Five things to know about BHS finances
As the Barbershop Harmony Society continues on a path of stabilization and growth, its improving financial footing is supporting long-term sustainability. Chief Financial Officer Erik Dove shares a few bright spots from the current financial picture.
The most important news:
All business units and programs saw growth year over year from 2022 to 2023.
The past year closed with a net cash gain from recurring operations, and 2024 is projected to continue that positive trend. Recurring cash flow from operations was a positive $216k in 2023 compared with the 2022 year end negative cash flow from operations of ($306K), a $522K increase. BHS continues to rebuild its 90 days cash on hand position that was depleted due to COVID-losses and litigation expenses.
BHS is budgeting a $412K positive recurring cash flow from operations for 2024.
Membership dues income was up $137K year over year to $1.62 million in 2023, a 9.2% increase over $1.49 million achieved in 2022.
Membership continues to grow in 2024. After experiencing steady membership declines starting in 1990 and continuing with the steep COVID-related decline experienced in 2021, BHS member numbers have steadily grown since 2022 with current membership numbers of more than 14,400 exceeding the levels needed to meet the 2024 budget.
How we got there
The resurging growth of chapters and districts reflects more people actively participating in barbershop, and drives growth across all aspects of the business.
Harmony University income was up $91K year over year based on increased attendance.
Events net income (International & Midwinter) was up $279K year over year, outperforming its budget by $46K. Looking ahead, Cleveland registrations are tracking ahead of budget.
Harmony Marketplace net income was up $75K year over year, and $46K positive performance over budget.
Sheet music and digital learning track sales were up $65K year over year and $24K above budget.
The recent one-time offer to purchase three years of BHS dues was accepted by 550+ members, producing a cash infusion of ~$220K that helped reduce interest expenses and maintain cash flow flexibility. Current year-to-date membership is up ~400 members since year-end 2023.
BHS eliminated outstanding revolving debt in early 2024. $2.9 million in mortgage debt remains but is being paid down monthly according to the mortgage terms. Reducing usage under the line of credit saves over $5K per month in budgeted interest expense.
We keep growing. The “new to barbershop” recruiting number has grown rapidly through the past three years, with more than 1500 people joining in the past 12 months, compared with 945 in the four quarters before that, and 454 during the bottom swing of the pandemic.
Simplified financial position: good news!
In addition to the high-level review of 2023 financials discussed above, several key indicators show signs of a return to business as usual. Brief highlights:
BHS exceeded Fiscal Year End (FYE) 2023 budgeted income by $391K at $638K compared to the $247K budget. Excluding the accounting treatment of the HFI Settlement Agreement and other one-time items, BHS would have reported a negative ($80K) net income in 2023 compared to the Board-approved budgeted loss of ($454K), a $374K positive improvement and a $530K improvement over 2022 results.
No litigation expenses or other one-time expenses are expected in 2024
BHS has positive book equity at FYE 2023. The 2023 positive book equity improved from the negative book equity at FYE 2022, though the BHS building’s $10 million market value (compared to its <$3 million book value) should be included to reflect BHS’s true equity position (as reported in the 2022 audit).
Any future sale proceeds of the headquarters building would create an opportunity for endowment-like investment and growth. Important note: the sale proceeds are not intended for operations, but instead investment earnings will be available to sustainably support BHS programs and growth. The 2024 budget does not depend on the proceeds of a building sale to achieve positive cash flow.
How does this help you succeed?
We are now in a position to dream again. Not to overstate things and act as if the challenges of the five past years didn’t happen… but for the most part, those financial impacts are receding behind us.
Now that the Society is not constantly catching up for losses and difficulties, it has breathing room to get back into a creative space to make the chapter experience central. A greatly reduced staff focuses its limited time on services that are most valuable to our community, constantly looking to serve our communities in outward-looking activities.
The Barbershop Harmony Society is back to a growth mindset. More than 1500 people have joined in the past 12 months, a huge recharge from the pandemic era. Is it possible that the new boosts of energy are coming from people who are going to be in it for a longer run? That might suggest more growth, stability, and opportunity.
Of course, most people join barbershop by way of a local chapter experience. The success of the entire Society is the aggregate of your local successes. We look forward to dreaming and growing together in the future!
Erik Dove is Chief Financial Officer for the Barbershop Harmony Society.