Supplemental Financial Information
HBS funds its operations with cash from three primary sources: MBA tuition and fees; earned income from Harvard Business Publishing (HBP), Executive Education, and HBS Online; and philanthropic revenues (including current use gifts and distribution from the endowment).
In fiscal 2022, the School’s total revenues increased by $161 million, or 20 percent, to $966 million from $805 million in the prior year, primarily reflecting the growth in Executive Education tuition revenue, MBA tuition and fees, and HBP. Following a year of entirely virtual programming, Executive Education returned to its traditional residential model in fiscal 2022, blending its in-person programming with virtual learning.
Revenue (in millions)
- 31% Publishing
- 27% Endowment Distribution & Current
- 18% Executive Education Tuition
- 14% MBA Tuition & Fees
- 8% HBS Online
- 2% Housing, Rents, & Other
MBA Tuition and Fees
Student tuition and fee revenue from the MBA program increased 21 percent to $137 million from $113 million in fiscal 2021. In that year, a number of students elected to take advantage of the School’s deferral and leave policies because of COVID, reducing enrollment by 14 percent from fiscal 2020. By contrast, enrollment in fiscal 2022 was 1,870 students, in line with the School’s average enrollment between 2013 and 2020.
First-year MBA tuition in fiscal 2022 was $73,440, flat with fiscal 2021. Combined tuition and fees for fiscal 2022 were at the bottom of the peer business schools tracked by HBS and amounted to 14 percent of the School’s total revenues.
From an enrollment standpoint, the mix of first- and second-year MBA students was different in fiscal 2022 than in a typical year. From 2015 through 2020, total enrollment averaged about 940 students per class. Because of the deferral and leave options, in fiscal 2021 that number decreased to 729 first-year students and 880 second-year students. The School staggered the start of students who elected a deferral or leave of absence, allowing roughly half to enroll in fiscal 2022 and half in the current fiscal year. This resulted in fiscal 2022 enrollment of 1,013 first-year students and 857 second-year students.
Harvard Business Publishing
HBP’s three market groups—Harvard Business Review Group, HBP Education, and Corporate Learning—each delivered year-over-year revenue growth in fiscal 2022. As a result, total Publishing revenue increased 10 percent from fiscal 2021 to $302 million.
HBP international revenue continued its steady progress, increasing 15 percent and representing 42 percent of the group’s total annual sales in fiscal 2022.
Harvard Business Review provided subscribers with timely articles from its flagship magazine, website (hbr.org) and social media presence. In addition, HBR Press released a number books, podcasts, webinars, and HBR Live events. HBR Group sales increased 3 percent year-over-year, while paid circulation grew 1 percent to a record 352,000 subscribers.
HBP Education sales of course materials for participant-centered learning in business education increased 11 percent from fiscal 2021. HBP Education provides course materials for online, hybrid and face-to-face applications with content that adds dynamic, real-life perspectives to undergraduate, MBA, and executive education programs.
Revenue from Corporate Learning products and services increased 18 percent from fiscal 2021. Corporate Learning partners with companies to co-create leadership development solutions that align with strategy and engage learners.
Total HBP revenue amounted to 31 percent of the School’s total revenues in fiscal 2022, 3 percentage points lower than in fiscal 2021.
Executive Education tuition increased by $93 million to $174 million in fiscal 2022 from $81 million in the prior year, reflecting the return of on-campus programming. The group produced 116 residential programs and 52 fully virtual programs for 10,575 participants.
A combined 81 Topic-Focused and Comprehensive Leadership programs were designed and delivered for more than 6,300 global participants, representing an increase of 40 percent compared with fiscal 2021. The group also delivered custom programs in a range of industries, on-boarding 18 new clients into the portfolio and successfully navigating the return to on-campus programming, more than 80 percent of which was either entirely residential or blended. Internationally, the group launched new cohorts for its Senior Leadership Programs in India and the Middle East.
Total Executive Education tuition revenue accounted for 18 percent of the School’s total revenues in fiscal 2022, compared with 10 percent of total revenues in fiscal 2021.
Although HBS Online revenue declined 3 percent to $74 million in fiscal 2022 from $76 million a year earlier, the group performed well in the face of increased competition and higher learner acquisition costs.
Total enrollment increased 5 percent to nearly 41,000, a compound annual growth rate of more than 67 percent since the group launched in fiscal 2014. Women comprised 42 percent of the total enrollment in fiscal 2022, while international students made up 67 percent.
HBS Online expanded its course offerings with three new offerings: Design Thinking and Innovation, Power and Influence for Positive Impact, and Sustainable Investing.
Total HBS Online revenue amounted to 8 percent of the School’s total revenues in fiscal 2022, compared with 9 percent for the prior year.
Cash Received From Gifts (in millions)
Cash Received from Operations (in millions)
Gifts & Endowment
Philanthropic revenue has long been vital to sustaining the School’s annual operations. In fiscal 2022, total revenue from the School’s three philanthropic sources—distribution from the endowment, unrestricted current use gifts, and restricted current use gifts—increased to $260 million from $244 million in fiscal 2021. This revenue amounted to 27 percent of the School’s total revenues, compared with 30 percent a year earlier. For the University as a whole, philanthropic revenue amounted to 45 percent of total operating revenues for fiscal 2022.
The School’s annual endowment distribution for fiscal 2022 increased 4 percent from the prior year to $191 million, amounting to 20 percent of total revenue. In any given year, the change in the endowment distribution is governed by three factors: a specified rate increase set by the University, which in fiscal 2022 was 2.5 percent; new gifts to the endowment, which consists of more than 1,000 discrete funds established over the years by individual donors, corporations, and reunion classes; and cash transfers by the School to the endowment reserve. The School budgets the use of endowment distributions to support operations in accordance with the donors’ intentions and the terms of each gift.
Unrestricted Reserves (in millions)
Harvard is obligated to preserve the purchasing power of the endowment by spending only a small fraction of its value each year. Spending more than that over time, for whatever reason, would privilege the present over the future in a manner inconsistent with an endowment’s fundamental purpose of maintaining intergenerational equity.
The University executes on this obligation in determining each year’s endowment payout rate—that is, the percentage of the endowment’s fair market value withdrawn and distributed annually for operations and for one-time or time-limited strategic purposes. This rate applies to HBS and to all schools at Harvard.
Endowment Distribution (in millions)
Endowment Distribution Components
- 34% Professorships
- 24% Financial Aid
- 16% Unrestricted
- 8% Other
- 7% Special Initiatives
- 6% Research
- 5% Building Operations
Consistent with the long-term goal of preserving the value of the endowment in real terms (after inflation) and generating a predictable stream of available income, the University’s targeted annual payout range is 5.0 to 5.5 percent of market value.
The payout rate for fiscal 2022 was 4.2 percent, down 100 basis points from the prior year. The utilization of a payout formula means that the annual payout rate is generally lower following years of relatively high investment returns, as was the case in fiscal 2022, and higher following years of lower investment returns. Adjustments can be made in succeeding years, keeping in mind the long-term payout goals of balancing budgetary stability with the preservation of the endowment’s purchasing power. Each year the Harvard Corporation approves the final distribution amount.
Funds within the HBS endowment, along with those of the other Harvard schools, are managed by Harvard Management Company (HMC), a nonprofit, wholly owned subsidiary of the University. HMC has managed the Harvard endowment portfolio since 1974. Its mission is to ensure the University has the financial resources to confidently maintain and expand its leadership in education and research for future generations. The return on endowment assets for fiscal 2022, net of investment expenses and fees, was -1.8 percent, reflecting significant weakness in the equity and bond markets during the past year caused by persistent inflation and tightening monetary policies. Endowment returns for fiscal 2021 and 2020 were 33.6 percent and 7.3 percent, respectively.
The value of the University’s endowment declined to $50.9 billion at the end of fiscal 2022 from $53.2 billion at the end of the prior year. This value reflects investment returns, net of expenses and fees, as well as cash gifts to the endowment received during the year, net of the University’s annual distributions and decapitalizations.
The fiscal 2022 year-end market value of the HBS endowment was $5.1 billion as of June 30, 2022, compared with $5.3 billion a year earlier. The change reflected the negative return on the University’s endowment, less the School's annual distribution and decapitalizations, offset by endowment gifts received by HBS during the year and transfers to the School’s endowment reserve.
The value of the University endowment grew to $53.2 billion in fiscal 2021—an increase of 27 percent from $41.9 billion a year earlier. This value reflects investment returns, net of expenses and fees, as well as cash gifts to the endowment received during the year, net of the University's annual distributions and decapitalizations.
HBS received gifts from more than 10,200 donors in fiscal 2022, including MBA, Doctoral, and Executive Education program alumni, as well as friends of the School.
Total cash received from gifts in fiscal 2022, including new endowment gifts and gifts for capital construction projects, payments on prior years’ pledges, and restricted and unrestricted current use giving, was $151 million compared with $149 million in the prior year. Cash giving to the endowment decreased to $77 million, from $80 million in fiscal 2021. Cash giving for capital projects totaled $5 million, compared with $8 million in the prior year.
Current use giving—both restricted and unrestricted—provides crucial funding for innovation across the School. Because current use gifts can be spent immediately, they have a significant impact on the net operating surplus and, therefore, the School’s ability to capitalize on emerging strategic opportunities. For example, current use giving has enabled the School to enhance the Harvard Innovation Labs ecosystem, expand the reach of HBS Online, and broaden the faculty’s ambitious research agenda.
Revenue from unrestricted current use gifts increased 10 percent to $45 million in fiscal 2022. Sustaining the HBS community’s remarkable commitment to unrestricted current use giving remains instrumental in achieving the mission of the School.
Restricted current use giving typically varies from year to year in line with the School’s changing fundraising priorities and strategic needs. In fiscal 2022, revenue from these restricted gifts increased 26 percent from a year earlier to $24 million.
Endowment (in millions)
- FY 22 $5,086
- FY 21 5,265
- FY 20 4,092
- FY 19 3,985
- FY 18 3,787
Restricted current use giving typically varies from year to year in line with the School's changing fundraising priorities and strategic needs. In fiscal 2021, revenue from these restricted gifts decreased 17 percent from a year earlier to $19 million.
Housing, Rents, Interest Income & Other
With more students on campus in fiscal 2022, total revenue from the housing, rents, and other category increased by $3 million from the prior year to $19 million. The School reported no interest income in fiscal 2022, compared with $1 million a year earlier. Total housing, rents, interest income, and other revenue amounted to 2 percent of the School’s total revenues in fiscal 2022, consistent with the prior year.
Executive Education, HBP, and HBS Online operating costs, as well as the School's faculty research costs, cut across multiple expense line items in the Statement of Activity and Cash Flows.
Expenses (in millions)
- 47% Salaries & Benefits
- 14% Other
- 10% Publishing & Printing
- 8% Space & Occupancy
- 6% Fellowships
- 6% Professional Services
- 5% Depreciation
- 3% University Assessments
- 1% Supplies & Equipment
- 0% Debt Service
Faculty research expenses include a portion of faculty salaries and benefits expense, as well as direct costs for faculty support staff and travel, and for the School’s network of global offices. Additionally, HBS allocates a portion of the costs associated with library resources, campus facilities, technology, and administration to this category. Faculty research expenses totaled $140 million in fiscal 2022, comprising 15 percent of the School’s operating budget.
Although HBS characterizes costs charged to HBP, HBS Online, and Executive Education as operating expenses, in a profit-seeking enterprise they would in large part be considered cost of goods sold. These expenses include direct costs for staff compensation, specialized outside professional services in Information Technology and other functional areas, marketing costs, and residence expenses for Executive Education program participants.
Total operating expenses for fiscal 2022 were $908 million, an increase of $129 million, or 17 percent, from $779 million for fiscal 2021. The increase was primarily attributable to other expense and salaries and benefits.
Salaries & Benefits
Compensation for faculty and staff is the largest expense at HBS. The School’s salaries and benefits expense for fiscal 2022 increased 11 percent to $428 million from $386 million in fiscal 2021. This represented 47 percent of the School’s total operating costs, compared with 50 percent in the prior year. The change in salaries and benefits was attributable to both an increase in full-time equivalent (FTE) faculty and staff and rate increases.
Expanding the size and diversity of the faculty is a strategic priority for the School. These efforts enhance the strength of our MBA and Doctoral Programs; fuel the growth of HBP, Executive Education, and HBSO; and expand our ability to conduct innovative research. In fiscal 2022, six candidates accepted Assistant Professor positions, and two faculty members were promoted to associate or tenured positions. The total number of faculty, as measured in full-time equivalent (FTE), can rise or fall in any given year reflecting retirements, departures, and fluctuations in recruiting activity. Net of retirements and departures, the size of the HBS faculty increased to 272 FTEs in fiscal 2022, from 256 FTEs a year earlier.
The School’s staff grew to a budgeted 1,325 FTEs in fiscal 2022, from 1,289 in the prior year.
To capitalize on new opportunities, the School invested to expand the faculty, increase Information Technology staffing to accommodate the growth in virtual and hybrid learning, and grow HBS Online. The increase in IT staffing also reflects the School’s continuing investments to further strengthen the security of the School’s data infrastructure.
The School categorizes fellowships, or financial aid, as an expense line item on the Statement of Activity and Cash Flows. Making education at HBS affordable to a broad cross section of applicants, regardless of their financial circumstances, is a long-standing goal of the School.
The prospect of entering or returning to the workforce with high levels of education debt can deter strong MBA candidates from applying to HBS and restrict their career choices upon graduation. This is particularly true for younger students, women, those from outside the United States, and students whose early career paths have not enabled them to reduce their undergraduate loans. Consequently, the School strives to assist students in minimizing their debt at graduation by ensuring that fellowship support more than keeps pace with tuition and fees.
Total fellowships expense for fiscal 2022, including assistance for MBA students, Doctoral candidates, and a limited number of Executive Education participants, increased by $4 million, or 8 percent, from fiscal 2021 to $57 million. The increase in fellowships reflected the increase in student enrollment. Fellowships amounted to 6 percent of the School’s total operating costs in fiscal 2022, down one point from the prior year.
Approximately half of the School’s MBA students currently receive fellowships, which cover an average of more than 50 percent of a student’s total tuition. About 26 percent of total tuition—more than $35 million—was awarded as fellowships in fiscal 2022.
Average fellowship support per student totaled nearly $44,000 in fiscal 2022 and was up 2 percent from the prior year. Over the past five fiscal years, the School’s average two-year MBA fellowship award has grown from more than $75,000 for the class of 2018 to $86,000 for the class of 2023.
Funding for fellowships comes from restricted endowment and current use giving by HBS alumni and friends. These funds are supplemented by unrestricted funds as necessary, which totaled $1.2 million in fiscal 2022.
Publishing & Printing
This expense category includes a portion of HBP’s production costs plus a small amount of spending related to the School’s printed materials and publications. The production costs include, for example, Harvard Business Review’s printing expense. They also include strategic investments in digital infrastructure and content designed to extend the group’s record of consistent growth at a time of significant change in the way information is consumed.
Publishing and printing expenses for fiscal 2022 increased by $11 million, or 14 percent, from the prior year to $89 million, reflecting the growth of HBP. Printing and publishing accounted for 10 percent total operating costs, consistent with the prior year.
Space & Occupancy
The HBS campus includes 36 buildings encompassing 2 million square feet. Space and occupancy expenses include costs related to maintaining and operating the School’s buildings and campus infrastructure. Additionally, facilities improvement and renovation costs that do not qualify as capital expenses are generally included in this category.
Also included are expenses related to dining facilities and other campus services; costs associated with leased space for HBP, HBS Online, and the School’s global offices; as well as residence costs for Executive Education program participants.
With MBA enrollment returning to its historical average in fiscal 2022, the School’s space and occupancy expenses increased by $9 million, or 14 percent, from the prior year to $73 million. Space and occupancy expense accounted for 8 percent of the School’s total operating costs in fiscal 2022, consistent with the prior year.
A large portion of the School’s professional services expense is related to spending that a for-profit business would categorize as cost of goods sold.
For fiscal year 2022, professional services expenses increased $7 million, or 15 percent, from the prior year to $53 million. This result primarily reflected the resumption of on-campus activities in fiscal 2022 and the need for professional services to support the School’s larger revenue base.
IT spending represented 11 percent of the School’s total operating expenses in fiscal 2022. Controlling IT costs is an important financial priority for the School, and to that end HBS has begun to shift toward software-as-a-service platforms rather than custom-developed applications. The School also is moving toward greater use of third-party IT service providers and transitioning IT applications to the cloud.
Supplies & Equipment & Other Expenses
Supplies and equipment expenses for fiscal 2022 were $10 million, or 1 percent of the School’s total operating costs, consistent with the prior year. In the other expense category, fiscal 2022 spending was $124 million, up approximately 70 percent from the prior year. This amounted to 14 percent of the School’s total operating costs versus 9 percent in fiscal 2021. The increase of on-campus activity with the fading of COVID-19 resulted in a significant rise in the other expenses line. The largest expense increases occurred in areas such as catering, travel, and advertising.
HBS finances major capital projects with a mix of three sources of funding: gifts, unrestricted reserves of internally generated cash, and the strategic use of debt financed through the University.
The HBS balance sheet historically has been only modestly leveraged, and debt leverage remained low in fiscal 2022. HBS paid down $5 million in building debt in fiscal 2022, compared with $7 million in the prior year. The School’s year-end fiscal 2022 building debt-to-net asset ratio was 0.5 percent, unchanged from the prior year. Other University debt increased by $4 million to $83 million.
The School’s debt service expense consists of interest payments to the University and is covered by using cash from operations. Fiscal 2022 debt service expense remained at $2 million. As in fiscal 2021, this expense was mainly associated with borrowings to finance prior years’ campus expansion. Consistent with the four prior years, the interest portion of the School’s debt service amounted to less than 1 percent of total operating costs in fiscal 2022.
The University Assessments expense encompasses services provided to HBS by Harvard University, including payroll and benefits administration, processing of accounts receivable and payable, and legal services. The amount charged to HBS in any given year is primarily calculated as a percentage of the School’s total expenses. The School’s expense for these assessments increased $6 million to $27 million, or 3 percent of total operating costs. Of the total increase, approximately $5 million represented the reinstatement of an assessment waived by the University in fiscal 2021 in response to the challenging economic environment. The other $1 million represented regular annual increases in the assessments.
The School computes depreciation using the straight-line method over the estimated useful lives of the assets. The depreciation expense for fiscal 2022 decreased by $1 million, or 2.2 percent, from the prior year to $45 million. The School’s depreciation expense for fiscal 2022 amounted to 5 percent of total operating costs, compared with 6 percent a year earlier.
Cash Before Capital Activites
The School’s cash operations totaled $58 million in fiscal 2022, compared with $26 million in fiscal 2021, reflecting the School’s ability to increase revenue faster than expenses. As in fiscal 2021, this cash was largely generated by margin contributions from the School’s competitive business units—HBP, Executive Education, and HBS Online—as well as generous giving to the School by alumni and friends of HBS. In addition, depreciation is a non-cash item that added back $45 million to the School’s cash flow in fiscal 2022, compared with $46 million in the prior year
Net Capital Expenses
Given continued uncertainty about the pandemic heading into fiscal 2022, capital spending was limited to select projects. These included the renovations of Cash House and Cumnock Hall as well as construction at 114 Western Avenue for new leased co-working office space. Total capital expenses for fiscal 2022 increased to $43 million from $22 million in the prior year. The School’s net capital expenses for fiscal 2022 totaled $28 million, down $2 million from the prior year.
Changes in Debt & Other
The School’s debt and other cash activities decreased by $63 million in fiscal 2022, compared with a decrease of $5 million in the prior year. The change in debt and other cash activities primarily related a transfer to the HBS endowment of $65 million in unrestricted cash, made possible by the School’s operating surplus, to fund future capital needs.
Because gifts, internally generated cash, and unrestricted reserves have been available and sufficient to finance capital activities, fiscal 2022 marked the School’s 14th consecutive year with no new borrowings. Debt principal payments were $6 million in fiscal 2022 compared with $7 million a year earlier.
Capitalization of endowment income—or cash used to purchase endowment units—was a $5 million use of cash in fiscal 2022, down $1 million from the prior year. In compliance with federal and state legal requirements, the School’s objective is to spend as much of the endowment distribution as possible in any given year, according to the terms of each gift. Funds unspent as a result of gift restrictions are generally reinvested in the endowment.
In compliance with the law, HBS accesses the investment appreciation within existing endowment accounts when the terms of the gift require funds to be withdrawn at a rate higher than the University’s payout rate in any given year. Decapitalization of endowment income—or cash drawn from endowment appreciation—was a $4 million source of cash in fiscal 2022, compared with a $1 million source of cash in fiscal 2021.
Ending Balance, Unrestricted Reserves
Approximately 57 percent of the School’s revenues in fiscal 2022 came from HBP, Executive Education, and HBS Online—business units that are sensitive to fluctuations in the economy. Consequently, maintaining an ample balance of unrestricted reserves outside of the endowment is crucial to providing HBS with sufficient liquidity to finance ongoing campus renewal and expansion projects and to capitalize on emerging strategic opportunities through economic cycles over the long term.
Continuing its focus on generating strong cash from operating activities, HBS concluded fiscal 2022 with an unrestricted current use reserves balance of $227 million, compared with $211 million a year earlier. This level is substantially above the required level of unrestricted reserves for liquidity management purposes.