Nelnet Reports Second Quarter 2024 Results
Nelnet (NYSE: NNI) reported Q2 2024 GAAP net income of $45.1 million, or $1.23 per share, up from $27.4 million in Q2 2023. Net income excluding derivative adjustments was $43.9 million. The Asset Generation and Management segment saw net interest income of $35.8 million, while Nelnet Bank reported a net loss of $2.8 million. The Loan Servicing segment's revenue decreased to $109.1 million, and the Education Technology Services segment's revenue increased to $116.9 million. The company repurchased 487,980 Class A shares for $46.8 million in Q2 and declared a Q3 dividend of $0.28 per share. Nelnet's CEO highlighted strong operating results and cash generation, emphasizing focus on long-term success and strategic opportunities.
Nelnet (NYSE: NNI) ha riportato un utile netto GAAP del secondo trimestre 2024 di 45,1 milioni di dollari, pari a 1,23 dollari per azione, in aumento rispetto ai 27,4 milioni di dollari del secondo trimestre 2023. L'utile netto escludendo le rettifiche derivate è stato di 43,9 milioni di dollari. Il segmento Generazione e Gestione degli Attivi ha registrato un utile netto da interessi di 35,8 milioni di dollari, mentre Nelnet Bank ha riportato una perdita netta di 2,8 milioni di dollari. I ricavi del segmento Servizi di Prestito sono diminuiti a 109,1 milioni di dollari, mentre i ricavi del segmento Servizi Tecnologici Educativi sono aumentati a 116,9 milioni di dollari. L'azienda ha riacquistato 487.980 azioni di Classe A per 46,8 milioni di dollari nel secondo trimestre e ha dichiarato un dividendo di 0,28 dollari per azione per il terzo trimestre. Il CEO di Nelnet ha evidenziato solidi risultati operativi e generazione di cassa, sottolineando l'attenzione sul successo a lungo termine e sulle opportunità strategiche.
Nelnet (NYSE: NNI) informó un ingreso neto GAAP del segundo trimestre de 2024 de 45,1 millones de dólares, o 1,23 dólares por acción, un aumento desde los 27,4 millones de dólares en el segundo trimestre de 2023. El ingreso neto excluyendo ajustes derivados fue de 43,9 millones de dólares. El segmento de Generación y Gestión de Activos reportó ingresos netos por intereses de 35,8 millones de dólares, mientras que Nelnet Bank reportó una pérdida neta de 2,8 millones de dólares. Los ingresos del segmento de Servicios de Préstamo disminuyeron a 109,1 millones de dólares, y los ingresos del segmento de Servicios de Tecnología Educativa aumentaron a 116,9 millones de dólares. La compañía recompró 487,980 acciones Clase A por 46,8 millones de dólares en el segundo trimestre y declaró un dividendo de 0,28 dólares por acción para el tercer trimestre. El CEO de Nelnet destacó sólidos resultados operativos y generación de efectivo, enfatizando el enfoque en el éxito a largo plazo y oportunidades estratégicas.
Nelnet (NYSE: NNI)는 2024년 2분기 GAAP 순이익이 4천5백10만 달러로 주당 1.23달러를 기록했다고 보고했습니다. 이는 2023년 2분기 2천7백40만 달러에서 증가한 수치입니다. 파생상품 조정을 제외한 순이익은 4천3백90만 달러였습니다. 자산 생성 및 관리 부문은 발생 이자 수익 3천5백팔십만 달러를 기록했으며, Nelnet 은행은 2백80만 달러의 순손실을 보고했습니다. 대출 서비스 부문의 수익은 1억 9백10만 달러로 감소하였고 교육 기술 서비스 부문의 수익은 1억 1천6백90만 달러로 증가했습니다. 회사는 2분기에 468,980주의 A 클래스를 4천6백80만 달러에 재매입했으며, 3분기 주당 0.28달러의 배당금을 선언했습니다. Nelnet의 CEO는 강력한 운영 성과와 현금 창출을 강조하며 장기 성공과 전략적 기회에 집중하겠다고 밝혔습니다.
Nelnet (NYSE: NNI) a annoncé un résultat net GAAP de 45,1 millions de dollars pour le deuxième trimestre 2024, soit 1,23 dollar par action, en augmentation par rapport à 27,4 millions de dollars au deuxième trimestre 2023. Le résultat net, hors ajustements dérivés, s'est élevé à 43,9 millions de dollars. Le segment Génération et Gestion d'Actifs a enregistré un revenu net d'intérêts de 35,8 millions de dollars, tandis que Nelnet Bank a affiché une perte nette de 2,8 millions de dollars. Les revenus du segment des Services de Prêts ont diminué à 109,1 millions de dollars, tandis que les revenus des Services Technologiques Éducatifs ont augmenté à 116,9 millions de dollars. L'entreprise a racheté 487 980 actions de Classe A pour 46,8 millions de dollars au deuxième trimestre et a annoncé un dividende de 0,28 dollar par action pour le troisième trimestre. Le PDG de Nelnet a souligné de solides résultats opérationnels et une bonne génération de liquidités, en mettant l'accent sur l'importance du succès à long terme et des opportunités stratégiques.
Nelnet (NYSE: NNI) meldete ein GAAP-Nettoeinkommen von 45,1 Millionen US-Dollar im zweiten Quartal 2024, was 1,23 US-Dollar pro Aktie entspricht, im Vergleich zu 27,4 Millionen US-Dollar im zweiten Quartal 2023. Das Nettoergebnis ohne derivative Anpassungen betrug 43,9 Millionen US-Dollar. Der Bereich Asset Generation and Management verzeichnete Zinserträge von 35,8 Millionen US-Dollar, während Nelnet Bank einen Nettoverlust von 2,8 Millionen US-Dollar meldete. Der Umsatz im Bereich Loan Servicing fiel auf 109,1 Millionen US-Dollar, während der Umsatz im Bereich Educational Technology Services auf 116,9 Millionen US-Dollar stieg. Das Unternehmen kaufte 487.980 Stammaktien der Klasse A für 46,8 Millionen US-Dollar zurück und erklärte eine Dividende von 0,28 US-Dollar pro Aktie für das dritte Quartal. Der CEO von Nelnet hob starke operative Ergebnisse und Cashflow hervor und betonte die Konzentration auf langfristigen Erfolg und strategische Möglichkeiten.
- Q2 2024 GAAP net income increased to $45.1 million from $27.4 million in Q2 2023
- Education Technology Services segment revenue grew to $116.9 million, up from $109.9 million in Q2 2023
- Company repurchased 487,980 Class A shares for $46.8 million in Q2 2024
- Declared Q3 dividend of $0.28 per share
- Loan Servicing segment revenue decreased to $109.1 million from $122.0 million in Q2 2023
- Nelnet Bank reported a net loss of $2.8 million in Q2 2024, compared to net income of $1.3 million in Q2 2023
- Recognized $5.9 million allowance for credit losses related to residual ownership investments in loan securitizations
- Average balance of loans outstanding decreased from $13.6 billion in Q2 2023 to $10.5 billion in Q2 2024
Insights
Nelnet's Q2 2024 results show a significant improvement in GAAP net income, rising to
- The Asset Generation and Management segment saw a decrease in net interest income due to loan portfolio runoff and reduced loan spread.
- Nelnet Bank reported a net loss of
$2.8 million , contrasting with a profit last year. - The Loan Servicing and Systems segment experienced a revenue decline and a substantial drop in net income.
The Education Technology Services and Payments segment shows promise with increased revenue and net income. The company's share repurchases and dividend declaration indicate confidence in its financial position. Overall, while there are some concerning trends in core businesses, Nelnet's diversification appears to be providing some stability.
Nelnet's Q2 results reveal a mixed picture for investors. The company's ability to increase net income despite challenges in key segments demonstrates resilience. However, several trends warrant attention:
- The declining loan portfolio in the AGM segment could impact future earnings.
- Nelnet Bank's loss and increased loan loss provisions suggest potential risks in its loan book.
- The transition to the new USDS contract in the Loan Servicing segment is pressuring revenues and profits.
On the positive side, the Education Technology Services and Payments segment's growth could become a more significant contributor. The company's strong liquidity position and continued share repurchases may provide some downside protection. Investors should closely monitor the performance of Nelnet's diversification strategy and its ability to navigate the changing landscape in student loan servicing.
The transition to the new Unified Servicing and Data Solution (USDS) contract with the Department of Education is a pivotal technological shift for Nelnet. Key observations:
- The company incurred a
$2.1 million charge in Q2 related to this transition, with more expected in H2 2024. - Revenue per borrower under USDS is lower than the legacy contract, impacting the Loan Servicing segment's profitability.
- The completion of "significant technology initiatives" suggests substantial backend improvements.
This transition demonstrates Nelnet's ability to adapt to changing government requirements but at a short-term cost. The long-term implications depend on how efficiently Nelnet can operate under the new system and whether it can leverage these technological improvements across other business segments. The company's tech investments could be important for maintaining its competitive edge in the evolving education finance landscape.
Net income, excluding derivative market value adjustments1, was
"The operating results and cash generation from our businesses continue to be strong in 2024," said Jeff Noordhoek, chief executive officer of Nelnet. "We are excited about our current and future opportunities, always with a commitment to delivering exceptional service to our customers and a strategic focus on long-term success. Leveraging our position of strong liquidity to capitalize on market opportunities, including loan acquisitions, strategic investments, and capital management initiatives, continues to be a priority."
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
During the second quarter of 2024, the company recorded an allowance for credit losses and provision expense of
AGM recognized net income after tax of
Nelnet Bank
As of June 30, 2024, Nelnet Bank had a
Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment was
As of June 30, 2024, the company was servicing
______________________________ | |
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. |
Following the completion of significant technology initiatives due to the transition from the legacy servicing contract to the new USDS contract, the company estimates incurring a charge of
The Loan Servicing and Systems segment reported net income after tax of
Education Technology Services and Payments
For the second quarter of 2024, revenue from the Education Technology Services and Payments operating segment was
Net income after tax for the Education Technology Services and Payments segment was
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 second quarter of 2023, the company recognized a loss on its ALLO voting membership interest investment of
For the second quarter of 2024, the company reported a loss of
Share Repurchases
During the first six months of 2024, the company has repurchased 884,704 Class A common shares for
Board of Directors Declares Third Quarter Dividend
The Nelnet Board of Directors declared a third-quarter cash dividend on the company's outstanding shares of Class A common stock and Class B common stock of
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 prepayments, 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.
Non-GAAP Performance Measures
The company prepares its financial statements and presents its financial results in accordance with
Consolidated Statements of Operations (Dollars in thousands, except share data) (unaudited) | |||||||||||||
Three months ended | Six months ended | ||||||||||||
June 30, 2024 | March 31, 2024 | (1) | June 30, 2023 | (1) | June 30, 2024 | June 30, 2023 | (1) | ||||||
Interest income: | |||||||||||||
Loan interest | $ 202,129 | 216,724 | 243,045 | 418,853 | 468,288 | ||||||||
Investment interest | 40,737 | 52,078 | 40,982 | 92,814 | 81,707 | ||||||||
Total interest income | 242,866 | 268,802 | 284,027 | 511,667 | 549,995 | ||||||||
Interest expense on bonds and notes payable and bank deposits | 176,459 | 194,580 | 233,148 | 371,039 | 432,597 | ||||||||
Net interest income | 66,407 | 74,222 | 50,879 | 140,628 | 117,398 | ||||||||
Less provision (negative provision) for loan losses | 3,611 | 10,828 | (11,380) | 14,440 | 791 | ||||||||
Net interest income after provision for loan losses | 62,796 | 63,394 | 62,259 | 126,188 | 116,607 | ||||||||
Other income (expense): | |||||||||||||
Loan servicing and systems revenue | 109,052 | 127,201 | 122,020 | 236,252 | 261,247 | ||||||||
Education technology services and payments revenue | 116,909 | 143,539 | 109,858 | 260,449 | 243,462 | ||||||||
Solar construction revenue | 9,694 | 13,726 | 4,735 | 23,420 | 13,386 | ||||||||
Other, net | 28,871 | 16,861 | (9,167) | 45,734 | (24,235) | ||||||||
Loss on sale of loans | (1,438) | (141) | (5,461) | (1,579) | (15,753) | ||||||||
Impairment expense and provision for beneficial interests | (7,776) | (37) | — | (7,813) | — | ||||||||
Derivative market value adjustments and derivative settlements, net | 3,182 | 9,721 | 2,070 | 12,903 | (12,005) | ||||||||
Total other income (expense), net | 258,494 | 310,870 | 224,055 | 569,366 | 466,102 | ||||||||
Cost of services: | |||||||||||||
Cost to provide education technology services and payments | 40,222 | 48,610 | 40,407 | 88,832 | 88,110 | ||||||||
Cost to provide solar construction services | 8,072 | 14,229 | 9,122 | 22,300 | 17,422 | ||||||||
Total cost of services | 48,294 | 62,839 | 49,529 | 111,132 | 105,532 | ||||||||
Operating expenses: | |||||||||||||
Salaries and benefits | 139,634 | 143,875 | 144,706 | 283,509 | 297,416 | ||||||||
Depreciation and amortization | 15,142 | 16,769 | 18,652 | 31,911 | 35,279 | ||||||||
Other expenses | 59,792 | 56,845 | 45,997 | 116,637 | 86,781 | ||||||||
Total operating expenses | 214,568 | 217,489 | 209,355 | 432,057 | 419,476 | ||||||||
Income before income taxes | 58,428 | 93,936 | 27,430 | 152,365 | 57,701 | ||||||||
Income tax expense | (14,753) | (23,181) | (10,187) | (37,936) | (18,273) | ||||||||
Net income | 43,675 | 70,755 | 17,243 | 114,429 | 39,428 | ||||||||
Net loss attributable to noncontrolling interests | 1,416 | 2,653 | 10,183 | 4,069 | 13,957 | ||||||||
Net income attributable to Nelnet, Inc. | $ 45,091 | 73,408 | 27,426 | 118,498 | 53,385 | ||||||||
Earnings per common share: | |||||||||||||
Net income attributable to Nelnet, Inc. shareholders - basic and diluted | $ 1.23 | 1.98 | 0.73 | 3.22 | 1.43 | ||||||||
Weighted average common shares outstanding - basic and diluted | 36,525,482 | 37,156,971 | 37,468,397 | 36,841,227 | 37,406,843 | ||||||||
(1) | During the second quarter of 2024, the company identified certain immaterial errors in the previously issued consolidated financial statements that have been corrected to conform to the June 30, 2024 presentation. Refer to the company's quarterly report on Form 10-Q for the three months ended June 30, 2024 that was filed with the Securities and Exchange Commission on August 8, 2024 for additional information. |
Condensed Consolidated Balance Sheets (Dollars in thousands) (unaudited) | |||||||
As of | As of | As of | |||||
June 30, 2024 | December 31, 2023 | (1) | June 30, 2023 | (1) | |||
Assets: | |||||||
Loans and accrued interest receivable, net | $ 10,939,519 | 13,108,204 | 14,360,612 | ||||
Cash, cash equivalents, and investments | 2,041,911 | 2,014,819 | 2,106,133 | ||||
Restricted cash and investments | 848,283 | 875,348 | 692,256 | ||||
Goodwill and intangible assets, net | 198,550 | 202,848 | 234,195 | ||||
Other assets | 472,930 | 511,165 | 392,494 | ||||
Total assets | $ 14,501,193 | 16,712,384 | 17,785,690 | ||||
Liabilities: | |||||||
Bonds and notes payable | $ 9,567,708 | 11,828,393 | 13,070,140 | ||||
Bank deposits | 890,472 | 743,599 | 731,046 | ||||
Other liabilities | 822,991 | 940,285 | 756,378 | ||||
Total liabilities | 11,281,171 | 13,512,277 | 14,557,564 | ||||
Equity: | |||||||
Total Nelnet, Inc. shareholders' equity | 3,294,061 | 3,253,751 | 3,250,746 | ||||
Noncontrolling interests | (74,039) | (53,644) | (22,620) | ||||
Total equity | 3,220,022 | 3,200,107 | 3,228,126 | ||||
Total liabilities and equity | $ 14,501,193 | 16,712,384 | 17,785,690 | ||||
(1) | During the second quarter of 2024, the company identified certain immaterial errors in the previously issued consolidated financial statements that have been corrected to conform to the June 30, 2024 presentation. Refer to the company's quarterly report on Form 10-Q for the three months ended June 30, 2024 that was filed with the Securities and Exchange Commission on August 8, 2024 for additional information. |
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 June 30, | |||
2024 | 2023 | ||
GAAP net income attributable to Nelnet, Inc. | $ 45,091 | 27,426 | |
Realized and unrealized derivative market value adjustments (a) | (1,533) | (2,005) | |
Tax effect (b) | 368 | 481 | |
Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments | $ 43,926 | 25,902 | |
Earnings per share: | |||
GAAP net income attributable to Nelnet, Inc. | $ 1.23 | 0.73 | |
Realized and unrealized derivative market value adjustments (a) | (0.04) | (0.05) | |
Tax effect (b) | 0.01 | 0.01 | |
Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments | $ 1.20 | 0.69 | |
(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. |
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SOURCE Nelnet
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