Third Quarter 2016 Earnings ReleaseOctober 25, 2016

Kevin Gilligan, Chairman & CEOSteve Polacek, Senior VP & CFO

Forward-looking Statements

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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 include but are not limited to those listed in Capella Education Company’s most recent 10-K and 10-Qs filed with the Securities and Exchange Commission. Other factors may also be discussed in future 8-K, 10-K and 10-Q filings. All filings are available for viewing on our Web site at capellaeducation.com.

Third Quarter 2016 Results

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• Delivered very strong financial results in third quarter 2016; raising earnings guidance for the full year

• Highly focused on executing strategy of providing the “most direct path between learning and employment”

• See good opportunities to maintain positive growth momentum in 2017 with key growth drivers

Capella University Learner Success

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• Organization-wide, strategic initiative

• Early cohort persistence improvements of 19 percent over nearly 5 years are extending into later cohorts and helping to lift total enrollment

• Progress positively impacts Capella’s business model and brand, further strengthens regulatory position, and helps more learners achieve their desired outcomes

Capella University FlexPath Model

• Continue to see strong new enrollment growth in our FlexPath programs

• Positive performance reflects strong market demand for high-quality, innovative programs

• Offering is a highly-differentiated product

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Capella UniversityEmployer Channel

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• Offering employers § High-quality competency-based learning programs

§ Flexible low-cost models

§ Measurable competency attainment and ROI

• Strong employer opportunity pipeline heading into 2017

• Working to strengthen business-to-business marketing and sales capabilities to develop new growth opportunities

Capella UniversityBrand Marketing

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• Strategy has increased awareness and consideration for Capella University and delivered new enrollment growth, while reducing cost-per-new enrollment

• Will take some increase in marketing spend to drive next cycle of new enrollment growth

• Disciplined management of marketing investments to deliver value creation

• Expanding addressable market through investments in job-ready skills strategy: RightSkill, Hackbright Academy, and DevMountain

• Positioning Capella to create new sources of revenue growth and carve-out leadership role in providing 21st century workforce with job-ready skills

Job-Ready Skills

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Most Direct Path

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• Believe Capella will outperform market with focus on learner success, differentiated programs and offerings, and ability to adapt and execute in a changing market

• Strategy of providing most direct path between learning and employment

CreditHourDegrees

FlexibleDegrees

JobReadySkills

HistoricallyDirect MoreDirect MostDirect

Capella Education Company

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Consolidated Capella Education Company Continuing OperationsThree Months Ended Sept. 30, 2016 (revenue in millions)

$100.1 $105.9

Q3 2015 Q3 2016

Revenues +5.8%

Capella Education Company

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14.1% 14.5%

Q3 2015 Q3 2016

Consolidated Capella Education Company Continuing OperationsThree Months Ended Sept. 30, 2016 (operating income in millions)

$14.1$15.3

Q3 2015 Q3 2016

Operating Income Operating Margin

Capella University Enrollment

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• Total enrollment growth at high-end of expectations; new enrollments in FlexPath and health-care related programs remain robust; early cohort persistence improved 4%

2.6%

11.1%11.9%

8.8%

15.3%

2.9% 2.3%

-5.6%

-3.7%

2.5%

-0.9%-1.4% -0.6%

2.1% 2.5%4.6%

4.3% 4.2%

1.8% 2.6% 2.4%

2.8%

-10%

-5%

0%

5%

10%

15%

20%New Enrollment Growth Total Enrollment GrowthLinear (New Enrollment Growth) Linear (Total Enrollment Growth)

Reportable Segment Performance

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Quarter Ending Sept. 30, 2016 Capella University1

Revenue$103.5 million

+3.4% (y-o-y change)

Operating Performance Operating margin 16.4% versus 14.8% in prior year

1 Post-Secondary segment includes results for Capella University and Sophia Learning, but is referred to as Capella University in this slide since Sophia Learning is a very small part of this category

Regulatory Metrics

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• 2013 three-year cohort default rate is 6.5 percent

§ Below national, public sector, and non-profit sector averages

• Received gainful employment debt-to-earnings ratio calculations

§ Initial calculations indicate none of Capella University programs fail; one small program in zone

§ No impact from the gainful employment related data release expected

Reportable Segment Performance

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Quarter Ending Sept. 30, 2016 Job-Ready Skills1

Revenue $2.4 million

Operating Performance Operating loss of $1.6 million

1 Job-Ready Skills segment includes results for Capella Learning Solutions, Hackbright Academy, and DevMountain

Consolidated Cash Position

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• Generated $34.0 million in operating cash flow from continuing operations in third quarter 2016

• Cash and marketable securities of $163.5 million as of Sept. 30, 2016

• During quarter, paid quarterly cash dividend of $0.39 per share, or $4.6 million

• Repurchased 130,000 shares during third quarter; share repurchase authorization $33.5 million as of Sept. 30, 2016

Capella Education Company 2016 Outlook

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Fiscal year ending Dec. 31, 2016

Revenue Upper range of $424 – $428 million

EPS $3.50 - $3.551

Company expectations as of 10/25/2016 for consolidated Capella Education Company continuing operations

1 Expectations include $1.4 million ($0.09 EPS impact) in transaction-related costs and an estimated $0.9 million ($0.05 EPS impact) in purchase accounting related items

Capella Education Company Fourth Quarter 2016 Outlook

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Quarter ending Dec. 31, 2016

Revenue About +3.5% to +4.5% (y-o-y change)

Operating Margin Approx. 16.0% to 17.0% of revenue

Total Enrollment About +2.0% to +3.0%(y-o-y change)

New EnrollmentSlightly down(y-o-y change)

Company expectations as of 10/25/2016 for consolidated Capella Education Company continuing operations; enrollment data Capella University

Job-Ready Skills Segment Outlook

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Fiscal year ending Dec. 31, 2016

RevenuePrimary revenue contributors will be

Hackbright Academy and DevMountain

Operating Performance

About $0.25 - $0.30 dilution from Hackbright Academy and

DevMountain (incl. appx. $0.14 relating to acquisition transaction costs

and purchase accounting impacts)

Company expectations as of 10/25/2016 for Job-Ready Skills segment

Positioning Capella

• Strong balance sheet and financial foundation

• Goal of creating long-term sustainable growth and shareholder value

• Objective to provide most direct path between learning and employment

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Questions

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Thank You

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