Nelnet, Inc. :NNI-US: Earnings Analysis: Q3, 2017 By the Numbers : December 5, 2017

Nelnet, Inc. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Nelnet, Inc. – Navient Corp, SLM Corp, Fidelity National Information Services, Inc. and Discover Financial Services (NAVI-US, SLM-US, FIS-US and DFS-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 314.33 million, Net Earnings of USD 45.85 million.
  • Gross margins narrowed from 85.60% to 83.73% compared to the same period last year, operating (EBITDA) margins now 29.53% from 48.80%.
  • Year-on-year change in operating cash flow of 19.51% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 314.33 302.48 353.41 292.35 298.99
Revenue Growth (%YOY) 5.13 8.07 18.18 -0.42 -1.06
Earnings (mil) 45.85 28.46 49.51 97.31 83.42
Earnings Growth (%YOY) -45.04 9.96 4.33 18.01 72.23
Net Margin (%) 14.59 9.41 14.01 33.29 27.9
EPS 1.11 0.68 1.17 2.3 1.98
Return on Equity (%) 2.15 1.34 2.36 4.8 4.29
Return on Assets (%) 0.73 0.44 0.74 1.42 1.18

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Market Share Versus Profits

Revenues History
Earnings History

NNI-US’s change in revenue this period compared to the same period last year of 5.13% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that NNI-US is holding onto its market share. Also, for comparison purposes, revenues changed by 3.92% and earnings by 61.12% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 85.60% to 83.73%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 48.80% to 29.53% in this time frame. For comparison, gross margins were 85.33% and EBITDA margins were 25.45% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

NNI-US’s change in operating cash flow of 19.51% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 45.79% to 26.34% and (2) one-time items that contributed to a decrease in pretax margins from 44.17% to 21.98%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Nelnet, Inc. engages in the provision of education-related products and services, as well as loan asset management. It operates through the following segments: Loan Systems and Servicing, Tuition Payment Processing and Campus Commerce, Communications, and Asset Generation and Management. The System and Servicing segment specializes in student loan portfolio and the portfolios of third parties such as loan conversion activities, application processing, borrower updates, customer service, payment processing, due diligence procedures, funds management reconciliations, and claim processing. The Tuition Payment Processing and Campus Commerce segment provides products and services to help students and families manage the payment of education costs at all levels, as well as school information system software for private and faith-based schools that help schools automate administrative processes such as admissions, scheduling, student billing, attendance, and grade book management. The Communications segment is the operation of Allo Communications LLC which provides pure optic service to homes and businesses for internet, broadband, television, and telephone services. Asset Generation and Management segment is the acquisition, management, and ownership of student loan assets. The company was founded by Michael S. Dunlap and Stephen F. Butterfield in 1977 and is headquartered in Lincoln, NE.

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