Navient Corporation · NASDAQ:NAVI
Navient — Q4 2019 Earnings Presentation
22 slides from Navient's earnings presentation, Jan 22, 2020
Slide 1: 2019 4th Quarter and Full Year Earnings Call Presentation
2019 4th Quarter and Full Year Earnings Call Presentation January 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 December 31, 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 “2019 Form 10-K”),
Slide 3: Operating Results: Core Earnings Basis
Operating Results “Core Earnings ” Basis 1 Selected Financial Information and Ratios Full Year and 4th Quarter Highlights (In millions, except per share Q4 19 Q4 18 2019 2018 • Adjusted Core Earnings per share increased 16% to $0.67 amounts) compared to $0.58 in the year-ago quarter 2, and 26% to $2
Slide 4: Federal Education Loans Segment
Federal Education Loans Segment “Core Earnings” Basis Selected Financial Information and Ratios Full Year and 4th Quarter Highlights ($ In millions) Q4 19 Q4 18 2019 2018 Federal Education Segment net interest margin 0.87% 0.86% 0.83% 0.83% • Q4 19 Net Interest Margin: 87 basis points • Q4 19 Charge
Slide 5: Consumer Lending Segment
Consumer Lending Segment “Core Earnings Basis” Selected Financial Information and Ratios Full Year and 4th Quarter Highlights ($ In millions) Q4 19 Q4 18 2019 2018 Consumer Lending • Q4 19 Net Interest Margin: 3.31% Segment net interest margin 3.31% 3.18% 3.30% 3.24% • Q4 19 Charge-off Rate: 1.7% Pr
Slide 6: Business Processing Segment
Business Processing Segment “Core Earnings” Basis Selected Financial Information and Ratios Full Year and 4th Quarter Highlights ($ In millions) Q419 Q4 18 2019 2018 Business Processing Government Services $34 $41 $154 $174 • Q4 19 EBITDA Margin 1: 18% Healthcare RCM Services $25 $25 $104 $93 • Full
Slide 7: Q4 2019 Capital Management
Q4 2019 Capital Management Capital Return Repurchased 5.8 million common shares for $77 million in the quarter • Repurchased 34.5 million shares in 2019, a 13% reduction in shares outstanding • Since inception 1, returned $3.2 billion through share repurchases Paid $34 million in dividends to sh
Slide 8: Well Positioned to Continue on Our Successful Financial Performance
Well Positioned to Continue on Our Successful Financial Performance • 2020 Adjusted Core EPS guidance: $3.00 - $3.10 1 Key Company & Business Segment Metrics 2019 2019 2020 Original 2 Targets Actual Targets Core Earnings Return on Equity 3 Mid Teens 19% ✓ High Teens to Low Twenties Core Earnings Eff
Slide 9: GAAP Results
GAAP Results (In millions, except per share amounts) Q4 19 Q4 18 2019 2018 Net income (loss) $171 $72 $597 $395 Diluted earnings (loss) per common share $0.78 $0.28 $2.56 $1.49 Operating expenses $235 $252 $984 $984 Provision for loan losses $50 $85 $258 $370 Average Education Loans $88,266 $96,380
Slide 10: Appendix
Appendix © 2020 Navient Solutions, LLC. All rights reserved. 10
Slide 11: 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 $2.6 billion of cash flows in 2019 FFELP Cash Flows 12/31/19 Secured • Paid down unsecured debt of $2.0 billion in 2019 Residual (including O/C)
Slide 12: 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 $1.6 $1.4 $1.4 $1.4 $1.2 $1.2 $1.2 $1.2 $1.1 $1.2 ($’s in Billions) ($’s in Billions) $1.0 $1.0 $1.0 $0.9 $1.0 $0.9 $0.8 $0
Slide 13: Managing Unsecured Debt Maturities
Managing Unsecured Debt Maturities (par value, $ in billions) 2.1 $1.8 1.8 1.4 $1.4 $1.5 1.5 1.5 1.4 1.4 1.3 1.1 0.6 0.6 0.5 0.5 0.0 0.0 0.0 0.0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029+ As of December 31, 2018 As of December 31, 2019 Long-term Conservative Funding Approach • Unsecured debt
Slide 14: Consumer Loan Segment Credit Detail
Consumer Loan Segment Credit Detail Credit Metrics Allowance for Loan Loss TDR Loans ($ in millions) 2019 2018 2017 December 31, 2019 Ending Allow ance as Total delinquencies $885 $1,135 $1,045 ($ in millions) Allow ance Balance % of Ending Balance Total delinquency rate as a % of loans 10.5% 12.6%
Slide 15: 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 16: Other Segment: Core Earnings Basis
Other Segment “Core Earnings” Basis 2019 shared services expenses declined 12% from the year-ago period 2019 Total Unallocated Shared Services Expenses Shared Services Overview $254 Million • Nearly 75% of total expenses are allocated CEO, Corporate Marketing & Other Proxy Contest Matters 2% • Proxy
Slide 17: Refi Portfolio Has Created Value For Shareholders
Refi Portfolio Has Created Value For Shareholders Refi Securitization Transactions in 2019 3.0% 1 Refi Gross Margin 2.5% 2.68% 2.47% 2.37% 2.31% 2.0% 2.03% 1.5% 1.0% 0.5% 0.0% 2019-A 2019-C 2019-E 2019-F 2019-G 2019-A 2019-C 2019-E 2019-F 2019-G Deal Size $647 $610 $535 $714 $498 Average FICO 2 756
Slide 18: Navient Is Focused On Expense Efficiency
Navient Is Focused On Expense Efficiency Notable Items Impacting Total Expenses Compared to Prior Periods ($ In millions) Q4 19 Q4 18 2019 2018 Reported Core Earnings Expenses $237 $256 $990 $997 Year over Year Change in Reported Core Earnings Expenses (7%) (1%) Restructuring & Reorganization Expens
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: Notes on Non-GAAP Financial Measures
Notes on Non-GAAP Financial Measures (Dollars in Millions) 4. Tangible Net Asset Ratio (TNA) – The Tangible Net Asset Ratio measures the amount of assets available to retire the Company’s unsecured debt. Management and Navient’s equity investors, credit rating agencies and debt capital investors use
Slide 21: 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, 2019 2018 (Dollars in Millions) 2019 2018 GAAP net income (loss) $171 $72 $597 $395 Net impact of derivative accounting (27) 59 (5) 90 Net impact of goodwill and acquired intang
Slide 22: Navient
NAVIENT.