EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1





Investor Contact:
Heide Erickson
Capella Education Company
Media Contact:
Irene Silber
Capella Education Company

Capella Education Company Reports First Quarter 2008 Results

Revenue Increased 23.5 Percent; Enrollment Up 22.7 Percent;

Operating Income Up 42.2 Percent

MINNEAPOLIS, May 1, 2008—Capella Education Company (NASDAQ: CPLA), a provider of exclusively online post-secondary education through its wholly owned subsidiary Capella University, today announced financial results for the three months ended March 31, 2008.



Revenues for the three months ended March 31, 2008 increased by 23.5 percent to $65.3 million, compared to $52.8 million in the first quarter of 2007.



Total active enrollment increased by 22.7 percent to 23,496 learners from the same period in 2007.



Operating income in the three months ended March 31, 2008 increased by 42.2 percent to $7.1 million, compared to $5.0 million during the same period in 2007. The operating margin in the first quarter was 10.9 percent of revenue, compared to 9.5 percent of revenue during first quarter 2007, an increase of 140 basis points.



The tax rate for the first quarter of 2008 was 35.4 percent, compared to 36.9 percent for first quarter 2007.





Net income for the first quarter of 2008 was $5.5 million, compared to $3.8 million in the first quarter of 2007.



Diluted net income per share was $0.31 in the first quarter of 2008, compared to $0.23 in the first quarter of 2007.



As part of a $50 million share repurchase program, which was authorized on March 3, 2008, a total of 394,000 shares were repurchased through March 31, 2008, for total consideration of $21.8 million.

“We are pleased with these results, which are a testament to our talented team of Capella faculty and staff, as well as our solid alignment with the needs of our adult learners,” said Stephen Shank, chairman and chief executive officer of Capella Education Company. “The quarter demonstrates the soundness of our strategies, the differentiated nature of our business model, and our ability to execute,” said Shank.

“In addition to meeting our revenue growth objectives for the quarter, we continued to generate operating margin improvements through revenue growth, the leveraging of our infrastructure, and our continued focus on process improvements,” added Lois Martin, senior vice president and chief financial officer. “Our performance allowed us to achieve margin expansion even as we made investments to facilitate the largest of our ERP module implementations. In addition, we continued to invest to increase marketing effectiveness and to enhance the learner experience and learning outcomes,” said Martin.

Balance Sheet and Cash Flow

As of March 31, 2008, the Company had cash, cash equivalents and marketable securities of $131.9 million, compared to $143.8 million in cash, cash equivalents and marketable securities at year-end. The change from year-end 2007 to first quarter 2008 reflects increased cash flow from operations, offset by payments related to the repurchase of common stock. The Company had no debt during the first quarter 2008 or at year-end 2007. Cash flow from operations was $10.1 million during the first quarter of 2008 compared to $6.3 million in the first quarter of 2007. Capital expenditures were $4.4 million for the three months ended March 31, 2008, which compares to $3.6 million in capital expenditures in the first quarter of 2007, as the Company continued to invest in an Enterprise Resource Planning system, scheduled for completion in the summer of 2008. Depreciation and amortization was $2.8 million for the three months ended March 31, 2008, compared to $2.4 million for the same period in 2007.


For the second quarter ending June 30, 2008, enrollment is expected to grow by 18.5 to 20.0 percent and revenue by approximately 21.0 to 22.5 percent compared to the second quarter of 2007. The operating margin is anticipated to be approximately 12.0 to 12.5 percent of total revenue.

“We expect second quarter enrollment growth rate to be slightly lower than that achieved in the first quarter 2008, as we experience the productivity impacts from two major ERP





module implementations during the past two quarters,” said Martin. “We are continuing to make progress as we work through the substantial learning curve associated with this implementation. We look forward to moving from the implementation stage of our ERP installation to the actual realization of operational benefits during the second half of 2008,” concluded Martin.

Forward-Looking Statements

Certain information in this news release does not relate to historical financial information, including statements relating to our future prospects and our expectations regarding our revenues, enrollment, and operating performance, and may be deemed to constitute 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 certain risks and uncertainties that could cause the company's actual results in the future to differ materially from its historical results and those presently anticipated or projected. The company undertakes no obligation to update its forward-looking statements to reflect events or circumstances arising after such date.

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; regional accreditation standards and state and regional regulatory requirements; changes in funding and availability for Title IV programs; responding to any additional governmental inquiries into our financial aid practices; attracting and retaining learners; updating and expanding the content of existing programs and developing new programs; the review of our business and financial aid practices by governmental authorities, including action by Federal Student Aid on the final audit report of the Office of Inspector General of the U.S. Department of Education arising out of its ongoing compliance audit of Capella University; changes in applicable federal and state laws and regulations and accrediting agency policies; maintaining and expanding existing commercial relationships with employers and developing new such relationships; our failure to keep up with advances in technology important to the online learner experience; our ability to manage growth effectively; the continued successful implementation of our Enterprise Resource Planning system; unforeseen changes in student enrollment or our expenses; and 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 are included under, among others, the heading “Risk Factors” in our most recent Form 10-K on file with the Securities and Exchange Commission and other documents filed by the company with the Securities and Exchange Commission.




Conference Call

Capella will discuss its first quarter 2008 results and second quarter 2008 outlook during a conference call scheduled today, May 1, at 9:00 a.m. Eastern time (ET). To participate in the live call, investors should dial (800) 750-4984 (domestic) or (913) 312-0694 (international) at 8:50 a.m. (ET). The webcast will be available on the Capella Education Company Web site at www.capellaeducation.com.

A replay of the call will be available from May 1 through May 8, 2008, by calling (888) 203-1112 (domestic) or (719) 457-0820 (international), passcode 4435619. It will also be archived at www.capellaeducation.com in the investor relations section for 60 days.

About Capella Education Company

Founded in 1991, Capella Education Company (NASDAQ: CPLA) is a national leader in online education and parent company of Capella University, a regionally accredited* online university. Capella University offers graduate degree programs in business, information technology, education, human services, psychology, public health, and public safety, and bachelor's degree programs in business, information technology, and public safety. These academic programs are designed to meet the needs of working adults, combining high quality, competency-based curricula with the convenience and flexibility of an online learning format. Currently, Capella University offers 19 graduate and undergraduate degree programs with 104 specializations and more than 950 courses. More than 23,000 learners were enrolled as of March 31, 2008. For more information about Capella Education Company, please visit http://www.capellaeducation.com. For more information about Capella University, please visit http://www.capella.edu or call 1.888.CAPELLA (227.3552).


* Capella University is accredited by The Higher Learning Commission and is a member of the North Central Association of Colleges and Schools (NCA), www.ncahlc.org.

Capella University, 225 South Sixth Street, Ninth Floor, Minneapolis, MN 55402, 1-888-CAPELLA (227-3552), www.capella.edu.

# # #


Consolidated Balance Sheets

(In thousands, except par value)


     As of March 31,
    As of December 31,



Current assets:


Cash and cash equivalents

   $ 18,040     $ 60,600  

Marketable securities

     113,813       83,167  

Accounts receivable, net of allowance of $1,686 at March 31, 2008 and $951 at December 31, 2007

     8,523       7,557  

Prepaid expenses and other current assets

     8,538       12,593  

Deferred income taxes

     1,877       1,896  

Total current assets

     150,791       165,813  

Property and equipment, net

     35,586       34,462  

Total assets

   $ 186,377     $ 200,275  



Current liabilities:


Accounts payable

   $ 3,989     $ 6,089  

Accrued liabilities

     25,990       23,826  

Deferred revenue

     6,941       6,476  

Total current liabilities

     36,920       36,391  

Deferred rent

     1,247       1,167  

Other liabilities

     335       335  

Deferred income taxes

     5,210       5,508  

Total liabilities

     43,712       43,401  

Shareholders’ equity:


Common stock, $0.01 par value:


Authorized shares — 100,000


Issued and outstanding shares — 17,010 at March 31, 2008 and 17,363 at December 31, 2007

     170       173  

Additional paid-in capital

     177,010       196,643  

Accumulated other comprehensive income

     134       195  

Retained earnings (accumulated deficit)

     (34,649 )     (40,137 )

Total shareholders’ equity

     142,665       156,874  

Total liabilities and shareholders’ equity

   $ 186,377     $ 200,275  


Consolidated Statements of Income

(In thousands, except per share amounts)


     Three Months Ended
     March 31,
     2008    2007


   $ 65,251    $ 52,824

Costs and expenses:


Instructional costs and services

     29,016      23,523

Marketing and promotional

     21,393      18,320

General and administrative

     7,730      5,981

Total costs and expenses

     58,139      47,824

Operating income

     7,112      5,000

Other income, net

     1,389      1,092

Income before income taxes

     8,501      6,092

Income tax expense

     3,013      2,248

Net income

   $ 5,488    $ 3,844

Net income per common share:



   $ 0.32    $ 0.24


   $ 0.31    $ 0.23

Weighted average number of common shares outstanding:



     17,316      16,015


     17,894      16,700


Unaudited Other Information

(In thousands, except enrollment amounts)


     Three Months Ended
March 31,
     2008    2007

Depreciation and amortization

   $ 2,765    $ 2,410

Net cash flow provided by operating activities

     10,084      6,281

Capital expenditures

     4,449      3,556


Enrollment by Degree(a):    March 31,       
     2008    2007    % Change  


   8,908    7,865    13.3 %


   10,683    8,256    29.4 %


   3,779    2,937    28.7 %


   126    93    35.5 %


   23,496    19,151    22.7 %


(a) Enrollment as of March 31, 2008 and 2007 is the enrollment as of the last day of classes for the quarter ended March 31, 2008 and 2007, respectively.