Supplemental Financial Information
Revenues
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 2023, the School’s total revenues increased by $101 million, or 11 percent, to $1.1 billion from $966 million in the prior year, primarily reflecting the growth in Executive Education tuition revenue, the endowment distribution, and MBA tuition and fees. Executive Education’s revenue reflected an increase in higher-revenue programming and participant growth of 20 percent from fiscal 2022.
Revenue (in millions)
- FY19
- FY20
- FY21
- FY22
- FY23
Revenue Components
- 29% Publishing
- 27% Endowment Distribution & Current
- 21% Executive Education Tuition
- 14% MBA Tuition & Fees
- 6% HBS Online
- 3% Housing, Rents, & Other
MBA Tuition and Fees
Tuition and fee revenue from the MBA program increased by 11 percent to $152 million in fiscal 2023 from $137 million in the prior year. This growth was a function of the deferral and leave policies granted by HBS to first-year and second-year students in fiscal 2021, during the peak of the COVID pandemic. With both classes including deferred students in fiscal 2023, total enrollment increased 8 percent to 2,024 students compared with 1,870 students in the prior year.
First-year MBA tuition in fiscal 2023 was $73,440, unchanged from fiscal 2022. Combined tuition and fees for fiscal 2023 remained lower than that of peer business schools, and amounted to 14 percent of the School’s total revenues.
Harvard Business Publishing
Fiscal 2023 marked another year of growth for HBP’s three market groups—Corporate Learning, Education, and Harvard Business Review Group. As a result, total Publishing revenue increased 3 percent from the prior year to $310 million.
Publishing’s growing worldwide influence was evident in the strong performance of HBP International revenue, which increased 6 percent and accounted for 43 percent of the group’s total annual sales in fiscal 2023.
Revenue from Corporate Learning products and services increased 7 percent from fiscal 2022. Corporate Learning partners with companies around the world, engaging learners through blended, digital, and on-campus experiences.
HBP Education sales of course materials increased 2 percent from fiscal 2022. The group provides course materials and teaching resources for online, hybrid, and in-person applications, serving as a pedagogical partner for a wide range of educators and learners.
Through its flagship magazine, Harvard Business Review, as well as digital content, live events, books, and tools, HBR Group continued to deliver insights on emerging business trends and management best practices. Paid circulation rose to 377,000, surpassing last year’s mark by 7 percent.
Total HBP revenue amounted to 29 percent of the School’s total revenue in fiscal 2023, 2 percentage points lower than in fiscal 2022.
Executive Education
Executive Education tuition increased by $50 million to $224 million from $174 million in the prior year, primarily reflecting an increase in residential programming and participation. The group welcomed 12,722 participants across 179 programs, comprising 132 in-person programs, 28 hybrid programs, and 19 fully virtual programs.
A combined 92 Focused and Comprehensive Leadership Programs were designed and delivered for more than 7,700 participants, representing an increase of more than 20 percent compared with fiscal 2022. Executive Education also delivered custom programs to more than 4,500 participants, onboarding 23 new clients across a diverse mix of industries.
Internationally, the group delivered full iterations of its Senior Executive Leadership Program (SELP) in India, the Middle East, and Africa and resumed its in-person SELP program in China. Sixty-three percent of participants in the group’s open enrollment programs represented businesses based outside the U.S.
Total Executive Education tuition revenue accounted for 21 percent of the School’s total revenue in fiscal 2023, compared with 18 percent in fiscal 2022.
HBS Online
HBS Online revenue decreased 3 percent to $68 million from $70 million in fiscal 2022, as the group continued to navigate the challenges of increased competition and higher learner acquisition costs.
Total enrollment increased 2 percent to nearly 42,000. While enrollment growth slowed from fiscal 2022, the group continued to see strong demand from women, minority, and international participants, while maintaining an overall completion rate of 88 percent.
HBS Online launched marketing and registration for its CLIMB (Credential of Leadership, Impact, and Management in Business) program. The yearlong, comprehensive offering for both new and experienced business leaders combines courses on leadership, strategy, and finance with shorter courses in areas such as dynamic teaming and personal branding.
Total HBS Online revenue accounted for 6 percent of the School’s total revenue in fiscal 2023, compared with 8 percent in fiscal 2022.
Cash Received From Gifts (in millions)
- FY19
- FY20
- FY21
- FY22
- FY23
Net Operating Surplus (in millions)
- FY19
- FY20
- FY21
- FY22
- FY23
Gifts & Endowment
Philanthropic revenue—distribution from the endowment, unrestricted current use gifts, and restricted current use gifts—fuels and sustains the School’s annual operations. In fiscal 2023, revenue from these three sources accounted for $282 million, or 27 percent of the School’s total revenues, compared with $260 million, or 27 percent, in fiscal 2022. For the University as a whole, philanthropic revenue accounted for 45% of total operating revenues in fiscal 2023.
The School’s annual endowment distribution for fiscal 2023 increased 9 percent from the prior year to $208 million, or 20 percent of total revenue. Three factors govern the change in the endowment distribution: a specified rate increase set by the University, which in fiscal 2023 was 4.5 percent; new gifts to the endowment, which comprises more than 1,000 discrete funds established over the School’s 115-year history 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)
- FY19
- FY20
- FY21
- FY22
- FY23
Harvard is obligated to preserve the endowment’s purchasing power 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 this obligation in determining each year’s endowment payout rate—the percentage of the endowment’s fair market value withdrawn and distributed annually for operations and for one-time or limited strategic purposes. This rate applies to HBS and all schools at Harvard.
Endowment Distribution (in millions)
- FY19
- FY20
- FY21
- FY22
- FY23
Endowment Distribution Components
- 33% Professorships
- 24% Financial Aid
- 17% Unrestricted
- 8% Other
- 7% Special Initiatives
- 6% Research
- 5% Building Operations
Consistent with the long-term goal of preserving the endowment’s value in real terms (after inflation) and generating a predictable stream of available income, the University’s targeted annual payout ratio is 5.0 to 5.5 percent of market value.
The payout rate for fiscal 2023 was 4.7 percent, up 50 basis points from the prior year. Using the payout formula means that the annual payout rate is generally lower following years of high investment returns and higher following years of lower investment returns. Adjustments can be made in succeeding years, considering the long-term payout goals of balancing budget stability with preserving the endowment’s purchasing power. The Harvard Corporation approves the final amount each year.
Funds within the HBS endowment and 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 2023, net of investment expenses and fees, was 2.9 percent, compared with -1.8 percent in fiscal 2022 and 33.6 percent in fiscal 2021.
The value of the University’s endowment declined to $50.7 billion at the end of fiscal 2023 from $50.9 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 2023 year-end market value of the HBS endowment was $5.1 billion as of June 30, 2023, unchanged from the prior year.
HBS received gifts from more than 9,800 donors in fiscal 2023, including MBA, Doctoral, and Executive Education program alumni, as well as friends of the School.
Total cash received from gifts in fiscal 2023, including new endowment gifts and gifts for capital construction projects, payments on prior years’ pledges, and restricted and unrestricted current use giving, was $158 million, compared with $151 million in the prior year. Cash giving to the endowment increased to $81 million from $77 million in fiscal 2022. Cash giving for capital projects totaled $3 million in fiscal 2023, compared with $5 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. Current use giving has supported a number of Dean Datar’s strategic initiatives, including the Digital, Data, and Design Institute at Harvard (D^3), digital transformation, and the Institute for the Study of Business in Global Society (BiGS), as well as expansion of the School’s need-based fellowship program.
Revenue from unrestricted current use gifts decreased 2 percent to $44 million in fiscal 2023 from $45 million a year earlier. 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 2023, revenue from these restricted gifts increased 25 percent from a year earlier to $30 million.
Endowment (in millions)
- FY 23 5,132
- FY 22 5,086
- FY 21 5,265
- FY 20 4,092
- FY 19 3,985
Housing, Rents, Interest Income & Other
With the high number of students on campus in fiscal 2023, total revenue from the housing, rents, and other category increased by $4 million from the prior year to $27 million. The School reported $4 million of interest income in fiscal 2023, compared with zero interest income a year earlier. Total housing, rents, interest income, and other revenue amounted to 3 percent of the School’s total revenues in fiscal 2023, one percentage point higher than the prior year.
Expenses
The full breadth of activities at the School cuts across multiple expense line items in the Statement of Activity and Cash Flows.
Expenses (in millions)
- FY19
- FY20
- FY21
- FY22
- FY23
Expenses Components
- 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 $153 million in fiscal 2023, comprising 15 percent of the School’s operating budget.
Although HBS characterizes costs charged to HBP, Executive Education, and HBS Online 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 2023 were $1 billion, an increase of $95 million, or 11 percent, from $908 million for fiscal 2022. The increase was primarily attributable to salaries and benefits, professional services, and printing and publishing.
Salaries & Benefits
Compensation for faculty and staff is the largest expense at HBS. The School’s salaries and benefits expense for fiscal 2023 increased 7 percent to $457 million from $428 million in fiscal 2022, primarily reflecting an increase in full-time equivalent (FTE) staff, as well as the initial cohort of fellows participating in the Institute for the Study of Business in Global Society (BiGS). Salaries and benefits represented 46 percent of the School’s total operating costs, compared with 47 percent in the prior year.
Increasing 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 HBS Online; and expand our ability to conduct innovative research. The total number of faculty, as measured in FTEs, can rise or fall in any given year as a result of retirements, departures, and fluctuations in recruiting activity. Net of retirements and departures, there were 271 faculty FTEs in fiscal 2023, compared with 272 FTEs in fiscal 2022.
The School’s staff grew to a budgeted 2,083 FTEs in fiscal 2023, from 1,912 FTEs in the prior year. The increase primarily reflected strategic growth investments to expand the reach of Publishing, Executive Education, and HBS Online, new initiatives such as the Digital, Data, and Design (D^3) Institute, and staffing enhancements in the MBA and Doctoral Programs. Information Technology staffing also was a key investment area in fiscal 2023, as HBS began to ramp up its digital transformation and continued to strengthen the security of its data infrastructure.
Fellowships
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 students, students 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.
To increase affordability for students from diverse socioeconomic backgrounds, in August 2022, the School announced that it would provide full-tuition scholarships to the 10% of the student body with the greatest financial need.
Total fellowships expense for fiscal 2023, including assistance for MBA students, Doctoral candidates, and a small number of Executive Education participants, increased by $9 million, or 16 percent, from fiscal 2022 to $66 million. The increase reflected higher student enrollment, the introduction and implementation of the full-tuition scholarships, and adjustments to account for the higher living costs faced by students.
Fellowships amounted to 7 percent of the School’s total operating costs in fiscal 2023, up 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 28 percent of total tuition—nearly $43 million—was awarded as fellowships in fiscal 2023.
Average fellowship support per student totaled nearly $44,000 in fiscal 2023. Over the past five fiscal years, the School’s average two-year MBA fellowship award has grown from more than $42,000 for the class of 2019 to $87,000 for the class of 2024.
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 $1.0 million in fiscal 2023.
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 2023 increased by $7 million, or 8 percent, from the prior year to $96 million, reflecting the growth of HBP. Printing and publishing accounted for 10 percent of total operating costs, consistent with the prior year.
Space & Occupancy
The 41-acre HBS campus includes 36 buildings encompassing nearly 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.
Driven by the growth in Executive Education, higher MBA enrollment, and the increase in on-campus events, the School’s space and occupancy expenses increased by $9 million, or 12 percent, from the prior year to $82 million. Space and occupancy expenses accounted for 8 percent of the School’s total operating costs in fiscal 2023, consistent with fiscal 2022
Professional Services
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 2023, professional services expenses increased by $24 million, or 45 percent, from the prior year to $77 million. The largest drivers of the increase were the ramp up in investments by the School’s new digital transformation group; product development, content management expenses, and investments in other strategic initiatives by HBP; and the growth of Executive Education. As a percentage of the total operating costs, professional services increased to 8 percent in fiscal 2023 from 6 percent in the prior year.
IT spending represented 11 percent of the School’s total operating expenses in fiscal 2023, consistent with 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 2023 were $14 million, or 1 percent of the School’s total operating costs, unchanged from fiscal 2022. In the other expense category, fiscal 2023 spending was $136 million, up approximately 10 percent from the prior year. This amounted to 13 percent of the School’s total operating costs, down 1 percent from fiscal 2022.
Debt Service
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 2023. HBS paid down $5 million in building debt in fiscal 2023, compared with $6 million in the prior year. The School’s year-end fiscal 2023 building debt-to-net-asset ratio was 0.4 percent, 10 basis points lower than the prior year. Other University debt remained at $83 million.
The School’s debt service expense consists of interest payments to the University. Fiscal 2023 debt service expense increased to $4 million from $2 million a year earlier. The increase reflected higher interest rates on money borrowed from the University for mortgage loans made by HBS as a faculty recruiting incentive. Once again in fiscal 2023, the interest portion of the School’s debt service amounted to less than 1 percent of total operating costs.
University Assessments
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 $1 million to $28 million, or 3 percent of total operating costs.
Depreciation
The School computes depreciation using the straight-line method over the estimated useful lives of the assets. The depreciation expense for fiscal 2023 decreased by $2 million, or 4 percent, from the prior year to $43 million. The School’s depreciation expense amounted to 4 percent of total operating costs in fiscal 2023, compared with 5 percent a year earlier.
Cash Before Capital Activites
The School’s cash from operations totaled $64 million in fiscal 2023, compared with $58 million in fiscal 2022. As in fiscal 2022, this cash was largely generated by margin contributions from the School’s competitive business units—Executive Education, HBP, and HBS Online—as well as generous giving to the School by alumni and friends of HBS. In addition, depreciation is a noncash item that added back $43 million to the School’s cash flow in fiscal 2023, compared with $45 million in the prior year.
Net Capital Expenses
Capital spending for fiscal 2023 included the completion of construction at 114 Western Avenue for new leased co-working office space, the development of co-working space for HBS Online and the School’s IT department, and renovations at Shad Hall. Total capital expenses for fiscal 2023 decreased 28 percent to $31 million from $43 million in the prior year. The School’s net capital expenses for fiscal 2023 totaled $26 million, down $2 million from the prior year.
Changes in Debt & Other
The School’s debt and other cash activities decreased by $61 million in fiscal 2023, compared with a decrease of $63 million in the prior year. The change in debt and other cash activities primarily related to a transfer to the HBS endowment of $65 million of 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 2023 marked the School’s 15th consecutive year with no new borrowings. Debt principal payments were $5 million in fiscal 2023 compared with $6 million a year earlier.
Capitalization of endowment income—or cash used to purchase endowment units—was a $4 million use of cash in fiscal 2023, 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 within individual endowments as a result of gift restrictions are generally reinvested in those endowments.
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 $5 million source of cash in fiscal 2023, compared with a $4 million source of cash in fiscal 2022.
Ending Balance, Unrestricted Reserves
Approximately 56 percent of the School’s revenues in fiscal 2023 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 flow from operating activities, HBS concluded fiscal 2023 with an unrestricted current use reserves balance of $247 million, compared with $227 million a year earlier. This level is substantially above the required level of unrestricted reserves for liquidity management purposes.