Arthur Rhein - Chairman, President and Chief Executive Officer Martin F. Ellis - Executive Vice President, Treasurer and Chief Financial Officer

Matt Sheerin - Thomas Weisel Partners Brian Kinstlinger – Sidoti & Company Brian Alexander - Raymond James

Good morning, and welcome to the Agilysys fiscal 2008 third quarter conference call. For your information, all participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. Before we begin, the company would like to remind you that all remarks today may include forward-looking statements based on current expectations that involve risks and uncertainties that could cause the company results to differ materially from management’s current expectations. Please refer to the risk factors, which can materially affect these results, outlined in Agilysys’ corporate filings with the Securities and Exchange Commission and the company’s earnings release. (Operator Instructions) At this the time, I would like to turn over the conference to Mr. Arthur Rhein, Chairman, President, and CEO of Agilysys.

Thank you, and good morning and thank you all for joining us today. Our unaudited results were issued before the market opened and are currently available on our website. As usual with me today is Martin Ellis, Executive Vice President, Treasurer and Chief Financial Officer. Let me start by saying that operationally this quarter was very strong with solid demand across our continuing or base business and newly acquired businesses. Total revenues grew at a rate of just over 65% with organic growth increasing 12% compared with a year ago. For the nine months, we grew 61%, with 13% organic growth and our organic growth would be almost 17% were it not for the decisions we made regarding our sales in China, which Martin will comment on later in our discussion. Additionally, I’m very pleased with the progress we’re making toward achieving our longer term goals. However, I am disappointed with our reported financial results due to a significant increase in bill-and-hold transactions in the quarter, which, consistent with our revenue recognition policies, will contribute to sales and earnings in subsequent quarters, while the transaction associated costs, including costs of goods is included in current quarter results. In addition, we incurred some higher expenses as a result of unanticipated one-time expenses largely associated with acquisitions. Strategically, the speed at which we are transforming our business, the number and types of acquisitions and the discipline we applied have all contributed to the solid execution of our strategy in the first nine months of this fiscal year. We have made excellent progress with the integration of our acquisitions. As we’ve mentioned previously, the process we use is specifically tailored to each of the individual businesses we acquire in order to facilitate an effective, timely, and smooth transition. This quarter’s results included the full quarter contribution of the four acquisitions we’ve made over the past 13 months. As you’ll recall, we have integrated two of the four into our Hospitality Solutions business. The first, Visual One Systems was a leading developer of open system software for the hospitality industry. This has provided us with the complementary product offering and it significantly increased the breadth and depth of the company’s hospitality opportunities. Our other Hospitality acquisition, InfoGenesis, a software developer, provides the most innovative and scalable point-of-sale products in the hospitality industry. Both of these acquisitions have strengthened our already leading position in key segments of the hospitality market. In April, we acquired Stack Computer, an EMC premier technology integrator and Cisco Advanced Technology Partner, which has become the foundation of our storage and networking solutions practice. Agilysys is now one of EMC’s largest resellers. And in July, we completed the acquisition of Innovative Systems Design, the largest U.S. solution provider of Sun Microsystems server, storage, and enterprise storage management products as well as professional services. Here too, we are on schedule with the integration process and our newly formed Sun Technology solutions business. These acquisitions have expanded our markets, diversified our supplier mix and broadened our customer base. Today, Agilysys is a very different company. With these acquisitions, we are an independent software vendor with approximately $100 million in annual revenues and EBITDA margins of 17 to 19%, and a Retail Solutions business with approximately $100 million in revenue, and a Technology Solutions business with approximately $650 million in revenues, both with EBITDA margins of 5% to 7%. In this past quarter, we continue to make significant progress in building our capabilities consistent with our strategic plan. We will continue to significantly grow our base business with a focus on improving our operating leverage, and just as we have done with our acquisitions, we remain focused on streamlining all of our operations, growing into our overhead and leveraging fixed costs. As we proceed with the final quarter of this transformational year, we are refining our guidance to better reflect where we expect to finish the year. Martin will provide you with more detail in his remarks. As I’ve already commented, we saw a very strong demand for our products and services. Although, we see some pockets of increased competitiveness, we remain optimistic about the fourth quarter and cognizant of the macro economic environment. Regarding acquisitions, interestingly, the credit crunch has created a delta between owner expectations and what investors are currently willing to pay. Seller expectations have not come down consistent with the market. We continue to look at opportunities as we are well positioned, have the financial flexibility, and intend to capitalize on strategic opportunities. We will continue to make investments in developing new markets and products and in additional acquisitions that will expand our product and services offerings, while improving our business model, with a focus on improving our operating leverage and managing overhead expenses. Given the significant progress we’ve made, we remain confident that we will meet or exceed our stated goal of growing sales to $1 billion by the end of fiscal 2009 and we expect to be well positioned to meet or exceed our goal of growing sales to $1.5 billion by the end of fiscal 2010 with EBITDA margins of 6%. With that, I’ll turn it over to Martin, who will provide you further details on the quarter. Martin F. Ellis: Thank you, Arth, and good morning, everyone. Let me begin today by mentioning that there are a number of items that without further explanation make it difficult to compare earnings and earnings per share to prior year. For the quarter, we had net income including discontinued operations of $2 million or $0.07 per share. Discontinued operations contributed $900,000 or $0.03 per share. In the third quarter a year ago, net income was $20 million or $0.64 per share, which included income of $17.4 million or $0.56 per share from discontinued operations of our formal KeyLink Systems distribution business. Income from continuing operations was $1.1 million in the third quarter or $0.04 per share. This was a $1.4 million decline over income of $2.5 million or $0.08 per share a year earlier. The decline is a result of a number of items that will be addressed further in our review of the quarter’s results. Just to remind you, current quarter sales and SG&A include the full quarter contribution of all our recent acquisitions. Sales for the third quarter increased 65% to $250 million compared with $151.5 million in the third quarter of fiscal 2007. The base business grew at 11.8% year-over-year and contributed $17.9 million of the sales growth for the quarter. Revenue from acquisitions accounted for $81 million or 82% of the growth. Our Asia business was weaker than anticipated. Sales volumes and associated margins on pipeline sales were lower than expected, and we made a conscious decision not to pursue sales where transaction margins were unacceptably low. The enterprise IT market in China remains very competitive and selling margins continue to be low. Given the current size of our business, individual orders can materially move our sales and gross margin. Gross margins can vary depending on the customer, size of the transaction, mix of products, related supply of programs and services associated with an order. Also, the increased size of our software business will drive margin variability depending on the timing of software sales. As a result, changes in customer and product mix will cause gross margins to vary from quarter-to-quarter. Gross margin was 23.1% of sales or 30 basis points lower than the year earlier period. The decline in gross margin versus prior year was partly due to a handful of significant sales at lower margins as well as a change in product mix, particularly on the services side. Also, gross margins in the quarter were slightly lower than our expected annual margins but consistent with changes in our mix of customers and products for the quarter. From time-to-time the company enters into sales transactions where the customer has placed an order and consistent with the customer’s requirements, the customer has accepted an invoice with shipment of the product scheduled to occur at a later date, typically referred to as bill-and-hold transactions. The cost of goods sold associated with these transactions is included in the inventory on the December balance sheet. Revenue and the associated cost of goods sold are recognized once the product is shipped to the end customer. Included in inventory at December 31 is $31.5 million in bill-and-hold inventory, which is significantly higher than normal levels. Selling, general and administrative expenses for the quarter were $55.2 million or 22.1% of sales, compared with $33 million or 21.8% of sales in the same quarter last year. The $22.2 million increase in SG&A expenses was largely due to incremental operating expenses from the company’s recent acquisitions, which contributed $19.1 million or 86% of the increase in expenses. We also incurred a number of unanticipated acquisition and integration related expenses. In addition, with the low sales of our Asia business we reported approximately $600,000 in lower operating income than forecast for Asia. Depreciation and amortization expense for the quarter was $8.2 million, including $2.4 million booked for intangible amortization catch-up. With the acquisitions made over the last year, we may record an additional catch-up once our intangible analysis is complete. Our current expenses are a little higher than expected, many are acquisition related, and we expect to see an improvement in our operating leverage over time as we continue to leverage our fixed costs as we execute on our strategic plan. EBITDA from continuing operations was $10.6 million for the quarter compared with $4.4 million a year ago. Net interest income for the third quarter was $1.4 million compared with $1 million in the same period last year, and the improvement was due to the company’s higher cash position, which was partially offset by a slight decline in the yield earned on the company’s short-term investments. The effective income tax rate for the quarter was very high. Excluding one-time discreet items, the effective rate for continuing operations for the three months ended December 31, was 66.4% compared with 20.6% for the third quarter in the prior year. The high effective rate is principally due to relatively low profit before tax and sizable permanent differences, including the effects of losses from the company’s equity investments, tax code limitations on deductibility of meals and entertainment costs, and compensation associated with incentive stock options. Now, let me turn to the balance sheet of December 31 and treasury activities for the quarter. Cash flow from continuing operations in the statement of cash flow includes divestiture-related charges. Excluding taxes and transaction expenses associated with the divestiture, year-to-date the company generated $17.7 million in cash flow from operations. For the full fiscal year, we expect to generate cash in excess of $20 million in cash flow from operations. Cash and cash equivalents were $138 million compared with $605 million at March 31, 2007. The decrease in cash was due to acquisitions, repurchase of common stock and taxes payable on the gain on sale of the KeyLink business. The company has aggressively invested the majority of the divestiture proceeds in strategic acquisitions and recapitalizing the business. To-date, we have paid $213 million net of cash acquired for acquisitions. We paid $128 million in taxes on the gain on sale of KeyLink and $121 million for the repurchase of common shares. As of December 31, 2007 accounts receivable were $225 million, an increase of 93% compared with the $117 million at March 31, 2007. Accounts payable of $186 million increased 120% from the $84 million at March 31. And the increases in receivables and payables were due to the overall increase in company sales as well as the impact of recent acquisitions. Inventory was $48 million at December 31 compared with $10 million at March 31 of 2007. Included in inventory is the $31.5 million in bill-and-hold inventory discussed earlier. Net working capital was 5.8% of sales in the quarter. This reflects a significant improvement from 11% a year ago, and given the seasonally higher sales in the December quarter, is in line with the company’s goal of keeping working capital at approximately 5% of sales. Before we turn to business outlook and guidance, let me briefly review our recent share repurchases. On September 26, 2007, we announced the results of our dutch auction tender offer. The company repurchased 4.7 million shares at a price of $18.50 for a total cost of $86 million. On December 17, 2007, we announced that we had repurchased a further 2 million shares on the open market at a total purchase price of approximately $30.4 million. Also on December 17, we announced that we had entered into an additional 10b5-1 plan for the purchase of up to an additional 2.5 million shares. And as of January 25, 1.8 million common shares have been repurchased for an approximate $26 million under this plan. Including the shares repurchased in the tender offer, we have repurchased in total 8.4 million shares or approximately 27% of our previously outstanding basic shares. And following these repurchases, approximately 23.1 million shares are outstanding. Now, let me turn to guidance for the remainder of the year. We are updating guidance to account for our nine months performance. As a result, we are reconfirming our previously issued guidance for annual sales and gross margin. Annual sales are expected to be in the range of $780 to $800 million. Full year gross margin is expected to remain at approximately 23.5% of sales. However, the company now expects EBITDA margin to be approximately 2% of sales. SG&A expenses are anticipated to be approximately $190 million for the full year including the impact of acquisition and integration-related costs, stock compensation expense of $6 million, and depreciation and amortization of $18.5 million. Interest income is expected to be approximately $12.5 million and the company anticipates an effective tax rate of approximately 27% for the full fiscal year, including the impact of $2.9 million in year-to-date FIN 48 benefits. Based on an estimated 28.5 million weighted average shares outstanding, earnings per share are expected to be in the range of $0.22 to $0.25 per share. On a longer-term basis, we are on track to achieve our stated financial goals to grow sales to $1 billion by March 2009 and to $1.5 billion by March 2010, as well as to target gross margins in excess of 20% and EBITDA margins of 6% by 2010. That concludes the review of our quarter and the outlook for the year and the longer-term. With that, let me open it up for questions.

And our first question comes from Matt Sheerin - Thomas Weisel Partners. Matt Sheerin - Thomas Weisel Partners: In my first question, I wanted to just get a little bit more information on this buy-and-hold strategy of some customers, which you haven’t really talked about it much. It sounds like it is normal in the course of business, but more so. So, can you tell us exactly what’s going on? What markets is that in? You said $31 million or so, how much do you think will fall into the March quarter because your guidance implies that you are not going to have nearly as much seasonality in March that you normally have. And also, do customers have the option of opting out and canceling or is it definitely a contractual obligation for customers? Martin F. Ellis: Matt, bill-and-hold transactions are common in the businesses that we’re in. In this quarter they were larger than they’ve been historically. And if you go back to comments that we’ve made regarding rollouts, particularly on the retail side, those rollouts are typically accounted for as bill-and-hold transactions. And they occur when the customer places a purchase order on us for product, they buy the product, we issue an invoice and then over a period of time we will roll out the product for them on the retail side at their stores, and those rollouts or bill-and-hold transactions have historically been included in inventory. And in the September quarter, we saw a slight increase in bill-and-hold as our inventory went up. On the Technology Solutions side, we can also have bill-and-hold transactions, where a customer places a purchase order, we invoice them, they accept the product but delivery is still to take place based on the needs of, in their case, a rollout or acceptance of the product at various data centers. So, from the revenue recognition cycle, you have a purchase order, you’ve got an invoice on a customer, the customer has accepted the product, it’s just that delivery has not taken place. And in the December quarter, we had a larger number of these sales than we typically do. Our expectation is that a large part of that will rollout in the March quarter but not all of it, because the longer term rollouts from the retail side are over many months versus over a few months. Matt Sheerin - Thomas Weisel Partners: Will that be then a split between your Technology Solutions or enterprise customers and retail customers then? Martin F. Ellis: Yes. Matt Sheerin - Thomas Weisel Partners: Particularly for customers where you are carrying inventory for a while, are you compensated for that in some way? Martin F. Ellis: Ultimately the compensation is tied into the original purchase price. The inventory can be stored at the third-party warehouse or it could be stored at space that we have or it may be shipped to the customer at some later date. Typically the storage costs for us are di minimus and there is no additional charge for the storage. Matt Sheerin - Thomas Weisel Partners: And then just a question regarding seasonality in your business, because you have done several acquisitions now, and then your March guidance implies that some of it is just a pull-in from December sales, is that true? And then also looking in June, which historically has been up just a little bit for you, but now you’ve got Sun business, which typically is strongest in the June quarter. So, can you help us understand the seasonality of your business going forward? Martin F. Ellis: The seasonality, I think, is still consistent with what we’ve discussed in the past, that the June, September and March quarters are more or less consistent, admittedly some additional seasonality for Sun in June. And then the December quarter, particularly on the Technology Solutions side, is seasonally a high quarter and we’d historically said that December quarter makes up about 30% of annual sales and that’s consistent with what we see today. The March quarter implied forecast based on our guidance includes the expected rollout of some of these bill-and-hold transactions. And so, if you’re comparing it to historical seasonality, it’s a little higher than you would see historically because of the higher level of bill-and-hold transactions. Matt Sheerin - Thomas Weisel Partners: And then, so you expect June to be just in line with your normal seasonality then, historically?

Matt, I would say that it’s probably going to be a bit different this year because of the addition of Sun business and that is the end of Sun’s fiscal year. So I suspect we’ll see a bit more activity than we would have normally expected have we not been involved with Sun. It remains to be seen what the effect will really be. Matt Sheerin - Thomas Weisel Partners: And then my last question for now. Just regarding SG&A you talked about some incremental expenses on the integration and acquisitions you didn’t expect. Could you give us an idea of how much that was and what should we be expecting in terms of your actual SG&A dollars over the next couple of quarters and then as a percentage going forward?

While Martin is pulling out the specifics that we think you’re asking for, I would just comment that when we look at the business overall, again in revising our guidance we’re very comfortable at this point with our revenue projections, as well as our gross margin in terms of coming at approximately to 23.5%. The reduction that we’re projecting in our EBITDA margins is really very closely tied to these expenses. And as we’ve looked at all of them not just the ones that relate to specifically the acquisitions, we’re pretty comfortable in recognizing that that’s where the difference is. And again, it’s not at the margin or at the sales line. Martin F. Ellis: Matt, a little bit more specifically, these are expenses that we don’t expect to incur in the future. They are associated with acquisitions and they include items such as audits of the target’s financial statements in order to be able to file an 8-K where we would have to incur an additional audit so that we can file the 8-K to meet SEC requirements. It includes some additional severance associated with reorganizing the organizational structure to feed into us and includes a little bit of maintenance integration, maintenance fees around software as we standardize software products across our acquisitions, and then maybe a little bit around professional fees and standardizing on the hospitality side, compliance around credit card information that ultimately we need to have consistent with our business, typically referred as PCI compliance. Matt Sheerin - Thomas Weisel Partners: So, could you give us a ballpark of what that number is then? Martin F. Ellis: Year-to-date, it’s a little over $2.5 million in the quarter, that’s probably closer to $1 million. Matt Sheerin - Thomas Weisel Partners: It’s $1 million, okay. But it still looks like the number was about $4 or $5 million higher than I had expected. On the services side your gross margins fell a lot on flattish revenue, does that imply that there were some people-related expenses there? Does that have anything to do with it? Martin F. Ellis: No, let me talk a little bit about other expenses and in the services sales just as it relates to other expenses. We also have higher compensation and benefit-related costs, some related to just overall expenses around stock compensation awards that were made by the Board about a quarter-and-a-half into the fiscal year; others relate to hiring additional sales people in support of growth of our base business. Specifically on the services side, the real difference in margin year-over-year is a function of the mix between our propriety services and our re-marketed services. Our year-over-year services grew 77% but in that mix of services our proprietary services grew quite a bit faster than re-marketed services. And the reason the margin came down is that for re-marketed services we record that at a 100% margin effectively as an agent fee and on the proprietary services we earn our normal margins that are somewhere in the range of mid 20s to high 30s depending on what it is that we’re offering. And so, the growth in proprietary services was really the reason that the overall margins came down.

And the next question comes from Brian Kinstlinger - Sidoti. Brian Kinstlinger - Sidoti: Couple of follow-ups. First of all, one of the questions that I’m not sure was answered, do your clients have the option of canceling those buy-and-hold orders, especially those technology people who are rarely using that that way?

No. In fact, I would characterize that the bill-and-hold transactions probably have more glue than a standard transaction because we are doing something quite specific tailoring the product that we’re ordering, and it’s really specific for their rollout schedules, if you will. And maybe at the risk of just getting a tad deeper in that, if you think about customers requiring product for a rollout whether it be into remote stores, remote locations or even their data centers, the fact is that they are using this inventory in effect as just-in-time inventory and it is consistent with their purchase order, we bill it, again they accept it, it is invoiced and then it’s really their inventory from a practical perspective. From a revenue recognition perspective, we do not take credit for it until we actually deliver the product and that’s what we’re dealing with. Brian Kinstlinger - Sidoti: And Martin, did you say that, in terms of that buy-and-hold, all of the expenses that are associated will recognize or just part of them, (inaudible) sense in that? Martin F. Ellis: All of the cost of goods sold related expenses are included in inventory. Other expenses associated with the sale, commissions, whatever else that we did to close the sale are recorded in the quarter and those expenses whether we paid sales people commission on those sales would have been part of our expenses in this December quarter. The actual revenue when the product is shipped and the cost of goods sold and any associated supplier incentives will be recognized at the time that the product ships. Brian Kinstlinger - Sidoti: A follow-up on the services margin. It sounds like the proprietary, the lower margin business has been growing faster and so the mix is the cause of the weaker margins. Is that something you expect for the next couple of quarters? What do you think is driving that? Is that acquisitions that are growing faster that you’ve made or might that reverse itself; give us a sense of what you’re seeing that is the dynamic behind that?

First of all, I’d like to point out that the sale of proprietary services is really better than our reselling or re-marketed services. It’s just mathematically the way we treat the two. One is in essence all margin, and the other we have a cost associated to it. So the reality is, we would prefer that our proprietary services continue to grow and grow at as fast a rate as we can in fact execute. So from that perspective, that’s a good thing not a bad thing. Martin F. Ellis: And I’ll just add one more comment that both parts, the re-marketed and proprietary, grew meaningfully over the prior years. Some of it is related to mix associated with acquisitions, mix of proprietary versus re-marketed services. But ultimately, our objective is to grow our proprietary services as much as possible because that’s ultimately where we differentiate ourselves in front of the customer. Brian Kinstlinger - Sidoti: So, with that said then, while it is more profitable on the dollars sold from what you are reporting, if you’re pushing proprietary more then gross margins probably won’t go back to the 70% to 75% range that you’ve seen historically, is that accurate? That’s reported on your income statement. Martin F. Ellis: I’d say that’s probably a fair comment, but it will be a function of ultimately a mix of proprietary versus re-marketed, and we can have courses where we have sizable re-marketed services contracts for customers. So, I don’t want to say it won’t happen, but as proprietary currently and potentially continues to grow a little quicker, it’s probably lower than some of those margins you saw historically. Brian Kinstlinger - Sidoti: And in terms of China, can you talk about what percentage of your business is in China and what’s your focus going forward there will be or will there be as much of a focus?

Our business in China is really, I would say, two-fold. One is, we are in China to support our gaming hospitality customers. And as some of our customers have moved to Macau and potentially Singapore, we are using a Hong Kong facility as a base. Today, the total sales in China is a relatively small percentage of our total maybe 3% to 5%. We also have a business where we are involved in mainland China. And last year, we were involved with some of the banking institutions, particularly the regional banks in terms of their desire to standardize, and in fact automate their businesses. And over time, we found that that business, although it was very good for us a year or so ago, has become more competitive. And we decided that we’re just not going to continue to entertain that business. That’s a near-term decision. As I’d mentioned, it affected our organic growth rates, if you will. But our plans are to continue to operate in that part of the world both in support of our gaming or hospitality customers as they expand into that market as well as continuing to explore, if you will, the China market as it continues to mature. Brian Kinstlinger - Sidoti: And the hospitality and gaming, clearly, such high margins that while it is a small piece of your business, it really drives numbers. So I’m wondering, what do you see as the growth opportunity there? Is it much bigger than right now than per se your value as a reselling business? Or how do you see that market over the next year given where the economy is? And what you are seeing in terms of rollouts of new facilities?

I hope you can see that we’ve really built what we consider to be quite a foundation for our hospitality business. If you look at where we were when we acquired IED which was the initial acquisition, and if you will, foray into the hospitality business, today we have $100 million software and services business with EBITDA margin, as I’ve mentioned, in the 17% to 19% range. If you also look at the products in terms of how we’ve expanded the depth as well as the breadth of the product that we now offer, we can take our product set to a much larger segment of the hospitality market. That was our intention when we got into it. So today, we can now go after what we will call smaller hotels, smaller resort locations, with an open system offering that’s different than again, when we got into the business with IED, where our product played in a more of a proprietary environment and we had excellent market share at the very large gaming and resort hotels. That continues. But we are now able to move further down into the customer pyramid, if you will. So again, we think the growth opportunity is really quite excellent and we certainly will be giving you more insight into that as we go forward. But we have some very significant internal growth plans for that business. We have the ability with the acquisitions of InfoGenesis and V1 where they had minimal international business, but it has provided us a footprint. And we are now involved in expansion plans in Europe as well as in Asia. So we think that’s a very, very exciting business and one that will add to our profitability handsomely in the future. Now from a growth perspective, as we look at the reseller space, we think both as a function of organic growth as well as acquisitions we may continue to make, you may see that business grow at a faster rate that in no way reflects any less importance or less emphasis internally that we’re putting in the hospitality business. We want that business to grow as fast as it can. And we now have an offering, if you will, that is really quite complete and something that we can now take to a much larger set of customers in a much larger geography than we were a year ago. Brian Kinstlinger - Sidoti: And Martin, I wanted to touch on the amortization you said there was some catch-up. And you, in your guidance suggested almost $3 million more amortization for the year than you had last quarter. I’m not sure what catch-up is. Are these one-time catch ups? And that means next year you’ll be back to where you thought you would be prior? Just give us a sense because that seems to be part of the increase, if I’m not wrong, in SG&A that was unexpected? Martin F. Ellis: It’s a definitely meaningful component of the increase in SG&A for the quarter. The catch-up, Brian, relates to us finalizing our intangible asset analysis for recent acquisitions. We have 12 months in which to finalize that. We had initially booked a part of the intangible asset amortization based on just an initial estimate. We continue to do work on that. As we refine our intangible asset analysis, we recorded in the quarter a catch-up for prior quarters based on work that we’ve done to date. And then we plan to finalize in this upcoming quarter what our intangibles will be for the businesses. And it’s possible that we may have an intangible catch-up when we finalize intangibles for these businesses. And all of that means is, we are catching up the recording of intangible amortization for the quarters that have passed since we closed the deal. As it relates to next year, we’ll provide guidance at the start of the fiscal year relating to intangible amortization. But excluding any new acquisitions, our intangible amortization would probably go down slightly next fiscal year because, generally speaking, intangible amortization is front-end loaded. Brian Kinstlinger - Sidoti: On the quarterly basis the $6.8 million is a tad high because you have the normal number that you would amortize plus a little bit in the September and the June quarter, correct? Martin F. Ellis: That is correct. And so that catch-up in this quarter reflects the catch-up for the first two quarters plus what we would have booked in the December quarter. And that’s one of the reasons why we’ve gone to EBITDA margin because this intangible amortization is a significant component of overall SG&A. And it makes comparison year-over-year difficult when you’re trying to track operating income or SG&A, and you’ve got this intangible amortization that’s being recorded which is purely associated with the nature of the acquisitions that we’ve been making. Brian Kinstlinger - Sidoti: If I look at your income statement, you have on the other income line $1.2 million on other expenses. There’s one that’s $1 million and one it’s $0.25 million, and I am not clear what that is. Could you help explain that? Martin F. Ellis: Other income for expense is largely a combination of our equity investments. We had one equity investment earlier in the year that we sold and had a gain on that equity investment. The other significant contributor is our remaining equity investment where that business is running at a loss and we get to record losses from Magirus in our other income. That’s just a function of the investment, and depending on their performance whether it’s income generating or loss generating, we book our proportionate share. And those are really the primary components of what’s flowing through other income or expense; below that is interest income and interest expense. Brian Kinstlinger - Sidoti: And when you guided $13.5 million, does that include the equity losses as well or not? Martin F. Ellis: Year-to-date that would include equity losses and ending the quarter. Brian Kinstlinger - Sidoti: Is there insight for that business to become profitable? Where are they in their business? And is profitability foreseeable?

It’s actually an interesting situation. The investment in Magirus was made when we were more heavily involved in the distribution business many years ago. Magirus recently sold their IBM and HP distribution products business, if you will, to Avnet for which they received a sum of money. And the distribution of that in terms of our dividend has not been executed yet. But we are expecting a significant amount of cash as our share of that transaction. But in the interim, they are going through something that I would say is analogous to what our company is dealing with in terms of, they have a built-in overhead structure that they now have to spread over a smaller business, and in fact, are planning to grow into it. Now they are a private company. Their sales remain quite substantial. But in the near term, they are going to have some of the same issues that we deal with in terms of rationalizing our overhead. So, in the near term, we have experienced and expect that they will have losses for a few quarters. I can’t tell you exactly how many. Brian Kinstlinger - Sidoti: And what was the cash payment that you expect? Is that not been decided?

It’s a bit fluid, but it’s probably between $5 to $7 million in cash.

(Operator Instructions). We do have a question from Brian Alexander - Raymond James. Analyst for Brian Alexander - Raymond James: This is Bob Gruendike filling in for Brian. Real quickly, Martin I didn’t catch, how much the one-time expenses were associated with the acquisition this quarter? Martin F. Ellis: In the quarter, Bob, there were approximately $1 million; year-to-date, they are approximately $2.5 million. Analyst for Brian Alexander - Raymond James: So that excludes the amortization catch-up? Martin F. Ellis: That’s excludes the amortization catch-up. It excludes any amortization. Those are specific identifiable cost severance, additional audit fees, integration costs to integrate facilities, things like that. Analyst for Brian Alexander - Raymond James: So, when you’ve lowered your EBITDA goal for the full fiscal year, how much of that reduction is related to the impact of these bill-and-hold sales versus the one-time expenses that you incurred in the prior quarter? Can you account for those or delineate between those? Martin F. Ellis: I would say, guidance for the full year is not impacted by bill-and-hold transactions. The EBITDA margin is not impacted by bill-and-hold transactions for the full year. They will have an impact on the fourth quarter. Our revised guidance for the year is a combination of two things. Previous guidance was established when we were through two quarters and had about 65% of our revenues still to be generated through the last two quarters. In this current quarter, we now have a better view of what the year looks like. And the reason we’ve taken down guidance is we have nine months of performance of actual. And in the nine months of actual, we have some higher than anticipated acquisition integration related costs. I mentioned a little bit on the China or Asia side of the business that performed lower than anticipated. And then there are some other items that relate to compensation; and compensation related costs, two pieces there. Adding additional sales people in support of growth of the business, it takes a period of time for them to be able to pay for themselves. And we continue to invest in headcount. And then there is a couple of other items around retirement plans and performance in the market that have impacted expenses as well as stock options that were granted later in the year.

Bob, at the risk of repeating myself again, is we’ve reconciled the difference. When you look at the reduction in the EBITDA that we’re projecting, given the range we were at, you’re looking at somewhere between $4 and $8 million. I certainly don’t want to sound cavalier about it, but as we’ve looked at these one-time expenses whether they’d be the acquisition fees and costs that are somewhere between, let’s say, $2.5 to maybe $3 million. And then you look at some of the, what I would call, one-time compensation expenses that we talked about as well as we look at the number of people we’ve added, we had talked earlier in the year about investing in our existing business. I am very comfortable that we are well within the $4 to $8 million. We understand where it went. And as I’ve said, don’t want to be cavalier that we don’t recognize the significance of altering our guidance. But these expenses from our perspective are well within the tolerance level, well within what we can control versus what we don’t control. And again, we believe that most of them are one-time situations that will over time bleed out. So, we are still feeling very good. Consistent with the comments I made to you earlier, I think we had just an excellent quarter. The top line is very strong. Our organic growth I am very, very pleased with. And I am very pleased with the margins. We’ve made a number of acquisitions. I am not going to tell you that everything has worked perfectly. Once in a while we do have a hiccup here or there, but well within the tolerance levels that we would have expected. And overall, when I look at the progress we’ve made this year that we’re calling a transformational year, and our longer term goals, we’re well on our way. Analyst for Brian Alexander - Raymond James: That segues into my next question a little bit, thus far with respect to the four acquisitions that you’ve made, which ones are exceeding your expectations and which ones are maybe meeting or falling short of your expectations thus far?

I think it would to be fair to say that all of them are within the tolerances of our expectations in terms of their performance. That doesn’t mean they are all performing to the plus side. When you look at our individual businesses or business units depending on how finite you want to measure this, we have some that are up in any quarter and some are down as compared to our expectations. That’s just normal pluses and minuses of running the business our size. As it relates to a couple of the acquisitions, one, as we went through the integration issues, we decided that we were going to change our integration plan. So there has been a bit more disruption to that business again within tolerance. And the other one of the businesses we acquired has put us in a much heavier participation rate, if you will, in the storage market and we are finding that that is a bit more competitive than it was several months ago. And it’s something that we are dealing with in terms of the margin that we are seeing in that business. Beyond that I’m not sure I can characterize it any better for you. Analyst for Brian Alexander - Raymond James: So when you said earlier in your prepared remarks that there are pockets of increased competitiveness, I guess storage is one of those pockets? Are there any others that you could point to?

No. I’d say that in terms of what we’ve anticipated, what we expect in the marketplace, expect relative to the seasonality of things, I think that’s the only one that we really didn’t anticipate. Analyst for Brian Alexander - Raymond James: And finally, Martin, looks like the tax rate is fluctuating quarter-to-quarter. And you changed your full year guidance for tax rate again. Just wondering, going forward, maybe in the FY ‘09, if there is a way to ballpark where you think your tax rate might end up for the full year? Martin F. Ellis: Bob, that’s tough to say right now, but let me comment on some of the movements in the tax rates. We can come up with a fairly decent estimate of the effective tax rate for the fiscal year, that’s what moves our reported rates around are a number of other items. And most specifically in this year, in the quarter we got higher effective tax rate, but year-to-date reflectively if you look at the nine months, no taxes are recorded on the income statement, in fact a small benefit of about $42,000. And the reason for the benefit is that against our effective rate you’ve also got now movements in taxes that relate to the new reported requirements under FIN 48. And some of the volatility that you’re seeing is a release or an adjustment to FIN 48 balances. And certainly for the year, we’ve had close on $2.9 million in FIN 48 benefits that have come through and eliminated other taxes on the business. So, at the start of this year, we provided some guidance that the effective tax rate would be in the low 40s. For now that’s probably my best estimate for next year given that we can’t identify at this point what if any changes there might be with respect to FIN 48 balances over the next quarters and the next year. So, I would model something in the low 40s.

And we do have follow-up question from Brian Kinstlinger - Sidoti & Company. Brian Kinstlinger - Sidoti: Three questions. First of all, can you give us a sense of how much, especially in the storage side, financial services clients are as a percentage of revenue?

I don’t think we can give you a number. We’d have to probably get back to you. But particularly, in the California market, it’s a significant piece of the business. Certainly, it’s a significant market and we’re seeing some of that. Brian Kinstlinger - Sidoti: By high level, would you say more than 10% of revenues that comes from financial services clients?

No. Martin F. Ellis: Out on the West Coast it might be a bit more than that, but as part of total revenues, no, I would say.

No. It’s not even close to that total. Brian Kinstlinger - Sidoti: I didn’t think so, but when you said that, I wanted to make sure.

No. It’s really just a situation where the market is a bit less robust, just a bit, but the issue is, there is margin pressure that we hadn’t anticipated. Brian Kinstlinger - Sidoti: In terms of Magirus, I’d ask you some questions there. Is that’s something you plan to maintain your investment in? Are you evaluating that at least?

We are certainly evaluating it. The good news is that with the distribution that we’ll receive, in essence our investment will have been returned to us over time, given the dividends that we’ve experienced. So we are feeling that from that perspective it’s a pretty good investment if we’re back to essentially no investment or we’ve got it all paid for we’d receive the money, we have 19% of the business going forward. And certainly that will have a value at some point; they are private. And we are certainly evaluating whether that investment makes sense and if not, how we work that out with the owners of the company. But I don’t think we’re going to do anything in the short term. Brian Kinstlinger - Sidoti: If I look at the second half of this fiscal year, you are going to report roughly in EBITDA margin between 4% and 4.3% depending on the quarter. And when I look at next year without you giving any specific guidance, is that something I should look at as the base as I look at next year of where you will build off of? Is that fair to say or is that not accurate? Martin F. Ellis: I’d say, Brian, it’s probably not worthwhile benchmarking the fourth quarter because that’s going to include some of the impacts of old transactions. I would fix something between our guidance for this year for now and the fourth quarter as a reasonable estimate of next year’s performance. And then in a quarter’s time, we’ll provide more specific guidance for the new fiscal year. Brian Kinstlinger - Sidoti: Suppose I took, you’re going to do $18 million in EBITDA in the second half of the year, and I put that over the total revenue, doesn’t matter when you’ve got that EBITDA in the second, third quarter or the fourth quarter as it carries over, why would that not be an accurate way to look at it? Do you see what I’m saying?

And that would be our guidance is 2% for the year, but we expect EBITDA to be above 2% next year. Firstly, we’re missing a quarter or so of the Innovative and InfoGenesis acquisitions that will contribute to EBITDA margins; plus in the early part of this year, we ran the first quarter at a loss, breakeven second quarter. Next year I wouldn’t expect first and second quarter to be a loss or breakeven. So, back again to an implied EBITDA margin for Q4 based on our guidance and you take our annual guidance of 2%, the Q4 implied EBITDA margin will be quite a bit higher than the 2%. And I’ve picked something in between 2% and your implied EBITDA margin for the fourth quarter. Brian Kinstlinger - Sidoti: But wouldn’t the 4.3% this quarter have been higher, had you not have done the bill-and-hold and so that was really understated?

Had bill-and-holds been recorded, EBITDA margin would have been higher. But had that been recorded in this quarter, they wouldn’t be recorded in the fourth quarter and so we would have expected a lower EBITDA margin in the fourth quarter.

(Operator Instructions) Gentlemen, there does not appear to be anything more at the present time. Do you have any concluding remarks?

We certainly want to thank everyone for joining us today. And as always, we look forward to updating you on our progress next quarter. Bye.