Navient Corporation · NASDAQ:NAVI
Navient — Q2 2020 Earnings Presentation
21 slides from Navient's earnings presentation, Jul 22, 2020
Slide 1: 2020 2nd Quarter Earnings Call Presentation
2020 2nd Quarter Earnings Call Presentation July 22, 2020
Slide 2: Forward-Looking Statements; Non-GAAP Financial Measures
Forward-Looking Statements; Non-GAAP Financial Measures The following information is current as of June 30, 2020 (unless otherwise noted) and should be read in connection with Navient Corporation’s “Navient” Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”), file
Slide 3: Successfully Building Long-term Value in Challenging Environment
Successfully Building Long-term Value in Challenging Environment Federal Education Loans Consumer Lending Segment Business Processing Segment Segment Provided immediate payment Dynamically adjusted our Rapidly pivoted from COVID-19 relief to 6 million borrowers originations in response to impa
Slide 4: 2020 Outlook
2020 Outlook Key Company & Business Segment Metrics Full Year 2020 Year to Date 2020 Full Year 2020 Original Targets 1 Actuals Updated Guidance Core Earnings Return on Equity 2 High Teens to Low Twenties 21% ✓ Low to Mid Twenties Core Earnings Efficiency Ratio 3 ~50% 48% ✓ ~50% 3.6% Adjusted Tangibl
Slide 5: Operating Results: Core Earnings Basis
Operating Results “Core Earnings ” Basis 1 Selected Financial Information and Ratios 2nd Quarter Highlights (In millions, except per share amounts) Q2 20 Q1 20 Q2 19 • Adjusted Core Earnings per share of $0.91 compared to $0.74 in the year-ago quarter 2 GAAP diluted EPS $0.64 ($0.53) $0.64 • Provide
Slide 6: Federal Education Loans Segment
Federal Education Loans Segment “Core Earnings” Basis Selected Financial Information and Ratios 2nd Quarter Highlights ($ In millions) Q2 20 Q1 20 Q2 19 Federal Education • Q2 20 Net Interest Margin: 107 basis points Segment net interest margin 1.07% 0.81% 0.81% • Q2 20 Charge-off Rate: 11 basis poi
Slide 7: Consumer Lending Segment
Consumer Lending Segment “Core Earnings” Basis Selected Financial Information and Ratios 2nd Quarter Highlights ($ In millions) Q2 20 Q1 20 Q2 19 Consumer Lending • Q2 20 Net Interest Margin: 3.20% Segment net interest margin 3.20% 3.31% 3.22% • Q2 20 Charge-off Rate: 1.0% Private Education Loans (i
Slide 8: Consumer Lending Segment: Assisting Borrowers Through the Crisis
Consumer Lending Segment Assisting Borrowers Through the Crisis Total Private Education Loans in Forbearance 1 Total Private Education Loans in Current Repayment 1 ($’s in billions) ($’s in billions) $3.5 $24.0 $22.0 $3.0 $20.0 $2.5 $18.0 $2.0 $16.0 $1.5 $14.0 $1.0 $12.0 $0.5 $10.0 • Implemented an
Slide 9: Business Processing Segment
Business Processing Segment “Core Earnings” Basis Selected Financial Information and Ratios 2nd Quarter Highlights ($ In millions) Q2 20 Q1 20 Q2 19 Business Processing Government Services $43 $33 $40 • Q2 20 EBITDA Margin 1: 13% Healthcare RCM Services $21 $24 $25 • New Government Services contract
Slide 10: Q2 2020 Financing and Capital Management
Q2 2020 Financing and Capital Management Financing Issued 2 Private Education Loan ABS transactions for $1.3 billion Extended a FFELP Facility for two years and a Private Education facility for one year Increased capacity in our Private Education Refinance Loan Facility Total available capac
Slide 11: GAAP Results
GAAP Results (In millions, except per share amounts) Q2 20 Q1 20 Q2 19 Net income (loss) $125 ($106) $153 Diluted earnings (loss) per common share $0.64 ($0.53) $0.64 Operating expenses $213 $251 $241 Provision for loan losses $44 $95 $68 Average Education Loans $85,149 $87,006 $91,547 © 2020 Navien
Slide 12: Appendix
Appendix © 2020 Navient Solutions, LLC. All rights reserved. 12
Slide 13: Education Loan Portfolio Generates Significant Cash Flows
Education Loan Portfolio Generates Significant Cash Flows Projected Life of Loan Cash Flows over ~20 Years Optimizing Cash Flows $’s in Billions • Generated $1.4 billion of cash flows YTD 2020 FFELP Cash Flows 06/30/20 Secured • Paid down unsecured debt of $0.7 billion YTD 2020 Residual (including O
Slide 14: Education Loan Portfolio Generates Meaningful Cash Flows Over the Next Five Years
Education Loan Portfolio Generates Meaningful Cash Flows Over the Next Five Years Projected Annual Private Education Loan Cash Flows Projected Annual FFELP Loan Cash Flows $1.4 $1.6 $1.2 $1.2 $1.4 $1.2 $1.0 $1.0 $1.0 $1.2 ($’s in Billions) $0.9 ($’s in Billions) $1.0 $1.0 $0.9 $0.9 $0.8 $0.8 $0.6 $0
Slide 15: Managing Unsecured Debt Maturities
Managing Unsecured Debt Maturities (par value, $ in billions) 2.1 $1.8 1.8 $1.5 1.5 1.4 1.4 1.4 1.3 1.3 $1.3 0.7 0.5 0.6 0.6 0.5 0.5 0.0 0.0 0.0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029+ As of June 30, 2019 As of June 30, 2020 Long-term Conservative Funding Approach • Navient prioritizes co
Slide 16: Other Segment
Other Segment “Core Earnings” Basis YTD Unallocated Shared Services Expenses Shared Services Overview $127 million • Nearly 75% of total expenses are allocated CEO, Corporate Marketing & Other • Shared services are related to the management of the entire HR & Corporate Facilities 3% company or share
Slide 17: Navient Is Focused On Expense Efficiency
Navient Is Focused On Expense Efficiency Notable Items Impacting Total Expenses Compared to Prior Periods ($ In millions) Q2 20 Q2 19 Q2 20 YTD Q2 19 YTD Reported Core Earnings Expenses 214 $242 $469 $499 Year over Year Change in Reported Core Earnings Expenses (12%) (6%) Restructuring & Reorganizat
Slide 18: Notes on Non-GAAP Financial Measures
Notes on Non-GAAP Financial Measures (Dollars in Millions) In addition to financial results reported on a GAAP basis, Navient also provides certain performance measures which are non-GAAP financial measures. The following non-GAAP financial measures are presented within this Presentation: 1. Core Ea
Slide 19: Notes on Non-GAAP Financial Measures
Notes on Non-GAAP Financial Measures (Dollars in Millions) 4. Earnings before Interest, Taxes, Depreciation and Amortization Expense (“EBITDA”) – This metric measures the operating performance of the Business Processing segment and is used by management and our equity investors to monitor operating
Slide 20: Differences Between Core Earnings And GAAP
Differences Between Core Earnings And GAAP Quarters Ended Core Earnings adjustments to GAAP: Jun. 30, Mar. 31, Jun. 30, (Dollars in Millions) 2020 2020 2019 GAAP net income (loss) $125 ($106) $153 Net impact of derivative accounting 59 247 23 Net impact of goodwill and acquired intangible assets 5 5
Slide 21: Navient
NAVIENT.