Drupal Association Q4 2016 Financial Update

As part of the Drupal Association Board's duty, board members met in April and approved the Q4 2016 financial statements. Now, we are able to share them with the community to provide transparency and clarity. You can find the financial statements here, which include the Income Statement and Balance Sheet for each month. Our cash balances are located on the balance sheet, located in the Asset section (first part of the balance sheet) called "cash and cash equivalents.

In this blog post, we will answer the following questions:

1. How did we perform financially this quarter?

2. How did we perform financially through the end of 2016?

3. How can we perform better in 2017?

Setting Performance Metrics

To answer #1 and #2, we need to know what success looks like. As they say, if you can’t measure it, you can’t manage it. The Drupal Association works with a virtual CFO firm called Summit CPA, who creates our monthly financial reports as well as sets our financial KPIs, making sure we are working towards goals that ensure the Drupal Association’s sustainability.

Since the Drupal Association’s cash reserves were depleted due to investments in Drupal.org improvements especially to support Drupal 8’s release, Summit recommends that we rebuild our cash reserves and achieve a cash reserve KPI of 15%-30% of estimated twelve-month revenue. Since Drupal’s revenue and expenditures drastically fluctuate from month to month due to DrupalCon’s large cash outlay, a cash reserve goal closer to 30% is the ideal goal.

To rebuild our cash reserves, we need to create an operating profit to fill the reserve. To do this, Summit recommends that our second KPI is to achieve a Net Income Margin of 10%.

Q4 2016 Performance

Since Q4 2016 is near the beginning of our financial turnaround, we will see improvements with both KPIs over time. It is also important to note that Q4 is historically when our cash is lowest. It is the period of time that is between DrupalCon Europe, which operated at a loss, and DrupalCon North America, which rebuilds our cash since it is a profitable event.

Below is our KPI progress in Q4 2016.

2016 End of Year Performance

2016 was a challenging year financially as we drastically reduced costs by laying off 40% of our staff and eliminating our Portland office. While these corrections were difficult, they set the organization on a sustainable path.

While we continued to remain cash positive by the end of 2016 (see Cash Flow chart below), we operated at a loss, which was anticipated. In positive news, we reduced the losses by about $145,000 (see Forecast vs Actual table below).

Chart: Cash Flow

(*This chart shows the Drupal Association’s cash flow. It uses actual data from January 2015 to December 2016 and uses forecasted data from January 2017 to April 2017. )

Table: 2016 Actual vs Forecast

Areas of focus in 2017

With these 2016 improvements in place, 2017 is positioned to be a healthier year financially for the Drupal Association. To ensure a stronger year, we conducted a margin analysis of our programs to see where we need to focus.

From this study, we found several areas to focus in 2017 that create value for the community while also improving our financial health. Areas of focus include:

• Make DrupalCon Europe a financially sustainable event that continues to provide value

• Grow DrupalCon North America attendance through improved marketing and attracting more end users with customer content such as industry summits and case studies.

• Create more value for Supporting Partners to grow participation and create a program for End Users to join.

• Improve the Drupal adoption journey off of the Drupal.org front page by including content from Drupal businesses that provide value for the visitors and branding or leads for the Drupal businesses who provide the content.

• Identify ways to reduce costs associated with Drupal.org by studying the sites and services the Drupal Association provides to see if we can reduce associated costs.

We are hard at work making the above improvements and starting to see encouraging results. Starting with our 2017 quarterly updates, we will provide more clarity into our financial portfolio and how each program performed.