title of presentation - stop rocketship · •facilities fees and financing update •business team...
TRANSCRIPT
Business Committee April 30, 2013
2
Agenda
• CFO/CBO Update and Summary Discussion
• Organization Status and Priorities
• Financial Overview and status
• Facilities Fees and Financing Update
• Business Team Objectives – 2013/2014
• Organization
3
RSED Organizational Status and Priorities
4
90%+ of
students
graduate at
70th+ NWEA
percentile
High-level goals
Gro
wth
Q
uality
Rocketship
serves 30,000
students by 2017-18
People and
systems
support quality
and growth
Scala
bilit
y
Designing and implementing ELA
guidance system
Piloting and refining 4th/5th grade open
model
Creating network services R&D arm to
drive student recruitment and parent
leadership strategy and execution
Building internal capacity and expertise in
marketing, communications, and policy
Hiring staff and founding fellows for new
regions
Building talent management systems
Creating Scalability team to support teams
in optimizing and documenting practices
Expanding school-level business support
and systems to free up school leader time
Enhancing instructional data infrastructure
Major areas of investment in 2013-14
94.5 National
and Regional
FTEs
$17.6M in
total budget
requests
Proposed 2013-14 expenses
Planned investments align to three organizational goals
5
Organizational Status
• Executive Team— - Been together for 1 year now - Gained organizational and overall perspective
• Conducted self-assessment. Are we… - Able to sustain growth objectives? - Deliver high quality schools? - Be a great place to work?
6
Where We Stand…
• Cohesive leadership team
• Strong Results of our Schools
• Responsible Growth
• Committed Talent at all Levels of Org
• High brand recognition
• Parent Engagement and Leadership
• Instructional Foundation and Some Recent Results
• Operations Systems
• Talent Pipeline--teachers, principals, directors, regional, national, etc.
• Overall School Model (finances, enrollment, etc.)
• Organizational culture and morale
• Short Term v. Long Term
Promising Items Challenging Items
7
Need significant investment Foundation for growth
• Use 2013-2014 as an investment year at schools and N/R - School leader talent pipeline - Management depth at National/Regional - Systems and operations infrastructure
• Result: - Existing schools would break-even - National/Regional would experience significant growth - Significant increase in expenses at National/Regional - Funding from growth regions and/or capital campaign
Sets up better foundation for scale and replicability
8
Financial Overview and Status
9
The past year Key steps and decisions—a review
• June: - Identified weak budgets due to lack of net income and fundraising
• October: - Presented solution rooted in more efficient school model
• January: - Cut at the National Office to confirm sustainability targets
• March: - Revised school model to align with new academic priorities
• April: - Reviewed outputs from new budgets and devised a new strategy
10
1. School Budget Model Changes
11
• Rocketship began the 12/13 school year with a breakeven school model
August 2012 Model
(pre-Prop 30)
Students 630
Teachers 16
Rev per Student $7,393
Compensation per Student $3,230
Other Expenses per Student $1,726
Fees per Student $2,380
Total Revenue $4,657,711
Expenses
Comp $2,034,857
Other $1,087,663
35% Fees $1,499,355
Total Expenses $4,621,875
Net Income $35,835
Margin 0.8%
Progression of School Budgets What does a Year 5 school look like?
12
Progression of School Budgets
-No Academic Dean -4 fewer teachers -2 fewer ILSs
B. $330K
-Fewer teachers and students
C. $50K
$380K cost savings
-Fewer students have less revenue
A. $220K D. $75K
$145K less Income
-Less revenue has less fees
$230K Net Income
A.
B.
C.
D.
August 2012 Model Redesign School Model
(pre-Prop 30) Initial October Budget
Students 630 600
Teachers 16 12
Rev per Student $7,393 $7,399
Compensation per Student $3,230 $2,839
Other Expenses per Student $1,726 $1,746
Fees per Student $2,380 $2,371
Total Revenue $4,657,711 $4,439,392
Expenses
Comp $2,034,857 $1,703,103
Other $1,087,663 $1,047,746
35% Fees $1,499,355 $1,422,712
Total Expenses $4,621,875 $4,173,562
Net Income $35,835 $265,831
Margin 0.8% 6.0%
• The redesigned school model projected $230K more net income per school
13
Progression of School Budgets
August 2012 Model Redesign School Model
(pre-Prop 30) Initial October Budget Prop 30 Revenue
Students 630 600 600
Teachers 16 12 12
Rev per Student $7,393 $7,399 $7,811
Compensation per Student $3,230 $2,839 $2,839
Other Expenses per Student $1,726 $1,746 $1,755
Fees per Student $2,380 $2,371 $2,515
Total Revenue $4,657,711 $4,439,392 $4,686,605
Expenses
Comp $2,034,857 $1,703,103 $1,703,103
Other $1,087,663 $1,047,746 $1,052,720
35% Fees $1,499,355 $1,422,712 $1,509,237
Total Expenses $4,621,875 $4,173,562 $4,265,060
Net Income $35,835 $265,831 $421,544
Margin 0.8% 6.0% 9.0%
• Prop 30 added $410/student of revenue, increasing Net Income to $420K
-More revenue has more fees
B. $85K Fees
A. $245K Revenue
-Higher per student revenue
B.
A.
$160K Net Income
14
Progression of School Budgets
• The latest model reflects - 1) lessons from the past year and
- 2) modifications to the “redesign model”
August 2012 Model Redesign School Model
(pre-Prop 30) Initial October Budget Prop 30 Revenue Latest Model
Students 630 600 600 653
Teachers 16 12 12 16
Rev per Student $7,393 $7,399 $7,811 $7,819
Compensation per Student $3,230 $2,839 $2,839 $3,386
Other Expenses per Student $1,726 $1,746 $1,755 $1,775
Fees per Student $2,380 $2,371 $2,515 $2,523
Total Revenue $4,657,711 $4,439,392 $4,686,605 $5,102,757
Expenses
Comp $2,034,857 $1,703,103 $1,703,103 $2,209,525
Other $1,087,663 $1,047,746 $1,052,720 $1,158,136
35% Fees $1,499,355 $1,422,712 $1,509,237 $1,646,784
Total Expenses $4,621,875 $4,173,562 $4,265,060 $5,014,445
Net Income $35,835 $265,831 $421,544 $88,313
Margin 0.8% 6.0% 9.0% 1.7%
15
Run Rate Cost (Year 3+) Difference
August 2012 Model Latest Budget Total
Enrollment 630 653 23
Revenue $4,657,711 $5,102,757 445,047
Changes due to New Instructional Model
Salaries $1,613,456 $1,743,111 ($129,655)
Employee Benefits $421,401 $466,414 ($45,012)
2:1 Tech, Chromebooks $25,363 $58,537 ($33,174)
Curriculum $73,000 $95,679 ($22,679)
Professional Development $31,640 $48,307 ($16,667)
TFA and Recruitment Costs $34,400 $8,000 $26,400
Substitutes and Proctors $65,075 $29,007 $36,068
Total Changes from New Model $2,264,335 $2,449,056 ($184,721)
Changes Driven by '12/13 Actual Expenses
Office Supplies $31,500 $56,696 ($25,196)
Copiers $36,570 $48,548 ($11,978)
Utilities $48,000 $55,000 ($7,000)
Authorizor Fee $48,871 $38,034 $10,836
Student Insurance $28,350 $11,204 $17,146
Total Changes from '12/13 Actual Expenses $193,291 $209,482 ($16,191)
35% Fees $1,499,355 $1,646,784 ($147,429)
Interest $62,982 $85,151 ($22,169)
All Other Costs $601,913 $623,972 ($22,059)
Total Expenses $4,621,875 $5,014,445 ($392,569)
Net Income $35,835 $88,313 $52,477
Budget Changes Summary
16
2. Baseline Model Analysis
17
Startup Capital Need—in total Assuming no grants and no income
($125,000)
$500,000
($2,089,430)
($2,500,000)
($2,000,000)
($1,500,000)
($1,000,000)
($500,000)
-
$500,000
$1,000,000
Security Deposit Security Deposit Working Capital(Deferral)
Working Capital(Deferral)
Working Capital(Deferral)
Year -1 Year 0 Year 1 Year 2 Year 3 Total
Startup Capital Needs
Cumulative Impact Security Deposit Minimum Cash Working Capital Minimum Cash
18
Startup Cash Flow Support Total need could be offset by available grants and debt
($534,587)
($1,534,587)
($2,714,430)
($504,315)($250,000)
($500,000)
($1,684,158)
($250,000)
($3,500,000)
($3,000,000)
($2,500,000)
($2,000,000)
($1,500,000)
($1,000,000)
($500,000)
-
Cash Flow Need Net Income Walton CSP ReceivablesFinancing
Best Case Worst Case
OperatingIncome
Private Grants Public Grants SustainableFunding
CDE Loan Funding Gap Funding Gap
Startup Capital and Cash Flow Support
Expect these to be available, but not
guaranteed
Minimum or maximum need, depending on
availability of grants/loans
19
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Operating Details
S-T Ratio - 37 41 41 41 41Students - 560 611 659 657 653Teachers - 15 15 16 16 16Public Rev / Student - $8,716 $7,889 $7,311 $4,435 $6,893
Income StatementRecurring Revenue - $4,142,806 $4,622,191 $5,059,536 $5,133,938 $5,102,757Grants / Fundraising - - - - - - Total Revenue - $4,142,806 $4,622,191 $5,059,536 $5,133,938 $5,102,757
Compensation $68,013 $2,039,571 $2,085,505 $2,209,985 $2,209,855 $2,209,525Other $700 $1,172,125 $1,103,014 $1,170,450 $1,161,757 $1,158,136Facilities Fee - $779,281 $848,614 $931,811 $946,850 $941,019Management Fee - $584,461 $636,461 $698,858 $710,138 $705,765Total Expenses $68,713 $4,575,438 $4,673,594 $5,011,104 $5,028,600 $5,014,445
Net Income ($68,713) ($432,632) ($51,403) $48,432 $105,338 $88,313Net Income w/o Grants ($68,713) ($432,632) ($51,403) $48,432 $105,338 $88,313
Cash FlowBOP Cash - ($193,713) ($1,025,519) ($1,040,661) ($1,034,587) ($937,112)Net Income ($68,713) ($432,632) ($51,403) $48,432 $105,338 $88,313Operating Cash Flow ($125,000) ($1,516,438) ($394,168) ($178,824) ($32,426) $14,211Financing Cash Flow - $1,117,263 $430,430 $136,466 $24,564 ($11,385)EOP Cash ($193,713) ($1,025,519) ($1,040,661) ($1,034,587) ($937,112) ($845,973)
Liquidity ($193,713) ($1,025,519) ($1,040,661) ($1,034,587) ($937,112) ($845,973)Cash Surplus / (Shortage) ($693,713) ($1,525,519) ($1,540,661) ($1,534,587) ($1,437,112) ($1,345,973)
Baseline School Breakeven by Year 3…
$1,034,587 negative cash plus $500K “Buffer” = $1.5M need
Yields need of Minimum $534K Maximum $1,534K
Likely help from: 1. $750K of grants 2. $250K of CDE loan
20
Existing schools have current need additional cash
($3,000,000)
($2,000,000)
($1,000,000)
-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
EOP Cash Balance - No GrowthRS9
RS8
RSA
RBM
RDP
ROMO
RLS
RSSP
RMS
Total
($5,000,000)
($4,000,000)
($3,000,000)
($2,000,000)
($1,000,000)
-
$1,000,000
$2,000,000
$3,000,000
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
EOP Cash Surplus / (Shortage) - No GrowthRS9
RS8
RSA
RBM
RDP
ROMO
RLS
RSSP
RMS
Total
Cash balance overall is positive • Cash at existing schools will
remain relatively flat (near zero)
• But new schools (RBM, RSA, RS8 and RS9) will have $3 million need
Note: This assumes that RSED grants $1 million to RBM
However, safety of a cash buffer (i.e. 45 days of expenses on hand) yields a $2.5 million shortfall
21
Impact of Growth – New Schools
Growing by 5 schools per year will bring the total cash balance to negative $19M by FY 2018. Safe Cash Position
would require $16
million more (or a
need of $35M).
Net income from operating schools could fund much of this need
($25,000,000)
($20,000,000)
($15,000,000)
($10,000,000)
($5,000,000)
-
$5,000,000
$10,000,000
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
EOP Cash Balance - Growth
($40,000,000)
($35,000,000)
($30,000,000)
($25,000,000)
($20,000,000)
($15,000,000)
($10,000,000)
($5,000,000)
-
$5,000,000
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
EOP Cash Surplus / (Shortage) - Growth
22
Baseline School Model – Long Term Planning Need to achieve at least $200K net income improvement /school
• Expenses - Reduce to 1 Assistant Principal at each school - Continued evaluation of the instructional model—may lead
to economic benefit (if doesn’t detract from instructional value
- Online curriculum support and evolution - Staff training may lead to a need for fewer adults in each
classroom - Sharing of Operations Managers across schools
• Revenues - Higher number of students at each school (back to 630-650
as before)
Unlikely to achieve these levels at existing schools due to facilities constraints—were not designed with the new instructional model options in mind
23
Cash Need Analysis - No Growth
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
EOP Cash $4,840,720 $4,696,524 $3,015,210 $2,159,673 $1,978,233 $1,913,576
Cash Need $340,720 $196,524 ($1,484,790) ($2,340,327) ($2,521,767) ($2,586,424)
Grants $1,853,100 - - - - -
Cumulative Grants $1,853,100 $1,853,100 $1,853,100 $1,853,100 $1,853,100 $1,853,100
Total Need $2,193,820 $2,049,624 $368,310 ($487,227) ($668,667) ($733,324)
Incremental Net Income / School $200,000 $200,000 $200,000 $200,000 $200,000
Mature Schools 8 9 9 9 9
Incremental Net Income $1,600,000 $1,800,000 $1,800,000 $1,800,000 $1,800,000
Cumulative Net Income $1,600,000 $3,400,000 $5,200,000 $7,000,000 $8,800,000
Need with Net Income $3,649,624 $3,768,310 $4,712,773 $6,331,333 $8,066,676
“Safe Cash Position” – Current 8 schools Net income improvement would yield significant cash benefit
Cash need of $2.5M by FY 2018 is offset by $1.8M of grants this year from new funders
If each school could generate $200K more net income per year, there would be $9M of extra cash generated over the next five years to fund growth
Safe Cash Position assuming current expense structure and facilities operations
Safe Cash Position assuming ability to improve expense structure by $200K per year per school
24
Cash Need Analysis - Growth Cash Need Analysis - No Growth
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
EOP Cash $4,840,720 $3,921,674 ($2,055,430) ($8,083,988) ($13,450,513) ($18,410,820)
Cash Need $340,720 ($2,578,326) ($11,055,430) ($19,583,988) ($27,450,513) ($34,910,820)
Grants $1,853,100 $2,900,000 $3,450,000 $2,500,000 $1,500,000 $1,250,000
Cumulative Grants $1,853,100 $4,753,100 $8,203,100 $10,703,100 $12,203,100 $13,453,100
Total Need $2,193,820 $2,174,774 ($2,852,330) ($8,880,888) ($15,247,413) ($21,457,720)
Incremental Net Income / School $200,000 $200,000 $200,000 $200,000 $200,000
Schools 8 13 18 23 28
Incremental Net Income $1,600,000 $2,600,000 $3,600,000 $4,600,000 $5,600,000
Cumulative Net Income $1,600,000 $4,200,000 $7,800,000 $12,400,000 $18,000,000
Need with Net Income $3,774,774 $1,347,670 ($1,080,888) ($2,847,413) ($3,457,720)
“Safe Cash Position” – Current growth plan $200K additional net income improvement would fund growth
$35M of cash need to open 5 schools per year over the next five years is offset by $13M of expected fundraising to $22M ($250K per school from Walton, $1M total from Debs) If each school could generate $200K more net income per year, need would be less
than $4 million (and this is at the “safe” level
25
Baseline School: Bay Area vs. Milwaukee
MKE has higher revenue and lower cost of living. But, higher costs, including lower ISD funding, mitigate that benefit
BA vs. MKEBA MKE MKE F/(U) to BA
Net Rev / Student $7,814 $8,033 $219Students $600 $600 - Rev / School $4,688,246 $4,819,537 $131,290Revenue Differences $131,290
School Compensation $2,209,525 $1,988,573 $220,953Janitor - $35,000 ($35,000)Teacher Travel to BA - $27,000 ($27,000)Utilities $38,000 $70,000 ($32,000)Fees $1,640,886 $1,686,838 ($45,952)ISD Loss - ($150,000) ($150,000)Expense Differences ($68,999)
Net Income Difference $62,291
Milwaukee school financial picture is expected to be slightly better than a comparable Bay Area school
26
NASH has substantially higher revenue offset slightly by transportation / ISD MEM is $700 / student less than NASH, making it more similar to BA
BA vs. NASH and MEM
BA NASH NASH F/(U) to BA MEM MEM F/(U) to BA
Net Rev / Student $7,814 $9,676 $1,862 $8,976 $1,162
Students 600 600 - 600 -
Rev / School $4,688,246 $5,805,362 $1,117,116 $5,385,362 $697,116
Revenue Differences $1,117,116 $697,116
School Compensation $2,209,525 $1,988,573 $220,953 $1,988,573 $220,953
Difference in Benefits - $59,657 ($59,657) $59,657 ($59,657)
Transportation - $300,000 ($300,000) $300,000 ($300,000)
Teacher Travel to BA - $27,000 ($27,000) $27,000 ($27,000)
Fees $1,640,886 $2,031,877 ($390,991) $1,884,877 ($243,991)
ISD Loss - ($200,000) ($200,000) ($200,000) ($200,000)
Expense Differences ($756,695) ($609,695)
Net Income Difference $360,421 $87,421
Nashville school financial picture is expected to be significantly
better than a comparable Bay Area school. Memphis will less
favorable than Nashville.
Baseline School: Bay Area vs. Tennessee
27
3. FY 2013-14 School Projections
28
RMS RSSP RLS ROMO RDP RBM RSA TotalOperating Details
S-T Ratio 37 41 39 40 40 30 29 37Enrollment 591 658 630 635 638 179 485 3,816ADA 579 638 616 613 615 176 465 3,702Teachers 16 16 16 16 16 6 17 103Tutors, ECCs, ATs 8 8 8 9 8 4 8 53Public Rev / Student $7,958 $7,523 $7,841 $7,525 $7,502 $8,298 $7,523 $7,676
Income StatementRecurring Revenue $4,736,584 $4,975,267 $4,972,584 $4,823,049 $4,807,995 $1,386,527 $3,697,462 $29,399,468Grants / Fundraising - - - - - $517,264 $405,000 $922,264Total Revenue $4,736,584 $4,975,267 $4,972,584 $4,823,049 $4,807,995 $1,903,791 $4,102,462 $30,321,732
Compensation $1,963,356 $2,269,774 $1,958,333 $1,988,017 $1,876,353 $879,634 $1,578,653 $12,514,120Other $981,292 $1,203,385 $1,105,190 $1,064,717 $1,133,586 $464,795 $819,331 $6,772,296Facilities Fee $869,143 $912,894 $913,223 $984,357 $881,870 $62,975 $689,160 $5,313,622Management Fee $651,857 $684,671 $684,917 $660,336 $661,403 $194,742 $516,870 $4,054,795Total Recurring Expenses $4,465,648 $5,070,724 $4,661,663 $4,697,427 $4,553,212 $1,602,145 $3,604,014 $28,654,833
Recurring Net Income $270,936 ($95,457) $310,921 $125,621 $254,783 $301,645 $498,448 $1,666,898% Margin 5.7% (1.9%) 6.3% 2.6% 5.3% 15.8% 12.1% 5.5%
Non-Recurring Expenses $76,799 $9,483 $24,533 $36,695 $65,473 $107,368 $42,537 $362,887
Full Net Income $194,137 ($104,940) $286,388 $88,927 $189,311 $194,277 $455,911 $1,304,011Net Income w/o Grants $194,137 ($104,940) $286,388 $88,927 $189,311 ($322,987) $50,911 $381,747% Margin 4.1% (2.1%) 5.8% 1.8% 3.9% 10.2% 11.1% 4.3%
Cash FlowBOP Cash $979,638 $106,669 $137,440 $346,244 $123,466 $66,740 $78,489 $1,838,687Net Income $194,137 ($104,940) $286,388 $88,927 $189,311 $194,277 $455,911 $1,304,011Operating Cash Flow ($117,499) ($296,364) ($716,111) ($682,852) ($880,891) ($620,181) ($1,491,244) ($4,805,143)Financing Cash Flow ($50,000) $794,327 $812,825 $768,954 $1,082,706 $404,806 $1,075,612 $4,889,230EOP Cash $1,006,276 $499,692 $520,542 $521,273 $514,591 $45,642 $118,769 $3,226,785
Existing Bay Area Schools ‘12/13
$1.3M of net income (only $0.4M without grants). Cash supported by $900K of grants
29
FY 2013/14 School Financials - Detailed FY 2013/14 School Financials - Baseline
RMS RSSP RLS ROMO RDP RBM RSA RS8 RS9 Baseline TotalOperating Details
S-T Ratio 38 38 37 38 36 40 35 - 37 41 #DIV/0!Enrollment 610 606 625 615 615 444 600 - 560 653 4,675ADA 586 582 600 590 590 410 570 - 525 627 4,453Teachers 16 16 17 16 17 11 17 - 15 16 125Tutors, ECCs, ATs 8 7 7 8 7 6 5 - 7 9 8Public Rev / Student $7,950 $7,745 $7,810 $7,831 $7,835 $6,565 $7,497 - $7,965 $7,797 $7,686
Income StatementRecurring Revenue $4,862,998 $4,706,785 $4,894,778 $4,829,742 $4,832,141 $2,924,700 $4,511,680 - $4,142,806 $5,102,757 $35,705,630Grants / Fundraising - - - - - $250,000 - $138,450 $329,786 - $718,236Total Revenue $4,862,998 $4,706,785 $4,894,778 $4,829,742 $4,832,141 $3,174,700 $4,511,680 $138,450 $4,472,592 $5,102,757 $36,423,865
Compensation $2,139,052 $2,096,454 $2,197,659 $2,138,391 $2,175,786 $1,670,246 $2,111,244 $68,013 $2,034,603 $2,209,525 $16,631,447Other $1,046,594 $1,072,954 $1,130,390 $1,102,436 $1,130,357 $938,873 $1,122,404 $80,438 $1,163,699 $1,158,136 $8,788,144Facilities Fee $896,820 $865,929 $901,856 $985,919 $890,208 $120,000 $975,219 - $779,281 $941,019 $6,415,231Management Fee $672,615 $649,447 $676,392 $667,296 $667,656 $392,826 $620,577 - $584,461 $705,765 $4,931,269Total Expenses $4,755,080 $4,684,784 $4,906,296 $4,894,041 $4,864,008 $3,121,946 $4,829,443 $148,450 $4,562,045 $5,014,445 $36,766,092
Net Income $107,917 $22,002 ($11,518) ($64,299) ($31,867) $52,754 ($317,763) ($10,000) ($89,452) $88,313 ($342,227)Net Income w/o Grants $107,917 $22,002 ($11,518) ($64,299) ($31,867) ($197,246) ($317,763) ($148,450) ($419,238) $88,313 ($1,060,462)
Cash FlowBOP Cash $1,006,276 $499,692 $520,542 $521,273 $514,591 $45,642 $118,769 $27,978 $75,080 ($937,112) $3,329,844Net Income $107,917 $22,002 ($11,518) ($64,299) ($31,867) $52,754 ($317,763) ($10,000) ($89,452) $88,313 ($342,227)Operating Cash Flow ($152,069) $212,014 $39,218 $124,677 $169,212 ($537,570) ($318,806) $8,166 ($1,523,729) $14,211 ($1,978,887)Financing Cash Flow - ($204,612) ($18,846) ($75,402) ($130,541) $886,396 $293,943 - $1,117,263 ($11,385) $1,868,200EOP Cash $962,125 $529,096 $529,395 $506,249 $521,395 $447,223 ($223,858) $26,145 ($420,838) ($845,973) $2,876,931
Existing Bay Area Schools ‘13/14 Investments will yield close to break-even income levels
• Negative net income of $340K driven by growing schools (RSA and RS9) • Cash decreasing by only $600K due to $1M of support from National to RBM • Assumes grant by RSED of $1 million to RBM ($250K grant and $800K loan)
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Example School: RLS Additional compensation driving 13/14 expenses higher
Rocketship Los Suenos
2012-13 2013-14 RLS Budget vs.RLS Budget RLS Actuals Baseline School RLS Budget 2012-13 Actuals Baseline School
Operating DetailsS-T Ratio 40 39 41 37 (3) (4)Students 630 630 653 625 (5) (28)ADA 605 616 627 600 (16) (27)Teachers 16 16 16 17 (1) (1)ILSs, ECCs, Ats 8 8 9 7 1 2Public Rev / Student $7,581 $7,841 $7,797 $7,810 ($32) $13
Income StatementRecurring Revenue $4,701,224 $4,972,584 $5,102,757 $4,894,778 ($77,807) ($207,980)Grants / Fundraising and Other - - - - - - Total Revenue $4,701,224 $4,972,584 $5,102,757 $4,894,778 ($77,807) ($207,980)
Compensation $2,034,857 $1,958,333 $2,209,525 $2,197,659 ($239,326) $11,866Other $1,118,941 $1,105,190 $1,158,136 $1,130,390 ($25,200) $27,746Facilities Fee $880,571 $913,223 $941,019 $901,856 $11,368 $39,164Management Fee $660,428 $684,917 $705,765 $676,392 $8,526 $29,373Total Recurring Expenses $4,694,797 $4,661,663 $5,014,445 $4,906,296 ($244,632) $108,149
Recurring Net Income $6,427 $310,921 $88,313 ($11,518) ($322,439) ($99,831)% Margin 0.1% 6.3% 1.7% (0.2%) (6.5%) (2.0%)
$50K for lower average salaries this year
$40K for higher benefits costs
$40K for additional ILS
$30K for higher hourly rates
$80K for BOM
$240K of increased comp
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4. National and Regional Overview
32
Summary of Expenses
Note: Excludes $2.1M of redesign costs
FY 2013-14 Budget
Comp Non Comp Total Growth Rate
National $7,721,903 $3,817,428 $11,539,332 20.0%
Bay Area $1,605,000 $318,721 $1,923,721 15.0%
MKE $540,204 $46,000 $586,204 Region Expansion
NASH $462,997 $198,500 $661,497 Region Expansion
Total $10,330,104 $4,380,649 $14,710,753
The total for National/Regional above is approximately $13.4 million. For comparison, the forecast for N/R for 2012/13 is approximately $9.0 million. The final proposed amount is
expected to be approximately $12.0 million.
Note: Initial Annual Planning Budgets have been submitted (and are
shown below). We are still in review process to review the submissions,
and are taking steps to prioritize hires and delay non-critical hires and
expenses. The current status is at least 10% less than the total shown
here (and could be lower).
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Long Term Projections
Rocketship Consolidated - Income Statement2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Enrollment 3,816 5,110 8,826 14,229 23,087 36,371
# of Schools 7 9 15 24 39 62
# of Bay Area Schools 7 8 13 18 23 28
# of Regions 1 2 3 5 8 11
Revenues
Management Fee $4,054,795 $5,384,642 $9,400,115 $15,328,807 $25,132,772 $40,086,220
Growth Philanthropy $4,503,100 $11,576,500 $23,206,500 $20,281,500 $18,486,000 $17,986,000
Other Philanthropy $3,885,900 $550,000 - - - -
Other Home Office Revenue - - - - - -
Total Revenue $12,443,795 $17,511,142 $32,606,615 $35,610,307 $43,618,772 $58,072,220
Expenses
National Office Expenses $7,112,759 $11,539,332 $13,847,198 $16,616,637 $19,939,965 $23,927,958
Regional Support Office Expenses $2,276,721 $3,944,701 $5,885,481 $8,800,893 $12,929,805 $18,014,023
Other Home Office Expenses $352,161 $134,938 $34,125 $34,125 $29,250 $24,375
Total Expenses $9,741,641 $15,618,970 $19,766,803 $25,451,655 $32,899,020 $41,966,356
Net Income $2,702,155 $1,892,172 $12,839,812 $10,158,652 $10,719,751 $16,105,864
Net Income without Philanthropy ($5,686,845) ($10,234,328) ($10,366,688) ($10,122,848) ($7,766,249) ($1,880,136)
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Fundraising Assumed
• $3.0M for national for each new region (assuming it comes in same stages as DC)
• $2.5M for each new region (all at once starting next year)
Summary
Total FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
National - Unrestricted $4,435,900 $3,885,900 $550,000 - - - -
National - Growth $43,200,000 $450,000 $2,700,000 $11,575,000 $9,825,000 $9,450,000 $9,200,000
Bay Area $13,453,100 $1,853,100 $2,900,000 $3,450,000 $2,500,000 $1,500,000 $1,250,000
Milwaukee $1,886,500 $700,000 $526,500 $406,500 $181,500 $36,000 $36,000
TN $2,500,000 $1,500,000 $450,000 $275,000 $275,000 - -
New Regions $35,000,000 - $5,000,000 $7,500,000 $7,500,000 $7,500,000 $7,500,000
Total $100,475,500 $8,389,000 $12,126,500 $23,206,500 $20,281,500 $18,486,000 $17,986,000
Based on current growth plans, expect $90 million of fundraising over next 5 years, $75 million based on new region expansion
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Summary of Cash—Total organization
Note: Excludes non-BA / MKE schools cash needs, but includes their management fees • $3.0M for national for each new region (assuming it comes in same stages as DC) • $2.5M for each new region (all at once starting next year)
Rocketship Consolidated - Cash2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Cash
National & Regions $9,149,964 $10,526,939 $24,149,340 $34,271,466 $44,343,099 $59,601,887
BA Schools $3,069,245 $1,851,145 ($4,348,116) ($10,765,990) ($16,758,617) ($22,275,536)
MKE Schools ($42,920) ($128,153) ($387,043) ($1,130,598) ($2,642,927) ($5,122,878)
Total $12,176,288 $12,249,931 $19,414,181 $22,374,879 $24,941,555 $32,203,474
Cash Surplus / (Shortage)
National & Regions $7,197,592 $8,056,088 $20,967,884 $30,159,089 $39,097,305 $53,031,991
BA Schools $126,656 ($4,004,760) ($13,585,083) ($23,384,960) ($32,525,712) ($41,275,892)
MKE Schools ($502,251) ($633,413) ($2,126,102) ($5,315,182) ($10,716,349) ($19,533,467)
Total $6,821,998 $3,417,915 $5,256,699 $1,458,947 ($4,144,757) ($7,777,368)
Actual projected Cash Position assuming current expense structure and facilities operations
“Safe Cash Position” assuming
current expense structure and
facilities operations
36
Cash Estimate at National – as of June 30
Home Office Conservative Cash Estimate
March Cash Balance $3,567,161
Management Fees $2,641,510
Secured Philanthropy $590,000
Grant Letter Pending $3,824,600
Q4 Expenses ($3,344,384)
Expected June Cash Balance $7,278,887
Does not include the $1 million going to RBM
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Facilities Fees and Financing
38
Review of Facility Fee Utilization Summary of strategy
• 2010-2012 - Collected lease payments from schools that only cover debt service,
taxes and insurance expenses
• After 2012 (starting 2013/2014) - Collect 20% Facility Fee to allow Launchpad to cover all the same
expenses, and establish replacement reserves and help fund future projects.
- Consistent with original Rocketship model, but the difference between the actual leases and the full 20% fee has not been internally dedicated for Launchpad’s facility activities.
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Review of Facility Fee Utilization
2012-13
RMS RSSP RLS ROMO RDP RBM RSA AVG
Lease (Pre-Modification / ~Debt Service) $480,461 $491,296 $646,339 $984,357 $803,146 $62,975 $478,393
Fee applicable Revenue $4,345,714 $4,564,472 $4,566,116 $4,402,242 $4,409,350 $1,298,277 $3,445,799
% of Revenue 11% 11% 14% 22% 18% N/A 14% 15%
2013-14
RMS RSSP RLS ROMO RDP RBM RSA NET
Lease (Pre-Modification / ~Debt Service) $480,461 $491,296 $646,339 $984,357 $803,146 $62,975 $478,393
Fee applicable Revenue $4,484,098 $4,329,645 $4,509,278 $4,448,642 $4,451,041 $2,618,840 $4,137,180
Facility Fee / Lease (Post Modification at 20%) $896,820 $865,929 $901,856 $889,728 $890,208 $523,768 $827,436
Difference $415,993 $394,283 $255,181 ($96,190) $86,111 $403,768 ($147,783) $1,311,363
Notes: RSA will not be at full enrollment in 2013/14. No shortage expected beginning 2014/15.
RBM financing for Phase 2 construction will likely result in smaller difference from the 20% Facility Fee.
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Cross-over refunding of RS#1 and RS#2 First step in Obligated Group Strategy
• New Market Tax Credit (NMTC) loans exists on several schools now
- RMS, RSSP, RLS, RDP
- Federal tax rules require maintaining NMTC for 7 years
• “Cross-over” refunding
- Uses an interim escrow arrangement to bridge the gap to the end of the 7 year commitment, although makes RMS and RSSP slightly more expensive than today’s debt
- Removes future interest rate risk on these schools, especially since these are required to be refinanced in next 2-3 years
- Locks in today’s interest rates; probably 5.5% - 6.5%
- Sets up the end result of an obligated group structure enabling easier access to bond financing for future schools
- Close on cross-over refunding in Fall, 2013
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Cross-over Refunding Economic Decision
Mateo Sheedy Si Se Puede
Assumptions:
Cross-Over Bonds Issuance Date 9/1/2013 9/1/2013
NMTC Loan Principal ($) 5,541,938 6,800,000
NMTC Loan Maturity 5/15/2015 3/18/2016
Number of Years until Cross-Over 1.71 2.55
Cross-Over Bonds Interest Rate 6.00% 6.00%
Final Maturity of Cross-Over Bonds 6/1/2044 6/1/2044
Cross-Over Bonds Principal 7,080,000 9,265,000
Non-Asset Bonds 853,048 1,580,677
Non-Asset Bonds % 12.0% 17.1%
Break-Even Interest Rate 7.06% 7.67%
The break-even interest rate represents the effective long-term rate we would pay if we
executed the strategy now (i.e. with a long-term bond rate of 6%). The effective rate would
be lower if we are able to beat that rate. If we believe that long-term rates will not rise in
next 24 months above 7%, then it might not make sense to execute this strategy. The
strategy would make more sense if we can achieve an investment grade rating.
Currently researching the
possibility of being able to
refinance in 2014. If so, the
effective rate would be
closer to 6.5%.
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Business Team 2013-2014 Initiatives
43
Business Team Organization—2013/2014
Andy Stern
CBO
Margaret Diesel
Financial Controller
Laura Kozel
VP, Facilities
Imelda Gonzalez
Director, HR
Josh Mukhopadhyay
Legal Counsel
VP, Operations
(OPEN)
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Business Team—Key Initiatives 2013/2014 Invest in scalability and infrastructure
• Drive scalability and consistency (S&S Team) - Compliance—systems/tool creation for national oversight - Direct support—help desk and training on central systems - Knowledge management—Document/organize materials - Key Priorities
- Version 1.0 “BOM Handbook” - BOM and OM trainings at July summer PD - Identification of nuances for MWKE in systems, documentation, and training
• Business Operations Redesign (Field Ops Team) - Business Operations Managers at each school - Regional management - Clear direction/training and consistent priorities
• Other functions - Finance Team: Robust purchasing function; Budget vs. Actual reporting system - Facilities Team: Implement scalable financing infrastructure; facilities management - HR Team: Roll-out of HRIS, Benefits and other plan communications upgrade - Legal team: Clear understanding and influence on zoning and other non-negotiables
• Budget Implications - Total budget for all Business functions in 2012/13 was $3.6 million. Current budget is
approximately $5.1 million
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Tradeoff between quality and size?
Quality
Size (Growth)
Organizations have easier time of achieving
quality when small
Difficult to maintain quality with growth
Size (Growth)
Scalability
Quality
Scalability can enable RSED to move the entire curve to the right
Rethinking
elementary school
from the ground up.
Twitter: @RocketshipED
www.rsed.org