Nelnet(NNI)

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Nelnet Campus Commerce to Host Virtual Summit, Showcasing Payment Innovation
Prnewswire· 2025-10-02 11:30
Accessibility StatementSkip Navigation LINCOLN, Neb., Oct. 2, 2025 /PRNewswire/ -- Nelnet Campus Commerce, a trusted leader in higher education payment technology, announced that it will host its annual Virtual Client Summit on Oct. 16, 2025. The free, full-day virtual event will bring together bursars, financial aid officers, IT leaders, and administrators from more than 1,000 client institutions to collaborate, share insights, and shape the future of campus payment technology. The summit features institut ...
Nelnet Campus Commerce Launches Notify to Streamline Campus Communication
Prnewswire· 2025-08-12 20:15
Core Insights - Nelnet Campus Commerce launched Notify, a communication platform aimed at enhancing outreach, relationships, and the billing and payment process for educational institutions [1][4] - Notify is designed to automate communication, ensuring messages are timely, accurate, and relevant, thereby reducing manual work for campus teams [2][3] - The platform addresses challenges faced by higher education institutions, allowing them to focus on building trust with students rather than logistical issues [3][4] Company Overview - Nelnet Campus Commerce serves nearly 1,000 colleges and universities and over 8 million students in the U.S., providing integrated payment solutions [5] - The company’s solutions are PCI Level 1 validated and compatible with major Enterprise Resource Planning (ERP) systems, facilitating various payment processes [5] - Nelnet Business Services, a division of Nelnet, Inc., offers payment technology and community management solutions for both higher education and K-12 institutions globally [6]
Nelnet(NNI) - 2025 Q2 - Quarterly Report
2025-08-06 20:20
```markdown [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%2E%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Nelnet's unaudited consolidated financial statements for Q2 2025, detailing balance sheets, income, equity, cash flows, and key notes [Consolidated Balance Sheets](index=3&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Consolidated Balance Sheet Highlights (Dollars in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------------------ | :------------ | :---------------- | :----- | :------- | | Total assets | $13,711,088 | $13,777,753 | $(66,665) | -0.48% | | Loans and accrued interest receivable (net) | $10,155,483 | $9,992,744 | $162,739 | 1.63% | | Total cash and cash equivalents | $225,753 | $194,518 | $31,235 | 16.06% | | Total investments and notes receivable | $2,104,939 | $2,200,696 | $(95,757) | -4.35% | | Total liabilities | $10,228,395 | $10,478,636 | $(250,241) | -2.39% | | Bonds and notes payable | $7,903,561 | $8,309,797 | $(406,236) | -4.89% | | Bank deposits | $1,382,042 | $1,186,131 | $195,911 | 16.52% | | Total equity | $3,482,693 | $3,299,117 | $183,576 | 5.56% | | Retained earnings | $3,576,192 | $3,340,540 | $235,652 | 7.05% | [Consolidated Statements of Income](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Consolidated Statements of Income Highlights (Dollars in thousands, except share data) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | YoY Change | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Total interest income | $212,289 | $242,866 | -12.59% | $420,117 | $511,667 | -17.89% | | Interest expense | $132,854 | $176,459 | -24.60% | $257,968 | $371,039 | -30.59% | | Net interest income | $79,435 | $66,407 | 19.62% | $162,149 | $140,628 | 15.30% | | Provision for loan losses | $17,930 | $3,611 | 396.55% | $33,267 | $14,440 | 130.38% | | Net interest income after provision for loan losses | $61,505 | $62,796 | -2.06% | $128,882 | $126,188 | 2.13% | | Total other income (expense), net | $461,177 | $266,270 | 73.20% | $776,955 | $577,179 | 34.60% | | Total expenses | $285,318 | $270,638 | 5.43% | $562,333 | $551,002 | 2.06% | | Income before income taxes | $237,364 | $58,428 | 306.25% | $343,504 | $152,365 | 125.45% | | Net income | $177,854 | $43,675 | 307.25% | $258,983 | $114,429 | 126.32% | | Net income attributable to Nelnet, Inc. | $181,459 | $45,091 | 302.43% | $264,018 | $118,498 | 122.82% | | Earnings per common share (basic and diluted) | $4.97 | $1.23 | 304.07% | $7.24 | $3.22 | 124.84% | - The significant increase in Net income and EPS for both the three and six months ended June 30, 2025, was primarily driven by a **$175.0 million gain on partial redemption of ALLO investment**[11](index=11&type=chunk)[30](index=30&type=chunk)[120](index=120&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Consolidated Statements of Comprehensive Income (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $177,854 | $43,675 | $258,983 | $114,429 | | Other comprehensive (loss) income | $(1,779) | $6,216 | $(3,678) | $17,859 | | Comprehensive income | $176,075 | $49,891 | $255,305 | $132,288 | | Comprehensive income attributable to Nelnet, Inc. | $179,680 | $51,307 | $260,340 | $136,357 | [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20SHAREHOLDERS%27%20EQUITY) Key Changes in Shareholders' Equity (Dollars in thousands) | Item | June 30, 2025 (Balance) | March 31, 2025 (Balance) | Change (QoQ) | June 30, 2024 (Balance) | March 31, 2024 (Balance) | Change (QoQ) | | :------------------------------------------------ | :---------------------- | :----------------------- | :----------- | :---------------------- | :----------------------- | :----------- | | Retained earnings | $3,576,192 | $3,412,939 | $163,253 | $3,295,301 | $3,304,197 | $(8,896) | | Accumulated other comprehensive (loss) earnings, net | $(2,208) | $(429) | $(1,779) | $(2,260) | $(8,476) | $6,216 | | Total Nelnet, Inc. shareholders' equity | $3,574,983 | $3,363,009 | $211,974 | $3,220,022 | $3,235,720 | $(15,698) | | Noncontrolling interests | $(92,290) | $(56,514) | $(35,776) | $(74,039) | $(61,470) | $(12,569) | | Total equity | $3,482,693 | $3,363,009 | $119,684 | $3,220,022 | $3,235,720 | $(15,698) | [Consolidated Statements of Cash Flows](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Consolidated Statements of Cash Flows Highlights (Dollars in thousands) | Item | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :------------------------------------------------ | :----------------------------- | :----------------------------- | :--------- | | Net cash provided by operating activities | $172,929 | $345,319 | -49.93% | | Net cash provided by investing activities | $709,828 | $1,823,622 | -61.08% | | Net cash used in financing activities | $(1,012,339) | $(2,250,942) | -55.03% | | Net decrease in cash, cash equivalents, and restricted cash | $(129,244) | $(82,088) | 57.45% | | Cash, cash equivalents, and restricted cash, end of period | $801,776 | $943,403 | -14.99% | - The decrease in net cash provided by operating activities was due to adjustments to net income for non-cash items, including the gain on partial redemption of ALLO investment, deferred income tax benefit, loan discount, and investment gains/losses, partially offset by an increase in net income and changes in derivative market value adjustments and provision for loan losses[177](index=177&type=chunk)[178](index=178&type=chunk) - Investing activities for the six months ended June 30, 2025, included **$410.9 million cash proceeds from the partial redemption of the ALLO investment**[176](index=176&type=chunk)[177](index=177&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [1. Basis of Financial Reporting](index=10&type=section&id=1.%20Basis%20of%20Financial%20Reporting) - The unaudited consolidated financial statements for Nelnet, Inc. and subsidiaries as of June 30, 2025, and for the three and six months ended June 30, 2025 and 2024, are prepared on the same basis as the audited 2024 Annual Report and include all normal recurring adjustments necessary for fair presentation. Management's estimates and assumptions are used, and actual results may differ[27](index=27&type=chunk) [2. Partial Redemption of ALLO Investment](index=10&type=section&id=2.%20Partial%20Redemption%20of%20ALLO%20Investment) - In June 2025, Nelnet received **$410.9 million cash proceeds** from ALLO for the redemption of all its preferred membership interests and a portion of its voting membership interest, recognizing a pre-tax gain of **$175.0 million**[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - Following the transaction, Nelnet's voting membership interest in ALLO decreased from **45% to 27%**, and it no longer holds preferred interests. The remaining voting interest is accounted for under the HLBV method with a carrying value of **$0**[31](index=31&type=chunk) - The contingent obligation to SDC related to future disposals of ALLO voting interests was reduced by **$4.9 million**, with a maximum remaining obligation of **$9 million** (down from **$35 million**)[32](index=32&type=chunk) [3. Loans and Accrued Interest Receivable and Allowance for Loan Losses](index=11&type=section&id=3.%20Loans%20and%20Accrued%20Interest%20Receivable%20and%20Allowance%20for%20Loan%20Losses) Loans and Accrued Interest Receivable (Dollars in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Non-Nelnet Bank loans | $8,935,169 | $8,955,868 | $(20,699) | | Nelnet Bank loans | $827,641 | $644,597 | $183,044 | | Accrued interest receivable | $560,927 | $549,283 | $11,644 | | Allowance for loan losses | $(125,349) | $(114,890) | $(10,459) | | **Total (net)** | **$10,155,483** | **$9,992,744** | **$162,739** | Allowance for Loan Losses as % of Ending Loan Balance | Portfolio | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Non-Nelnet Bank: Federally insured loans | 0.57% | 0.59% | | Non-Nelnet Bank: Private education loans | 4.73% | 5.02% | | Non-Nelnet Bank: Consumer and other loans | 11.67% | 11.13% | | Nelnet Bank: Federally insured loans | 0.33% | — | | Nelnet Bank: Private education loans | 2.39% | 2.09% | | Nelnet Bank: Consumer and other loans | 4.68% | 3.77% | Annualized Net Charge-offs as % of Average Loans | Portfolio | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Non-Nelnet Bank: Federally insured loans | 0.16% | 0.22% | 0.14% | 0.19% | | Non-Nelnet Bank: Private education loans | 0.55% | 2.64% | 1.02% | 1.85% | | Non-Nelnet Bank: Consumer and other loans | 7.62% | 4.62% | 6.58% | 4.98% | | Nelnet Bank: Federally insured loans | 0.06% | — | 0.06% | — | | Nelnet Bank: Private education loans | 1.10% | 0.40% | 1.08% | 0.44% | | Nelnet Bank: Consumer and other loans | 1.71% | 7.44% | 1.49% | 7.66% | - Nelnet Bank's consumer and other loans saw a decrease in annualized net charge-offs due to a change in portfolio mix towards higher credit quality and exiting a high charge-off consumer loan program in December 2024[36](index=36&type=chunk) - In March 2025, the Company acquired ownership interests in certain trusts, consolidating **$646.9 million** of federally insured Stafford and consolidation loans and **$721.3 million** of bonds and notes payable[34](index=34&type=chunk) [4. Bonds and Notes Payable](index=19&type=section&id=4.%20Bonds%20and%20Notes%20Payable) Bonds and Notes Payable (Dollars in thousands) | Type | June 30, 2025 (Carrying amount) | December 31, 2024 (Carrying amount) | Change | | :------------------------------------------------ | :------------------------------ | :-------------------------------- | :----- | | Variable-rate bonds (FFELP securitizations) | $6,933,724 | $6,960,219 | $(26,495) | | Fixed-rate bonds (FFELP securitizations) | $324,392 | $346,359 | $(21,967) | | FFELP loan warehouse facilities | $553,313 | $853,165 | $(299,852) | | Consumer loan warehouse facilities | $68,026 | $90,000 | $(21,974) | | Private education loan asset-backed securitizations | $79,945 | $105,388 | $(25,443) | | Participation agreements | $2,051 | $3,320 | $(1,269) | | Discount on bonds and notes payable and debt issuance costs | $(57,890) | $(48,654) | $(9,236) | | **Total** | **$7,903,561** | **$8,309,797** | **$(406,236)** | - The Company has a **$495.0 million** unsecured line of credit, with no outstanding amount as of June 30, 2025, and the full amount available for future use[51](index=51&type=chunk) Debt Repurchases (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Purchase price | $(141,998) | $(4,199) | $(142,869) | $(4,199) | | Par value | $142,396 | $4,190 | $143,320 | $4,190 | | Gain (loss), net | $388 | $(9) | $439 | $(9) | - As of June 30, 2025, the Company holds **$238.8 million** (par value) of its own FFELP asset-backed securities, which are eliminated in consolidation but remain legally outstanding[53](index=53&type=chunk) [5. Derivative Financial Instruments](index=21&type=section&id=5.%20Derivative%20Financial%20Instruments) - Nelnet uses settled-to-market derivative financial instruments, including basis swaps and interest rate swaps, to manage interest rate risk. As of June 30, 2025, outstanding basis swaps totaled **$1.4 billion notional amount**, and interest rate swaps for floor income hedges totaled **$400 million notional amount**[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - Nelnet Bank uses non-centrally cleared derivative instruments as cash flow hedges for variable rate intercompany and third-party deposits. As of June 30, 2025, intercompany deposit hedges totaled **$195 million notional amount**, and third-party deposit hedges totaled **$50 million notional amount**[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) Derivative Market Value Adjustments and Settlements (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total settlements - income | $744 | $1,649 | $1,489 | $3,406 | | Total change in fair value - (expense) income | $(3,866) | $1,533 | $(10,190) | $9,497 | | **Derivative market value adjustments and derivative settlements, net - (expense) income** | **$(3,122)** | **$3,182** | **$(8,701)** | **$12,903** | [6. Investments and Notes Receivable](index=24&type=section&id=6.%20Investments%20and%20Notes%20Receivable) Total Investments and Notes Receivable (Dollars in thousands) | Category | June 30, 2025 (Fair value) | December 31, 2024 (Fair value) | Change | | :------------------------------------------------ | :--------------------------- | :----------------------------- | :----- | | Investments at fair value | $1,286,729 | $1,160,320 | $126,409 | | Other investments and notes receivable (not measured at fair value) | $818,210 | $1,040,376 | $(222,166) | | **Total** | **$2,104,939** | **$2,200,696** | **$(95,757)** | - The Company's investment in ALLO is now **$0** after the partial redemption in June 2025, which previously included **$225.6 million** in preferred membership interests and accrued return as of December 31, 2024[71](index=71&type=chunk)[73](index=73&type=chunk) - Solar investments, accounted for using the HLBV method, resulted in net losses of **$(1,502) thousand** and **$(1,046) thousand** for the three and six months ended June 30, 2025, respectively, excluding noncontrolling interests[72](index=72&type=chunk) - As of June 30, 2025, the gross unrealized loss on available-for-sale debt securities was **$22.7 million**, with **$534.6 million** in fair value of securities having unrealized losses. The Company intends and has the ability to retain these investments, and no credit losses were identified[76](index=76&type=chunk)[246](index=246&type=chunk) [7. Intangible Assets](index=28&type=section&id=7.%20Intangible%20Assets) Amortizable Intangible Assets, Net (Dollars in thousands) | Category | June 30, 2025 | December 31, 2024 | Remaining Useful Life (months) | | :------------------------------------------------ | :------------ | :---------------- | :----------------------------- | | Customer relationships | $32,121 | $34,960 | 92 | | Trade name | $526 | $565 | 82 | | Computer software | $631 | $803 | 22 | | **Total amortizable intangible assets, net** | **$33,278** | **$36,328** | **90** | - Amortization expense for intangible assets was **$1.5 million** and **$3.1 million** for the three and six months ended June 30, 2025, respectively[78](index=78&type=chunk) [8. Goodwill](index=28&type=section&id=8.%20Goodwill) Goodwill by Reportable Operating Segment (Dollars in thousands) | Segment | Total Goodwill | | :-------------------------------- | :------------- | | Education Loan Servicing and Systems | $23,639 | | Education Technology Services and Payments | $92,507 | | Asset Generation and Management | $41,883 | | **Total** | **$158,029** | - Goodwill remained unchanged at **$158.0 million** as of June 30, 2025, and December 31, 2024[9](index=9&type=chunk) [9. Impairment Expense and Provision for Beneficial Interests](index=29&type=section&id=9.%20Impairment%20Expense%20and%20Provision%20for%20Beneficial%20Interests) Impairment Expense and Provision for Beneficial Interests (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Investments - beneficial interest in loan securitizations | $4,977 | $5,911 | $6,487 | $5,911 | | Leases, buildings, and associated improvements | $3,269 | — | $3,350 | — | | Property and equipment - solar facilities | $1,902 | $1,170 | $1,902 | $1,170 | | Investments - venture capital | $140 | $37 | $140 | $37 | | Other assets - solar inventory | — | $695 | — | $695 | | **Total** | **$10,288** | **$7,776** | **$11,879** | **$7,813** | - Impairment charges in Q2 2025 included **$3.3 million** for operating lease assets due to office space consolidation and **$1.9 million** for solar facility construction in progress due to a contract cancellation[82](index=82&type=chunk) - In April 2024, the Company discontinued residential solar operations, leading to non-cash impairment charges on certain solar facilities and inventory[83](index=83&type=chunk) [10. Bank Deposits](index=30&type=section&id=10.%20Bank%20Deposits) Nelnet Bank Interest-Bearing Deposits (Dollars in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Retail and other savings | $1,092,175 | $916,475 | $175,700 | | Brokered CDs, net | $269,058 | $247,872 | $21,186 | | Retail and other CDs, net | $20,809 | $21,784 | $(975) | | **Total interest-bearing deposits** | **$1,382,042** | **$1,186,131** | **$195,911** | - Nelnet Bank held **$149.9 million** in intercompany deposits from Nelnet, Inc. and its subsidiaries as of June 30, 2025, which are eliminated for consolidated financial reporting[85](index=85&type=chunk) - Deposits exceeding FDIC insurance limits totaled **$44.3 million** as of June 30, 2025, primarily intercompany deposits[87](index=87&type=chunk) [11. Earnings per Common Share](index=31&type=section&id=11.%20Earnings%20per%20Common%20Share) Earnings Per Common Share (Basic and Diluted) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to Nelnet, Inc. (Numerator) | $181,459 | $45,091 | $264,018 | $118,498 | | Weighted average common shares outstanding (Denominator) | 36,485,605 | 36,525,482 | 36,482,035 | 36,841,227 | | **Earnings per share - basic and diluted** | **$4.97** | **$1.23** | **$7.24** | **$3.22** | [12. Segment Reporting](index=32&type=section&id=12.%20Segment%20Reporting) - Nelnet's reportable segments include Loan Servicing and Systems (LSS), Education Technology Services and Payments (ETSP), Asset Generation and Management (AGM), and Nelnet Bank, all part of the Nelnet Financial Services (NFS) division. Other NFS activities and Corporate and Other Activities are also reported[121](index=121&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk) Income Before Income Taxes by Reportable Segment (Dollars in thousands) | Segment | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | LSS | $19,959 | $2,243 | $38,471 | $18,234 | | ETSP | $23,542 | $25,599 | $71,005 | $73,235 | | AGM | $27,393 | $24,310 | $57,226 | $58,055 | | Nelnet Bank | $(465) | $(3,718) | $1,487 | $(2,571) | | NFS other operating segments | $10,091 | $16,525 | $20,152 | $30,286 | | Corporate and Other Activities | $156,746 | $(6,531) | $154,970 | $(24,872) | | **Total Income before income taxes** | **$237,364** | **$58,428** | **$343,504** | **$152,365** | [13. Disaggregated Revenue](index=36&type=section&id=13.%20Disaggregated%20Revenue) Loan Servicing and Systems Revenue (Dollars in thousands) | Service Offering | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Government loan servicing | $85,737 | $87,014 | $173,100 | $192,490 | | Private education and consumer loan servicing | $22,733 | $12,959 | $45,426 | $25,577 | | FFELP loan servicing | $2,241 | $3,245 | $4,873 | $6,624 | | Software services | $9,452 | $4,879 | $16,444 | $9,420 | | Outsourced services | $561 | $955 | $1,622 | $2,141 | | **Total** | **$120,724** | **$109,052** | **$241,465** | **$236,252** | Education Technology Services and Payments Revenue (Dollars in thousands) | Service Offering | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Tuition payment plan services | $36,013 | $34,164 | $76,085 | $73,043 | | Payment processing | $37,515 | $34,326 | $89,051 | $82,113 | | Education technology services | $44,481 | $47,205 | $100,177 | $103,227 | | Other | $175 | $1,214 | $202 | $2,066 | | **Total** | **$118,184** | **$116,909** | **$265,515** | **$260,449** | Other, Net Income (Expense) (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Investment activity, net | $8,852 | $217 | $14,012 | $(1,082) | | ALLO preferred return | $5,985 | $4,160 | $14,400 | $6,569 | | Borrower late fee income | $1,642 | $2,584 | $3,231 | $5,718 | | Investment advisory services (WRCM) | $1,504 | $1,524 | $2,977 | $3,033 | | Administration/sponsor fee income | $1,293 | $1,482 | $2,598 | $3,028 | | Loss from ALLO voting membership interest investment | — | — | — | $(10,693) | | (Loss) gain from solar investments, net | $(1,502) | $(2,610) | $(1,046) | $170 | | Other | $5,202 | $6,663 | $10,498 | $11,360 | | **Total Other, net** | **$22,976** | **$14,020** | **$46,670** | **$18,103** | [14. Reinsurance](index=37&type=section&id=14.%20Reinsurance) Reinsurance Premiums and Losses (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net premiums written | $38,882 | $20,714 | $73,439 | $36,158 | | Net premiums earned | $26,112 | $14,851 | $50,799 | $27,631 | | Reinsurance losses and underwriting expenses | $25,662 | $10,988 | $47,874 | $22,305 | | Loss reserve balance, net | $57,100 | $33,100 | $57,100 | $33,100 | - The increase in reinsurance premiums earned and associated losses/underwriting expenses was primarily due to an increase in overall property volume and new business[102](index=102&type=chunk)[166](index=166&type=chunk) [15. Major Customer](index=37&type=section&id=15.%20Major%20Customer) Government Loan Servicing Revenue (Dollars in thousands) | Period | Revenue | | :------------------------------- | :------ | | Three months ended June 30, 2025 | $85,737 | | Three months ended June 30, 2024 | $87,014 | | Six months ended June 30, 2025 | $173,100 | | Six months ended June 30, 2024 | $192,490 | - Nelnet Servicing was awarded a new Unified Servicing and Data Solution (USDS) contract by the Department of Education, effective April 2023, replacing the legacy contract. Servicing under the USDS contract went live on April 1, 2024[104](index=104&type=chunk)[105](index=105&type=chunk) - Revenue earned per-borrower under the new USDS contract is lower than under the legacy servicing contract. The Company expects a decrease in serviced borrowers through Q4 2025 due to transfers to a new remote hosted servicing customer and borrowers exiting the CARES forbearance period[105](index=105&type=chunk)[138](index=138&type=chunk) [16. Fair Value](index=38&type=section&id=16.%20Fair%20Value) Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (Dollars in thousands) | Item | June 30, 2025 (Total) | December 31, 2024 (Total) | | :-------------------------------- | :-------------------- | :------------------------ | | Investments | $1,286,729 | $1,160,320 | | Derivative instruments (assets) | $402 | $3,232 | | Derivative instruments (liabilities) | $2,077 | $53 | - The Company's financial instruments are primarily measured at fair value using Level 2 inputs (observable inputs other than quoted prices). Loans receivable and beneficial interest in loan securitizations are classified as Level 3 (unobservable inputs)[108](index=108&type=chunk)[109](index=109&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=39&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management's discussion of Nelnet's Q2 2025 financial condition and results, covering consolidated and segment performance, and ALLO redemption impact [Overview](index=41&type=section&id=OVERVIEW) - Nelnet is a diversified hybrid holding company focused on consumer lending, loan servicing, payments, and technology, primarily in the education sector. It also invests in fiber communications (ALLO), venture capital, real estate, reinsurance, and renewable energy (solar)[115](index=115&type=chunk) Non-GAAP Net Income Attributable to Nelnet, Inc., Excluding Derivative Market Value Adjustments (Dollars in thousands, except share data) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP net income attributable to Nelnet, Inc. | $181,459 | $45,091 | $264,018 | $118,498 | | Realized and unrealized derivative market value adjustments | $3,866 | $(1,533) | $10,190 | $(9,497) | | Tax effect | $(928) | $368 | $(2,446) | $2,279 | | **Non-GAAP net income attributable to Nelnet, Inc.** | **$184,397** | **$43,926** | **$271,762** | **$111,280** | | Non-GAAP EPS | $5.05 | $1.20 | $7.45 | $3.02 | - The Company recognized a pre-tax gain of **$175.0 million** from the partial redemption of its ALLO investment on June 4, 2025[120](index=120&type=chunk) [Consolidated Results of Operations](index=44&type=section&id=CONSOLIDATED%20RESULTS%20OF%20OPERATIONS) Consolidated Operating Results Summary (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | YoY Change | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Loan interest | $172,104 | $202,129 | -14.85% | $338,543 | $418,853 | -19.20% | | Investment interest | $40,185 | $40,737 | -1.36% | $81,574 | $92,814 | -12.11% | | Net interest income | $79,435 | $66,407 | 19.62% | $162,149 | $140,628 | 15.30% | | Provision for loan losses | $17,930 | $3,611 | 396.55% | $33,267 | $14,440 | 130.38% | | LSS revenue | $120,724 | $109,052 | 10.70% | $241,465 | $236,252 | 2.21% | | ETSP revenue | $118,184 | $116,909 | 1.09% | $265,515 | $260,449 | 1.95% | | Reinsurance premiums earned | $26,112 | $14,851 | 75.83% | $50,799 | $27,631 | 83.85% | | Solar construction revenue | $1,259 | $9,694 | -87.01% | $5,254 | $23,420 | -77.56% | | Gain on partial redemption of ALLO investment | $175,044 | — | N/A | $175,044 | — | N/A | | Derivative market value adjustments, net | $(3,866) | $1,533 | -352.84% | $(10,190) | $9,497 | -207.30% | | Total operating expenses | $219,291 | $214,372 | 2.29% | $437,207 | $431,861 | 1.24% | | Impairment expense and provision for beneficial interests | $10,288 | $7,776 | 32.31% | $11,879 | $7,813 | 52.04% | | Net income attributable to Nelnet, Inc. | $181,459 | $45,091 | 302.43% | $264,018 | $118,498 | 122.82% | - Loan interest decreased due to lower average loan balances and gross yield. Interest expense decreased due to lower average debt outstanding and cost of funds, partially offset by increased deposit balances at Nelnet Bank[129](index=129&type=chunk)[130](index=130&type=chunk) - Solar construction revenue significantly decreased due to uncertain economic conditions and legislation impacting new projects, and NRE recognized **$12.9 million** in contract loss reserves for remaining legacy contracts[130](index=130&type=chunk)[171](index=171&type=chunk) - Salaries and benefits decreased primarily due to staff reductions in LSS in H2 2024 after government servicing contract enhancements. Depreciation and amortization decreased due to prior year impairment charges and reclassification of IT activities to other expenses[130](index=130&type=chunk) [LOAN SERVICING AND SYSTEMS OPERATING SEGMENT – RESULTS OF OPERATIONS](index=48&type=section&id=LOAN%20SERVICING%20AND%20SYSTEMS%20OPERATING%20SEGMENT%20%E2%80%93%20RESULTS%20OF%20OPERATIONS) LSS segment profitability increased from higher private education and consumer loan servicing volumes and cost savings, despite lower government contract revenue LSS Servicing Volume (Dollars in millions, Number of borrowers) | Item | June 30, 2025 | June 30, 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Total servicing volume (dollars) | $516,093 | $523,750 | -1.46% | | Government servicing volume (dollars) | $465,689 | $489,298 | -4.79% | | Private and consumer servicing volume (dollars) | $38,018 | $19,876 | 91.28% | | Total servicing borrowers | 14,523,042 | 15,535,969 | -6.58% | | Remote hosted borrowers | 2,056,358 | 133,681 | 1438.90% | LSS Operating Results (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | YoY Change | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Loan servicing and systems revenue | $120,724 | $109,052 | 10.70% | $241,465 | $236,252 | 2.21% | | Salaries and benefits | $65,549 | $70,631 | -7.20% | $135,123 | $147,353 | -8.30% | | Income before income taxes | $19,959 | $2,243 | 789.83% | $38,471 | $18,234 | 110.99% | | Before tax operating margin | 16.0% | 1.9% | 742.11% | 15.4% | 7.3% | 110.96% | - Private education and consumer loan servicing revenue increased due to the conversion of Discover Financial Services and SoFi Lending Corp. loan portfolios in late 2024 and early 2025[138](index=138&type=chunk) - Software services revenue increased due to a new remote hosted servicing customer awarded a USDS contract, with further increases expected as more volume is transferred[138](index=138&type=chunk) [EDUCATION TECHNOLOGY SERVICES AND PAYMENTS OPERATING SEGMENT – RESULTS OF OPERATIONS](index=50&type=section&id=EDUCATION%20TECHNOLOGY%20SERVICES%20AND%20PAYMENTS%20OPERATING%20SEGMENT%20%E2%80%93%20RESULTS%20OF%20OPERATIONS) ETSP revenue grew in tuition payment plans and payment processing, but operating margin declined due to lower FACTS education services revenue and increased growth expenses ETSP Operating Results (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | YoY Change | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Education technology services and payments revenue | $118,184 | $116,909 | 1.09% | $265,515 | $260,449 | 1.95% | | Cost of services | $39,844 | $40,222 | -0.94% | $87,891 | $88,832 | -1.06% | | Salaries and benefits | $41,598 | $40,736 | 2.12% | $83,339 | $80,903 | 3.01% | | Income before income taxes | $23,542 | $25,599 | -8.03% | $71,005 | $73,235 | -3.05% | | Non-GAAP before tax operating margin, excluding net interest income | 23.1% | 25.9% | -10.81% | 33.0% | 34.8% | -5.17% | - Tuition payment plan services and payment processing revenue increased due to a higher number of payment plans and increased payment volumes in K-12 and higher education markets[141](index=141&type=chunk) - Education technology services revenue decreased due to the winding down of the EANS program funding for private schools, which ended on September 30, 2024. EANS revenue was **$0.1 million** in Q2 2025, down from **$8.8 million** in Q2 2024[141](index=141&type=chunk) [NELNET FINANCIAL SERVICES DIVISION - RESULTS OF OPERATIONS](index=52&type=section&id=NELNET%20FINANCIAL%20SERVICES%20DIVISION%20-%20RESULTS%20OF%20OPERATIONS) NFS division showed mixed results: AGM's loan acquisitions and spread offset by higher loan loss provisions, Nelnet Bank's significant growth, and varied performance in other segments [Asset Generation and Management Operating Segment](index=52&type=section&id=Asset%20Generation%20and%20Management%20Operating%20Segment) AGM Loan Portfolio Activity (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance as of March 31 / December 31 | $9,260,006 | $10,799,942 | $8,955,868 | $12,049,462 | | Loan acquisitions and originations | $143,129 | $195,279 | $975,715 | $276,009 | | Repayments, claims, capitalized interest, participations, and other, net | $(357,981) | $(375,982) | $(695,057) | $(726,478) | | Loans lost to external parties | $(67,571) | $(574,834) | $(127,037) | $(1,354,489) | | Loans sold | $(241) | $(133,788) | $(132,147) | $(333,887) | | Loans contributed to Nelnet Bank | $(42,173) | — | $(42,173) | — | | **Balance as of June 30** | **$8,935,169** | **$9,910,617** | **$8,935,169** | **$9,910,617** | - AGM's FFELP portfolio experienced accelerated run-off in late 2021 due to loan consolidations into the Federal Direct Loan Program, but prepayment rates have become more consistent with historical rates since August 2024[145](index=145&type=chunk)[189](index=189&type=chunk) AGM Core Loan Spread Analysis | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Variable loan yield, net | 6.80% | 7.42% | 6.65% | 7.34% | | Loan cost of funds - interest expense | (5.60)% | (6.50)% | (5.50)% | (6.50)% | | Variable loan spread | 1.21% | 0.93% | 1.16% | 0.85% | | Fixed rate floor income, net of settlements on derivatives | 0.06% | 0.05% | 0.07% | 0.05% | | **Core loan spread** | **1.27%** | **0.98%** | **1.23%** | **0.90%** | | Average balance of AGM's loans | $9,215,579 | $10,484,458 | $9,379,948 | $11,022,981 | | Average balance of AGM's debt outstanding | $8,439,800 | $10,168,761 | $8,445,716 | $10,778,080 | - Variable loan spread increased due to a higher proportion of loans funded with operating cash rather than debt. As of June 30, 2025, AGM had **$576.1 million** (par value) of unencumbered loans[153](index=153&type=chunk) AGM Net Income (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income before income taxes | $27,393 | $24,310 | $57,226 | $58,055 | | Net income | $20,801 | $18,475 | $43,461 | $44,122 | | Non-GAAP net income, excluding derivative market value adjustments | $22,446 | $17,764 | $47,991 | $39,074 | [Nelnet Bank Operating Segment](index=57&type=section&id=Nelnet%20Bank%20Operating%20Segment) Nelnet Bank Loan Portfolio Activity (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance as of March 31 / December 31 | $761,633 | $483,723 | $644,597 | $432,872 | | Loan acquisitions and originations | $58,567 | $84,388 | $203,166 | $157,949 | | Loans contributed from AGM | $42,173 | — | $42,173 | — | | **Balance as of June 30** | **$827,641** | **$542,351** | **$827,641** | **$542,351** | - Nelnet Bank's loan portfolio grew to **$827.6 million** as of June 30, 2025, including **$42.2 million** in private education loans contributed from AGM[157](index=157&type=chunk)[158](index=158&type=chunk) Nelnet Bank Average Balance Sheet and Net Interest Margin | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest-earning assets | $1,733,147 | $1,136,841 | $1,602,783 | $1,089,391 | | Total interest-bearing liabilities | $1,514,157 | $1,004,546 | $1,405,409 | $956,840 | | Net interest margin | 3.29% | 3.07% | 3.37% | 3.03% | Nelnet Bank Net Income (Loss) (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net interest income | $14,066 | $8,464 | $26,456 | $16,031 | | Provision for loan losses | $6,797 | $7,836 | $9,123 | $12,210 | | Income (loss) before income taxes | $(465) | $(3,718) | $1,487 | $(2,571) | | Net (loss) income | $(364) | $(2,802) | $1,154 | $(1,914) | | Non-GAAP net income (loss), excluding derivative market value adjustments | $929 | $(3,256) | $4,368 | $(4,084) | [NFS Other Operating Segments](index=60&type=section&id=NFS%20Other%20Operating%20Segments) NFS Other Operating Segments Income (Loss) Before Income Taxes (Dollars in thousands) | Segment | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | WRCM | $1,413 | $1,408 | $2,793 | $2,757 | | Nelnet Insurance Services | $(31) | $4,914 | $3,206 | $6,980 | | Real estate investments | $108 | $(2,046) | $(1,942) | $(4,088) | | Investment securities | $8,601 | $12,249 | $16,095 | $24,637 | | **Total** | **$10,091** | **$16,525** | **$20,152** | **$30,286** | - Nelnet Insurance Services saw increased reinsurance premiums and associated losses/underwriting expenses due to higher property volume and new business, but also adverse development in commercial auto programs[166](index=166&type=chunk) - Real estate investments recognized a realized gain of **$1.6 million** from a sale during Q2 2025[166](index=166&type=chunk) - Investment interest income and expense in investment securities decreased due to lower average balances of investment debt securities and debt outstanding, and a decrease in interest rates[166](index=166&type=chunk) [CORPORATE AND OTHER ACTIVITIES – RESULTS OF OPERATIONS](index=62&type=section&id=CORPORATE%20AND%20OTHER%20ACTIVITIES%20%E2%80%93%20RESULTS%20OF%20OPERATIONS) Corporate and Other Activities income before taxes significantly increased, driven by the **$175.0 million ALLO investment redemption gain**, offset by impairment charges and NRE contract loss reserves Corporate and Other Activities Income (Loss) Before Income Taxes (Dollars in thousands) | Activity | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Shared services | $(11,923) | $(9,056) | $(21,911) | $(19,101) | | Solar tax equity investments | $(1,892) | $(2,580) | $(686) | $(266) | | Nelnet Renewable Energy (NRE) | $(17,601) | $(4,752) | $(24,175) | $(8,788) | | ALLO investment | $185,236 | $3,940 | $193,651 | $(4,653) | | Venture capital investments | $1,340 | $3,417 | $5,560 | $2,711 | | Other | $1,586 | $2,500 | $2,531 | $5,225 | | Eliminations/reclassifications | $96 | — | $193 | — | | **Total** | **$156,746** | **$(6,531)** | **$154,970** | **$(24,872)** | - Shared services recognized a **$3.3 million** non-cash impairment charge related to operating lease assets due to office space consolidation[170](index=170&type=chunk) - Nelnet Renewable Energy (NRE) recognized **$12.9 million** in contract loss reserves in Q2 2025 for remaining legacy construction contracts, contributing to negative margins[171](index=171&type=chunk) - The ALLO investment segment recognized a **$175.0 million gain** in Q2 2025 from a partial redemption. Income from preferred membership interests was **$6.0 million** and **$14.4 million** for the three and six months ended June 30, 2025, respectively, but will cease as all preferred interests were redeemed[171](index=171&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=65&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Nelnet maintains strong liquidity for loan acquisitions, investments, and capital management, with the **$410.9 million** ALLO redemption cash used for debt reduction and share repurchases Sources of Liquidity as of June 30, 2025 (Dollars in thousands) | Item | Amount | | :------------------------------------------------ | :------- | | Net cash and cash equivalents | $209,012 | | Unencumbered AFS debt securities (investments) - at fair value | $169,384 | | Unencumbered federally insured, private, consumer, and other loans (Non-Nelnet Bank) - at par | $576,072 | | Unencumbered repurchased Nelnet issued asset-backed debt securities - at par | $238,840 | | Unused capacity on unsecured line of credit | $495,000 | | **Total Sources of liquidity** | **$1,688,308** | - The Company received **$410.9 million cash** from the partial redemption of its ALLO investment, primarily used to pay down third-party debt and repurchase asset-backed securities[176](index=176&type=chunk) - AGM expects approximately **$1.07 billion** in future undiscounted cash flows from its loan portfolio, including **$0.74 billion** of overcollateralization in asset-backed securitizations. This forecast assumes prepayment rates of **6%** for federally insured loans and **11-20%** for private education loans[181](index=181&type=chunk)[182](index=182&type=chunk)[186](index=186&type=chunk)[188](index=188&type=chunk) - Nelnet Bank's leverage ratio of capital to total assets was **12.8%** as of June 30, 2025, meeting the FDIC's 'well capitalized' requirement of at least **12%**[211](index=211&type=chunk) - The Company is committed to funding an additional **$63.5 million** directly in solar tax equity investments and **$115.7 million** by syndication partners, totaling **$179.2 million**[212](index=212&type=chunk) - A new stock repurchase program was authorized on May 8, 2025, allowing repurchase of up to **five million shares** of Class A common stock over three years. As of June 30, 2025, **4,822,191 shares** remained authorized[217](index=217&type=chunk) - The Board declared a Q3 2025 cash dividend of **$0.30 per share**, payable September 16, 2025[220](index=220&type=chunk) [Critical Accounting Estimates](index=73&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) Management identifies the allowance for loan losses as a critical accounting policy and estimate, requiring difficult and subjective judgments due to inherent uncertainties - There have been no material changes to the Company's critical accounting policy and estimate since December 31, 2024[223](index=223&type=chunk) [Recent Accounting Pronouncements](index=74&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) New FASB guidance on income tax disclosures (effective for year ending December 31, 2025) and enhanced expense disclosures (effective for fiscal years beginning after December 15, 2026) are being evaluated for their impact on consolidated financial statements - New FASB guidance on income tax disclosures (effective for year ending December 31, 2025) and enhanced expense disclosures (effective for fiscal years beginning after December 15, 2026) are being evaluated for their impact on consolidated financial statements[224](index=224&type=chunk)[225](index=225&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=74&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Nelnet is exposed to market risks, primarily interest rate risk, across its AGM and Nelnet Bank segments, as well as its investment portfolio. The Company actively manages these risks through various strategies, including derivative instruments and managing asset/liability mixes, to minimize the impact of interest rate fluctuations on earnings and fair values [Interest Rate Risk - AGM Operating Segment](index=74&type=section&id=Interest%20Rate%20Risk%20-%20AGM%20Operating%20Segment) AGM Loan Assets and Debt Instruments by Rate Characteristics (Dollars in thousands) | Category | June 30, 2025 (Dollars) | June 30, 2025 (Percent) | December 31, 2024 (Dollars) | December 31, 2024 (Percent) | | :-------------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Fixed-rate loan assets | $948,581 | 10.6% | $814,843 | 9.1% | | Variable-rate loan assets | $7,986,588 | 89.4% | $8,141,025 | 90.9% | | Fixed-rate debt instruments | $361,495 | 4.5% | $399,994 | 4.8% | | Variable-rate debt instruments | $7,599,856 | 95.5% | $7,958,357 | 95.2% | - AGM's primary market risk is from fluctuations in borrowing and lending rates. The Company earns 'floor income' when fixed borrower rates on FFELP loans exceed variable SAP rates, particularly on loans originated before April 1, 2006[228](index=228&type=chunk)[229](index=229&type=chunk) AGM Fixed Rate Floor Income, Net (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fixed rate floor income, gross | $997 | $159 | $1,972 | $338 | | Derivative settlements | $427 | $1,193 | $855 | $2,383 | | **Fixed rate floor income, net** | **$1,424** | **$1,352** | **$2,827** | **$2,721** | - AGM uses basis swaps to match interest rate characteristics between student loan assets (indexed to 30-day average SOFR) and debt funding (indexed to 1-month or 3-month SOFR). As of June 30, 2025, notional amounts for basis swaps totaled **$1.4 billion**[236](index=236&type=chunk)[237](index=237&type=chunk) [Interest Rate Risk - Nelnet Bank](index=76&type=section&id=Interest%20Rate%20Risk%20-%20Nelnet%20Bank) Nelnet Bank Assets and Deposits by Rate Characteristics (Dollars in thousands) | Category | June 30, 2025 (Dollars) | June 30, 2025 (Percent) | December 31, 2024 (Dollars) | December 31, 2024 (Percent) | | :-------------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Total fixed-rate assets | $663,656 | 38.2% | $595,842 | 42.8% | | Total variable-rate assets | $1,072,715 | 61.8% | $795,852 | 57.2% | | Fixed-rate deposits | $469,123 | 30.6% | $449,706 | 35.8% | | Variable-rate deposits | $1,062,772 | 69.4% | $804,916 | 64.2% | - Nelnet Bank manages interest rate risk by monitoring rates, managing asset/liability maturity and repricing, and using derivative instruments to hedge variable rate deposit cash flows[240](index=240&type=chunk)[242](index=242&type=chunk) [Interest Rate and Market Risk - Investments](index=77&type=section&id=Interest%20Rate%20and%20Market%20Risk%20-%20Investments) Investment Interest Income and Debt Funding Costs (Excluding Nelnet Bank, Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Asset-backed securities available-for-sale (average balance) | $620,800 | $827,144 | $605,050 | $845,389 | | Interest income | $8,110 | $13,991 | $16,105 | $28,110 | | Average yields | 5.24% | 6.78% | 5.37% | 6.67% | | Debt funding asset-backed securities (average balance) | $100 | $123,390 | $100 | $132,192 | | Interest expense | $1 | $2,017 | $2 | $4,435 | | Average rates | 4.01% | 6.56% | 4.03% | 6.73% | - The Company's asset-backed investment securities portfolio has limited liquidity, and a significant loss could be incurred if sold prior to maturity. As of June 30, 2025, gross unrealized losses on available-for-sale debt securities totaled **$22.7 million**[246](index=246&type=chunk) [Consolidated Sensitivity Analysis](index=78&type=section&id=Consolidated%20Sensitivity%20Analysis) Consolidated Earnings Sensitivity to Interest Rate Changes (Dollars in thousands) | Scenario | Three months ended June 30, 2025 (Impact on Net Income before taxes) | Six months ended June 30, 2025 (Impact on Net Income before taxes) | | :-------------------------------- | :----------------------------------------------------------------- | :----------------------------------------------------------------- | | Increase of 100 basis points | $4,143 (1.7%) | $7,823 (2.3%) | | Increase of 300 basis points | $16,558 (7.0%) | $31,662 (9.2%) | | Decrease of 100 basis points | $(3,396) (-1.4%) | $(6,319) (-1.8%) | | Decrease of 300 basis points | $(7,848) (-3.3%) | $(14,433) (-4.2%) | [PART II. OTHER INFORMATION](index=77&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=77&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) No material changes from the Legal Proceedings section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the Legal Proceedings section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024[253](index=253&type=chunk) [ITEM 1A. RISK FACTORS](index=77&type=section&id=ITEM%201A.%20RISK%20FACTORS) A new risk factor highlights the adverse impact of the 'One Big Beautiful Bill' on Nelnet's solar tax equity investments and construction, accelerating tax credit expiration and leading NRE to explore strategic alternatives - The 'One Big Beautiful Bill,' enacted July 4, 2025, significantly reduces tax incentives for clean energy, accelerating the expiration and phasing out of commercial solar tax credits[255](index=255&type=chunk) - New 'foreign entity of concern' restrictions introduced by the Bill may adversely impact supply chain costs, availability, and compliance for solar projects[255](index=255&type=chunk) - Due to the Bill and rising construction costs, Nelnet Renewable Energy (NRE) accepted no new solar construction contracts in Q2 2025 and is exploring strategic alternatives, expecting adverse impacts on revenue[256](index=256&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=78&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The Company repurchased **183,554 Class A shares** for **$21.36 million** in Q2 2025, with a new program authorizing repurchase of up to **five million shares** over three years Class A Common Stock Repurchases (Q2 2025) | Period | Total shares purchased | Average price paid per share | | :-------------------- | :--------------------- | :--------------------------- | | April 1 - April 30, 2025 | 122 | $102.78 | | May 1 - May 31, 2025 | 52,395 | $117.00 | | June 1 - June 30, 2025 | 131,037 | $115.51 | | **Total** | **183,554** | **$115.93** | - On May 8, 2025, the Board authorized a new stock repurchase program for up to **five million shares** of Class A common stock over three years, replacing the prior program. As of June 30, 2025, **4,822,191 shares** remained authorized for repurchase[217](index=217&type=chunk)[260](index=260&type=chunk) [ITEM 5. OTHER INFORMATION](index=78&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section details Rule 10b5-1 trading plans and outlines dividend restrictions from financing agreements and regulatory requirements, which currently do not materially limit the Company's ability to pay dividends Rule 10b5-1 Trading Plans Adopted in Q2 2025 | Name and Title | Date of Adoption | Scheduled Expiration Date | Aggregate Number of Securities to Be Purchased or Sold | | :-------------------- | :--------------- | :------------------------ | :----------------------------------------------------- | | Thomas E. Henning, Director | 6/6/2025 | 10/5/2025 | Sale of an aggregate of 8,196 shares of Class A common stock | - Dividend payments are subject to restrictions from the unsecured line of credit, trust indentures, and regulatory requirements for Nelnet Bank and Nelnet Insurance Services. However, these provisions do not currently materially limit the Company's ability to pay dividends[258](index=258&type=chunk) [ITEM 6. EXHIBITS](index=81&type=section&id=ITEM%206.%20EXHIBITS) Exhibits include certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File) - Exhibits include certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File)[262](index=262&type=chunk) ```
Nelnet(NNI) - 2025 Q2 - Quarterly Results
2025-08-06 20:17
[Introduction and Cautionary Statements](index=1&type=section&id=Introduction%20and%20Cautionary%20Statements) This section sets the context for the financial report and outlines forward-looking statements and associated risks [Report Context](index=1&type=section&id=Report%20Context) This report provides supplemental financial information for Nelnet, Inc. for the second quarter of 2025, intended to be read in conjunction with the company's Q2 2025 earnings press release and Quarterly Report on Form 10-Q - Supplemental financial information for **Nelnet, Inc.** for the **second quarter 2025**[1](index=1&type=chunk) - To be read in connection with the Company's press release for **second quarter 2025 earnings** and the Company's **Quarterly Report on Form 10-Q** for the quarter ended June 30, 2025[1](index=1&type=chunk) [Forward-Looking and Cautionary Statements](index=1&type=section&id=Forward-Looking%20and%20Cautionary%20Statements) The report contains forward-looking statements based on management's current expectations, which are inherently subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. The company disclaims any commitment to update these statements except as legally required - This report contains **forward-looking statements** and information based on **management's current expectations**[2](index=2&type=chunk) - Statements are subject to known and unknown **risks, uncertainties, assumptions, and other factors** that may cause actual results and performance to be materially different[3](index=3&type=chunk) - The Company **disclaims any commitment to voluntarily update or revise** its prior forward-looking statements except as required by law[4](index=4&type=chunk) [Identification of Forward-Looking Statements](index=1&type=section&id=Identification%20of%20Forward-Looking%20Statements) Explains how forward-looking statements are identified through non-historical facts and specific terminology - Forward-looking statements are identified by **non-historical facts**, statements about **future financial condition**, **results of operations**, **economic performance**, **management's plans and objectives**, and words like **'anticipate,' 'expect,' 'will,' and 'should.'**[2](index=2&type=chunk) [Basis and Risks of Forward-Looking Statements](index=1&type=section&id=Basis%20and%20Risks%20of%20Forward-Looking%20Statements) Details the foundation and inherent risks of forward-looking statements, referencing risk factor sections - Statements are based on **management's experience**, perception of **historical trends**, **current conditions**, and **expected future developments**[3](index=3&type=chunk) - Risks and uncertainties are set forth in the **'Risk Factors' sections** of the Company's **Annual Report on Form 10-K for 2024** and the **Q2 2025 10-Q Quarterly Report**[3](index=3&type=chunk) [Specific Risk Factors](index=1&type=section&id=Specific%20Risk%20Factors) Outlines various specific risks impacting the company's operations and financial performance across multiple business areas - Risks related to **student loan servicing**, including **maintaining volumes**, **contract modifications**, and **service requirements**[5](index=5&type=chunk) - **Loan portfolio risks** such as **credit risk**, **prepayment risk**, **interest rate basis and repricing risk**, and **use of derivatives**[5](index=5&type=chunk) - Risks from changes in **education loan terms, laws, regulations, government programs, and budgets**[5](index=5&type=chunk) - Risks related to **operational or information systems breaches**, use of **artificial intelligence**, and uncertainties in **forecasting cash flows from student loan assets**[5](index=5&type=chunk) - Risks related to **Nelnet Bank's business objectives**, **solar tax equity investments**, and other **strategic investments** (venture capital, real estate, reinsurance, acquisitions)[5](index=5&type=chunk) - Risks and uncertainties associated with **litigation matters**, **regulatory compliance**, and **climate change**[5](index=5&type=chunk) [Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) Presents Nelnet's consolidated statements of income and condensed consolidated balance sheets for key periods [Consolidated Statements of Income](index=2&type=section&id=Consolidated%20Statements%20of%20Income) Nelnet, Inc. reported substantial growth in net income attributable to Nelnet, Inc. for both the three and six months ended June 30, 2025, primarily driven by a significant gain on partial redemption of an ALLO investment. Total interest income decreased, but net interest income increased due to a larger decrease in interest expense. Provision for loan losses saw a notable increase Consolidated Statements of Income Highlights (Dollars in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Total interest income | $212,289 | $242,866 | -12.59% | $420,117 | $511,667 | -17.70% | | Interest expense | $132,854 | $176,459 | -24.71% | $257,968 | $371,039 | -30.47% | | Net interest income | $79,435 | $66,407 | +19.62% | $162,149 | $140,628 | +15.30% | | Provision for loan losses | $17,930 | $3,611 | +396.54% | $33,267 | $14,440 | +130.38% | | Total other income (expense), net | $461,177 | $266,270 | +73.21% | $776,955 | $577,179 | +34.60% | | Income before income taxes | $237,364 | $58,428 | +306.25% | $343,504 | $152,365 | +125.45% | | Net income attributable to Nelnet, Inc. | $181,459 | $45,091 | +302.43% | $264,018 | $118,498 | +122.82% | | Earnings per common share (basic and diluted) | $4.97 | $1.23 | +304.07% | $7.24 | $3.22 | +124.84% | - A **gain on partial redemption of ALLO investment** of **$175,044 thousand** was recognized in the **three and six months ended June 30, 2025**[6](index=6&type=chunk) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Nelnet's total assets slightly decreased compared to December 31, 2024, and significantly compared to June 30, 2024, primarily due to reductions in restricted cash and loans and accrued interest receivable. Total liabilities also decreased, while Nelnet, Inc. shareholders' equity increased Condensed Consolidated Balance Sheets Highlights (Dollars in thousands) | Metric | As of June 30, 2025 | As of Dec 31, 2024 | Change (vs. Dec 31, 2024) | As of June 30, 2024 | Change (vs. June 30, 2024) | | :---------------------------------- | :------------------ | :----------------- | :------------------------ | :------------------ | :------------------------- | | Loans and accrued interest receivable, net | $10,155,483 | $9,992,744 | +1.63% | $10,939,519 | -7.17% | | Cash, cash equivalents, and investments | $2,330,692 | $2,395,214 | -2.70% | $2,092,269 | +11.40% | | Restricted cash | $576,023 | $736,502 | -21.80% | $797,925 | -27.79% | | Total assets | $13,711,088 | $13,777,753 | -0.48% | $14,501,193 | -5.45% | | Bonds and notes payable | $7,903,561 | $8,309,797 | -4.90% | $9,567,708 | -17.39% | | Bank deposits | $1,382,042 | $1,186,131 | +16.52% | $890,472 | +55.20% | | Total liabilities | $10,228,395 | $10,478,636 | -2.39% | $11,281,171 | -9.33% | | Total Nelnet, Inc. shareholders' equity | $3,574,983 | $3,349,762 | +6.72% | $3,294,061 | +8.53% | [Company Overview and Business Segments](index=4&type=section&id=Company%20Overview%20and%20Business%20Segments) Provides an overview of Nelnet's diversified business model and its various operating segments [Company Overview](index=4&type=section&id=Company%20Overview) Nelnet is a diversified hybrid holding company primarily engaged in consumer lending, loan servicing, payments, and technology, with a strong focus on the education sector. The company also diversifies its investments into areas like fiber communications (ALLO), venture capital, real estate, reinsurance, and renewable energy (solar), and is actively expanding its private education and consumer loan portfolios through Nelnet Bank - **Nelnet** is a **diversified hybrid holding company** with primary businesses in **consumer lending, loan servicing, payments, and technology**, largely serving the **education space**[9](index=9&type=chunk) - A significant portion of revenue is **net interest income** from a portfolio of **federally insured student loans**[9](index=9&type=chunk) - Investments include a **fiber communications company (ALLO)**, early-stage and emerging growth companies (**venture capital**), **real estate**, **reinsurance**, and **renewable energy (solar)**[9](index=9&type=chunk) - **Nelnet Bank** is actively expanding its **private education, consumer, and other loan portfolios**[9](index=9&type=chunk) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) Nelnet provides non-GAAP financial information, specifically net income excluding derivative market value adjustments, to offer investors a clearer view of its operating results and performance. These adjustments, which do not qualify for hedge accounting, can introduce significant period-to-period volatility due to market factors, making the non-GAAP measure useful for comparability - The Company provides **non-GAAP financial information** related to specific items management believes are important in evaluating **operating results and performance**[10](index=10&type=chunk) - **Derivative market value adjustments** are excluded due to their **volatility**, which affects **period-to-period comparability** of results of operations[13](index=13&type=chunk) - Management utilizes **operating results excluding these items** for **comparability purposes** when making decisions and in presentations to stakeholders[13](index=13&type=chunk) [Reconciliation of GAAP to Non-GAAP Net Income](index=4&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Net%20Income) Provides a detailed reconciliation between GAAP and non-GAAP net income, highlighting derivative adjustments GAAP to Non-GAAP Net Income Reconciliation (Dollars in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :-------------------------------------------------------------------- | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | GAAP net income attributable to Nelnet, Inc. | $181,459 | $45,091 | +302.43% | $264,018 | $118,498 | +122.82% | | Realized and unrealized derivative market value adjustments (a) | $3,866 | $(1,533) | N/A | $10,190 | $(9,497) | N/A | | Tax effect (b) | $(928) | $368 | N/A | $(2,446) | $2,279 | N/A | | Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments | $184,397 | $43,926 | +319.78% | $271,762 | $111,280 | +144.23% | | GAAP earnings per share | $4.97 | $1.23 | +304.07% | $7.24 | $3.22 | +124.84% | | Non-GAAP earnings per share | $5.05 | $1.20 | +320.83% | $7.45 | $3.02 | +146.69% | [Explanation of Derivative Market Value Adjustments](index=4&type=section&id=Explanation%20of%20Derivative%20Market%20Value%20Adjustments) Clarifies the nature and accounting treatment of derivative market value adjustments not qualifying for hedge accounting - **Derivative market value adjustments** include both **realized and unrealized gains and losses** from changes in **fair values of derivatives** that **do not qualify for hedge accounting under GAAP**[11](index=11&type=chunk) - Changes in fair value for derivatives not qualifying for hedge accounting are reported in **current period earnings** **without considering the corresponding change in fair value of the hedged item**[12](index=12&type=chunk) [Rationale for Non-GAAP Presentation](index=4&type=section&id=Rationale%20for%20Non-GAAP%20Presentation) Justifies the use of non-GAAP measures for better operational and performance evaluation due to derivative volatility - Management believes these **point-in-time estimates** of asset and liability values related to derivative instruments are **subject to volatility** due to **timing and market factors** beyond management's control[13](index=13&type=chunk) - Non-GAAP information provides **additional operational and performance indicators** **closely assessed by management** and represents what **earnings would have been had these derivatives qualified for hedge accounting**[13](index=13&type=chunk) [Recent Developments](index=5&type=section&id=Recent%20Developments) Nelnet completed a partial redemption of its ALLO investment on June 4, 2025, receiving $410.9 million in cash proceeds and recognizing a pre-tax gain of $175.0 million. Following this transaction, Nelnet no longer holds preferred membership interests but retains a significant 27% voting equity interest in ALLO, with a carrying value of $0 - On **June 4, 2025**, Nelnet **redeemed a portion of its voting membership interests and all outstanding preferred membership interests in ALLO**[15](index=15&type=chunk) - Received **cash proceeds** of **$410.9 million** and recognized a **pre-tax gain** of **$175.0 million** from the transaction[15](index=15&type=chunk) - Nelnet's **ownership of voting membership interest in ALLO decreased from 45% to 27%**, with the **carrying value of such interest remaining at $0**[15](index=15&type=chunk) [Operating Segments Description](index=5&type=section&id=Operating%20Segments%20Description) Nelnet's reportable operating segments include Loan Servicing and Systems (NDS), Education Technology Services and Payments (NBS), Asset Generation and Management (AGM), and Nelnet Bank. Other business activities and unallocated corporate functions are grouped under Corporate and Other Activities - **Reportable operating segments** are **Loan Servicing and Systems (NDS)**, **Education Technology Services and Payments (NBS)**, **Asset Generation and Management (AGM)**, and **Nelnet Bank**[16](index=16&type=chunk)[18](index=18&type=chunk) - **NDS and NBS earn fee-based revenue**, while **AGM earns net interest income on its FFELP loan portfolio**[16](index=16&type=chunk) - **Nelnet Bank** operates as an **internet industrial bank** focused on **private education and unsecured consumer loan markets**[16](index=16&type=chunk) [Reportable Operating Segments](index=5&type=section&id=Reportable%20Operating%20Segments) Lists Nelnet's primary reportable operating segments: LSS, ETSP, AGM, and Nelnet Bank - **Loan Servicing and Systems (LSS)**, referred to as **Nelnet Diversified Services (NDS)**[18](index=18&type=chunk) - **Education Technology Services and Payments (ETSP)**, referred to as **Nelnet Business Services (NBS)**[18](index=18&type=chunk) - **Asset Generation and Management (AGM)**, part of the **Nelnet Financial Services (NFS)** division[18](index=18&type=chunk) - **Nelnet Bank**, part of the **NFS division**[18](index=18&type=chunk) [Corporate and Other Activities](index=5&type=section&id=Corporate%20and%20Other%20Activities) Describes components grouped under corporate and other unallocated activities, including investments and overhead - Includes **interest income on corporate cash balances** and **interest expense on unsecured corporate related debt transactions**[17](index=17&type=chunk) - Encompasses certain **investment activities**, including **ALLO**, **venture capital investments**, and **solar tax equity investments**[17](index=17&type=chunk) - Includes operating results of the Company's **solar engineering, procurement, and construction business**[17](index=17&type=chunk) - Covers **corporate costs and overhead functions** not allocated to operating segments, such as **executive management** and **investments in innovation**[17](index=17&type=chunk) [Segment Performance Analysis](index=6&type=section&id=Segment%20Performance%20Analysis) Analyzes the financial performance of Nelnet's individual operating segments, including income before taxes [Segment Operating Results (Net Income (Loss) Before Taxes)](index=6&type=section&id=Segment%20Operating%20Results%20(Net%20Income%20(Loss)%20Before%20Taxes)) Nelnet's segments exhibited varied performance. NDS significantly increased operating margin due to higher private education loan servicing and cost savings. NBS saw increased revenue but decreased operating margin due to higher expenses and lower FACTS education services revenue. AGM's income before taxes increased for Q2 2025 but slightly decreased for the six-month period, impacted by increased loan loss provisions and derivative adjustments. Nelnet Bank improved significantly, moving from a loss to income before taxes, driven by increased net interest income. Corporate activities were heavily influenced by the ALLO investment gain Segment Income (Loss) Before Taxes (Dollars in thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :-------------------------------- | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | NDS | $19,959 | $2,243 | +789.83% | $38,471 | $18,234 | +110.99% | | NBS | $23,542 | $25,599 | -8.03% | $71,005 | $73,235 | -3.05% | | AGM | $27,393 | $24,310 | +12.68% | $57,226 | $58,055 | -1.43% | | Nelnet Bank | $(465) | $(3,718) | +87.50% | $1,487 | $(2,571) | +157.84% | | NFS other operating segments | $10,091 | $16,525 | -39.06% | $20,152 | $30,286 | -33.49% | | Corporate: ALLO investment | $185,236 | $3,940 | +4601.42% | $193,651 | $(4,653) | N/A | | Corporate: Nelnet Renewable Energy - solar construction | $(17,601) | $(4,752) | +270.42% | $(24,175) | $(8,788) | +175.10% | - **NDS operating margin increased** due to **higher private education and consumer loan servicing volume** and **cost-saving measures**, partially offset by lower revenue from the new government servicing contract[20](index=20&type=chunk) - **NBS experienced a decrease in before-tax operating margin** due to **lower FACTS education services revenue** and **increased operating expenses** to support customer growth and new technology investments[20](index=20&type=chunk) - AGM's results were impacted by **increased provision for loan losses** due to **loan acquisitions** and **derivative market value adjustments**[20](index=20&type=chunk) - **Nelnet Bank's net interest income increased** due to **higher average loan and investment balances** and an **improved net interest margin**[20](index=20&type=chunk) - Corporate activities were **significantly boosted by the** **$175.0 million** **gain on partial redemption of the ALLO investment**[21](index=21&type=chunk) - Nelnet Renewable Energy (NRE) recognized **$12.9 million** in **contract loss reserves** for remaining legacy construction contracts and faced **adverse impacts from uncertain economic conditions** on new projects[21](index=21&type=chunk) [Three Months Ended June 30, 2025](index=8&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025) Presents the income (loss) before taxes for each segment for the second quarter of 2025 Income (Loss) Before Taxes by Segment (Q2 2025, Dollars in thousands) | Segment | Income (Loss) Before Taxes | | :-------------------------------- | :------------------------- | | Loan Servicing and Systems (LSS) | $19,959 | | Education Technology Services and Payments (ETSP) | $23,542 | | Asset Generation and Management (AGM) | $27,393 | | Nelnet Bank | $(465) | | NFS Other Operating Segments | $10,091 | | Corporate and Other Activities | $156,746 | | Total | $237,364 | [Three Months Ended March 31, 2025](index=9&type=section&id=Three%20Months%20Ended%20March%2031%2C%202025) Presents the income (loss) before taxes for each segment for the first quarter of 2025 Income (Loss) Before Taxes by Segment (Q1 2025, Dollars in thousands) | Segment | Income (Loss) Before Taxes | | :-------------------------------- | :------------------------- | | Loan Servicing and Systems (LSS) | $18,512 | | Education Technology Services and Payments (ETSP) | $47,462 | | Asset Generation and Management (AGM) | $29,834 | | Nelnet Bank | $1,952 | | NFS Other Operating Segments | $10,060 | | Corporate and Other Activities | $(1,776) | | Total | $106,140 | [Three Months Ended June 30, 2024](index=10&type=section&id=Three%20Months%20Ended%20June%2030%2C%202024) Presents the income (loss) before taxes for each segment for the second quarter of 2024 Income (Loss) Before Taxes by Segment (Q2 2024, Dollars in thousands) | Segment | Income (Loss) Before Taxes | | :-------------------------------- | :------------------------- | | Loan Servicing and Systems (LSS) | $2,243 | | Education Technology Services and Payments (ETSP) | $25,599 | | Asset Generation and Management (AGM) | $24,310 | | Nelnet Bank | $(3,718) | | NFS Other Operating Segments | $16,525 | | Corporate and Other Activities | $(6,531) | | Total | $58,428 | [Six Months Ended June 30, 2025](index=11&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025) Presents the income (loss) before taxes for each segment for the first half of 2025 Income (Loss) Before Taxes by Segment (H1 2025, Dollars in thousands) | Segment | Income (Loss) Before Taxes | | :-------------------------------- | :------------------------- | | Loan Servicing and Systems (LSS) | $38,471 | | Education Technology Services and Payments (ETSP) | $71,005 | | Asset Generation and Management (AGM) | $57,226 | | Nelnet Bank | $1,487 | | NFS Other Operating Segments | $20,152 | | Corporate and Other Activities | $154,970 | | Total | $343,504 | [Six Months Ended June 30, 2024](index=12&type=section&id=Six%20Months%20Ended%20June%2030%2C%202024) Presents the income (loss) before taxes for each segment for the first half of 2024 Income (Loss) Before Taxes by Segment (H1 2024, Dollars in thousands) | Segment | Income (Loss) Before Taxes | | :-------------------------------- | :------------------------- | | Loan Servicing and Systems (LSS) | $18,234 | | Education Technology Services and Payments (ETSP) | $73,235 | | Asset Generation and Management (AGM) | $58,055 | | Nelnet Bank | $(2,571) | | NFS Other Operating Segments | $30,286 | | Corporate and Other Activities | $(24,872) | | Total | $152,365 | [Detailed Revenue and Loan Portfolio Analysis](index=13&type=section&id=Detailed%20Revenue%20and%20Loan%20Portfolio%20Analysis) Provides an in-depth analysis of Nelnet's revenue streams and loan portfolio performance [Loan Servicing and Systems (LSS) Revenue](index=13&type=section&id=Loan%20Servicing%20and%20Systems%20(LSS)%20Revenue) LSS revenue increased to $120.72 million for Q2 2025, up from $109.05 million in Q2 2024, and to $241.47 million for H1 2025, up from $236.25 million in H1 2024. This growth was primarily driven by significant increases in private education and consumer loan servicing revenue and software services revenue, offsetting a decrease in government loan servicing revenue Loan Servicing and Systems Revenue (Dollars in thousands) | Service Offering | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Government loan servicing | $85,737 | $87,014 | -1.47% | $173,100 | $192,490 | -10.07% | | Private education and consumer loan servicing | $22,733 | $12,959 | +75.42% | $45,426 | $25,577 | +77.69% | | FFELP loan servicing | $2,241 | $3,245 | -30.94% | $4,873 | $6,624 | -26.43% | | Software services | $9,452 | $4,879 | +93.74% | $16,444 | $9,420 | +74.56% | | Outsourced services | $561 | $955 | -41.26% | $1,622 | $2,141 | -24.24% | | Total LSS revenue | $120,724 | $109,052 | +10.70% | $241,465 | $236,252 | +2.21% | [Loan Servicing Volumes](index=13&type=section&id=Loan%20Servicing%20Volumes) Total servicing volume decreased to $516.09 billion as of June 30, 2025, from $523.75 billion a year prior, primarily due to a reduction in government and FFELP loan servicing volumes. Conversely, private and consumer loan servicing volume saw a significant increase. The total number of servicing borrowers also decreased, but remote hosted borrowers experienced substantial growth Loan Servicing Volumes (dollars in millions) | Servicing Volume (dollars in millions) | As of June 30, 2025 | As of June 30, 2024 | Change (YoY) | | :------------------------------------- | :------------------ | :------------------ | :------------ | | Government | $465,689 | $489,298 | -4.83% | | FFELP | $12,386 | $14,576 | -15.02% | | Private and consumer | $38,018 | $19,876 | +91.28% | | Total | $516,093 | $523,750 | -1.46% | Number of Servicing Borrowers | Number of Servicing Borrowers | As of June 30, 2025 | As of June 30, 2024 | Change (YoY) | | :---------------------------- | :------------------ | :------------------ | :------------ | | Government | 12,694,386 | 14,096,152 | -9.94% | | FFELP | 502,205 | 610,745 | -17.77% | | Private and consumer | 1,326,451 | 829,072 | +60.00% | | Total | 14,523,042 | 15,535,969 | -6.58% | - Number of remote hosted borrowers increased significantly to **2,056,358** as of June 30, 2025, from **133,681** as of June 30, 2024[28](index=28&type=chunk) [Education Technology Services and Payments (ETSP) Revenue](index=13&type=section&id=Education%20Technology%20Services%20and%20Payments%20(ETSP)%20Revenue) ETSP revenue increased slightly to $118.18 million for Q2 2025 from $116.91 million in Q2 2024, and to $265.52 million for H1 2025 from $260.45 million in H1 2024. Payment processing revenue saw notable growth, while education technology services revenue decreased. The business is subject to seasonal fluctuations, with higher revenue and operating margin typically in the first quarter Education Technology Services and Payments Revenue (Dollars in thousands) | Service Offering | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Tuition payment plan services | $36,013 | $34,164 | +5.41% | $76,085 | $73,043 | +4.16% | | Payment processing | $37,515 | $34,326 | +9.29% | $89,051 | $82,113 | +8.45% | | Education technology services | $44,481 | $47,205 | -5.77% | $100,177 | $103,227 | -2.95% | | Other | $175 | $1,214 | -85.58% | $202 | $2,066 | -90.22% | | Total ETSP revenue | $118,184 | $116,909 | +1.09% | $265,515 | $260,449 | +1.95% | - This segment is subject to **seasonal fluctuations**, with revenue and before-tax operating margin typically **higher in the first quarter** compared to the remainder of the year[29](index=29&type=chunk) [Other Income (Expense) Components](index=14&type=section&id=Other%20Income%20(Expense)%20Components) Nelnet's 'other, net' income significantly increased to $22.98 million for Q2 2025 from $14.02 million in Q2 2024, and to $46.67 million for H1 2025 from $18.10 million in H1 2024. This growth was primarily driven by increased investment activity and ALLO preferred return, despite a decrease in borrower late fee income Components of 'Other, net' Income (Dollars in thousands) | Component | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Investment activity, net | $8,852 | $217 | +3979.26% | $14,012 | $(1,082) | N/A | | ALLO preferred return | $5,985 | $4,160 | +43.87% | $14,400 | $6,569 | +119.21% | | Borrower late fee income | $1,642 | $2,584 | -36.45% | $3,231 | $5,718 | -43.49% | | (Loss) gain from solar investments, net | $(1,502) | $(2,610) | +42.45% | $(1,046) | $170 | N/A | | Total Other, net | $22,976 | $14,020 | +63.88% | $46,670 | $18,103 | +157.81% | [Solar Investments Accounting](index=14&type=section&id=Solar%20Investments%20Accounting) Explains the accounting method for solar investments and presents related net gains or losses - The Company accounts for its solar investments using the **Hypothetical Liquidation at Book Value (HLBV)** method, which typically results in **accelerated losses in the initial years** of investment[30](index=30&type=chunk) Net Gain (Loss) from Solar Investments (excluding noncontrolling interests, Dollars in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :-------------------------------------------------------------------- | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | (Losses) gains from solar investments, net | $(1,502) | $(2,610) | +42.45% | $(1,046) | $170 | N/A | | Net gain (loss), excluding amounts attributed to noncontrolling interest investors | $1,657 | $(2,618) | N/A | $3,158 | $1,803 | +75.15% | [Derivative Settlements](index=15&type=section&id=Derivative%20Settlements) Total derivative settlements, net, decreased to $0.74 million for Q2 2025 from $1.65 million in Q2 2024, and to $1.49 million for H1 2025 from $3.41 million in H1 2024. This reduction reflects lower income from basis swaps and interest rate swaps, which do not qualify for hedge accounting Derivative Settlements, Net (Dollars in thousands) | Component | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Basis swaps | $154 | $249 | -38.15% | $307 | $614 | -50.00% | | Interest rate swaps - floor income hedges | $427 | $1,193 | -64.19% | $855 | $2,383 | -64.04% | | Interest rate swaps - intercompany deposits | $163 | $207 | -21.26% | $327 | $409 | -20.10% | | Total derivative settlements - income | $744 | $1,649 | -54.99% | $1,489 | $3,406 | -56.30% | [Loan Portfolio and Allowance for Loan Losses](index=15&type=section&id=Loan%20Portfolio%20and%20Allowance%20for%20Loan%20Losses) As of June 30, 2025, Nelnet's total loans and accrued interest receivable, net, were $10.16 billion, a slight increase from December 31, 2024, but a decrease from June 30, 2024. Nelnet Bank's loan portfolio significantly grew, including new federally insured loans. The total allowance for loan losses increased, with varying percentages across different loan types and segments Loans and Accrued Interest Receivable, Net (Dollars in thousands) | Loan Type | As of June 30, 2025 | As of Dec 31, 2024 | Change (vs. Dec 31, 2024) | As of June 30, 2024 | Change (vs. June 30, 2024) | | :------------------------------------ | :------------------ | :----------------- | :------------------------ | :------------------ | :------------------------- | | Non-Nelnet Bank loans | $8,935,169 | $8,955,868 | -0.23% | $9,910,617 | -9.84% | | Nelnet Bank loans | $827,641 | $644,597 | +28.39% | $542,351 | +52.60% | | Total Loans and Accrued Interest Receivable, net | $10,155,483 | $9,992,744 | +1.63% | $10,939,519 | -7.17% | - **Nelnet Bank's loan portfolio** includes **$106,555 thousand** in **federally insured loans** as of June 30, 2025, which were not present in prior periods[32](index=32&type=chunk) - The Asset Generation and Management operating segment (Non-Nelnet Bank) contributed **$42.2 million** of **private education loans** to Nelnet Bank during the second quarter of 2025[32](index=32&type=chunk) [Loans and Accrued Interest Receivable Breakdown](index=15&type=section&id=Loans%20and%20Accrued%20Interest%20Receivable%20Breakdown) Provides a detailed breakdown of loans and accrued interest receivable by type and segment Loans and Accrued Interest Receivable by Type (Dollars in thousands, as of June 30, 2025) | Loan Type | Non-Nelnet Bank | Nelnet Bank | | :-------------------------- | :-------------- | :---------- | | Federally insured loans: | | | | Stafford and other | $2,039,136 | $10,040 | | Consolidation | $6,327,949 | $96,515 | | Private education loans | $156,614 | $516,663 | | Consumer and other loans | $411,470 | $204,423 | [Allowance for Loan Losses as Percentage of Loan Balance](index=16&type=section&id=Allowance%20for%20Loan%20Losses%20as%20Percentage%20of%20Loan%20Balance) Details the allowance for loan losses as a percentage of ending loan balances across different loan portfolios Allowance for Loan Losses as % of Ending Loan Balance (As of June 30, 2025) | Loan Portfolio | Non-Nelnet Bank | Nelnet Bank | | :---------------------------- | :-------------- | :---------- | | Federally insured loans | 0.57% | 0.33% | | Private education loans | 4.73% | 2.39% | | Consumer and other loans | 11.67% | 4.68% | - The allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty was **20.4%** for non-Nelnet Bank and **16.5%** for Nelnet Bank as of June 30, 2025[34](index=34&type=chunk) [Loan Activity - Non-Nelnet Bank (AGM)](index=17&type=section&id=Loan%20Activity%20-%20Non-Nelnet%20Bank%20(AGM)) For the six months ended June 30, 2025, AGM's total loan balance decreased slightly to $8.94 billion from $8.96 billion at year-end 2024. This period saw $975.7 million in loan acquisitions, but was offset by $695.1 million in repayments, $127.0 million in loans lost to external parties, $132.1 million in loans sold, and $42.2 million in loans contributed to Nelnet Bank. The accelerated run-off of the FFELP portfolio has significantly decreased since August 2024 Non-Nelnet Bank (AGM) Loan Activity (Six months ended June 30, 2025, Dollars in thousands) | Activity | FFELP | Private | Consumer and other | Total | | :---------------------------------------------------- | :---------- | :-------- | :----------------- | :---------- | | Balance as of December 31, 2024 | $8,388,564 | $221,744 | $345,560 | $8,955,868 | | Loan acquisitions | $703,425 | — | $272,290 | $975,715 | | Repayments, claims, capitalized interest, participations, and other, net | $(467,370) | $(21,455) | $(206,232) | $(695,057) | | Loans lost to external parties | $(125,535) | $(1,502) | — | $(127,037) | | Loans sold | $(131,999) | — | $(148) | $(132,147) | | Loans contributed to Nelnet Bank | — | $(42,173) | — | $(42,173) | | Balance as of June 30, 2025 | $8,367,085 | $156,614 | $411,470 | $8,935,169 | - The accelerated run-off of the FFELP portfolio due to consolidation into Federal Direct Loan Program loans has **significantly decreased since August 2024**, with prepayment rates returning to longer-term historical rates[36](index=36&type=chunk) [Loan Spread Analysis - Non-Nelnet Bank (AGM)](index=18&type=section&id=Loan%20Spread%20Analysis%20-%20Non-Nelnet%20Bank%20(AGM)) AGM's core loan spread increased to 1.27% for Q2 2025 from 0.98% in Q2 2024, and to 1.23% for H1 2025 from 0.90% in H1 2024. This improvement was driven by a higher variable loan yield and lower loan cost of funds, despite a decrease in the average balance of AGM's loans and debt outstanding. Management considers derivative settlements when evaluating loan spread Non-Nelnet Bank (AGM) Loan Spread Analysis | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Variable loan yield, net | 6.80% | 7.42% | -0.62 pp | 6.65% | 7.34% | -0.69 pp | | Loan cost of funds - interest expense | (5.60)% | (6.50)% | +0.90 pp | (5.50)% | (6.50)% | +1.00 pp | | Variable loan spread | 1.21% | 0.93% | +0.28 pp | 1.16% | 0.85% | +0.31 pp | | Core loan spread | 1.27% | 0.98% | +0.29 pp | 1.23% | 0.90% | +0.33 pp | | Average balance of AGM's loans | $9,215,579 | $10,484,458 | -12.10% | $9,379,948 | $11,022,981 | -14.91% | - Management believes **derivative settlements** should be evaluated with the Company's **net interest income (loan spread)** as part of its overall **risk management strategy** to **reduce interest rate volatility**[37](index=37&type=chunk) [Loan Activity - Nelnet Bank](index=19&type=section&id=Loan%20Activity%20-%20Nelnet%20Bank) Nelnet Bank's total loan portfolio significantly increased to $827.64 million as of June 30, 2025, from $542.35 million a year prior. This growth was driven by $203.17 million in loan acquisitions and originations and $42.17 million in loans contributed from AGM during the first half of 2025 Nelnet Bank Loan Activity (Six months ended June 30, 2025, Dollars in thousands) | Activity | FFELP | Private | Consumer and other | Total | | :------------------------------------ | :---------- | :-------- | :----------------- | :---------- | | Balance as of December 31, 2024 | — | $482,445 | $162,152 | $644,597 | | Loan acquisitions and originations | $111,040 | $37,396 | $54,730 | $203,166 | | Repayments | $(4,485) | $(45,351) | $(12,459) | $(62,295) | | Loans contributed from AGM | — | $(42,173) | — | $42,173 | | Balance as of June 30, 2025 | $106,555 | $516,663 | $204,423 | $827,641 | [Average Balance Sheet and Net Interest Margin - Nelnet Bank](index=20&type=section&id=Average%20Balance%20Sheet%20and%20Net%20Interest%20Margin%20-%20Nelnet%20Bank) Nelnet Bank's total interest-earning assets grew to an average of $1.73 billion for Q2 2025, up from $1.14 billion in Q2 2024. The net interest margin increased to 3.29% for Q2 2025 from 3.07% in Q2 2024, and to 3.37% for H1 2025 from 3.03% in H1 2024, driven by growth in private education and consumer loans and an increase in net interest margin Nelnet Bank Average Interest-Earning Assets and Liabilities (Dollars in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Average interest earning assets | $1,733,147 | $1,136,841 | +52.46% | $1,602,783 | $1,089,391 | +47.13% | | Average interest bearing liabilities | $1,514,157 | $1,004,546 | +50.73% | $1,405,409 | $956,840 | +46.88% | | Net interest margin | 3.29% | 3.07% | +0.22 pp | 3.37% | 3.03% | +0.34 pp | - **Nelnet Bank** experienced an increase of **$5.6 million** and **$10.4 million** in net interest income for the three and six months ended June 30, 2025, respectively, compared with the same periods in 2024, due to an increase in the average balance of loans and investments and an increase in net interest margin[20](index=20&type=chunk)
Nelnet Introduces Propelr, an Employee Learning Company Committed to Launching Workforce Potential
Prnewswire· 2025-07-24 21:45
Core Insights - Nelnet Business Services has launched Propelr, a digital learning platform aimed at enhancing training and retention for human resources, training, and compliance leaders [1][2] Company Overview - Propelr is designed to provide scalable, engaging, and efficient training solutions, focusing on onboarding, compliance training, professional development, and customer education [2][4] - The platform is backed by Nelnet's extensive experience in education technology, emphasizing effective employee education as critical for business success [2][3] Features and Benefits - Propelr offers a human-centered approach supported by artificial intelligence (AI), simplifying course creation, tracking, and reporting while prioritizing learner engagement [5] - The platform includes dedicated support to assist businesses in designing and implementing training programs at every stage [5] - Custom learning paths are available to empower teams, improving productivity, safety, and performance on the job [5] - On-demand virtual learning modules allow for adaptable training across various shifts, facilities, and growing workforces [5] - Gamification features are integrated to keep employees engaged and motivated, supporting retention and growth goals [5]
Nelnet: Good Business With Good Management, But Fairly Priced
Seeking Alpha· 2025-07-15 06:19
Investment Strategy - The company focuses on finding value in the market, particularly in small-cap stocks that offer asymmetric upside potential [1] - There is an interest in generating income through investments, leading to a focus on sustainable high dividend yields [1] - Key factors considered in business evaluation include insider buying, high insider ownership, a history of free cash flow growth, and substantial catalysts for turnaround [1] Investment Preferences - The company is open to high yield debt plays and selling puts, but is not interested in short positions [1] - Influences on investment strategy include notable investors such as Warren Buffett and Peter Lynch [1] - The preferred holding period for investments is indefinite, with a comfort level in matching market returns during bull runs and generating superior returns during market declines [1] Educational Background - The company has a Bachelor of Science degree with a major in Economics and Finance [1]
Nelnet: Key Drivers Pushing Shares To New Highs
Seeking Alpha· 2025-07-10 06:40
Core Insights - Nelnet has achieved a 15.7% compound annual growth rate (CAGR) in book value per share over the past 20 years, indicating strong financial performance [1] - The company has a market capitalization of $4.5 billion, yet it remains underfollowed in the investment community, suggesting potential for growth and investment interest [1] Company Analysis - The focus on undercovered companies allows for the identification of asymmetric investment opportunities, which can lead to market-beating returns [1] - The company operates in sectors such as technology, software, electronics, and energy transition, which are critical areas for future growth [1] Investment Perspective - The analysis emphasizes the importance of diligent research in small to mid-cap companies, which are often overlooked by larger investors [1] - The investment thesis is supported by a professional background in engineering and experience in automotive battery research and development, adding credibility to the analysis [1]
3 Financial Stocks to Buy Now on Core PCE Coming in High
ZACKS· 2025-07-01 14:45
Group 1: Economic Environment - The May 2025 Personal Consumption Expenditures (PCE) inflation report indicates core PCE inflation rose approximately 0.22% month over month and 2.68% year over year, reinforcing expectations for the Fed's hawkish stance [1][11] - Treasury yields have increased, with the benchmark 10-year yield climbing from roughly 3.35% to about 3.45%, reflecting market reactions to persistent inflation data [2][11] Group 2: Financial Sector Performance - Financial institutions, including banks and insurance companies, are expected to see increased profitability due to higher lending rates and improved net interest margins in a high-rate environment [4][5] - The S&P 500 Financials Select Sector SPDR (XLF) has risen 9.1% year to date as of June 30, indicating strong performance in the financial sector [5] Group 3: Investment Opportunities - Stocks such as Nelnet, Inc. (NNI), Pagaya Technologies Ltd. (PGY), and United Fire Group, Inc. (UFCS) are highlighted as viable investment options due to their strong earnings momentum and favorable growth rates [3][11] - Nelnet (NNI) has an expected earnings growth rate of 59% for the current year, with a Zacks Rank 1 and a VGM Score of B [8] - Pagaya Technologies (PGY) shows an expected earnings growth rate of 195.2% for the current year, also holding a Zacks Rank 1 and a VGM Score of B [9] - United Fire Group (UFCS) has an expected earnings growth rate of 8% for the next year, with a Zacks Rank 2 and a VGM Score of B [10]
Nelnet(NNI) - 2025 Q1 - Quarterly Report
2025-05-08 20:19
PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Nelnet, Inc.'s unaudited consolidated financial statements for Q1 2025, including balance sheets, income, cash flow, equity statements, and notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$14.19 billion** and liabilities to **$10.83 billion** by March 31, 2025, driven by loans and debt, with equity reaching **$3.36 billion** Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$14,191,958** | **$13,777,753** | | Loans and accrued interest receivable, net | $10,422,704 | $9,992,744 | | Total investments and notes receivable | $2,302,550 | $2,200,696 | | Total cash and cash equivalents | $220,517 | $194,518 | | **Total Liabilities** | **$10,828,949** | **$10,478,636** | | Bonds and notes payable | $8,656,157 | $8,309,797 | | Bank deposits | $1,313,407 | $1,186,131 | | **Total Equity** | **$3,363,009** | **$3,299,117** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Q1 2025 net income attributable to Nelnet, Inc. increased to **$82.6 million** (EPS **$2.26**), driven by higher net interest income despite decreased loan interest Q1 2025 vs. Q1 2024 Income Statement (in thousands, except EPS) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $82,714 | $74,222 | | Provision for Loan Losses | $15,337 | $10,828 | | Total Other Income, net | $315,778 | $310,908 | | Total Expenses | $277,015 | $280,365 | | Income Before Income Taxes | $106,140 | $93,937 | | **Net Income Attributable to Nelnet, Inc.** | **$82,560** | **$73,408** | | **Earnings Per Share (diluted)** | **$2.26** | **$1.98** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 operating cash flow decreased to **$91.2 million**, investing activities provided **$136.4 million**, and financing used **$326.4 million**, leading to a **$98.9 million** net cash decrease Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $91,169 | $211,559 | | Net cash provided by investing activities | $136,357 | $1,086,435 | | Net cash used in financing activities | ($326,445) | ($1,382,499) | | **Net decrease in cash, cash equivalents, and restricted cash** | **($98,893)** | **($84,668)** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, loan portfolio, debt, derivatives, investments (ALLO, Hudl), segment performance, and a significant subsequent ALLO investment redemption - In March 2025, the company acquired student loan trusts containing **$646.9 million** in federally insured loans, which were consolidated onto the balance sheet[30](index=30&type=chunk) - The company's servicing contract with the Department of Education was replaced by a new Unified Servicing and Data Solution (USDS) contract, effective April 2023, which went live on April 1, 2024. The new contract results in less revenue on a per borrower blended basis[101](index=101&type=chunk)[102](index=102&type=chunk) - Subsequent to the quarter end, in April 2025, the company entered into an agreement for ALLO to redeem all of Nelnet's preferred membership interests and a portion of its voting interest. The transaction is expected to close in May 2025, yielding approximately **$410 million** in cash proceeds and a pre-tax gain of about **$175 million**[107](index=107&type=chunk)[109](index=109&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial performance, covering consolidated results, segment performance, liquidity, capital resources, and the impact of the new servicing contract and key investments GAAP to Non-GAAP Net Income Reconciliation (in thousands) | Description | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | GAAP net income attributable to Nelnet, Inc. | $82,560 | $73,408 | | Realized and unrealized derivative market value adjustments | $6,324 | ($7,964) | | Tax effect | ($1,519) | $1,911 | | **Non-GAAP net income attributable to Nelnet, Inc.** | **$87,365** | **$67,355** | - The company's business is diversified across consumer lending, loan servicing, payments, and technology, with significant revenue from federally insured student loans and strategic investments in fiber communications (ALLO), venture capital, and renewable energy[115](index=115&type=chunk) [Consolidated Results of Operations](index=38&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated net income attributable to Nelnet, Inc. rose to **$82.6 million** in Q1 2025, driven by higher net interest income and an **$8.4 million** preferred return from ALLO Key Operating Results Comparison (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $82,714 | $74,222 | | LSS Revenue | $120,741 | $127,201 | | ETSP Revenue | $147,330 | $143,539 | | Total Operating Expenses | $217,916 | $217,489 | | Net Income Attributable to Nelnet, Inc. | $82,560 | $73,408 | [Segment Results of Operations](index=41&type=section&id=Segment%20Results%20of%20Operations) Segment performance varied, with LSS showing higher margins, ETSP revenue growth but compressed margins, NFS (AGM, Nelnet Bank) showing mixed results, and Corporate benefiting from ALLO investment returns Income (Loss) Before Income Taxes by Segment (in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | NDS (LSS) | $18,512 | $15,990 | | NBS (ETSP) | $47,462 | $47,635 | | AGM | $29,834 | $33,743 | | Nelnet Bank | $1,952 | $1,147 | | NFS Other | $10,060 | $13,762 | | Corporate & Other | ($1,776) | ($18,342) | [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity reached **$1.26 billion** by March 31, 2025, with **$1.02 billion** projected from securitizations, ongoing stock repurchases, and a declared dividend, plus **$410 million** expected from the ALLO redemption Sources of Liquidity as of March 31, 2025 (in thousands) | Source | Amount | | :--- | :--- | | Net cash and cash equivalents | $175,630 | | Unencumbered AFS debt securities | $164,597 | | Unencumbered private, consumer, and other loans | $327,744 | | Unencumbered repurchased Nelnet issued ABS | $97,419 | | Unused capacity on unsecured line of credit | $495,000 | | **Total Sources of Liquidity** | **$1,260,390** | - The company forecasts approximately **$1.02 billion** in future undiscounted cash flows from its existing asset-backed securitizations as of March 31, 2025[186](index=186&type=chunk)[189](index=189&type=chunk) - The company paid a Q1 2025 dividend of **$0.28 per share** and declared a Q2 2025 dividend of **$0.28 per share**. Under its stock repurchase program, **3,341,735 shares** remained authorized for repurchase as of March 31, 2025[222](index=222&type=chunk)[225](index=225&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, particularly basis and repricing risk in AGM, managed by Nelnet Bank and derivatives, with a 100 bps rate increase yielding **$5.0 million** higher pre-tax net income - The AGM segment's FFELP loans are exposed to basis risk, as assets are primarily indexed to 30-day average SOFR while funding is indexed to various other benchmarks like 90-day SOFR. The company uses basis swaps to mitigate this risk[245](index=245&type=chunk)[246](index=246&type=chunk) Consolidated Earnings Sensitivity to Interest Rate Changes (Q1 2025) | Change in Interest Rates | Change in Pre-Tax Net Income (in thousands) | Change in EPS | | :--- | :--- | :--- | | +300 basis points | $19,077 | $0.40 | | +100 basis points | $5,005 | $0.10 | | -100 basis points | ($4,248) | ($0.09) | | -300 basis points | ($10,558) | ($0.22) | [Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of the end of the period[259](index=259&type=chunk) - No material changes in internal control over financial reporting were identified during the first quarter of 2025[260](index=260&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to legal proceedings have occurred since the 2024 Annual Report on Form 10-K - No material changes from the Legal Proceedings section of the 2024 Form 10-K were reported[264](index=264&type=chunk) [Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors described in the 2024 Annual Report on Form 10-K were reported - No material changes from the risk factors described in the 2024 Form 10-K were reported[265](index=265&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2025, the company repurchased **38,491 shares** for **$4.5 million**, and a new program was authorized in March 2025 for up to **five million shares** Stock Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2025 | 258 | $108.70 | | Feb 2025 | 0 | N/A | | Mar 2025 | 38,233 | $115.86 | | **Total** | **38,491** | **$115.81** | - On March 20, 2025, the Board authorized a new stock repurchase program for up to **five million Class A shares**, effective for the three-year period ending May 8, 2028, which will replace the current program[268](index=268&type=chunk) [Other Information](index=68&type=section&id=Item%205.%20Other%20Information) No officers or directors adopted or terminated Rule 10b5-1 trading plans or other trading arrangements during Q1 2025 - No officers or directors adopted or terminated Rule 10b5-1 trading plans during Q1 2025[270](index=270&type=chunk) [Exhibits](index=69&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the ALLO Membership Unit Redemption Agreement and CEO/CFO certifications - Key exhibits filed include the ALLO Membership Unit Redemption Agreement and Sarbanes-Oxley Act certifications by the CEO and CFO[273](index=273&type=chunk)
Nelnet(NNI) - 2025 Q1 - Quarterly Results
2025-05-08 20:18
Introduction and Risk Factors This section outlines forward-looking statements and various risks, including those related to student loan servicing, loan portfolio management, financing, regulatory changes, and investments [Forward-Looking and Cautionary Statements](index=1&type=section&id=Forward-Looking%20and%20Cautionary%20Statements) This section outlines forward-looking statements based on management's expectations, subject to known and unknown risks, with no commitment to update except as legally required - Forward-looking statements are based on management's current expectations and perceptions of historical trends, current conditions, and future developments[3](index=3&type=chunk) - Statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results to differ materially[3](index=3&type=chunk) - The Company disclaims any commitment to voluntarily update or revise forward-looking statements, except as required by law[4](index=4&type=chunk) [Risk Factors](index=1&type=section&id=Risk%20Factors) The report highlights various risks, including those related to student loan servicing contracts, loan portfolio management (credit, prepayment, interest rate risks), financing and liquidity, regulatory changes, cybersecurity, and investments in areas like ALLO, solar tax equity, venture capital, and real estate - Risks include maintaining and increasing student loan servicing volumes under U.S. Department of Education contracts, unfavorable contract modifications, and meeting service requirements[5](index=5&type=chunk) - Loan portfolio risks encompass credit risk, prepayment risk, interest rate basis and repricing risk, and uncertainties regarding benefits from purchased securitized and unsecuritized loans[5](index=5&type=chunk) - Operational and information systems risks, including cyber breaches and the use of artificial intelligence, are also noted[5](index=5&type=chunk) - Investment-related risks cover ALLO Holdings, solar tax equity, venture capital, real estate, and reinsurance, including the ability to realize tax credits and achieve business objectives for Nelnet Bank[5](index=5&type=chunk) Consolidated Financial Statements This section presents the company's consolidated financial performance and position, including income statements and balance sheets for recent periods [Consolidated Statements of Income](index=2&type=section&id=Consolidated%20Statements%20of%20Income) Nelnet, Inc. reported a net income attributable to Nelnet, Inc. of $82.56 million for Q1 2025, an increase from $63.16 million in Q4 2024 and $73.41 million in Q1 2024, with earnings per common share also increasing to $2.26 in Q1 2025 Consolidated Statements of Income Highlights (Q1 2025 vs. Q4 2024 vs. Q1 2024) | Metric (in thousands) | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :-------------------- | :------------- | :---------------- | :------------- | | Total interest income | $207,828 | $221,249 | $268,802 | | Net interest income | $82,714 | $80,079 | $74,222 | | Net income | $81,130 | $63,427 | $70,756 | | Net income attributable to Nelnet, Inc. | $82,560 | $63,159 | $73,408 | | EPS - basic and diluted | $2.26 | $1.73 | $1.98 | - **Net interest income** increased to **$82.71 million** in Q1 2025 from $80.08 million in Q4 2024 and $74.22 million in Q1 2024[6](index=6&type=chunk) - **Total other income (expense), net**, was **$315.78 million** in Q1 2025, slightly down from $321.53 million in Q4 2024 but up from $310.91 million in Q1 2024[6](index=6&type=chunk) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Nelnet's total assets increased to $14.19 billion from $13.78 billion at December 31, 2024, but decreased from $15.37 billion at March 31, 2024, while loans and accrued interest receivable, net, saw an increase QoQ but a decrease YoY Condensed Consolidated Balance Sheets Highlights (as of March 31, 2025 vs. Dec 31, 2024 vs. March 31, 2024) | Metric (in thousands) | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :-------------------- | :------------- | :---------------- | :------------- | | Loans and accrued interest receivable, net | $10,422,704 | $9,992,744 | $11,829,078 | | Total assets | $14,191,958 | $13,777,753 | $15,374,212 | | Bonds and notes payable | $8,656,157 | $8,309,797 | $10,582,513 | | Total liabilities | $10,828,949 | $10,478,636 | $12,138,492 | | Total Nelnet, Inc. shareholders' equity | $3,419,523 | $3,349,762 | $3,297,190 | - **Loans and accrued interest receivable, net**, increased by approximately **$430 million** from December 31, 2024, to March 31, 2025, but decreased by approximately $1.4 billion compared to March 31, 2024[7](index=7&type=chunk) - **Total Nelnet, Inc. shareholders' equity** continued to grow, reaching **$3.42 billion** as of March 31, 2025, up from $3.35 billion at December 31, 2024, and $3.30 billion at March 31, 2024[7](index=7&type=chunk) Company Overview and Non-GAAP Measures This section provides an overview of Nelnet's diversified business, details reclassification and error corrections, and reconciles GAAP and non-GAAP net income [Company Overview](index=4&type=section&id=Company%20Overview) Nelnet is a diversified hybrid holding company primarily engaged in consumer lending, loan servicing, payments, and technology, with a significant focus on the education sector, also diversifying through investments in fiber communications (ALLO), venture capital, real estate, reinsurance, and renewable energy (solar) - Nelnet's primary businesses include consumer lending, loan servicing, payments, and technology, largely serving the education space[9](index=9&type=chunk) - A significant portion of revenue comes from net interest income on federally insured student loans[9](index=9&type=chunk) - The Company diversifies investments in ALLO, venture capital, real estate, reinsurance, and solar energy, and is expanding private education, consumer, and other loan portfolios through Nelnet Bank[9](index=9&type=chunk) [Reclassification and Immaterial Error Corrections](index=4&type=section&id=Reclassification%20and%20Immaterial%20Error%20Corrections) Immaterial errors in prior consolidated financial statements were identified and corrected in Q2 2024 to conform to the March 31, 2025 presentation, with further details available in the Q1 2025 10-Q - Immaterial errors in prior consolidated financial statements were identified and corrected in Q2 2024[10](index=10&type=chunk) - Corrections were made to conform to the March 31, 2025 presentation[10](index=10&type=chunk) [GAAP and Non-GAAP Net Income Reconciliation](index=4&type=section&id=GAAP%20and%20Non-GAAP%20Net%20Income%20Reconciliation) Nelnet provides non-GAAP net income, excluding derivative market value adjustments, to offer a clearer view of operational performance, as these adjustments can cause significant period-to-period volatility due to accounting rules for derivatives not qualifying for hedge accounting GAAP vs. Non-GAAP Net Income Attributable to Nelnet, Inc. (Q1 2025 vs. Q4 2024 vs. Q1 2024) | Metric (in thousands) | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :-------------------- | :------------- | :---------------- | :------------- | | GAAP net income attributable to Nelnet, Inc. | $82,560 | $63,159 | $73,408 | | Realized and unrealized derivative market value adjustments | $6,324 | ($13,792) | ($7,964) | | Tax effect | ($1,519) | $3,310 | $1,911 | | Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments | $87,365 | $52,677 | $67,355 | | GAAP EPS | $2.26 | $1.73 | $1.98 | | Non-GAAP EPS | $2.39 | $1.44 | $1.81 | - **Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments**, was **$87.37 million** in Q1 2025, up from $52.68 million in Q4 2024 and $67.36 million in Q1 2024[12](index=12&type=chunk) - The Company uses non-GAAP measures to provide additional information regarding operational and performance indicators, as derivative market value adjustments can cause significant period-to-period volatility[14](index=14&type=chunk) Recent Developments This section details recent significant events, specifically the partial redemption of Nelnet's investment in ALLO [Partial Redemption of ALLO Investment](index=5&type=section&id=Partial%20Redemption%20of%20ALLO%20Investment) Nelnet is undergoing a partial redemption of its ALLO investment, expecting to receive approximately $410 million in cash proceeds and recognize a pre-tax gain of about $175 million, with this transaction, expected to close in late May 2025, reducing Nelnet's ownership in ALLO from 45% to approximately 26% while retaining a significant voting equity interest - ALLO executed a financing transaction on April 18, 2025, resulting in gross proceeds of **$500 million**[16](index=16&type=chunk) - Nelnet expects to receive approximately **$410 million** in cash proceeds from the redemption of its preferred and a portion of its voting membership interests in ALLO[18](index=18&type=chunk) - A pre-tax gain of approximately **$175 million** is anticipated upon closing, which is expected in late May 2025[18](index=18&type=chunk) - Nelnet's ownership of ALLO will decrease from **45% to approximately 26%** after the transaction, but it will maintain a significant voting equity investment[19](index=19&type=chunk) Operating Segments This section describes Nelnet's operating segments, their financial performance, and detailed breakdowns of their income and expenses [Segment Descriptions](index=5&type=section&id=Segment%20Descriptions) Nelnet operates through several reportable segments: Loan Servicing and Systems (NDS), Education Technology Services and Payments (NBS), Asset Generation and Management (AGM), and Nelnet Bank, all part of the Nelnet Financial Services (NFS) division, with other activities including ALLO and venture capital investments grouped under Corporate and Other Activities - Reportable operating segments include Loan Servicing and Systems (NDS), Education Technology Services and Payments (NBS), Asset Generation and Management (AGM), and Nelnet Bank[22](index=22&type=chunk) - NDS and NBS generate fee-based revenue, while AGM earns net interest income from its FFELP loan portfolio[20](index=20&type=chunk) - Nelnet Bank focuses on private education and unsecured consumer loan markets, and Corporate and Other Activities include investments in ALLO, venture capital, solar tax equity, and unallocated corporate costs[20](index=20&type=chunk)[21](index=21&type=chunk) [Segment Operating Results (Pre-Tax Income)](index=6&type=section&id=Segment%20Operating%20Results%20(Pre-Tax%20Income)) For Q1 2025, NDS and Nelnet Bank showed increased pre-tax operating margins, while NBS experienced a slight decrease due to higher operating expenses, AGM's pre-tax income decreased due to higher loan loss provisions and lower investment interest income, partially offset by increased net loan interest income, and Corporate activities showed mixed results, with ALLO investment income turning positive Segment Operating Results (Net Income (Loss) Before Taxes) (Q1 2025 vs. Q1 2024) | Segment (in thousands) | March 31, 2025 | March 31, 2024 | | :--------------------- | :------------- | :------------- | | NDS | $18,512 | $15,990 | | NBS | $47,462 | $47,635 | | AGM | $29,834 | $33,743 | | Nelnet Bank | $1,952 | $1,147 | | NFS other operating segments | $10,060 | $13,762 | | Corporate (total) | $8,416 | ($8,593) | | Net income before taxes | $106,140 | $93,937 | - **NDS pre-tax operating margin** increased due to higher private education and consumer loan servicing volume and cost-saving measures, despite lower government loan servicing revenue[24](index=24&type=chunk) - **AGM's pre-tax income** decreased due to a **$13.0 million provision for loan losses** in Q1 2025 (up from $6.5 million in Q1 2024) and a **$9.1 million decrease in investment interest income**, partially offset by a **$16.6 million increase in net loan interest income**[24](index=24&type=chunk) - **Nelnet Bank's pre-tax income** increased significantly due to a **$4.8 million increase in net interest income**, driven by higher loan and investment balances and improved net interest margin[24](index=24&type=chunk) - The **ALLO investment segment** recognized income of **$8.4 million** in Q1 2025, a positive swing from a loss of $8.6 million in Q1 2024, primarily due to income on preferred membership interests and the carrying value of voting interests reaching $0[24](index=24&type=chunk) [Detailed Segment Financials](index=8&type=section&id=Detailed%20Segment%20Financials) This section provides a detailed breakdown of interest income, interest expense, net interest income, other income, and total expenses for each reportable segment and reconciling items across Q1 2025, Q4 2024, and Q1 2024, illustrating the specific contributions and costs of each business area Total Interest Income by Segment (Q1 2025) | Segment (in thousands) | Loan Servicing and Systems | Education Technology Services and Payments | Asset Generation and Management | Nelnet Bank | Total Reportable Segments | | :--------------------- | :------------------------- | :--------------------------------------- | :------------------------------ | :---------- | :------------------------ | | Total interest income | $721 | $6,939 | $167,238 | $24,467 | $199,365 | Total Other Income (Expense), Net by Segment (Q1 2025) | Segment (in thousands) | Loan Servicing and Systems | Education Technology Services and Payments | Asset Generation and Management | Nelnet Bank | Total Reportable Segments | | :--------------------- | :------------------------- | :--------------------------------------- | :------------------------------ | :---------- | :------------------------ | | Total other income (expense), net | $126,537 | $147,394 | $1,691 | ($2,223) | $273,399 | Income (Loss) Before Income Taxes by Segment (Q1 2025) | Segment (in thousands) | Loan Servicing and Systems | Education Technology Services and Payments | Asset Generation and Management | Nelnet Bank | Total Reportable Segments | | :--------------------- | :------------------------- | :--------------------------------------- | :------------------------------ | :---------- | :------------------------ | | Income (loss) before income taxes | $18,512 | $47,462 | $29,834 | $1,952 | $97,760 | Disaggregated Revenue and Loan Portfolio Details This section provides detailed breakdowns of revenue by service offering, loan servicing volumes, components of other income, derivative settlements, and comprehensive loan portfolio analysis for both Nelnet Bank and Non-Nelnet Bank segments [Loan Servicing and Systems (LSS) Revenue](index=11&type=section&id=Loan%20Servicing%20and%20Systems%20(LSS)%20Revenue) LSS revenue for Q1 2025 was $120.74 million, a decrease from Q4 2024 but a slight decrease from Q1 2024, driven by a decrease in government loan servicing revenue, partially offset by a significant increase in private education and consumer loan servicing revenue Loan Servicing and Systems Revenue by Service Offering (Q1 2025 vs. Q4 2024 vs. Q1 2024) | Service Offering (in thousands) | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------------------------------ | :------------- | :---------------- | :------------- | | Government loan servicing | $87,358 | $103,217 | $105,474 | | Private education and consumer loan servicing | $22,696 | $24,819 | $12,620 | | FFELP loan servicing | $2,633 | $2,642 | $3,380 | | Software services | $6,992 | $6,415 | $4,541 | | Outsourced services | $1,062 | $888 | $1,186 | | Total LSS revenue | $120,741 | $137,981 | $127,201 | - **Government loan servicing revenue** decreased by **17.1% YoY** from $105.47 million in Q1 2024 to $87.36 million in Q1 2025[32](index=32&type=chunk) - **Private education and consumer loan servicing revenue** increased significantly by **79.8% YoY** from $12.62 million in Q1 2024 to $22.70 million in Q1 2025[32](index=32&type=chunk) [Loan Servicing Volumes](index=11&type=section&id=Loan%20Servicing%20Volumes) As of March 31, 2025, total servicing volume increased QoQ to $542.34 billion, primarily driven by a substantial increase in private and consumer loan servicing volume, offsetting a decrease in government and FFELP volumes, while the total number of servicing borrowers slightly decreased QoQ Loan Servicing Volume (dollars in millions) (as of March 31, 2025 vs. Dec 31, 2024 vs. March 31, 2024) | Servicing Volume | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :--------------- | :------------- | :---------------- | :------------- | | Government | $482,786 | $489,877 | $495,409 | | FFELP | $12,826 | $13,260 | $15,783 | | Private and consumer | $46,728 | $29,226 | $21,015 | | Total | $542,340 | $532,363 | $532,207 | Number of Servicing Borrowers (as of March 31, 2025 vs. Dec 31, 2024 vs. March 31, 2024) | Number of Borrowers | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------------------ | :------------- | :---------------- | :------------- | | Government | 13,453,127 | 14,049,550 | 14,328,013 | | FFELP | 524,421 | 549,861 | 656,814 | | Private and consumer | 1,645,423 | 1,168,293 | 882,256 | | Total | 15,622,971 | 15,767,704 | 15,867,083 | - **Private and consumer loan servicing volume** increased by **59.9% QoQ** from $29.23 billion to $46.73 billion, and by **122.3% YoY** from $21.02 billion[33](index=33&type=chunk) [Education Technology Services and Payments (ETSP) Revenue](index=11&type=section&id=Education%20Technology%20Services%20and%20Payments%20(ETSP)%20Revenue) ETSP revenue for Q1 2025 was $147.33 million, a significant increase from Q4 2024 and slightly up from Q1 2024, with this growth primarily driven by increases in tuition payment plan services, payment processing, and education technology services, reflecting seasonal fluctuations Education Technology Services and Payments Revenue by Service Offering (Q1 2025 vs. Q4 2024 vs. Q1 2024) | Service Offering (in thousands) | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------------------------------ | :------------- | :---------------- | :------------- | | Tuition payment plan services | $40,072 | $31,149 | $38,880 | | Payment processing | $51,536 | $41,117 | $47,786 | | Education technology services | $55,695 | $35,759 | $56,021 | | Other | $27 | $310 | $852 | | Total ETSP revenue | $147,330 | $108,335 | $143,539 | - **ETSP revenue** increased by **36.0% QoQ** from $108.34 million in Q4 2024 to $147.33 million in Q1 2025, and by **2.6% YoY** from $143.54 million[35](index=35&type=chunk) - The segment is subject to seasonal fluctuations, with revenue and before-tax operating margin typically higher in the first quarter[35](index=35&type=chunk) [Other Income (Expense) Components](index=12&type=section&id=Other%20Income%20(Expense)%20Components) Total 'other, net' income was $23.69 million in Q1 2025, a decrease from Q4 2024 but a substantial increase from Q1 2024, primarily driven by a significant increase in ALLO preferred return and positive investment activity, offsetting a decrease in borrower late fee income and solar investment gains Components of 'Other, Net' Income (in thousands) (Q1 2025 vs. Q4 2024 vs. Q1 2024) | Component | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :---------------------------- | :------------- | :---------------- | :------------- | | ALLO preferred return | $8,416 | $6,133 | $2,409 | | Investment activity, net | $5,161 | $4,989 | ($1,298) | | Borrower late fee income | $1,587 | $1,369 | $3,133 | | Gain from solar investments, net | $456 | $4,559 | $2,780 | | Loss from ALLO voting membership interest investment | $0 | $0 | ($10,693) | | Other, net | $23,694 | $27,794 | $4,082 | - **ALLO preferred return** increased by **249.3% YoY** from $2.41 million in Q1 2024 to $8.42 million in Q1 2025[37](index=37&type=chunk) - **Net investment activity** turned positive in Q1 2025 (**$5.16 million**) compared to a loss in Q1 2024 ($1.30 million)[37](index=37&type=chunk) - **Solar investments**, accounted for using the HLBV method, generated a net gain of **$456 thousand** in Q1 2025, significantly lower than $4.56 million in Q4 2024 and $2.78 million in Q1 2024[37](index=37&type=chunk)[38](index=38&type=chunk) [Derivative Settlements](index=13&type=section&id=Derivative%20Settlements) Derivative settlements, net, decreased to $746 thousand in Q1 2025 from $1.09 million in Q4 2024 and $1.76 million in Q1 2024, reflecting lower settlements from basis swaps and interest rate swaps Derivative Settlements - Income (in thousands) (Q1 2025 vs. Q4 2024 vs. Q1 2024) | Component | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :---------------------------- | :------------- | :---------------- | :------------- | | Basis swaps | $153 | $156 | $365 | | Interest rate swaps - floor income hedges | $429 | $704 | $1,190 | | Interest rate swaps - Nelnet Bank | $164 | $227 | $202 | | Total derivative settlements - income | $746 | $1,087 | $1,757 | - **Total derivative settlements** decreased by **31.4% QoQ** and **57.5% YoY**[40](index=40&type=chunk) [Loans and Accrued Interest Receivable and Allowance for Loan Losses](index=13&type=section&id=Loans%20and%20Accrued%20Interest%20Receivable%20and%20Allowance%20for%20Loan%20Losses) As of March 31, 2025, total loans and accrued interest receivable, net, increased QoQ to $10.42 billion, driven by growth in Nelnet Bank's federally insured, private education, and consumer loans, and Non-Nelnet Bank's FFELP and consumer loans, with the total allowance for loan losses also increasing QoQ to $120.08 million Loans and Accrued Interest Receivable, Net (in thousands) (as of March 31, 2025 vs. Dec 31, 2024 vs. March 31, 2024) | Loan Type | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :---------------------------- | :------------- | :---------------- | :------------- | | Non-Nelnet Bank loans | $9,260,006 | $8,955,868 | $10,799,942 | | Nelnet Bank loans | $761,633 | $644,597 | $483,723 | | Accrued interest receivable | $566,275 | $549,283 | $684,095 | | Total loans and accrued interest receivable, net | $10,422,704 | $9,992,744 | $11,829,078 | Allowance for Loan Losses (in thousands) (as of March 31, 2025 vs. Dec 31, 2024 vs. March 31, 2024) | Allowance Type | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :---------------------------- | :------------- | :---------------- | :------------- | | Non-Nelnet Bank allowance for loan losses | $103,204 | $98,689 | $95,220 | | Nelnet Bank allowance for loan losses | $16,872 | $16,201 | $10,788 | | Total allowance for loan losses | $120,076 | $114,890 | $106,008 | Allowance for Loan Losses as a Percentage of Ending Loan Balance (as of March 31, 2025 vs. Dec 31, 2024 vs. March 31, 2024) | Loan Portfolio | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :---------------------------- | :------------- | :---------------- | :------------- | | Non-Nelnet Bank: Federally insured loans | 0.56 % | 0.59 % | 0.59 % | | Non-Nelnet Bank: Private education loans | 4.98 % | 5.02 % | 5.63 % | | Non-Nelnet Bank: Consumer and other loans | 11.52 % | 11.13 % | 12.08 % | | Nelnet Bank: Federally insured loans | 0.33 % | — | — | | Nelnet Bank: Private education loans | 2.02 % | 2.09 % | 1.00 % | | Nelnet Bank: Consumer and other loans | 4.08 % | 3.77 % | 5.99 % | [Loan Activity - Non-Nelnet Bank (AGM)](index=14&type=section&id=Loan%20Activity%20-%20Non-Nelnet%20Bank%20(AGM)) Non-Nelnet Bank (AGM) loan portfolios increased to $9.26 billion as of March 31, 2025, driven by significant loan acquisitions, particularly in FFELP and consumer loans, offsetting repayments and sales, and the accelerated run-off of the FFELP portfolio has decreased since August 2024 Non-Nelnet Bank (AGM) Loan Activity (in thousands) (Q1 2025) | Activity | FFELP | Private | Consumer and other | Total | | :---------------------------- | :----------- | :----------- | :----------------- | :----------- | | Balance as of Dec 31, 2024 | $8,388,564 | $221,744 | $345,560 | $8,955,868 | | Loan acquisitions | $702,800 | $0 | $129,787 | $832,587 | | Repayments, claims, etc., net | ($230,558) | ($12,535) | ($93,984) | ($337,077) | | Loans lost to external parties | ($58,764) | ($702) | $0 | ($59,466) | | Loans sold | ($131,758) | $0 | ($148) | ($131,906) | | Balance as of Mar 31, 2025 | $8,670,284 | $208,507 | $381,215 | $9,260,006 | - **Loan acquisitions for Non-Nelnet Bank** totaled **$832.59 million** in Q1 2025, significantly higher than $196.33 million in Q4 2024 and $80.73 million in Q1 2024[44](index=44&type=chunk) - The accelerated run-off of the FFELP portfolio, experienced since late 2021, has significantly decreased since August 2024, with prepayment rates returning to historical levels[44](index=44&type=chunk) [Loan Spread Analysis - Non-Nelnet Bank (AGM)](index=15&type=section&id=Loan%20Spread%20Analysis%20-%20Non-Nelnet%20Bank%20(AGM)) The core loan spread for AGM's Non-Nelnet Bank portfolio increased to 1.19% in Q1 2025, up from 1.18% in Q4 2024 and 0.84% in Q1 2024, with this improvement driven by a decrease in loan cost of funds, despite a slight decrease in variable loan yield Loan Spread Analysis - Non-Nelnet Bank (AGM) (Q1 2025 vs. Q4 2024 vs. Q1 2024) | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :---------------------------- | :------------- | :---------------- | :------------- | | Variable loan yield, net | 6.51 % | 6.97 % | 7.28 % | | Loan cost of funds - interest expense | (5.39) % | (5.86) % | (6.50) % | | Variable loan spread | 1.13 % | 1.12 % | 0.79 % | | Core loan spread | 1.19 % | 1.18 % | 0.84 % | | Average balance of AGM's loans | $9,544,317 | $9,403,661 | $11,561,504 | - **Core loan spread** increased by **0.01 percentage points QoQ** and **0.35 percentage points YoY**[46](index=46&type=chunk) - The **average balance of AGM's loans** increased QoQ to **$9.54 billion** but decreased YoY from $11.56 billion[46](index=46&type=chunk) [Loan Activity - Nelnet Bank](index=16&type=section&id=Loan%20Activity%20-%20Nelnet%20Bank) Nelnet Bank's loan portfolios grew significantly to $761.63 million as of March 31, 2025, driven by substantial loan acquisitions and originations, including federally insured loans, private education loans, and consumer loans Nelnet Bank Loan Activity (in thousands) (Q1 2025) | Activity | FFELP | Private | Consumer and other | Total | | :---------------------------- | :----------- | :----------- | :----------------- | :----------- | | Balance as of Dec 31, 2024 | $0 | $482,445 | $162,152 | $644,597 | | Loan acquisitions and originations | $111,002 | $29,041 | $4,555 | $144,598 | | Repayments | ($815) | ($22,035) | ($4,712) | ($27,562) | | Balance as of Mar 31, 2025 | $110,187 | $489,451 | $161,995 | $761,633 | - **Nelnet Bank's total loan acquisitions and originations** were **$144.60 million** in Q1 2025, a decrease from $186.23 million in Q4 2024 but an increase from $73.56 million in Q1 2024[50](index=50&type=chunk) - **Federally insured loans**, which were $0 in prior periods, reached **$110.19 million** as of March 31, 2025[50](index=50&type=chunk) [Average Balance Sheet - Nelnet Bank](index=16&type=section&id=Average%20Balance%20Sheet%20-%20Nelnet%20Bank) Nelnet Bank's average interest-earning assets increased to $1.47 billion in Q1 2025, up from $1.39 billion in Q4 2024 and $1.04 billion in Q1 2024, and the net interest margin for Nelnet Bank was 3.46% in Q1 2025, a decrease from 3.76% in Q4 2024 but an increase from 3.00% in Q1 2024 Nelnet Bank Average Balance Sheet and Rates (Q1 2025 vs. Q4 2024 vs. Q1 2024) | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :---------------------------- | :------------- | :---------------- | :------------- | | Average interest-earning assets | $1,470,971 | $1,389,982 | $1,041,941 | | Rate on interest-earning assets | 6.75 % | 7.42 % | 6.59 % | | Average interest-bearing liabilities | $1,295,453 | $1,235,218 | $909,136 | | Rate on interest-bearing liabilities | 3.73 % | 4.11 % | 4.11 % | | Net interest margin | 3.46 % | 3.76 % | 3.00 % | - The **average balance of private education loans** increased to **$489.21 million** in Q1 2025 from $482.38 million in Q4 2024, with a yield of 6.10%[52](index=52&type=chunk) - **Retail and other deposits** constitute the largest portion of interest-bearing liabilities, with an average balance of **$962.95 million** and a rate of 4.21% in Q1 2025[52](index=52&type=chunk)