Navient Corporation · NASDAQ:NAVI
Navient — Q3 2019 Earnings Presentation
21 slides from Navient's earnings presentation, Oct 23, 2019
Slide 1: 2019 3rd Quarter Earnings Call Presentation
2019 3rd Quarter Earnings Call Presentation October 23, 2019
Slide 2: Forward-Looking Statements; Non-GAAP Financial Measures
Forward-Looking Statements; Non-GAAP Financial Measures The following information is current as of September 30, 2019 (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, 2018 (the “2018 Form 10-K”),
Slide 3: Operating Results: Core Earnings Basis
Operating Results “Core Earnings ” Basis 1 Selected Financial Information and Ratios 3rd Quarter Highlights (In millions, except per Q3 19 Q2 19 Q3 18 share amounts) • Adjusted Core Earnings per share of $0.65 compared to $0.56 in the year-ago quarter 2 GAAP diluted EPS $0.63 $0.64 $0.43 Adjusted Co
Slide 4: Federal Education Loans Segment
Federal Education Loans Segment “Core Earnings” Basis Selected Financial Information and Ratios 3rd Quarter Highlights ($ In millions) Q3 19 Q2 19 Q3 18 Federal Education Segment net interest margin 0.82% 0.81% 0.82% • Net Interest Margin: 82 basis points • Charge-off Rate: 6 basis points FFELP Loan
Slide 5: Consumer Lending Segment
Consumer Lending Segment “Core Earnings Basis” Selected Financial Information and Ratios 3rd Quarter Highlights ($ In millions) Q3 19 Q2 19 Q3 18 Consumer Lending Segment net interest margin 3.45% 3.22% 3.35% • Net Interest Margin: 3.45% • Charge-off Rate: 1.6% Private Education Loans (including Ref
Slide 6: Business Processing Segment
Business Processing Segment “Core Earnings” Basis Selected Financial Information and Ratios 3rd Quarter Highlights ($ In millions) Q3 19 Q2 19 Q3 18 Business Processing Government Services $39 $40 $40 • EBITDA Margin 1: 20% Healthcare RCM Services $27 $25 $24 Total Business Processing $66 $65 $64 •
Slide 7: Impact of CECL – Pro-forma Estimates
Impact of CECL – Pro-forma Estimates The Path Through Our Post CECL Capital Structure and Income ($’s in millions) • On January 1, 2020, shareholder’s equity (after tax impact) is estimated to decrease by approximately $590 - $655 1 • Ongoing profitability of the existing education portfolio will be
Slide 8: Q3 2019 Capital Management
Q3 2019 Capital Management Capital Return Repurchased 9.7 million common shares for $130 million • Since inception 1, returned $3.1 billion through share repurchases Paid $36 million in dividends to shareholders • Since inception 1, returned $1.1 billion through dividends The tangible net asse
Slide 9: Education Loan Portfolio Generates Significant Cash Flows
Education Loan Portfolio Generates Significant Cash Flows Projected Life of Loan Cash Flows over ~20 Years Enhancing Cash Flows $’s in Billions • Generated $1.9 billion of cash flows in YTD 2019 FFELP Cash Flows 9/30/19 Secured • Paid down unsecured debt of $1.0 billion in YTD 2019 Residual (includi
Slide 10: On Track to Meet or Exceed Original Target Financial Metrics
On Track to Meet or Exceed Original 1 Target Financial Metrics • Raising our 2019 Adjusted Core EPS 2 guidance to a range of $2.52 to $2.55 3 Key Company & Business Segment Metrics 2018 2019 Actual Original 1 Target Core Earnings Return on Equity 4 15% Mid-teens Core Earnings Efficiency Ratio 5 47%
Slide 11: GAAP Results
GAAP Results (In millions, except per share amounts) Q3 19 Q2 19 Q3 18 Net income (loss) $145 $153 $114 Diluted earnings (loss) per common share $0.63 $0.64 $0.43 Operating expenses $251 $241 $255 Provision for loan losses $64 $68 $85 Average Education Loans $89,411 $91,547 $98,689 © 2019 Navient So
Slide 12: Appendix
Appendix © 2019 Navient Solutions, LLC. All rights reserved. 12
Slide 13: 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 $1.6 $1.5 $1.6 $1.4 $1.3 $1.4 $1.3 $1.2 $1.1 $1.2 $1.1 ($’s in Billions) $1.0 $1.0 ($’s in Billions) $1.0 $1.0 $0.9 $0.8 $0.8 $0
Slide 14: Managing Unsecured Debt Maturities
Managing Unsecured Debt Maturities (par value, $ in billions) $2.2 $2.1 $2.1 $1.8 $1.8 $1.6 $1.4 $1.4 $1.5 $1.5 $1.4 $1.4 $1.4 $0.6 $0.6 $0.5 $0.5 $0.0 $0.0 $0.0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028+ As of September 30, 2018 As of September 30, 2019 Long-term Conservative Funding Approa
Slide 15: Consumer Loan Segment Credit Detail
Consumer Loan Segment Credit Detail Credit Metrics Allowance for Loan Loss TDR Loans ($ in millions) 3Q 19 2Q 19 3Q 18 September 30, 2019 Ending Allow ance as Total delinquencies $911 $944 $1,202 ($ in millions) Allow ance Balance % of Ending Balance Total delinquency rate as a % of loans 10.6% 10.8
Slide 16: Long-term Capital Allocation Philosophy
Long-term Capital Allocation Philosophy Consistently balance capital adequacy with capital allocation opportunities, including dividends, organic growth, stock repurchases and acquisitions ✓ Execute dynamic capital allocation policy to maintain appropriate leverage that supports our credit ratings a
Slide 17: Other Segment: Core Earnings Basis
Other Segment “Core Earnings” Basis YTD shared services expenses declined 9% from the year ago period YTD 2019 Total Unallocated Shared Services Expenses Shared Services Overview $197 Million • Nearly 75% of total expenses are allocated CEO, Corporate Proxy Contest Marketing & Other Matters 2% • Sha
Slide 18: Navient Is Focused On Expense Efficiency
Navient Is Focused On Expense Efficiency Notable Items Impacting Total Expenses Compared to Prior Periods ($ In millions) Q3 19 Q3 18 YTD Q3 19 YTD Q3 18 Reported Core Earnings Expenses $253 $256 $753 $741 Year over Year Change in Reported Core Earnings Expenses (1%) 2% Restructuring & Reorganizatio
Slide 19: 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 20: Differences Between Core Earnings And GAAP
Differences Between Core Earnings And GAAP Quarters Ended Core Earnings adjustments to GAAP: Sep. 30, Jun. 30, Sep. 30, (Dollars in Millions) 2019 2019 2018 GAAP net income (loss) $145 $153 $114 Net impact of derivative accounting (7) 23 12 Net impact of goodwill and acquired intangible assets 6 11
Slide 21: Navient
NAVIENT.