Nelnet Reports Second Quarter 2020 Results
LINCOLN, Neb., Aug. 6, 2020 /PRNewswire/ -- Nelnet (NYSE: NNI) today reported GAAP net income of $86.5 million, or $2.21 per share, for the second quarter of 2020, compared with GAAP net income of $24.6 million, or $0.61 per share, for the same period a year ago.
GAAP net income increased for the three months ended June 30, 2020, compared with the same period in 2019, primarily due to the recognition of a $51.0 million ($38.8 million after tax) gain to adjust the carrying value of the company's investment in Hudl to reflect Hudl's May 2020 equity raise transaction value. In addition, there was a decrease in net losses for the three months ended June 30, 2020, as compared with the same period in 2019, from changes in the fair values of derivative instruments that do not qualify for hedge accounting.
Net income, excluding derivative market value adjustments(1), was $89.5 million, or $2.28 per share, for the second quarter of 2020, compared with net income of $52.8 million, or $1.32 per share, for the same period in 2019.
"Nelnet reported strong second quarter results from its loan portfolio and core operating businesses during unprecedented times," said Jeff Noordhoek, Chief Executive Officer. "Through the challenges and uncertainty, I have been impressed by the resiliency and commitment of our associates to serve our customers at exceptionally high levels. Our results are also a testament to the value of our products and services and our ability to innovate quickly to meet the critical needs of our customers through the difficulties of the pandemic and resulting recession."
Nelnet operates four primary business segments, earning interest income on loans in its Asset Generation and Management (AGM) segment and fee-based revenue in its Loan Servicing and Systems; Education Technology, Services, and Payment Processing; and Communications segments.
Asset Generation and Management
The company's AGM operating segment reported net interest income of $66.1 million during the second quarter of 2020, compared with $59.2 million for the same period a year ago. The company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. The company recognized income from derivative settlements of $5.8 million during the second quarter of 2020, compared with income of $13.0 million for the same period in 2019. Derivative settlements for each applicable period should be evaluated with the company's net interest income. Net interest income and derivative settlements totaled $71.9 million and $72.2 million in the second quarter of 2020 and 2019, respectively.
The decrease in net interest income and derivative settlements for the three months ended June 30, 2020, as compared to the same period in 2019, was due to a decrease in the average balance of loans outstanding to $20.2 billion for the second quarter of 2020 from $21.8 billion for the same period in 2019. This decrease was partially offset by an increase in core loan spread in 2020 as compared to 2019.
Core loan spread(2), which includes the impact of derivative settlements, increased to 1.35 percent for the quarter ended June 30, 2020, compared with 1.21 percent for the same period in 2019. Core loan spread was positively impacted in the second quarter of 2020 due to lower interest rates. The company has a portfolio of student loans that are earning interest at a fixed borrower rate and that are financed with variable rate debt. As a result, in a low interest rate environment, the company earns additional spread income that it refers to as floor income. During the three months ended June 30, 2020, the company recognized $30.6 million of floor income (net of $1.3 million in derivative settlements paid), compared with $23.0 million (net of $12.2 million of derivative settlements received) for the comparable period in 2019. The company anticipates receiving significant fixed rate floor income in future periods.
Provision for loan losses was $3.0 million for the three months ended June 30, 2020, compared with $9.0 million for the same period in 2019. On January 1, 2020, the company adopted the CECL accounting standard, which required the company to record expected life of loan losses on all loans. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The company's total allowance for loan losses of $209.4 million at June 30, 2020 represents reserves equal to 0.7 percent of the company's federally insured loans (or 29.1 percent of the risk sharing component of the loans that is not covered by a federal guaranty), 8.7 percent of the company's private education loans, and 26.2 percent of the company's consumer loans.
Subsequent to June 30, 2020, the company made the decision to sell $60.8 million (par value) of consumer loans and currently anticipates recognizing a gain in the third quarter of 2020 of $14.8 million ($11.2 million after tax).
Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment was $111.0 million for the second quarter of 2020, compared with $114.0 million for the same period in 2019. As of June 30, 2020, the company was servicing $476.5 billion in government-owned, Federal Family Education Loan (FFEL) Program, private education, and consumer loans, compared with $469.2 billion of loans serviced by the company as of June 30, 2019.
Net income for the Loan Servicing and Systems segment was $11.1 million for the three months ended June 30, 2020, compared with $17.0 million for the same period in 2019. The decrease in net income in 2020 was due to a decrease in revenue as a result of provisions implemented by the company's servicing customers, including the Department of Education (Department), to provide borrowers relief as a result of the COVID-19 pandemic and additional costs incurred to meet increased service and security standards under the company's servicing contracts with the Department.
Education Technology, Services, and Payment Processing
For the second quarter of 2020, revenue from the Education Technology, Services, and Payment Processing operating segment was $59.3 million, compared to $60.3 million for the same period in 2019. As a result of COVID-19, demand for certain of this segment's products and services were negatively impacted.
Net income for the Education Technology, Services, and Payment Processing segment was $8.9 million for the three months ended June 30, 2020, compared with $8.4 million for the same period in 2019.
The company is uncertain how the pandemic will affect higher education and K-12 enrollment in upcoming terms. A decrease in enrollment could continue to reduce the demand for certain of the company's products and services and decrease this segment's revenue and net income in future periods.
Communications
Revenue from ALLO was $19.0 million for the second quarter of 2020, compared with $15.8 million for the same period in 2019. The number of households served as of June 30, 2020, was 53,067, an increase of 10,307, or 24 percent, from the number of households served as of June 30, 2019. Since March 2020, ALLO has experienced increased demand from new and existing residential customers to support connectivity needs for working and learning from home as a result of the COVID-19 pandemic.
For the second quarter of 2020, ALLO recognized a net loss of $5.4 million, compared with a net loss of $4.9 million for the same period in 2019. The company anticipates this operating segment will be dilutive to consolidated earnings as it continues to build and add customers to its network in Lincoln, Nebraska and other communities, due to large upfront capital expenditures and associated depreciation and upfront customer acquisition costs.
ALLO's management uses earnings before interest, income taxes, depreciation, and amortization (EBITDA)(3) to eliminate certain non-cash and non-operating items in order to consistently measure performance from period to period. For the second quarter of 2020, ALLO reported EBITDA of $3.8 million, compared with $1.2 million for the same period in 2019.
Investment in Hudl
In May 2020, the company made an additional equity investment in Hudl of approximately $26 million as part of a larger equity raise by Hudl. As a result of the equity raise, the company recognized a $51.0 million (pre-tax) gain during the three months ended June 30, 2020 to adjust the carrying value of its previous Hudl investments to reflect the overall transaction value.
Liquidity and Capital Activities
As of June 30, 2020, the company had $67.5 million in cash and cash equivalents and $142.2 million in available-for-sale investments, consisting primarily of student loan asset-backed securities, $86.7 million of which were subject to a participation accounted for as a secured borrowing. The company also has a $455.0 million unsecured line of credit. As of June 30, 2020, $30.0 million was outstanding on the line of credit and $425.0 million was available for future use.
The company has a stock repurchase program to purchase up to a total of five million shares of the company's Class A common stock during the three-year period ending May 7, 2022. During the three months ended June 30, 2020, the company repurchased 1,473,049 shares of stock for $67.3 million ($45.67 per share). As of June 30, 2020, 3.3 million shares remained authorized for repurchase under the company's stock repurchase program.
The company paid cash dividends of $7.7 million, or $0.20 per share, during the second quarter of 2020.
The company intends to use its strong liquidity position to invest in market opportunities, including: federally insured, private education, and consumer loan acquisitions; strategic acquisitions and investments, including anticipated capital commitments to Nelnet Bank; expansion of ALLO's communications network; and capital management initiatives, including stock repurchases, debt repurchases, and dividend distributions. The timing and size of these opportunities will vary and will have a direct impact on the company's cash and investment balances.
Board of Directors Declares Third Quarter Dividend
The Nelnet Board of Directors declared a third quarter cash dividend on the company's outstanding shares of Class A common stock and Class B common stock of $0.20 per share. The dividend will be paid on September 15, 2020 to shareholders of record at the close of business on September 1, 2020.
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements within the meaning of federal securities laws. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "future," "intend," "may," "plan," "potential," "predict," "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 and uncertainties related to the severity, magnitude, and duration of the COVID-19 pandemic, including changes in the macroeconomic environment and consumer behavior, restrictions on business, educational, individual, or travel activities intended to slow the spread of the pandemic, and volatility in market conditions resulting from the pandemic; risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the company under existing and any future servicing contracts with the Department, which current contracts accounted for 30 percent of the company's revenue in 2019; risks to the company related to the Department's initiatives to procure new contracts for federal student loan servicing and awards of contracts to other parties, including the pending and uncertain nature of the Department's procurement process, the uncertain timing and nature of the outcome of the company's protest of the reported decision by the Department as to the company's proposal for the business processing outsourcing component of the Department's procurement, the possibility that awards or other evaluations of proposals may be challenged by various interested parties and may not be finalized or implemented within the currently anticipated time frame or at all, risks that the company may not be successful in obtaining any of such potential new contracts, and risks related to the company's ability to comply with agreements with third-party customers for the servicing of loans; risks related to the company's loan portfolio, such as interest rate basis and repricing risk and changes in levels of loan repayment or default rates; the use of derivatives to manage exposure to interest rate fluctuations; the uncertain nature of expected benefits from FFEL Program, private education, and consumer loan purchases and initiatives to purchase additional FFEL Program, private education, and consumer loans; financing and liquidity risks, including risks of changes in the securitization and other financing markets for loans; risks and uncertainties from changes in terms of education loans and in the educational credit and services marketplace resulting from changes in applicable laws, regulations, and government programs and budgets, such as changes resulting from the Coronavirus Aid, Relief, and Economic Security Act and the expected decline over time in FFEL Program loan interest income and fee-based revenues due to the discontinuation of new FFEL Program loan originations in 2010 and the resulting initiatives by the company to adjust to a post-FFEL Program environment; risks and uncertainties related to the ability of ALLO to successfully expand its fiber network and market share in existing service areas and additional communities and manage related construction risks; risks that the conditions to the reported approval of federal deposit insurance and an industrial bank charter for Nelnet Bank may not be satisfied within a reasonable timeframe or at all, thus delaying or preventing Nelnet Bank from commencing operations, and the uncertain nature of the expected benefits from obtaining an industrial bank charter, including the ability to successfully launch banking operations and achieve expected market penetration; risks and uncertainties related to other initiatives to pursue additional strategic investments, 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 from changes in economic conditions and consumer behavior; cybersecurity risks, including potential disruptions to systems, disclosure of confidential information, and/or damage to reputation resulting from cyber-breaches; and changes in the general interest rate environment, including the availability of any relevant money-market index rate such as LIBOR or the relationship between the relevant money-market index rate and the rate at which the company's assets and liabilities are priced.
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, including the cautionary information about forward-looking statements contained in the company's supplemental financial information for the second quarter ended June 30, 2020. 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 securities laws.
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.
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.
2 Core loan
spread 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.
3 EBITDA 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.
Consolidated Statements of Operations
(Dollars in thousands, except share data)
(unaudited)
Three months ended Six months ended
June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
Interest income:
Loan interest $
146,140 181,793 238,222 327,933 480,555
Investment interest 5,743 7,398 8,566 13,141 16,819
Total interest income 151,883 189,191 246,788 341,074 497,374
Interest expense:
Interest on bonds and notes
payable 85,248 134,118 186,963 219,366 378,733
Net interest income 66,635 55,073 59,825 121,708 118,641
Less provision for loan losses 2,999 76,299 9,000 79,297 16,000
Net interest income after
provision for loan losses 63,636 (21,226) 50,825 42,411 102,641
Other income/expense:
Loan servicing and systems
revenue 111,042 112,735 113,985 223,778 228,883
Education technology, services,
and payment
processing revenue 59,304 83,675 60,342 142,979 139,502
Communications revenue 18,998 18,181 15,758 37,179 30,300
Gain on sale of loans - 18,206 1,712 18,206 1,712
Other income 60,127 8,281 14,440 68,408 23,507
Impairment expense (332) (34,087) (34,419)
Derivative market value
adjustments and
derivative settlements, net 1,910 (16,365) (24,088) (14,455) (35,628)
Total other income/expense 251,049 190,626 182,149 441,676 388,276
Cost of services:
Cost to provide education
technology, services,
and payment processing
services 15,376 22,806 15,871 38,181 36,930
Cost to provide communications
services 5,743 5,582 5,101 11,325 9,860
Total cost of services 21,119 28,388 20,972 49,506 46,790
Operating expenses:
Salaries and benefits 119,247 119,878 111,214 239,125 222,272
Depreciation and amortization 29,393 27,648 24,484 57,041 48,697
Other expenses 37,052 43,384 45,417 80,439 89,233
Total operating expenses 185,692 190,910 181,115 376,605 360,202
Income (loss) before income
taxes 107,874 (49,898) 30,887 57,976 83,925
Income tax (expense) benefit (21,264) 10,133 (6,209) (11,131) (17,600)
Net income (loss) 86,610 (39,765) 24,678 46,845 66,325
Net income attributable to
noncontrolling
interests (128) (767) (59) (895) (115)
Net income (loss) attributable
to Nelnet, Inc. $
86,482 (40,532) 24,619 45,950 66,210
Earnings per common share:
Net income (loss) attributable
to Nelnet, Inc.
shareholders -basic and
diluted $
2.21 (1.01) 0.61 1.16 1.65
Weighted average common shares
outstanding -
basic
and diluted 39,203,404 39,955,514 40,050,065 39,579,459 40,210,787
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
As of As of As of
June 30, 2020 December 31, 2019 June 30, 2019
Assets:
Loans and accrued
interest receivable,
net $
20,460,873 21,402,868 22,179,604
Cash, cash equivalents,
and investments 517,240 381,005 306,501
Restricted cash 853,775 1,088,695 969,597
Goodwill and intangible
assets, net 223,645 238,444 254,389
Other assets 555,675 597,958 509,709
Total assets $
22,611,208 23,708,970 24,219,800
Liabilities:
Bonds and notes payable $
19,726,158 20,529,054 21,294,192
Other liabilities 544,264 788,822 598,990
Total liabilities 20,270,422 21,317,876 21,893,182
Equity:
Total Nelnet, Inc.
shareholders' equity 2,336,796 2,386,712 2,322,326
Noncontrolling interests 3,990 4,382 4,292
Total equity 2,340,786 2,391,094 2,326,618
Total liabilities and
equity $
22,611,208 23,708,970 24,219,800
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
Three months ended June 30,
2020 2019
GAAP net
income
attributable
to
Nelnet,
Inc. $
86,482 24,619
Realized
and
unrealized
derivative
market
value
adjustments
(a) 3,911 37,060
Tax
effect
(b) (939) (8,894)
Net
income
attributable
to
Nelnet,
Inc.,
excluding
derivative
market
value
adjustments $
89,454 52,785
Earnings per share:
GAAP net
income
attributable
to
Nelnet,
Inc. $
2.21 0.61
Realized
and
unrealized
derivative
market
value
adjustments
(a) 0.10 0.93
Tax
effect
(b) (0.03) (0.22)
Net
income
attributable
to
Nelnet,
Inc.,
excluding
derivative
market
value
adjustments $
2.28 1.32
(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 that 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.
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. 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.
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, primarily 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.
(b) The tax effects are calculated by
multiplying the realized and unrealized
derivative market value adjustments by the
applicable statutory income tax rate.
Core loan spread
The following table analyzes the loan spread on the company's portfolio of loans, which represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets. The spread amounts included in the following table are calculated by using the notional dollar values found in the "Net interest income, net of settlements on derivatives" table on the following page, divided by the average balance of loans or debt outstanding.
Three months ended June 30,
2020 2019
Variable loan 3.09
% 5.00
yield, gross %
Consolidation
rebate fees (0.84) (0.84)
Discount accretion,
net of premium and
deferred
origination costs
amortization 0.02 0.02
Variable loan
yield, net 2.27 4.18
Loan cost of funds
-interest expense (1.67) (3.42)
Loan cost of funds
-derivative
settlements (a)
(b) 0.14 0.02
Variable loan
spread 0.74 0.78
Fixed rate floor
income, gross 0.63 0.20
Fixed rate floor
income -
derivative
settlements (a)
(c) (0.02) 0.23
Fixed rate floor
income, net of
settlements on
derivatives 0.61 0.43
Core loan spread 1.35
% 1.21
%
Average balance of
loans $
20,242,054 21,837,774
Average balance of
debt outstanding 20,217,401 21,536,878
(a) Derivative settlements 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. Derivative
accounting requires that net
settlements with respect to
derivatives that do not qualify
for "hedge treatment" under GAAP
be recorded in a separate income
statement line item below net
interest income. The company
maintains an overall risk
management strategy that
incorporates the use of derivative
instruments to reduce the economic
effect of interest rate
volatility. As such, management
believes derivative settlements
for each applicable period should
be evaluated with the company's
net interest income (loan spread)
as presented in this table.
A reconciliation of core loan
spread, which includes the impact
of derivative settlements on loan
spread, to loan spread without
derivative settlements follows.
Three months ended June 30,
2020 2019
Core loan spread 1.35 1.21
% %
Derivative settlements (1:3
basis swaps) (0.14) (0.02)
Derivative settlements (fixed
rate floor income) 0.02 (0.23)
Loan spread 1.23 0.96
% %
(b) Derivative settlements include
the net settlements received
related to the company's 1:3
basis swaps.
(c) Derivative settlements include
the net settlements received
(paid) related to the
company's floor income
interest rate swaps.
Net interest income, net of settlements on derivatives
The following table summarizes the components of "net interest income" and "derivative settlements, net" from the company's Asset Generation and Management segment statements of income.
Three months ended June 30,
2020 2019
Variable
interest
income, gross $
155,646 271,983
Consolidation
rebate fees (42,387) (45,647)
Discount
accretion,
net of
premium and
deferred
origination
costs
amortization 1,015 1,046
Variable
interest
income, net 114,274 227,382
Interest on
bonds and
notes payable (84,141) (183,072)
Derivative
settlements
(basis
swaps), net
(a) 7,129 807
Variable loan
interest
margin, net
of
settlements
on
derivatives
(a) 37,262 45,117
Fixed rate
floor income,
gross 31,866 10,840
Derivative
settlements
(interest
rate swaps),
net (a) (1,308) 12,165
Fixed rate
floor income,
net of
settlements
on
derivatives
(a) 30,558 23,005
Core loan
interest
income (a) 67,820 68,122
Investment
interest 4,443 5,073
Intercompany
interest (348) (963)
Net interest
income (net
of
settlements
on
derivatives)
(a) $
71,915 72,232
(a) Derivative settlements 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. Derivative
accounting requires that net
settlements on derivatives that do
not qualify for "hedge treatment"
under GAAP be recorded in a
separate income statement line
item below net interest income.
The company maintains an overall
risk management strategy that
incorporates the use of derivative
instruments to reduce the economic
effect of interest rate
volatility. As such, management
believes derivative settlements
for each applicable period should
be evaluated with the company's
net interest income as presented
in this table. Core loan interest
income and net interest income
(net of settlements on
derivatives) are non-GAAP
financial measures.
A reconciliation of net interest
income (net of settlements on
derivatives) to net interest
income for the company's Asset
Generation and Management segment
follows.
Three months ended June 30,
2020 2019
Net interest income
(net of settlements
on derivatives) $
71,915 72,232
Derivative
settlements (1:3
basis swaps) (7,129) (807)
Derivative
settlements (fixed
rate floor income) 1,308 (12,165)
Net interest income $
66,094 59,260
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
A reconciliation of ALLO's GAAP net loss to earnings before net interest expense, income taxes, depreciation, and amortization (EBITDA), is provided below.
Three months ended June 30,
2020 2019
Net loss $
(5,363) (4,932)
Net interest
income (1)
Income tax
benefit (1,694) (1,558)
Depreciation
and
amortization 10,824 7,737
Earnings before
interest,
income taxes
depreciation,
and
amortization
(EBITDA) $
3,767 1,246
EBITDA is a supplemental non-GAAP performance measure that is frequently used in capital-intensive industries such as telecommunications. ALLO's management uses EBITDA to compare ALLO's performance to that of its competitors and to eliminate certain non-cash and non-operating items in order to consistently measure performance from period to period. EBITDA excludes interest and income taxes because these items are associated with a company's particular capitalization and tax structures. EBITDA also excludes depreciation and amortization expense because these non-cash expenses primarily reflect the impact of historical capital investments, as opposed to the cash impacts of capital expenditures made in recent periods, which may be evaluated through cash flow measures. The company reports EBITDA for ALLO because the company believes that it provides useful additional information for investors regarding a key metric used by management to assess ALLO's performance. There are limitations to using EBITDA as a performance measure, including the difficulty associated with comparing companies that use similar performance measures whose calculations may differ from ALLO's calculations. In addition, EBITDA should not be considered a substitute for other measures of financial performance, such as net income or any other performance measures derived in accordance with GAAP.
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SOURCE Nelnet, Inc.
