LINCOLN,
Neb., May 9, 2024 /PRNewswire/ -- Nelnet
(NYSE: NNI) today reported GAAP net income of $73.2 million, or $1.97 per share, for the first quarter of 2024,
compared with GAAP net income of $26.5
million, or $0.71 per share,
for the same period a year ago.
Net income, excluding derivative market value adjustments[1],
was $67.2 million, or $1.81 per share, for the first quarter of 2024,
compared with $54.9 million, or
$1.47 per share, for the same period
in 2023.
"We are extremely pleased with the results of the first
quarter," said Jeff Noordhoek, chief
executive officer of Nelnet. "Our core businesses performed well in
an uncertain environment. We continue to look for market
opportunities to capitalize on our strong liquidity position,
including investing in our current businesses, loan acquisitions,
strategic acquisitions and investments, and capital management
initiatives. Year to date, we have repurchased almost 818,000
shares of our common stock at a price we believe is extremely
attractive."
Nelnet has four reportable operating segments, earning interest
income on loans in its Asset Generation and Management (AGM) and
Nelnet Bank segments, both part of the company's Nelnet Financial
Services (NFS) division, and fee-based revenue in its Loan
Servicing and Systems and Education Technology Services and
Payments segments. Other business activities and operating segments
that are not reportable and not part of the NFS division are
combined and included in Corporate Activities.
Asset Generation and Management
The AGM operating segment reported loan and investment net
interest income of $40.6 million
during the first quarter of 2024, compared with $45.5 million for the same period a year ago. The
decrease in 2024 was due to the expected runoff of the loan
portfolio and a decrease in loan spread[2]. The average balance of
loans outstanding decreased from $14.0
billion for the first quarter of 2023 to $11.6 billion for the same period in 2024.
AGM recognized a provision for loan losses in the first
quarter of 2024 of $6.6 million
($5.0 million after tax), compared
with $31.9 million ($24.2 million after tax) in the first quarter of
2023. Provision for loan losses is primarily impacted by loans
acquired during the period. AGM acquired $80.7 million in loans in the first quarter of
2024, compared with $253.7 million
for the same period in 2023.
AGM recognized income of $5.7
million ($4.3 million after
tax) related to changes in the fair value of derivative instruments
that do not qualify for hedge accounting during the first quarter
of 2024, compared with a loss of $37.4
million ($28.4 million after
tax) for the same period in 2023.
AGM recognized net income after tax of $25.6 million for the three months ended
March 31, 2024, compared with a loss
of $0.2 million for the same period
in 2023.
Nelnet Bank
As of March 31, 2024, Nelnet Bank
had a $483.7 million loan portfolio
and total deposits, including intercompany deposits, of
$960.6 million. Nelnet Bank
recognized net income after tax for the three months ended
March 31, 2024 of $0.9 million, compared with a net loss of
$0.1 million for the same period in
2023.
Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment was
$127.2 million for the first quarter
of 2024, compared with $139.2 million
for the same period in 2023.
As of March 31, 2024, the company
was servicing $532.2 billion in
government-owned, FFEL Program, private education, and consumer
loans for 15.9 million borrowers, compared with $578.6 billion in servicing volume for 17.3
million borrowers as of March 31,
2023.
The Loan Servicing and Systems segment reported net income after
tax of $12.2 million for the three
months ended March 31, 2024, compared
with $19.2 million for the same
period in 2023.
Education Technology Services and Payments
For the first quarter of 2024, revenue from the Education
Technology Services and Payments operating segment was $143.5 million, an increase from $133.6 million for the same period in 2023.
Revenue less direct costs to provide services for the first quarter
of 2024 was $94.9 million, compared
with $85.9 million for the same
period in 2023.
Net income after tax for the Education Technology Services and
Payments segment was $36.2 million
for the three months ended March 31,
2024, compared with $28.7
million for the same period in 2023. Net income for the
three months ended March 31, 2024 and
2023 included $7.9 million
($6.0 million after tax) and
$6.0 million ($4.6 million after tax) of interest income,
respectively.
This segment is subject to seasonal fluctuations. Based on the
timing of when revenue is recognized and when expenses are
incurred, revenue and operating margin are higher in the first
quarter compared with the remainder of the year.
Corporate Activities
Included in corporate activities is the operating results of the
company's 45 percent voting membership interest in ALLO Holdings
LLC, a holding company for ALLO Communications LLC (ALLO). During
the first quarter of 2024, the company recognized a loss on its
ALLO voting membership interests investment of $10.7 million ($8.1
million after tax), compared with a loss of $20.2 million ($15.4
million after tax) for the same period in 2023. Absent
additional equity contributions, the company will not recognize
additional losses for its voting membership interests in
ALLO.
Share Repurchases
Year to date through May 9, 2024, the company has
repurchased 817,826 Class A common shares for $75.3 million (average price of $92.01 per share), including a total of 396,724
Class A common shares for $35.5
million ($89.41 per share)
repurchased during the three months ended March 31, 2024.
Board of Directors Declares Second Quarter Dividend
The Nelnet Board of Directors declared a second-quarter cash
dividend on the company's outstanding shares of Class A common
stock and Class B common stock of $0.28 per share. The dividend will be paid on
June 14, 2024, to shareholders of record at the close of
business on May 31, 2024.
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements within
the meaning of federal securities laws. The words "anticipate,"
"assume," "believe," "continue," "could," "ensure," "estimate,"
"expect," "forecast," "future," "intend," "may," "plan,"
"potential," "predict," "scheduled," "should," "will," "would," and
similar expressions, as well as statements in future tense, are
intended to identify forward-looking statements. These statements
are based on management's current expectations as of the date of
this release and are subject to known and unknown risks,
uncertainties, assumptions, and other factors that may cause the
actual results and performance to be materially different from any
future results or performance expressed or implied by such
forward-looking statements. Such risks and uncertainties include,
but are not limited to: risks related to the ability to
successfully maintain and increase allocated volumes of student
loans serviced by the company under existing and future servicing
contracts with the Department of Education, risks related to
unfavorable contract modifications or interpretations, and risks
related to the company's ability to comply with agreements with
third-party customers for the servicing of Federal Direct Loan
Program, FFEL Program, private education, and consumer loans; loan
portfolio risks such as prepayment or default risk, credit risk,
interest rate basis and repricing risk, risks related to the use of
derivatives to manage exposure to interest rate fluctuations,
uncertainties regarding the expected benefits from purchased
securitized and unsecuritized FFEL Program, private education,
consumer, and other loans, or investment interests therein, and
initiatives to purchase additional FFEL Program, private education,
consumer, and other loans; financing and liquidity risks, including
risks of changes in the interest rate environment; risks from
changes in the terms of education loans and in the educational
credit and services markets resulting from changes in applicable
laws, regulations, and government programs and budgets; risks
related to a breach of or failure in the company's operational or
information systems or infrastructure, or those of third-party
vendors, including disclosure of confidential or personal
information and/or damage to reputation resulting from cyber
breaches; risks related to use of artificial intelligence;
uncertainties inherent in forecasting future cash flows from
student loan assets and related asset-backed securitizations; risks
related to the ability of Nelnet Bank to achieve its business
objectives and effectively deploy loan and deposit strategies and
achieve expected market penetration; risks related to the expected
benefits to the company from its continuing investment in ALLO and
Hudl, and risks related to investments in solar projects, including
risks of not being able to realize tax credits which remain subject
to recapture by taxing authorities and rising construction costs;
risks and uncertainties related to other initiatives to pursue
additional strategic investments (and anticipated income therefrom)
including venture capital and real estate investments, reinsurance,
acquisitions, and other activities (including risks associated with
errors that occasionally occur in converting loan servicing
portfolios to a new servicing platform), including activities that
are intended to diversify the company both within and outside of
its historical core education-related businesses; risks from
changes in economic conditions and consumer behavior; risks related
to the company's ability to adapt to technological change; risks
related to the exclusive forum provisions in the company's articles
of incorporation; risks related to the company's executive
chairman's ability to control matters related to the company
through voting rights; risks related to related party transactions;
risks and uncertainties associated with climate change; risks
related to natural disasters, terrorist activities, or
international hostilities; and risks and uncertainties associated
with litigation matters and maintaining compliance with the
extensive regulatory requirements applicable to the company's
businesses, and uncertainties inherent in the estimates and
assumptions about future events that management is required to make
in the preparation of the company's consolidated financial
statements.
For more information, see the "Risk Factors" sections and other
cautionary discussions of risks and uncertainties included in
documents filed or furnished by the company with the Securities and
Exchange Commission. All forward-looking statements in this release
are as of the date of this release. Although the company may
voluntarily update or revise its forward-looking statements from
time to time to reflect actual results or changes in the company's
expectations, the company disclaims any commitment to do so except
as required by law.
|
_____________________________________________
|
|
1
|
Net income, excluding
derivative market value adjustments, is a non-GAAP measure. See
"Non-GAAP Performance Measures" at the end of this press release
and the "Non-GAAP Disclosures" section below for explanatory
information and reconciliations of GAAP to non-GAAP financial
information.
|
|
2
|
Loan spread represents
the spread between the yield earned on loan assets and the costs of
the liabilities and derivative instruments used to fund the
assets.
|
Non-GAAP Performance Measures
The company prepares its financial statements and presents its
financial results in accordance with U.S. GAAP. However, it also
provides additional non-GAAP financial information related to
specific items management believes to be important in the
evaluation of its operating results and performance.
Reconciliations of GAAP to non-GAAP financial information, and a
discussion of why the company believes providing this additional
information is useful to investors, is provided in the "Non-GAAP
Disclosures" section below.
|
Consolidated
Statements of Operations
|
|
(Dollars in thousands,
except share data)
|
|
(unaudited)
|
|
|
Three months
ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
Interest
income:
|
|
|
|
|
|
|
Loan
interest
|
$
216,724
|
|
227,234
|
|
225,243
|
|
Investment
interest
|
52,078
|
|
48,019
|
|
40,725
|
|
Total interest
income
|
268,802
|
|
275,253
|
|
265,968
|
|
Interest expense on
bonds and notes payable and bank deposits
|
194,580
|
|
205,335
|
|
199,449
|
|
Net interest
income
|
74,222
|
|
69,918
|
|
66,519
|
|
Less provision for loan
losses
|
10,928
|
|
10,924
|
|
34,275
|
|
Net interest income
after provision for loan losses
|
63,294
|
|
58,994
|
|
32,244
|
|
Other income
(expense):
|
|
|
|
|
|
|
Loan servicing and
systems revenue
|
127,201
|
|
128,816
|
|
139,227
|
|
Education technology
services and payments revenue
|
143,539
|
|
106,052
|
|
133,603
|
|
Solar construction
revenue
|
13,726
|
|
11,982
|
|
8,651
|
|
Other, net
|
17,015
|
|
(27,493)
|
|
(14,071)
|
|
(Loss) gain on sale of
loans, net
|
(41)
|
|
6,987
|
|
11,812
|
|
Impairment
expense
|
—
|
|
(26,951)
|
|
—
|
|
Derivative market value
adjustments and derivative settlements, net
|
9,721
|
|
(8,654)
|
|
(14,074)
|
|
Total other income
(expense), net
|
311,161
|
|
190,739
|
|
265,148
|
|
Cost of
services:
|
|
|
|
|
|
|
Cost to provide
education technology services and payments
|
48,610
|
|
39,379
|
|
47,704
|
|
Cost to provide solar
construction services
|
14,229
|
|
23,371
|
|
8,299
|
|
Total cost of
services
|
62,839
|
|
62,750
|
|
56,003
|
|
Operating
expenses:
|
|
|
|
|
|
|
Salaries and
benefits
|
143,875
|
|
152,917
|
|
152,710
|
|
Depreciation and
amortization
|
16,769
|
|
22,004
|
|
16,627
|
|
Other
expenses
|
56,845
|
|
51,697
|
|
40,785
|
|
Total operating
expenses
|
217,489
|
|
226,618
|
|
210,122
|
|
Income (loss) before
income taxes
|
94,127
|
|
(39,635)
|
|
31,267
|
|
Income tax (expense)
benefit
|
(23,119)
|
|
9,722
|
|
(8,250)
|
|
Net income
(loss)
|
71,008
|
|
(29,913)
|
|
23,017
|
|
Net loss attributable
to noncontrolling interests
|
2,202
|
|
21,359
|
|
3,470
|
|
Net income (loss)
attributable to Nelnet, Inc.
|
$
73,210
|
|
(8,554)
|
|
26,487
|
|
Earnings per common
share:
|
|
|
|
|
|
|
Net income (loss)
attributable to Nelnet, Inc. shareholders - basic and
diluted
|
$
1.97
|
|
(0.23)
|
|
0.71
|
|
Weighted average
common shares outstanding - basic and diluted
|
37,156,971
|
|
37,354,406
|
|
37,344,604
|
|
Condensed
Consolidated Balance Sheets
|
|
(Dollars in
thousands)
|
|
(unaudited)
|
|
|
As of
|
|
As of
|
|
As of
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
Assets:
|
|
|
|
|
|
|
Loans and accrued
interest receivable, net
|
$
11,829,078
|
|
13,108,204
|
|
14,561,108
|
|
Cash, cash equivalents,
and investments
|
2,101,373
|
|
2,039,080
|
|
2,175,144
|
|
Restricted cash and
investments
|
797,217
|
|
875,348
|
|
710,469
|
|
Goodwill and intangible
assets, net
|
200,699
|
|
202,848
|
|
237,690
|
|
Other assets
|
470,295
|
|
511,165
|
|
398,198
|
|
Total
assets
|
$
15,398,662
|
|
16,736,645
|
|
18,082,609
|
|
Liabilities:
|
|
|
|
|
|
|
Bonds and notes
payable
|
$
10,582,513
|
|
11,828,393
|
|
13,438,416
|
|
Bank
deposits
|
802,061
|
|
743,599
|
|
675,767
|
|
Other
liabilities
|
756,308
|
|
942,738
|
|
745,097
|
|
Total
liabilities
|
12,140,882
|
|
13,514,730
|
|
14,859,280
|
|
Equity:
|
|
|
|
|
|
|
Total Nelnet, Inc.
shareholders' equity
|
3,305,862
|
|
3,262,621
|
|
3,229,683
|
|
Noncontrolling
interests
|
(48,082)
|
|
(40,706)
|
|
(6,354)
|
|
Total
equity
|
3,257,780
|
|
3,221,915
|
|
3,223,329
|
|
Total liabilities and
equity
|
$
15,398,662
|
|
16,736,645
|
|
18,082,609
|
Non-GAAP Disclosures
(Dollars in thousands, except
share data)
(unaudited)
Non-GAAP financial measures disclosed by management are meant to
provide additional information and insight relative to business
trends to investors and, in certain cases, to present financial
information as measured by rating agencies and other users of
financial information. These measures are not in accordance with,
or a substitute for, GAAP and may be different from, or
inconsistent with, non-GAAP financial measures used by other
companies. The company reports this non-GAAP information because
the company believes that it provides additional information
regarding operational and performance indicators that are closely
assessed by management. There is no comprehensive, authoritative
guidance for the presentation of such non-GAAP information, which
is only meant to supplement GAAP results by providing additional
information that management utilizes to assess performance.
Net income, excluding derivative market value
adjustments
|
Three months ended
March 31,
|
|
2024
|
|
2023
|
|
GAAP net income
attributable to Nelnet, Inc.
|
$
73,210
|
|
26,487
|
|
Realized and unrealized
derivative market value adjustments (a)
|
(7,964)
|
|
37,411
|
|
Tax effect
(b)
|
1,911
|
|
(8,979)
|
|
Non-GAAP net income
attributable to Nelnet, Inc., excluding derivative market
value adjustments
|
$
67,157
|
|
54,919
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
GAAP net income
attributable to Nelnet, Inc.
|
$
1.97
|
|
0.71
|
|
Realized and unrealized
derivative market value adjustments (a)
|
(0.21)
|
|
1.00
|
|
Tax effect
(b)
|
0.05
|
|
(0.24)
|
|
Non-GAAP net income
attributable to Nelnet, Inc., excluding derivative market
value adjustments
|
$
1.81
|
|
1.47
|
|
(a)
|
"Derivative market
value adjustments" includes both the realized portion of gains and
losses (corresponding to variation margin received or paid on
derivative instruments that are settled daily at a central
clearinghouse) and the unrealized portion of gains and losses that
are caused by changes in fair values of derivatives which do not
qualify for "hedge treatment" under GAAP. "Derivative market value
adjustments" does not include "derivative settlements" that
represent the cash paid or received during the current period to
settle with derivative instrument counterparties the economic
effect of the company's derivative instruments based on their
contractual terms.
|
|
The accounting for
derivatives requires that changes in the fair value of derivative
instruments be recognized currently in earnings, with no fair value
adjustment of the hedged item, unless specific hedge accounting
criteria is met. Management has structured all of the company's
derivative transactions with the intent that each is economically
effective; however, the company's derivative instruments do not
qualify for hedge accounting in the consolidated financial
statements. As a result, the change in fair value of derivative
instruments is reported in current period earnings with no
consideration for the corresponding change in fair value of the
hedged item. Under GAAP, the cumulative net realized and unrealized
gain or loss caused by changes in fair values of derivatives in
which the company plans to hold to maturity will equal zero over
the life of the contract. However, the net realized and unrealized
gain or loss during any given reporting period fluctuates
significantly from period to period.
|
|
The company believes
these point-in-time estimates of asset and liability values related
to its derivative instruments that are subject to interest rate
fluctuations are subject to volatility mostly due to timing and
market factors beyond the control of management, and affect the
period-to-period comparability of the results of operations.
Accordingly, the company's management utilizes operating results
excluding these items for comparability purposes when making
decisions regarding the company's performance and in presentations
with credit rating agencies, lenders, and investors.
|
|
(b)
|
The tax effects are
calculated by multiplying the realized and unrealized derivative
market value adjustments by the applicable statutory income tax
rate.
|
View original
content:https://www.prnewswire.com/news-releases/nelnet-reports-first-quarter-2024-results-302141672.html
SOURCE Nelnet, Inc.