Executives
Nancy McKinley – Vice President, Human Resources and Administration
Nicholas R. Schacht – President, Chief Executive Officer
Charles R. Waldron – Chief Financial Officer
Analysts
Robert Craig - Stifel Nicolaus & Company, Inc.
[Nick Genova] – B. Riley and Company, Inc.
Learning Tree International (LTRE) F3Q08 Earnings Call August 5, 2008 4:30 PM ET
Operator
Good day and welcome to the third quarter 2008 Learning Tree earnings conference call. My name is Candace and I’ll be your coordinator for today. (Operator Instructions) I would now like to turn the presentation over to your host for today’s conference Miss Nancy McKinley, VP of Human Resources and Administration. Please begin.
Nancy McKinley
Good afternoon. Joining us today from management are Nick Schacht, our President and Chief Executive Officer and Bob Waldron, our Chief Financial Officer. As a reminder, except for historical statements, the matters addressed in this conference call are forward-looking statements. Please do not put undue reliance on these forward-looking statements since they are based on key assumptions about future risks and uncertainties. Although we believe that our assumptions are reasonable, inevitably some will prove to be incorrect.
As a result, our actual future results can be expected to differ from those discussed in this call and those differences may be material. We are not under undertaking any obligation to update forward-looking statements.
To help you assess the major risks in our business, we’ve identified many but not all of them, in Item One A of our Form 10-K. Please read those risk factors carefully. Some of the factors discussed in Item One A that could affect us include risks associated with the timely development, introduction and customer acceptance of our courses; competition; international operations, including currency fluctuations; changing economic and market conditions; technology development and new technology introduction; efficient delivery and scheduling of our courses; adverse weather conditions; strikes; acts of war or terrorism and other external events; and attracting and retaining qualified personnel.
And now I’d like to turn the call over to Nick Schacht.
Nicholas R. Schacht
Thank you Nancy. Good afternoon. I will begin today’s presentation by covering our performance in our third quarter and first nine months of fiscal 2008, which ended June 27, 2008.
During our third quarter we realized increases in our revenues, our gross profit margins, our operating income and our net income compared to our third quarter in fiscal 2007. We are pleased with this continued improvement in our performance and believe we are seeing initial results from the growth initiatives we began in the latter part of fiscal 2007, and have continued to implement this year.
After discussing our results, I will speak further about those growth initiatives, and provide some forward-looking information about our fourth quarter for fiscal 2008. Following my presentation, we will open the floor for questions and discussion. Bob Waldron, our Chief Financial Officer, will join me in the Q&A section of this conference call.
For your convenience, we have posted the text of these prepared remarks in the investor relations section of our website. Go to www.learningtree.com/investor.
On May 28, 2008 we announced that we were exploring the possible sale of the company. I will not comment further on that process during this presentation other than to explain its effects on our financial performance during our third quarter of fiscal 2008, and its anticipated effects on future quarters.
As I will describe in more detail on our discussion of G&A, our third quarter results reflect approximately $560,000 in G&A expense related to our efforts to explore a possible sale. For our third quarter and first nine months of fiscal 2008, these expenses reduced our operating income and pre-tax income by $560,000; our net income by $350,000; and our earnings per share by $0.02.
Let’s start out by identifying some highlights of our operating results for our third quarter of fiscal 2008. Revenues increased $46.9 million from $42.7 million, an improvement of 10% from the same quarter of fiscal 2007.
Gross profit increased to 58.2% of revenues from 57.1 % for the same quarter of fiscal 2007. Operating expenses were 46.8% of revenues, compared to 45.3% for the same quarter of fiscal 2007. As a result of these factors, income from operations increased to $5.4 million from $5 million in the same quarter of fiscal 2007.
Net income increased to $3.8 million compared to $3.7 million in our third quarter of fiscal 2007. Earnings per share on a diluted basis were $0.23 compared to $0.22 in the third quarter of fiscal 2007. And excluding the $560,000 of costs associated with the potential sale of the company, income from operations and net income would have been $5.9 million and $4.2 million respectively. And earnings per share would have been $0.25.
For our first nine months of fiscal 2008, revenues increased to $137.1 million compared to $123 million for the same period in fiscal 2007, an increase of 11.4%. Gross profit increased to 57.9% of revenues from 56.2% for the first nine months of fiscal 2007. Operating expenses increased to 47.3% of revenues from 46.3% for the first nine months of fiscal 2007.
Income from operations increased 19.3% to $14.5 million from $12.2 million in our first nine months of fiscal 2007. Net income increased 20.7% to $11 million compared to $9.2 million in our first nine months of fiscal 2007. Earnings per share on a diluted basis increased to $0.67 compared to $0.56 in the same period of fiscal 2007.
And excluding the $560,000 of costs associated with the potential sale of the company, income from operations and net income would have been $15.1 million and $11.4 million respectively, and earnings per share would have been $0.69. Revenues for our third quarter fiscal 2008 increased by 10% compared to the same quarter in fiscal 2007.
The increase in revenues compared to our third quarter of fiscal 2007 was primarily due to a 5.5% increase in the number of participants in our courses, a 4% increase in average revenue per participant, and a 0.5% increase due to higher revenues from daily rentals of our classrooms, which we rent out when they are not needed for our own classes.
Overall, during our third quarter fiscal 2008, we trained a total of 24,074 course participants, a 5.5% increase from the 22,820 participants we trained in the same quarter last year. During our third quarter fiscal 2008, we provided 26,189 attendee days of training in management courses, a 4.4% increase compared to 25,095 attendee days in the same quarter of the prior year.
We provided 62,743 attendee days of training in IT courses during the quarter, a 2.6% increase compared to 61,182 attendee days in our third quarter of fiscal 2007. Overall, we provided a total of 88,932 attendee days of training in the quarter, a 3.1% increase compared to 86,278 attendee days in our third quarter of fiscal 2007.
In our third quarter of fiscal 2008, the average revenue per participant was 4% higher than in the same quarter of fiscal 2007, primarily due to a 3.8% effective changes in foreign exchange rates as well as price increases, partly offset by an increased proportion of participants in shorter course events and onsite course events which have a lower average revenue per participants in longer course events.
I will now discuss our operations in our third quarter fiscal 2008 and how they compare with the same quarter fiscal 2007. Costs of revenues declined to 41.8% of revenues in our third quarter fiscal 2008 compared to 42.9% in our third quarter fiscal 2007. And our gross profit percentage accordingly increased to 58.2% compared to 57.1%.
Changes in foreign exchange rates do not materially affect our gross profit percentage, since exchange rate changes increase our cost of revenues by approximately the same percentage as they increase our revenues. The improvement in cost of revenues in our third quarter of fiscal 2008 reflects an 8.1% increase in average revenue present, partially offset by a 5.6% increase in average cost present.
The increase in our average revenue present was the result of a 4% increase in the average participants per event, and the 4% increase in average revenue per participant discussed earlier. The increase in average cost per event principally resulted from the effective changes in foreign exchange rates and small increases in the direct costs of conducting our events.
During our third quarter fiscal 2008 we presented 1,788 events, a 1.5% increase from the 1,762 events conducted during the same period in fiscal 2007. During our third quarter of fiscal 2008, our spending on course development was $2.6 million compared with $2.3 million in the same quarter of our prior year. This resulted in course development expense of 5.6% of revenues in our third quarter fiscal 2008 compared to 5.5% during the same quarter of fiscal 2007.
Our higher spending in fiscal 2008 is principally due to our revenue growth initiative to significantly accelerate the rate at which we introduce new course titles. Our increased third quarter course development activity was primarily for work on titles that will execute their first events in our fourth quarter for fiscal 2008 and our first quarter fiscal 2009.
In our third quarter of fiscal 2008 we introduced nine new IT course titles and four new management course titles. And we retired one IT course title. Our library of instructural ed courses numbered 175 titles at the end of our third quarter of fiscal 2008 compared with 159 titles at the same point a year earlier. At the end of our third quarter this year we had 50 management titles in our course library compared to 46 titles at the end of our third quarter in fiscal 2007. Our library of IT titles numbered 125 at the end of our third quarter compared to 113 a year earlier.
Sales and marketing expense in our third quarter for this year was $11.2 million or 23.9% of revenues compared with $9.4 million or 22.1% for the same quarter in fiscal 2007. The increase in sales and marketing expense was principally due to increases in personnel related expenses and advertising costs, and the effective changes in foreign exchange rates. Those increases were partly offset by reduced direct marketing expenses as a result of our ongoing refinements to our marketing for our continued business intelligence analysis, which resulted in our mailing fewer catalogs than in the same quarter in fiscal 2007.
G&A expenses in our third quarter of fiscal 2008 was 17.3% of revenues compared with 17.7% in the same quarter of fiscal 2007. G&A expense in our third quarter was $8.1 million compared to $7.5 million in our third quarter last year. As I mentioned earlier, our G&A expense for our third quarter of fiscal 2008 included $560,000 of costs associated with our efforts to explore the potential sale of the company. These costs include transaction contribution bonuses for key personnel, principally in our finance and accounting department, as well as investment banker fees, legal fees and special committee fees associated with this process.
Excluding the costs associated with a potential sale, G&A for our third quarter of fiscal 2008 would have been $7.6 million or 16.1% of revenues. As a result of these factors in our third quarter fiscal 2008 we achieved income from operations of %5.4 million or 11.4% of revenues compared to income from operations of $5 million or 11.8% of revenues in the same quarter of our prior year.
Income from operations in our third quarter was reduced by the $560,000 in G&A expense associated with the potential sale of the company. Excluding these costs, our income from operations for our third quarter of fiscal 2008 would have been $5.9 million, an increase of 17.5% over our third quarter of fiscal 2007.
In our third quarter of fiscal 2008 other income net was $0.7 million compared with $1 million in the same quarter of fiscal 2007. This decline primarily resulted from a $0.2 million decline in interest income due principally to lower interest rates, and a $0.2 million foreign exchange transaction loss. These declines were partially offset by a $0.2 million gain we realized during our third fiscal quarter on the sale of our remaining shares in Rasmussen College.
As a result of the preceding factors pre-tax income in our third quarter of fiscal 2008 was $6.1 million compared to pre-tax income of $6 million in the third quarter of fiscal 2007. Our pre-tax income was reduced by $560,000 as a result of the G&A expense associated with the potential sale of the company. Including these costs our pre-tax income for our third quarter of fiscal 2008 would have been $6.6 million, an increase of 10.4% over our third quarter fiscal 2007.
For our third quarter fiscal 2008 our effective tax rate was 37.3% compared to 38.5% in the third quarter of fiscal 2007. In summary, net income for our third quarter fiscal 2008 was $3.8 million, or 8.1% of revenues compared to net income of $3.7 million or 8.7% in our third quarter of fiscal 2007. Our net income was reduced by $350,000 as a result of the G&A expense associated with the potential sale of the company.
Excluding these costs, our net income for third quarter of fiscal 2008 would have been $4.2 million, an increase of 12.6% over our third quarter of fiscal 2007. During the nine months ended June 27, 2008, the total of our cash and available for sale securities increased by $3.6 million to $92.1 million from $88.5 million on September 28, 2007. This includes $26.6 million of auction rate securities.
As previously announced in our second quarter fiscal 2008 we reclassified our auction rate securities from current to non-current assets and recorded a temporary impairment in their value of $4.3 million. At the end of our third quarter, these securities were again evaluated by an independent expert who concluded that their value had improved by $0.8 million. And this improvement is reflected in our balance sheet of June 27, 2008. Because we do not believe that the value of these securities is permanently affected, impairments to these assets do not affect our reported net income.
We sold $2.7 million of our auction rate securities during our third quarter of fiscal 2008 and an additional $600,000 after quarter end, all at full face value. Net working capital of June 27, 2008 defined as current assets minus current liabilities decreased to $25.5 million compared to $43.9 million as of September 28, 2007. The change in working capital was primarily due to the reclassification of $26 million of available for sale securities to non-current assets, partially offset by cash generated by operations.
Excluding the reclassification of auction rate securities net working capital increased by $7.6 million since the end of our fiscal year 2007. We did not repurchase any shares of our common stock during the quarter.
Looking to the future we are excited about our progress toward our goals of increased revenues and higher profitability, and the growth plan we have undertaken to achieve those goals. Our plan includes seven core growth initiatives which aim to increase our revenues and further improve our profitability by leveraging our fixed cost infrastructure. We began implementing these initiatives in late fiscal 2007 and have continued that implementation throughout fiscal 2008.
Here is a summary of our core growth initiatives and some information on our progress to date. Initiative number one, significantly increase the rate of introduction of our new course titles. We are working to accelerate our revenue growth through the rapid expansion of our course library because we believe that additional course titles will allow us to serve more customers by meeting a broader set of professional development needs.
Performance of new titles has a well established historical track record, and new titles typically grow to full revenue contribution levels approximately two years after introduction. We plan to advertise an average of 51 new course titles per year in each of fiscal years 2008, 2009 and 2010, which is a significant increase from the number of new titles we introduced in previous years.
We are on track to advertise 55 new course titles in fiscal 2008, of which we expect 33 to be scheduled for their first events this fiscal year with the remaining 22 to be scheduled for their first events in fiscal 2009.
Initiative two, expand the market for our management training. We have been very successful at increasing the number of participants in our management courses and have tripled our management training revenues since fiscal 2004. Our customers primarily send managers from their IT departments to Learning Tree management courses. We believe we have a substantial opportunity to further increase our sales of management training by marketing our service to other departments within our existing clients.
And also by introducing our management training services to new clients. We are currently developing and testing several marketing and sales approaches to achieve this objective.
Initiative three, develop and provide blended learning solutions. While we remain firmly committed to the value of instructural ed classroom training as the center point of our business model, we believe there’s an opportunity in certain situations to further increase the value of that training by integrating elements of eLearning together with our classroom training in blended learning solutions.
As a result, we believe that we can capture greater market share through offering these blended learning solutions to customers where appropriate. We’re actively developing and testing blended learning programs to determine formats that are both educationally effective and commercially viable.
Initiative four, increase our marketing quantities. In recent years we have developed a proprietary system of cutting edge business intelligence techniques which we have named POST, an acronym for Profit Optimization Selection Tree and which we have used to increase the return on our investments in direct marketing. In recent years we used our POST techniques to identify regions of our database which we were mailing unproductively.
By eliminating such regions from our direct marketing and by adjusting the frequency of mailing to other database regions, we increased our marketing return on investment by 67% between fiscal 2004 and fiscal 2007. We are now applying the same POST methods to identify new, profitable database regions in order to increase our quantities of direct mail and email and thus drive profitable increases in revenue.
Initiative five, improve the productivity of our telesales force. Earlier this year we began applying our POST business intelligence techniques to the selection and prioritization of the leads to be fed to our outbound telesales force worldwide, with the goal of increasing their sales productivity. While the full effects of this initiative are still building, our initial results have been consistent with our expectations based on the POST analysis.
Initiative six, implement tightly targeted direct mail, email and telemarketing campaigns. We have begun to use POST business intelligence techniques to generate increased sales through tightly targeted marketing and sales campaigns, several of which are now in the initial stages of implementation.
And Initiative seven, significantly grow our direct sales force. We believe we have a substantial opportunity to increase our market share of courses held with customer locations, particularly for large enterprise level customers. And we have therefore implemented a plan to increase our number of direct field sales representatives substantially by fiscal 2010. We have strong sales management in place and our hiring of additional sales professionals is progressing according to plan.
As we have for the past 34 years, we continue to emphasize excellence in educating and training managers and IT professionals from government and commercial organizations around the world. We believe that quality is a significant differentiator in the eyes of our customers and that Learning Tree’s proven long term record of exceptional performance is the reason for their tremendous loyalty.
It is worth noting that every single one of our top 100 customers from fiscal 2003 continues to be a Learning Tree customer five years later in fiscal 2008. We continue our emphasis on excellence by focusing on our core strengths; our expert instructors, proprietary content library, state of the art classrooms, application technology to education and worldwide course delivery systems.
We use the 52, 53 week year – fiscal year method to better align our external financial reporting with the way we operate our business. Under this method, each fiscal quarter ends on the Friday closest to the end of the calendar quarter. Accordingly, fiscal 2008 is a 53 week year and our fourth quarter this year will include 14 calendar weeks compared to the fourth quarter of fiscal 2007 which had 13 weeks.
Approximately half of our business annually is conducted in currencies other than U.S. dollars and fluctuations in exchange rates will affect future revenues and expenses when translated into dollars. We expect to report a favorable affect of approximately 2% due to changes in foreign exchange rates in our fourth quarter of fiscal 2008 which will have the effect of increasing both our revenues and our expenses compared to our fourth quarter fiscal 2007.
Our projections for our fourth quarter 2008 include approximately $400,000 G&A expense related to the potential sale of the company, which will reduce our projected operating income and pre-tax income by that amount. Note that we expect to incur similar expense in each of our first and second quarters of fiscal 2009.
We currently expect revenues in our fourth quarter fiscal 2008 to be between $45.5 million and $47.5 million compared to $44.2 million in the same quarter of fiscal 2007. We expect our gross profit percentage in our fourth quarter fiscal 2008 to be between 56.1% and 47.6% compared to 56.9% in our fourth quarter of fiscal 2007.
We expect overall operating expenses for our fourth quarter of fiscal 2008 to be between $22 million and $23 million. As a result of the above factors, we expect operating income for our fourth quarter of fiscal 2008 to be between $2.8 million and $4.8 million compared with operating income of $2.3 million in the fourth quarter fiscal 2007.
We expect fourth fiscal quarter interest income to be approximately $0.9 million. As a result of the above factors we expect pre-tax income for our fourth quarter fiscal 2008 to be between $3.7 million and $5.7 million compared with pre-tax income of $3.5 million in the fourth quarter of fiscal 2007. We estimate that our effective tax rate in our fourth quarter of fiscal 2008 will be approximately 37.6%.
For our full fiscal year 2008 we expect revenues to be between $182.5 million and $184.5 million compared with $167.2 million for fiscal 2007. And including the impact of G&A expenses of approximately $1 million related to the potential sale of the company, we expect pre-tax income to bet between $21.4 million and $23.4 million compared with $18.7 million for fiscal 2007.
We believe these improvements reflect initial results from our revenue growth initiatives, as well as the results of our continued efforts to improve our profitability. During fiscal 2008 we have concentrated on implementing our core growth initiatives with the concurrent goal of continuing to increase our profitability. We are pleased with the progress we have made toward both of these goals.
We believe that our growth initiatives will largely bear fruit in fiscal 2009 and beyond and we are working heard to achieve the results we envision. And now, I’d like to open the floor for questions.
Question-and-Answer Session
Operator
Thank you sir. (Operator Instructions) Your first question comes from Robert Craig - Stifel Nicolaus & Company, Inc.
Robert Craig - Stifel Nicolaus & Company, Inc.
A couple of macro questions to start off. Any indications of cutbacks or any planned reductions in training budgets among your client base and/or any changes in demand patterns, domestic versus international?
Nicholas R. Schacht
Those are good questions Bob. In terms of what we’re seeing in regard to our customers specifically, we recently conducted our own periodic survey of our customers where we ask about their expectations of spending on training. This survey was done two weeks ago and as a result – anyway, at that time 57% of the respondents expected training expenditures in the next six months to remain constant, 27% expected an increase in spending on training, and 16% expected a decrease.
So we’re seeing overall a somewhat positive outlook from our particular client base. In terms of looking at things internationally, I can’t say that we’re seeing appreciably different trends internationally than we are in the United States.
Robert Craig - Stifel Nicolaus & Company, Inc.
Regarding that survey, Nick, were those numbers appreciably different from the last time you conducted such a survey?
Nicholas R. Schacht
Those numbers went down slightly in terms of the number expecting an increase but you know where we see 27% of them expecting an increase in spending on training, this time six months ago that number was about 30%.
Robert Craig - Stifel Nicolaus & Company, Inc.
And how reliable a predictor has that been, that survey?
Nicholas R. Schacht
Over time we think it’s been a pretty reliable predictor.
Robert Craig - Stifel Nicolaus & Company, Inc.
And I take it you’re not seeing any impact from greater travel costs, be it gasoline or airfare or whatever on the business?
Nicholas R. Schacht
We haven’t seen anything that would indicate that travel costs are a factor in our customer’s decisions patterns. I think a good thing to keep in mind is that clearly because of the fact that our goal and the goal of individuals attending our courses is to improve their productivity on the job, the benefits and productivity gains far outweigh additional costs related to travel.
Robert Craig - Stifel Nicolaus & Company, Inc.
Per your front end comments I won’t ask any specifics on the sale process but has there been any level of distraction within the organization? And I guess a second question would be has that process or the prospects or a more difficult economic environment in any way changed your growth plans?
Nicholas R. Schacht
I guess I can answer both of those questions. The first question, have we experienced any distraction as a result of the sale process; we’ve worked very, very hard not to allow there to be any distractions as a result of this process. For the most part there’s a very small number of us who are involved in the sale process and all of our frontline operational management is not involved. So they’re focused on serving our customers and working to grow sales and improve our profitability. So the potential for distraction has been very small.
Has that sale process changed our growth plan? No. Our growth plans and our objectives remain exactly the same as when we announced them six months ago.
Robert Craig - Stifel Nicolaus & Company, Inc.
Could you indicate just maybe in rough terms you know what kind of additions that you made to the sales and telesales teams in the quarter? And any measures of greater sales force productivity, be it lead conversion ratios or anything else you’d like to throw out there?
Nicholas R. Schacht
You know, thinking about that since we haven’t discussed any of those metrics before I’m not going to give you any of that data now. We will when we file our 10-K obviously provide our numbers of sales people, but at this point I’m not going to release that information.
Robert Craig - Stifel Nicolaus & Company, Inc.
Okay, but suffice to say you’re continuing to add bodies here.
Nicholas R. Schacht
Yes that would be consistent with our growth plan as it would be unrealistic for us to expect increased revenues to come in without increased numbers of sales people to capture those revenues.
Robert Craig - Stifel Nicolaus & Company, Inc.
Okay. Is the number of titles that you’re currently advertising in the catalog? I think last quarter you mentioned that number was 210. Is that north of 220 now given the intros?
Nicholas R. Schacht
I believe the latest catalog has 219 titles advertised in it. But it’s going up with each generation. So since we are introducing catalogs on roughly an every two month cycle, I believe we may only have had one new catalog come out since the last call.
Robert Craig - Stifel Nicolaus & Company, Inc.
Okay. I’ll put this one in kind of the dumb question category. What did the term “identify new profitable database regions” mean?
Nicholas R. Schacht
What that means, Bob, and it’s not a dumb question – what it means is that within our database there may have been regions or segments of our database that, based on our prior analysis methodologies we were choosing not to mail. But based on the new POST techniques where we can more finely segment our database into smaller regions we’re looking for those smaller regions that may be profitable.
So for example if there were a zip code that under prior analysis we would have chosen not to mail, using POST we can identify much smaller areas within that zip code where we believe based on our history and based on the data we have available, that it would be profitable to mail.
Robert Craig - Stifel Nicolaus & Company, Inc.
Okay. Last one and I’ll turn it over here. The fourth quarter guidance on revenue on a week adjusted or like week basis would appear to be down year-over-year. Can I guess – is that accurate, one, and two, could you explain why that might be the case?
Nicholas R. Schacht
Sure. I think that is relatively accurate. I think you could look at the guidance and say it is effectively flat to maybe down a little bit on a like week basis. As we always do we provide our forward-looking guidance based on the best information we have at the time we provide that guidance. And we are getting somewhat mixed signals from the economy.
On the one hand our recent sales volumes haven’t been growing at levels that we’d like to see. And with the exception of our passport enrollments, our orders over the last 13 weeks have been essentially flat compared to a year ago. And our passport enrollments have continued to decline year-over-year consistent with the longer term decline in the number of passport holders.
But on the other hand, and we have some data points that support our expectations for future growth although it is somewhat lower growth rate than what we expected earlier. First we believe that the effect of our growth initiatives have yet to be fully felt. It takes time for enrollments in our new course titles to build. Typically it takes two years from the introduction to reach full enrollment levels. And similarly we’ve learned from analysis of past data that our other marketing sales initiatives will also take time to build to their full effect.
We also have positive indications from two surveys. One is the one that I referred to earlier, our survey of our own customers. The other is a survey from Techtel Corporation who released a study last week showing continued growth in IT spending in the coming six months, although at a lower rate than they had previously projected.
So while we may be encountering some economic headwinds, overall we’re still very encouraged by the prospect of growth in the near term and the long term promise of our growth plans and growth initiatives.
Robert Craig - Stifel Nicolaus & Company, Inc.
That does beg another question, sorry about that. One more. But I guess I’d ask you to comment on the feasibility of your 2010 targets given some of the commentary you’ve just made regarding the economic outlook and given the progress to date. I guess it’s been close to six months since you developed that. Are those numbers still feasible? If you were to develop that plan today, would those numbers still be the same?
Nicholas R. Schacht
I think you’ve asked two different questions so let me answer them separately. Are the numbers still feasible? Yes I believe the numbers are still feasible but I will add the caveat that if we face a significant economic slowdown for a prolonged period of time, it may take us longer than our original timeframe to achieve those numbers.
Clearly when we put the plan in place six months ago, things looked a little bit different than they do now. And we will just have to keep monitoring that, you know, on a daily, weekly, monthly basis.
With regard to would I put the same timeframe in place? At this point in time, I don’t know that I would have put exactly the same timeframe in place. I probably would have adjusted it somewhat to take into account the current sales rates and the current economic situation.
Operator
Your next question comes from [Nick Genova] – B. Riley and Company, Inc..
[Nick Genova] – B. Riley and Company, Inc.
Just a couple quick questions. First following up on some of the revenue discussion, can you give me a little bit more detail on how the calendar shift impacts Q4? Is it pretty straightforward over are those extra operating days you’re getting are they less productive generally or how should I look at that?
Nicholas R. Schacht
Hang on while I think through that question, Nick. That’s a good question.
[Nick Genova] – B. Riley and Company, Inc.
I guess I’m just trying to figure out if it’s pretty straightforward like the extra week you’re getting is that a legitimate extra week?
Nicholas R. Schacht
In general it’s pretty straightforward so anything else I could add I think would be an unnecessary complication for the purposes of modeling.
[Nick Genova] – B. Riley and Company, Inc.
And then going back you guys mentioned during the prepared comments that, and this is a continuation of the plan on some of the initiatives you guys originally put out, but on the marketing the management courses outside of the IT department, can you give me a little bit more color on how that is progressing? And where you’re at in that process as to whether are you still in the very early stages and when would you expect this initiative to start bearing fruit?
Nicholas R. Schacht
We are still in the very early stages. We do not expect this initiative to bear any significant fruit in terms of revenue until sometime in fiscal 2009. However we are seeing some initially positive and hopeful results. What we’re doing is trying out a number of different approaches to leverage our existing relationships and gain some market recognition and ultimately market share in those non IT departments.
So we’re encouraged by the progress that we’ve been able to make but as it’s still early in the process what we’re doing right now is still on a trial basis and has not been fully implemented.
[Nick Genova] – B. Riley and Company, Inc.
Okay. That’s helpful. And then on the gross profit side looks like if I take the mid-point of your gross profit guidance that it’s basically flat year-over-year even with the higher revenue level. Can you talk a little bit about that? I guess I would expect a little bit of leverage and maybe when you switch start to see that leverage come back again.
Nicholas R. Schacht
When we look at the higher level of revenue, I think that if you go back to Bob’s question and parceling it out for a 14 week quarter versus a 13 week quarter and looking at the impact of that effects, I think an easy way to look at it is revenues are effectively on a weekly basis flattish in terms of our projection compared to the prior year. So in terms of the gross profit then it would not be unusual for gross profit to be at about the same level as last year.
[Nick Genova] – B. Riley and Company, Inc.
Okay. And then final question on the pipeline of new titles you guys are coming out with, how far ahead you guys looking as far as what you already have formulated for the course titles?
Nicholas R. Schacht
We tend to look to around 15 months into the future.
Operator
At this time I’ll turn the call back to management for any closing remarks.
Nicholas R. Schacht
Thank you very much. Let me make sure that you all have had a chance to push the star one button. And so while I am finishing my remarks, if you want to ask a question please push star one and Candace will get you into the queue.
For over 34 years Learning Tree has built a strong position as the world’s leading vendor independent provider of training for managers and technology professionals. Our instructors, our content, our classrooms and our worldwide delivery systems continue to raise the standards for quality and effectiveness in the industry.
The goal of our quality processes and training methods is that each and every individual we train acquires the skills and knowledge needed to succeed in his or her job. We remain committed to the proposition that the long term success of our customers depends in part on their investment in technology and in the training of their personnel to leverage and manage that investment.
We are excited about the continued improvement in our performance and we are committed to continued improvements in both our revenues and our profitability. We look forward to continuing to help our customers maximize their productivity and the effectiveness of their people.
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