Nelnet Earnings 2019-06-30

NNI 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Document

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, 2019


☐			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, 2019, there were 28,403,007 and 11,279,641 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, 2019

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, 2019		December 31, 2018
Assets:
Loans receivable (net of allowance for loan losses of $62,591 and $60,388, respectively)	$	21,455,758	22,377,142
Cash and cash equivalents:
Cash and cash equivalents - not held at a related party	14,065		9,472
Cash and cash equivalents - held at a related party	70,335		111,875
Total cash and cash equivalents	84,400		121,347
Investments and notes receivable	221,936		249,370
Restricted cash	690,580		701,366
Restricted cash - due to customers	279,017		369,678
Accrued interest receivable	724,011		679,197
Accounts receivable (net of allowance for doubtful accounts of $4,054 and $3,271, respectively)	65,414		59,531
Goodwill	156,912		156,912
Intangible assets, net	97,477		114,290
Property and equipment, net	337,418		344,784
Other assets	106,647		45,533
Fair value of derivative instruments	230		1,818
Total assets	$	24,219,800	25,220,968
Liabilities:
Bonds and notes payable	$	21,294,192	22,218,740
Accrued interest payable	56,471		61,679
Other liabilities	263,502		256,092
Due to customers	279,017		369,678

Total liabilities	21,893,182		22,906,189
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 28,399,526 shares and 28,798,464 shares, respectively	284		288
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 11,279,641 shares and 11,459,641 shares, respectively	113		115
Additional paid-in capital	1,670		622
Retained earnings	2,317,115		2,299,556
Accumulated other comprehensive earnings	3,144		3,883
Total Nelnet, Inc. shareholders' equity	2,322,326		2,304,464
Noncontrolling interests	4,292		10,315
Total equity	2,326,618		2,314,779
Total liabilities and equity	$	24,219,800	25,220,968

Supplemental information - assets and liabilities of consolidated education and other lending variable interest entities:
Loans receivable	$	21,498,948	22,359,655
Restricted cash	657,953		677,611
Loan accrued interest receivable and other assets	724,227		679,735
Bonds and notes payable	(21,276,901)		(22,146,374)
Accrued interest payable and other liabilities	(202,371)		(163,327)

Net assets of consolidated education and other lending variable interest entities	$	1,401,856	1,407,300

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,
	2019		2018	2019	2018
Interest income:
Loan interest	$	238,222	223,371	480,555	421,094
Investment interest	8,566		5,818	16,819	10,952
Total interest income	246,788		229,189	497,374	432,046
Interest expense:
Interest on bonds and notes payable	186,963		171,450	378,733	306,999
Net interest income	59,825		57,739	118,641	125,047
Less provision for loan losses	9,000		3,500	16,000	7,500
Net interest income after provision for loan losses	50,825		54,239	102,641	117,547
Other income:
Loan servicing and systems revenue	113,985		114,545	228,883	214,687
Education technology, services, and payment processing revenue	60,342		48,742	139,502	108,963
Communications revenue	15,758		10,320	30,300	19,509
Other income	16,152		9,580	25,219	28,135

Derivative market value adjustments and derivative settlements, net	(24,088)		17,031	(35,628)	83,829
Total other income	182,149		200,218	388,276	455,123
Cost of services:
Cost to provide education technology, services, and payment processing services	15,871		11,317	36,930	25,000
Cost to provide communications services	5,101		3,865	9,860	7,583
Total cost of services	20,972		15,182	46,790	32,583
Operating expenses:
Salaries and benefits	111,214		111,118	222,272	207,760
Depreciation and amortization	24,484		21,494	48,697	39,951
Loan servicing fees to third parties	3,156		3,204	6,049	6,341
Other expenses	42,261		40,409	83,184	73,826
Total operating expenses	181,115		176,225	360,202	327,878
Income before income taxes	30,887		63,050	83,925	212,209
Income tax expense	6,209		13,511	17,600	49,487
Net income	24,678		49,539	66,325	162,722
Net (income) loss attributable to noncontrolling interests	(59)		(104)	(115)	637
Net income attributable to Nelnet, Inc.	$	24,619	49,435	66,210	163,359
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	0.61	1.21	1.65	3.99
Weighted average common shares outstanding - basic and diluted	40,050,065		40,886,617	40,210,787	40,918,396

See accompanying notes to consolidated financial statements.


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(unaudited)
	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018	2019	2018
Net income	$	24,678	49,539	66,325	162,722
Other comprehensive loss:
Available-for-sale securities:
Unrealized holding losses arising during period, net of gains	(537)		(413)	(972)	(1,474)
Reclassification adjustment for gains recognized in net income, net of losses	—		(5)	—	(52)
Income tax effect	129		100	233	356
Total other comprehensive loss	(408)		(318)	(739)	(1,170)
Comprehensive income	24,270		49,221	65,586	161,552
Comprehensive (income) loss attributable to noncontrolling interests	(59)		(104)	(115)	637
Comprehensive income attributable to Nelnet, Inc.	$	24,211	49,117	65,471	162,189

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, 2018	—	29,289,689		11,468,587		$	—	293	115	448	2,231,875	3,022	9,473	2,245,226
Issuance of noncontrolling interests	—	—		—		—		—	—	—	—	—	495	495
Net income	—	—		—		—		—	—	—	49,435	—	104	49,539
Other comprehensive loss	—	—		—		—		—	—	—	—	(318)	—	(318)
Distribution to noncontrolling interests	—	—		—		—		—	—	—	—	—	(238)	(238)
Cash dividend on Class A and Class B common stock - $0.16 per share	—	—		—		—		—	—	—	(6,508)	—	—	(6,508)
Issuance of common stock, net of forfeitures	—	134,933		—		—		1	—	1,910	—	—	—	1,911
Compensation expense for stock based awards	—	—		—		—		—	—	1,506	—	—	—	1,506
Repurchase of common stock	—	(93,620)		—		—		(1)	—	(1,278)	(3,631)	—	—	(4,910)



Balance as of June 30, 2018	—	29,331,002		11,468,587		$	—	293	115	2,586	2,271,171	2,704	9,834	2,286,703
Balance as of March 31, 2019	—	28,628,528		11,459,641		$	—	286	115	636	2,321,407	3,552	4,298	2,330,294
Issuance of noncontrolling interests	—	—		—		—		—	—	—	—	—	26	26
Net income	—	—		—		—		—	—	—	24,619	—	59	24,678
Other comprehensive loss	—	—		—		—		—	—	—	—	(408)	—	(408)
Distribution to noncontrolling interests	—	—		—		—		—	—	—	—	—	(91)	(91)
Cash dividend on Class A and Class B common stock - $0.18 per share	—	—		—		—		—	—	—	(7,172)	—	—	(7,172)
Issuance of common stock, net of forfeitures	—	10,138		—		—		—	—	1,384	—	—	—	1,384
Compensation expense for stock based awards	—	—		—		—		—	—	1,590	—	—	—

10-Q	2019-06-30	Quarter: 2019-06-30
10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-08-08	Earnings, Exhibits
8-K	2019-06-17	Other Events
8-K	2019-05-23	Officers, Amend Bylaw, Shareholder Vote, Exhibits
8-K	2019-05-14	Enter Agreement, Exhibits
8-K	2019-05-08	Earnings, Exhibits
8-K	2019-05-08	Earnings, Exhibits
8-K	2019-02-27	Earnings, Exhibits
8-K	2018-11-08	Earnings, Officers, Exhibits
8-K	2018-09-25	Regulation FD, Other Events, Exhibits
8-K	2018-08-07	Earnings, Exhibits
8-K	2018-06-28	Enter Agreement, Off-BS Arrangement, Regulation FD, Other Events, Exhibits
8-K	2018-05-24	Amend Bylaw, Shareholder Vote, Exhibits
8-K	2018-04-17	Other Events, Exhibits
8-K	2018-02-07	Regulation FD, Other Events, Exhibits

SYF	Synchrony Financial	21,941
CACC	Credit Acceptance	8,634
PPDF	Ppdai Group	6,062
DNB	DUN & Bradstreet	4,624
TREE	LendingTree	3,903
WRLD	World Acceptance	1,284
ONDK	On Deck Capital	255
ELVT	Elevate Credit	194
HJV	MS Structured Saturns Series 2002-14	0
COOP	Cooperative Bankshares	0

EX-3.2	compositethirdamendedand.htm
EX-10.1	exhibit101redactedamen.htm
EX-10.2	exhibit102redactedinte.htm
EX-10.7	ubthudlnnisubordinationa.htm
EX-31.1	nni-63019xex311.htm
EX-31.2	nni-63019xex312.htm
EX-32	nni-63019xex32.htm