LINCOLN,
Neb., Feb. 27, 2025 /PRNewswire/
-- Nelnet (NYSE: NNI) today reported GAAP net income of
$63.2 million, or $1.73 per share, for the fourth quarter of 2024,
compared with a GAAP net loss of $7.9
million, or $0.21 per share,
for the same period a year ago.
Net income, excluding derivative market value
adjustments1, was $52.7
million, or $1.44 per share,
for the fourth quarter of 2024, compared with a net loss of
$0.7 million, or $0.02 per share, for the same period in 2023.
"We are pleased with the results in the fourth quarter of 2024
and optimistic about the opportunities ahead in 2025," said
Jeff Noordhoek, chief executive
officer of Nelnet. "This past year was a record-breaking one for
Nelnet Business Services, one of our three core businesses. For
Nelnet Diversified Services, 2024 was a year of strategic
reinvestment as we transitioned to the new federal servicing
contract and expanded our private loan servicing portfolio. Nelnet
Financial Services focused on consolidation and alignment as part
of our strategy to diversify assets and offset earnings from our
legacy student loan portfolio. Our results reflect a balanced mix
of success across different segments - exactly what we expect from
a diversified company."
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 (referred to as Nelnet Diversified Services
(NDS)) and Education Technology Services and Payments (referred to
as Nelnet Business Services (NBS)) 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 $48.3 million
during the fourth quarter of 2024, compared with $35.6 million for the same period a year ago. The
increase in 2024 was due an increase in loan spread2,
offset by the anticipated runoff of the legacy Federal Family
Education Loan Program loan portfolio. The average balance of loans
outstanding decreased from $12.5
billion for the fourth quarter of 2023 to $9.4 billion for the same period in 2024.
AGM recognized a provision for loan losses in the fourth quarter
of 2024 of $13.5 million
($10.3 million after tax), compared
with $0.4 million ($0.3 million after tax) in the fourth quarter of
2023. Provision for loan losses was primarily impacted by
establishing an initial allowance for consumer loans acquired
during the fourth quarter of 2024. AGM also recognized a non-cash
provision expense of $4.6
million ($3.5 million after
tax) during the fourth quarter of 2024 related to the company's
ownership of beneficial interest in loan securitizations.
In addition, AGM recognized income of $8.3 million ($6.3
million after tax) related to changes in the fair value of
derivative instruments that do not qualify for hedge accounting,
compared with a loss of $4.9 million
($3.7 million after tax) for the same
period in 2023. AGM recognized net income after tax of $25.5 million during the fourth quarter of 2024,
compared with $17.2 million for the
same period in 2023.
|
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.
|
Nelnet Bank
As of December 31, 2024, Nelnet
Bank had a $644.6 million and
$757.0 million loan and investment
portfolio, respectively, and total deposits, including
intercompany deposits, of $1.25
billion. Nelnet Bank reported loan and investment net
interest income of $12.9 million
during the fourth quarter of 2024, compared with $6.9 million for the same period a year ago. The
increase in 2024 was due to an increase in the loan and investment
portfolio and net interest margin.
Nelnet Bank recognized provision for loan losses in the fourth
quarter of 2024 of $8.6 million
($6.5 million after tax), compared
with $2.6 million ($2.0 million after tax) in the fourth quarter of
2023. Provision for loan losses at Nelnet Bank is due primarily
from the establishment of an initial allowance for loans originated
and acquired during the period. In addition, Nelnet Bank recognized
income of $5.5 million ($4.2 million after tax) related to changes in the
fair value of derivative instruments that do not qualify for hedge
accounting, compared with a loss of $4.6
million ($3.5 million after
tax) for the same period in 2023.
Nelnet Bank recognized net income after tax for the quarter
ended December 31, 2024 of
$4.2 million, compared with a net
loss of $3.3 million for the same
period in 2023.
Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment was
$138.0 million for the fourth quarter
of 2024, compared with $128.8 million
for the same period in 2023. On April 1,
2024, the company began to earn revenue under its new
Unified Servicing and Data Solution (USDS) contract which replaced
its legacy student loan servicing contract with the Department of
Education (Department). Revenue earned under the USDS contract on a
per borrower blended basis is lower than the legacy contract.
During the fourth quarter of 2024, the company recognized
$10.9 million in non-recurring
revenue under its Department servicing contract related to certain
inflation provisions from the prior legacy contract.
In July 2024, Discover Financial
Services announced the sale of an approximately $10 billion private education student loan
portfolio, representing approximately 400,000 borrowers, to
partnerships managed by two global investment firms, with the
company assuming responsibility for servicing the portfolio upon
the sale. The conversion of these loans to the company's platform
began in September 2024 with the
majority of loan conversions completed in the fourth quarter of
2024. The company recognized $4.0
million in non-recurring conversion revenue in the fourth
quarter of 2024.
As of December 31, 2024, the
company was servicing $532.4 billion
in government-owned, FFELP, private education, and consumer loans
for 15.8 million borrowers, compared with $532.6 billion in servicing volume for 16.1
million borrowers as of December 31,
2023.
The Loan Servicing and Systems segment reported net income after
tax of $20.4 million for the three
months ended December 31, 2024,
compared with $8.4 million for the
same period in 2023.
Education Technology Services and Payments
For the fourth quarter of 2024, revenue from the Education
Technology Services and Payments operating segment was $108.3 million, an increase from $106.1 million for the same period in 2023.
Revenue less direct costs to provide services for the fourth
quarter of 2024 was $69.7 million,
compared with $66.7 million for the
same period in 2023.
Net income after tax for the Education Technology Services and
Payments segment was $13.6 million
for the three months ended December 31,
2024, compared with $10.1
million for the same period in 2023.
Corporate Activities
Included in Corporate Activities are the operating results of
the company's solar construction business. During the fourth
quarter of 2024, the company reported a loss of $17.0 million ($13.0
million after tax) in its solar construction business. Since
the acquisition of this business, the company has incurred low and,
in some cases, negative margins on certain legacy projects. The
2024 loss includes the estimated losses on legacy construction
projects. The company has a handful of remaining legacy
construction contracts to complete, down from over 30 at the
beginning of 2024.
Year-End Results
GAAP net income for the year ended December 31, 2024 was $184.0 million, or $5.02 per share, compared with GAAP net income of
$89.8 million, or $2.40 per share, for 2023. Net income in
2024, excluding derivative market value adjustments1,
was $176.4 million, or $4.81 per share, compared with $121.6 million, or $3.25 per share, for 2023.
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, risks
related to consistently meeting service requirements to avoid the
assessment of performance penalties, 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 credit risk, prepayment 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
FFELP, private education, consumer, and other loans, or investment
interests therein, and initiatives to purchase additional FFELP,
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, including investment interests therein, 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 solar tax equity investments, including risks of not being able
to realize tax credits which remain subject to recapture by taxing
authorities; 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, solar construction, 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 and uncertainties associated with climate change;
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 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, including changes to the regulatory
environment from the change in presidential administration, 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 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
|
|
|
Year
ended
|
|
|
December 31,
2024
|
|
September 30,
2024
|
|
December 31,
2023
|
(1)
|
|
December 31,
2024
|
|
December 31,
2023
|
(1)
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan
interest
|
$
178,434
|
|
190,211
|
|
227,234
|
|
|
787,498
|
|
|
931,945
|
|
|
Investment
interest
|
42,815
|
|
50,272
|
|
48,019
|
|
|
185,901
|
|
|
177,855
|
|
|
Total interest
income
|
221,249
|
|
240,483
|
|
275,253
|
|
|
973,399
|
|
|
1,109,800
|
|
|
Interest expense on
bonds and notes payable and bank deposits
|
141,170
|
|
168,328
|
|
205,335
|
|
|
680,537
|
|
|
845,091
|
|
|
Net interest
income
|
80,079
|
|
72,155
|
|
69,918
|
|
|
292,862
|
|
|
264,709
|
|
|
Less provision for loan
losses
|
22,057
|
|
18,111
|
|
3,050
|
|
|
54,607
|
|
|
8,115
|
|
|
Net interest income
after provision for loan losses
|
58,022
|
|
54,044
|
|
66,868
|
|
|
238,255
|
|
|
256,594
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan servicing and
systems revenue
|
137,981
|
|
108,175
|
|
128,816
|
|
|
482,408
|
|
|
517,954
|
|
|
Education technology
services and payments revenue
|
108,335
|
|
118,179
|
|
106,052
|
|
|
486,962
|
|
|
463,311
|
|
|
Reinsurance premiums
earned
|
18,673
|
|
16,619
|
|
9,428
|
|
|
62,923
|
|
|
20,067
|
|
|
Solar construction
revenue
|
13,828
|
|
19,321
|
|
11,982
|
|
|
56,569
|
|
|
31,669
|
|
|
Other, net
|
27,794
|
|
15,706
|
|
(36,390)
|
|
|
61,602
|
|
|
(74,327)
|
|
|
Gain (loss) on sale of
loans, net
|
42
|
|
(107)
|
|
(886)
|
|
|
(1,643)
|
|
|
(17,662)
|
|
|
Derivative market value
adjustments and
derivative settlements, net
|
14,879
|
|
(11,525)
|
|
(8,654)
|
|
|
16,258
|
|
|
(16,701)
|
|
|
Total other income
(expense), net
|
321,532
|
|
266,368
|
|
210,348
|
|
|
1,165,079
|
|
|
924,311
|
|
|
Cost of services and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs incurred to
provide loan servicing
|
1,497
|
|
196
|
|
—
|
|
|
1,889
|
|
|
—
|
|
|
Cost to provide
education technology services
and payments
|
38,658
|
|
45,273
|
|
39,379
|
|
|
172,763
|
|
|
171,183
|
|
|
Cost to provide solar
construction services
|
28,558
|
|
26,815
|
|
23,371
|
|
|
77,673
|
|
|
48,576
|
|
|
Total cost of
services
|
68,713
|
|
72,284
|
|
62,750
|
|
|
252,325
|
|
|
219,759
|
|
|
Salaries and
benefits
|
147,229
|
|
146,192
|
|
152,917
|
|
|
576,931
|
|
|
591,537
|
|
|
Depreciation and
amortization
|
12,544
|
|
13,661
|
|
22,004
|
|
|
58,116
|
|
|
79,118
|
|
|
Reinsurance losses and
underwriting expenses
|
16,180
|
|
16,761
|
|
7,084
|
|
|
55,246
|
|
|
16,781
|
|
|
Other
expenses
|
50,681
|
|
44,685
|
|
44,613
|
|
|
189,503
|
|
|
173,070
|
|
|
Total operating
expenses
|
226,634
|
|
221,299
|
|
226,618
|
|
|
879,796
|
|
|
860,506
|
|
|
Impairment expense and
provision for beneficial interests
|
5,764
|
|
29,052
|
|
26,951
|
|
|
42,629
|
|
|
31,925
|
|
|
Total
expenses
|
301,111
|
|
322,635
|
|
316,319
|
|
|
1,174,750
|
|
|
1,112,190
|
|
|
Income (loss) before
income taxes
|
78,443
|
|
(2,223)
|
|
(39,103)
|
|
|
228,584
|
|
|
68,715
|
|
|
Income tax (expense)
benefit
|
(15,016)
|
|
282
|
|
9,399
|
|
|
(52,669)
|
|
|
(19,385)
|
|
|
Net income
(loss)
|
63,427
|
|
(1,941)
|
|
(29,704)
|
|
|
175,915
|
|
|
49,330
|
|
|
Net (income) loss
attributable to
noncontrolling interests
|
(268)
|
|
4,329
|
|
21,791
|
|
|
8,130
|
|
|
40,496
|
|
|
Net income (loss)
attributable to Nelnet, Inc.
|
$
63,159
|
|
2,388
|
|
(7,913)
|
|
|
184,045
|
|
|
89,826
|
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Nelnet, Inc.
shareholders - basic and diluted
|
$
1.73
|
|
0.07
|
|
(0.21)
|
|
|
5.02
|
|
|
2.40
|
|
|
Weighted average
common shares
outstanding - basic and diluted
|
36,461,513
|
|
36,430,485
|
|
37,354,406
|
|
|
36,642,533
|
|
|
37,416,621
|
|
|
|
|
(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 December 31, 2024
presentation. Refer to the company's annual report on Form 10-K for
the year ended December 31, 2024 that was filed with the Securities
and Exchange Commission on February 27, 2025 for additional
information.
|
|
Condensed
Consolidated Balance Sheets
(Dollars in
thousands)
(unaudited)
|
|
|
As of
|
|
As of
|
|
As of
|
|
|
December 31,
2024
|
|
September 30,
2024
|
|
December 31,
2023
|
(1)
|
|
Assets:
|
|
|
|
|
|
|
|
Loans and accrued
interest receivable, net
|
$
9,992,744
|
|
10,572,881
|
|
13,108,204
|
|
|
Cash, cash equivalents,
and investments
|
2,395,214
|
|
2,173,000
|
|
2,032,788
|
|
|
Restricted
cash
|
736,502
|
|
679,334
|
|
857,379
|
|
|
Goodwill and intangible
assets, net
|
194,357
|
|
196,400
|
|
202,848
|
|
|
Other assets
|
458,936
|
|
462,513
|
|
511,165
|
|
|
Total
assets
|
$
13,777,753
|
|
14,084,128
|
|
16,712,384
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Bonds and notes
payable
|
$
8,309,797
|
|
8,938,446
|
|
11,828,393
|
|
|
Bank
deposits
|
1,186,131
|
|
1,070,758
|
|
743,599
|
|
|
Other
liabilities
|
982,708
|
|
864,786
|
|
940,285
|
|
|
Total
liabilities
|
10,478,636
|
|
10,873,990
|
|
13,512,277
|
|
|
Equity:
|
|
|
|
|
|
|
|
Total Nelnet, Inc.
shareholders' equity
|
3,349,762
|
|
3,290,652
|
|
3,253,751
|
|
|
Noncontrolling
interests
|
(50,645)
|
|
(80,514)
|
|
(53,644)
|
|
|
Total
equity
|
3,299,117
|
|
3,210,138
|
|
3,200,107
|
|
|
Total liabilities and
equity
|
$
13,777,753
|
|
14,084,128
|
|
16,712,384
|
|
|
|
|
(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 December 31, 2024
presentation. Refer to the company's annual report on Form 10-K for
the year ended December 31, 2024 that was filed with the Securities
and Exchange Commission on February 27, 2025 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
December 31,
|
|
Year ended December
31,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
GAAP net income (loss)
attributable to Nelnet, Inc.
|
$
63,159
|
|
(7,913)
|
|
184,045
|
|
89,826
|
|
Realized and unrealized
derivative market value adjustments (a)
|
(13,792)
|
|
9,507
|
|
(10,124)
|
|
41,773
|
|
Tax effect
(b)
|
3,310
|
|
(2,282)
|
|
2,430
|
|
(10,026)
|
|
Non-GAAP net income
(loss) attributable to Nelnet, Inc.,
excluding derivative market value adjustments
|
$
52,677
|
|
(688)
|
|
176,351
|
|
121,573
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
GAAP net income (loss)
attributable to Nelnet, Inc.
|
$
1.73
|
|
(0.21)
|
|
5.02
|
|
2.40
|
|
Realized and unrealized
derivative market value adjustments (a)
|
(0.38)
|
|
0.25
|
|
(0.28)
|
|
1.12
|
|
Tax effect
(b)
|
0.09
|
|
(0.06)
|
|
0.07
|
|
(0.27)
|
|
Non-GAAP net income
(loss) attributable to Nelnet, Inc.,
excluding derivative market value adjustments
|
$
1.44
|
|
(0.02)
|
|
4.81
|
|
3.25
|
|
|
|
(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-fourth-quarter-2024-results-302388012.html
SOURCE Nelnet, Inc.
