II- American Red Cross CONFIDENTIAL PHSS The Five Year Plan Jack McMaster President Preparedness and Health and Safety Services sz?dmz?z'a/ In?rmatz?on?r Use 0724/ byAmm'can Red Cram CONFIDENTIAL PHSS Executive Summary - 5 Year Path to Revenue Stream - Stable Long-Term Funding for Red Cross Mission - Changes in Competition and Technology - Undermines Current Strategy - Enormous Change Management Challenge - Added to many other change initiatives American Red Cross Con?dential Informaz?zb?for U56 0719/ @Amerz?mn Red Cram 1 CONFIDENTIAL PHSS: A Unique Valuable Asset - The Nation?s Health and Safety Preparedness Leader 10M Fee Based Customers - Annual Revenue - 5M Community Program Reach - Consistent ?Force For Good? - Iconic Brand - Trusted and Treasured - Stewards of a Multi-Generational Legacy American cm. CoWde?tz'a/ I szormaz?zb? for U56 0729/ [kg/American Rm? Cram CONFIDENTIAL PHSS: 5 Year Revenue Projections - Baseline (There may be no baseline in the digital world) 2012 2013 2014 2015 2016 Revenue $201.8 $205.8 $209.9 $214.1 $218.4 Expenses $162.4 $165.7 $169.0 $172.4 $175.8 Contribution Margin $39.3 $40.1 $40.9 $41.7 $42.6 - Growth Scenario 2012 2013 2014 2015 2016 Revenue $245.0 $327.7 $439.3 $555.9 $680.1 Expenses $203.7 $264.4 $344.9 $430.3 $512.3 Contribution Margin $41.3 $63.3 $94.4 $125.6 $167.8 Cor?dmlz?a/ Information for Use 072/); @Amm'mn Red Crorr CONFIDENTIAL PHSS: The Changing Situation - Macro Level Forces Undermining Chapter Led Model Classroom, instructor-led, print-based learning model in transition - Digital music experience suggests no predictable baseline Entry of for-profit competitors (Cintas, Aramark) as Resellers - Increased competition of existing non-profits (YMCA, AHA) Enormous dependence on unmanaged AP channel - dominate economics Current PHSS Product financials are model based and unreliable - Chapter don?t roll up American Red Cross Cm?dem?z'a/ I n?rmaz?z'on for U56 0725/ @Amerz'ccm Red Cram CONFIDENTIAL PHSS: The Impact of Competition Led 2-year certification Sensitive price followers fractured price umbrella - Aquatics: Ellis Associates owns Water Park Training Red Cross dominates LTS LGT But - control the pricing - Care Giver: Fractured competitor pool - Chapter Legacy: Fractured competitor pool - Preparedness: No real competitor - AED/Lifeline: Corporate sales teams (for profit) American Red Cross Con?dential Iiy?ormaz?z'on?r U56 0719/ @Amm'ccm Red Cram 5 CONFIDENTIAL PHSS: Thru The Product Lens Product: Degraded Value Propositions Year Refresher Cycles) - 2 Year Certification I Highly variable quality Price No National Pricing Strategy - Market vs. Mission tension Channel No National AP Strategy - Balkanized Web Presence I Fractured OTM ITM capability Promotion No National Marketing Campaigns - Major Partner Print Oriented (StayWell) American Corygdentz?a/ I Igformaz?z'on for Use Orr/y @American Red Crow? CONFIDENTIAL PHSS: Product Specific Issues - FAICPR - Market Leader, share), Poor Price Leadership 10% YIY enrollment decline 70% AP delivered with Red Cross share of economics Print materials revenue dependence in transition - Aquatics LTS Market Leader, share), AP Price Leader 90% AP delivered off-site, no pressing certification requirement (LTS) - Little chapter control I no national oversight or strategy - Red Cross share of economics American Red Cross Corg?dem?z'a/ I Iy?ormatz'cm for Use 0725/ lay/1772mm? Red Cross CONFIDENTIAL PHSS: Product Specific Issues - Care Giverl Chapter Developed Other Product Suite Incomplete product distribution artificially caps economic potential Fractured competitors] no coherent price umbrella Market Clutterl Confusion I Lost Opportunities Revenue at Product Participating Chapter Net Revenue Chapters Average Baby Sitter 350 Chapters NAT 42 Chapters AED 270 Chapters Lifeline 45 Chapters $54.7 Chapter Developed varies by product TOTAL Co?dem?z?a/ I Igformaz?z'on far U56 Onb/ bj/Amerz'mn Red Cram CONFIDENTIAL PHSS: Product Specific Issues - Preparedness - Broad Monetization Opportunity for Red Cross - White Space Red Cross Can Uniquely Own 1) Sponsored Community preparedness offerings 2) Tear-Sheet sponsorship opportunity 3) Ready Rating ?consulting? services American Red Cross Con?dential I nfornzatz'on for Onb/ by American Red Cram 9 CONFIDENTIAL PHSS Portfolio Overview Net Rev FY11F FY12 Increase FY16 CAGR 113.77 151.09 33% 335.22 23% Aquatics 19.89 45.96 131% 119.95 39% Care Giver - Nurses 8.37 14.07 68% 34.55 33% Care Giver Baby Sitter 6.40 8.93 40% 39.87 44% AED 4.45 10.00 125% 20.00 45% LifeLine 3.20 4.50 41% 20.00 44% Chapter Developed - 5.00 - 10.00 19% preparedness - 10.00 - 100.00 78% Margin 34.9 41.3 - 167.8 - Total 156.1 249.5 60% 679.6 34% *All ?gures represent a 5-year CAGR except Chapter Developed and Donor Led which are 4-year CAGR American Cordeentia/ Informalz?arzfor U56 072/)! by/Imm'mn Red Cross 10 CONFIDENTIAL PHSS Product Strategy - Strategically price to capture >2/3rds of 5-year revenue growth Lead transition to e-learning model with LMS Develop dominant e-commerce, OTM, ITM channels - Amazon-like shopping experience Develop managed, measured, meaningful AP strategy - Fewer with better economics I quality Develop new Red Cross Materials to replace print revenues American Red Cross Con?dential Information for U56 0724/ lay/4772mm? Red Crow 11 CONFIDENTIAL PHSS Product Strategy Products optimized to market opportunity Not chapter financial capabilities Pivot from process I program NHQ orientation - National product model - National product metrics rolled up from chapter to divisions Division PHSS leader - Optimizes all sales, services, and administration Transition publisher economic model - From exclusive, print paid to non-exclusive training revenue share American RedCross Con?dential I Iz?rmaz?z'on for O?g/ [y/American Red Crow 12 CONFIDENTIAL E-Book CPR I a Thumbs . Com .. Advertisers 2. a . 2 mugs American Rod I:sz II a i' KNWR American Red Cross Caiz?dem?z'a/ Iiyrormaz?z'on?r Use 0715/ @American Red Cray; CONFIDENTIAL RedCross.org i- "92:15 . i" Search 7 '60 American Red Cross DONATE FUNDS 1'1. Wm; Getting Giving Working Your w! "111 . Assistance and Getting Involved with the Red Cross Local Red Cross Take a Class Find Vnur Rod (?russ Take a Class Tc: 1m -:wr c'xnlme training: Gal 0 please seam r, e'rutenng: prvurmp T-zv learn about our clagsaes attess free digital 1151mm; purmase materials. please? Trd'mng Workp'dce CO - :3 . ~ner murw . Responde's 1 v73; FIFSI Aid LPR AED . I iihiils :rrnme Elm-s I Dru-.6 and more 1 . .2. I Prepare --Home a. Famiiy W-denn Training for Ptotessnonal American Coiy?ia?entz'a/ Information for Use 0724/ byAmem?an Red Crow 14 Zippy Bags w? FIRST AID KIT RedCrou :7 may AID KIT in} CONFIDENTIAL Con?dential In?rmatz'on?r Uxe 0714/ @Amm'can Red Cross 15 CONFIDENTIAL Course Price Variability $34 - $100 Range $10000 (D1V1Slon 9) $90.00 $80.00 $70.00 7 - - -- - $60.00 3 . WKPL. $50.00 CPR PRO WKPL. 000.00 - SFA WITH ADULT WKPL. $30-00 WKPL. $20.00 9 WKPL. $10.00 American Redes Confz?dmtz'a/ M?rmatz?onfor Use 0723/ lay/4772mm? Red Cron 16 CONFIDENTIAL Adult CPR AED Community Course Prices 3/ Adult Prices, Community. Confidential Iryrormatz'on for UN: 0729/ @Amerz'mn Red Crow 17 -I- Total Training Rev of Enrollees - A- -Avg. Rev Per Enrollee CONFIDENTIAL LMS January FA CPR Data Iiy?ormaz?zb?for Um On_/y byAmm'ccm Red Cross $700.00 A253 $600.00 A. N08 20.4 $4 .00 . $500.00 '5 a I [5'1 16.9 16.9 . . . $349.12.3 $301.00 .. $285.00 $300.00 10] A. . I . ,$232.00 . . $232.00 - $208.00 A $200.00 my $103.00 $100.00 i $88'20.60 19.49 5.90 11.13 7.10 10.78 15.78 13.99 7.90 13.70 Enrollee American Red Cross CONFIDENTIAL Product Management Portfolio Care Giver Care Giver Aquatics Nursing Baby Sitting Chapter Legacy AED Lifeline Donor Led 2011 Rev 8.5M 2012 Rev $7.50 2016 Rev ID Top 5 . E-Learning AP Strategy Chann.el Channf? candidates for Nauonal RR Web (Fewer, Expansuon Expansuon Vendor Better) Strate Strate Nat I Strate LaunCh gy gy Expansion gy . . . . Develop Pricing Pricing Strategy strategy National Nahonal 3 Donor Led vs. Community to Maxumlze Channel Corporate Strategy Strategy Colle es Economics ExPans'on Strate onsors Strategy gy Marketing: Air coverage . . . . AP Strategy . E-Commerce 3 Tear-Sheet (Cor Ent to drwe Strate Strate Strate Strate onsors P, demand to 8V 8V 8V 8V RedCross.org American Red Cross Cor?dmlz?a/ Informalion?r Use only @Amm'ccm Red Cross 19 CONFIDENTIAL PHSS Strategy: 5 Year Revenue Plan FAICPR - Grow market share: Superior Products with e-Iearning: - Develop superior national channels e-commerce OTM I ITM National Accounts F2F 5-Year FY11F Increase FY12 FY16 CAGR Total Rev 5 113.8 33% 151.1 5 335.2 24% Enrollees: 4,711,000 15% 5,417,650 7,572,796 10% AP RC Mix Delivered Rev (ARAP) 7.97 28% 5 10.22 22.00 23% Avg RC Rev (ARAC) 5 45.89 5% 5 48.39 65.00 7% American Red Cross Con?dential I n?rmaz?z'on for Use 0an lay/1772mm? Red Cram CONFIDENTIAL PHSS Strategy: 5 Year Revenue Plan - Aquatics - Implement new AP channel strategy (fewer, better economics) - Marketing campaign to drive consumer demand for Red Cross Aquatics Brand - Re-Enter Aquatics Examiner Market 2m FY11F Increase FY12 FY16 CAGR Total Rev 19.89 131% 45.96 119.95 43% Enrollees: 2,807,000 18% 3,308,000 5,403,000 14% AP RC Mix Delivered Rev (ARAP) 2.40 106% 4.94 9.01 30% Avg RC Rev (ARAC) 2.18 104% 4.44 5.19 19% American Cross Confidential I 7gf0rmaz?z'0n for 0719/ byAmerz'mn Red Crow 21 CONFIDENTIAL PHSS Strategy: 5 Year Revenue Plan Baby Sitter - Expand channel capacity and marketing/sales reach to full chapter network - Develop digital product strategy - Expand product extensions (Latch-Key) 5-Year FY11F Increase FY12 FY16 CAGR Total Rev 6.40 40% 8.93 39.87 44% Enrollees: 124,000 21% 150,000 500,000 32% AP RC Mix Delivered Rev (ARAP) 9.03 17% 10.53 22.00 19% Avg RC Rev (ARAC) 55.44 4% 67.94 75.00 3% Con?dential I n?rmaz?z'on for U56 0725/ @Amermm Red Cross 22 CONFIDENTIAL PHSS Strategy: 5 Year Revenue Plan Nurse Training - Expand channel capacity and marketing/sales reach to full chapter network - Develop Digital Product Strategy - Expand product extensions (medication administration) ?ea: FY11F Increase FY12 FY16 CAGR Total Rev 8.37 68% 14.07 34.55 33% Enrollees: 11,300 33% 15,000 26,235 18% AP RC Mix Delivered Rev (ARAP) 8.25 27% 10.50 22.00 22% Avg RC Rev (ARAC) 798.00 25% 1,000.00 1,400.00 12% American Red Cross Con?dential Information for UN: 0729/ @Amen?m Red Crow 23 PHSS Strategy: 5 Year Revenue Plan Donor Led CONFIDENTIAL - Bundle suite of donor funded community preparedness products with set deliverables and predictable costs for Red Cross co-branded opportunity - Develop sponsorship monetization strategy for Red Cross co-branded tear-sheets - Develop suite of small business preparedness education and certification products to compliment Ready Rating web products Donor Led Total Rev Tear-Sheet Total Rev Ready Rating Total Rev Total American Red Cross FY11F FY12 FY16 4-Year CAGR $0.0 $5.0 $50.0 58% $0.0 $5.0 $50.0 58% $0.0 $0.0 $0.0 0% $0.0 $10.0 $100.0 58% Con?dential I szormaz?z?on for Use Onb/ @Amerz'eem Red Crow 24 CONFIDENTIAL PHSS Strategy: 5 Year Revenue Plan - Chapter Developed - Identify suite of chapter developed products for national distribution - Develop digital product extensions - Develop collateral product materials Zn 5-Year FY11F Increase FY12 FY16 CAGR Total Rev 5 9.20 33% 12.20 5 46.40 38% Enrollees: 551.7K 9% 600K 26% Avg Rev Per 5 16.68 22% 20.33 5 26.51 10% American Red Cross Cory?idenz?ia/ M?rmaz?z?on for Use 0an [ayAmm'can Red Crow 25 PHSS Strategy: 5 Year Revenue Plan AEDILifeLine - Develop National Channel Strategy with Vendors CONFIDENTIAL - Re-negotiate vendor contracts to add existing product extensions - Bundle Red Cross AED training offering with product Total Rev Enrollees: Avg Rev Per Enrollee (ARPEE) LifeLine FY11F Incr?e_ase FY12 FY16 $3.2 41% $4.5 $20.0 AED FY11F Increase FY12 FY16 $4.4 125% $10.0 $20.0 2,454 124% 5,500 9,500 1,813 0% $1,818 $2,105 23,000 30% 30,000 100,000 139 8% 150 200 American Red Cross Con?dential I mfarmaz?z'on for U56 0714/ byAmm'ccm Red Cross 26 CONFIDENTIAL PHSS - Issues - LMS Punch List E- Commerce Amazon Skin - AP Channel Strategy Extending Product Reach Across Chapter Network E-Learning Leadership No National Product Insuring Uniform Product Quality Delivering to Meet Market Demand - National Telemarketing Strategy National Back Office Administration Automation American Red Cross Con?dential In?rmaz?z'on?r Use 0724/ [by/1772mm? Red Cross 27 CONFIDENTIAL PHSS - Conclusion Plausible Path to 5 Year Revenue Stream New Product Model Addresses Shifting Competitive Landscape Leadership Team Can Meet the Change Management Challenge Confidential I iyformaz?z'on for Use 0729/ [by/1772mm? Red Crow 28