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Sep 30, 2023
Nelnet Q3 2023 Earnings Report
Nelnet reported mixed results due to the anticipated runoff of its legacy student loan portfolio, while core fee-based businesses showed growth opportunities.
Key Takeaways
Nelnet's Q3 2023 GAAP net income was $45.3 million, or $1.21 per share, down from $104.8 million, or $2.80 per share, in the same period last year. Excluding derivative market value adjustments, net income was $42.9 million, or $1.15 per share, compared to $64.5 million, or $1.73 per share in 2022. The company is focusing on growth opportunities in its core fee-based businesses amidst the student loan portfolio runoff.
GAAP net income decreased to $45.3 million, or $1.21 per share, compared to $104.8 million, or $2.80 per share, year-over-year.
Net income, excluding derivative market value adjustments, was $42.9 million, or $1.15 per share, compared to $64.5 million, or $1.73 per share, in the same period last year.
Loan Servicing and Systems segment reported revenue of $127.9 million, with net income after tax of $18.6 million.
Education Technology, Services, and Payment Processing segment revenue increased to $113.8 million, with net income after tax of $16.8 million.
Nelnet
Nelnet
Nelnet Revenue by Segment
Revenue by Segment
Asset Generation & Management Revenue
CapyFin.comLoan Servicing & Systems Revenue
CapyFin.comEducation Technology Services & Payments Revenue
CapyFin.com Forward Guidance
This press release contains forward-looking statements within the meaning of federal securities laws. 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.
Positive Outlook
- Ability to successfully maintain and increase allocated volumes of student loans serviced by the company under existing and future servicing contracts with the Department
- Expected benefits from the November 2020 launch of Nelnet Bank operations, including the ability to successfully conduct banking operations and achieve expected market penetration
- Continuing investment in ALLO
- 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
- Ability to adapt to technological change
Challenges Ahead
- Risks related to the 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
Revenue & Expenses
Visualization of income flow from segment revenue to net income