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8/14/2019 School Update Feb09_TOWNHALL
1/18
1
State of the School: Managingin Turbulent Times
February 19, 2009
8/14/2019 School Update Feb09_TOWNHALL
2/18
Impact of the Crisis in Higher
Education Endowments down 25% or more State appropriations for higher education being cut
dramatically ASU $90M since June 2008
Expense reductions underway at most private and publicuniversities
Corporate spending in training and development down GMAT test taker up, but unemployment and family net
worth down
High growth expected in for-profit sector P/E Apollo: 27, DeVry: 29, Grand Canyon: 147 (IPO Nov. 08,07/08 revenues $100M, Market Cap: $834M)
8/14/2019 School Update Feb09_TOWNHALL
3/18
Impact of the crisis on Thunderbird
Decline in forecasted Corporate Learning revenues $3.1M in Russia (business plus currency), $2.9M in other programs
(deferrals, cancellations and less new business), $0.4M contingency
Real Estate transactions not completed Endowment loss of $6.6M (31%) since 6/30/08 Slowdown in new philanthropic commitments
Loss of liquidity due to CommonFund short-term fundclosure ($2.4M still tied up) Lower interest cost on variable rate bond debt (current rate
< 1.5%, vs. 5% budgeted)
Declining liquidity ratio as consequence of short-term fundclosure and endowment loss (58% expected at 6/30/09 vs.required 50%)
8/14/2019 School Update Feb09_TOWNHALL
4/18
8/14/2019 School Update Feb09_TOWNHALL
5/18
Fall Enrollment Trends
-
200400
600
800
1,0001,200
1,400
1,600
04/05 05/06 06/07 07/08 08/09F 09/10F
Full-time MBAGM Executive MBA GMBA Latin America GMBA On-Demand MA/MS
8/14/2019 School Update Feb09_TOWNHALL
6/18
-
5,000
10,000
15,000
20,000
25,000
30,000
04/05 05/06 06/07 07/08 08/09F 09/10F
Learn ing and
Co ns ul ting N etwo rk
Dis tance L earn ing
Open Enrol lm ent
Consor t ia
Ru s s ia
Cus tom
Corporate Fee Trends
8/14/2019 School Update Feb09_TOWNHALL
7/18
Change in Unrestricted Net Assets
vs. Free Cash Flow
(8,000)
(6,000)
(4,000)
(2,000)
-
2,000
04/05 05/06 06/07 07/08 08/09F
Amount(inthousan
d)
Change in unrestrictednet assets *
Unrestricted Investmentand Currency Gain/Loss
Free Cash Flow
* Change in unrest ri ct ed net asset s is before unreali zed gains or losses on unrest ri ct ed endowment and currency t ranslat ion.
8/14/2019 School Update Feb09_TOWNHALL
8/18
Capital Expenditures
-
1,000
2,000
3,000
4,000
5,000
04/05 05/06 06/07 07/08 08/09F 09/10F
-
1,000
2,000
3,000
4,000
5,000
Russia
Glendale
08/09 Budget &
09/10 Strategic
Plan
8/14/2019 School Update Feb09_TOWNHALL
9/18
$41.56M
$15.62M
$44.44M
$0
$10
$20
$30
$40
$50
$60
$70
2/1/2006 FY 06-07 FY 07-08 FY 08-09 FY 09-10 FY 10-11
Millions
Level Pace
Actual CommitmentsNeeded per year (3 yrs) as 6/30/08 -$7.81MNeeded per year (2 yrs) based on current amount raised -$10.49M28M
(as of February 16, 2009)
Capital Campaign
8/14/2019 School Update Feb09_TOWNHALL
10/18
How is Thunderbird positioned to
weather the storm? Program portfolio diversification to tap multiple markets
On-Demand, MA/MS, future European EMBA and future Part Time
MBA
Concentration of Corporate Learning clients in resilientsectors
Oil & Gas and Pharma industries Promising new business in the Corporate Learning
pipeline
Prior reorganization improved productivity and flexibility New Learning Management System to support new
distance programs
8/14/2019 School Update Feb09_TOWNHALL
11/18
How is Thunderbird positioned to
weather the storm? Limited reliance on endowment or state funding Preparedness to execute transactions
Land zoning completed
Letter of credit in place until Sept. 2011, new $2M line ofcredit Significant campaign commitments in place Endowment moved to a 100% insured bank account to
eliminate any further downside risk Actions to improve cash position
Deferred $3M capex Reviewed all open positions, with significant savings from deferred
hires/replacements Converted rubles to US dollars Other expense reductions $15.8M of cash in the bank as of Jan 31st (includes Spring tuition)
8/14/2019 School Update Feb09_TOWNHALL
12/18
Risks going forward
Outstanding bond risks Default risk from missing covenants (ex: liquidity ratio),
Other risks: Interest rate volatility (currently covered by interest ratecap), Bank of NY rating downgrade, inability to remarket bonds
Limited options to restructure debt before Sept. 2011
Further declines in corporate learning revenues
Further decline in new philanthropic commitments andpledge payments
Shift in applications from Full Time MBA to early careerand working professional degree programs
Potential decline in enrollments due to lack of financing Foreign currency impact on affordability of Thunderbird
programs
8/14/2019 School Update Feb09_TOWNHALL
13/18
Weathering the storm in the next
two years Revenue opportunities
Expense reductions Restructuring of assets and liabilities
Strategic initiatives
8/14/2019 School Update Feb09_TOWNHALL
14/18
Planning for the worst while working
for the best
$74,902$70,871$66,939$62,735$59,252$68,537$69,801Total Revenue(including Russia)
10%5%0%(6%)(11%)09/10 Fcst vs 08/09 Fcst %
6,1263,095163(3,541)(6,524)09/10 Fcst vs 08/09 Fcst $
$67,902$64,871$61,939$58,235$55,252$61,776$60,527Total revenue(excluding Russia)
8,1637,8407,5177,1046,6918,7149,282Other
17,22515,53513,84412,69911,43513,70715,126Corporate Fees (excludingRussia)
$42,514$41,496$40,578$38,432$37,126$39,355$36,119Tuition and fees net ofscholarships
ForecastActualRevenueBestCase
HiMidpoint
MiddleCase
LoMidPoint
WorstCase
08/0907/08
09/10 Forecast
$ in Thousands
09/10 Revenue Projection Scenarios
8/14/2019 School Update Feb09_TOWNHALL
15/18
Revenue Opportunities &Potential Expense Reductions
Consultative process: Identify and prioritize options for
revenue opportunities and expense reductions Suggestion box open to all faculty and staff Senior administration in consultation with the faculty senate
and others to review all options and submit a final proposal to
the president Budget process for 2009/10 fiscal year
Incorporate suggestions from consultative process
8/14/2019 School Update Feb09_TOWNHALL
16/18
Restructuring of assets and liabilities
Potential sale of multi-family residential and officeparcels
Restructure bond debt before Sept. 2011
Endowment management Minimize down-side risk
Once liquidity position improves and market volatility subsides,look for opportunities to re-enter markets
8/14/2019 School Update Feb09_TOWNHALL
17/18
Strategic Initiatives
Opportunities in the Middle East Kingdom of Saudi Arabia
Partnership with for-profit sector Expansion of the CBSD model to other emerging markets
Other initiatives
8/14/2019 School Update Feb09_TOWNHALL
18/18
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State of the School: Managingin Turbulent Times
February 19, 2009