Navient Corporation · NASDAQ:NAVI
Navient — Q1 2023 Earnings Presentation
33 slides from Navient's earnings presentation, Apr 27, 2023
Slide 1: 2023 1st Quarter Investor Presentation
2023 1 st Quarter Investor Presentation April 27, 2023 NASDAQ: NAVI
Slide 2: Forward-Looking Statements; Non-GAAP Financial Measures
Forward-Looking Statements; Non-GAAP Financial Measures The following information is current as of March 31, 2023 (unless otherwise noted) and should be read in connection with Navient Corporation’s “Navient” Annual Report on 2022 Form 10-K for the year end December 31, 2022 (the “2022 Form 10-K”),
Slide 3: Navient provides technology-enabled education finance and business processing solutions
Navient provides technology-enabled education finance and business processing solutions that simplify complex programs and help millions of people achieve success Our customer-focused, data-driven services deliver exceptional results for clients in education, healthcare and government Originations F
Slide 4: Business Processing, Consumer Lending, Federal Education Loans
Consumer Lending Federal Education Loans Business Processing Net interest margin Net interest margin Generated revenue of of 1.12% reflects our of 3.12% demonstrates $72 million continued success in the value of private managing interest rate education lending risk Revenue from traditional s
Slide 5: Navient is Focused on Cost Efficiency
Navient is Focused on Cost Efficiency Cutting-Edge Efficiency Continuously Evolving Innovative financing boosts net income, Focused on evolving to a variable cost maximizing cashflow and shareholder value structure from a fixed cost structure Continuing to drive strong margins through Growin
Slide 6: Navient: A Culture of ESG
Navient: A Culture of ESG • National partnership with Boys & Girls Clubs of America to bring career and college planning resources to support equity for youth • 4 hours paid time each month – equivalent to 6 days per year – for employees to volunteer in their communities • Participant in the Carbon
Slide 7: Education Lending: Strong Growth in In-School Product
Education Lending: Strong Growth in In-School Product Deploying Capital at Mid-Teens ROE Sizable Market With Attractive Yields1 Using Our Data & Expertise Estimated Total Market Annual Originations and Yields ($’s in billions) In-school products continue to exhibit strong growth. Our Going Merry Gra
Slide 8: Adhering to a Consistent and Transparent Capital Allocation Philosophy
Adhering to a Consistent and Transparent Capital Allocation Philosophy Consistently balance capital adequacy with capital allocation opportunities, including dividends, organic growth, acquisitions, and reducing unsecured debt ✓ Execute dynamic capital allocation to maintain appropriate leverage tha
Slide 9: 2023 Outlook
2023 Outlook 2023 Full Year Adjusted Core EPS Guidance: $3.15 - $3.30 1 Full Year 2023 Guidance Q1 2023 Actuals Core Earnings Return on Equity 1 Mid-Teens 19% Core Earnings Efficiency Ratio 1 55% – 58% 53% Adjusted Tangible Equity Ratio 1 8% – 9% 8.5% Net Interest Margin – 1.00% – 1.10% 1.12% Federa
Slide 10: Financing & Capital Management
Financing & Capital Management 1st Quarter 2023 Capital Management 1st Quarter 2023 Financing Returned $106 million through share Unsecured debt reduced by over 10% repurchases & dividends ✓ Paid dividends of $21 million ✓ Retired $1 billion of unsecured debt ✓ Repurchased 4.9 million shares at an a
Slide 11: Education Loan Portfolio Cash Flows
Education Loan Portfolio Cash Flows Projected Life of Loan Cash Flows over ~20 Years Enhancing Cash Flows $’s in Billions FFELP Cash Flows • Generated $0.4 billion of cash flows in Q1 2023 03/31/2023 Secured Residual (including O/C) $4.5 • Originated $168 million of new private education loans Floor
Slide 12: Education Loan Portfolio Cash Flows Over the Next Five Years
Education Loan Portfolio Cash Flows Over the Next Five Years Projected Annual Private Education Cash Flows Projected Annual FFELP Cash Flows $1.2 $1.2 Cash Flows assuming Cash Flows assuming call option can be trusts run to maturity $1.0 exercised at 10% $1.0 ($’s in Billions) ($’s in Billions) $0.8
Slide 13: Projected FFELP Cash Flows
Projected FFELP Cash Flows $4.5 Billion $1.4 Billion Total Cash Flows from Projected Excess Spread Total Cash Flows from Projected Servicing Revenues $’s in millions 2023 as of 03/31/2023 Remaining 2024 2025 2026 2027 2028 2029 2030 Projected FFELP Average Balance $44,831 $36,959 $33,322 $29,854 $26
Slide 14: Conservative Capital Structure Management
Conservative Capital Structure Management Long-Term Conservative Funding Approach Managing Unsecured Debt Maturities • Important to maintain our credit ratings which (par value, $ in billions) support ongoing access to the unsecured debt market • We pursue opportunities to repurchase debt in the ope
Slide 15: Navient Student Loan Comparison
Navient Student Loan Comparison In-School Private ReFi Private FFELP 1 Education Student Loans Education Student Loans Borrower Student or Parent Student or Parent Student or Parent Co-Signer None Typical Not Typical Lender Eligible banks and private lenders Banks and other private sector lenders Ba
Slide 16: FFELP ABS Characteristics
FFELP ABS Characteristics FFELP ABS Transaction Features Collateral Characteristics • Issue size of $500M+ • Guarantee of underlying collateral insulates bondholders from most risk of loss of principal 1 • Senior and subordinate notes • Amortizing tranches with 1 to 10+ year • Typically non-discharg
Slide 17: Prepayment Analysis: FFELP Stafford & PLUS Loan Trusts
Prepayment Analysis: FFELP Stafford & PLUS Loan Trusts • Stafford/Mixed trust loan prepayments declined significantly following legislation effective in 2006 • Prepayments increased significantly in Q4 2022 leading up to the temporary Limited Public Service Loan Forgiveness Waiver (PSLF) original pe
Slide 18: Prepayment Analysis: FFELP Consolidation Loan Trusts
Prepayment Analysis: FFELP Consolidation Loan Trusts • Constant prepayment rates for Consolidation ABS trusts declined significantly following legislation effective in 2006 • Consolidation loan prepayments increased in Q4 2021 following announcement of the Dept. of Education temporary Limited Public
Slide 19: Private Education Loan ABS Characteristics
Private Education Loan ABS Characteristics Private Education Loan ABS Transaction Features Collateral Characteristics • Issue size of $500M+ • Collateralized by loans made to students and parents to fund college tuition, room and • Senior and subordinate notes board - Seasoned assets benefiting from
Slide 20: Navient Private Education Trusts
Navient Private Education Trusts 2020-2022YTD Navient Issuance Program NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV 20-A 20-B 20-C 20-D 20-E 20-F 20-G 20-H 20-I 21-A 21-B 21-C 21-D 21-E 21-F 21-G 22-A 22-B 23-A Bond Amount ($mil) 620 712 546 808 499 781 786 955 604 818
Slide 21: Prepayment Analysis: Private Education Legacy Loan Trusts
Prepayment Analysis: Private Education Legacy Loan Trusts • Constant prepayment rates increased beginning in 2014 on increased seasoning-related voluntary prepayment and the emergence of the external student loan refinance market • Prepayment activity declined slightly in 2020 during the COVID-19 cr
Slide 22: Prepayment Analysis: Private Education Refinance Loan Trusts
Prepayment Analysis: Private Education Refinance Loan Trusts • Constant prepayment rates increased through 2019 as borrowers took advantage of opportunities to refinance at lower coupons as interest rates decreased • Prepayment activity declined to current levels as interest rates increased beginnin
Slide 23: Appendix
Appendix Confidential and proprietary information © 2023 Navient Solutions, LLC. All rights reserved. 23
Slide 24: Operating Results
Operating Results Selected Financial Information and Ratios 1st Quarter 2023 Highlights Q1 23 Q4 22 Q1 22 • Adjusted Core EPS1, 2 of $1.06 - Core Earnings Return on Equity1 increased to 19% (In millions, except per share amounts) from 15% in the prior quarter GAAP Diluted EPS $0.86 $0.78 $1.67 • Ach
Slide 25: Federal Education Loans Segment
Federal Education Loans Segment Selected Financial Information and Ratios 1st Quarter 2023 Highlights Q1 23 Q4 22 Q1 22 Federal Education Loans ($ In millions) Segment net interest margin 1.12% 0.94% 1.04% Q1 23 Net Interest Margin: 112 bps Q1 23 Annualized Net Charge-off Rate: 22 bps FFELP Loans •
Slide 26: Consumer Lending Segment
Consumer Lending Segment Selected Financial Information and Ratios 1st Quarter 2023 Highlights Q1 23 Q4 22 Q1 22 Consumer Lending ($ In millions) Q1 23 Net Interest Margin: 312 bps Segment net interest margin 3.12% 2.87% 2.80% Q1 23 Annualized Net Charge-off Rate : 163 bps Consumer Loans • Achieved
Slide 27: Business Processing Segment
Business Processing Segment Selected Financial Information and Ratios 1st Quarter 2023 Highlights Q1 23 Q4 22 Q1 22 Business Processing ($ In millions) Government Services Revenue $40 $39 $49 Q1 23 EBITDA Margin 1: 7% Healthcare Services Revenue $32 $31 $45 Total Business Processing $72 $70 $94 • Ge
Slide 28: Other Segment
Other Segment Q1 2023 Unallocated Shared Services Expense Shared Services Overview $61 million Shared services are related to the Regulatory Related management of the entire company or shared Costs 3% CEO, Corporate by multiple reporting segments Marketing & Other HR 3% - Centralization creates cost
Slide 29: 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. Definitions for the non- GAAP financial measures and reconciliations are provided below and
Slide 30: Notes on Non-GAAP Financial Measures
Notes on Non-GAAP Financial Measures (Dollars in Millions) 4. Core Earnings Efficiency Ratio – The Core Earnings Efficiency Ratio measures the company’s Adjusted Core Earnings expenses, which exclude restructuring and regulatory-related expenses, relative to its Adjusted Core Earnings revenue. This
Slide 31: Differences Between Core Earnings and GAAP
Differences Between Core Earnings and GAAP Quarters Ended Core Earnings adjustments to GAAP: Mar. 31, Dec. 31, Mar. 31, (Dollars in Millions) 2023 2022 2022 GAAP net income (loss) $111 $105 $255 Net impact of derivative accounting 27 (1) (159) Net impact of goodwill and acquired intangible assets 3
Slide 32: Investor Relations Website
Investor Relations Website www.navient.com/investors www.navient.com/abs • Environmental Social Governance (ESG) information - Navient Corporate Social Responsibility • Student loan asset-backed security (ABS) trust data - Static pool information – detailed portfolio stratifications by trust as of t
Slide 33: Navient
NAVIENT.