"We are extremely pleased with our third quarter results as they continue to demonstrate the increasing value of the Capella brand, the quality of our academic programs and the attractiveness of Capella's business model, which is focused on delivering long-term sustainable growth and margin expansion," said Kevin Gilligan, chief executive officer of Capella Education Company. "Our results were driven by strong demand fundamentals and solid execution across the business, reflected particularly in enrollment growth in all of our degree programs and in the success of new product introductions including our newest market, Public Service Leadership."

For the three months ended Sept. 30, 2009:

Revenues increased 28.1 percent to $83.6 million, compared to $65.2 million in the third quarter of 2008.

Total active enrollment increased by 27.7 percent from the end of the third quarter 2008 to 30,738 learners.

About 2 percentage points of year-over-year revenue growth were related to a scheduling shift, concentrating a higher number of colloquia in the third quarter 2009.

Operating income increased by 83.3 percent to $14.5 million, compared to $7.9 million for the same period in 2008. Operating margin was 17.4 percent, compared to 12.2 percent for the third quarter 2008.

Net income for the third quarter of 2009 was $9.8 million, compared to $5.8 million for the same period in 2008, an increase of 69.4 percent.

Diluted net income per share was $0.57, compared to $0.34 for the same period in 2008.

The company repurchased approximately 160,000 shares for total consideration of $10.1 million.

For the nine months ended Sept. 30, 2009, the Company reported:

Revenues increased by 22.2 percent to $240.1 million, compared to $196.5 million for the same period in 2008.

Operating income for the nine months ended Sept. 30, 2009, was $41.0 million or 17.1 percent of revenue, compared to $23.7 million or 12.1 percent of revenue during the same period in 2008.

Net income was $27.7 million or $1.62 per weighted average number of diluted shares outstanding compared to $17.6 million or $1.01 per share for the same period in 2008.

Balance Sheet and Cash Flow

As of Sept. 30, 2009, the Company had cash, cash equivalents, and marketable securities of $153.7 million, compared to $123.6 million at year-end 2008. The Company had no debt in 2009 or 2008.

Cash flow from operations was $49.4 million during the first nine months of 2009 compared to $32.1 million in the same period in 2008, an increase of 53.7 percent.

Fourth Quarter and Full Year 2009 Outlook

For the fourth quarter ending Dec. 31, 2009, total enrollment is expected to grow by 25.5 to 26.5 percent and revenue is expected to increase by 22.5 to 23.5 percent compared to the fourth quarter of 2008.

"Fourth quarter revenue growth is expected to be driven by a continuation of strong enrollment growth," said Lois Martin, senior vice president and chief financial officer. "Revenue growth is expected to be less than total enrollment growth, primarily due to the revenue impact of fewer scheduled colloquia in the fourth quarter as compared to the prior year. The timing of colloquia also impacts the sequential comparison of fourth quarter expectations to actual third quarter 2009 revenue growth."

Operating margins are anticipated to be approximately 23 to 24 percent of total revenue for the fourth quarter of 2009.

Full year 2009 average quarterly enrollment is expected to increase by approximately 24.5 percent, while annual revenue growth is anticipated to increase by slightly over 22 percent year-over-year. Annual operating margins are expected to be 18.5 to 19.0 percent of revenue.

"The very strong results this quarter and our optimism regarding our full-year results validate our strategy to focus on our learners, educational quality and excellence in operations to deliver against our financial goals," said Martin. "Learner inquiries and conversion to enrollments remain strong. We continue to realize great productivity gains in learner support and administrative functions, enabled by our integrated system and investments we have been making to improve productivity.