Group 1 - Nelnet (NYSE: NNI) reported a 6.4% growth in book value compared to the previous year, indicating an improvement over 2023 despite being lower than historical rates [1] - The management has successfully addressed previous challenges, contributing to the improved financial performance [1] Group 2 - The article reflects a positive sentiment towards Nelnet's performance and potential for future growth, highlighting the company's recovery trajectory [1]

Core Viewpoint - Nelnet (NNI) has received an upgrade to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Impact - Changes in a company's future earnings potential, as reflected in earnings estimate revisions, are strongly correlated with near-term stock price movements [3]. - Institutional investors utilize earnings estimates to calculate the fair value of a company's shares, leading to buying or selling actions that affect stock prices [3]. Business Improvement Indicators - The rising earnings estimates and the Zacks rating upgrade for Nelnet suggest an improvement in the company's underlying business, which could lead to higher stock prices as investors respond positively [4]. Importance of Earnings Estimate Revisions - Empirical research supports the correlation between earnings estimate revisions and stock movements, making it beneficial for investors to track these revisions for investment decisions [5]. - The Zacks Rank stock-rating system effectively utilizes earnings estimate revisions to classify stocks, providing a reliable framework for investors [6]. Specifics on Nelnet's Earnings Estimates - Nelnet is projected to earn $6.50 per share for the fiscal year ending December 2025, reflecting a year-over-year increase of 35.1% [7]. - Over the past three months, the Zacks Consensus Estimate for Nelnet has risen by 10.2%, indicating a positive trend in earnings expectations [7]. Zacks Rating System Overview - The Zacks rating system maintains a balanced distribution of 'buy' and 'sell' ratings across its universe of over 4000 stocks, with only the top 5% receiving a 'Strong Buy' rating [8]. - The upgrade of Nelnet to a Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [9].

Core Insights - Nelnet reported strong fourth-quarter 2024 earnings, exceeding market expectations in both revenue and earnings per share, indicating robust operational performance [1][2] Financial Performance - Non-GAAP earnings per share (EPS) for Q4 2024 reached $1.44, surpassing the anticipated $1.23, marking a significant turnaround from a net loss to a net income of $63.2 million compared to a loss of $7.9 million in the previous year [2][9] - Revenue from Loan Servicing and Systems was $138 million, a 7.1% increase from $128.8 million in Q4 2023, driven by the new Unified Servicing and Data Solution (USDS) contract [3][6] - Revenue from Education Technology Services and Payments rose by 2.1% to $108.3 million from $106.1 million in the prior year [3][6] - The Asset Generation and Management segment saw net interest income increase to $48.3 million from $35.6 million, supported by improved loan spreads [7] Business Segments and Strategy - Nelnet operates through four major segments: Loan Servicing and Systems, Education Technology Services and Payments, Asset Generation and Management, and Nelnet Bank, providing diversified revenue streams [4] - The company is focusing on strengthening its educational technologies and expanding Nelnet Bank's offerings, with a notable recovery in net income from $3.3 million loss to $4.2 million profit [5] - Despite challenges in the solar construction business, which reported a $17 million loss, the company is refocusing on commercial solar markets for better future prospects [8] Future Outlook - Management is optimistic about growth into 2025, projecting resilience through federal contracts and diversified business strategies, particularly in education technology and energy solutions [11] - The company aims to sustain profitability by balancing declining Federal Family Education Loan Program (FFELP) contributions with income from diversified sectors [11]

Loan Servicing and Revenue - As of December 31, 2024, the Company serviced $532.4 billion of loans for 15.8 million borrowers[27] - The Company was servicing $489.9 billion of student loans for 14.0 million borrowers for the Department, representing 26% of the Company's revenue in 2024[28] - Nelnet Servicing received a five-year USDS contract from the Department, which went live on April 1, 2024, with revenue recognized starting in Q2 2024[29] - The Company expects a decrease in revenue earned on a per borrower basis under the new USDS contract compared to the legacy contract, assuming consistent borrower volume[30] - As of December 31, 2024, NDS serviced private education and consumer loans on behalf of 39 third-party servicing customers[36] Financial Performance - FACTS generated $308 million in revenue for the year ended December 31, 2024, compared to $298 million in 2023[49] - Nelnet Campus Commerce generated $141 million in revenue for the year ended December 31, 2024, up from $129 million in 2023[60] - Nelnet Payment Services generated $59 million in revenue for the year ended December 31, 2024, up from $55 million in 2023, representing a 7.3% increase[64] - Nelnet International served approximately 675 schools in 69 countries, generating $9 million in revenue for 2024, an increase from $8 million in 2023, reflecting a 12.5% growth[66] - ALLO recognized approximately $190 million in revenue for the year ended December 31, 2024, while its debt increased to approximately $1.14 billion from $715 million in 2023[93] Investments and Loan Portfolios - AGM's loan portfolio reached $9.0 billion as of December 31, 2024, with 93.7% federally insured[72] - During 2024, the company purchased $599.5 million of consumer and other non-FFELP loans to expand its loan portfolios[73] - Nelnet Bank's loan portfolio was $644.6 million as of December 31, 2024, focusing on private education and unsecured consumer loans[76] - Nelnet Bank had $1.25 billion in deposits as of December 31, 2024, including $68.5 million in intercompany deposits[77] - The Company has invested a total of $314.8 million in solar tax equity investments, with third-party investors contributing $271.4 million[86] Regulatory Compliance - The Company is subject to various federal and state regulations, including the Higher Education Act and the Dodd-Frank Act, which could impact its operations and compliance costs[100][101] - The Company anticipates additional states adopting laws regulating student loan servicers, which may increase operational costs and compliance requirements[106] - The Company must comply with the Family Educational Rights and Privacy Act (FERPA) and the Gramm-Leach-Bliley Act (GLBA), which protect student education records and customer financial information, respectively[110] - The Company is subject to compliance with the General Data Protection Regulation (GDPR) and similar laws, which impose obligations on organizations processing personal data of individuals in the EU[112] - Nelnet Bank, as an FDIC-insured institution, must maintain minimum capital ratios as prescribed by the Community Bank Leverage Ratio framework[116] Associate Engagement and Development - The total associate headcount as of December 31, 2024, is 6,739, with NDS accounting for 54.9%, NBS for 33.3%, NFS for 1.9%, and Corporate and other for 9.9%[124] - The Company achieved an overall engagement score of 74 out of 100 in the 2023 associate culture survey, slightly above the industry benchmark[127] - Associate voluntary turnover decreased to 23% in 2024, down from 24% in 2023 and 25% in 2022[128] - The company emphasizes individual development planning as part of its annual goal-setting process, providing various professional, technical, and leadership training courses[132] - The company has established relationships with trade schools, universities, and professional associations to attract talent[126] Community and Ethical Commitment - The company encourages associates to contribute to local causes and organizations, reinforcing its commitment to community support[135] - The company has a Code of Ethics and Conduct that applies to all associates, ensuring compliance with the highest levels of ethics and integrity[136] - The company maintains a comprehensive benefits package and a robust wellness program to support competitive compensation[134] - The company conducts strategic talent reviews and succession planning annually across all business areas[130] - The company has adopted internal procedures to protect its intellectual property, including trademarks, copyrights, and trade secrets[123]

[Introduction and Forward-Looking Statements](index=1&type=section&id=I.%20Introduction%20and%20Forward-Looking%20Statements) This section provides the report's release context and outlines the forward-looking nature of statements, subject to various risks detailed in the 2024 10-K [Release Information](index=1&type=section&id=I.A.%20Release%20Information) This report provides supplemental financial information for Nelnet, Inc.'s fourth quarter 2024 earnings, released on February 27, 2025, and should be read in conjunction with the company's 2024 Annual Report on Form 10-K - Release Date: **February 27, 2025**[1](index=1&type=chunk) - Context: Supplemental financial information for Q4 2024 earnings, to be read with the **2024 Annual Report on Form 10-K**[1](index=1&type=chunk) [Forward-Looking and Cautionary Statements](index=1&type=section&id=I.B.%20Forward-Looking%20and%20Cautionary%20Statements) The report contains forward-looking statements based on management's current expectations, which are subject to various known and unknown risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are based on management's current expectations, historical trends, current conditions, and expected future developments[3](index=3&type=chunk) - Statements are subject to known and unknown risks and uncertainties, including those outlined in the 'Risk Factors' section of the **2024 Annual Report on Form 10-K**[3](index=3&type=chunk) - Key risks include maintaining student loan servicing volumes, loan portfolio risks (credit, prepayment, interest rate), financing and liquidity risks, regulatory changes, cyber breaches, use of artificial intelligence, and risks related to investments in ALLO and solar tax equity[4](index=4&type=chunk) [Consolidated Financial Performance](index=2&type=section&id=II.%20Consolidated%20Financial%20Performance) This section presents Nelnet's consolidated statements of operations and balance sheets, highlighting significant financial changes for the year ended December 31, 2024 [Consolidated Statements of Operations](index=2&type=section&id=II.A.%20Consolidated%20Statements%20of%20Operations) Nelnet, Inc. reported a significant increase in net income attributable to Nelnet, Inc. for the year ended December 31, 2024, reaching $184.0 million, more than doubling from $89.8 million in 2023 Consolidated Statements of Operations (Year Ended December 31) | Metric | 2024 (in thousands) | 2023 (in thousands) | YoY Change | | :----------------------------------- | :------------------ | :------------------ | :--------- | | Total interest income | $973,399 | $1,109,800 | -12.3% | | Net interest income | $292,862 | $264,709 | +10.6% | | Net interest income after provision for loan losses | $238,255 | $256,594 | -7.2% | | Total other income (expense), net | $1,165,079 | $924,311 | +26.0% | | Total expenses | $1,174,750 | $1,112,190 | +5.6% | | Income (loss) before income taxes | $228,584 | $68,715 | +232.6% | | Net income (loss) attributable to Nelnet, Inc. | $184,045 | $89,826 | +104.9% | | Earnings per common share (basic and diluted) | $5.02 | $2.40 | +109.2% | [Condensed Consolidated Balance Sheets](index=3&type=section&id=II.B.%20Condensed%20Consolidated%20Balance%20Sheets) As of December 31, 2024, Nelnet's total assets decreased by 17.5% to $13.78 billion from $16.71 billion in 2023, primarily driven by a significant reduction in loans and accrued interest receivable Condensed Consolidated Balance Sheets (As of December 31) | Metric | 2024 (in thousands) | 2023 (in thousands) | YoY Change | | :----------------------------------- | :------------------ | :------------------ | :--------- | | Loans and accrued interest receivable, net | $9,992,744 | $13,108,204 | -23.8% | | Cash, cash equivalents, and investments | $2,395,214 | $2,032,788 | +17.8% | | Total assets | $13,777,753 | $16,712,384 | -17.5% | | Bonds and notes payable | $8,309,797 | $11,828,393 | -29.7% | | Bank deposits | $1,186,131 | $743,599 | +59.5% | | Total liabilities | $10,478,636 | $13,512,277 | -22.4% | | Total Nelnet, Inc. shareholders' equity | $3,349,762 | $3,253,751 | +2.9% | [Company Overview and Financial Reporting Notes](index=4&type=section&id=III.%20Company%20Overview%20and%20Financial%20Reporting%20Notes) This section details Nelnet's diversified business model, clarifies reclassifications, and reconciles GAAP and non-GAAP net income for enhanced performance analysis [Company Overview](index=4&type=section&id=III.A.%20Company%20Overview) Nelnet is a diversified hybrid holding company focused on consumer lending, loan servicing, payments, and technology, primarily in the education sector - Nelnet is a diversified hybrid holding company with primary businesses in consumer lending, loan servicing, payments, and technology, largely serving the education space[8](index=8&type=chunk) - A significant portion of revenue is net interest income from its existing federally insured student loan (FFELP) portfolio, which is expected to decline over time[8](index=8&type=chunk)[10](index=10&type=chunk) - The company is expanding its private education, consumer, and other loan portfolios, including through Nelnet Bank (launched in 2020), and servicing federally owned student loans[10](index=10&type=chunk) - Diversification efforts include investments in ALLO (fiber communications), early-stage and emerging growth companies (venture capital), real estate, reinsurance, and renewable energy (solar)[8](index=8&type=chunk) [Reclassifications and Immaterial Error Corrections](index=4&type=section&id=III.B.%20Reclassifications%20and%20Immaterial%20Error%20Corrections) During the second quarter of 2024, Nelnet identified and corrected immaterial errors in previously issued consolidated financial statements to ensure conformity with the December 31, 2024 presentation - Immaterial errors in previously issued consolidated financial statements were identified and corrected in Q2 2024 to conform to the **December 31, 2024** presentation[11](index=11&type=chunk) [GAAP and Non-GAAP Net Income Reconciliation](index=5&type=section&id=III.C.%20GAAP%20and%20Non-GAAP%20Net%20Income%20Reconciliation) Nelnet provides non-GAAP net income, excluding derivative market value adjustments, to offer a more consistent view of operational performance by removing the volatility caused by fair value changes in derivatives - Non-GAAP net income excludes realized and unrealized derivative market value adjustments, which are subject to significant period-to-period fluctuations due to timing and market factors[13](index=13&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk) - Management utilizes operating results excluding these items for comparability when assessing performance and in presentations with credit rating agencies, lenders, and investors[15](index=15&type=chunk) GAAP vs. Non-GAAP Net Income Attributable to Nelnet, Inc. (Year Ended December 31) | Metric | 2024 (in thousands) | 2023 (in thousands) | YoY Change | | :----------------------------------- | :------------------ | :------------------ | :--------- | | GAAP net income (loss) | $184,045 | $89,826 | +104.9% | | Realized & unrealized derivative market value adjustments | $(10,124) | $41,773 | -124.2% | | Tax effect | $2,430 | $(10,026) | +124.2% | | Non-GAAP net income (loss) | $176,351 | $121,573 | +45.0% | | GAAP EPS | $5.02 | $2.40 | +109.2% | | Non-GAAP EPS | $4.81 | $3.25 | +48.0% | [Operating Segments](index=6&type=section&id=IV.%20Operating%20Segments) This section describes Nelnet's key operating segments and presents their individual net income (loss) before taxes for the year ended December 31, 2024 [Segment Descriptions](index=6&type=section&id=IV.A.%20Segment%20Descriptions) Nelnet operates through reportable segments including Loan Servicing and Systems (NDS), Education Technology Services and Payments (NBS), and the Nelnet Financial Services (NFS) division - Reportable operating segments include Nelnet Diversified Services (NDS) for loan servicing and systems, Nelnet Business Services (NBS) for education technology services and payments, and the Nelnet Financial Services (NFS) division[16](index=16&type=chunk)[18](index=18&type=chunk) - The NFS division includes Asset Generation and Management (AGM), focused on maximizing cash flows from the FFELP portfolio and acquiring new loan assets, and Nelnet Bank, an internet industrial bank for private education and unsecured consumer loans[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - 'Corporate and Other Activities' comprises investment management (WRCM), reinsurance, real estate investments, solar tax equity investments, Nelnet Renewable Energy (solar EPC), ALLO investment, venture capital, and unallocated corporate costs[17](index=17&type=chunk)[19](index=19&type=chunk) [Segment Operating Results (Net Income (Loss) Before Taxes)](index=7&type=section&id=IV.B.%20Segment%20Operating%20Results%20(Net%20Income%20(Loss)%20Before%20Taxes)) For the year ended December 31, 2024, NBS and AGM were the primary contributors to pre-tax income, with NBS showing strong growth, while Nelnet Bank and Nelnet Renewable Energy continued to report pre-tax losses Segment Net Income (Loss) Before Taxes (Year Ended December 31) | Segment | 2024 (in thousands) | 2023 (in thousands) | YoY Change | | :----------------------------------- | :------------------ | :------------------ | :--------- | | NDS | $40,497 | $77,714 | -47.9% | | NBS | $117,896 | $91,101 | +29.4% | | AGM | $75,202 | $80,636 | -6.7% | | Nelnet Bank | $(1,942) | $(368) | -427.7% | | Nelnet Renewable Energy - solar construction | $(35,972) | $(54,691) | +34.2% | | Solar tax equity investments | $(2,179) | $(60,982) | +96.4% | | ALLO investment | $8,087 | $(57,972) | +113.9% | | Venture capital investments | $6,912 | $(6,008) | +215.1% | | Total Net income (loss) before taxes | $228,584 | $68,715 | +232.6% | [2024 Operating and Liquidity Highlights](index=7&type=section&id=V.%202024%20Operating%20and%20Liquidity%20Highlights) This section summarizes key operational developments and liquidity positions across Nelnet's business segments for the year 2024 [Loan Servicing and Systems](index=7&type=section&id=V.A.%20Loan%20Servicing%20and%20Systems) Nelnet's Loan Servicing and Systems segment transitioned to a new Unified Servicing and Data Solutions (USDS) contract with the Department of Education in April 2024 - The company began servicing under a new Unified Servicing and Data Solutions (USDS) contract with the Department of Education in **April 2024**, replacing the legacy contract[23](index=23&type=chunk)[24](index=24&type=chunk) - Revenue from the Department decreased in 2024 due to a reduction in the number of borrowers serviced and lower per-borrower blended revenue under the new USDS contract[24](index=24&type=chunk) [Education Technology Services and Payments](index=7&type=section&id=V.B.%20Education%20Technology%20Services%20and%20Payments) The Education Technology Services and Payments segment experienced revenue growth to $487.0 million in 2024, driven by both existing and new customers - Education technology services and payments revenue grew to **$487.0 million** in 2024, driven by existing and new customers[25](index=25&type=chunk) - Operating margin increased due to higher tuition payment plan services and payment processing revenue, while maintaining a consistent cost structure[25](index=25&type=chunk) [Asset Generation and Management](index=8&type=section&id=V.C.%20Asset%20Generation%20and%20Management) Net interest income for the Asset Generation and Management (AGM) segment decreased in 2024, primarily due to the continued amortization of the FFELP student loan portfolio and a decrease in core loan spread - Net interest income decreased in 2024 due to the amortization of the FFELP student loan portfolio and a decrease in core loan spread[26](index=26&type=chunk) - The average balance of student loans decreased by **$3.0 billion**, from **$13.3 billion** in 2023 to **$10.3 billion** in 2024[26](index=26&type=chunk) - Accelerated run-off of the FFELP portfolio has significantly decreased since **August 2024**, with prepayment rates returning to historical levels[26](index=26&type=chunk) - A **$39.5 million** allowance for credit losses was recorded in 2024 on beneficial interest securitization investments due to increased cumulative loss expectations[28](index=28&type=chunk) [Nelnet Renewable Energy (NRE)](index=8&type=section&id=V.D.%20Nelnet%20Renewable%20Energy%20(NRE)) Nelnet Renewable Energy (NRE) strategically shifted its focus exclusively to the commercial solar market in April 2024, discontinuing residential solar operations - NRE discontinued residential solar operations in **April 2024** to focus exclusively on the commercial solar market[29](index=29&type=chunk) - NRE recognized a net loss before taxes of **$36.0 million** in 2024, an improvement from **$54.7 million** in 2023[30](index=30&type=chunk) - Losses in 2023 and 2024 included impairment charges on goodwill, intangible assets, and other assets (**$1.9 million** in 2024, **$20.6 million** in 2023)[30](index=30&type=chunk) - Operating results are expected to improve as remaining legacy construction contracts are completed[30](index=30&type=chunk) [Solar Tax Equity Investments](index=8&type=section&id=V.E.%20Solar%20Tax%20Equity%20Investments) As of December 31, 2024, Nelnet had $314.8 million invested in solar tax equity partnerships, recognizing pre-tax losses of $6.5 million, partially offset by gains from sold investments - As of **December 31, 2024**, Nelnet had invested **$314.8 million** in solar tax equity partnerships[31](index=31&type=chunk) - The company recognized pre-tax losses of **$6.5 million** in 2024 from solar tax equity investments, which includes **$4.6 million** attributable to noncontrolling interests[31](index=31&type=chunk) - These losses were partially offset by **$15.3 million** in gains from investments sold during 2024[31](index=31&type=chunk) - Despite accelerated initial losses under HLBV accounting, current investments are expected to generate approximately **$163 million** in pre-tax income (excluding noncontrolling interests) between **January 1, 2025**, and **December 31, 2030**[32](index=32&type=chunk) [Investments - ALLO and Hudl](index=9&type=section&id=V.F.%20Investments%20-%20ALLO%20and%20Hudl) Nelnet holds a 45% voting interest in ALLO, resulting in a $10.7 million net loss in 2024 under HLBV accounting, while its preferred membership interests in ALLO generated $17.5 million in income - Nelnet holds a **45%** voting membership interest in ALLO, recognizing a **$10.7 million** net loss in 2024 under the HLBV method of accounting[33](index=33&type=chunk) - Income from ALLO preferred membership interests was **$17.5 million** in 2024[33](index=33&type=chunk) - The company has an approximately **22%** preferred ownership investment in Hudl, with a carrying amount of **$168.7 million** as of **December 31, 2024**[34](index=34&type=chunk) - Future operating results or liquidation events for solar, ALLO, or Hudl could significantly impact the company's earnings due to their accounting methods (HLBV and measurement alternative)[35](index=35&type=chunk) [Liquidity](index=9&type=section&id=V.G.%20Liquidity) As of December 31, 2024, Nelnet maintained strong liquidity with $717.1 million in unencumbered cash and investments and a fully available $495.0 million unsecured line of credit - As of **December 31, 2024**, the company had **$717.1 million** of unencumbered cash and investments[36](index=36&type=chunk) - A **$495.0 million** unsecured line of credit was fully available as of **December 31, 2024**[36](index=36&type=chunk) - Expected future undiscounted cash flows include approximately **$1.07 billion** from the AGM loan portfolio (with **$675.0 million** in the next five years) and **$323.4 million** from beneficial interest investments (majority within five years)[36](index=36&type=chunk) - Liquidity will be used for FFELP, private education, consumer, and other loan acquisitions, strategic investments, stock repurchases, debt repurchases, and dividend distributions[37](index=37&type=chunk) [Detailed Financial and Operational Data](index=10&type=section&id=VI.%20Detailed%20Financial%20and%20Operational%20Data) This section provides granular financial and operational data across Nelnet's various segments, including revenue breakdowns, loan volumes, and spread analysis [Loan Servicing and Systems Revenue Breakdown](index=15&type=section&id=VI.A.%20Loan%20Servicing%20and%20Systems%20Revenue%20Breakdown) For the year ended December 31, 2024, government loan servicing revenue decreased by 7.6% to $380.9 million, while private education and consumer loan servicing revenue increased by 29.5% to $63.5 million Loan Servicing and Systems Revenue (Year Ended December 31) | Service Offering | 2024 (in thousands) | 2023 (in thousands) | YoY Change | | :----------------------------------- | :------------------ | :------------------ | :--------- | | Government loan servicing | $380,921 | $412,478 | -7.6% | | Private education and consumer loan servicing | $63,453 | $48,984 | +29.5% | | FFELP loan servicing | $12,212 | $13,704 | -10.9% | | Software services | $21,032 | $29,208 | -28.0% | | Outsourced services | $4,790 | $13,580 | -64.7% | | Total Loan servicing and systems revenue | $482,408 | $517,954 | -6.9% | [Loan Servicing Volumes](index=15&type=section&id=VI.B.%20Loan%20Servicing%20Volumes) As of December 31, 2024, total servicing volume remained relatively stable at $532.4 billion, a slight decrease from $532.6 billion in 2023 Servicing Volume (Dollars in millions, As of December 31) | Category | 2024 | 2023 | YoY Change | | :----------------------------------- | :--------- | :--------- | :--------- | | Government | $489,877 | $494,691 | -1.0% | | FFELP | $13,260 | $17,462 | -24.1% | | Private and consumer | $29,226 | $20,493 | +42.6% | | Total | $532,363 | $532,646 | -0.1% | Number of Servicing Borrowers (As of December 31) | Category | 2024 | 2023 | YoY Change | | :----------------------------------- | :--------- | :--------- | :--------- | | Government | 14,049,550 | 14,503,057 | -3.1% | | FFELP | 549,861 | 725,866 | -24.3% | | Private and consumer | 1,168,293 | 894,703 | +30.6% | | Total | 15,767,704 | 16,123,626 | -2.2% | [Education Technology Services and Payments Revenue Breakdown](index=15&type=section&id=VI.C.%20Education%20Technology%20Services%20and%20Payments%20Revenue%20Breakdown) Education technology services and payments revenue increased by 5.1% to $487.0 million in 2024, primarily driven by an 8.4% increase in tuition payment plan services and a 9.3% increase in payment processing revenue Education Technology Services and Payments Revenue (Year Ended December 31) | Service Offering | 2024 (in thousands) | 2023 (in thousands) | YoY Change | | :----------------------------------- | :------------------ | :------------------ | :--------- | | Tuition payment plan services | $135,851 | $125,326 | +8.4% | | Payment processing | $179,043 | $163,859 | +9.3% | | Education technology services | $169,065 | $170,754 | -1.0% | | Total Education technology services and payments revenue | $486,962 | $463,311 | +5.1% | [Solar Construction Revenue Breakdown](index=16&type=section&id=VI.D.%20Solar%20Construction%20Revenue%20Breakdown) Solar construction revenue significantly increased by 78.6% to $56.6 million in 2024, primarily driven by a substantial 153.1% rise in commercial revenue to $53.3 million Solar Construction Revenue (Year Ended December 31) | Customer Type | 2024 (in thousands) | 2023 (in thousands) | YoY Change | | :----------------------------------- | :------------------ | :------------------ | :--------- | | Commercial revenue | $53,269 | $20,969 | +153.1% | | Residential revenue | $3,300 | $10,700 | -69.2% | | Total Solar construction revenue | $56,569 | $31,669 | +78.6% | - The company discontinued residential solar operations in **April 2024** to focus exclusively on the commercial solar market[54](index=54&type=chunk) [Other Income (Expense) Breakdown](index=16&type=section&id=VI.E.%20Other%20Income%20(Expense)%20Breakdown) The 'Other, net' income category significantly improved in 2024, turning from a net expense of $(74.3) million in 2023 to a net income of $61.6 million Other Income (Expense), Net (Year Ended December 31) | Component | 2024 (in thousands) | 2023 (in thousands) | YoY Change | | :----------------------------------- | :------------------ | :------------------ | :--------- | | ALLO preferred return | $17,486 | $9,120 | +91.7% | | Investment activity, net | $12,438 | $(8,586) | +244.8% | | Loss from ALLO voting membership interest investment | $(10,693) | $(65,277) | +83.6% | | Loss from solar investments, net | $(6,477) | $(59,645) | +89.2% | | Total Other, net | $61,602 | $(74,327) | +182.9% | - Solar investments are accounted for using the Hypothetical Liquidation at Book Value (HLBV) method, which typically results in accelerated losses in the initial years of investment[56](index=56&type=chunk) [Impairment Expense and Provision for Beneficial Interests](index=17&type=section&id=VI.F.%20Impairment%20Expense%20and%20Provision%20for%20Beneficial%20Interests) Total impairment expense and provision for beneficial interests increased to $42.6 million in 2024, primarily due to a significant $39.5 million provision for beneficial interest in loan securitizations Impairment Expense and Provision for Beneficial Interests (Year Ended December 31) | Item | 2024 (in thousands) | 2023 (in thousands) | | :----------------------------------- | :------------------ | :------------------ | | Investments - beneficial interest in loan securitizations | $39,491 | — | | Goodwill | — | $18,873 | | Property and equipment - internally developed software | — | $4,310 | | Intangible assets | — | $1,708 | | Total | $42,629 | $31,925 | - The 2024 increase was primarily due to a non-cash allowance for credit losses related to beneficial interest in certain loan securitizations[59](index=59&type=chunk) - In 2023, significant impairment charges were related to goodwill and intangible assets of the GRNE operating segment and internally developed software[61](index=61&type=chunk)[64](index=64&type=chunk) - In 2024, impairment charges also included solar facilities and inventory due to the discontinuation of residential solar operations[64](index=64&type=chunk) [Derivative Settlements](index=18&type=section&id=VI.G.%20Derivative%20Settlements) Total derivative settlements decreased significantly by 75.5% to $6.1 million in 2024 compared to $25.1 million in 2023, primarily driven by an 81.4% decrease in income from interest rate swaps related to floor income hedges Derivative Settlements - Income (Year Ended December 31) | Component | 2024 (in thousands) | 2023 (in thousands) | YoY Change | | :----------------------------------- | :------------------ | :------------------ | :--------- | | 1:3 basis swaps | $929 | $1,544 | -39.8% | | Interest rate swaps - floor income hedges | $4,288 | $23,044 | -81.4% | | Interest rate swaps - Nelnet Bank | $917 | $484 | +89.5% | | Total derivative settlements - income | $6,134 | $25,072 | -75.5% | [Loans and Accrued Interest Receivable and Allowance for Loan Losses](index=18&type=section&id=VI.H.%20Loans%20and%20Accrued%20Interest%20Receivable%20and%20Allowance%20for%20Loan%20Losses) Total loans and accrued interest receivable, net, decreased by 23.8% to $9.99 billion in 2024, primarily due to a significant reduction in Non-Nelnet Bank federally insured loans Loans and Accrued Interest Receivable, Net (As of December 31) | Category | 2024 (in thousands) | 2023 (in thousands) | YoY Change | | :----------------------------------- | :------------------ | :------------------ | :--------- | | Non-Nelnet Bank loans | $8,955,868 | $12,049,462 | -25.7% | | Nelnet Bank loans | $644,597 | $432,872 | +48.9% | | Accrued interest receivable | $549,283 | $764,385 | -28.1% | | Total Loans and accrued interest receivable, net | $9,992,744 | $13,108,204 | -23.8% | Allowance for Loan Losses as a Percentage of Ending Loan Balance (As of December 31) | Category | 2024 | 2023 | | :----------------------------------- | :--------- | :--------- | | Non-Nelnet Bank: Federally insured loans | 0.59% | 0.59% | | Non-Nelnet Bank: Private education loans | 5.02% | 5.68% | | Non-Nelnet Bank: Consumer and other loans | 11.13% | 13.66% | | Nelnet Bank: Private education loans | 2.09% | 0.93% | | Nelnet Bank: Consumer and other loans | 3.77% | 7.40% | [Loan Activity](index=20&type=section&id=VI.I.%20Loan%20Activity) Nelnet's loan portfolios exhibited contrasting trends in 2024: Non-Nelnet Bank loans significantly decreased due to substantial repayments, claims, and loans lost to external parties, while Nelnet Bank's portfolio grew substantially [Non-Nelnet Bank Loan Portfolios Activity](index=20&type=section&id=VI.I.1.%20Non-Nelnet%20Bank%20Loan%20Portfolios%20Activity) Non-Nelnet Bank loan portfolios saw a significant decrease in 2024, primarily driven by substantial repayments, claims, and loans lost to external parties Non-Nelnet Bank Loan Portfolios Activity (Year Ended December 31) | Activity | 2024 (in thousands) | 2023 (in thousands) | | :----------------------------------- | :------------------ | :------------------ | | Balance as of Dec 31, prior year | $11,686,207 | $12,049,462 | | Loan acquisitions | $706,459 | $1,132,291 | | Repayments, claims, capitalized interest, participations, and other, net | $(1,452,435) | $(1,461,803) | | Loans lost to external parties | $(1,621,038) | $(1,062,662) | | Loans sold | $(726,580) | $(728,135) | | Balance as of December 31, current year | $8,388,564 | $11,686,207 | [Nelnet Bank Loan Portfolios Activity](index=21&type=section&id=VI.I.2.%20Nelnet%20Bank%20Loan%20Portfolios%20Activity) Nelnet Bank's loan portfolio experienced substantial growth in 2024, driven by significant new loan acquisitions and originations, despite repayments and sales to AGM Nelnet Bank Loan Portfolios Activity (Year Ended December 31) | Activity | 2024 (in thousands) | 2023 (in thousands) | | :----------------------------------- | :------------------ | :------------------ | | Balance as of Dec 31, prior year | $432,872 | $432,872 | | Loan acquisitions and originations | $391,446 | $139,253 | | Repayments | $(114,633) | $(68,475) | | Loans sold to AGM | $(65,088) | $(57,701) | | Balance as of December 31, current year | $644,597 | $432,872 | [Loan Spread Analysis](index=22&type=section&id=VI.J.%20Loan%20Spread%20Analysis) AGM's core loan spread for the full year 2024 was 0.97%, a decrease from 1.04% in 2023, despite an increase in variable loan yield and a decrease in loan cost of funds AGM Loan Spread Analysis (Year Ended December 31) | Metric | 2024 | 2023 | | :----------------------------------- | :--------- | :--------- | | Variable loan yield, net | 7.25% | 6.82% | | Loan cost of funds - interest expense | (6.34)% | (5.99)% | | Variable loan spread | 0.92% | 0.84% | | Core loan spread | 0.97% | 1.04% | | Average balance of AGM's loans | $10,310,430 | $13,316,525 | - Core loan spread for the full year decreased to **0.97%** in 2024 from **1.04%** in 2023, but showed an increase in Q4 2024 to **1.18%** from **0.63%** in Q4 2023[73](index=73&type=chunk) - The average balance of AGM's loans decreased by **$3.0 billion**, from **$13.3 billion** in 2023 to **$10.3 billion** in 2024[73](index=73&type=chunk)

Core Insights - Nelnet reported a significant turnaround in its financial performance for the fourth quarter of 2024, achieving a GAAP net income of $63.2 million, or $1.73 per share, compared to a net loss of $7.9 million, or $0.21 per share, in the same period of 2023 [1][16][25] - The company expressed optimism for 2025, highlighting record-breaking results in its Nelnet Business Services segment and strategic reinvestments in Nelnet Diversified Services [2] Financial Performance - The AGM segment reported a net interest income of $48.3 million for Q4 2024, up from $35.6 million in Q4 2023, driven by an increase in loan spread despite a decrease in the average balance of loans outstanding from $12.5 billion to $9.4 billion [3] - AGM recognized a provision for loan losses of $13.5 million in Q4 2024, significantly higher than the $0.4 million in Q4 2023, primarily due to new consumer loans acquired [4] - Nelnet Bank's loan and investment net interest income rose to $12.9 million in Q4 2024 from $6.9 million in Q4 2023, attributed to an increase in the loan and investment portfolio [7] - The Loan Servicing and Systems segment generated revenue of $138.0 million in Q4 2024, an increase from $128.8 million in Q4 2023, with the new USDS contract contributing to this growth [10] - The Education Technology Services and Payments segment reported revenue of $108.3 million for Q4 2024, up from $106.1 million in Q4 2023, with net income after tax increasing to $13.6 million from $10.1 million [13][14] Segment Analysis - Nelnet operates through four reportable segments: AGM, Nelnet Bank, Nelnet Diversified Services, and Nelnet Business Services, each contributing to the overall financial performance [2] - The AGM segment's net income after tax for Q4 2024 was $25.5 million, compared to $17.2 million in Q4 2023, reflecting improved performance [5] - Nelnet Bank recognized a net income after tax of $4.2 million for Q4 2024, a recovery from a net loss of $3.3 million in Q4 2023 [9] - The Loan Servicing and Systems segment's net income after tax increased to $20.4 million in Q4 2024 from $8.4 million in Q4 2023, indicating strong operational performance [12] Year-End Results - For the year ended December 31, 2024, Nelnet reported a GAAP net income of $184.0 million, or $5.02 per share, compared to $89.8 million, or $2.40 per share, in 2023 [16] - The company's net income, excluding derivative market value adjustments, was $176.4 million for 2024, up from $121.6 million in 2023 [16][25]

Group 1 - Nelnet, Inc. declared a first quarter cash dividend of $0.28 per share on its Class A and Class B common stock [1] - The dividend payment date is set for March 14, 2025, for shareholders of record as of February 28, 2025 [1] Group 2 - The company will release its earnings for the fourth quarter and the year ended December 31, 2024, after the close of the New York Stock Exchange on February 27, 2025 [2] - Additional earnings information will be available on the company's investor relations website [2]

Financial Performance - GAAP net income attributable to the company for Q3 2024 was $2,388,000, a decrease from $44,354,000 in Q3 2023[128] - Non-GAAP net income attributable to the company, excluding derivative market value adjustments, was $12,393,000 for Q3 2024, compared to $41,968,000 in Q3 2023[128] - The company reported earnings per share of $0.07 for Q3 2024, down from $1.18 in Q3 2023[128] - The net income attributable to the Company was $2,388 million in Q3 2024, down from $44,354 million in Q3 2023, highlighting a significant decline in profitability[135] - The net loss for the three months ended September 30, 2024, was $(3,457) million, compared to a net income of $18,597 million in the same period of 2023[153] - The company reported a net loss of $(12,423) for the three months ended September 30, 2024, compared to a net income of $30,827 in the same period of 2023[182] - Net (loss) income for the three months ended September 30, 2024, was $(3,615) million, compared to a profit of $1,747 million in the same period of 2023[203] - The net loss for the three months ended September 30, 2024, was $9,116 million, compared to a net loss of $30,521 million in the same period of 2023, indicating an improvement of 70%[212] Revenue and Income Sources - Total revenue for the three months ended September 30, 2024, was $8,529 million, a decrease from $10,057 million in the same period of 2023, representing a decline of approximately 15.2%[142] - Total interest income decreased to $240,483 in Q3 2024 from $284,551 in Q3 2023, reflecting a decrease in the average balance of debt outstanding[138] - Interest income for the three months ended September 30, 2024, was $894 million, down from $1,098 million in the same period of 2023, reflecting a decrease of approximately 18.6%[152] - Loan servicing revenue for the three months ended September 30, 2024, was $108.175 million, a decrease from $127.892 million in the same period of 2023, representing a decline of about 15.4%[152] - Education technology services and payments revenue increased to $118.179 million in Q3 2024 from $113.796 million in Q3 2023, reflecting a growth of approximately 3.3%[161] - Solar construction revenue increased significantly to $19,321 in Q3 2024 from $6,301 in Q3 2023, as the company shifts focus to the commercial solar market[138] - The company recognized $2.4 million in revenue from EANS programs in Q3 2024, down from $8.1 million in Q3 2023, indicating a decrease of approximately 70.4%[161] - The company reported net premiums of $16,619 million for the three months ended September 30, 2024, compared to $6,287 million in 2023, representing a year-over-year increase of 164%[209] Expenses and Losses - Total operating expenses rose to $221,495 in Q3 2024 from $214,409 in Q3 2023, driven by restructuring charges and increased costs in various segments[140] - The company recognized a provision for loan losses of $6.1 million in the NFS other operating segment for Q3 2024, compared to $1.9 million in the same period of 2023, indicating increased risk in loan performance[134] - The company incurred a charge of $7.1 million related to staff reductions, with $2.1 million and $4.1 million recognized in the second and third quarters of 2024, respectively[152] - The cost to provide solar construction services for the three months ended September 30, 2024, was $26,815 million, up from $7,783 million in the same period of 2023, reflecting increased operational expenses[212] - Total operating expenses for the three months ended September 30, 2024, were $6,645 million, compared to $4,198 million in 2023, reflecting a growth of 58.5%[203] - The company recognized a loss on the sale of loans amounting to $(1,685) million for the nine months ended September 30, 2024, compared to $(16,776) million for the same period in 2023, reflecting improved loan sale performance[179] Loan Portfolio and Acquisitions - The company is actively expanding its private education, consumer, and other loan portfolios, and launched Nelnet Bank in November 2020[127] - The company’s loan portfolio primarily consists of federally insured student loans, generating significant net interest income[127] - The company is focused on maximizing cash flows from its FFELP loan portfolio and acquiring additional loan assets[129] - The AGM operating segment's loan portfolio stood at $9.5 billion as of September 30, 2024, down from $12.735 billion in the previous year[162] - Total loan acquisitions in Q3 2024 were $234.116 million, significantly higher than $109.658 million in Q3 2023, marking an increase of approximately 113%[163] - Total loan acquisitions and originations amounted to $205,205 million for the nine months ended September 30, 2024, compared to $97,107 million for the same period in 2023, indicating a substantial increase in loan activity[190] Investment Activities - The company has made investments in various sectors, including fiber communications, venture capital, real estate, reinsurance, and renewable energy[127] - The company has invested a total of $543.7 million in solar tax equity investments as of September 30, 2024, with $241.4 million syndicated to third-party investors, highlighting ongoing investment in renewable energy[214] - The company recognized net gains from real estate investments of $2.1 million for the three months ended September 30, 2024, compared to $0.1 million in 2023[209] - The company has partial ownership in securitizations correlating to approximately $1.99 billion of loans, with an investment balance of $218.7 million as of September 30, 2024[254][255] Future Outlook and Risks - The company anticipates improvements in the NDS segment's operating results in future periods as cost-saving measures take effect and new servicing opportunities are realized[133] - The company expects fluctuations in future earnings due to investment purchases, sales, and valuation adjustments[141] - The company anticipates limited impact on its capital or liquidity profile from interest rate movements due to its derivative portfolio as of September 30, 2024[272] - The company has experienced accelerated run-off of its FFELP portfolio due to borrowers consolidating loans for federal loan forgiveness, impacting cash flows significantly[235] - If prepayment rates double, forecasted cash flow could reduce by $0.09 billion, while a tenfold increase could lead to a reduction of $0.43 billion[238] Tax and Regulatory Matters - The effective tax rate for the nine months ended September 30, 2024, was 23.75%, compared to 22.75% for the same period in 2023[140] - The income tax benefit for the three months ended September 30, 2024, was $3,915 million, compared to a tax benefit of $13,131 million for the same period in 2023, reflecting changes in tax strategies and operational performance[212] - The Department announced a broad-based student debt relief plan in August 2022, which was invalidated by the Supreme Court on June 30, 2023[165] - The SAVE income-driven repayment plan was finalized in 2023, aimed at lowering monthly payments and accelerating forgiveness for borrowers, effective July 1, 2024[166] Corporate Governance and Shareholder Returns - The Company repurchased a total of 889,963 shares of its Class A common stock during the first three quarters of 2024, at an average price of $93.14 per share[275] - The Company paid a cash dividend of $0.28 per share on September 13, 2024, and has declared a similar dividend for the fourth quarter of 2024[276][277] - The Company plans to continue regular quarterly dividend payments, subject to future earnings and financial conditions[277]

Financial Performance - Total interest income for Q3 2024 was $240,483,000, a decrease of 15.5% compared to $284,551,000 in Q3 2023[4] - Net interest income after provision for loan losses was $54,044,000, down 26.1% from $73,117,000 in the same quarter last year[4] - Net loss attributable to Nelnet, Inc. was $2,388,000, compared to a net income of $44,354,000 in Q3 2023[4] - The company reported a net income per share of $0.07 for Q3 2024, significantly lower than $1.18 in Q3 2023[4] - GAAP net income attributable to Nelnet, Inc. for Q3 2024 was $2.388 million, compared to $44.354 million in Q3 2023, reflecting a significant decrease[8] - Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments, was $12.393 million for Q3 2024, up from $41.968 million in Q3 2023[8] - The Company reported a net income of $2.4 million for the three months ended September 30, 2024, compared to a net income of $44.4 million for the same period in 2023[15] - The company reported a net loss attributable to noncontrolling interests of $8.40 million for the nine months ended September 30, 2024, compared to a net loss of $18.70 million in 2023, showing an improvement[20][22] Revenue and Expenses - Loan servicing and systems revenue reached $108,175,000, a decline of 15.4% from $127,892,000 in Q3 2023[4] - The company incurred total operating expenses of $221.5 million for the three months ended September 30, 2024[16] - The company incurred a total operating expense of $653.55 million for the nine months ended September 30, 2024, compared to $633.89 million in 2023, reflecting an increase of about 3.1%[20][22] - Total operating expenses for the three months ended June 30, 2024, were $214.568 million, slightly higher than $214.409 million in the previous quarter[18][19] Loan Loss Provisions - The provision for loan losses increased to $18,111,000, compared to $4,275,000 in Q3 2023, indicating a rise in credit risk[4] - The Company recognized a provision for loan losses of $6.1 million in Q3 2024, compared to $1.9 million in Q3 2023, indicating a rise in expected credit losses[12] - The provision for loan losses was $32.55 million for the nine months ended September 30, 2024, compared to $5.07 million in 2023, indicating a significant increase[20][22] Assets and Liabilities - Total assets decreased to $14,084,128,000 from $17,197,889,000 in Q3 2023, reflecting a decline of 18.2%[6] - Total liabilities reduced to $10,873,990,000, down 22.2% from $13,960,751,000 in the same period last year[6] - Cash, cash equivalents, and investments increased to $2,123,245,000 from $2,108,585,000 in Q3 2023, showing a slight growth of 0.7%[6] Segment Performance - The Loan Servicing and Systems (LSS) segment reported a net loss of $4.549 million in 2024, down from a profit of $24.469 million in 2023, due to decreased revenue and increased expenses[9] - The Education Technology Services and Payments (ETSP) segment generated $26.813 million in net income for Q3 2024, an increase from $22.123 million in Q3 2023, attributed to higher revenue[12] - The Asset Generation and Management (AGM) segment reported a net loss of $16.346 million in Q3 2024, compared to a profit of $40.562 million in Q3 2023, impacted by provisions for loan losses and derivative market value adjustments[12] - Nelnet Bank experienced a net loss of $4.758 million in Q3 2024, compared to a profit of $14.038 million in Q3 2023, primarily due to increased provisions for loan losses[12] Strategic Initiatives - The company anticipates continued challenges in maintaining and increasing allocated volumes of student loans serviced under existing contracts[2] - The Company launched Nelnet Bank in November 2020, expanding its private education and consumer loan portfolios[7] - The Company is actively pursuing new third-party servicing opportunities to improve future segment performance[12] - The Company plans to focus exclusively on the commercial solar market and discontinue residential solar operations as of April 2024[14] Solar and Investment Activities - The Company recorded an expense of $8.8 million related to estimated losses on legacy solar construction projects during Q3 2024[14] - The company’s investment activity net income for the three months ended September 30, 2024, was $8,529 million, compared to a loss of $(1,003) million for the same period in 2023[31] - The Company recognized no loss from ALLO voting membership interest investment for the three months ended September 30, 2024, compared to a loss of $17.3 million for the same period in 2023[14] - Income from preferred membership interests in ALLO was $4.8 million for the three months ended September 30, 2024, up from $2.3 million in the same period in 2023[14] Loan Metrics - The company’s private education loans showed a delinquency rate of 5.01% as of September 30, 2024, down from 5.78% a year earlier[38] - Nelnet Bank's total loans reached $559.87 million as of September 30, 2024, an increase from $468.81 million a year prior[39] - The allowance for loan losses as a percentage of risk-sharing component for federally insured loans not covered by federal guaranty was 20.7% as of September 30, 2024[38] - Total loan servicing volume reached $526,553 million as of September 30, 2024, reflecting a slight increase from $523,750 million as of June 30, 2024[26]

Core Points - Nelnet reported a significant decline in GAAP net income for Q3 2024, with net income of $2.4 million ($0.07 per share), down from $44.4 million ($1.18 per share) in Q3 2023 [1][2] - Excluding derivative market value adjustments, net income was $12.4 million ($0.34 per share) for Q3 2024, compared to $42.0 million ($1.12 per share) in the same period last year [2][30] Financial Performance - The company incurred a non-cash provision expense of $29.0 million related to loan securitizations, reflecting changes in future cash flow estimates due to increased cumulative net loss rates [3][10] - A non-cash expense of $5.6 million was recorded for writing off unamortized debt discount costs from early redemption of higher-cost debt securities [4] - Losses of $11.2 million were reported from tax equity investments in solar projects, with the accounting method accelerating losses in initial years but not affecting long-term return expectations [5] - Estimated losses of $8.8 million were recognized on legacy solar construction projects, although the company is optimistic about repositioning its solar EPC business for future profitability [6] Operating Segments - The Asset Generation and Management (AGM) segment reported net interest income of $38.4 million, down from $51.5 million in Q3 2023, primarily due to the runoff of the Federal Family Education Loan Program (FFELP) portfolio [9][10] - Nelnet Bank reported a net loss after tax of $3.6 million for Q3 2024, compared to net income of $1.7 million in Q3 2023, with a provision for loan losses of $6.1 million [12] - The Loan Servicing and Systems segment generated revenue of $108.2 million, down from $127.9 million in the same period last year, attributed to the transition to a new servicing contract [13][16] - The Education Technology Services and Payments segment saw revenue increase to $118.2 million, up from $113.8 million in Q3 2023, with net income after tax rising to $20.4 million [17][18] Corporate Activities - The company declared a fourth-quarter cash dividend of $0.28 per share, payable on December 16, 2024, to shareholders of record as of December 2, 2024 [21] - The company recognized a loss of $10.1 million in its solar EPC business for Q3 2024, compared to a loss of $4.9 million in Q3 2023, reflecting ongoing challenges in legacy construction projects [20]