Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Jerry Herman - Stifel Nicolaus & Company, Inc.
Jerry Herman - Stifel Nicolaus & Company, Inc.
I was wondering if you could break out funding sources and what you’re seeing from those various sources, namely the percentage of funding that comes from consumer, the percent that comes from Title I and then finally from state and local governments in K-12?
Michael J. Perik
Our test prep business has about $11 million in it this year of institutional sales. Everything else is a parent, grad student writing the check or it’s franchise fees from internationally. So $11 million of that comes from the state, from public funds, let’s put it that way. That gives you some sense of the test prep business. In the K-12 business that is all public funds and it depends on which district you’re talking to and sometimes even when in the district it can be a mix of federal funding and state funding or district funding. To speak to the overall funding question, we’ve seen just a small little bit of some business you might lose because of the economic environment in terms of K-12 but our major pieces of business, whether we renewed them or we didn’t renew them, I wouldn’t be blaming the economy for any of that frankly. There’s some softness but I think given where our business is right now and trying to turn things around, I don’t think that’s a major factor in our K-12.
Jerry Herman - Stifel Nicolaus & Company, Inc.
Mike, is it also true of the consumer side in test prep? There’s a lot of pressures on the consumer.
Michael J. Perik
This is what’s been interesting, this where I’ve been very excited this summer in looking at what we’re doing there. It would be wrong for us to say we are in a marketplace where the economy or pricing is not a determinant. But you can make that work for you. We made that work for us in July. There are parts of our business that are completely inelastic. We could and did raise some of our tutoring rates for the small group and one-on-one tutoring and had no impact in terms of the volume of our business, we did that for some of our grad courses. Because in those cases when a parent is really intent getting junior into Harvard or is really intent as an individual to get themselves into medical school, they’re not really that price sensitive at that point. However when you move to the broader high school market and you look at the options that you might have going with a Kaplan, a Revolution Prep or Princeton Review, then you’re looking at a specific combination of brand and price. Brand’s important because you want quality for your kid but you’re frankly, with gas prices and everything, you’re interested in terms of what you’re doing in terms of price. You’re not unaware of price. We sense that that was happening in our market and historically Princeton has always been the most expensive offering you could find out in SAT in terms of its classroom courses, always about Kaplan in that.
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