Capella Education 1Q profit falls with enrollment
MINNEAPOLIS (AP) — Capella Education saw a 23 percent decline in first quarter profits because of falling enrollment amid tighter regulations.
The online education company said that it expects revenue to fall between 1 percent and 2 percent during the current quarter as enrollment declines between 6 percent and 7 percent. Shares fell 9 percent in afternoon trading.
For-profit colleges have come under intense scrutiny regarding graduation rates, especially for students that take out huge loans in hopes of landing higher paying jobs.
Last week, Sen. Tom Harkin, D-Iowa, and Kay Hagan, D-N.C., introduced a bill to try to check advertising from such schools, which has particularly targeted Iraq and Afghanistan veterans for the benefits they receive under the new GI Bill.
New enrollments have been sinking at other for-profit schools as well, such as Apollo Group Inc.'s University of Phoenix and DeVry Inc. since last year. Several companies say that bad publicity about the industry has scared off students. Steps the companies have taken to improve quality and comply with new, stricter government rules have curbed enrollments, which drive profits in the sector.
Capella reported Tuesday that during the quarter ended March 31, it had net income of $11.3 million, or 82 cents per share, down from $14.6 million 90 cents per share, in the same period last year.
Revenue fell nearly 2 percent to $109.4 million.
Wall Street was looking for net income of 79 cents per share, according to a survey by FactSet.
Total active enrollment at its Capella University fell 5.9 percent from the year before to 37,553, while new enrollment decreased by 4.9 percent.
The company said it expects the enrollment declines to continue.
New enrollment growth this quarter at Capella University is expected to fall by a "high single digit" compared to last year, while revenue will be down and total enrollment will fall about 6 percent to 7 percent compared to last year, the company said.
"We are diligently managing costs and have a solid operating plan in place to successfully execute against our goals," Chief Financial Officer Steve Polacek said.
Capella four months ago said it would have to lay off dozens of employees as part of a broad realignment effort.
The company said that during the first quarter, it bought back 319,000 shares of its stock for about $12.9 million. It is still authorized to buy back $46.7 million of its stock.
Shares of Capella Education Co. dropped $3.12 to $31.29 in afternoon trading. The stock has traded between $26.12 and $54.86 over the last year.
