Exhibit 99.1
Media Contact: Ben Kiser, 402.458.3024
Investor Contact: Cheryl Watson, 317.469.2064
Investor Contact: Cheryl Watson, 317.469.2064
For immediate release
Nelnet Reports Strong Earnings and Asset Growth
| • | Student loan assets reach $26.2 billion, up 10 percent in first six months of 2007 | ||
| • | Fee-based revenue 53 percent of total revenue |
LINCOLN, Neb., July 31, 2007 — Nelnet, Inc. (NYSE: NNI) today reported GAAP net income for the first six months of 2007 of $29.5 million, or $0.59 per share, compared with $97.8 million, or $1.80 per share, for the first six months of 2006. Base net income excluding discontinued operations for the first six months of 2007 was $46.4 million, or $0.92 per share, and is comparable to $37.8 million, or $0.70 per share, for the first six months of 2006.
GAAP net income for the second-quarter 2007 was $14.8 million, or $0.30 per share, compared with $45.8 million, or $0.84 per share, for the second-quarter 2006. Base net income excluding discontinued operations for the second-quarter 2007 was $21.7 million, or $0.44 per share, and is comparable to $18.8 million, or $0.34 per share, for the same period a year ago.
On May 25, 2007, Nelnet sold EDULINX Canada Corporation, a Canadian student loan service provider and subsidiary of the company. As a result of this transaction, the results of operations for EDULINX are reported as discontinued operations.
“We are pleased with our results for the first six months and second quarter, especially the strength of our asset growth and the diversification and revenue contribution from our fee-based businesses,” said Mike Dunlap, Nelnet Chairman and Chief Executive Officer. “These key elements of originating assets, diversification, and fee-based revenue have been and will continue to be an important part of our business strategy for mitigating margin compression and delivering long-term value. As the legislative process approaches a resolution, we will maintain our focus on these key elements and on providing exceptional service to students, families, and schools throughout the education life cycle.”
Student Loan Assets
Since December 31, 2006, net student loan assets have increased 10 percent, or $2.4 billion, from $23.8 billion to $26.2 billion at June 30, 2007.
Fee-based Revenue
Fee-based revenue in the first six months of 2007 and the second quarter of 2007 represented 53 percent of Nelnet’s total revenue for both periods. This is an increase from the first six months of 2006 and second quarter of 2006 when fee-based revenue represented 37 percent and 36 percent of total revenue, respectively.
Income from loan and guarantee servicing fees reached $62.1 million for the first six months of 2007, up from $59.2 million in the first six months of 2006. In the second quarter of 2007, loan and guarantee servicing income grew to $31.6 million from $28.9 million in the second quarter of 2006.
Other fee-based income increased to $78.3 million for the first six months of 2007 compared with $34.2 million for the first six months of 2006. For the second quarter of 2007, other fee-based income increased to $38.3 million, up from $16.1 million in the same period a year ago. Other fee-based income includes Nelnet’s list management, direct marketing, tuition payment plan, and enrollment services businesses. In large part, the increase in fee-based revenue is attributable to acquisitions.
Margin Analysis
Net interest income for the first six months of 2007 was $136.0 million compared with $172.3 million for the first six months of 2006. For the second quarter of 2007, Nelnet reported net interest income of $68.0 million compared with $86.1 million for the second quarter of 2006. Net interest income for the first six months of 2006 and second quarter of 2006 includes a special allowance yield adjustment of $24.5 million and $10.6 million, respectively.
The company reported core student loan spread of 1.28 percent for the first six months of 2007 compared with 1.51 percent in the same period in 2006. For the second quarter of 2007, Nelnet reported core student loan spread of 1.28 percent compared with 1.49 percent in the same period of 2006 and 1.29 percent for the first quarter of 2007.
Operating Expenses
For the first six months of 2007, the company reported operating expenses of $241.9 million compared with $194.5 million for the first six months of 2006. Operating expenses were $120.7 million in the second quarter of 2007 compared with $101.3 million for the same period a year ago. The increase in operating expenses is primarily attributable to acquisitions.
Non-GAAP Performance Measures
A description of base net income and a reconciliation of GAAP net income to base net income can be found in supplemental financial information to this earnings release that is available online atwww.nelnetinvestors.com/releases.cfm?reltype=Financial.
Nelnet will host a conference call to discuss this earnings release at 11:00 a.m. (Eastern) today. To access the call live, participants in the United States and Canada should dial 866.558.6869 and international callers should dial 913.643.4199 at least 15 minutes prior to the call. A live audio Web cast of the call will also be available at www.nelnetinvestors.com under the conference calls and Web casts menu. A replay of the conference call will be available between 1:00 p.m. (Eastern) today and 11:59 p.m. (Eastern) August 7, 2007. To access the replay via telephone within the United States and Canada, callers should dial 888.203.1112. International callers should dial 719.457.0820. All callers accessing the replay will need to use the confirmation code 1546828. A replay of the audio Web cast will also be available at www.nelnetinvestors.com.
About Nelnet
For 28 years, Nelnet has been helping the education-seeking family plan for their education, pay for their education, and prepare for their careers. The company has invested hundreds of millions of dollars in products, services, and technology improvements for students and the educational institutions they attend. These services include live counseling to help families through all aspects of the financial aid process, benefits for borrowers, including tens of millions of dollars in borrower loan discounts and other benefits, and Nelnet sponsored scholarships. Nelnet serves students in 50 states, employs approximately 3,500 associates, and has $26.2 billion in net student loan assets.
Additional information is available at www.nelnet.com.
Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or expected. Among the key factors that may have a direct bearing on Nelnet’s operating results, performance, or financial condition are changes in terms of student loans and the educational credit marketplace, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, or changes in the general interest rate environment and in the securitization markets for education loans. For more information see our filings with the Securities and Exchange Commission.
Condensed Consolidated Statements of Income
| Three months ended | Six months ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||
| 2007 | 2007 | 2006 | 2007 | 2006 | ||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
| (dollars in thousands, except share data) | ||||||||||||||||||||
| Interest income: | ||||||||||||||||||||
| Loan interest | $ | 439,720 | $ | 418,113 | $ | 383,867 | $ | 857,833 | $ | 731,389 | ||||||||||
| Amortization of loan premiums and deferred origination costs | (22,634 | ) | (21,059 | ) | (21,125 | ) | (43,693 | ) | (42,987 | ) | ||||||||||
| Investment interest | 18,783 | 21,425 | 24,249 | 40,208 | 43,726 | |||||||||||||||
| Total interest income | 435,869 | 418,479 | 386,991 | 854,348 | 732,128 | |||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Interest on bonds and notes payable | 367,893 | 350,495 | 300,844 | 718,388 | 559,793 | |||||||||||||||
| Net interest income | 67,976 | 67,984 | 86,147 | 135,960 | 172,335 | |||||||||||||||
| Less provision for loan losses | 2,535 | 2,753 | 2,190 | 5,288 | 11,808 | |||||||||||||||
| Net interest income after provision for loan losses | 65,441 | 65,231 | 83,957 | 130,672 | 160,527 | |||||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Loan and guarantee servicing income | 31,610 | 30,466 | 28,926 | 62,076 | 59,216 | |||||||||||||||
| Other fee-based income | 38,262 | 40,029 | 16,074 | 78,291 | 34,229 | |||||||||||||||
| Software services income | 5,848 | 5,748 | 4,018 | 11,596 | 7,427 | |||||||||||||||
| Other income | 2,937 | 6,879 | 2,906 | 9,816 | 4,893 | |||||||||||||||
| Derivative market value, foreign currency, and put option adjustments | 5,547 | (12,130 | ) | 29,080 | (6,583 | ) | 68,343 | |||||||||||||
| Derivative settlements, net | 5,196 | 4,240 | 6,702 | 9,436 | 11,446 | |||||||||||||||
| Total other income (expense) | 89,400 | 75,232 | 87,706 | 164,632 | 185,554 | |||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Salaries and benefits | 59,761 | 61,704 | 54,753 | 121,465 | 104,252 | |||||||||||||||
| Other expenses | 54,394 | 52,887 | 40,720 | 107,281 | 79,143 | |||||||||||||||
| Amortization of intangible assets | 6,491 | 6,638 | 5,817 | 13,129 | 11,115 | |||||||||||||||
| Total operating expenses | 120,646 | 121,229 | 101,290 | 241,875 | 194,510 | |||||||||||||||
| Income before taxes | 34,195 | 19,234 | 70,373 | 53,429 | 151,571 | |||||||||||||||
| Income tax expense | 13,306 | 7,264 | 26,038 | 20,570 | 56,080 | |||||||||||||||
| Income before minority interest | 20,889 | 11,970 | 44,335 | 32,859 | 95,491 | |||||||||||||||
| Minority interest in net earnings of subsidiaries | — | — | — | — | (242 | ) | ||||||||||||||
| Income from continuing operations | 20,889 | 11,970 | 44,335 | 32,859 | 95,249 | |||||||||||||||
| Income (loss) from discontinued operations, net of tax | (6,135 | ) | 2,810 | 1,418 | (3,325 | ) | 2,570 | |||||||||||||
| Net Income | $ | 14,754 | $ | 14,780 | $ | 45,753 | $ | 29,534 | $ | 97,819 | ||||||||||
| Earnings (loss) per share, basic and diluted | ||||||||||||||||||||
| Income from continuing operations | $ | 0.42 | $ | 0.23 | $ | 0.81 | $ | 0.66 | $ | 1.75 | ||||||||||
| Income (loss) from discontinued operations, net of tax | (0.12 | ) | 0.06 | 0.03 | (0.07 | ) | 0.05 | |||||||||||||
| Net Income | $ | 0.30 | $ | 0.29 | $ | 0.84 | $ | 0.59 | $ | 1.80 | ||||||||||
| Weighted average shares outstanding | 49,452,960 | 50,982,187 | 54,297,230 | 50,213,349 | 54,269,440 | |||||||||||||||
Condensed Consolidated Balance Sheets and Financial Data
| As of | As of | As of | ||||||||||
| June 30, | December 31, | June 30, | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
| (dollars in thousands) | ||||||||||||
| Assets: | ||||||||||||
| Student loans receivable, net | $ | 26,174,958 | $ | 23,789,552 | $ | 22,404,492 | ||||||
| Cash, cash equivalents, and investments | 1,367,257 | 1,773,751 | 1,971,740 | |||||||||
| Goodwill | 191,256 | 191,420 | 145,950 | |||||||||
| Intangible assets, net | 146,542 | 161,588 | 171,942 | |||||||||
| Assets of discontinued operations | — | 27,309 | 34,232 | |||||||||
| Other assets | 993,361 | 853,253 | 825,076 | |||||||||
| Total assets | $ | 28,873,374 | $ | 26,796,873 | $ | 25,553,432 | ||||||
| Liabilities: | ||||||||||||
| Bonds and notes payable | $ | 27,791,146 | $ | 25,562,119 | $ | 24,327,855 | ||||||
| Liabilities of discontinued operations | — | 7,732 | 13,182 | |||||||||
| Other liabilities | 471,050 | 555,172 | 460,206 | |||||||||
| Total liabilities | 28,262,196 | 26,125,023 | 24,801,243 | |||||||||
| Shareholders’ equity | 611,178 | 671,850 | 752,189 | |||||||||
| Total liabilities and shareholders’ equity | $ | 28,873,374 | $ | 26,796,873 | $ | 25,553,432 | ||||||
| Return on average total assets | 0.21 | % | 0.27 | % | 0.81 | % | ||||||
| Return on average equity | 9.5 | % | 9.6 | % | 27.4 | % | ||||||
| Shareholders’ equity to total assets | 2.12 | % | 2.51 | % | 2.94 | % | ||||||