Michael Nemeroff (Wedbush): Okay, and about the last one on the cash flow?
Mike Beach: We''ve factored in what we’re saying in the marketplace related to the cash flow guidance we’ve provided, and we haven’t seen a material slowdown in collections and are comfortable with the range we’re providing. There were some events that happened during the third quarter that could have had a negative impact on cash flow.
Michael Stanton: It’s fair to say that our cash flow guidance for the full year of $80 million to $85 million which is raised assumes that there could be some amount of impact but we feel good about that number.
Michael Nemeroff (Wedbush): So you’re still tracking or still expect that 200 basis point improvement in the margin next year?
Mike Beach: So as we look at next year, we clearly expect margin expansion and our goal is 24% EBITDA excluding stock-based comp. We give formal guidance as it relates to 2009 on our fourth quarter call as we historically have and at that time, we’ll nail down the exact margin. But that’s our goal and we do expect margin expansion over 2008, in 2009.
Michael Nemeroff (Wedbush): You’re at EDUCAUSE and you’re with several thousand schools down there. Can you tell us what the tone is there and how schools are thinking about their budgets going-forward into 2009? Does the market meltdown here, does that impact the sale cycle, the length of the sale cycles potentially for statewide deals going-forward, and how much of that is baked into your guidance for next year?
Michael Chason: I’ve had a really great opportunity over the last two days and of course, will continue throughout today and tomorrow to meet with a good number of both clients and prospective clients, as well as speak with a number of other leaders in the industry. And I see that the attitude here is basic cautiously optimistic.
Certainly we’re staying down and talking with schools about expanding their licenses and how they can better utilize our technology to take into consideration if the schools may be under a slight amount of budget pressure next year, so looking to our technology to help reduce expenses, allow them to put more students in a class and especially in the community college and the commercial college system that actually expects to see increasing enrollments as more people go back to school to continue with their education if there’s an economic slowdown. All of those are factors that are tied into people looking to continue to purchase our software.
We do believe in this past quarter, it did influence the sale cycle, just a general concern about the economy, but not specific cutbacks yet in the budget. And I think that we can expect that to continue, a slightly longer sales cycle on higher ed but not the same kind of reduction in budgets that we’ve seen tied to the K-12 space.
Regarding the sale cycle statewide deals, I don’t think we have enough experience yet with statewide deals to specifically say whether this is going to have any influence on them. Of course, the statewide deals we’ve done have been on longer sale cycle. But as states look for ways to save money, improve education, and again, potentially prepare for increasing enrollment in their state institutions, there could be more discussions with senior level executives about doing statewide deals. So I think that economic pressure could be an impetus for more conversations around that.
Tom Roderick (Thomas Weisel Partners): When you look at the post-secondary part of your business, can you give us a sense as to how that’s broken out between state-funded universities and in private universities?
Michael Chason: I think the breakout of this will be generally in line with the general breakout between public and private institutions.
Mike Beach: Yes, I’d say it’s roughly 60/40, and in favor of public.
Tom Roderick (Thomas Weisel Partners): You''ve announced a fair number of wins over the last several quarters, sounds like you got Tulane in this quarter, can you talk about what if any live implementations are out there and what are the sort of the top reference accounts on outcomes?
Michael Stanton: On the outcomes side, Tulane is a new client and not up yet, so any of the newer clients that are up in the last two or three quarters, I think it’s safe to assume that they’re not up and live. I think clients like Mississippi was an early adopter. Seton Hall University is going to be another one that stands out.
Michael Chason: The thing that you have to recognize is when we do an outcome system implementation, it''s a slightly different than our other products that are up and running right as soon as they download. Schools often take the time to put in place the business process around it, so when they’re looking at the date and examining it, they’re tracking to that over time. So for implementations to be fully successful, it is really kind of a multi-year process and year one is about to get itself established.
Amy Junker (Robert W. Baird): Can you talk just a little bit in terms of your guidance for the fourth quarter? Does that include perhaps some greater expenses as well that are related to some of these larger Connect deals you’ve signed recently? I’m just wondering if we’re going to see a little bit of the same phenomenon we saw in the second quarter with some of those expenses coming through before the revenue.
Mike Beach: I think the earnings stance from the guidance is just driven from the lowest revenue expectations. So, that''s just showed the revenue expectations flowing to the bottom line. We haven’t increased expenses related to deal-related cost. One thing we do anticipate is lower net or lower interest income, so higher net interest expense for the quarter given the return that we''re currently getting on our investments based off taking a very conservative approach in investing those funds.
Amy Junker (Robert W. Baird): Can you share with us what the contribution to the quarter was from NTI and how much you wrote off during the quarter as well?
Mike Beach: The NTI revenue was roughly $10 million recognized in the quarter and I believe the adjustment is around $2 million; the write-down is $2 million.
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