Transcript template_powerpoint_without_rings_new

Welcome to
Acumen Learning, LLC
(877) 224-5444
(Terry Tate Video)
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Important Question!
How much do you know about
Verizon Wireless’
Key Success Measures?
(or Key Performance Indicators (KPIs))
Let’s find out!
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
POP QUIZ!
For fiscal year:
Page 35
1 - How much Cash was on hand?
2010
Its OK to guess!  $______
2 - How much Cash was generated by Operating Activities?
$______
3 - What is our Net Income?
$______
4 - What is our Gross Margin?
______%
5 - What is our Net Profit Margin?
______%
6 - What is EBITDA as a % of Revenue?
______%
7 - What is VZW’s latest quarter ARPU?
$______
8 - What VZW’s latest quarter Data ARPU?
$______
9 - What is Return on Assets (ROA)?
______%
10 - How much did Total Operating Revenues grow?
______%
11 - How much did Net Income grow?
______%
Given all the above, how do we stack up to our competition?
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
35
Today's Learning Objectives:
 List and describe the 11 key performance measures that
are important V W and the Executive Team.
 List and describe the 5 business drivers
all successful businesses must focus on.
 Create a personal action plan that can positively impact
personal performance and company results.
 Teach specific components of V W financial statements.
 Better articulate company performance & strategy.
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Business can be tough!
 Only 5-10% of business start-ups survive past 5 years.
 16% of CEOs lose their job every year.
Booz Allen Hamilton 5th annual Study
 70% of merger and acquisition activity do not live
up to expectation.
Wall Street Journal 2007
So why do businesses fail?
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Acumen Means?
…the ability to make good business decisions,
in a timely manner, with an understanding of how the
decision should impact the business.
3
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Definition: CASH
DEFINITION
What is required to grow and maintain the
business.
MEASURES
Cash:
Cash
“The bills and coins in the register, petty cash, and
cash in the bank. It also includes cash equivalents,
like CD’s and other highly liquid investments, that
easily convert into cash within 90 days.”
 See Page 58
Cash Flow:
“Cash generation or “cash flow” is the difference
between the cash that flows into the business and the
cash that flows out of the business in a given period
of time (month, quarter, annual)”
8
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Cash Verizon Wireless
(In Millions)
Cash
Cash Flow
Why carry more cash?
• Acquisition?
• Uncertainty?
Partially for the Alltel acquisition:
$ 24.0 B assumed debt
$ 5.9 B cash
$ 29.9 B total (12M Customers!)
(S&P 500 Average Cash: 6%)
9
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Cash Benchmarks
(In Millions)
Cash
Cash Flow
9
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
CASH Review notes on page 9
1. Define Cash Driver
• What is required to grow
and maintain the business.
2. Measures of Cash
1. Cash:
Easily converted into cash in 90 days or
less.
2. Cash Flow :
Difference of cash in and cash out over a
given period of time.
3. Importance of Cash Driver
4. Benchmark the numbers
• Have sufficient cash to run the business
• What is the cost of that cash (capital)
• Enhance shareholder value
• Improve attractiveness to suppliers and
customers.
Cash
Cash Flow
2008
2009
2010
$9.2 B
$607 M
$5.3 B
$18.1 B
$21.3 B
$25.5 B
9
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Definition: PROFIT
DEFINITION
Profit = Earnings = Income and is the money
made after expenses are subtracted from sales.
Can be expressed in dollars ($) or percent (%).
 Profit
= $
 Margin = %
#1 -
Increase price
#3 - Both!
Profit
#2 -
Lower costs
MEASURES
Gross Profit ($) and Gross Profit Margin (%)
Sales (Revenues)
- Cost of Goods Sold (COGS)
EBITDA:
Earnings Before Interest, Taxes, Depreciation & Amortization
Sales (Revenues)
- Cost of Goods Sold (COGS)
- Controllable expenses
Net Profit ($) and Net Profit Margin (%):
Sales (Revenues)
- all expenses (COGS, Controllables, non-controllables)
10
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Profit ($) / Margin (%)
(Take notes on Page 11)
Sales Price: $1.50
Water
Label
Bottle & cap
Packaging
(Direct Labor)
Total:
-
.04
.11
.15
.20
.50
$1.50 - .50 =
$1.00 Gross Profit =
Rent
Selling, Gen, & Admin. (SG&A or Overhead)
Marketing
Shipping
Total:
-
$1.50 - $.50 - $.60 =
$.40 EBITDA =
Interest Expense
Taxes
Depreciation /Amortization
Total:
- .04
- .06
- .02
.12
$1.50 - $.50 - $.60 - $.12 =
$.28 Net Profit =
.03
.30
.08
.19
.60
COGS
66.7% Gross Profit Margin
Controllables
26.7% EBITDA Margin
Non-Controllables
Life
Spring
Artesian Water
18.6% Net Profit Margin
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
High Margin vs. Low Margin
(Take notes on Page 11)
High Margins
Low Margins
32%
8.0%
30%
3.9%
21%
1.7%
WHY?
WHY?
They offer something Unique!
They sell commodities.
“If you’re not unique, you better be cheap!”
S&P 500 Averages: Net Margin = 11%
To drive Profit($) you need either: High Margin (%) or High Volume
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
VZW Gross Profit & Net Profit
2010
(in Millions)
Sales (Revenues)
- Costs of Goods Sold (COGS)
= Gross Profit
Selling,
General
& Adm.(SG&A)
Cost- of
Goods Sold
(COGS)
Cost of Service
$ 8,342
= EBITDA
+ Cost of Equipment
$11,423
$19,765
- Depreciation & Amortization
- Interest and Taxes
= Net Profit
Income
Earnings
$63,919
- $19,765
$44,154 Gross Profit Margin
100%
$1.00
69.08%
- $18,727
 Roaming, Cell tower leasing, rent & Maint., rent ($845m)
$25,427
Margin
 Hand EBITDA
sets, Head sets,
Accessories
39.78%
- $7,458
- $1,293
$16,676 Net Profit Margin
26.09%
11
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Profit Verizon Wireless
(In Millions)
Gross Profit Margin (%) = Total Revenues – COGS (Cost of Goods Sold)
EBITDA (%) = Earnings Before Interest, Taxes, Depreciation, & Amortization: (CONTROLABLES)
Net Profit Margin (%) = Total Revenues – All Expenses
11
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Profit Benchmarks
(In Millions)
11
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Profit Review notes on page 12
1. Define Profit Driver
2. Measures of Profit
 What is left over after you have subtracted
expenses.
1. Gross Profit (Margin):
Revenues/Sales - COGS
 Can be expressed in dollars ($) or as a
percent (%).
2. EBITDA:
Earnings before Interest, Tax, Depreciation, &
Amortization.
3. Net Profit (Margin) – subtract all expenses.
3. Importance of Profit Driver

Net Profit is one of the most important
#’s for the business.

Indicates price strength & cost controls

Identifies ability to manage costs
4. Benchmark the numbers
2008
2009
2010
Gross
68.1%
67.9%
69.08%
EBITDA
39.3%
38.5%
39.85%
Net
26.4%
23.6%
26.09%
11
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Definition: ASSETS
DEFINITION
Assets
What we have and how well we use what
we have.
• Asset Strength:
The ability to remain viable during ups and downs in
the marketplace.
• Asset Utilization:
The ability to efficiently and effectively use assets to
generate profits.
MEASURES
• ROA: (Return on Assets)
• ARPU: (Average Revenue Per Unit/User)
• Data ARPU: – Average Data
• CHURN - % that leave
12
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Assets Verizon Wireless
(In Millions)
ROA =
Net Income = $16,676 = 12.08%
Total Assets $138,044
Total Assets have increased due to: purchase of
700 MHz spectrum in March 2008, which drives the
return on assets % down. Rural Cellular, Alltel etc.
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
13
Assets Benchmarks
(In Millions)
USA Today
ComScore/Forrester Research
March 25, 2011
Money: Page 2B
"A smartphone typically uses 24 times as much spectrum capacity as a regular cellphone. Nearly 66 million
people own smarphones now, and that's growing fast, research firm ComScore reports. And tablets -- which
provide many of the same features of the smartphone but on a much bigger screen -- can use 122 times more
spectrum capacity as an ordinary cell phone. More than 82 million people will have a tablet in 2015, up from 10.3
million last year, Forrester Research projects.”
13
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Asset Review notes on page 14
1. Define Asset Driver
• What we have and
•
ROA – Percent value of total revenue to total
assets.
• How well we use what we have.
•
ARPU – Average revenue in dollars gained
per user/unit.
•
Data ARPU
•
CHURN
3. Importance of Asset Driver
•
2. Measures of Asset
Demonstrates ability to work smarter
rather than harder.
•
Indicates company invests in “right”
assets
•
Indication of execution & efficiency
4. Benchmark the numbers
2008
2009
2010
ROA
11.46%
10.93%
12.08%
ARPU
$51.72
$50.75
$53.52
13
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Definition: GROWTH
DEFINITION
The ability to increase year over year, quarter
over quarter, and/or month over month.
“In today’s business world, no growth means
lagging behind in a world that grows every
day…”
Growth
“Investors expect it, employees are energized
by it, customers are generally attracted to it
and executives are measured by it.”
MEASURES
• Revenue Growth:
Top-line Sales (Revenue increase).
• Net Income Growth:
Bottom-line (Profit increase).
• Customer Growth:
Increase/decrease in customer base.
14
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Growth Verizon Wireless
(In Millions)
15
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Growth Benchmarks
(In Millions)
Building out/investing in FiOS. On average,
customers pay a monthly bill of $135, about
twice the average bill for the Verizon customer.
Merger:
Sprint worth $30 B
Nextel worth $45 B
Total: $75 B Total
2007 Lost 29 B
2008 Lost 3 B
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
15
Growth Review notes on page 16
1. Define Growth Driver
The ability to increase:
 year over year
 quarter over quarter, and/or
 month over month.
2. Measures of Growth
• Revenue Growth:
Top-line Sales or Revenues increase.
• Net Income Growth:
Bottom-line or Profit increase.
• Customer Growth:
The increase/decrease in the customers.
3. Importance of Growth Driver
“Investors expect it, employees are energized
by it, customers are generally attracted to it
and executives are measured by it.”
4. Benchmark the numbers
2008
2009
2010
Rev Growth
12.4%
25.9%
2.88%
Net Growth
22.8%
10.5%
13.57%
9.4%
7.6%
Cust. Growth 12.7%
15
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Definition: PEOPLE
DEFINITION
Customers that has the ability to impact the
success of our business:
 External Customers
 Internal Customers
 Vendor/Re-sellers
People
MEASURES
• # of Customers:
The total # of individual accounts at end
of period.
• Churn:
Rate at which current users/units
terminate with VZW.
16
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
People:
What is more important than meeting customer expectations?
Exceeding?
Anticipating Customer Needs & Expectations!
“If I would have asked my customer what they wanted, they
would have said a faster horse!”
~Henry Ford
17
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
People:
(Take Notes on Page 17)
External Customers:
1.Have a formal process for listening to your customers
2.Anticipating customer needs is critical!
Internal Customers:
1.Meet monthly and ask:
#1) Are there any gaps in my performance, and
#2) Have my priorities changed?”
Top 2 Reasons Why Companies Fail:
#1 reason: (Too little Cash)
#2 reason: Cultural differences.
17
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
People Verizon Wireless
(In Millions)
17
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
People Benchmarks
(In Millions)
17
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
People Review
1. Define People Driver
The External Customer, Vendor/Re-seller, or
Internal Customer that has the ability to
impact the success of the business.
3. Importance of People Driver
• Without People, then what happens?
• Anticipate and then exceed expectations.
• Customer service is for everyone;
o Internal customers
o External customers
o Vendors customers
2. Measures of People
# of Customers:
Total # of individual accounts at end of period
Churn:
Rate at which current users/units terminate
4. Benchmark the numbers
2008
2009
2010
# of Cust.
80.00
87.50
94.14
Churn
1.24%
1.44%
1.33%
17
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
VZW Financial Statements
The Annually Reported Financial Statements
• Statement of Income (P&L)
• Balance Sheet
• Statement of Cash Flows
VZW is a privately held company, therefore the following information and documents are Proprietary & Confidential!
1.
What is the basic equation for each statement?
2.
What is the purpose of the statement?
3.
What are the key numbers and how are they trending?
4.
How can you impact each statement?
21
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Equation:
Revenues – Expenses = Income
Statement of Income
How do
impact
this
REVIEW
 you
Teach
 1 Question
statement?
P&L
Indicates:
Profitability
Gross Profit ($)
63,919
- 8,342
- 11,423
$44,154
Gross Margin (%)
$44,154
(Revenue
Sales)
= Top =
Line
÷ 63,919
= 69.08%
32% = S&P 500 Ave
Cost Of Goods Sold
COGS
EBITDA
(SG&A) or Overhead
SG&A:
= EBIT
• Salaries
• Advertising
• Sales commissions
• Call center costs
• Benefits/Severance
Interest
• Rent
• Bad debt charges
• Merger integration costs
Taxes• Professional services:
Attorney fees, Accounting
Total Rev:
$63,919
Total op. costs: -$45,950
$17,969
Depreciation
$25,427
_________________________________________________________________________
_
EBITDA
MARGIN
$25,427
÷
Net Profit
Margin
$63,919
Net Income:
Total Rev.:
63,919
(Income = Earnings = Profit)
= Bottom Line
+$ 7,458
16,676
39.78%
÷
=26.09%
25
11% = S&P 500 Ave
Variance Analysis
2010 vs. 2009
4.7%
-8.2%
2.88%
How to calculate growth
or
Year over year change
8.0%
-6.5%
2.4%
This year ÷ Last year
- 1 x 100 =
 ($63,919 ÷ $62,131) = 1.02877
_1.5%_
0.81%
8.57%
 (1.02877 – 1) x 100 = 2.88%
-72.3%
26.8%
14.6%
33.9%
13.57%
25
Equation:
Indicates:
Assets = Liabilities + Equity
Financial Strength
REVIEW  Teach 
Balance
Sheet
2 Questions
Snapshot in time
Most Liquid
Becomes Cash < 1 year
Least Liquid
Due First
Due in < 1 year
Assets = Liabilities +
138,044
=
38,622
+
Equity
99,422
Due Last
Balance
Equity
Equity Position:
72%
(99,422 / 138,044)
27
Variance Analysis
2010 vs. 2009
2.75%
-18.46%
14.77%
27
Equation:
Cash In – Cash Out = Net Change in
Cash
Statement of Cash FlowPurpose:
Cash Management
Earn it
Cash coming in
Cash going out
Most important number!
= Cash from core business
+$25,547
- Cash to run the business
Sell Assetsset
Spending on investments suggests
management is investing in the future.
-$6,671
?
Borrow it
-$14,152
Net Change in Cash (+/-) 
Started

+$ Year
607
Ended$Year

5,331
?
29
$63,919 - $8,342 - $11,423 = $44,154
$16,676
$17,969 + $7,458 =$25,427
1
$5,331
2
$25,547
3
$16,676
4
69.08
5
26.09
6
39.78 %
$63,919
$63,919
$63,919
7 $53.52
$16,676
$138,044
$63,919
$62,131
$16,676
$14,684
8
$20.51
9
12.08 %
10
2.88 %
11 13.57 %
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Changing Behavior
When a Person Says …
Chances of the idea being
incorporated into their life is...
“That’s a good idea”…
10%
“I’ll do it!” and commits...
25%
Says when they’ll do it…
40%
Plans how to do it…
50%
Commits to another…
60%
Sets a future specific
appointment with the
person they committed to...
Good Management
Technique!
95%
*Based on a 1993 Brigham Young University Study
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Where to Find Information:
Click On Investor Relations
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
47
One final thought…
“People will work…
hard for a paycheck,
harder for a person, and
hardest for a reason.”
~T. S. Monson
(Multi-national Leader)
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Final Exam!
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Confidential and proprietary material for authorized Verizon Wireless personnel only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
50