BREAKOUT SESSION 1

1. BREAKOUT SESSION 1 Financial Acumen for Sales & Marketing and Other Non-Accounting Managers Allison Therwhanger Sponsored by:

2. Financial Acumen for Sales, Marketing and Other Non-Accounting Professionals June 12, 2018 Allison Therwhanger President, Shippert Medical Technologies

3. About the Speaker Allison Therwhanger President, Shippert Medical Technologies Treasurer, PWH 3

4. Today’s Agenda What Will We Cover in This Hour? 4

5. Financial Acumen: “The Numbers” Why Look at the Numbers? • Gives you information to make decisions • Helps you plan, predict and forecast • Helps you critique • Shows you where you are doing well and where improvement is needed • Gives you the opportunity to diagnose a problem before it gets too far into the year • Gives you a way to measure your own performance and others • Helps you move to the next level when you can meet or exceed your numbers • Many managers don’t take the time to analyze the numbers, you can be that better manager and control and predict your results Today’s Goal After this hour, I hope you gain more confidence in reading and working with financial statements, using key metrics and delivering top performances! 5

6. Financial Acumen: 3 Key Financial Statements Financial Statements 6

7. Financial Acumen: The Balance Sheet Balance Sheet • Gives you a snapshot on the company’s financial position as of a particular date • Components: Assets, Liabilities, Equity • The Balance sheet must be in “balance” • Assets = Liabilities + Equity Assets Liabilities • Any item of economic value owned by an individual or corporation • Listed on the Balance Sheet in order of liquidity and its tangible/Intangible nature • Current Assets: • Cash (Bank accounts) • Accounts Receivable • Inventory • Long Term-Term Assets • Furniture – fixed asset • Equipment – fixed asset • Vehicles – fixed asset • Leasehold Improvements • Building • Land • Goodwill (intangibles) • Intellectual Property (Intangibles) • Money the company owes to creditors, banks employees, vendors etc. • Current Liabilities: • A/P, Taxes Payable, Short-term portion of long term debt • Long Term Liabilities: • Portion of loans due more than one year from now 7

8. Financial Acumen: The Balance Sheet Equity • The part of the assets that are owned by the shareholders (free and clear of debt) • Shareholder/Partner Stock (Common, preferred)** • Retained Earnings • Net Income – closes out to Retained Earnings • Contributions/Distributions • Additional Paid in Capital • **Names of accounts varies depending upon the type of entity 8

9. Real-Life Example: The Balance Sheet Company XYZ Balance Sheet (12/31/2017) 9

10. Real-Life Example: The Balance Sheet Liabilities and Shareholders’ Equity 10

11. Financial Acumen: The Income Statement The Income Statement • This report shows the financial activities for a specified period of time (monthly, quarterly, annually). • Tells you how much money the company brings in and how much goes out of the company. Gives the reader a wealth of information by type of revenue and expense. • Components • Revenue • Cost of goods Sold • Expenses • Net income or loss Types of Revenues and Expenses Misc. Income and Expenses • Revenue: • General Sales (less discounts and returns) • Royalty Income • Investment Income • Expenses: • Cost of Goods Sold • G&A • Marketing and Selling • R&D expenses • Depreciation / Amortization Expense • Interest • Taxes 11

12. Financial Acumen: Types of Profit Types of Profit Sales (Cost of Goods Sold) Gross Profit This measures the profit made after direct costs of sales. Gross Profit (Operating Expenses) Operating Profit (This measure the company’s profit from its ongoing operations) Net Profit (is the amount remaining after all costs are deducted from all income) EBIT (Earnings Before Interest and Taxes) EBITDA(Earnings Before Interest Taxes Depreciation and Amortization) EBITDA is popular because it allows you to compare the profits to other companies without having it distorted with financing (interest) activities raising money (stock) or certain accounting decisions (taxes, depreciation, etc.) 12

13. Real-Life Example: The Income Statement Company XYZ Income Statement (12/31/2017) 13

14. Questions? 14

15. Financial Acumen: The Statement of Cashflows The Statement of Cashflows • Demonstrates the flow of cash in and out of the business • Divides into operating, investing and financing activities • Incorporates both changes in the income statement and the balance sheet Company XYZ Statement of Cashflows (12/31/2017) 15

16. Financial Acumen: The Statement of Cashflows (Cont.) Company XYZ Statement of Cashflows (12/31/2017) 16

17. Questions? How Are We Doing So Far? 17

18. Financial Acumen: Non-Profit Financials Non-Profit Financials • Balance Sheet = Statement of Financial Position • Income Statement = Statement of Activities • Non Profits can also have an additional statement called the Statement of Functional Expenses • Fundraising, program services, etc. • Non Profits also have various Net Asset Classes • Unrestricted • Temporarily Restricted • Permanently Restricted • Equity = Net Assets 18

19. Check-In Point How Are We On Time? 19

20. Financial Acumen: Budgeting Department Budgets To Start… Don’t Forget… • Find out which budget items are fixed or variable • Fixed items – you can budget with certainty • Variable items – expenses that change as sales change • For sales, make sure you know the timing of the revenue, contractual purchases, etc. • Don’t be intimated by the numbers! • Find out what you are accountable for. • Find out how the timing of the purchases affects your budget • Find out if you are allocated certain expenses out of your control • Review previous years’ data to see if you are being realistic 20

21. Financial Acumen: Budgeting (Cont.) Department Budgets Revenue Ideas Expenses • Confirm timing • Build a monthly estimate • Tie variable expenses to volume in a spreadsheet to automatically adjust for volume • Change as you go and get numbers monthly if possible • Confirm timing • Build a monthly estimate • Change as you go and get numbers monthly if possible • Keep all of your backup data for reference and for justification Before we leave budgeting, does anyone have specific questions and/or specific budgeting situations that they want to discuss? 21

22. Financial Acumen: Performance Metrics How is Your Company Performing? Key Ratios Please Remember • Use the ratios to compare and trend over numerous years • Use the ratios to compare to the industry averages • Liquidity • Financing • Profitability Ratios • Shareholder Ratios 22

23. Financial Acumen: Performance Metrics (Cont.) How is Your Company Performing? 23

24. Financial Acumen: Performance Metrics (Cont.) How is Your Company Performing? 24

25. Financial Acumen: Performance Metrics (Cont.) How is Your Company Performing? 25

26. Financial Acumen: Performance Metrics (Cont.) How is Your Company Performing? 26

27. Financial Acumen: Key Metrics Top Metrics Sales and Marketing Should Know • Key competitive strengths • Competitors • Gross Margin % and $ by total business and key product/product families compared to plan • Sales of new products (total sales, sales at new accounts) • ASP- Average Sales Price • Sales performance by rep/sales group • Pipeline reporting – activity, opportunities • Program profitability – advertising, mailers, campaigns • Sales by product category, geography, customer and plant. • Budget – performance to budget in areas you are responsible for • Average sales price for critical product line items and product families • Clinical/cost benefits of your product line • Market Growth of your product line as compared to your growth • Market share compared to competition 27

28. Financial Acumen: Key Metrics Top Metrics Manufacturing and Engineering Should Know • Open orders • Backorders • Lead Time/On Time delivery to goals (especially critical components • Quality metrics (complaint trends, out of box failures, etc.) • Manufacturing variances (labor efficiency, materials, overhead) • Safety metrics • Material, per hour labor, OH costs for products • Absorption • History of cost fluctuations • % Revenue generated by new products • Budget – performance to budget in areas you are responsible for (op ex and cap ex) • Forecast mo/qtr/yr • On time delivery report • IP Associated with products • Production Yield • Inventory metrics (turnover, trends) • Cost reduction results vs. target • Contribution margin • Performance by hour/shift/day/week • Performance by work center/plant/product line 28

29. Financial Acumen: Key Metrics 29

30. Conclusion Thank You! • Remember numbers give you the power to make good decisions! • Taking time to understand the numbers set you apart from the rest! Questions? Please feel free to contact me: 303-754-5184 alt@innoviamedical.com 30