclaim
or Prophet 21 Wholesale software solutions. Other sources of revenue include:
customer support maintenance contracts, equipment maintenance (when purchased
via Prophet 21), the sale of optional third-party software products and training
services provided by the Company's Educational Services department which began
operations in fiscal 1998. Each Prophet 21 Acclaim Solution includes the Prophet
21 Acclaim Software, an IBM RISC System/6000 computer, various optional
third-party software products and hardware components, training, support and
installation. Each Prophet 21 Wholesale Solution includes the Prophet 21
Wholesale Software, training, support and installation. The Company's
Educational Services department develops a variety of educational tools and
programs to train customers in the Prophet 21 Systems. Such programs include
interactive computer-based training, video training and remote training. The
Company's cost of revenue consists principally of the costs of hardware
components, customer support, installation and training and, to a lesser extent,
third-party software.
Prophet 21 Acclaim is a complete distribution industry management solution
that combines the functionality of the traditional Prophet 21 System with the
technology of Progress Software Corporation's DBMS. Prophet 21 Acclaim is
targeted for sales to new customers and current Prophet 21 XL customers. It has
been designed so that current XL users can move to this new product while
preserving their existing technology infrastructure.
Prophet 21 Wholesale is a fully integrated Microsoft Windows NT-based
client/server software suite. Prophet 21 Wholesale is targeted for medium-sized
companies looking to solve their distribution-centric business requirements with
a Windows NT client/server solution. These companies desire a solution that
provides a transaction-intensive sales order management and inventory management
solution to meet their customer service needs. They also require a solution that
integrates with an accounting solution and can be implemented in a
cost-effective
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<PAGE>
manner. The Prophet 21 Wholesale product is suitable for distribution-oriented
companies, as well as businesses that have a distribution component of their
own.
The statements contained in this Quarterly Report on Form 10-Q that are not
historical facts are forward-looking statements (within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended) that involve risks and
uncertainties. Such forward-looking statements may be identified by, among other
things, the use of forward-looking terminology such as "believes," "expects,"
"may," "will," "should" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. From time to time, the Company or its
representatives have made or may make forward-looking statements, orally or in
writing. Such forward-looking statements may be included in various filings made
by the Company with the Securities and Exchange Commission, or press releases or
oral statements made by or with the approval of an authorized executive officer
of the Company. These forward-looking statements, such as statements regarding
anticipated future revenues, capital expenditures and other statements regarding
matters that are not historical facts, involve predictions. The Company's actual
results, performance or achievements could differ materially from the results
expressed in, or implied by, these forward-looking statements. Potential risks
and uncertainties that could affect the Company's future operating results
include, but are not limited to: (i) economic conditions, including economic
conditions related to the computer industry; (ii) the availability of components
and parts from the Company's vendors at current prices and levels; (iii) the
intense competition in the markets for the Company's products and services; (iv)
the Company's ability to protect its intellectual property; (v) potential
infringement claims against the Company for its software development products;
(vi) the Company's ability to obtain customer maintenance contracts at current
levels; (vii) the Company's ability to develop, market, provide, and achieve
market acceptance of new service offerings to new and existing clients; and
(viii) Year 2000 compliance of the Company's and other vendors' products and
related issues, including impact of the Year 2000 problem on customer buying
patterns.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Revenue. Revenue decreased by 16.8%, or $1,879,000, from $11,165,000 in the
three months ended September 30, 1998 ("First Quarter of Fiscal 1999") to
$9,286,000 in the three months ended September 30, 1999 ("First Quarter of
Fiscal 2000"). Software and hardware sales revenue decreased by 54.8%, or
$3,566,000, from $6,504,000 in the First Quarter of Fiscal 1999 to $2,938,000 in
the First Quarter of Fiscal 2000. This decrease was attributable primarily to a
slowdown in software market sales caused by potentially new and existing
customer concerns relating to issues in connection with the Year 2000. Other
factors contributing to the decrease included the Company's focus on larger
accounts which typically require a longer sales cycle
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<PAGE>
than traditionally targeted Prophet 21 customers. Service and support revenue
increased by 36.2%, or $1,687,000, from $4,661,000 in the First Quarter of
Fiscal 1999 to $6,348,000 in the First Quarter of Fiscal 2000. This increase was
attributable primarily to an increase in the number of new users who have
entered into maintenance contracts.
Gross profit. The Company's gross profit decreased by 35.5%, or $1,955,000,
from $5,507,000 in the First Quarter of Fiscal 1999 to $3,552,000 in the First
Quarter of Fiscal 2000. Gross profit margin decreased from 49.3% of revenue in
the First Quarter of Fiscal 1999 to 38.3% of revenue in the First Quarter of
Fiscal 2000. Gross profit from software and hardware sales decreased by 72.9%,
or $2,627,000, from $3,603,000 in the First Quarter of Fiscal 1999 to $976,000
in the First Quarter of Fiscal 2000. Gross profit margin attributable to
software and hardware sales decreased from 55.4% in the First Quarter of Fiscal
1999 to 33.2% in the First Quarter of Fiscal 2000. The decrease in such gross
profit and gross profit margin were attributable primarily to a decrease in
sales volume. Gross profit from service and support revenue increased by 35.3%,
or $672,000, from $1,904,000 in the First Quarter of Fiscal 1999 to $2,576,000
in the First Quarter of Fiscal 2000. Gross profit margin attributable to service
and support revenue decreased slightly from 40.8% of service and support revenue
in the First Quarter of Fiscal 1999 to 40.6% of service and support revenue in
the First Quarter of Fiscal 2000. The increase in such gross profit was
attributable primarily to increased revenues. The decrease in such gross profit
margin was attributable primarily to a slight decrease in revenue from the
Company's Educational Services department.
Sales and marketing expenses. Sales and marketing expenses increased by
4.3%, or $103,000, from $2,393,000 in the First Quarter of Fiscal 1999 to
$2,496,000 in the First Quarter of Fiscal 2000, and increased as a percentage of
revenue from 21.4% to 26.9%, respectively. Such expenses increased in absolute
dollars due primarily to increased compensation expenses associated with
staffing and increased investment in marketing. Such expenses increased as a
percentage of revenue due to decreased sales volume.
Research and development expenses. Research and development expenses
increased by 31.1%, or $408,000, from $1,310,000 in the First Quarter of Fiscal
1999 to $1,718,000 in the First Quarter of Fiscal 2000, and increased as a
percentage of revenue from 11.7% to 18.5%, respectively. Research and
development expenses increased in absolute dollars due primarily to an increase
in salary expenses. Such expenses increased as a percentage of revenue due to
decreased sales volume.
General and administrative expenses. General and administrative expenses
increased by 17.7%, or $117,000, from $660,000 in the First Quarter of Fiscal
1999 to $777,000 in the First Quarter of Fiscal 2000, and increased as a
percentage of revenue from 5.9% to 8.4%, respectively. General and
administrative expenses were offset in part by decreased operating expenses.
Such expenses increased as a percentage of revenue due to decreased sales
volume.
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<PAGE>
Income taxes. The Company's effective tax rate was 32.0% and 34.0% in the
First Quarter of Fiscal 1999 and 2000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has funded its operations primarily from
cash generated by operations and available cash, including funds raised in the
Company's initial public offering completed in March 1994. The Company's cash
flow provided by operations was $617,000 and $1,891,000 for the three months
ended September 30, 1998 and 1999, respectively.
The Company's working capital was $16,869,000 and $17,931,000 at September
30, 1998 and 1999, respectively.
The Company invested $253,000 and $430,000 in capital equipment and
leasehold improvements in the three months ended September 30, 1998 and 1999,
respectively. There are no other material commitments for capital expenditures
currently outstanding.
The Company does not have a significant concentration of credit risk with
respect to accounts receivable due to the large number of customers comprising
the Company's customer base and their dispersion across different geographic
regions. The Company performs on-going credit evaluations and generally does not
require collateral. The Company maintains reserves for potential credit losses,
and, to date, such losses have been within the Company's expectations.
In fiscal 1997, the Company's Board of Directors approved resolutions to
repurchase up to 600,000 shares of the Company's Common Stock in open market
purchases. The Company has repurchased an aggregate of 599,990 shares at a total
cost of $4,014,000. The Company's last Common Stock repurchase occurred in the
fourth quarter of fiscal 1999.
The Company believes that available funds and the cash flow expected to be
generated from operations will be adequate to satisfy its current and planned
operations for at least the next 24 months.
YEAR 2000 COMPLIANCE
Historically, certain computer programs have been written using two digits
rather than four to define the applicable year, which could result in the
computer recognizing a date using "00" as the year 1900 rather than 2000. This
in turn, could result in major system failures or miscalculations, and is
generally referred to as the "Year 2000 Problem". The Company believes that it
has sufficiently assessed its state of readiness with respect to its Year 2000
compliance. As the assessment was completed using internal personnel, costs and
time for such personnel were not specifically tracked. The Company, however,
estimates that such costs were immaterial.
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<PAGE>
There were no external costs incurred by the Company relating to its Year
2000 assessment. Costs incurred to date to address the Year 2000 problem have
been immaterial and the Company does not believe that Year 2000 compliance will
result in material investments by the Company in the future. The Company does
not believe that Year 2000 compliance will result in material investments by the
Company, nor does the Company anticipate that the Year 2000 Problem will have
any adverse effects on the business operations or financial performance of the
Company. The Company does not believe that it has any material exposure to the
Year 2000 Problem with respect to its own information systems and believes that
all of its business-critical systems correctly define the Year 2000 and
subsequent years. There can be no assurance, however, that the Year 2000 Problem
will not adversely affect the Company's business, operating results and
financial condition.
Some of the Company's older products, which are no longer sold, are not
Year 2000 compliant, however, the Company offers compliant upgrades for such
products. The Company believes that each of its current products is Year 2000
compliant, however, it has no control over whether software modification made by
third parties will be Year 2000 compliant. There can be no assurance that the
Company's products will not be integrated by the Company or its customers or
interact with non-compliant software or other products which may expose the
Company to claims. Additionally, there can be no assurance that such potential
instances of non-compliance will not adversely affect the Company's business,
operating results and financial condition. The Company has established no
reserve for auditing its software products or for correcting Year 2000
compliance issues with such products.
Although the Company believes its products are Year 2000 compliant, the
purchasing patterns of customers and potential customers may be affected by
issues associated with the Year 2000 Problem. As companies expend significant
resources to correct their current data storage solutions, these expenditures
may result in reduced funds to purchase products such as those offered by the
Company. There can be no assurance that the Year 2000 Problem will not adversely
affect the Company's business, operating results and financial condition.
Conversely, the Year 2000 Problem may cause other companies to accelerate
purchases, thereby causing an increase in short-term demand and a consequent
decrease in long-term demand for the Company's products.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27 Financial Data Schedule for the period ended September 30, 1999.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report on Form 10-Q is filed.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Prophet 21, Inc.
DATE: November 12, 1999 By:/s/ Charles L. Boyle, III
--------------------------------
Charles L. Boyle, III,
President and Chief
Executive Officer
(Principal Executive
Officer)
DATE: November 12, 1999 By:/s/ Thomas M. Giuliani
--------------------------------
Thomas M. Giuliani,
Chief Financial Officer
and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANT'S FORM 10-Q FOR THE
PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000917823
<NAME> Prophet 21, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 4,060
<SECURITIES> 1,624
<RECEIVABLES> 17,499
<ALLOWANCES> (261)
<INVENTORY> 1,110
<CURRENT-ASSETS> 25,727
<PP&E> 3,887
<DEPRECIATION> (750)
<TOTAL-ASSETS> 33,881
<CURRENT-LIABILITIES> 7,796
<BONDS> 0
0
0
<COMMON> 42
<OTHER-SE> 25,227
<TOTAL-LIABILITY-AND-EQUITY> 33,881
<SALES> 9,286
<TOTAL-REVENUES> 9,286
<CGS> 5,734
<TOTAL-COSTS> 5,734
<OTHER-EXPENSES> 4,991
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (60)
<INCOME-PRETAX> (1,379)
<INCOME-TAX> (469)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (910)
<EPS-BASIC> (0.25)<F1>
<EPS-DILUTED> (0.25)<F2>
<FN>
<F1> This amount represents basic earnings per share in accordance with
the requirements of Statement of Financial Accounting Standards No.
128 - "Earnings per Share."
<F2> This amount represents diluted earnings per share in accordance with
the requirements of Statement of Financial Accounting Standards No.
128 - "Earnings per Share."
</FN>
</TABLE>
