LINCOLN,
Neb., Feb. 27, 2024 /PRNewswire/ --
Nelnet (NYSE: NNI) today reported a GAAP net loss of
$8.6 million, or $0.23 per share, for the fourth quarter of 2023,
compared with GAAP net income of $30.8
million, or $0.83 per share,
for the same period a year ago.
Excluding derivative market value adjustments1, the
company's net loss was $1.3 million,
or $0.04 per share, for the fourth
quarter of 2023, compared with net income of $36.4 million, or $0.98 per share, for the same period in 2022.
During the fourth quarter of 2023, the company recognized a net
loss after taxes and noncontrolling interest from its Nelnet
Renewable Energy division of $40.3
million (or $1.08 per share)
that included operating losses and impairment charges related to
its solar construction business and investment losses on tax equity
investments.
"Our commitment has always been dedicated to the creation of
long-term value and making strategic decisions aimed at maximizing
long-term cash flow," said Jeff
Noordhoek, chief executive officer of Nelnet. "Our solar
engineering and construction company, acquired in the summer of
2022, has experienced several challenges resulting in costly
lessons that are included in this quarter's results. While we
realign our solar construction business for success, I'm pleased to
report that our core fee-based businesses performed exceptionally
well in 2023 and are well-positioned for a promising future along
with our asset generation strategy within Nelnet Financial
Services."
Operating Segments
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 division, and fee-based revenue in its Loan Servicing and
Systems and Education Technology Services and Payments
segments.
Asset Generation and Management
The AGM operating segment reported net interest income of
$35.6 million during the fourth
quarter of 2023, compared with $58.5
million for the same period a year ago. The decrease in 2023
was due to the expected runoff of the loan portfolio and a decrease
in loan spread2. The average balance of loans
outstanding decreased from $14.8
billion for the fourth quarter of 2022 to $12.5 billion for the same period in 2023.
AGM recognized a provision for loan losses in the fourth quarter
of 2023 of $8.3 million ($6.3 million after tax), compared with
$27.4 million ($20.8 million after tax) in the fourth quarter of
2022. Provision for loan losses is primarily impacted by loans
acquired during the period. The company acquired $196.4 million in loans in the fourth quarter of
2023, compared with $926.3 million
for the same period in 2022.
AGM recognized net income after tax of $17.2 million for the three months ended
December 31, 2023, compared with
$22.9 million for the same period in
2022.
Nelnet Bank
As of December 31, 2023, Nelnet
Bank had a $432.9 million loan
portfolio and total deposits, including intercompany deposits, of
$847.6 million. Nelnet Bank
recognized a net loss after tax for the quarter ended December 31, 2023 of $3.3
million, compared with net income of $1.4 million for the same period in 2022.
Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment was
$128.8 million for the fourth quarter
of 2023, compared with $140.0 million
for the same period in 2022.
As of December 31, 2023, the
company was servicing $532.6 billion
in government-owned, FFEL Program, private education, and consumer
loans for 16.1 million borrowers, compared with $587.5 billion in servicing volume for 17.6
million borrowers as of December 31,
2022.
The Loan Servicing and Systems segment reported net income after
tax of $8.4 million for the three
months ended December 31, 2023,
compared with $12.9 million for the
same period in 2022.
Education Technology Services and Payments
For the fourth quarter of 2023, revenue from the Education
Technology Services and Payments operating segment was $106.1 million, an increase from $98.3 million for the same period in 2022.
Revenue less direct costs to provide services for the fourth
quarter of 2023 was $66.7 million,
compared with $59.0 million for the
same period in 2022.
Net income after tax for the Education Technology Services and
Payments segment was $10.1 million
for the three months ended December 31,
2023, compared with $5.8
million for the same period in 2022.
Corporate Activities
Included in corporate activities is the operating results of the
Nelnet Renewable Energy (NRE) division. NRE recognized operating
losses in the fourth quarter of 2023 related to its solar
construction business (excluding impairments) of $17.9 million ($11.7
million or $0.31 per share
after taxes and noncontrolling interest) and an impairment charge
on goodwill and intangible assets of $20.6
million ($12.5 million or
$0.34 per share after taxes and
noncontrolling interest). In addition, NRE recognized losses of
$36.1 million ($16.1 million or $0.43 per share after taxes and noncontrolling
interest) in the fourth quarter of 2023 on solar tax equity
investments. For NRE's solar tax equity investments, the company
recognizes losses in the initial year of the investment, however it
expects to recognize a positive return over the life of the
investment. NRE funded almost $70
million in solar tax equity investments during the fourth
quarter of 2023.
Also 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 fourth quarter of 2023, the company recognized a
loss of $15.6 million ($11.9 million or $0.32 per share after tax), compared with a loss
of $20.3 million ($15.4 million or $0.41 per share after tax) for the same period in
2022.
Year-End Results
GAAP net income for the year ended December 31, 2023 was $91.5 million, or $2.45 per share, compared with GAAP net income of
$407.3 million, or $10.83 per share, for 2022. Net income in 2023,
excluding derivative market value adjustments1, was
$123.3 million, or $3.29 per share, compared with $231.3 million, or $6.15 per share, for 2022.
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," "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, including the company's level of service as the result
of the unprecedented event of all borrowers returning to repayment
in October 2023 which has generated
extraordinary call volume and web traffic, 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, 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, and risks
from changes in levels of loan prepayment or default rates;
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; uncertainties inherent in
forecasting future cash flows from student loan assets and related
asset-backed securitizations; risks and uncertainties related to
the operations of Nelnet Bank, including the ability to
successfully conduct banking operations 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), acquisitions, and
other activities, 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, including artificial
intelligence; risks related to the company's reinsurance business;
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 with maintaining compliance with the
extensive regulatory requirements applicable to the company's
businesses.
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.
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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.
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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.
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Consolidated
Statements of Operations
(Dollars in thousands,
except share data)
(unaudited)
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Three months
ended
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Year
ended
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December 31,
2023
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September 30,
2023
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December 31,
2022
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December 31,
2023
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December 31,
2022
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Interest
income:
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Loan
interest
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$
227,234
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|
236,423
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228,878
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931,945
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651,205
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Investment
interest
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48,019
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48,128
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34,012
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177,855
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91,601
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Total interest
income
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275,253
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284,551
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262,890
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1,109,800
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742,806
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Interest expense on
bonds and notes payable and bank deposits
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205,335
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207,159
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181,790
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845,091
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430,137
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Net interest
income
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69,918
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77,392
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81,100
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264,709
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312,669
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Less provision for loan
losses
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10,924
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10,659
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27,801
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65,450
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46,441
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Net interest income
after provision for loan losses
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58,994
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66,733
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53,299
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199,259
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266,228
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Other income
(expense):
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Loan servicing and
systems revenue
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128,816
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127,892
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140,021
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517,954
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535,459
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Education technology
services and payments revenue
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106,052
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113,796
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98,332
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463,311
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408,543
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Solar construction
revenue
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11,982
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6,301
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15,186
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31,669
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24,543
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Other, net
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(27,493)
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(211)
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735
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(48,787)
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25,486
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Gain (loss) on sale of
loans, net
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6,987
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5,362
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(2,713)
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39,673
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2,903
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Impairment
expense
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(26,951)
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(4,974)
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(9,361)
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(31,925)
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(15,523)
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Derivative market value
adjustments and derivative settlements, net
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(8,654)
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3,957
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13,424
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(16,701)
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264,634
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Total other income
(expense), net
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190,739
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252,123
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255,624
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955,194
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1,246,045
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Cost of
services:
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Cost to provide
education technology services and payments
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39,379
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43,694
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39,330
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171,183
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148,403
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Cost to provide solar
construction services
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23,371
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7,783
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14,004
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48,576
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19,971
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Total cost of
services
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62,750
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51,477
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53,334
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219,759
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168,374
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Operating
expenses:
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Salaries and
benefits
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152,917
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141,204
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151,568
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591,537
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589,579
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Depreciation and
amortization
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22,004
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21,835
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20,099
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79,118
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74,077
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Other
expenses
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51,697
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51,370
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50,481
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189,851
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170,778
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Total operating
expenses
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226,618
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214,409
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222,148
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860,506
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834,434
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(Loss) income before
income taxes
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(39,635)
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52,970
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33,441
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74,188
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509,465
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Income tax benefit
(expense)
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9,722
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(10,734)
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(5,459)
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(19,753)
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(113,224)
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Net (loss)
income
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(29,913)
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|
42,236
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|
27,982
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|
54,435
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396,241
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Net loss attributable
to noncontrolling interests
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21,359
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|
3,096
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2,791
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37,097
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11,106
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Net (loss) income
attributable to Nelnet, Inc.
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$
(8,554)
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45,332
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30,773
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91,532
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407,347
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Earnings per common
share:
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Net (loss) income
attributable to Nelnet, Inc. shareholders - basic and
diluted
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$
(0.23)
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1.21
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0.83
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2.45
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10.83
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Weighted average
common shares outstanding - basic and diluted
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37,354,406
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37,498,073
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37,290,293
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37,416,621
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37,603,033
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Condensed
Consolidated Balance Sheets
(Dollars in
thousands)
(unaudited)
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As of
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As of
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As of
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December 31,
2023
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September 30,
2023
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December 31,
2022
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Assets:
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Loans and accrued
interest receivable, net
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$
13,108,204
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13,867,557
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15,243,889
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Cash, cash
equivalents, and investments
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2,039,080
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2,133,378
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2,230,063
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Restricted cash and
investments
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875,348
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604,855
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1,239,470
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Goodwill and intangible
assets, net
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202,848
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228,812
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240,403
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Other assets
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511,165
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388,080
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420,219
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Total
assets
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$
16,736,645
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17,222,682
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19,374,044
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Liabilities:
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Bonds and notes
payable
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$
11,828,393
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12,448,109
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14,637,195
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Bank
deposits
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743,599
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718,053
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691,322
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Other
liabilities
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942,738
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797,365
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845,625
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Total
liabilities
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13,514,730
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13,963,527
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16,174,142
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Equity:
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Total Nelnet, Inc.
shareholders' equity
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3,262,621
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3,294,981
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3,198,959
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Noncontrolling
interests
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(40,706)
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(35,826)
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943
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Total
equity
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3,221,915
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3,259,155
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3,199,902
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Total liabilities and
equity
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$
16,736,645
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17,222,682
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19,374,044
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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
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Three months ended
December 31,
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Year ended December
31,
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2023
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2022
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2023
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2022
|
GAAP net (loss) income
attributable to Nelnet, Inc.
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$
(8,554)
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30,773
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91,532
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407,347
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Realized and unrealized
derivative market value adjustments (a)
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9,507
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7,434
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41,773
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(231,691)
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Tax effect
(b)
|
(2,282)
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(1,784)
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|
(10,026)
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|
55,606
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Non-GAAP net (loss)
income attributable to Nelnet, Inc., excluding derivative market
value adjustments
|
$
(1,329)
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|
36,423
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|
123,279
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|
231,262
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Earnings per
share:
|
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GAAP net (loss) income
attributable to Nelnet, Inc.
|
$
(0.23)
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|
0.83
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|
2.45
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|
10.83
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Realized and unrealized
derivative market value adjustments (a)
|
0.25
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0.20
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|
1.12
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(6.16)
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Tax effect
(b)
|
(0.06)
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|
(0.05)
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|
(0.28)
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|
1.48
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Non-GAAP net (loss)
income attributable to Nelnet, Inc., excluding derivative market
value adjustments
|
$
(0.04)
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|
0.98
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|
3.29
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|
6.15
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|
|
|
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(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.
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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.
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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.
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(b)
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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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View original
content:https://www.prnewswire.com/news-releases/nelnet-reports-fourth-quarter-2023-results-302073177.html
SOURCE Nelnet, Inc.