Good morning, everyone. And welcome to the Strayer Education Incorporated’s third quarter earnings results conference call. This call is being recorded. On today's call, we will the opportunity for questions and answers. At this time, for opening remarks and introductions, I would like to turn the call over to Strayer Education’s Senior Vice President of Corporate Communications, Ms. Sonya Udler. Ms. Udler, please go ahead.

Good morning. With us today to discuss the results are Robert Silberman, Chairman and Chief Executive Officer for Strayer Education; and, Mark Brown, Executive Vice President and Chief Financial Officer. For those of you that wish to listen to the conference via the Internet, please go to strayereducation.com where the call will be archived for 90 days. If you are unable to listen to the call in real time, a replay will be available beginning today at 1:00 PM, Eastern, through Thursday, November 5th. The replay is available at 888-203-1112, pass code 1914628. Again, following Strayer's remarks we will open the call for questions and answers. Please note that today’s press release contains statements that are forward-looking and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act. The statements are based on the company’s current expectations, and are subject to a number of uncertainties and risks that the company has identified in the press release and that could cause the company’s actual results to differ materially. Further information about these and other relevant uncertainties may be found in the company’s annual report on Form 10-K, and its other filings with the Securities and Exchange Commission. And now, I would like to turn the call over to Rob. Rob, please go ahead.

Thank you, Sonya. And good morning, ladies and gentlemen. As is our custom, I’d like to begin this morning with a brief overview of both our company and our business model for any listeners who are new to Strayer. I’ll then ask Mark to report on the detailed financial results for the third quarter, after which I’ll comment on our enrollment results for the fall academic term, provide an update on our growth strategies, and discuss the company’s earnings outlook for both Q4 and full year 2009. Finally, Mark and I would like to share our thoughts on Strayer’s business model and our investment plans for 2010. Strayer Education, Inc. is an education service company whose primary asset is Strayer University, A 54,000-student, 70 campus post secondary education institution, which offers Associate's, Bachelor's, and Master's degrees in Business Administration, Accounting, Computer Science, Public Administration, and Education. Strayer students are working adults who are returning to school to further their careers. Our revenue comes from tuition payments and associated fees. Approximately 70% of our revenue comes to us from federally insured Title 4 loans. Our expenses include the costs of our professors, our admissions and administrative staff, marketing expenses, and facilities and supplies cost. We currently operate campuses in 15 States in the Eastern half of the United States as well as throughout the world over the Internet. We serve students in all 50 States and over 30 foreign countries with our online courses. Strayer University is accredited by the Middle States Commission on Higher Education. Mark, you want to run them through the financials?

Sure. Revenues for the three months ended September 30th, 2009 increased 31% to $114.4 million, compared to $87 million for the same period in ’08, due to increased enrollment and 5% tuition increase, which commenced in January of this year. Income from operations was $27.3 million compared to $18.3 million for the same period in ’08, an increase of 49%. Operating income margin was 23.8% compared to 21% for the same period in ’08. Net income was $16.7 million compared to $11.8 million for the same period in ’08, an increase of 42%. Diluted earnings per share was $1.21 compared to $0.83 for the same period in ’08, an increase of 46%. Diluted weighted average shares outstanding decreased to $13,780,000 from $14,240,000 for the same period in ’08. Revenues for the nine months ended September 30th, 2009 increased 29% to $364.8 million compared to $282 million for the same period in ’08 due to increased enrollment and a 5% tuition increase, which commenced in January of this year. Income from operations was $120 million compared to $87.4 million for the same period in ’08, an increase of 37%. Operating income margin was 32.9% compared to 31% for the same period in ’08. Net income was $73.2 million compared to $56.6 million for the same period in ’08, an increase of 29%. Diluted earnings per share was $5.29 compared to $3.97 for the same period in ’08, an increase of 33%. Diluted weighted average shares outstanding decreased to $13,850,000 from $14,275,000 for the same period in ’08. At September 30th, 2009, the company had cash, cash equivalents, and marketable securities of $93.4 million and no debt. The company generated $89.8 million from operating activities in the first nine months of ’09, compared to $63 million during the first -- during the same period of ’08. Capital expenditures were $22.1 million for the nine months ended September 30th, 2009 compared to $15.3 million for the same period in ’08. During the three months ended September 30th, 2009 the company invested $5 million to repurchase 24,528 shares of stock at an average price of $202.13 as part of a previously announced stock repurchase authorization. During the nine months ended September 30th, 2009 the company has invested $70.1 million for share repurchases. Also during the first nine months of ’09 the company paid regular quarterly dividends of $21.1 million. For the third quarter 2009 bad debt expense as a percentage of revenues, was 4.5% compared to 3.7% for the same period in ’08. Date sales outstanding, adjusted to exclude tuition receivable related to future quarters, was 15 days at the end of the third quarter of ’09 compared to 13 days at the end of the same quarter of ’08. Rob?

Thanks, Mark, just a couple of comments on the third quarter financials before we get into a more detailed discussion on the operating results on the budget for next year. In the third quarter we exceeded the midpoint of our EPS forecast by $0.06 per share. That was almost entirely caused by higher than expected revenue. This is a pattern we’ve had through the year where our revenue per student growth has been more than Mark and I were expecting. The revenue growth from the third quarter at 31.5%, was about 150 basis points more than Mark and I had thought it would be three months ago when we were forecasting. Based on our announced enrollment growth of 24% for the summer term that additional revenue growth was caused, as it has been for the last couple of quarters has been the trend this year, by lower student drops inter-quarter as well as some higher ancillary fees. For our expenses, Mark was right about on target for his forecast for the quarter. That higher revenue led to operating margin expansion of 280 basis points, which again was quite a bit above our forecast. We thought we were going to do about 150 basis points better. Mark, right? On distributable cash flow, for the first nine months of the year, we're up 43% on 29% net income growth, which is well ahead of our model. However, that cash flow growth is somewhat inflated by the timing of tax benefits associated with stock based compensation. If you back out those tax benefits, the free cash flow growth is more in line with our net income growth, which is what we would expect. Turning to the fall term enrollment results, total university enrollment increased 22% on a year-over-year basis. New student enrollments were up 20%, continuing students enrollments were up 23%. With regard to student mix, pretty down the -- down the middle here. The Business Administration, Accounting, and Economics degree seekers continue to make up about 70% of our student body for the fall term. Computer Science degree candidates 15% -- roughly 15%. The stand alone graduate programs are at 7% of our student population. About the only new news here is that -- interestingly the new undergraduate Criminal Justice Program is already at 5%. We just started that in the spring term, Mark?

That's right.

So it’s just a couple of terms old. Our total graduate student population was stable in the fall term versus the previous year at just under 30% of the student mix. So if you think about the university as a whole, roughly 70% of the students are undergraduate, 30% graduate. Turning to an update on the growth strategy, many of you will remember that’s it's based on five objectives. The first is to maintain enrollment in the company’s mature markets. Second, accelerate the rate of growth of new campuses, particularly into new States. Third, invest in our online curricula. Fourth, increase our corporate and institutional alliances. And the final objective is effectively redeploying the surplus owners' capital that we generate. So just going through that over the last quarter on the first objective, for our fall term we were well ahead of target at our mature campuses that we reported 11% growth, If you strip out just those campuses that are over 10 years old that we would expect truly stable enrollment in, they actually grew about 4% in the quarter. With regard to new campus activity, we had very busy third quarter. We opened four new campuses for the fall term, three of which were in new markets for us. Those four campuses included one each in the Cleveland and Akron, Ohio markets. So the greater Cleveland and North Ohio has two campuses for us now. We opened a second campus in the Cincinnati, Ohio markets. That is not a new market for us, although it’s only a quarter to -- we put the first campus in Cincinnati I think just one term ago. And then we opened our first campus in the Miami, Florida market. We had pretty strong openings at all four of those campuses. We’re encouraged by those markets and we look forward to continue the operations there. We also announced today that Strayer University has been approved to operate in four new States, a bit of a Southwest bent -- moving South and West from our current operations into Mississippi, Arkansas, Louisiana, and Texas. We also announced that we’re going to open three new campuses for the winter 2010 term, one each in Lawrenceville, and New Brunswick, New Jersey. And then our first campus in Arkansas, one in Little Rock. All of those will be new markets for us. Turning to the third leg, the -- of this growth strategy, the online curricula, our global online unit, supported by that second online operations center in Salt Lake City generated a growth rate of 43%. On capital redeployment, in addition to paying our common dividend of $0.50 per share during the quarter as Mark mentioned, we are also able to basically use up the remainder of outstanding share repurchase authorization to repurchase $5 million worth of our common stock at an average price of $202. Mark, I think, year-to-date, you mentioned repurchase $70 million and that average price is about $175 a share for--

Correct.

--if I remember correctly. On the business outlook for the fourth quarter, based on our strong enrollment growth for the fall term, offset partly by increased expenses associated with our new campus openings, and taking into account, I hope, fully at this point, the increased revenue per student growth we’ve experienced during the year, we estimate that our fourth quarter EPS will be in the $2.28 to $2.30 range, with approximately 50 to 100 basis points of operating margin expansion versus last year. Now, with clear visibility into our fourth quarter, this is the time of the year in which we are actually in position to provide actual guidance on our full year earnings -- full year 2009. I’d like at this point to go back and compare ourselves to what we said a year ago, and just to reground all of ourselves on how this model works. So if you remember back a year ago when Mark and I provided Strayer’s business model for 2009, we said that if the university achieved a 20% increase in student enrollment, we would expect a 23% to 24% increase in the company’s revenues. We thought that would generate roughly stable operating margins versus last year -- versus the previous year 2008, and earnings per share in the $6.90 to $7 range. So we now basically have the year in the books at least with regard to enrollment, we actually achieved 22.5% enrollment -- a little bit higher, 22.6% enrollment growth for the full year of 2009, which we project will lead to a 29% increase in revenues. Again taking into account this increased revenue per student growth that we saw during the year, that's going to lead to approximately 150 basis points of operating margin expansion and full year 2009 earnings per…

Thank you. (Operator instructions) And we’ll go first with Sara Gubins with Bank of America Merrill Lynch. Sara Gubins - Bank of America/Merrill Lynch: Hi. Thanks. Good morning.

Good morning, Sara. Sara Gubins - Bank of America/Merrill Lynch: First question, could you talk about the expected contribution from new campuses relative to the 20% enrollment outlook in 2010?

It won’t be very much. I mean, when we open a new campus that first year, we just get a handful of students, and we were quite patient in terms of how we think about these campus growths. So I would guess, in total, it’s not more than a percent.

A percent or two.

Yes. So as I said, there’ll just be handful of students in each. And particularly the ones that we opened at the back end of the year will not have very much impact at all. Sara Gubins - Bank of America/Merrill Lynch: Okay. And then you mentioned ancillary revenues having been a help during the year. Could you just talk about what that is?

Sure. There’s a variety of things. We have graduation fees. We have, I guess, withdrawal fees when people withdraw. Some of those are contra-revenue items, scholarships, we have a military scholarship. And anything else at the top of your head, Mark?

Corporate discounts.

Yes, corporate discounts. So if those are lower than we expect that creates a little more revenue per student. I would say the inter-quarter drops are the larger issue for us. Sara Gubins - Bank of America/Merrill Lynch: Okay. And then last question, it's probably the question of the week. But can you talk a bit about your revenue recognition policy, how you do refunds for students? And just walk us through maybe a little bit more detail what the contra-accounts for revenue are?

Sure. Well, I’ll try. And Mark, you interrupt if I’m--

I’ll try.

That's probably the best way to start is to recognize that we have a relatively simple structure because our academic terms -- we only have four academic terms a year. It’s kind of a traditional university structure. And each of those academic terms are almost exactly aligned with our financial quarters to support even more specifically, each of those academic terms both start and end within a financial quarter. So it makes the revenue recognition relatively simple from that standpoint. The balance sheet entry when a student enrolls is, we book a liability, which is the honor and tuition deferred revenue. And then we book an asset, which is either cash, if they paid up front, or an account receivable. Right, Mark?

That’s right.

Most of the accounts receivable are drawn down the first couple of weeks in terms of the Title 4 draw downs, but that’s at the entry. And then in the income statement, we recognized that revenue rate of weight through the quarter, with the exception if the student withdraws, depending on when they do withdraw, we have a schedule, which is in our catalogue as to what refunds are due to students. And it’s basically, once a student gets to the midterm or six weeks into the quarter, they withdraw after that. They still owe us 100% of the tuition. And then, if a student is a Title 4 borrower, we have a separate obligation in terms of returning to the lender under a separate schedule, which the Department of Education publishes. Any refunds are due to the lender on a case of a direct loan student due to the government. And we obviously comply with that. Our revenue is recognized on the basis of our university refund schedule onto the degree that we have to return funds to either a lender or the government under Title 4. And there’s still dollars owed to us under our refund policy, then we have a receivable from the student. Is that right?

Yes.

Okay. Sara Gubins - Bank of America/Merrill Lynch: And are you making estimates throughout the quarter about the refunds that you’ll need to make? Or do you true it up at the end of the quarter?

Well, we make them when we have to make them.

Yes. We just report the actual amount at the end of the quarter. Sara Gubins - Bank of America/Merrill Lynch: Okay.

We don’t estimate because we know exactly what we have to pay. And then, since the quarter’s over -- the academic quarter’s over before the end of the financial quarter, when we report, it’s quite straightforward. Sara Gubins - Bank of America/Merrill Lynch: Okay. Great, good. Thanks a lot. I’ll turn it over.

Thanks, Sara.

And we’ll go next to Andrew Fones with UBS.

Thanks. I have a couple of follow-ups on the revenue recognition, if you don’t mind. First, I guess I just wanted to make sure whether or not you’ve received any type of inquiry from the SEC regarding your practices. I’m sure you’re aware that one of your campuses did you receive an inquiry recently?

I did hear that. No, we have not received any.

Okay. And then, in terms of the -- you mentioned if the funds have to be returned, the Title 4 contracts will be returned, but there may still be so may OT, whether or not you’ve had any collection issues on that, regarding that accounts receivable?

Well, we have that question issues, which is the source of increased bad debt expense. Whether a receivable from a student is generated through -- if the student's paying through Title 4 or for just hasn’t paid themselves, basically, all of our bad debt expense derives from students who withdraw during the quarter. And in this economic environment over the last year, we found it harder to collect. And that’s run through our increased bad debt expense. As I mentioned last quarter, and again this is true this quarter, the number of those students as a percent of our total, continues to go down. So from an academic quality standpoint, I’m actually quite pleased with what we’re doing there. And I see the more difficult collectability ph of those receivables as just the function of the economy and cost we’re quite prepared to bear.

Okay. And I guess, as you think about the difficulty collecting those, did it give you any concerns about the collectability of the revenue such that you would consider not recognizing that as revenue or netting it out of your revenue until the funds are received?

Well, the difficulty of collecting, it is reflected in the higher reserve that were taking, which is why our bad debt expense is up. So we are -- it already runs through our income statement.

Okay. And then just to (inaudible), since you negotiated your (inaudible) you’re looking out at their -- that you think could be a potential positive to a negative?

Well, I think you have to look at that whole process within the context of the fact that we’re a heavily regulated industry. There’s nothing specific that I’ve seen in what they’ve described as topics, which either gives me excitement or pause. I think all of the issues are well within the scope of what the government ought to look at in terms of protecting the government’s balance sheet with regards to the issuance of Title 4 loans. And in general, I think that most of those rules are geared towards -- the rules that exist and the ones we’re looking at are geared towards making sure that -- when you’re operating an enterprise in the public good, the enterprise is managed, the governing structure of the enterprise is focused on achieving that public good, particularly if you’re relying on government support through government guaranteed loan. And that everybody within the organization understands that. And if, I think, as long as the enterprise is ran in that way, I don’t think there’s any -- there's a whole lot of downside that could come out of these discussions. So we have a pretty sane view about it.

Okay. Thanks. And then perhaps just one final one. Obviously, you had more than just off this (inaudible) through CapEx this year with the new technology center. Can you give us a sense to where the CapEx may fall in 2010? Thanks.

Well, we still have a fair amount of build out to do in the second online center, along with the 13 campuses and a constant investment in updating our technology at all times. I think it’s rather similar. Isn’t it, Mark?

Yes. It will be consistent with what we invested in 2009. So Andrew, we think it will be in the 7% to 8% of our revenue in a net range.

But we have a bit of a bulge in these last two years with several existing campuses -- existing campus renovations. I would think that in 2011, it trends back down to -- I think historically, it's about 5%, right?

Yes, in the 5.5% to 6% range.

Great. Thank you.

Thank you, Andrew.

And we’ll take our next question from Amy Junker with Robert W. Baird.

Good morning. Thanks.

Good morning, Amy.

Rob, can you talk a little bit about the ramp up in the new campuses, the cost, I just want to make sure I’m thinking about this the right way. But when you open a new campus, let’s say the four campuses you’re planning to open or that you opened and start enrolling for the fall, was the bulk of those losses, does that occur in the quarter just before you start enrolling students?

The quarter just before, and then the quarter of? I think Mark has a slide on this, if you go to our Web Site and go look under the investor data that we did back in 2007. Mark had a notional slide that showed that. But if memory serves, it's highest in the actual quarter that you opened it. It’s pretty high the quarter right before, and then it starts to go down as your enrollment grows.

Okay, great. That’s perfect. And to follow-up on Sara’s question, I guess about what the contribution from campuses opening for 2010. I understand that the 13 probably won’t have that big of a driver. But how should we think about the impact of either the 11 you opened in 2009? How much of that is really contributing? Do you think the enrollment for 2010 or is it more the 2008 campuses you opened up? How much before that really is a meaningful contributor to enrollment?

Once you get to that first 12 months, you’re adding about 100 to 150 students per year per campus, so that does start to get meaningful. And when we have a bough wave of campuses that have been opened, a year or two, three, four years ago. Those are the ones that are drawing at the highest rate and providing the highest percentage increase impact.

And so, the way I think about this, and correct me if I’m wrong, but the 11 you opened up in ’09, the 13 in 2010, will continue to drive that growth for the next several years at least, right?

Correct. Absolutely, correct. And the other thing, just to clarify, Amy, is that Sara asked her question with regard to the contribution impact for enrollment. The contribution impact for earnings is negative for the 13 in the first year. It's minimal. It's breakeven in the second year, and you start to get some earnings impact in the third and fourth year. The contribution impact in terms of enrollment growth precedes that a little bit.

Great. And then last clarification from me, in your business plan, if I recall from the past, the 20% enrollment that you had put out there, that's not necessarily an expectation of what you think you're going to do. That's what would be required in order to get to flat margins. Is that the right way to think about that?

Exactly, right. You're right.

Okay. So it could be higher, it could be lower, you don't know? But that's the threshold you need to meet in order to get break even margins?

Exactly right, Amy. We never presumed to predict enrollment. Students will come when they come. But in terms of analyzing the business from a financial stand point, we like having a stake in the sand that allows us -- or a stake in the ground that allows us to measure ourselves what the financial impact would be above or below that in terms of distributable cash and earnings. And so we provide that to you all as well.

Okay. And I just -- because I just wanted to make sure and understand that it's not as if you've been trending above those levels recently. It's not as if you are seeing something that's indicating not necessarily a slow down. That was just a threshold.

That is a threshold and you see what we see.

Okay

We provide it to you when we get it.

Okay.

We try not to get too far ahead of ourselves.

Great. Thanks, guys.

And we'll take our next question from Ariel Sokol of Wedbush Securities.

Good morning. In the past you've talk about bad debt expense as a percent of revenue as a good proxy for decision making on campus. So how do you characterize decision making on campus? Is this quarter -- was in line? And what assumptions are you making regarding for your 2010 business plan?

I'm quite pleased with the decision making on campus this quarter as I mentioned just previously. The bad debt expenses is a proxy, but it's -- it may not be the most accurate proxy in a period of declining economic activity. And the more important proxy is what is the number of students who are generating bad debt expense, i.e. what are the number of students as a percentage of our whole who are enrolled -- who for ever reason were not adequately prepared, they were not adequately communicated with, they're dissatisfied, they drop out sometime in that first term and then we are forced to collect a receivable from them for a product that they're not getting. So it's just a bad deal all around. Since that number was smaller in this last quarter, our summer academic term, as a percentage of our total students that it was the year before, I'm quite pleased with that decision making. And as I mentioned, the added costs that runs though our income statement of the lack of -- the lower collectability [ph] of any consumer credit from that stand point, is just something that we're comfortable with. And we're glad to incur that price from that stand point. From our stand point, it went quite well this last quarter. And your other question was what we're anticipating. Yes, for our next year -- first off you have a bit of a -- again, a bow wave that runs through because you get a couple of quarters of expense associated with a uncollected receivable that's never collected at the end of the current quarter. Because we don't write it off until 180 days after that. With that and with no more assumption but that the economy is not going to get better and it's not going get worst, our guess is as we said last quarter; it's probably going to be in the 4% to 5% range next year.

Thank you.

You're welcome.

And we'll go next to Andrew Steinerman of JP Morgan

Hi. If you can just jump into--

Good morning.

Good morning, gross margin trends instructional (inaudible) versus instructional costs as a percentage of revenue, why it did what you did in the quarter? And what would be your view into the fourth quarter on the gross margin line?

You're asking about our revenue minus our instructional and education expense? Is that--

Yes. As a percentage of revenues. Yes. That's right.

Every 20 students, we have to add adjunct faculty members to teach a class because our full time faculty at these levels of enrollment are always fully engaged at the start of the quarter. And there's cost associated with that. And there's also additional costs that we're constantly making -- there are investments that we are constantly making with regard to, particularly, our online technology. And so, our view is that the instruction and educational expense as the percentage of revenue is going to be relatively stable. We don’t expect to see a whole lot of additional margin out of that. We think that's the guts of what we do and we want that to be fully funded. There's a little bit of play -- if every single incremental class had one student in it and you take that out across 70 campuses and hundreds of online sections, you've got another 19 students you could put in and then you have some expansion there. But it's not going to be meaningful and it's not something that we really look to see. On the other hand, our marketing and admissions costs, and our G&A cost, where we bear a lot of the losses associated with new campuses as the university grows, we do expect that those will shrink as the percent of the revenue. And that's generally what we see.

No. I see. But that's very helpful. I want to ask a question, Rob, that both of you will probably say that we don’t control this one, but what stood out to me as pretty interesting is that on-campus enrollment growth grew faster than online enrollment, that's 23% versus 21%, for the first time in a real while. And so, is there anything going on of why students have started to maybe be taking more on-ground classes then they have in the past?

Yes. We noticed that also, Andrew, and dug into it in the last couple of weeks. There's couple of things going on. One is you'll see that change, and you can see them the numbers we reported, is concentrated in our new campuses. I believe the answer there is that over the last couple of years, since our self-study three years ago and then our reaffirmation two years ago, we have invested significantly more in full time faculty at a brand new campus. It increases the operating losses at those brand new campuses, but we felt because of all ancillary duties that we put on full time faculty in terms of advising and tutoring and some of the developmental education side, that we needed that full time faculty on the campus. What that is it made it more of a choice for a brand new student at a brand new campus. Whereas in the past, economically it only made sense to have just a few full time faculty and a few class schedules at a brand new campus. The new student, if they wanted to take other courses in the course catalogue, had to take them online. Now, over this last year we're seeing more and more choices that's available to the students. The students are able to make that choice based on their own desire. And frankly, we also advice students -- certain types of students that they're better off starting in a classroom, migrating to an online class a little later on in their process if we feel like they've got issues in terms of bringing -- certainly if they're in the developmental courses, developmental Math and English, to get them up to the college level. And also, some of our complicated entry level courses, whether Statistics or Finance or things of that nature. So the investment in the full time faculty at the campus I think has probably driven a lot of that. Other parts of it, I really don’t have an explanation for -- and as you said correctly in your question, we don’t really try and control it one way or the other. We're watching to see how the students want to take classes and making sure that we have enough inventory of faculty to deal with that.

Right. That makes perfect sense. Thank you.

Thank you, Andrew.

Now we'll take our next question from Jeff Silber with BMO Capital Markets

Thanks so much. I just wanted to focus on the new State entrants for next year. Correct me if I'm wrong, but four new States -- is that a record for you guys?

Yes.

Okay.

We've never done it before.

Okay. And I know you can't predict the timing of this, but that's on top of I think three this past year, is it something that you're doing, are you're being more aggressive on the new State openings? Are you finding States more receptive? Can you comment on that? That will be great.

Sure. I wouldn't say that we're finding them any more or less receptive because we've never really had significant challenges from that stand point. But we have invested more both through our university president's office and through our legal and regulatory staff to spend a little more time at this over the last couple of years, which I think the result you see in terms of more new States being opened. I also think that as our reputation grows, it’s a little easier for us. It's never been that difficult, but five years ago if we had gone down to Texas, I don’t think anybody would have heard of us. We've had operations in Tennessee now for six years. The people in Arkansas knew exactly who we were because of that. And so as our national reputation, grows as well as local reputation I just think it makes a little bit easier.

Okay. Great. And then on the business model, I know you typically talk about a 5% tuition increase each year. Are you finding any push back on that given where the price points are given what's gong on in the economy?

No

Okay. Let me just sneak another one in then.

Go ahead.

That was quick. Just on persistence, I don't know if you commented on that, and if you could give us some color what's going on there. That would be great.

Sure. It's relatively stable. It's at a very high rate. We're not going to get a whole lot more improvement on this because again, in an open access university, we measure this in gross. Subtracted from our continuation numbers are students who graduate, students who academically fail, and then with working adults, life happens to a few of them as well. So we're up into the mid-80s now and I just don’t think that it's going to get much higher then that. In this last quarter, it was down slightly. Part of that again is based on the timing of graduations. And we did actually have a slightly higher academic failure rate this quarter than we had a year before. But it's relatively stable.

All right. Great. Thanks so much.

Thank you, Jeff.

And we'll go next to Kelly Flynn with Credit Suisse

Thanks. A couple of questions, first on the business model. I'm wondering why the higher bad debt, is it changing your margin assumptions on the business model. All else equal, normally 20% enrollment growth coming with slight year-over-year margins, you've now got higher bad debt. What's the offset to that? Or how do you think about that?

There's a lot that flows into that model. We're doing 13 campuses, but we're not opening a second online center. So there's a little less margin drag from that. Hopefully, that second online center will reach break even by the end of the year, so it will have less of a drag. There's a lot of moving parts to it, Kelly. I wouldn't identify any specific one as being just positive there.

Okay. Great. And then on the revenue per student, can you just go over the puts and takes if you will, on that result in revenue per student targets just being slightly less than the price increase? You mentioned ancillary, what are the other factors that then takes away on that front that's got you to slightly less that 5% next year?

Well, the most important one is class count per student. That, for us, depends a lot on the mix between graduate and undergraduate students. Graduate students, although we charge them more per class, they take significantly less classes per term than undergraduate students. So over the last five or six years we've continued to see our graduate student population increase slightly faster than undergraduate population. We don’t have any reason to think that's going to change. We don’t have any reason to believe that's going to continue, but just for ease of modeling, we assumed that. And that drives a slightly lower class per student per year, which is probably the biggest impact on our revenue growth. We've had a tremendous year all year long in terms of doing better on inter-quarter drops than the previous year. It can't get a lot better than it is, and so we don’t have any reason to model in with that continued improvement. So when you levelize [ph] that, that also gets you back down to a price increase that is slightly below our -- revenue per student increase slightly below our price increase.

Okay. Great. Could I throw in one more about the campus ads, how do you think generally about for how long you can grow 20% a year without having to significantly increase the number of campuses you're adding against for the law of large numbers (inaudible) question?

We don't really think about that, Kelly. Honestly we think about what's our human capital capacity to open new campuses because the return on invested financial capital on opening a new campus is so high. And we'll do as many as we can in a year, and if that caused enrollment growth to be very, very high in one year and lower in the next year, that's fine by us. We don't really start with a assumed amount of enrollment or revenue growth that we're trying to achieve. We start with how can we build the university in the most effective and responsible way. And that start’s with human capital and that’s what dries our campus opening strategy.

Okay. Appreciate it. Thank you.

Thank you, Kelly.

And we’ll go next to Mark Marostica with Piper Jaffray.

Good morning. It’s actually Mark Skitovich for Marostica. I just have a couple of quick questions. I was hoping you could provide some additional granularity on what is implied in your business model EPS. You had mentioned relatively stable gross margin. I was just hoping you can comment on S&P and G&A spending levels as well as the tax rate for FY ‘10.

Well we said relatively stable operating margins, not gross margins. Our tax rate, Mark, is 39.5%?

Yes. We think it will be 39.5% which is pretty consistent with where we'll net out this year.

And on that, we don't give a whole lot more granularity with regard to EPS.

Okay, you--?

We give you the model so you can see it.

Right. I think there’s an earlier question on gross margins for the quarter and if I’m not mistaken, you had indicated that you thought going forward we’d see a similar trend there. Is that accurate?

Yes. The earlier--

In a year-over-year basis?

Well, the earlier question was with regard to a term we don’t use, frankly, that's gross margin. But I assume that he was focusing in on the instructional and education line.

Right.

And what was trying to illuminate there is that there’s going to be less variability in that line over time just because as the university grows -- we’re not selling software. We have to hire faculty consistent with our growth of the university. Because if your students per faculty number starts to go down, or starts to go up, it's been pretty well established that your academic quality suffers. So we’re not going to let that happen. The other costs will run through our income statement as a percent of revenue based on where we are in the average age of the campus because that’s really what’s affecting those operating margins. So I was not presuming to make a comment with regard specifically to next year, but just in general our instructional and educational line -- there isn’t a lot of leverage in that because we going to continue to invest in that. And as we grow, or as we -- when we stop opening new units, both the marketing and admissions and the G&A line should decrease a percent of revenue.

Okay. Clear now. And then, just one final question on openings next year, what proportion will be in the new markets versus existing? And then how will the funding be allocated on a quarterly basis next year?

When you ask funding you're talking about at what rate will we open the units?

Yes.

We haven't finalized that. We’re going to open three in the winter, so we know that much. The other ten -- I would guess it’s probably going to be spread pretty evenly across the year, but it depends on both the timing of real estate and more importantly, the timing of human capital. But I'd think for planning purposes relatively even. And I forgot the first part of the question. New markets. Yes. Most of them will be in new markets. We have a lot of new markets opened with those four States. And I would imagine the lion's share will be in new markets.

Okay. Great. Thanks.

Thank you.

We will go next to Trace Urdan with Signal Hill.

Thanks. Good morning.

Good morning, Trace.

Rob, the 5% price increase strikes me as maybe even aggressive in the context of what’s going on in the economy, what’s going on in the employment market. How do you think about that? Where does that number come from? And do you think that maybe you’re eating into the value proposition a little bit in being that consistent at a time when everything else is kind of soft right now?

Well, the amount of the price increase in and of itself, wouldn’t be either aggressive or eating into value without an analysis of where the baseline costs are. If you were changing $1 per class, you could have a very high price increase obviously, and have no impact on that. We’re quite comfortable that the value proposition for our students given our price point is very healthy. And that the increase in education as a factor of production in the economy generates real pricing power, which as we’ve said in the past, we think the most efficient and effective way to capture that, both for the enterprise and for the students, is through a predictable 5% increase. And so when we sat down this year, looked at our tuition, looked at the value that it -- our education creates for students, what with the demand for what we do, looked at the increase in cost, which we expect to incur in terms of attracting the finest faculty and the best facilities, and 5% feels like a pretty good balance. So luckily, there's a good division of labor. We get to decide that and you get to opine on it, so.

All right. Fair enough. I’ll let it alone there. Any increased attention or scrutiny or questioning from any of the corporate sponsors that help your students out with their tuition? Are they more interested in this benefit that they are providing the students than they have been in the past?

It’s been very strong all year to the great surprise of the number of commentators, but not much of a surprise to us. Because we had conversations last year with these people. What we found is even in a depressed economic environment and decreased number of jobs, that companies wants to continue to invest in human capital in their own organizations. And that the tuition reimbursement benefit is a relatively low cost way of increasing the productivity of their workforce, and more importantly decreasing the turn -- decreasing the turnover. And so, we've had a tremendous surge of interests both from our existing corporate clients as well, and by the way, we have a large number of governmental entities that are in our institutional alliance program for which there hasn’t been reduced employment as well. But even on the corporate side, it’s been a very strong year and a number -- a year in which we've added a number of new partners that we hadn’t had in the past. And so the answer to your question is, no. There hasn’t any push back at all on that, either in terms of their support or in terms of tuition pricing. My experience has been, their bigger focus is on the size of your discount, what you’re prepared to provide relative to your actual tuition. And they’ve been a little bit less focused on the price increase or the overall tuition. And we do participate in many of these programs where if an alliance partner send us enough students we will give them a 5% or 10% discount. And then the one that has the biggest impact for us obviously is the military, where as I’ve mentioned, we’ve frozen our tuition to active duty military since September 11, 2001. So it equates to a relatively high discount right now.

Okay. I might take a crack -- and this is really maybe for Mark, going back to Andrew Fones' question, and I think there was a little disconnect between what he was asking and answering in this. Because there’s a topic yesterday in particular, I think broadly and that is this idea that is there any way to handle differently from an accounting perspective, the phenomenon of students who come in and quickly leave and perhaps generate a receivable, but one that we all know will never get collected because maybe they attended one class or something of that sort. Is there any way to deal with that other than to just run them through the income statement discount? Have a receivable that you discount and ultimately write off? I think that’s one of the things that this inquiry at a poll prompted broadly in the (inaudible) yesterday?

Well, I’ll let Mark answer in terms of the accounting principles. But in terms of our own practice and which is consistent with accounting principle is if the student never shows up, there’s zero revenue that’s recognized.

Yes. Now, let’s assume he never shows up. But as the student who shows up a very little bit and then decides it’s not for them and leave, but is disinclined to ever pay a bill that they might legitimately owe?

There’s no accounting rule or principle that tells you how much to reserve against that that receivable. The management of the company that signs the financial statements has to make its best estimate as to what that reserve should be, which effectively discounts that receivable from the beginning. But, Mark might--

No. I think that’s right. What I mean is this is revenue that we technically have earned, but we apply pretty rigorous analysis when it comes to time to estimating our bad debt that takes that into account.

Yes. I think the criticism of the discussion is not that it isn’t being handled properly, but that it generates a certain amount of fluff in the income statement because we all know that this is revenue that will never amount to anything. So is there a basis to say, “Listen we’re not going to recognize any revenue from the student until they’ve completed X number of classes because--” I think that’s the topic and I--

I would tell you the answer that for those who have to sign financial statements--

Yes.

--that recognizing the revenue under a schedule, which is dictated by your own refund policy is pretty straight forward. There’s not a whole lot of discretion that you have in that. What eliminates what you call fluff in the income statement is taking an adequate reserve against it immediately. And if you’re doing that, then your bad debt expense will reflect the fact that you have students who are no longer enrolled, and your revenue is where it is. But you think about it from the stand point of the cost to the university. When that student enrolls, you’ve incurred the cost. You’ve hired the faculty member. You built the facility. You developed the curricula. And there is real accounting reality behind the requirement to record revenue there. And you don't know that that student is not going to pay you. And when you book that revenue -- and that’s why we estimate how much we don't make we're ultimately going to collect. This is one where I think, Trace, the accounting principles are pretty straightforward. So I wouldn't get too far a field based on a question as to what the appropriate way to do it is. If you’re running your business in -- under the rubric of those principles, then it should -- you should be fine.

Okay. Thanks for taking the time with that one.

Yes. Thanks, Trace.

And we’ll go next to Corey Greendale of First Analysis.

Thanks. Good morning.

Good morning, Corey.

I have a couple of regulatory related question, the one question about your 2010 model. And Rob, you already opined on the negotiated rule making, but I have more specific question about it. You’ve haven't probably had a chance to see but yesterday the department published an issue paper, kind of framing how they want the teams to look at the topics. And one of the questions they’re asking negotiators to consider is whether there should be some mandated relationship between tuition levels and the expected earning that someone would get coming out of a given program. And whether program should lose eligibility for a type of fora if that relationship is off whack. And you already talked about pricing, so I had imagined you’d say that wouldn't concern you. But given that you have a lot more data about the economic benefits of your degrees than we do, can you just talk a little bit whether any regulation like that would be of concern to you?

Well, as a citizen I would tell you that it would be a concern to me as proper policy because I would find it a bit intrusive. But you’re correct in surmising that based on our view as to the value what a Strayer University education is to the students who are enrolled, I don't have any particular concern in terms of the application of that as a principle of it -- if it, with regard to us, if it went through. But there’s a lot to -- a long ways to go between where we are now in terms of the negotiated rule making and actual regulations. I heard somebody say yesterday that in interpreting this that Congress passes a law. And then you have a negotiated rule making and that generates regulation. It’s not exactly correct. There’s a lot of different ways under initiated procedures for a better regulation to be promulgated. It doesn’t have to be negotiated rule making. Any of the departments on their own can just set the rules, published in the Federal register, go through a comment period, and have them ultimately be adopted. So I would not be particularly concerned above a general concern with regard to the public policy implications of mandated pricing with regard to one issue paper that came out in a negotiated rule making. And I would have no concern even under that principle if regard is fair.

Okay. That’s helpful. My other regulatory question. One of ancillary topic that‘s come up with that other company. That’s the easy question. And also the House hearing recently is how one measures attendance in online classes. Could you just quickly give us a summary of how you determine that someone has attended a class that’s fully online?

Sure. It’s actually a little bit easier than -- well, it’s equally easy than in a classroom. I teach courses and one of our requirements is to physically take an attendance which is submitted. In online, the individual has their own password verified identity which then once the student registers for each or logs on to each class -- for the four-and-a-half hour class, you have an electronic record of that. Plus, even better, you have a record of all their interactions as well. So it’s even easier to verify from an online perspective.

If it’s in an Internet class, do they have to be in the system for a certain amount of time or complete an assignment? Or how do you measure it?

Both.

Okay. And the other question I had about your 2010 model, I know you said that you’re not going to assume there is a continuation in improvement in the intra-quarter drops that you’ve been seeing this year. But if the economy improves, do you think there’s some risk to the model in that it could move in the other direction?

No. I really don’t think our model is that affected by the economy, Corey. We’ve gotten those questions for a couple of years, and our performance -- I think there’s out that over time, particularly the effectiveness of our academics, our reputation and brand in the market as it grows has a much larger impact on both the willingness of students originally enroll and then their desire to stay enrolled as they go through the program. So I don’t see that as an impact.

Okay. I appreciate the time. Thanks.

Thank you, Corey.

We’ll go next to Gary Bisbee with Barclays Capital.

Hey, guys. Good morning.

Hey, Gary.

I’ll follow up on that one and just try to -- I appreciate that geographic expansion is the primary driver of your growth. But if we look at total enrollment in mature campuses divided by mature campuses and the same things for the new, it does look like over the last 18 months that you have had at least a moderated mid-single digits lift in the number of kids per campus. Maybe that’s just the numbers going that way and maybe it is that there has been somewhat of a benefit. I guess the question is, as you manage the business, do you even care about that? Would try to -- if you had some benefit and maybe over the next 18 months, it starts to get tougher, would you try to manage differently or is that just not an important way to think about the business in your mind?

Well first off, we don’t have kids. They’re adults. And second, the answer to your question is no. It's not important how we manage the business. We've tried to be quite clear that our objective is to build a nationwide university and that in doing so to do it in a way that protects the reputation and the academic brand for all of our existing students and alumni. And that takes a certain amount of time and effort. The growth of the university will vary around that trend line. And so it’s just not something we remotely think about. And I guess the last point I would make is, the inference in the question is that this higher than trend line if you will, growth for the last 18 months is related to the -- solely our economy. If you just look empirically back at the last period in which we had a higher than trend line growth from that stand point, it was in 2004 and early 2005 when the economy was roaring. So I just -- there's just not a set of data with regard to our students that I think could bring one to have that conclusion. But the more important answer to your question is, to the degree that was, it wouldn't change anything with how we’re doing things.

Okay. And then just going back to the quarter, I guess one question. Is there anything in particular you’d point out in the selling and promotional expense which dropped quite a bit as a percent of revenue? Or is that just timing of openings and how your marketing budget works, et cetera?

Well, it’s most -- the biggest part of it - because we spend everything we intended to spend, was the increased revenue. But the increased revenue per student applied against the dollars we had already intended to spend on marketing and admissions creates leverage in that line.

Okay. And then what are you seeing in terms of media price -- there’s a mounting evidence, in my opinion, that the cost of probably bottom last quarter, this quarter, and we’re going to see sequential growth in television, billboard, most especially the traditional media, and even online properties. I think I’ve seen less bad results this quarter that would indicate costs are going to go higher. Are you seeing any of that and would you think about changing mix if that occurred? Or is it a much more important in your decision to stick with the mix that has worked for you even if that’s going to lead to more rapid growth in cost? Thanks a lot.

Sure. We have a very talented marketing team, spends a lot of time thinking about this. The overall dollars that we spend are set by myself, and Mark, and Karl McDonnell, our Chief Operating Officer. But it’s executed at a local level through Lysa Hlavinka's organization, they frame in ahead of our marketing. We encourage them to change the mix each quarter anyway just to continue to experiment with what’s the most effective way to build our brand. But ultimately, again the amount of dollars we spend, that is relatively constant. We probably spend the same amount each year in a given market for as many years as we’ve been in that market. The mix of media decisions are driven much more by -- at the local level, what’s going to get the brand out? What’s going to generate that name recognition? Because ultimately, the marketing mix and the marketing decisions aren’t going to drive the growth of the company. What’s going to happen is that it's what -- what happens inside the classroom is going to really be the value creator because that’s what keep -- it's students getting educated and then from just a pure revenue stand point, the continuing students are much more valuable to us. And it’s their success and the success of our alumni and our faculty which is ultimately going to be the determining factor in a brand new student deciding whether to enroll. So I don’t believe that if indeed advertising cost hit bottom and they're going to start increasing, that that’s going to have a meaningful impact on us. I also haven’t -- I'm not sure I’ve seen that. At least once a quarter, we sit down and detail with our marketing team and go region by region. And that’s the only thing I’ve heard at this point. But then we don’t do a lot of national advertising, we’re not in markets that might be more susceptible to those kinds of changes quicker in the cycle.

Okay. Thanks a lot.

Thank you, Gary.

And we’ll go next to Scott Schneeberger with Oppenheimer.

Thanks. Good morning.

Good morning, Scott.

You’ve mentioned earlier on dropouts. You sounded pretty pleased with what you saw in this term, and you mentioned that it was improved year over year. I don’t believe you give actual numbers on that front? But could you speak too sequentially in what you've see in the terms between now and last year and what the trend’s been?

Well it’s been pretty strong all year. We’ve now had three quarters this year. I don’t remember the winter term. I think it was positive. The spring term was definitely positive and the summer term was positive. So all in, we’ve been quite pleased.

Okay. Thanks. You mentioned the failure rates increased very recently. Any insight to that? Just curious by the mention of it.

No real insight. We’re an open-access university and we take in students who have been out of the classroom for a long period of time. But at the same time we have a -- what we hope is very rigorous, set of academic standards. And we encourage our faculty to hold students to those standards. So when a student academically fails, that will certainly affect your continuation rate because it’s not necessarily the case that they've failed out of the university with one failure. But I think -- I forget the statistic, but at some number of failures in an academic year, they’re forced to withdraw as well. Plus the fact that as a working adult, if you’re not succeeding in a classroom, you’re unlikely to stay enrolled anyway. You don’t like to be told that you’re not very good at what you do. So it’s part of the metric that goes into the continuation rate, and it’s also one of those contra-indicators that paradoxically, you want it to be there. If you had no academic failure, you’d have a hard time convincing yourself that you’ve got a real academic institution with an open-access admissions policy.

Okay. Thanks. One more on a separate subject if I could. Criminal Justice ramping up very aggressively as you mentioned at the top of the call. Could you speak briefly to consideration four new programs and how -- soup to nuts, how that thinking about it starts and comes to fruition and maybe a time frame? Thanks.

Yes. We don’t have a big new program development. It’s not really a core part of our strategy. We pulled into it both in terms of demand and also if we have faculty who we feel confident can teach in those areas. So any of our new programs over the last ten years -- well, there's really been four. There's the three new graduate degrees, as we did about five years ago, and now this one undergraduate Criminal Justice Degree. Those have all been in Professional Management Sciences that are closely related to what Strayer University’s done for over 100 years. And any new program development in the future would be based on that as well. But we don’t have a lot on the drawing board. It’s not a key part of what our value creation strategy is for our owners. We think that Strayer University has done a great job teaching Business Administration and Management Sciences for over 100 years and that’s why the best way to continue to compound value for us.

Okay. Thanks very much.

Thank you.

And we’ll go next to Brandon Dobell with William Blair.

Good morning. Thanks.

Good morning, Brandon.

Rob, if you take a look at the page of Criminal Justice roll outs and expansion or just being in enrollments? Has it been in lot of your expectations, better than expectations? And are you seeing any disproportionate ground versus online and enrollment trends?

I don’t know the answer to the last one. Do you know, Mark?

No, I don’t.

I would say it’s better than my expectations because I have relatively modest expectations to the initial roll out anyway. So it’s definitely been better.

And I would assume that it's offered at every campus now and would it be your plan to immediately roll it out with the new campuses next year as well?

It would be our plan to roll it out. And I believe it’s everywhere. There maybe one or two States that we don’t have regulatory approval in. But it’s virtually everywhere.

Okay. Fair enough. And back to one of the previous questions around the reserve rate on bad debt. Any sense of where that reserve rate is? And is it different for different kinds of programs for students, for example? And have you guys made any changes that are material in the past, I don’t know, 12, 18 months or so?

Well, it’s not different by subject matter area. And we have made some change, not so much in policy but in impact. Because as we mentioned last quarter and the quarter before, Mark and I have increased the reserve we take relative to our original algorithm because of our concern that in a weaker economy, you have a less likely collection of those receivables.

Okay. Any sense of the usual industry range that we hear out there, 35 to 50, is that the right kind of range for you guys as well? Or is that much over what you see with your students?

It depends on the aging of the receivables. But ultimately, yes. That feels like it’s -- yes. I would say, as Mark and I has said, and that’s consistent.

Okay. Fair enough. And then given the current environment, I'm sure there’s plenty teachers who are interested in joining you faculty. How do you think about teacher compensation or moves to full time faculty or away from full time faculty, more towards adjunct? Those teacher dynamics would be great. Thanks.

Well for our faculty, it’s somewhat dictated both by our culture and our practice, and partly by our accreditation which requires a very high concentration of full time faculty. We need one -- just from an accrediting standpoint, I think it’s roughly one full time faculty per every 80 full time equivalent students. We’ve managed that down to close to 50. I think one full time faculty to 50 students. And a full time faculty member is going to teach 12 courses per year, and a student is taking somewhere between six or eight courses per year. So you can calculate that gets us to our 18 to 20 students per faculty member. Our adjunct faculty gives us the opportunity to surge the -- in a given quarter of the enrollment without increasing the student per faculty ratio. And also gives us a pool of academic professionals that we can pick from in terms of filling full time faculty. All of our full time faculty positions are filled from people who have taught for us as adjuncts for probably four or five years. So we have a good sense as to their teaching capability, their eagerness, and their aptitude towards teaching adult students, and how well they're going to fit within a Strayer University culture. So we'll continue to manage that going forward with a heavy concentration on full time faculty, somewhere between a quarter and half of our classes in any given quarter are taught by a full time faculty, depending on the term. And then, supplementing that with adjuncts, both fill out the class schedule, and also to give us an opportunity to review professors to see if they're capable of being both full time faculty, and ultimately, hopefully, associate campus deans and campus deans because that's what's going to control our rate of university expansion.

Okay. Thanks, guys, appreciate it.

Thank you, Brent.

Now, we'll go next to Jerry Herman with Stifel Nicolaus.

Jerry, are you there?

Yes. Can you hear me?

I can, go ahead.

Sorry. I know it's getting late. I'll keep it to one. A question about the online service center, Rob, can you frame what contribution that mad and maybe in terms of the number of enrollment reps that are there? What I'm getting to -- they sense that that's a slightly more flexible form of capacity. And I just want to try to understand how much you absorbed at this point or used at this point.

It is more flexible. And ultimately, when it's fully built out, we would expect it -- we said five times the campus, and all the campuses will have five or six admissions officers. I think in terms of admissions officers, it's a slightly higher ratio. Our existing online facility has, I think, 60 or 65 admissions officers. So it'd be somewhere in that mode when it's full. But we're nowhere near there now. I don't exactly the number, but it's a handful or so.

Okay. Great.

No comments on Ohio?

Yes. Tell your landlord to fix the lights at the campus. And two of the letters are out.

I appreciate the heads up.

Okay.

Then we go next to Bob Wetenhall of Royal Bank of Canada.

Hey, good quarter.

Thanks, Bob.

Really fast, two, quick questions, is the rise in bad debt offsetting your favorable sales leverage on the G&A line?

Well, bad debt expense runs through G&A, so.

Right.

I mean, I don't really think about it that way. But I think mathematically, yes. We had increased expenses associated with the increased revenue that is really the bad debt. And that's where it goes, the G&A line.

I'm just asking back because it looks like you did really well in your S&P line due to the higher revenue base. So I think you'd get a comparable benefit in your G&A.

Yes. I think that's probably a fair assumption.

Okay. And one quick one as well, your sales are up 31%, and that reflects 5% tuition increase and a 22% enrollment growth. What's the delta from? That’s just the ancillary revenue?

It was 24% enrollment growth. But the delta is -- it's less the ancillary fees, and more the lower inter-quarter drops so that your net revenue at the end of the quarter ends up higher per student.

Okay. That's it specifically. I got it. Thanks a lot.

Thank you.

And we'll go next to Todd Young with Morningstar.

Good morning, everyone.

Good morning, Todd.

I just want to ask, we've seen a big ramp up in the number of openings per year. And I was wondering if that is a function of the economy we have today and availability of talent, and how we should think about that going forward.

It's not an impact -- it's not impacted by the economy today. It is impacted by the availability of human capital. But our human capital today to staff campus openings are individuals who have worked for us for four or five years. So it is a long lead front. It's a long pipeline. And the increase rate of campus openings or increase number of campus openings is purely the result of the hard work that Karl McDonnell, our Chief Operating Officer; Dr. Stallard, our University President; and, the academic staff, are doing in terms of, right now, putting in programs in place, which will allow, over the next two, three, four years a growth and development of human capital sufficient to open new units. We focus a lot on that because in the end, it will -- next to the performance of our existing classrooms, we'll have the largest impact on the value creation for our owners.

Okay. So going forward, I mean, I'm not trying to peg you to any kind of long term guidance or anything like that, but there's no reason to think that that should drop back to the eight or nine campuses you had opened in the previous year averages or anything like that.

Todd, we never comment on what it's going to be like on the future. Now whatever it is, it's going to be based on our human capital development. But we're not going to put it at risk. The number of units we open is far less important than making sure every one that we do open is a very effective part of Strayer University. Our downside risk is graduating or enrolling one student in a university where we don't have adequate academic oversight, we don't have first rate faculties. So it's as simple as that.

All right, fair enough. Thank you very much.

Thank you, Todd.

And we'll go next to Suzanne Stein with Morgan Stanley.

Hi. This is Kristina Colombe for Suzi Stein. Thanks for taking this question. Last quarter it was really helpful that you gave us an update on your corporate alliances. And I was hoping maybe you could tell us whether in this quarter, you added any new partners or what the growth was and the population of students that are from alliance partners.

Yes. We did add a couple. But I, honestly, forget who they were. We can get those out. And it was roughly that the growth from the corporate partners was roughly in line with our enrollment growth. I think last quarter was quite a bit above. But it tends to be lumpy. I do know that one of corporate partners, Verizon Wireless, we've opened a number of additional on-site facilities with them. And so, that's driven a large increase from that particular one. But it's pretty much in line with the whole year.

Thanks. And one last topic on the regulatory front because I was wondering if you could give us a little bit of detail on how you look at protecting yourself against enrolling students that have high school diplomas that are from diploma mills [ph] or high schools that are not credible.

Yes.

I mean, just going at the (inaudible) making how you could show whether you're adequately hedged against that.

Well, we have a very effective Registrar's Office. And the adequacy of the high school education is a big part of what that Registrar's Office does. We're constantly updating that with any high schools that we feel are not legitimate. I would tell you that's by far not the biggest problem. The biggest problem in running the university, particularly one for working adults at the undergraduate level, is students who graduated from first rate high schools, but don't have either the Math or English competency to succeed at the college level. And that's where, over the last couple of years, we've developed this mandatory diagnostic, which we provide. And for a student who doesn't score high enough in that test, although we allow them to enroll at Strayer University, we don't allow them to take college level classes. They have to -- we direct them into what is essentially a high school refresher course in Math and English because we found that is the single biggest determinant of their success at the college level if their cognate skills in both Math and English, regardless of what they're studying. So I'm not all concerned about fraudulent high schools. We don't have any of those. I am concerned about great high schools, but who aren't doing a good enough job teaching Math and English and -- or enrolling a student in their mid-30s that hasn't been in the classroom for 15 years, and whose skill level in that area is just not enough to achieve at the college level.

Great. Thank you.

Thank you.

And we'll go next to Kelly Flynn with Credit Suisse.

Thanks. I'll take it offline. Brandon kind of asked my question. Thanks.

Okay.

And with no further questions in the queue, I'd like to turn it back over for any additional closing remarks.

Thank you, ma'am. Sorry that we've gone on this long, but we're happy to answer any questions. We look forward to talking to you again in February. Thanks a lot.

That does conclude today's presentation. We thank you for your participation.