NELNET INC [NNI] Filings

10-Q 1 nni-20220930.htm 10-Q nni-20220930

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 September 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 October 31, 2022, there were 26,437,070 and 10,673,659 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

September 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	32
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	62
	Item 4.	Controls and Procedures	66

PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	66
	Item 1A.	Risk Factors	66
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
	Item 6.	Exhibits	70

Signatures			71

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
	September 30, 2022		December 31, 2021
Assets:
Loans and accrued interest receivable (net of allowance for loan losses of $119,057 and $127,113, respectively)	$	15,876,251	18,335,197
Cash and cash equivalents:
Cash and cash equivalents - not held at a related party	30,800		30,128
Cash and cash equivalents - held at a related party	32,398		95,435
Total cash and cash equivalents	63,198		125,563
Investments and notes receivable	2,063,514		1,588,919
Restricted cash	799,212		741,981
Restricted cash - due to customers	180,919		326,645
Accounts receivable (net of allowance for doubtful accounts of $3,195 and $1,160, respectively)	121,945		163,315
Goodwill	172,033		142,092
Intangible assets, net	70,368		52,029
Property and equipment, net	127,094		119,413
Other assets	88,999		82,887

Total assets	$	19,563,533	21,678,041
Liabilities:
Bonds and notes payable	$	15,042,595	17,631,089
Accrued interest payable	21,796		4,566
Bank deposits	580,825		344,315
Other liabilities	445,606		379,231
Due to customers	306,352		366,002

Total liabilities	16,397,174		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 26,483,298 shares and 27,239,654 shares, respectively	265		272
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 10,673,659 shares and 10,676,642 shares, respectively	107		107
Additional paid-in capital	837		1,000
Retained earnings	3,208,044		2,940,523
Accumulated other comprehensive (loss) earnings, net	(28,639)		9,304
Total Nelnet, Inc. shareholders' equity	3,180,614		2,951,206
Noncontrolling interests	(14,255)		1,632
Total equity	3,166,359		2,952,838
Total liabilities and equity	$	19,563,533	21,678,041

Supplemental information - assets and liabilities of consolidated education lending variable interest entities:
Loans and accrued interest receivable	$	15,173,335	17,981,414
Restricted cash	712,435		674,073

Bonds and notes payable	(14,725,098)		(17,462,456)
Accrued interest payable and other liabilities	(96,004)		(36,276)

Net assets of consolidated education lending variable interest entities	$	1,064,668	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			Nine months ended
	September 30,			September 30,
	2022		2021	2022	2021
Interest income:
Loan interest	$	176,244	124,096	422,327	370,219
Investment interest	26,889		12,558	57,589	29,122
Total interest income	203,133		136,654	479,916	399,341
Interest expense on bonds and notes payable and bank deposits	126,625		50,176	248,347	127,939
Net interest income	76,508		86,478	231,569	271,402
Less provision (negative provision) for loan losses	9,665		5,827	18,640	(10,847)
Net interest income after provision for loan losses	66,843		80,651	212,929	282,249
Other income/expense:
Loan servicing and systems revenue	134,197		112,351	395,438	335,961
Education technology, services, and payment processing revenue	106,894		85,324	310,211	257,284

Solar construction revenue	9,358		—	9,358	—
Other	2,225		11,867	24,750	30,183
Gain on sale of loans	2,627		3,444	5,616	18,715

Impairment expense and provision for beneficial interests, net	121		(14,159)	(6,163)	(12,223)
Derivative market value adjustments and derivative settlements, net	63,262		1,351	251,210	28,868
Total other income/expense	318,684		200,178	990,420	658,788
Cost of services:
Cost to provide education technology, services, and payment processing services	42,676		31,335	109,073	80,063

Cost to provide solar construction services	5,968		—	5,968	—
Total cost of services	48,644		31,335	115,041	80,063
Operating expenses:
Salaries and benefits	147,198		128,592	438,010	363,351
Depreciation and amortization	18,772		15,710	53,978	56,129


Other expenses	43,858		38,324	120,297	107,611
Total operating expenses	209,828		182,626	612,285	527,091
Income before income taxes	127,055		66,868	476,023	333,883
Income tax expense	26,586		15,649	107,765	76,747
Net income	100,469		51,219	368,258	257,136
Net loss attributable to noncontrolling interests	4,329		1,919	8,315	3,467
Net income attributable to Nelnet, Inc.	$	104,798	53,138	376,573	260,603
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	2.80	1.38	9.99	6.74
Weighted average common shares outstanding - basic and diluted	37,380,493		38,595,721	37,708,425	38,646,892

See accompanying notes to consolidated financial statements.


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(unaudited)
	Three months ended September 30,					Nine months ended September 30,
	2022			2021		2022		2021
Net income		$	100,469		51,219		368,258		257,136
Other comprehensive income (loss):
Net changes related to foreign currency translation adjustments	$	18			(9)		19		(9)
Net changes related to available-for-sale debt securities:
Unrealized holding gains (losses) arising during period, net	4,790			4,524		(45,730)		11,770
Reclassification of gains recognized in net income, net of losses	(578)			(1,173)		(4,220)		(2,052)
Income tax effect	(1,011)	3,201		(804)	2,547	11,988	(37,962)	(2,332)	7,386
Other comprehensive income (loss)		3,219			2,538		(37,943)		7,377
Comprehensive income		103,688			53,757		330,315		264,513
Comprehensive loss attributable to noncontrolling interests		4,329			1,919		8,315		3,467
Comprehensive income attributable to Nelnet, Inc.		$	108,017		55,676		338,630		267,980

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 June 30, 2021	—	27,494,942	11,054,171	$	—	275	111	10,158	2,812,315	10,941	(5,182)	2,828,618
Issuance of noncontrolling interests	—	—	—	—		—	—	—	—	—	4,935	4,935
Net income (loss)	—	—	—	—		—	—	—	53,138	—	(1,919)	51,219
Other comprehensive income	—	—	—	—		—	—	—	—	2,538	—	2,538
Distribution to noncontrolling interests	—	—	—	—		—	—	—	—	—	(125)	(125)
Cash dividends on Class A and Class B common stock - $0.22 per share	—	—	—	—		—	—	—	(8,407)	—	—	(8,407)
Issuance of common stock, net of forfeitures	—	29,805	—	—		—	—	493	—	—	—	493
Compensation expense for stock based awards	—	—	—	—		—	—	2,770	—	—	—	2,770
Repurchase of common stock	—	(341,094)	—	—		(3)	—	(11,828)	(13,247)	—	—	(25,078)

Conversion of common stock	—	372,717	(372,717)	—		4	(4)	—	—	—	—	—




Balance as of September 30, 2021	—	27,556,370	10,681,454	$	—	276	107	1,593	2,843,799	13,479	(2,291)	2,856,963

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
Issuance of noncontrolling interests	—	—	—	—		—	—	—	—	—	14,018	14,018
Net income (loss)	—	—	—	—		—	—	—	104,798	—	(4,329)	100,469
Other comprehensive income	—	—	—	—		—	—	—	—	3,219	—	3,219
Distribution to noncontrolling interests	—	—	—	—		—	—	—	—	—	(17,707)	(17,707)
Cash dividends on Class A and Class B common stock - $0.24 per share	—	—	—	—		—	—	—	(8,925)	—	—	(8,925)
Issuance of common stock, net of forfeitures	—	38,192	—	—		1	—	476	—	—	—	477
Compensation expense for stock based awards	—	—	—	—		—	—	3,631	—	—	—	3,631
Repurchase of common stock	—	(169,860)	—	—		(2)	—	(4,450)	(9,841)	—	—	(14,293)
Conversion of common stock	—	1,233	(1,233)	—		—	—	—	—	—	—	—
Other	—	—	—	—		—	—	—	(5,675)	—	—	(5,675)




Balance as of September 30, 2022	—	26,483,298	10,673,659	$	—	265	107	837	3,208,044	(28,639)	(14,255)	3,166,359

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	—	—	—	—		—	—	—	—	—	11,823	11,823
Net income (loss)	—	—	—	—		—	—	—	260,603	—	(3,467)	257,136
Other comprehensive income	—	—	—	—		—	—	—	—	7,377	—	7,377
Distribution to noncontrolling interests	—	—	—	—		—	—	—	—	—	(6,954)	(6,954)
Cash dividends on Class A and Class B common stock - $0.66 per share	—	—	—	—		—	—	—	(25,319)	—	—	(25,319)
Issuance of common stock, net of forfeitures	—	261,760	—	—		3	—	4,406	—	—	—	4,409
Compensation expense for stock based awards	—	—	—	—		—	—	7,628	—	—	—	7,628
Repurchase of common stock	—	(372,661)	—	—		(4)	—	(14,235)	(13,247)	—	—	(27,486)

Conversion of common stock	—	474,117	(474,117)	—		5	(5)	—	—	—	—	—



Balance as of September 30, 2021	—	27,556,370	10,681,454	$	—	276	107	1,593	2,843,799	13,479	(2,291)

NELNET INC [NNI] Filings
10-Q	[2022-11-07]
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]