Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Peter Appert – Piper Jaffray
Peter Appert – Piper Jaffray
The success you’ve enjoyed in terms of controlling costs is very impressive. I’m wondering about the sustainability of these cost reductions you’ve implemented. Is there going to be some catch up in 2010 in terms of deferred expenses?
Bob Bahash
We have been pretty active, as you know, in trying to control our costs. If you look by segment, especially if you take a look at the Education segment part of the influence this year was lower sales and marketing costs, free with order costs, etc. simply because the adoption cycle is so much lower. As you look at a doubling of the adoption state opportunities next year you’ll see an increase in those costs, also cost of goods sold.
We will be benefiting and we are benefiting this year from previous years restructuring actions and we will also benefit in 2010 from the restructuring action that we took in this year in the second quarter. We will see some up-ticks naturally as business starting improving for us but we’re going to continue to focus awfully hard on our costs and expense.
Peter Appert – Piper Jaffray
Does your cost suggest that margins in the Education business are basically flat next year even in the context of some recovery in revenue?
Bob Bahash
It’s a little bit early to be predicting the margins but as you know that first in a major adoption you have some higher costs because of sales, marketing, free with order costs, etc. so they do tend to influence your overall margins.
Peter Appert – Piper Jaffray
Can you share with us any granularity on the drivers of revenue performance in the Investment Services business? Specifically what I’m wondering is that the deteriorating revenues you’ve seen this year to the extent that a lot of this is subscription based revenues, does this imply that revenues remain under pressure going into 2010?
Bob Bahash
In the Investment Services area we’ve experienced some pressure from the index services side simply because of what has happened in the overall marketplace. When you look at price volume from the standpoint of the impact of the overall Dow and such that is clearly influenced these size of assets under management and our fees. On the other side we have seen an increase from a volume standpoint of individuals moving more into index services. That has counter balanced to a certain degree the loss of revenues simply because of the rate impact.
- To read the full transcript on Seeking Alpha, click here »
