Navient Corporation · NASDAQ:NAVI
Navient — Q3 2022 Earnings Presentation
38 slides from Navient's earnings presentation, Oct 27, 2022
Slide 1: 2022 3rd Quarter Investor Presentation
NAVIENT 2022 3rd Quarter Investor Presentation October 27, 2022 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 September 30, 2022 (unless otherwise noted) and should be read in connection with Navient Corporation’s “Navient” Annual Report on Form 10-K for the year end December 31, 2021 (the “2021 Form 10-K”), f
Slide 3: 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, health care and government Originations
Slide 4: Navient Delivers Diversified, Long-term Value
Consumer Lending Business Processing Federal Education Loans Total revenue of Originated Technology enabled $148 million $447 million platform & reflects our continued of high-quality Private differentiated success in managing Education Loans expertise enhances interest rate risk the client
Slide 5: Navient is Focused on Cost Efficiency
Navient is Focused on Cost Efficiency Cutting-Edge Efficiency Continuously Evolving Our Expense Base Innovative financing reduces interest expense, Demonstrated history of reducing expenses maximizing cashflow and shareholder value and improving efficiency across our businesses Continuing to d
Slide 6: Building Value and Driving Meaningful Returns
Building Value and Driving Meaningful Returns Since 2014 Separation 1 Our competitive franchise, with its highly attractive return Originated over Loan Originations $20 billion Private profile, leverages our core expertise to drive profits and growth Education Loans Loan Portfolios Acquired Accr
Slide 7: Navient Continues to Advance Environmental, Social and Governance Initiatives
Navient Continues to Advance Environmental, Social and Governance Initiatives Social Initiatives Environmental Initiatives Community partnerships • Participant in the Carbon Disclosure Project (CDP) • National partnership with Boys & Girls Clubs of America to • Ongoing efforts to reduce already low
Slide 8: Education Lending Remains an Attractive Opportunity
Education Lending Remains an Attractive Opportunity Sizable Market With Attractive Yields 1 Leveraging Our Existing Infrastructure to Generate Value Estimated Total Market Annual Originations 2 and Yields ($’s in billions) • Private Education Refinance Loans: Grad PLUS - Using our data and expertise
Slide 9: 2022 Guidance
2022 Guidance Full Year 2022 EPS Guidance: $3.35 - $3.45 1 Original Full Year 2022 Guidance 2 Year to Date 2022 Actuals Core Earnings Return on Equity 1 Mid to High Teens ✓ 18% Core Earnings Efficiency Ratio 1 ~54% ✓ 51% Adjusted Tangible Equity Ratio 1 ~6% ✓ 7.8% Net Interest Margin – Federal Educa
Slide 10: Funding, Liquidity, & Cashflow
Funding, Liquidity, & Cashflow © 2022 Navient Solutions, LLC. All rights reserved. 10
Slide 11: Financing and Capital Management
Financing and Capital Management Third Quarter Results & Upcoming Items Capital Management Returned $ 117 million through share repurchases and dividends ✓ Paid dividends of $22 million ✓ Repurchased 6.3 million shares for $95 million ✓ $685 million common share repurchase Board authority remains ou
Slide 12: 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 $1.5 billion of cash flows in YTD 2022 FFELP Cash Flows 09/30/2022 Secured • Returned $0.4 billion to shareholders through share Residual (inclu
Slide 13: Education Loan Portfolio Five Year Cash Flow
Education Loan Portfolio Five Year Cash Flow Projected Annual Private Education Loan Cash Flows Projected Annual FFELP Loan Cash Flows $1.2 $1.2 $1.0 $0.9 $1.0 $0.9 $0.9 $0.8 $0.8 $0.8 ($’s in Billions) ($’s in Billions) $0.8 $0.8 $0.7 $0.7 $0.6 $0.6 $0.4 $0.4 $0.3 $0.2 $0.2 $0.2 $0.0 $0.0 2022 2023
Slide 14: Projecting FFELP Cashflows through 2034
Projecting FFELP Cashflows through 2034 $’s in millions as of 09/30/2022 2022 2023 2024 2025 2026 2027 2028 2029 Projected FFELP Average Balance $45,866 $42,482 $38,444 $34,522 $30,829 $27,248 $23,803 $20,531 Projected Excess Spread $163 $560 $476 $432 $410 $367 $319 $281 Projected Servicing Revenue
Slide 15: Secured Cash Flow
Secured Cash Flow Comparing Current to Historical $ in Millions 3Q2022 2021 2020 2019 FFELP Term Securitized Servicing (Cash Paid) $ 135 $ 204 $ 227 $ 253 Net Residual1 (Excess Distributions) $ 425 $ 750 676 743 Other Secured FFELP Net Cash Flow 2 $ 13 $ 105 154 227 Total FFELP $ 573 $ 1,059 $ 1,057
Slide 16: Navient Capital Structure
Navient Capital Structure Optimizing Conservative Management for Long-Term Goals Long-Term Conservative Funding Approach Managing Unsecured Debt Maturities (par value, $ in billions) • Important to maintain our credit ratings which support ongoing access to the unsecured debt markets • We pursue opp
Slide 17: Managing Unsecured Debt Maturities
Managing Unsecured Debt Maturities $1.5 $1.3 $1.4 $1.4 $1.1 $1.1 $0.9 $1.0 $0.7 $0.7 $0.6 $0.6 $0.5 $0.5 $0.5 $0.5 $0.2 $0.0 $0.0 $0.0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031+ (par value, $ in billions) As of September 30, 2022 As of September 30, 2021 Long-Term Conservative Funding Approa
Slide 18: FFELP ABS
FFELP ABS © 2022 Navient Solutions, LLC. All rights reserved. 18
Slide 19: Student Loan Comparison
Student Loan Comparison(1) FFELP vs. In-School Private Education vs. Refi Private Education In-School Private ReFi Private FFELP 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
Slide 20: FFELP ABS Typical Transaction Characteristics
FFELP ABS Typical Transaction 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 •
Slide 21: Loan Prepayments: Navient Stafford & PLUS
Loan Prepayments Navient Stafford & PLUS • Higher prepayment activity in mid-2012 was related to the short-term availability of the Special Direct Consolidation Loan program • Prepayment increases occurred in 2015 and 2018 as we exercised our option to purchase assets from selected transactions to m
Slide 22: Loan Prepayments: Navient Consolidations
Loan Prepayments Navient Consolidations • CPRs for Consolidation ABS trusts declined significantly following legislation effective in 2006 that prevented in-school and re-consolidation of borrowers’ loans • Higher prepayment activity in mid 2012 was related to the short-term availability of the Spec
Slide 23: Private Education Loan ABS
Private Education Loan ABS © 2022 Navient Solutions, LLC. All rights reserved. 23
Slide 24: Private Education Loan ABS Issuance Characteristics
Private Education Loan ABS Issuance 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 benefi
Slide 25: Student Loan Comparison
Student Loan Comparison(1) FFELP vs. In-School Private Education vs. Refi Private Education In-School Private ReFi Private FFELP 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
Slide 26: Navient Private Education Trusts
Navient Private Education Trusts As of the respective cutoff dates for each transaction 2020-2022YTD Navient Issuance Program 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 Bond Amount
Slide 27: Prepayment Analysis: Constant Prepayment Rate
Prepayment Analysis Navient Private Education Legacy Loan Trusts • Constant prepayment rates increased beginning 2014 on increased seasoning-related voluntary prepayment and the emergence of the external student loan refinance market • Prepayment activity declined in 2020 during the COVID-19 crisis
Slide 28: Navient Corporation Appendix
Navient Corporation Appendix © 2022 Navient Solutions, LLC. All rights reserved. 28
Slide 29: Operating Results
Operating Results Core Earnings Basis Selected Financial Information and Ratios 3rd Quarter 2022 Highlights Q3 22 Q2 22 Q3 21 • Adjusted Core Earnings1 per share of $0.75 (In millions, except per share amounts) - Core Earnings Return on Equity 1 of 15% - Inclusive of a 5-cent reduction in EPS as a G
Slide 30: Federal Education Loans Segment
Federal Education Loans Segment Core Earnings Basis Selected Financial Information and Ratios 3rd Quarter 2022 Highlights Q3 22 Q2 22 Q3 21 Federal Education ($ In millions) Q3 22 Net Interest Margin: 94 bps Segment net interest margin 0.94% 1.11% 1.04% Q3 22 Annualized Net Charge-off Rate: 12 bps F
Slide 31: Consumer Lending Segment
Consumer Lending Segment Core Earnings Basis Selected Financial Information and Ratios 3rd Quarter 2022 Highlights Q3 22 Q2 22 Q3 21 Consumer Lending ($ In millions) Q3 22 Net Interest Margin: 290 bps Segment net interest margin 2.90% 2.66% 2.98% Q3 22 Annualized Net Charge-off Rate : 201 bps Privat
Slide 32: Business Processing Segment
Business Processing Segment Core Earnings Basis Selected Financial Information and Ratios 3rd Quarter 2022 Highlights ($ In millions) Q3 22 Q2 22 Q3 21 Business Processing Government Services $47 $53 $75 Q3 22 EBITDA Margin 1: 16% Healthcare RCM Services $32 $34 $47 • Total revenue of $79 million ev
Slide 33: Other Segment
Other Segment Core Earnings Basis YTD 2022 Unallocated Shared Services Expense Shared Services Overview $180 million Shared services are related to the management of the entire company or shared Regulatory 3% by multiple reporting segments CEO, Corporate Related Costs Marketing & Other - Centralizat
Slide 34: 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 35: Notes on Non-GAAP Financial Measures
Notes on Non-GAAP Financial Measures 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 performance and determ
Slide 36: Differences Between Core Earnings and GAAP
Differences Between Core Earnings and GAAP Quarters Ended Core Earnings adjustments to GAAP: Sept. 30, June 30, Sept. 30, (Dollars in Millions) 2022 2022 2021 GAAP net income (loss) $105 $180 $173 Net impact of derivative accounting (33) (72) (30) Net impact of goodwill and acquired intangible asset
Slide 37: Investor Relations Website
Investor Relations Website www.navient.com/investors www.navient.com/abs • NAVI / SLM student loan trust data (Debt/asset backed securities – NAVI / SLM Student Loan Trusts) - Static pool information – detailed portfolio stratifications by trust as of the cutoff date - Accrued interest factors - Qua
Slide 38: NAVIENT
NAVIENT