NELNET INC [NNI] Filings

10-Q 1 nni-20210930.htm 10-Q nni-20210930

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, 2021


☐			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, 2021, there were 27,560,397 and 10,681,454 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, 2021


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	63
	Item 4.	Controls and Procedures	67

PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	67
	Item 1A.	Risk Factors	67
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
	Item 6.	Exhibits	69

Signatures			70

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, 2021		December 31, 2020
Assets:
Loans and accrued interest receivable (net of allowance for loan losses of $138,044 and $175,698, respectively)	$	19,304,203	20,185,656
Cash and cash equivalents:
Cash and cash equivalents - not held at a related party	31,966		33,292
Cash and cash equivalents - held at a related party	159,970		87,957
Total cash and cash equivalents	191,936		121,249
Investments	1,374,913		992,940
Restricted cash	764,089		553,175
Restricted cash - due to customers	295,053		283,971
Accounts receivable (net of allowance for doubtful accounts of $1,458 and $1,824, respectively)	78,508		76,460
Goodwill	142,092		142,092
Intangible assets, net	55,176		75,070
Property and equipment, net	117,296		123,527
Other assets	79,473		92,020

Total assets	$	22,402,739	22,646,160
Liabilities:
Bonds and notes payable	$	18,610,748	19,320,726
Accrued interest payable	4,441		28,701
Bank deposits	200,651		54,633
Other liabilities	375,393		312,280
Due to customers	354,543		301,471

Total liabilities	19,545,776		20,017,811
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 27,556,370 shares and 27,193,154 shares, respectively	276		272
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 10,681,454 shares and 11,155,571 shares, respectively	107		112
Additional paid-in capital	1,593		3,794
Retained earnings	2,843,799		2,621,762
Accumulated other comprehensive earnings, net	13,479		6,102
Total Nelnet, Inc. shareholders' equity	2,859,254		2,632,042
Noncontrolling interests	(2,291)		(3,693)
Total equity	2,856,963		2,628,349
Total liabilities and equity	$	22,402,739	22,646,160

Supplemental information - assets and liabilities of consolidated education and other lending variable interest entities:
Loans and accrued interest receivable	$	19,032,669	20,132,996
Restricted cash	699,143		499,223

Bonds and notes payable	(18,465,230)		(19,355,375)
Accrued interest payable and other liabilities	(66,913)		(83,127)

Net assets of consolidated education and other lending variable interest entities	$	1,199,669	1,193,717

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,
	2021		2020	2021	2020
Interest income:
Loan interest	$	124,096	134,507	370,219	462,439
Investment interest	12,558		5,238	29,122	18,379
Total interest income	136,654		139,745	399,341	480,818
Interest expense:
Interest on bonds and notes payable and bank deposits	50,176		58,423	127,939	277,788
Net interest income	86,478		81,322	271,402	203,030
Less provision (negative provision) for loan losses	5,827		(5,821)	(10,847)	73,476
Net interest income after provision for loan losses	80,651		87,143	282,249	129,554
Other income/expense:
Loan servicing and systems revenue	112,351		113,794	335,961	337,571
Education technology, services, and payment processing revenue	85,324		74,121	257,284	217,100
Communications revenue	—		20,211	—	57,390
Other	11,867		1,502	30,183	69,910
Gain on sale of loans	3,444		14,817	18,715	33,023

Impairment expense and provision for beneficial interests, net	(14,159)		—	(12,223)	(34,419)
Derivative market value adjustments and derivative settlements, net	1,351		1,049	28,868	(13,406)
Total other income/expense	200,178		225,494	658,788	667,169
Cost of services:
Cost to provide education technology, services, and payment processing services	31,335		25,243	80,063	63,424
Cost to provide communications services	—		5,914	—	17,240
Total cost of services	31,335		31,157	80,063	80,664
Operating expenses:
Salaries and benefits	128,592		126,096	363,351	365,220
Depreciation and amortization	15,710		30,308	56,129	87,349


Other expenses	38,324		34,744	107,611	115,184
Total operating expenses	182,626		191,148	527,091	567,753
Income before income taxes	66,868		90,332	333,883	148,306
Income tax expense	15,649		19,156	76,747	30,286
Net income	51,219		71,176	257,136	118,020
Net loss (income) attributable to noncontrolling interests	1,919		327	3,467	(568)
Net income attributable to Nelnet, Inc.	$	53,138	71,503	260,603	117,452
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	1.38	1.86	6.74	2.99
Weighted average common shares outstanding - basic and diluted	38,595,721		38,538,476	38,646,892	39,229,932

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,
	2021			2020		2021		2020
Net income		$	51,219		71,176		257,136		118,020
Other comprehensive income:
Net changes related to foreign currency translation adjustments	$	(9)			—		(9)		—
Net changes related to available-for-sale debt securities:
Unrealized gains during period, net	4,524			1,893		11,770		2,114
Reclassification of gains to net income, net	(1,173)			(513)		(2,052)		(390)
Income tax effect	(804)	2,547		(329)	1,051	(2,332)	7,386	(412)	1,312
Other comprehensive income		2,538			1,051		7,377		1,312
Comprehensive income		53,757			72,227		264,513		119,332
Comprehensive loss (income) attributable to noncontrolling interests		1,919			327		3,467		(568)
Comprehensive income attributable to Nelnet, Inc.		$	55,676		72,554		267,980		118,764

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 earnings, net	Noncontrolling interests	Total equity
		Class A	Class B
Balance as of June 30, 2020	—	27,232,836	11,171,609	$	—	272	112	1,867	2,331,312	3,233	3,990	2,340,786
Issuance of noncontrolling interests	—	—	—	—		—	—	—	—	—	14	14
Net income (loss)	—	—	—	—		—	—	—	71,503	—	(327)	71,176
Other comprehensive income	—	—	—	—		—	—	—	—	1,051	—	1,051
Distribution to noncontrolling interests	—	—	—	—		—	—	—	—	—	(331)	(331)
Cash dividends on Class A and Class B common stock - $0.20 per share	—	—	—	—		—	—	—	(7,664)	—	—	(7,664)
Issuance of common stock, net of forfeitures	—	24,132	—	—		—	—	553	—	—	—	553
Compensation expense for stock based awards	—	—	—	—		—	—	1,864	—	—	—	1,864
Repurchase of common stock	—	(93,380)	—	—		—	—	(2,580)	(2,038)	—	—	(4,618)





Balance as of September 30, 2020	—	27,163,588	11,171,609	$	—	272	112	1,704	2,393,113	4,284	3,346	2,402,831

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

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 earnings, net	Noncontrolling interests	Total equity
		Class A	Class B
Balance as of December 31, 2019	—	28,458,495	11,271,609	$	—	285	113	5,715	2,377,627	2,972	4,382	2,391,094
Issuance of noncontrolling interests	—	—	—	—		—	—	—	—	—	66	66
Net income	—	—	—	—		—	—	—	117,452	—	568	118,020
Other comprehensive income	—	—	—	—		—	—	—	—	1,312	—	1,312
Distribution to noncontrolling interests	—	—	—	—		—	—	—	—	—	(920)	(920)
Cash dividends on Class A and Class B common stock - $0.60 per share	—	—	—	—		—	—	—	(23,343)	—	—	(23,343)
Issuance of common stock, net of forfeitures	—	196,407	—	—		2	—	5,153	—	—	—	5,155
Compensation expense for stock based awards	—	—	—	—		—	—	5,459	—	—	—	5,459
Repurchase of common stock	—	(1,591,314)	—	—		(16)	—	(14,623)	(58,506)	—	—	(73,145)
Impact of adoption of new accounting standard	—	—	—	—		—	—	—	(18,867)	—	—	(18,867)
Conversion of common stock	—	100,000	(100,000)	—		1	(1)	—	—	—	—	—
Acquisition of noncontrolling interest	—	—	—	—		—	—	—	(1,250)	—	(750)	(2,000)


Balance as of September 30, 2020	—	27,163,588	11,171,609	$	—	272	112	1,704	2,393,113	4,284	3,346	2,402,831

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	—	—

NELNET INC [NNI] Filings
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]