CON3030 - Sunde-DSunde Driver Based Rolling Forecasts

The Hackett Group
The Journey to World-Class
Implementation of Oracle Hyperion Planning

Driver-Based Rolling Forecasts
Deanna Sunde, The Hackett Group, Director EPM Planning & Essbase Practice
Dinh Le, Exelixis, Director Financial Planning and Analysis
The Hackett Group

The ONLY Partner you can go to for Total EPM
What do I look like compared to
World Class Organizations and
peers?
What are the trends and best
practices to consider in the
marketplace?
How do I utilize best practices

within my technology
implementation?
What best practices should I
consider to be more efficient
and effective?
How can I continue to
measure efficiency and
effectiveness ongoing?
How do I successfully
implement and phase EPM
technology for the broadest
success?
Page 2
2013 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
The Hackett Group EPM Practice
#1 Oracle EPM Partner

Oracle EPM Platinum Partner since 1997
400+ successful Hyperion EPM implementations
400+ dedicated EPM consultants with average 10 years experience
Majority are Oracle/Hyperion Certified with strong functional and industry
knowledge
Many of our consultants are: CPAs, MBAs, Six Sigma Black Belts, PMPs
One of the few firms with:

Managed Services Infrastructure, Hosting, Application Managed Services
Deep EPMA and Master Data Management expertise (DRM)
IFRS and tax integration solution specialists
Online database of Best Practice Assets and Accelerators

Page 3
Deanna Sunde
Oracle/Hyperion EPM Background

Have implemented Hyperion products for 14 years
Certified on Planning and Essbase
Finance Background
Accounting and Financial management at Princess Cruises 10 yrs
MBA in Finance, CPA (Inactive), BS in Economics
User Group Participation
Former President of the ODTUG Hyperion SIG (BOD member 2012-14)

Planning Track Member for Kscope13-15 (Lead for Kscope14)
Graduate of ODTUG Leadership Program
Speaker at many ODTUG and OAUG user conferences
Member of SROAUG BOD for 6 years
Page 4
Exelixis
Exelixis is a biopharmaceutical company committed to developing

and commercializing small molecule therapies for the treatment of
cancer
In advancing our first product, COMETRIQ, from discovery to
market, we have established an effective and integrated
infrastructure that encompasses the entire biopharmaceutical
development continuum
We are committed to excellence in all aspects of our work and are

dedicated to improving the care and outcome of cancer patients
Located in South San Francisco, CA
$31.3 million revenue, 200 employees, Traded on NASDAQ
Page 5
Dinh Le
15 Years of Finance & Finance systems experience

Oracle/Hyperion EPM Background
Essbase 10+ years
Director, Financial Planning and Analysis

Commercial Aviation, Retail, Manufacturing, Biotech
Project Manager for Planning implementation

5 ERP, 3 Essbase, 1 EPM implementation
Page 6
Agenda
Current State
Hackett Best Practices
Business Case
Exelixis Requirements
Hacketts Solution
Conclusion
Appendix
Page 7
Current State
FP&A: 4 FTEs
Budget and Quarterly Forecast
Essbase as backbone (11.1.1.3)
Full EPM installed but never configured
Text extracts from ADP and SAP provides Metadata and Actuals
Excel Add-in Protected Workbooks for Budget and Forecast Updates by End
Users
Excel-Add-in Reports for Management and Analytics
Page 8
Why Upgrade to EPM and Planning?
Technical limitation of Current State
Current model Essbase and Excel template

Models 7+ years old
Prone to excel errors, version control, maintenance
Lack of visibility during the planning process
Sun-setting of Excel Add-in and macro compatibility
Business Need
Fixed Annual Budget and Forecast limitation
Current setup could not meet the near-term planning need
Rolling forecasts
Driver-based
Page 9
Agenda
Current State
Business Case
Hacketts Solution
Conclusion
Appendix
Page 10
Rolling Forecasts
Match the Cadence of the Business
This is some what redundant with slide 13, they
While the concept of a rolling forecast has been around for ages, leading
companies are adopting interesting variations to suit the needs of their
company / industry.
Traditional Forecasting
(Accounting driven)
Best Practice Forecasting

32 driven)
(Market
%
Fiscal year-end horizon
Rolling beyond fiscal year-end
Time-based; quarterly done
Time- and event based, frequency
Bottom-up with involvement of the entire organization
Selective involvement of the organization
Many line items; financials only
Few line items; financials / non-financials /

key assumptions
Precise number
Range according to scenarios
The right balance must be struck across level of detail, frequency and horizon to move to a
rolling forecast without overburdening finance.
Page 11
Driver and Exception-Based Planning

High
Driver Based
Variability
Evaluate
Consolidate /
Eliminate
Run Rate /
Exception Based
Low
Low
Materiality
Enhance accuracy and change

the conversation through driverbased forecasting
Look across each dimension
(e.g., accounts, products,
customers) for opportunities to
streamline
If detail is a must, move to
automate and push for
High
exception-based planning /
forecasting
Leading organizations balance across the matrix and establish organizational standards (where logical) on
drivers and detail.
Page 12
Agenda
Current State

Business Case
Hacketts Solution
Conclusion
Appendix
Page 13
Background on Biotech
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
Distribution
Logistics
Manufacturing
6-7years
Page 14
NDA FILING
Government Pricing
3-6 years
Commercializati
on
~250
IND FILING
PRE DISCOVERY
~5,000 10,000
Compounds
FDA Review Scale mfg
Clinical Trials
~10-20 yrs
FDA Approved
Drug
Sales force
Regulatory
Medical Affairs
0.5-2 years
Exelixis
Page 15
Driver and Exception-Based Planning
Launch Activities
Consultants
Legal Patents
Fixed or Known Expenses

Rent, CAM
Insurance
Taxes
Depreciation
Evaluate
Consolidate
/ Eliminate
Driver Based
Run Rate
Page 16
Employment (Workforce)
Product Sales
Cost of Goods
Government Discounts
Clinical Trials
Recurring Expenses
Service contracts
Maintenance
Subscriptions
Outside services
Business Case
Change how Exelixis planning paradigm for existing business

Move away from bottoms-up to driver based
De-emphasize prior quarter variances
Extend the financial horizon outlook
Focus (Clinical, Commercial, FTE, Revenue..)

Reduce forecast cycle time
Develop & refine drivers logic to help roll-forward remaining expenses
Page 17
Agenda
Current State
Business Case
Hacketts Solution
Conclusion
Appendix
Page 18
Driver Based: Revenue
Pay Mix
Discounts
Unit Price
Product Sales
Dosage Split %
Payor Mix &

Discounts
Discounts
Discounts and
Allowances
Units
tC
Pay Mix
Cost
Page 19
Cost of Goods
Sold
Driver Based: Revenue Form
Patient Mix
Cost of goods sold
Page 20
Ongoing Expense Form

4 Qtrs of Forecast input
Calculated
Horizon
Growth Logic
4 Qtrs of Actuals
2 independent levers allow for flexibility in planning at any account
Look back
horizon
% Growth
Page 21
Growth
Logic
Forecasting Horizon
18 months (12 + 6)
Additional 6 month was appropriate for Exelixis
Q1 FY14
Q2 FY14
Q3 FY14
Q2 FY14
Q3 FY14
Q4 FY14
Horizon: 68,769
12 months 82,523
Forecast Horizon Forecast
65,495
Focus on initial 12 months
Q1 FY14
Q4 FY14
Q1 FY15
Preview
86,649
90,982
Q1 FY15
Q2 FY15
95,531
Q2 FY15
Forecast
Preview
De-Emphasize quarterly Act vs Forecast variance if they do not impact future periods
Focus will be on go forward outlook
Support existing Fiscal
month/quarter/annual reporting
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
4 Historical
saved versions
Forecast
65,495 68,769 82,523 86,649 90,982 95,531
PF1
PF2
PF3
PF4
48,428 55,693
38,197 40,106 46,122
52,051 46,391 39,378 41,347
49,510
51,030Q4 FY13
45,481 Q1 38,606
Q1 FY13
Q2 FY13 50,010
Q3 FY13
FY14
Forecast
Prior Fcst 1
66,831
53,041
47,549
40,536
Q2
FY14
65,495
68,769
38,606
40,536
Prior Fcst 2
Prior Fcst 3
Prior Fcst 4
49,510
50,010
51,030
45,481
Page 22
70,173
63,649
54,681
84,207
66,831
88,418
Q3 FY14
Q4 FY14
Q1 FY15
Q2 FY15
82,523
86,649
90,982
95,531
18 Month Rolling
Exploit the dynamic capabilities of a rolling forecast
True variances versus time shifts and other noise
Holistic view to fully reap benefits of a rolling forecast without additional work
Qualitative rolling view: Graphing current & prior versions along a fixed time series
Assess variability between forecast with varying time periods

Insights to trajectory of expenses and how they align with corporate initiatives
100,000
Forecast
Prior Fcst 1
80,000
60,000
Prior Fcst 2
Prior Fcst 3
40,000
Prior Fcst 4
20,000
Q1 FY13
Q3 FY13
Q1 FY14
Page 23
Q3 FY14
Q1 FY15
Angry Bird Method

100,000
80,000
60,000
40,000
20,000
Q1 FY13
Q3 FY13
Q1 FY14
Q3 FY14
Page 24
Q1 FY15
15-Month Overlap
-Quantitative way to assess forecast variability factoring in seasonality

Every Forecast will have a 15 month overlap with the forecast done before
it
Q4 FY13
Forecast
Prior Fcst 1
Prior Fcst 2
Prior Fcst 3
Prior Fcst 4
Q3 FY13
Forecast
Prior Fcst 1
Prior Fcst 2
Prior Fcst 3
Prior Fcst 4
49,510
Q2 FY14
68,769
66,831
Q3 FY14
82,523
70,173
Q4 FY14
86,649
84,207
Q1 FY15
90,982
88,418
Q2 FY15
95,531
48,428
Q1 FY14
65,495
55,693
Q4 FY13
Q1 FY14
Q2 FY14
Q3 FY14
Q4 FY14
Q1 FY15
Q2 FY15
48,428
55,693
66,831
70,173
50,010
51,030
45,481
38,606
Utilize this to show traditional variances
Page 25
84,207
49,510
88,418
Requirements
Installation 11.1.2.1 / Migration

Integrated 18th month rolling forecast Expense & Workforce
Flexible design to meet planning
1.
2.
3.
Bottoms up / Exception
Run-rate
Driver Based
Underlying model to accommodate current reporting requirements

15 weeks: Design to Rollout!
Page 26
Agenda
Current State
Business Case
Hacketts Solution
Conclusion
Appendix
Page 27
Project Timeline
Design Phase
Exelixis Project Manager
1 Resource and 1 Part-Time Project Director from Hackett
Participation by Exelixis Subject Matter Experts
Build Phase
Exelixis Project Manager
1 Resources and 1 Part-Time Project Director from Hackett
End Users for UAT
May
5/6
5/13
June
5/20
W1
W2
W3
July
W4
W5
W6
W7
W8
August
W9
W
10
11
12
September
13
14
15
9/9
9/16
9/23
Design
Install
Build
Test
Train
SOW
Steering committee & Sign off
Page 28
Support
Go-Live*
Approach
Upgrade Environment to 11.1.2.2

Rapid Deployment
Leverage Existing Model as Much as Possible
Narrow Defined Scope
18 Month Rolling Forecast

Driver Based
Unit Base Revenue, COGS, Discounts and Allowances
Workforce (with configuration changes)
Salesforce allowance and TE
Page 29
Overall Design
Actuals
Drivers Input
Page 30
Exception
Adjustment
Architecture v. 11.1.2.2
Upgraded from 11.1.1.3

Classic for Metadata
Calculation Manager
Page 31
Dimensionality
Finance/Finstmt
Finance/Capex
Wrkforce/Wrkforce
Account
Period
Year
Entities
Scenarios
Versions
Companies (for future use)
Currencies (for future use)
DataType
Employee
Projects
X
X
New Assets
X
X
Attribute Dimensions:
Functional (Entities)
Emp_Grade(Employee)
CurAttr (Companies)
European Entity (Entities)
Page 32
Finstmt
Rolling Forecasts supported using Substitution Variables

FcstQ1 FcstQ6
FcstYr1 FcstYr6
Help facilitate the rolling 18 month forecast
Data forms, business rules, and reports
Page 33
Ongoing Expense - Run Rates
Allows for 2 independent levers for any account

Look back horizon
Growth % / Inflation rate applied to the selected horizon
Page 34
15-Month Overlap
- For Variance Reporting Dynamic Quarters were Created: P1-P5
Q4 FY13
Forecast
Prior Fcst 1
Prior Fcst 2
Prior Fcst 3
Prior Fcst 4
Q3 FY13
Forecast
Prior Fcst 1
Prior Fcst 2
Prior Fcst 3
Prior Fcst 4
49,510
Q2 FY14
68,769
66,831
Q3 FY14
82,523
70,173
Q4 FY14
86,649
84,207
Q1 FY15
90,982
88,418
Q2 FY15
95,531
48,428
Q1 FY14
65,495
55,693
Q4 FY13
Q1 FY14
Q2 FY14
Q3 FY14
Q4 FY14
Q1 FY15
Q2 FY15
48,428
55,693
66,831
70,173
50,010
51,030
45,481
38,606
* See Appendix for formula and code details
Page 35
84,207
49,510
88,418
Capital Planning
Did not use out-of-the-box

Tracks Capital Spend
Calculates Depreciation
Separate Plan Type for Future Growth

i.e. Cash Flow, Balance Sheet
Page 36
Workforce Planning
Out-of-the-box with Customizations

Data Loaded from ADP
Substitution Variables Setup to Support Rolling Forecast
Entities dimension has a UDA of Active

For the cost centers that are currently budgeting
Used for integration to Finstmt
Page 37
Workforce Planning (cont.)
Employee dimension
Structured by Existing Employees, New Hires and Temp Hires to separate for
calculation purposes
Existing Employee further structured by Functional Roll-up to support
average salary calculations by functional entity
Emp_Grade attribute assigned designating their Employee Grade

Bonus done by Grade (also a custom Sales Bonus)
Page 38
Workforce Planning (cont.)
Employee dimension (cont.)

Hierarchy for Employee Avg Salaries
By functional area - not by Grade,
Calc also uses the Functional attribute on the Entities dimension
Emp_Grade attribute assigned designating their Employee Grade

Salespeople FieldSalesFlag set to 1 (SmartList Value YES).
Page 39
Workforce Planning Drivers
Page 40
Field Sales Force Drivers
Page 41
New Hires and New Temps Forms
Page 43
Agenda
Current State
Business Case
Hacketts Solution
Conclusion
Appendix
Page 44
Page 45
Copyright 2010,
Oracle
and/or
itsreserved.
affiliates.
rights
reserved.
2013
The Hackett Group,
Inc. All rights
Reproduction of All
this document
or any portion
thereof without prior written consent is prohibited.
Contact Information
Deanna Sunde
Dinh Le
Director, EPM Planning & Essbase Practice
Director, Financial Planning and Analysis
Los Angeles, CA
www.thehackettgroup.com
Phone (818) 602-6052

dsunde@thehackettgroup.com
South San Francisco, CA

exelixis.com
Amsterdam | Atlanta | Frankfurt | Hyderabad | London

Miami | New York | Paris | Philadelphia | San Francisco | Sydney
Page 46
Phone (650) 837-7007

dile@exelixis.com
Agenda
Current State
Business Case
Hacketts Solution
Conclusion
Appendix
Page 47
15 Month Overlap
For Variance Reporting Dynamic Quarters were Created P1-P5
Relative to the version that was selected at that intersection
To Calculate 15month Var for Forecast
P1
P2
Forecast
Q1 2013
Q2 2013
PF1
Q4 2012
Q1 2013
PF2
Q3 2012
Q4 2012
PF3
Q2 2012
Q3 2012
P3
P4
P5
Q3 2013
Q4 2013
Q1 2014
Q2 2013
Q3 2013
Q4 2013
Q1 2013
Q2 2013
Q3 2013
Q4 2012
Q1 2013
Q2 2013
P1
P2
P3
P4
P2
P3
P4
P5
Scenario: Forecast
P1
Scenario: PF1
Page 48
P5
15 Month Overlap
Page 49
15 Month Overlap - Base P1

If (@Ismbr("Forecast"))
&CurrQtr->&CurrYr->&ReportVer;
Elseif (@ismbr("PFcst1"))
If (&CurrQtrnum ==1)
@Member(@SHIFTSIBLING(&CurrQtr,3))->@Member(@Shiftsibling(&CurrYr,-1))->"Final";
Elseif (&CurrQtrnum ==2)
@Member(@SHIFTSIBLING(&CurrQtr,-1))->&CurrYr->"Final";
ENDIF;
ElseIF ( &CurrQtrnum ==2)
ElseIF (&CurrQtrnum ==3)
@Member(@SHIFTSIBLING(&CurrQtr,-2))->@Member(@Shiftsibling(&CurrYr,0))->"Final";
ENDIF;
Page 50
15 Month Overlap - Base P1 (cont)

&CurrQtr->&CurrYr->&ReportVer;
ENDIF;
ENDIF;
Else #missing;
ENDIF
Page 51
15 Month Overlap - Comp P1

&CurrQtr->&CurrYr->Pfcst1->"Final";
@Member(@SHIFTSIBLING(&CurrQtr,3))->@Member(@Shiftsibling(&CurrYr,-1))->PFcst2->"Final";
@Member(@SHIFTSIBLING(&CurrQtr,-1))->@Member(@Shiftsibling(&CurrYr,0))->PFcst2->"Final";
ENDIF;
ElseIF ( &CurrQtrnum ==2)
ElseIF (&CurrQtrnum ==3)
ENDIF;
Page 52
15 Month Overlap - Comp P1 (cont)
ENDIF;
Else #missing;
ENDIF
Page 53

CON3030 - Sunde-DSunde Driver Based Rolling Forecasts

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The Hackett Group

The Journey to World-Class

Implementation of Oracle Hyperion Planning

The Hackett Group

How do I utilize best practices

The Hackett Group EPM Practice

#1 Oracle EPM Partner

One of the few firms with:

Online database of Best Practice Assets and Accelerators

Oracle/Hyperion EPM Background

User Group Participation

Former President of the ODTUG Hyperion SIG (BOD member 2012-14)

Exelixis is a biopharmaceutical company committed to developing

We are committed to excellence in all aspects of our work and are

$31.3 million revenue, 200 employees, Traded on NASDAQ

15 Years of Finance & Finance systems experience

Director, Financial Planning and Analysis

Project Manager for Planning implementation

Why Upgrade to EPM and Planning?

Technical limitation of Current State

Current model Essbase and Excel template

This is some what redundant with slide 13, they

Best Practice Forecasting

Fiscal year-end horizon

Rolling beyond fiscal year-end

Time-based; quarterly done

Time- and event based, frequency

Bottom-up with involvement of the entire organization

Selective involvement of the organization

Many line items; financials only

Few line items; financials / non-financials /

Range according to scenarios

Driver and Exception-Based Planning

Enhance accuracy and change

Hackett Best Practices

FDA Review Scale mfg

Driver and Exception-Based Planning

Fixed or Known Expenses

Change how Exelixis planning paradigm for existing business

Focus (Clinical, Commercial, FTE, Revenue..)

Driver Based: Revenue

Payor Mix &

Driver Based: Revenue Form

Cost of goods sold

Ongoing Expense Form

2 independent levers allow for flexibility in planning at any account

Focus on initial 12 months

Assess variability between forecast with varying time periods

Angry Bird Method

-Quantitative way to assess forecast variability factoring in seasonality

Utilize this to show traditional variances

Installation 11.1.2.1 / Migration

Underlying model to accommodate current reporting requirements

Steering committee & Sign off

Upgrade Environment to 11.1.2.2

18 Month Rolling Forecast

Upgraded from 11.1.1.3

Companies (for future use)

Currencies (for future use)

European Entity (Entities)

Rolling Forecasts supported using Substitution Variables

Ongoing Expense - Run Rates

Allows for 2 independent levers for any account