Capella's Strong Position
March 2015
Forward-looking Statements
Statement Under the Private Securities Litigation Reform Act of 1995
Statements in this presentation concerning Capella Education Company’s
future prospects are “forward-looking statements” under the Federal
securities laws. There can be no assurance that future results will be
achieved, and actual results could differ materially from forecasts,
estimates, and summary information contained in this presentation.
Important factors that could cause actual results to differ materially are
included but are not limited to those listed in Capella Education
Company’s most recent 10-K, filed with the Securities and Exchange
Commission. Other and changed factors may also be discussed in future
8-K, 10-K and 10-Q filings. All filings are and will be available for viewing
on our Web site at capellaeducation.com.
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A Leader Delivering High-quality Online
Learning for Working Adults
• Exclusively online
• Founded in 1993 as one of first
fully-online universities
• Graduate focused university
– High average annual revenue per
learner
• Reputation for academic quality
and regulatory compliance
CERTIFICATE’S
3%
PhD/DOCTORAL
28%
BACHELOR'S
26%
MASTER'S
43%
• Pioneering direct assessment
programs decoupled from credit
hour requirements
• Less than 5 percent of revenue
outside of Capella University
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Capella University total enrollment of
36,309 learners as of 12/31/14
Strong Graduate Career Outcomes
Capella average graduate salary for selected programs compared to peers1:
Program 2
Capella
Salary
Capella
Difference 3
BS Business Admin & Mgmt, General
$65,347
61%
BS Information Technology
$77,821
35%
MS Business Admin& Mgmt, General
$85,615
35%
MS Comp. Systems Networking & Telecom.
$90,159
20%
MS Healthcare Admin/Mgmt
$83,039
20%
PhD Business Admin & Mgmt, General
$118,335
11%
PhD Psychology, General
$71,660
9%
Source: 2012 U.S. Department of Education gainful employment calculations sample; Capella analysis
1 Data available for 24 programs of which 14 programs exceeded, 7 performed similar (+/-5%), and 3 performed lower than average for all salaries reported for all institutions
2 ‘Program’ references the credential level and CIP (Classification of Instructional Program code) name found in the Gainful Employment Downloadable Spreadsheet
3 % variance of reported Capella salary versus the average of all of the salaries reported for all institutions (including Capella) in the respective category
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Unique Profile of Capella Learners
• Working adult
– Average age 39 years
– Mid-career adult professionals
– Pursuing education part-time
• 75% female
• About 50% learners of color
• Looking for:
– Rigorous academic experience
– Relevant learning
– Career advancement
– Personal fulfillment and growth
Serious professionals; advancing careers
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Capella's Market
Serving Large and Growing Markets
Job Outlook:
(New +
Replacement Jobs
for Target
Professions)
Vertical
Markets
Forecast CAGR
Through 2020
Fully Online Enrollment
Working Adults > age 25
(Fall 2012)
Bachelor’s
Degree
Master’s or
Higher
Healthcare/ Nursing
3.9 %
168,000
144,000
Business
2.7 %
446,000
219,000
IT
3.4 %
129,000
31,000
Education
3.2 %
53,000
172,000
Public Admin/Safety
2.7 %
154,000
38,000
4.3 %
41,000
65,000
3-4 %
991,000
669,000
Behavioral Sciences
(e.g. Psychology,
Counsel.)
Total
(range)
Sources: Eduventures, IPEDS, NCES, NCHEM, Bureau of Labor Statistics (BLS), Capella analysis
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Vertical market
characteristics:
• Significant job growth
expectations
• Highly fragmented
market
• High knowledge
worker concentrations
• Potential to expand
market with new
innovative education
models
Leveraging Capella's Differentiation
• Academic quality
– External recognitions including
specialized accreditations
– Learner outcomes
• Culture focused on learner success
• Online programs designed around
professions; learners can immediately
apply what they learn
• Analytics capability
• Marketing to increase awareness and
differentiation
• Fully embedded competency based
learning model
Most direct path to achieve educational goals
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Competency Based Learning Model
Capella
Degree
Demonstrated
program level
competencies
Competencies
demonstrated across
multiple assessments
within courses
Authentic Assessments with
imbedded criteria scored by faculty
Capella's competency based curricular architecture across all academic offerings
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Competency Based Learning Model
• Curriculum
– Aligning competencies
required to meet
professional standards and
employer needs
• Authentic assessment of
competencies
• Scholar-practitioner faculty
centric model
Teaching our learners what they need to know to move forward in their profession
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Driving Growth Through Innovation
Competency-Based Education
Capella’s Competency-Based
Education Models
Capella’s
traditional
education
model
compliant with
credit hour
requirements
Learning to be applied immediately
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Direct
Assessment
(FlexPath)
Self paced;
self directed;
curricular
framework; faculty
assessments &
evaluations
Two competency-based offerings
Marketing Strategy
Building
Relationships
Media
channels
Reputation
• Competitive advantage:
– Reputation
– Consultative enrollment
counselors
Connect
– Marketing analytics
Engage
– Learner life-time value
focus (ROI)
Inquire
Apply
Enroll
Graduate
• Opportunity:
– Creating demand and
brand recognition
– Personalizing marketing
– Optimizing marketing
efforts
Capella learners/graduates
building reputation
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– Expanding strategic
employer relationships
Driving Current and Future
Growth Opportunities
Foundation for Capella's Opportunities
Learner
Success
Innovation
Growth
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Diversification
Driving Growth through Learner Success
% approx. improvement year-over-year
Early Cohort Persistence
Improvements1
4%
4%
• Learner success grants to incentivize
learners to stay enrolled
• Culture focused on learner success
2013
2014
cohort persistence calculated as 4 quarter rolling average
from first quarter census date to fourth quarter census date
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– Integrated approach from marketing,
on-boarding, course room to
graduation
• Fully online model and
comprehensive data analytics
capabilities driving improvements
2012
1Early
4%
• Comprehensive focus on improving
early cohort persistence
Learner
Success
Growth
Driving Growth through Innovation
• Offering new learning models
– FlexPath direct assessment
program
• First online proprietary offering
approved by Higher Learning
Commission and Department
of Education
– SOPHIA Pathways for College
Credit TM
• Innovative pricing models
• Redefining employer
relationships
Innovation
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Growth
Driving Long-term Growth through
Diversification
• Enlarge our served market by
addressing underserved markets with
new innovative learning solutions
– FlexPath
• Leverage UK-based subsidiary RDI for
international growth
• Leverage Sophia’s technology platform
Diversification
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Growth
Capella’s Position
• Serving large, attractive markets
• Focusing on market share growth
– Building brand awareness and
consideration
– Further differentiating value proposition
• Driving learner success
• Developing innovative new learning
models
• Expanding served market
Learner
Success
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Innovation
Diversification
Growth
Financial Model
Financial Model Highlights
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Graduate focus
=
Strong revenue per learner
Longer degree programs
=
Stabilized revenues and
operating margins
Grants and innovation
=
Improve learner success and
affordability
Revenue growth
=
Operating margin leverage
Financial flexibility and
cash generation
=
Drive shareholder value
Revenues and Operating Margins
Revenues
$426
2010
Operating Income ($ in millions)
($ in millions)
$95
$430
$422
2011
2012
$422
$416
2013
$80
2014
22.3%
18.6%
2010
2011
1
$64
$59
$60
14.1%
14.4%
15.2%
2012
2013
2014 2
% indicates operating margin
operating income and operating margin include expenses related to workforce reductions;
2 2014 operating income and operating margin include lease amendment charges
1 2011
Stabilized financial performance; improved operating performance
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Capella University Annual Y-o-Y Enrollment
2012
2013
2014
• Strong new enrollment
growth
8.7%
• Consistent early cohort
persistence improvements
4%
4%
4%
2.2%
• Returned to year-over-year
total enrollment growth in
quarter ended Sept. 2014
0.6%
0.5%
-2.0%
-4.1%
1Early
Average Quarterly Total Enrollment Growth
New Enrollment Growth
Early Cohort Persistence
cohort persistence calculated as 4 quarter rolling average from first quarter census date to fourth quarter census date
Performance trends stabilizing
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1
Strong Cash Flow Generation
($ in millions)
$69
$65
$59
$64
1
$65
• Increased cash dividend
Dec. 2014 to $0.37 per
share
• Authorized share
repurchase of $32 million
remaining (as of 12/31/14)
$60
• Invested in analytics and
marketing capabilities,
FlexPath, learner success,
courses and infrastructure
2012
Operating Income
1
2013
2014
Cash from Operating Activities
2014 operating income includes lease amendment charges
Strong cash flow generation fully funding operations and investments
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Positioned for Long-term Growth
• Strong financial position
• Positive momentum to begin new period
of sustained growth
• Well positioned for continued growth
– Differentiated value proposition
– Marketing execution excellence
– Learner success traction
– Game-changing innovation
• Regulatory compliance track-record
Drive shareholder value
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Thank You
Contact Information
For additional information please contact:
Heide Erickson
Director, Investor Relations
Capella Education Company
Capella Tower
225 South Sixth Street
Minneapolis, MN 55402
612.977.5172
[email protected]
www.capellaeducation.com; www.capella.edu
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