Capella Education Company (NASDAQ: CPLA), a leading
educational services company, today announced financial results for
the three and six months ended June 30, 2016.
“We delivered solid second quarter results for Capella Education
Company as we continued to successfully execute our strategies in a
changing market environment,” said Kevin Gilligan, chairman and
chief executive officer. “We also made significant steps toward our
goal of providing the most direct path between learning and
employment in the job-ready skills market, positioning Capella for
accelerated growth in 2017 and beyond.”
Selected Financial Data for the Three Months Ended June 30,
2016
Results for the second quarter of 2016, and comparisons to
previous periods, are for consolidated Capella Education Company
continuing operations. Included in consolidated results are
Hackbright Academy and DevMountain operations from their respective
acquisition dates of April 22 and May 4, 2016. Results for Arden
University are presented as discontinued operations.
- Revenues were $106.7 million in the
second quarter of 2016, up 2.0 percent compared to $104.6 million
in the second quarter of 2015. Operating income from continuing
operations was $18.1 million, unchanged from the same period in
2015. Included in operating income for the second quarter of 2016
are acquisition-related transaction costs and effects of purchase
accounting of approximately $1.9 million. The operating margin was
16.9 percent, compared to 17.3 percent for the second quarter
2015.
- Diluted net income per common share
from continuing operations was $0.93, compared to $0.90 for the
same period in 2015.
Operating and Segment Highlights
- Starting in the second quarter 2016,
Capella Education Company is providing additional financial details
related to two segments: “Post-Secondary” consisting of Capella
University and Sophia Learning; and “Job-Ready Skills” consisting
of Capella Learning Solutions, Hackbright Academy and
DevMountain.
- For the Post-Secondary segment,
revenues were $105.8 million, up 1.2 percent compared to $104.5
million in the second quarter of 2015. The operating margin was
20.4 percent, compared to 17.7 percent for the second quarter 2015.
Results are primarily attributable to Capella University.
- Capella University total active
enrollment increased 2.4 percent to 38,231 learners, new enrollment
increased by 2.5 percent compared to second quarter 2015, and early
cohort persistence improved by approximately 4 percent.
- Revenues for the Job-Ready Skills
segment were $0.9 million compared to $0.1 million in the second
quarter of 2015. The operating loss was $3.5 million, compared to
$0.5 million for the second quarter 2015. Included in second
quarter 2016 results are $1.9 million of transaction costs and
effects of purchase accounting related to the acquisitions of
Hackbright Academy and DevMountain.
Balance Sheet and Cash Flow
At June 30, 2016, Capella Education Company had cash and
marketable securities of $132.8 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 six months ended June 30, 2016 was $42.8 million compared
to $40.2 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 second quarter of 2016. The
dividend was paid on July 15, 2016.
In the second quarter of 2016, Capella Education Company
repurchased approximately 143,000 shares of Capella stock for total
consideration of $7.5 million. The remaining authorization as of
the end of the second quarter was $41.0 million.
Outlook
For the third quarter ending Sept. 30, 2016, revenues from
continuing operations for consolidated Capella Education Company
are expected to be up 4.5 to 5.5 percent compared to third quarter
2015. Consolidated operating margin for continuing operations is
anticipated to be approximately 10.5 to 11.5 percent of total
revenue for the third quarter of 2016. Capella University new
enrollment is expected to be slightly up year-over-year and total
enrollment is expected to grow about 2.0 to 3.0 percent
year-over-year.
For the fiscal year ending Dec. 31, 2016, revenues from
continuing operations for consolidated Capella Education Company
are expected to be $424 to $428 million and earnings per share is
expected to be $3.30 to $3.40, including acquisition-related
transaction costs and effects of purchase accounting.
“Capella University’s performance year-to-date and expectations
for the third quarter position us for better annual performance in
2016 than we anticipated at the beginning of the year,” said Steve
Polacek, senior vice president and chief financial officer. “We are
in a strong financial position, diligently managing costs, and we
believe we are well-positioned for long-term sustainable
growth.”
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, gainful employment, return of Title IV funds,
borrower defenses to repayment, financial responsibility standards,
state authorization, 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;
successfully defending litigation and other claims; any
governmental action or review of our business, marketing, or
financial aid practices, including by any state attorneys general,
the federal Consumer Financial Protection Bureau, the Federal Trade
Commission, the Minnesota Office of Higher Education or other state
or federal 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 second quarter 2016 results and outlook
during a conference call scheduled today, July 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 July 26 through Aug. 2, 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
Capella Education Company (http://www.capellaeducation.com) is
an educational services company that provides access to
high-quality education through online postsecondary degree programs
and job-ready skills offerings needed in today’s market. Capella’s
portfolio of companies is dedicated to closing the skills gap by
placing adults on the most direct path between learning and
employment.
CAPELLA EDUCATION COMPANY Consolidated
Balance Sheets (In thousands, except par value)
As of June 30, 2016 As of December
31, 2015 (Unaudited) ASSETS Current assets: Cash
and cash equivalents $ 61,441 $ 86,104 Marketable securities,
current 44,840 27,522 Accounts receivable, net of allowance of
$5,585 at June 30, 2016 and $6,340 at December 31, 2015 18,702
17,081 Prepaid expenses and other current assets 15,487 14,308
Currents assets of business held for sale 23,186
4,251 Total current assets 163,656 149,266 Marketable
securities, non-current 26,512 45,679 Property and equipment, net
33,765 34,306 Goodwill 26,829 — Intangibles, net 8,862 — Other
assets 7,480 2,397 Noncurrent assets of business held for sale
— 18,707 Total assets $ 267,104
$ 250,355
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 1,245 $ 1,470 Accrued
liabilities 33,542 23,658 Dividends payable 4,697 4,824 Deferred
revenue 13,099 7,796 Current liabilities of business held for sale
9,356 8,291 Total current liabilities
61,939 46,039 Deferred rent 1,402 1,874 Other liabilities 2,306
3,061 Deferred income taxes 3,364 1,502
Total liabilities 69,011 52,476 Shareholders’ equity: Common stock,
$0.01 par value: Authorized shares — 100,000; Issued and
Outstanding shares — 11,607 at June 30, 2016 and 11,824 at December
31, 2015 116 118 Additional paid-in capital 117,149 114,849
Accumulated other comprehensive loss (89 ) (272 ) Retained earnings
80,917 83,184 Total shareholders’
equity 198,093 197,879 Total
liabilities and shareholders’ equity $ 267,104 $ 250,355
CAPELLA EDUCATION COMPANY
Consolidated Statements of Income (In thousands, except
per share amounts) Three Months
Ended June 30, Six Months Ended June 30, 2016
2015 2016 2015
(Unaudited) Revenues $ 106,725 $ 104,584 $ 212,173 $ 210,285
Costs and expenses: Instructional costs and services 45,502 45,527
90,813 90,769 Marketing and promotional 24,922 24,713 50,802 51,054
Admissions advisory 7,285 7,117 14,708 14,069 General and
administrative 10,944 9,168
21,251 18,724 Total costs and expenses
88,653 86,525 177,574
174,616 Operating income 18,072 18,059 34,599 35,669
Other income (expense), net 42 (10 )
33 (23 ) Income from continuing operations
before income taxes 18,114 18,049 34,632 35,646 Income tax expense
7,040 6,851 13,282
13,511 Income from continuing operations 11,074 11,198
21,350 22,135 Loss from discontinued operations, net of tax
(1,379 ) (867 ) (2,357 ) (1,767 ) Net income $
9,695 $ 10,331 $ 18,993 $ 20,368 Basic
net income (loss) per common share: Continuing operations 0.95 0.92
1.82 1.81 Discontinued operations (0.12 ) (0.07 )
(0.20 ) (0.14 ) Basic net income per common share $
0.83 $ 0.85 $ 1.62 $ 1.67 Diluted net
income (loss) per common share Continuing operations 0.93 0.90 1.79
1.78 Discontinued operations (0.11 ) (0.07 )
(0.20 ) (0.14 ) Diluted net income per common share $ 0.82
$ 0.83 $ 1.59 $ 1.64 Weighted average
number of common shares outstanding: Basic 11,648 12,187 11,701
12,207 Diluted 11,872 12,400 11,912 12,442 Cash dividends declared
per common share $ 0.39 $ 0.37 $ 0.78 $ 0.74
CAPELLA EDUCATION COMPANY Consolidated Statements
of Cash Flows (In thousands) Six Months
Ended June 30, 2016 2015
(Unaudited) Operating activities Net income $ 18,993
$ 20,368 Loss from discontinued operations, net of tax
(2,357 ) (1,767 ) Income from continuing operations 21,350
22,135 Adjustments to reconcile net income to net cash provided by
operating activities: Provision for bad debts 4,814 6,205
Depreciation and amortization 10,349 10,850 Amortization of
investment discount/premium, net 1,113 1,134 Loss on disposal of
property and equipment 144 27 Share-based compensation 4,432 3,894
Excess tax benefit from share-based compensation (348 ) (400 )
Deferred income taxes (352 ) (455 ) Changes in operating assets and
liabilities, net of assets acquired and liabilities assumed from
business acquisitions: Accounts receivable (5,713 ) (4,520 )
Prepaid expenses and other current assets (4,522 ) (4,844 )
Accounts payable and accrued liabilities 6,492 8,027 Income taxes
payable 929 (2,040 ) Deferred rent (472 ) (357 ) Deferred revenue
4,603 558 Net cash provided by
operating activities - continuing operations 42,819 40,214 Net cash
(used in) provided by operating activities - discontinued
operations (476 ) 703 Net cash provided by
operating activities 42,343 40,917
Investing activities
Acquisitions, net of cash acquired (32,118 ) — Capital expenditures
(9,977 ) (12,139 ) Investment in partnership interest (3,203 ) (57
) Purchases of marketable securities (12,737 ) (18,246 ) Maturities
of marketable securities 13,625 16,485
Net cash used in investing activities - continuing operations
(44,410 ) (13,957 ) Net cash used in investing activities -
discontinued operations (74 ) (204 ) Net cash used in
investing activities (44,484 ) (14,161 )
Financing
activities Excess tax benefits from share-based compensation
348 400 Net proceeds from exercise of stock options 1,551 1,087
Payment of dividends (9,214 ) (9,065 ) Repurchases of common stock
(15,012 ) (10,493 ) Net cash used in financing
activities - continuing operations (22,327 ) (18,071 ) Effect of
foreign exchange rates on cash (9 ) (34 ) Net
increase (decrease) in cash and cash equivalents (24,477 ) 8,651
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 63,550 102,654 Less cash of business held for sale at end of
period (2,109 ) (2,230 ) Cash and cash equivalents at
end of period $ 61,441 $ 100,424
Supplemental
disclosures of cash flow information Income taxes paid $ 12,703
$ 15,987 Non-cash investing and financing activities: Purchase of
equipment included in accounts payable and accrued liabilities $
342 $ 578 Declaration of cash dividend to be paid 4,609 4,561
Repurchases of common stock included in accrued liabilities $ —
$
499
CAPELLA EDUCATION COMPANY
Segment Reporting (In thousands)
Three Months Ended June 30, Six Months Ended June
30, 2016 2015 2016
2015 (Unaudited) Revenues Post-Secondary $
105,789 $ 104,496 $ 211,216 $ 209,756 Job-Ready Skills 936
88 957 529
Consolidated revenues $ 106,725 $ 104,584 $ 212,173
$ 210,285 Operating income (loss) Post-Secondary $
21,566 $ 18,521 $ 39,285 $ 36,178 Job-Ready Skills (3,494 )
(462 ) (4,686 ) (509 ) Consolidated operating
income 18,072 18,059 34,599 35,669 Other income (expense), net
42 (10 ) 33 (23 ) Income
from continuing operations before income taxes $ 18,114 $
18,049 $ 34,632 $ 35,646
Note: The summary of financial information by reportable segment
above excludes the results of operations for Arden University,
which are presented as discontinued operations in our Consolidated
Statement of Income.
Quarterly revenues and operating income (loss) by reportable
segment for 2015 and for the first two quarters of 2016 can be
found at the Capella Education Company website at www.capellaeducation.com, under ‘Investor
Relations’, within the ‘Financial Information’ section in the
‘Fiscal Year & Quarterly Results’ spreadsheet.
CAPELLA UNIVERSITY Other Information
June 30, Enrollment by
Degree (a): 2016 2015
% Change Doctoral 9,729 10,008 (2.8 )% Master's 17,706
16,576 6.8 % Bachelor's 9,798 9,803 (0.1 )% Other 998 959 4.1 %
Total 38,231 37,346 2.4 %
(a) Enrollment as of June 30, 2016 and 2015 is the enrollment as
of the last day of classes for the quarter ended June 30, 2016 and
2015, respectively.
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version on businesswire.com: http://www.businesswire.com/news/home/20160726005329/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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