Consolidated Financial Statements: May 31, 2018 and 2017
Letter from the Senior Vice President of Administration and Finance and Chief Financial Officer—Fiscal Year 2018
It is my pleasure to present the audited financial statements for Berklee for the fiscal year ending May 31, 2018. In an era of increasing challenges for higher education, Berklee’s 2018 financial results reflect our continuing focus on: 1. Ensuring Berklee is as affordable as possible for students; 2. Investing in support of the institution’s vision, mission, and strategic priorities; and 3. Maintaining our financial strength.
From an operating perspective, Berklee ended the year with total operating revenues of $283 million and an operating margin of $8.7 million or 3.1 percent of operating revenues, consistent with our 2-4 percent target range. Two years after the merger of Berklee College of Music and The Boston Conservatory, our 2018 operating results reflect continuing growth in Conservatory programs and financial results. Berklee Online turned in another strong year due primarily to growth in online degree enrollment. Berklee’s campus in Valencia, Spain, which offers undergraduate study abroad as well as graduate programs and is now operating at full capacity, produced its best financial results to date. Our core operations on the Boston campus continue to perform well, reflecting continuing demand for Berklee’s quality programs. During the year, Berklee invested in the institution’s highest strategic priorities, including the development of a new technology platform and new online master’s degree programs, which launched in September 2018. With generous support from a musician/philanthropist and the City of New York, Berklee opened a center in New York at the iconic Power Station Studios. Located just steps from Broadway, Power Station at BerkleeNYC will offer exciting opportunities for our music, dance, and theater students. Affordability was a top priority in 2018 as scholarship support reached new highs, while tuition increases were limited.
Fundraising continued its positive momentum in 2018. Support for the college enabled Berklee to exceed the cumulative $100 million goal for our Soundbreaking capital campaign by almost 20 percent with over a year to go until the campaign is complete. Scholarship support has been a key designation.
Berklee’s endowment increased to over $365 million in assets in 2018, generating new highs in support for the institution’s operating budget. The endowment is now the largest asset on Berklee’s balance sheet.
Berklee’s balance sheet continued to strengthen in 2018, with increasing liquidity and growing net assets. Total assets have grown to just under $765 million, with over $450 million in the endowment, short-term investments, and cash. Total liabilities have declined by $16 million to $375 million, reflecting scheduled principal payments on the institution’s debt as well as a decline in accrued pension liabilities, consistent with the closure of the defined benefit plan to new employees in 2012. Net assets increased by 10 percent in 2018 to $389 million.
During the fiscal year, both S&P Global Ratings (A stable) and Moody’s Investors Service (A2 stable) affirmed their current ratings of Berklee, noting the strength of Berklee’s enterprise profile and reputation. In their reports, both noted the strength of Berklee’s market positioning in music, dance, and theater, as well as Berklee’s consistent operating performance.
As higher education continues to face challenges and uncertainties in the years ahead, our balanced approach— affordability, strategic investment, and financial sustainability—will help us to navigate such an environment in the best interests of our students and the entire Berklee community.
Richard M. Hisey
Senior Vice President of Administration and Finance and Chief Financial Officer