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, 2015.
“We are pleased with a strong start to the year and are on track to meet our growth expectations for 2015,” said Kevin Gilligan, chairman and chief executive officer. “Our performance gives us confidence in the sustainability of our strategies.”
For the three months ended March 31, 2015:
- Revenues were $109.1 million, compared to $105.6 million in the first quarter of 2014, an increase of 3.3 percent.
- Capella University total active enrollment increased 4.6 percent to 37,536, new enrollment increased by 15.3 percent from first quarter 2014 and early cohort persistence improved by approximately 3 percent.
- Operating income was $16.8 million, compared to $15.1 million for the same period in 2014. Operating margin was 15.4 percent, compared to 14.3 percent for the first quarter 2014.
- Net income for the first quarter of 2015 was $10.0 million, compared to $8.8 million for the same period in 2014.
- Net income per diluted share was $0.80, compared to $0.70 for the same period in 2014.
Balance Sheet and Cash Flow
As of March 31, 2015, the Company had cash and marketable securities of $171.4 million, compared to $167.1 million at Dec. 31, 2014, and no debt for the same periods.
Cash flow from operating activities for the three months ended March 31, 2015 was $19.6 million compared to $15.5 million in the same period a year ago.
Dividend and Share Repurchases
A quarterly cash dividend of $0.37 per outstanding share of common stock was declared during the first quarter of 2015. The dividend was paid on April 15, 2015.
In the first quarter 2015, the Company repurchased approximately 58,000 shares of Capella stock for total consideration of $3.9 million. The remaining authorization as of the end of the first quarter was $28.1 million.
Outlook
For the second quarter ending June 30, 2015, Capella University new enrollment growth is expected to increase in the low single-digit percent range year-over-year. Total enrollment is expected to grow about 3.5 to 4.5 percent year-over-year, and consolidated revenue is expected to increase about 2.5 to 3.5 percent compared to second quarter 2014.
The consolidated operating margin is anticipated to be approximately 15.0 to 16.0 percent of total revenue for the second quarter of 2015.
“Our second quarter 2015 outlook reflects our continued ability to execute our strategies and deliver positive results in a challenging market environment,” said Steve Polacek, senior vice president and chief financial officer.
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; 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 are included under, among others, the heading "Risk Factors" in our most recent Form 10-K and Form 10-Qs 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 2015 results and outlook during a conference call scheduled today, April 28, 2015, at 9:00 a.m. Eastern time (ET). To participate in the live call, investors should dial 866.385.4179 (domestic) or 702.928.7882 (international) at 8:50 a.m. (ET), conference ID# 14110827. The webcast, including the accompanying presentation, will be available on the Capella Education Company Web site at www.capellaeducation.comin the investor relations section. A replay of the call will be available starting on April 28, 2015 through May 5, 2015, at 855.859.2056 (domestic) or 404.537.3406 (international), conference ID# 14110827. It will also be archived at www.capellaeducation.com in the investor relations section.
Investor and Analyst Day
Capella Education Company will be hosting an Investor and Analyst Day on Thursday, May 14, 2015, in New York, NY, from 9:00 a.m. until 2:00 p.m. eastern time (ET). This invitation-only event will include presentations by Capella leaders on Capella’s position and differentiation in the market by offering the most direct path for learners, including through its FlexPath offering. The event will be webcast live on the Capella Education Company web site at www.capellaeducation.com. 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 leader in online education, primarily through our wholly owned subsidiary Capella University (http://www.capella.edu), a regionally accredited* online university with more than 37,000 learners as of March 31, 2015. In addition, Capella Education Company offers online education through Resource Development International Ltd. (RDI) (http://www.rdi.co.uk), an independent provider of United Kingdom (UK) university distance learning qualifications. Capella Education Company also owns an innovative startup company called Sophia (http://www.sophia.org) - a social teaching and learning platform that integrates education with technology.
*Capella University is accredited by The Higher Learning Commission.
| CAPELLA EDUCATION COMPANY | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| (In thousands, except par value) | ||||||||||
As of March 31, 2015 | As of December 31, 2014 | |||||||||
| (Unaudited) | ||||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 99,423 | $ | 94,003 | ||||||
| Marketable securities, current | 33,268 | 29,619 | ||||||||
| Accounts receivable, net of allowance of $6,190 at March 31, 2015 and $6,558 at December 31, 2014 | 15,942 | 17,902 | ||||||||
| Prepaid expenses and other current assets | 9,304 | 9,007 | ||||||||
| Deferred income taxes | 2,868 | 2,809 | ||||||||
| Total current assets | 160,805 | 153,340 | ||||||||
| Marketable securities, non-current | 38,758 | 43,430 | ||||||||
| Property and equipment, net | 38,785 | 37,246 | ||||||||
| Goodwill | 16,815 | 16,961 | ||||||||
| Intangibles, net | 1,792 | 1,927 | ||||||||
| Other assets | 1,453 | 1,453 | ||||||||
| Total assets | $ | 258,408 | $ | 254,357 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 5,816 | $ | 6,832 | ||||||
| Accrued liabilities | 26,754 | 23,410 | ||||||||
| Dividends payable | 4,680 | 4,622 | ||||||||
| Income taxes payable | — | 709 | ||||||||
| Deferred revenue | 11,484 | 11,718 | ||||||||
| Total current liabilities | 48,734 | 47,291 | ||||||||
| Deferred rent | 2,261 | 2,440 | ||||||||
| Other liabilities | 2,711 | 3,698 | ||||||||
| Deferred income taxes | 6,058 | 5,894 | ||||||||
| Total liabilities | 59,764 | 59,323 | ||||||||
| Shareholders’ equity: | ||||||||||
| Common stock, $0.01 par value: Authorized shares — 100,000; Issued and Outstanding shares — 12,224 at March 31, 2015 and 12,243 at December 31, 2014 | 122 | 122 | ||||||||
| Additional paid-in capital | 113,796 | 112,417 | ||||||||
| Accumulated other comprehensive loss | (187 | ) | (335 | ) | ||||||
| Retained earnings | 84,913 | 82,830 | ||||||||
| Total shareholders’ equity | 198,644 | 195,034 | ||||||||
| Total liabilities and shareholders’ equity | $ | 258,408 | $ | 254,357 | ||||||
| CAPELLA EDUCATION COMPANY | ||||||||||
| Consolidated Statements of Income | ||||||||||
| (In thousands, except per share amounts) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2015 | 2014 | |||||||||
| (Unaudited) | ||||||||||
| Revenues | $ | 109,074 | $ | 105,596 | ||||||
| Costs and expenses: | ||||||||||
| Instructional costs and services | 47,061 | 47,300 | ||||||||
| Marketing and promotional | 27,500 | 25,761 | ||||||||
| Admissions advisory | 7,204 | 6,927 | ||||||||
| General and administrative | 10,529 | 10,465 | ||||||||
| Total costs and expenses | 92,294 | 90,453 | ||||||||
| Operating income | 16,780 | 15,143 | ||||||||
| Other expense, net | (146 | ) | (342 | ) | ||||||
| Income before income taxes | 16,634 | 14,801 | ||||||||
| Income tax expense | 6,597 | 5,984 | ||||||||
| Net income | $ | 10,037 | $ | 8,817 | ||||||
| Net income per common share: | ||||||||||
| Basic | $ | 0.82 | $ | 0.71 | ||||||
| Diluted | $ | 0.80 | $ | 0.70 | ||||||
| Weighted average number of common shares outstanding: | ||||||||||
| Basic | 12,228 | 12,342 | ||||||||
| Diluted | 12,485 | 12,612 | ||||||||
| Cash dividends declared per common share | $ | 0.37 | $ | 0.35 | ||||||
| CAPELLA EDUCATION COMPANY | ||||||||||
| Consolidated Statements of Cash Flows | ||||||||||
| (In thousands) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2015 | 2014 | |||||||||
| (Unaudited) | ||||||||||
| Operating activities | ||||||||||
| Net income | $ | 10,037 | $ | 8,817 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
| Provision for bad debts | 3,188 | 3,509 | ||||||||
| Depreciation and amortization | 5,502 | 6,168 | ||||||||
| Amortization of investment discount/premium, net | 560 | 328 | ||||||||
| Impairment of property and equipment | — | 160 | ||||||||
| Loss on disposal of property and equipment | 21 | 64 | ||||||||
| Share-based compensation | 1,737 | 1,447 | ||||||||
| Excess tax benefits from share-based compensation | (368 | ) | (74 | ) | ||||||
| Deferred income taxes | 41 | (482 | ) | |||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts receivable | (1,297 | ) | (2,049 | ) | ||||||
| Prepaid expenses and other current assets | (6 | ) | (358 | ) | ||||||
| Accounts payable and accrued liabilities | 903 | (4,025 | ) | |||||||
| Income taxes payable | (556 | ) | 1,347 | |||||||
| Deferred rent | (178 | ) | (149 | ) | ||||||
| Deferred revenue | (21 | ) | 781 | |||||||
| Net cash provided by operating activities | 19,563 | 15,484 | ||||||||
| Investing activities | ||||||||||
| Capital expenditures | (7,333 | ) | (5,835 | ) | ||||||
| Investment in partnership interest | — | (1,063 | ) | |||||||
| Purchases of marketable securities | (6,462 | ) | (34,821 | ) | ||||||
| Maturities of marketable securities | 6,980 | 2,800 | ||||||||
| Net cash used in investing activities | (6,815 | ) | (38,919 | ) | ||||||
| Financing activities | ||||||||||
| Excess tax benefits from share-based compensation | 368 | 74 | ||||||||
| Net proceeds from exercise of stock options | 633 | 358 | ||||||||
| Payment of dividends | (4,532 | ) | (4,326 | ) | ||||||
| Repurchases of common stock | (3,715 | ) | (3,203 | ) | ||||||
| Net cash used in financing activities | (7,246 | ) | (7,097 | ) | ||||||
| Effect of foreign exchange rates on cash | (82 | ) | (10 | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | 5,420 | (30,542 | ) | |||||||
| Cash and cash equivalents at beginning of period | 94,003 | 124,097 | ||||||||
| Cash and cash equivalents at end of period | $ | 99,423 | $ | 93,555 | ||||||
| Supplemental disclosures of cash flow information | ||||||||||
| Income taxes paid | $ | 7,089 | $ | 5,342 | ||||||
| Noncash transactions: | ||||||||||
| Purchase of equipment included in accounts payable and accrued liabilities | $ | 603 | $ | 311 | ||||||
| Declaration of cash dividend to be paid | $ | 4,580 | $ | 4,382 | ||||||
| Repurchases of common stock included in accrued liabilities | $ | 191 | $ | 318 | ||||||
| CAPELLA UNIVERSITY | ||||||||||
| Other Information | ||||||||||
| March 31 | ||||||||||
| Enrollment by Degree (a): | 2015 | 2014 | % Change | |||||||
| PhD/Doctoral | 10,233 | 10,743 | (4.7 | )% | ||||||
| Master's | 16,451 | 15,019 | 9.5 | % | ||||||
| Bachelor's | 9,835 | 9,203 | 6.9 | % | ||||||
| Other | 1,017 | 924 | 10.1 | % | ||||||
| Total | 37,536 | 35,889 | 4.6 | % | ||||||
(a) Enrollment as of March 31, 2015 and 2014 is the enrollment as of the last day of classes for the quarter ended March 31, 2015 and 2014, respectively.
Contacts:
Investor Contact:
Heide
Erickson, 612-977-5172
Heide.Erickson@capella.edu
or
Media
Contact:
Mike Buttry, 612-977-5499
Mike.Buttry@capella.edu
