Capella Education Company (NASDAQ:CPLA), a provider of
online post-secondary education, primarily through its wholly owned
subsidiary Capella University, today announced financial results
for the three months ended March 31, 2016.
“2016 is off to an exciting start for Capella Education
Company,” said Kevin Gilligan, chairman and chief executive
officer. “In addition to delivering first quarter results within
expectations, we continue to build a leadership position in the
market for job-ready 21st century skills. Our recent acquisition of
Hackbright Academy is another step in positioning Capella for
accelerated growth in 2017 and beyond.”
Results for the first quarter of 2016, and comparisons to
previous periods are for continuing operations. For the three
months ended March 31, 2016:
- Revenues were $105.4 million, compared
to $105.7 million in the first quarter of 2015, a decrease of 0.2
percent.
- Capella University total active
enrollment increased 2.6 percent to 38,503, new enrollment
decreased by 3.7 percent compared to first quarter 2015, and early
cohort persistence improved by approximately 2 percent.
- Operating income was $16.5 million,
compared to $17.6 million for the same period in 2015. Operating
margin was 15.7 percent, compared to 16.7 percent for the first
quarter 2015.
- Income from continuing operations for
the first quarter of 2016 was $10.3 million, compared to $10.9
million for the same period in 2015.
- Diluted net income per common share
from continuing operations was $0.86, compared to $0.88 for the
same period in 2015.
Balance Sheet and Cash Flow
As of March 31, 2016, the Company had cash and marketable
securities of $163.2 million, compared to $159.3 million at Dec.
31, 2015, and no debt for the same periods.
Cash provided by operating activities from continuing operations
for the three months ended March 31, 2016 was $22.7 million
compared to $18.1 million in the same period a year ago.
Dividend and Share Repurchases
A quarterly cash dividend of $0.39 per outstanding share of
common stock was declared during the first quarter of 2016. The
dividend was paid on April 15, 2016.
In the first quarter of 2016, the Company repurchased
approximately 165,000 shares of Capella stock for total
consideration of $7.5 million. The remaining authorization as of
the end of the first quarter was $48.5 million.
Outlook
On April 22, 2016, Capella announced the acquisition of
Hackbright Academy, the leading software engineering school for
women, for a cash payment of approximately $18 million.
Hackbright’s financial results will be included in our consolidated
financial statements as of the close of the transaction. For 2016,
we expect Hackbright to contribute about a point of revenue growth
to Capella’s results and dilution of approximately $0.15 to $0.25
per share.
The following revenue and operating margin outlook excludes the
expected financial results of Hackbright. For the second quarter
ending June 30, 2016, Capella University new enrollment is expected
to be slightly up year-over-year and total enrollment is expected
to grow about 1.5 to 2.5 percent year-over-year. Revenues from
continuing operations are expected to be about flat to up 1.0
percent compared to second quarter 2015. Consolidated operating
margin for continuing operations is anticipated to be approximately
17.0 to 18.0 percent of total revenue for the second quarter of
2016.
“Our goals remain to deliver annual new and total enrollment
growth for Capella University in 2016,” said Steve Polacek, senior
vice president and chief financial officer. “Our strong financial
position provides us with the ability to further invest in
differentiating our core business, while making longer-term
investments to expand into exciting new growth markets.”
Forward-Looking Statements
Certain information in this news release does not relate to
historical financial information, including statements relating to
future prospects and expectations regarding our growth, revenues,
enrollment, and operating performance, and should be considered
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The company cautions
investors not to place undue reliance on any such forward-looking
statements, which are based on information available at the time
those statements are made or management's good faith belief as of
that time with regard to future events, and should not be read as a
guarantee of future performance or results. Such statements are
subject to risks and uncertainties which could cause the company's
actual results to differ materially from historical results and
from results presently anticipated or projected. The company
undertakes no obligation to update its forward-looking
statements.
Among these risks and uncertainties are any failure to
materially comply with the extensive regulatory framework
applicable to us, including compliance with Title IV of the Higher
Education Act and the regulations thereunder; complying with U.S.
Department of Education rules, including those regarding incentive
compensation and gainful employment disclosures, certifications and
program requirements; maintaining our business in accordance with
regional and specialized accreditation standards and state
regulatory and program approval requirements; adapting to changes
in the administration, funding and availability for Title IV
programs; any governmental review of our business, marketing, or
financial aid practices, including by any state attorneys general,
the federal Consumer Financial Protection Bureau, the Minnesota
Office of Higher Education or other state regulatory bodies;
successfully growing our FlexPath programs; maintaining and
expanding existing commercial relationships with employers and
developing new employer and business partner relationships;
successfully managing our PhD completion efforts; improving our
conversion rate and effectively leveraging our brand-driven
marketing strategy; keeping up with advances in technology
important to the online learner experience; effectively managing
data security risks; improving our learner persistence and cohort
retention rate; successfully integrating acquisitions; successfully
growing Capella Learning Solutions’ new business lines; and
managing risks associated with the overall competitive environment
and general economic conditions.
Other factors that could cause the company’s results to differ
materially from those contained in its forward-looking statements
include those described in the “Risk Factors” section of our most
recent Annual Report on Form 10-K on file with the Securities and
Exchange Commission (SEC), and any updates or developments
described in our Quarterly Reports on Form 10-Q and other documents
the company files with the SEC.
Conference Call
Capella will discuss its first quarter 2016 results and outlook
during a conference call scheduled today, April 26, 2016, at 9:00
a.m. Eastern time (ET). To participate in the live call, investors
should dial 800.794.6623 (domestic) or 785.424.1227 (international)
at 8:50 a.m. (ET), conference ID# 8176. The webcast, including the
accompanying presentation, will be available on the Capella
Education Company Web site at www.capellaeducation.com in the
investor relations section. A replay of the call will be available
starting on April 26 through May 3, 2016, at 800.839.2670
(domestic) or 402.220.7230 (international), conference ID# 8176. It
will also be archived at www.capellaeducation.com in the investor
relations section.
About Capella Education Company
Founded in 1991, Capella Education Company
(http://www.capellaeducation.com) is a leading education provider,
primarily through our wholly owned subsidiary Capella University
(http://www.capella.edu), a regionally accredited* online
university with approximately 39,000 learners as of March 31, 2016.
Capella Education Company also owns Capella Learning Solutions
(CLS) which provides online non-degree, high-demand, job-ready
skills, training solutions and services to individuals and
corporate partners; Hackbright Academy
(https://hackbrightacademy.com), the leading software engineering
school for women with a mission to increase female representation
in tech through education, mentorship and community; and Sophia
(http://www.sophia.org), an innovative learning platform leveraging
technology to support self-paced learning.
*Capella University is accredited by The Higher Learning
Commission.
CAPELLA EDUCATION COMPANY Consolidated
Balance Sheets (In thousands, except par value)
As of March 31, 2016 As of
December 31, 2015 (Unaudited) ASSETS Current
assets: Cash and cash equivalents $ 92,519 $ 86,104 Marketable
securities, current 32,041 27,522 Accounts receivable, net of
allowance of $5,405 at March 31, 2016 and $6,340 at December 31,
2015 17,623 17,081 Prepaid expenses and other current assets 12,472
14,308 Current assets of business held for sale 21,996
4,251 Total current assets 176,651 149,266
Marketable securities, non-current 38,645 45,679 Property and
equipment, net 34,206 34,306 Noncurrent assets of business held for
sale — 18,707 Other assets 6,641 2,397
Total assets $ 256,143 $ 250,355
LIABILITIES AND
SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $
1,639 $ 1,470 Accrued liabilities 27,436 23,658 Dividends payable
4,730 4,824 Deferred revenue 10,712 7,796 Current liabilities of
business held for sale 8,202 8,291
Total current liabilities 52,719 46,039 Deferred rent 1,638 1,874
Other liabilities 2,000 3,061 Deferred income taxes 1,277
1,502 Total liabilities 57,634 52,476
Shareholders’ equity: Common stock, $0.01 par value: Authorized
shares — 100,000; Issued and Outstanding shares — 11,722 at March
31, 2016 and 11,824 at December 31, 2015 117 118 Additional paid-in
capital 116,533 114,849 Accumulated other comprehensive loss (85 )
(272 ) Retained earnings 81,944 83,184
Total shareholders’ equity 198,509 197,879
Total liabilities and shareholders’ equity $ 256,143
$ 250,355
CAPELLA EDUCATION COMPANY
Consolidated Statements of Income (In thousands,
except per share amounts) Three Months
Ended March 31, 2016 2015
(Unaudited) Revenues $ 105,448 $ 105,701 Costs and expenses:
Instructional costs and services 45,311 45,242 Marketing and
promotional 25,879 26,341 Admissions advisory 7,423 6,952 General
and administrative 10,308 9,556 Total
costs and expenses 88,921 88,091
Operating income 16,527 17,610 Other expense, net (9 )
(13 ) Income from continuing operations before income taxes
16,518 17,597 Income tax expense 6,242 6,660
Income from continuing operations 10,276 10,937 Loss from
discontinued operations, net of tax (978 ) (900 ) Net
income $ 9,298 $ 10,037 Basic net income (loss) per
common share: Continuing operations $ 0.87 $ 0.89 Discontinued
operations (0.08 ) (0.07 ) Basic net income per
common share $ 0.79 $ 0.82 Diluted net income (loss)
per common share Continuing operations $ 0.86 $ 0.88 Discontinued
operations (0.08 ) (0.08 ) Diluted net income per
common share $ 0.78 $ 0.80 Weighted average number of
common shares outstanding: Basic 11,755 12,228 Diluted 11,953
12,485 Cash dividends declared per common share $ 0.39 $ 0.37
CAPELLA EDUCATION COMPANY
Consolidated Statements of Cash Flows (In thousands)
Three Months Ended March 31,
2016 2015 (Unaudited)
Operating activities Net income $ 9,298 $ 10,037 Loss from
discontinued operations, net of tax (978 ) (900 )
Income from continuing operations 10,276 10,937 Adjustments to
reconcile net income to net cash provided by operating activities:
Provision for bad debts 1,926 3,139 Depreciation and amortization
5,209 5,314 Amortization of investment discount/premium, net 556
560 Loss on disposal of property and equipment 19 21 Share-based
compensation 2,813 1,737 Excess tax benefits from share-based
compensation (324 ) (368 ) Deferred income taxes (260 ) 44 Changes
in operating assets and liabilities: Accounts receivable (2,467 )
(1,259 ) Prepaid expenses and other current assets (1,149 ) (2,114
) Accounts payable and accrued liabilities 2,084 804 Income taxes
payable 1,382 (493 ) Deferred rent (236 ) (178 ) Deferred revenue
2,916 (35 ) Net cash provided by operating
activities - continuing operations 22,745 18,109 Net cash (used in)
provided by operating activities - discontinued operations
(750 ) 1,454 Net cash provided by operating
activities 21,995 19,563
Investing activities Capital
expenditures (5,309 ) (7,104 ) Investment in partnership interest
(2,246 ) — Purchases of marketable securities (8,507 ) (6,462 )
Maturities of marketable securities 10,560
6,980 Net cash used in investing activities - continuing
operations (5,502 ) (6,586 ) Net cash used in investing activities
- discontinued operations (31 ) (229 ) Net cash used
in investing activities (5,533 ) (6,815 )
Financing
activities Excess tax benefits from share-based compensation
324 368 Net proceeds from exercise of stock options 967 633 Payment
of dividends (4,612 ) (4,532 ) Repurchases of common stock
(7,507 ) (3,715 ) Net cash used in financing activities –
continuing operations (10,828 ) (7,246 ) Effect of foreign exchange
rates on cash (39 ) (82 ) Net increase in cash and
cash equivalents 5,595 5,420 Cash and cash equivalents and cash of
business held for sale at beginning of period 88,027
94,003 Cash and cash equivalents and cash of business
held for sale at end of period 93,622 99,423 Less cash of business
held for sale at end of period (1,103 ) (2,908 ) Cash
and cash equivalents at end of period $ 92,519 $ 96,515
Supplemental disclosures of cash flow information
Income taxes paid $ 5,117 $ 7,089 Non-cash investing and financing
activities: Purchase of equipment included in accounts payable and
accrued liabilities $ 670 $ 536 Declaration of cash dividend to be
paid 4,638 4,580 Repurchases of common stock included in accrued
liabilities $ —
$ 191
CAPELLA UNIVERSITY Other
Information March 31,
Enrollment by Degree (a): 2016
2015 % Change Doctoral 9,857 10,233 (3.7 )%
Master's 17,809 16,451 8.3 % Bachelor's 9,784 9,835 (0.5 )% Other
1,053 1,017 3.5 % Total 38,503 37,536
2.6 %
(a) Enrollment as of March 31, 2016 and 2015 is the enrollment
as of the last day of classes for the quarter ended March 31, 2016
and 2015, respectively.
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version on businesswire.com: http://www.businesswire.com/news/home/20160426005468/en/
Capella Education CompanyInvestor Contact:Heide
Erickson, 612-977-5172Heide.Erickson@capella.eduorMedia
Contact:Mike Buttry, 612-977-5499Mike.Buttry@capella.edu
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