Consolidated Financial Statements: May 31, 2019, and 2018
Letter from the Senior Vice President of Administration and Finance, and Chief Financial Officer—Fiscal Year 2019
It is my pleasure to present the audited financial statements for Berklee for the fiscal year ending May 31, 2019. In an era of increasing challenges for higher education, Berklee’s 2019 financial results reflect our continuing focus on 1) student success, including 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 $288.7 million and an operating margin of $12.7 million, or 4.4 percent of operating revenues, consistent with our 2–4 percent target range. Three years after the merger of Berklee College of Music and Boston Conservatory, our 2019 operating results reflect continuing growth in Conservatory programs and financial results. Berklee Online turned in another strong year, which included strategic expansion into graduate degrees. Berklee’s campus in Valencia, Spain, which offers undergraduate study abroad as well as graduate programs and is now operating at full capacity, turned in a second consecutive year of solid operating results. Berklee’s summer programs benefited from healthy growth in our summer five-week program for high school students. 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 continued development of a new technology platform. We also initiated two significant capital projects to improve our students’ experience: new practice rooms at our Boston campus and the renovation of our new center in New York City. Located just steps from Broadway, Power Station at BerkleeNYC will offer exciting opportunities for our music, dance, and theater students when it reopens by summer 2020. Affordability was a top priority in 2019 as scholarship support reached new highs, while tuition increases were limited.
Fundraising continued its positive momentum in 2019. Berklee concluded its Soundbreaking campaign in May and exceeded the $100 million capital campaign goal by over 50 percent. Scholarship support has been a key designation. Berklee’s endowment continues to generate new highs in support for the institution’s operating budget. The endowment, at $356 million, is the largest asset on Berklee’s balance sheet, followed closely by our facilities at $286 million, net of accumulated depreciation.
Berklee’s balance sheet continued to strengthen in 2019, with increasing liquidity and growing net assets. Total assets have grown to almost $780 million, with almost $470 million in the endowment, short-term investments, and cash. Total liabilities of $382 million primarily reflect the institution’s long-term debt, all of which has been issued over the long term at relatively low fixed interest rates. Net assets increased by 2 percent in 2018 to $397 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 and student success, 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