Navient Corporation · NASDAQ:NAVI
Navient — Q4 2022 Earnings Presentation
33 slides from Navient's earnings presentation, Feb 27, 2023
Slide 1: 2022 4th Quarter Investor Presentation
NAVIENT. 2022 4th Quarter Investor Presentation February 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 December 31, 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, 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, health care and government Originations
Slide 4: Consumer Lending, Federal Education Loans and Business Processing
Total revenue of Originated over Generated Consumer Lending Business Processing Federal Education Loans $621 million $2 billion $330 million in reflects our continued of high-quality Private revenue success in managing Education Loans interest rate risk Revenue from In-School originations
Slide 5: Navient is Focused on Cost Efficiency
Navient is Focused on Cost Efficiency Cutting-Edge Efficiency Continuously Evolving Innovative financing boosts net income, Focused on evolving to a variable cost maximizing cashflow and shareholder value structure from a fixed cost structure Continuing to drive strong margins through Growin
Slide 6: Navient: A Culture of ESG
Navient: A Culture of ESG • National partnership with Boys & Girls Clubs of America to bring career and college planning resources to support equity for youth • 4 hours paid time each month – equivalent to 6 days per year – for employees to volunteer in their communities • Participant in the Carbon
Slide 7: Education Lending Remains an Attractive Opportunity
Education Lending Remains an Attractive Opportunity Deploying Capital at Mid-Teens ROE Sizable Market With Attractive Yields 1 Using Our Data & Expertise Estimated Total Market Annual Originations and Yields 2 ($’s in billions) In-school products have exhibited strong growth and refinance Grad PLUS
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: Navient 2023 Outlook
Navient 2023 Outlook 2023 Full Year Adjusted Core EPS Guidance: $3.15 - $3.30 1 Full Year 2023 Guidance Core Earnings Return on Equity 1 Mid-Teens Core Earnings Efficiency Ratio 1 55% – 58% Adjusted Tangible Equity Ratio 1 8% – 9% Net Interest Margin – Federal Education Loans 1.00% – 1.10% Segment N
Slide 10: Funding, Liquidity, & Cash Flow
Funding, Liquidity, & Cash Flow Confidential and proprietary information © 2023 Navient Solutions, LLC. All rights reserved. 10
Slide 11: Financing and Capital Management
Financing and Capital Management Full Year 2022 Results Capital Management Returned $491 million through share repurchases & dividends ✓ Paid dividends of $91 million ✓ Repurchased 24.8 million shares at an average price of $16.13 ✓ $600 million common share repurchase Board authority remains outsta
Slide 12: Education Loan Portfolio Cash Flows
Education Loan Portfolio Cash Flows Projected Projected Life Life of of Loan Loan Cash Cash Flows Flows over over ~20 ~20 Years Years Enhancing Cash Flows $’s in Billions • Generated $1.9 billion of cash flows in FY22 FFELP Cash Flows 12/31/2022 Secured • Returned $0.5 billion to shareholders throug
Slide 13: Education Loan Portfolio Cash Flows Over the Next Five Years
Education Loan Portfolio Cash Flows Over the Next Five Years 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 $0.8 ($’s in Billions) ($’s in Billions) $0.8 $0.8 $0.7 $0.7 $0.6 $0.6 $0.6 $0.4 $0.4 $0.2 $0.2 $0.
Slide 14: Projected FFELP Cash Flows
Projected FFELP Cash Flows $’s in millions as of 12/31/2022 2023 2024 2025 2026 2027 2028 2029 2030 Projected FFELP Average Balance $40,659 $36,775 $33,102 $29,615 $26,289 $23,082 $20,048 $17,179 Projected Excess Spread $587 $483 $446 $412 $371 $323 $285 $248 Projected Servicing Revenue $185 $170 $1
Slide 15: 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 16: 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 17: 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-discha
Slide 18: FFELP Loan Prepayments: Stafford & PLUS
FFELP Loan Prepayments Navient Stafford & PLUS • Prepayment increases occurred in 2015 and 2018 as we exercised our option to purchase assets from selected transactions to mitigate the risk that certain tranches might remain outstanding past their legal final maturity dates • Prepayments increased s
Slide 19: FFELP Loan Prepayments: Consolidations
FFELP 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 • Consolidation loan prepayments increased in Q4 2021 following the PSLF Waiver announce
Slide 20: Private Education Loan ABS Characteristics
Private Education Loan ABS Characteristics Private Education Loan ABS Transaction Features Collateral Characteristics • Issue size of $500M+ • Collateralized by loans made to students and parents to fund college tuition, room and • Senior and subordinate notes board - Seasoned assets benefiting from
Slide 21: Private Education Trusts
Private Education Trusts As of the respective cutoff dates for each transaction 2020-2022YTD Navient Issuance Program NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV NAV 20-A 20-B 20-C 20-D 20-E 20-F 20-G 20-H 20-I 21-A 21-B 21-C 21-D 21-E 21-F 21-G 22-A 22-B Bond Amount ($mil) 6
Slide 22: Private Education Loan Prepayments
Private Education Loan Prepayments 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 C
Slide 23: Navient Corporation Appendix
Navient Corporation Appendix Confidential and proprietary information © 2023 Navient Solutions, LLC. All rights reserved. 23
Slide 24: Operating Results
Operating Results Selected Financial Information and Ratios 4th Quarter & Full Year 2022 Highlights Q4 22 Q4 21 2022 2021 (In millions, except per share amounts) • Adjusted Core EPS1, 2 of $0.85 in Q4 22 and $3.43 in FY22 GAAP Diluted EPS $0.78 ($0.07) $4.49 $4.18 - Core Earnings Return on Equity 15
Slide 25: Federal Education Loans Segment
Federal Education Loans Segment Selected Financial Information and Ratios 4th Quarter & Full Year 2022 Highlights Q4 22 Q4 21 2022 2021 Federal Education Loans ($ In millions) Q4 22 Net Interest Margin: 94 bps Segment net interest margin 0.94% 0.99% 1.01% 0.99% Q4 22 Annualized Net Charge-off Rate:
Slide 26: Consumer Lending Segment
Consumer Lending Segment Selected Financial Information and Ratios 4th Quarter & Full Year 2022 Highlights Q4 22 Q4 21 2022 2021 Consumer Lending ($ In millions) Q4 22 Net Interest Margin: 287 bps Segment net interest margin 2.87% 2.76% 2.81% 2.92% Q4 22 Annualized Net Charge-off Rate : 156 bps Cons
Slide 27: Business Processing Segment
Business Processing Segment Selected Financial Information and Ratios 4th Quarter & Full Year 2022 Highlights ($ In millions) Q4 22 Q4 21 2022 2021 Business Processing Government Services $39 $54 $187 $258 Revenue Q4 22 EBITDA Margin 1: 11% Healthcare RCM Services FY 22 EBITDA Margin 1: 16% $31 $57
Slide 28: Other Segment
Other Segment Core Earnings Basis Full Year 2022 Unallocated Shared Services Expense Shared Services Overview $242 million Shared services are related to the Regulatory 3% management of the entire company or shared CEO, Corporate Related Costs Marketing & by multiple reporting segments Other 5% - Ce
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. The following non-GAAP financial measures are presented within this Presentation: 1. Core Ea
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 Years Ended Core Earnings adjustments to GAAP: Dec. 31, Dec. 31, 2022 2021 (Dollars in Millions) 2022 2021 GAAP net income (loss) $105 ($11) $645 $717 Net impact of derivative accounting (1) (85) (266) (235) Net impact of goodwill and acquire
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.