First Quarter Results

Sunnyvale, CA. February 10, 2000 – Applied Signal Technology, Inc. (NASDAQ - APSG) announced its operating results for the first quarter of fiscal 2000 ended January 28, 2000.

Revenues for the first quarter of fiscal 2000 were $26,528,000, up 16 percent from the $22,848,000 recorded during the first quarter of fiscal 1999. Net income for the first quarter of fiscal 2000 was $2,116,000 or $0.24 per share, up 49 percent compared to net income of $1,422,000 or $0.16 per share for the same period of fiscal 1999. The earnings per share numbers are reported on a diluted basis.

The increase in revenue recorded during the first quarter of fiscal 2000 is due in part, to increased contract activity resulting from a continued demand for the Company’s products and services and in part, due to the Company recognizing a higher average profit on contracts during the first quarter of fiscal 2000 compared to the first quarter of fiscal 1999.

The increase in net income recorded during the first quarter of fiscal 2000 compared to the same period of fiscal 1999 reflects an improvement in contract margins. The contract margins improved from 36 percent for the first quarter of fiscal 1999 to 38.2 percent for the first quarter of fiscal 2000 primarily due to a shift in the mix of the Company’s sales from engineering services type contracts to products. This shift in the mix of sales improved the Company’s net income from 6.2 percent recorded during the first quarter of fiscal 1999 to 8 percent recorded during the same period of fiscal 2000.

Order levels for the first quarter of fiscal 2000 were $15,419,000, a 97 percent increase from the $7,826,000 reported for the same period of fiscal 1999 reflecting the government’s continued demand for the Company’s products and services.

Regarding the first quarter operating results, Gary Yancey, President and Chief Executive Officer of the Company, commented, “We are pleased with stronger year-over-year performance in this quarter. Our R&D investment was lower than our operating model of 12 percent of revenue due to staffing limitations, however, we anticipate meeting our operating model by year end.”

Mr. Yancey further remarked, “We are still observing that our intelligence agency customers are becoming more focused on providing intelligence through signal reconnaissance. I believe this bodes well for our traditional marketplace into the foreseeable future.”

Applied Signal Technology designs, develops, manufacturers and markets advanced, digital signal processing equipment to collect and process a wide range of telecommunications signals for signal reconnaissance and industrial telecommunication applications. For additional Company-related information, visit the Company’s website at www.appsig.com.

Except for historical information contained herein, matters discussed in this news release may contain forward looking statements that involve risks and uncertainties including customer concentration, competition, dependence upon personnel, volatility of operating results, use of estimates in program costs-to-complete and other risks detailed from time to time in the Company’s SEC reports including its latest Form 10-K for the fiscal year ended October 31, 1999.