President's Notes to Audited Financials F'10
December 14, 2010
Transformation, change and innovation are the building blocks of Silicon Valley and The Tech Museum. Through strategic initiatives, today, we have a strong financial platform from which to start our process of renewal. Museum attendance is critical to the long-term sustainability. With our new strategic plan to reposition the galleries as the Spirit of Silicon Valley we will broaden and diversify our audiences and become a unique destination.
In order to build a stable platform for renewal in a challenging economy, the priority of the museum has been to lower baseline museum expenses to match revenue in order to stabilize the institution. We have been able to achieve steady growth even while significantly reducing expenses. Key initiatives to deliver sustainability have been museum attendance growth developing the learning programs, expense control, and introducing traveling exhibitions as a new business unit that drives new audiences and higher per caps.
The vision of The Tech Museum is to be the place where people of all ages and backgrounds come to gain a deeper understanding of science and technology, a sense of what the future holds, and a context for developing informed opinions on issues affecting the world.
The Building Blocks of Change
Steady baseline museum growth
The baseline museum attendance has grown 3.5% in F'10 compared to F'09 and 4.4% over F'08 attendance. Our free field trip program for California school children K-12, introduced in F'08, now draws nearly 120K students each year, and has fueled baseline museum attendance growth.
While significantly reducing baseline museum expenses (down $3,084,831/19% vs. F'09), the F'10 baseline revenue was up 17%. The key revenue driver was the value of the endowment fund, which recovered more than $4 million compared to the prior fiscal year.
A new business unit - traveling exhibitions
In F'08, we introduced a second business unit, the traveling blockbuster exhibitions, to augment the baseline museum. Each blockbuster is structured as its own business unit with any profit adding cash to the museum to support its renewal. Blockbusters can have wide variations in revenue and expenses as each blockbuster has a unique audience requiring different attendance and revenue models.
Initially, the blockbusters were jointly funded by city partners and required a large investment and were a high risk. The financial crisis required a new model. Today, the business model is smaller exhibitions with lower financial risk and lower expenses, which create positive contributions to our cash flow.
In the fall of 2007, BODY WORLDS 2 & The 3 Pound Gem opened. Since then, The Tech Museum has operated 4 traveling exhibitions driving nearly 600K visitors to our museum with an economic impact of $30 million dollars to downtown San Jose.
Creating financial stability - Zero Bank Debt
We ended our fiscal year June 2010 free of debt. The cash position for the four most recent fiscal years improved significantly, as evidenced by zero bank debt. We have been able to use cash flow rather than credit. Records for the preceding fiscal years (F'03-06) show bank debt.
The audited financial statements, as of 6/30/10, show that The Tech Museum had a positive net change in assets of $1.9 million and there was an 8% increase of total revenue vs. F'09.
Efficiency: More with Less
By right sizing the institution for the future and tightly controlling expenses the museum is lean and poised for growth. F'10 expenses were $14,281,354 vs. $19,770,302 in F'09, which is a 28% decrease.
In the past three years, The Tech Museum has averaged 530K visitors an increase of 30% over 2005 and we have done that with 32% fewer staff. In 2005, The Tech Museum had 133 staff, compared to the current roster of 90.
Since 2005, The Tech Museum has lowered the operating cost per visitor from $45.06 to $32.09 - a decrease of 29%.
Our journey to the future continues -- thanks to the support of our community and the efforts of many. Please find our recent audited financials and tax returns posted below. F'10's 990 will be posted in February.
Peter Friess, Ph.D