NELNET INC [NNI] Filings

10-Q 1 nni-20220630.htm 10-Q nni-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-31924

NELNET, INC.

(Exact name of registrant as specified in its charter)


Nebraska		84-0748903
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

121 South 13th Street, Suite 100
Lincoln,	Nebraska	68508
(Address of principal executive offices)		(Zip Code)

(402) 458-2370

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, Par Value $0.01 per Share	NNI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2022, there were 26,540,797 and 10,674,892 shares of Class A Common Stock and Class B Common Stock, par value $0.01 per share, outstanding, respectively (excluding a total of 11,305,731 shares of Class A Common Stock held by wholly owned subsidiaries).

NELNET, INC.

FORM 10-Q

INDEX

June 30, 2022


PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements	2
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60
	Item 4.	Controls and Procedures	65

PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	65
	Item 1A.	Risk Factors	65
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
	Item 6.	Exhibits	67

Signatures			69

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(unaudited)
	As of		As of
	June 30, 2022		December 31, 2021
Assets:
Loans and accrued interest receivable (net of allowance for loan losses of $120,424 and $127,113, respectively)	$	16,916,344	18,335,197
Cash and cash equivalents:
Cash and cash equivalents - not held at a related party	32,849		30,128
Cash and cash equivalents - held at a related party	95,650		95,435
Total cash and cash equivalents	128,499		125,563
Investments and notes receivable	1,988,450		1,588,919
Restricted cash	754,693		741,981
Restricted cash - due to customers	290,850		326,645
Accounts receivable (net of allowance for doubtful accounts of $1,342 and $1,160, respectively)	119,774		163,315
Goodwill	149,117		142,092
Intangible assets, net	70,086		52,029
Property and equipment, net	123,738		119,413
Other assets	82,462		82,887

Total assets	$	20,624,013	21,678,041
Liabilities:
Bonds and notes payable	$	16,115,269	17,631,089
Accrued interest payable	12,963		4,566
Bank deposits	588,474		344,315
Other liabilities	406,686		379,231
Due to customers	409,476		366,002

Total liabilities	17,532,868		18,725,203
Commitments and contingencies
Equity:
Nelnet, Inc. shareholders' equity:
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding	—		—
Common stock:
Class A, $0.01 par value. Authorized 600,000,000 shares; issued and outstanding 26,613,733 shares and 27,239,654 shares, respectively	266		272
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 10,674,892 shares and 10,676,642 shares, respectively	107		107
Additional paid-in capital	1,180		1,000
Retained earnings	3,127,687		2,940,523
Accumulated other comprehensive (loss) earnings, net	(31,858)		9,304
Total Nelnet, Inc. shareholders' equity	3,097,382		2,951,206
Noncontrolling interests	(6,237)		1,632
Total equity	3,091,145		2,952,838
Total liabilities and equity	$	20,624,013	21,678,041

Supplemental information - assets and liabilities of consolidated education lending variable interest entities:
Loans and accrued interest receivable	$	16,294,069	17,981,414
Restricted cash	678,871		674,073

Bonds and notes payable	(15,823,651)		(17,462,456)
Accrued interest payable and other liabilities	(60,461)		(36,276)

Net assets of consolidated education lending variable interest entities	$	1,088,828	1,156,755

See accompanying notes to consolidated financial statements.


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(unaudited)
	Three months ended			Six months ended
	June 30,			June 30,
	2022		2021	2022	2021
Interest income:
Loan interest	$	134,706	122,005	246,083	246,123
Investment interest	16,881		11,578	30,700	16,563
Total interest income	151,587		133,583	276,783	262,686
Interest expense on bonds and notes payable and bank deposits	73,642		49,991	121,721	77,764
Net interest income	77,945		83,592	155,062	184,922
Less provision (negative provision) for loan losses	9,409		374	8,974	(16,674)
Net interest income after provision for loan losses	68,536		83,218	146,088	201,596
Other income/expense:
Loan servicing and systems revenue	124,873		112,094	261,241	223,611
Education technology, services, and payment processing revenue	91,031		76,702	203,317	171,960

Other	12,647		22,921	22,524	18,317
Gain on sale of loans	—		15,271	2,989	15,271

Impairment expense and provision for beneficial interests, net	(6,284)		(500)	(6,284)	1,936
Derivative market value adjustments and derivative settlements, net	45,024		(6,989)	187,949	27,516
Total other income/expense	267,291		219,499	671,736	458,611
Cost to provide education technology, services, and payment processing services	30,852		21,676	66,397	48,728


Operating expenses:
Salaries and benefits	141,398		118,968	290,813	234,759
Depreciation and amortization	18,250		20,236	35,206	40,419


Other expenses	36,940		32,587	76,439	69,286
Total operating expenses	196,588		171,791	402,458	344,464
Income before income taxes	108,387		109,250	348,969	267,015
Income tax expense	25,483		26,237	81,180	61,098
Net income	82,904		83,013	267,789	205,917
Net loss attributable to noncontrolling interests	2,225		854	3,987	1,548
Net income attributable to Nelnet, Inc.	$	85,129	83,867	271,776	207,465
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	2.26	2.16	7.18	5.36
Weighted average common shares outstanding - basic and diluted	37,710,214		38,741,486	37,875,108	38,672,902

See accompanying notes to consolidated financial statements.


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(unaudited)
	Three months ended June 30,					Six months ended June 30,
	2022			2021		2022		2021
Net income		$	82,904		83,013		267,789		205,917
Other comprehensive (loss) income:
Net changes related to foreign currency translation adjustments	$	(8)			(1)		1		—
Net changes related to available-for-sale debt securities:
Unrealized holding (losses) gains arising during period, net	(33,822)			2,897		(50,520)		7,246
Reclassification of gains recognized in net income, net of losses	(849)			(371)		(3,642)		(879)
Income tax effect	8,321	(26,350)		(606)	1,920	12,999	(41,163)	(1,528)	4,839
Other comprehensive (loss) income		(26,358)			1,919		(41,162)		4,839
Comprehensive income		56,546			84,932		226,627		210,756
Comprehensive loss attributable to noncontrolling interests		2,225			854		3,987		1,548
Comprehensive income attributable to Nelnet, Inc.		$	58,771		85,786		230,614		212,304

See accompanying notes to consolidated financial statements.


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except share data)
(unaudited)
	Nelnet, Inc. Shareholders
	Preferred stock shares	Common stock shares		Preferred stock		Class A common stock	Class B common stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive (loss) earnings	Noncontrolling interests	Total equity
		Class A	Class B
Balance as of March 31, 2021	—	27,367,797	11,154,171	$	—	274	112	5,859	2,736,923	9,022	(3,089)	2,749,101
Issuance of noncontrolling interests	—	—	—	—		—	—	—	—	—	5,488	5,488
Net income (loss)	—	—	—	—		—	—	—	83,867	—	(854)	83,013
Other comprehensive income	—	—	—	—		—	—	—	—	1,919	—	1,919
Distribution to noncontrolling interests	—	—	—	—		—	—	—	—	—	(6,727)	(6,727)
Cash dividends on Class A and Class B common stock - $0.22 per share	—	—	—	—		—	—	—	(8,475)	—	—	(8,475)
Issuance of common stock, net of forfeitures	—	32,513	—	—		—	—	1,824	—	—	—	1,824
Compensation expense for stock based awards	—	—	—	—		—	—	2,874	—	—	—	2,874
Repurchase of common stock	—	(5,368)	—	—		—	—	(399)	—	—	—	(399)

Conversion of common stock	—	100,000	(100,000)	—		1	(1)	—	—	—	—	—



Balance as of June 30, 2021	—	27,494,942	11,054,171	$	—	275	111	10,158	2,812,315	10,941	(5,182)	2,828,618

Balance as of March 31, 2022	—	27,151,270	10,674,892	$	—	272	107	1,208	3,092,226	(5,500)	(3,250)	3,085,063
Issuance of noncontrolling interests	—	—	—	—		—	—	—	—	—	9,275	9,275
Net income (loss)	—	—	—	—		—	—	—	85,129	—	(2,225)	82,904
Other comprehensive loss	—	—	—	—		—	—	—	—	(26,358)	—	(26,358)
Distribution to noncontrolling interests	—	—	—	—		—	—	—	—	—	(10,037)	(10,037)
Cash dividends on Class A and Class B common stock - $0.24 per share	—	—	—	—		—	—	—	(8,973)	—	—	(8,973)
Issuance of common stock, net of forfeitures	—	20,720	—	—		—	—	2,116	—	—	—	2,116
Compensation expense for stock based awards	—	—	—	—		—	—	3,187	—	—	—	3,187
Repurchase of common stock	—	(558,257)	—	—		(6)	—	(5,331)	(40,695)	—	—	(46,032)





Balance as of June 30, 2022	—	26,613,733	10,674,892	$	—	266	107	1,180	3,127,687	(31,858)	(6,237)	3,091,145

See accompanying notes to consolidated financial statements.




NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except share data)
(unaudited)
	Nelnet, Inc. Shareholders
	Preferred stock shares	Common stock shares		Preferred stock		Class A common stock	Class B common stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive (loss) earnings	Noncontrolling interests	Total equity
		Class A	Class B
Balance as of December 31, 2020	—	27,193,154	11,155,571	$	—	272	112	3,794	2,621,762	6,102	(3,693)	2,628,349
Issuance of noncontrolling interests	—	—	—	—		—	—	—	—	—	6,888	6,888
Net income (loss)	—	—	—	—		—	—	—	207,465	—	(1,548)	205,917
Other comprehensive income	—	—	—	—		—	—	—	—	4,839	—	4,839
Distribution to noncontrolling interests	—	—	—	—		—	—	—	—	—	(6,829)	(6,829)
Cash dividends on Class A and Class B common stock - $0.44 per share	—	—	—	—		—	—	—	(16,912)	—	—	(16,912)
Issuance of common stock, net of forfeitures	—	231,955	—	—		2	—	3,913	—	—	—	3,915
Compensation expense for stock based awards	—	—	—	—		—	—	4,859	—	—	—	4,859
Repurchase of common stock	—	(31,567)	—	—		—	—	(2,408)	—	—	—	(2,408)

Conversion of common stock	—	101,400	(101,400)	—		1	(1)	—	—	—	—	—



Balance as of June 30, 2021	—	27,494,942	11,054,171	$	—	275	111	10,158	2,812,315	10,941	(5,182)	2,828,618

Balance as of December 31, 2021	—	27,239,654	10,676,642	$	—	272	107	1,000	2,940,523	9,304	1,632	2,952,838
Issuance of noncontrolling interests	—	—	—	—		—	—	—	—	—	11,279	11,279
Net income (loss)	—	—	—	—		—	—	—	271,776	—	(3,987)	267,789
Other comprehensive loss	—	—	—	—		—	—	—	—	(41,162)	—	(41,162)
Distribution to noncontrolling interests	—	—	—	—		—	—	—	—	—	(15,161)	(15,161)
Cash dividends on Class A and Class B common stock - $0.48 per share	—	—	—	—		—	—	—	(18,035)	—	—	(18,035)
Issuance of common stock, net of forfeitures	—	310,639	—	—		3	—	6,498	—	—	—	6,501
Compensation expense for stock based awards	—			—		—	—	6,027	—	—	—	6,027
Repurchase of common stock	—	(938,310)	—	—		(9)	—	(12,345)	(66,577)	—	—	(78,931)

Conversion of common stock	—	1,750	(1,750)	—		—	—	—	—	—	—	—

NELNET INC [NNI] Filings
10-Q	[2022-08-08]
10-Q	[2022-05-09]
10-K	[2022-02-28]
10-Q	[2021-11-08]
10-Q	[2021-08-05]
10-Q	[2021-05-10]
10-K	[2021-02-25]
10-Q	[2020-11-05]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-02-27]
10-Q	[2019-11-07]
10-Q	[2019-08-08]
10-Q	[2019-05-08]
10-K	[2019-02-27]
10-Q	[2018-11-08]
10-Q	[2018-08-07]
10-Q	[2018-05-08]
10-K	[2018-02-27]
10-Q	[2017-11-07]
10-Q	[2017-08-07]
10-Q	[2017-05-08]
10-K	[2017-02-27]
10-Q	[2016-11-09]
10-Q	[2016-08-04]
10-Q	[2016-05-05]
10-K	[2016-02-25]
10-Q	[2015-11-05]
10-Q	[2015-08-06]
10-Q	[2015-05-07]
10-K	[2015-02-27]
10-Q	[2014-11-06]
10-Q	[2014-08-07]
10-Q	[2014-05-08]
10-K	[2014-02-27]
10-Q	[2013-11-07]
10-Q	[2013-08-08]
10-Q	[2013-05-10]
10-K	[2013-02-28]
10-Q	[2012-11-09]
10-Q	[2012-08-09]
10-Q	[2012-05-10]
10-K	[2012-02-28]