Navient Corporation · NASDAQ:NAVI
Navient — Q2 2024 Earnings Presentation
23 slides from Navient's earnings presentation, Jul 23, 2024
Slide 1: 2Q 2024 Earnings Call Presentation
2Q 2024 Earnings Call Presentation Confidential and proprietary information © 2024 Navient Solutions, LLC. All rights reserved. 1
Slide 2: Delivering Value to Shareholders
Delivering Value to Shareholders • Invest in capabilities to grow high-quality • Manage credit and interest rate risk and private education loan originations that Maximize the cash help borrowers manage loans Enhance the value generate targeted returns, and explore opportunities to deepen relationsh
Slide 3: Strategic Actions Update
Strategic Actions Update Following an in-depth business review conducted by the board and management, on Jan. 30, 2024, Navient announced strategic actions to simplify the company, reduce expense base and enhance flexibility. Below is a 2Q24 update. • Began implementing variable cost outsourced serv
Slide 4: 2Q 2024 Results
2Q 2024 Results “We achieved several key milestones on our strategic actions. We are aggressively and deliberately making GAAP Core Earnings 1 meaningful progress on future milestones, and remain confident in our ability to achieve our targeted expense Revenue (Before Provision) $247 million $239 mi
Slide 5: Federal Education Loans – 2Q 2024 Core Earnings Results
Federal Education Loans – • Net income was $28 million compared to $76 million 2Q 2024 Core Earnings Results • Net interest income decreased $73 million primarily due to: - the paydown of the loan portfolio 2Q24 2Q23 which included $2.5 billion in prepayments; this increase of $1.9 billion compared
Slide 6: FFELP Prepayments Accelerate Cash Flow
FFELP Prepayments Accelerate Cash Flow There is a short term lag between when loan prepayments occur and when the cash received is applied to Asset Backed Securitization debt paydowns. • The Impacts of FFELP Loan Prepayments $3,000 - Loan prepayments accelerate loan $2,500 principal cash flows - The
Slide 7: Consumer Lending – 2Q 2024 Core Earnings Results
Consumer Lending – • Originated $278 million of Private Education Loans compared to $197 million 2Q 2024 Core Earnings Results - Refinance Loan originations were $222 million compared to $142 million - In-school Loan originations were $56 million compared to $55 million 2Q24 2Q23 • Net income was $6
Slide 8: 2Q 2024 Allowance for Loan Losses
2Q 2024 Allowance for Loan Losses ($ in millions) $961 $898 • Our total provision expense was $14 million in 2Q24 • This consists of: - $(2) million for our FFELP portfolio - $10 million related to a general reserve build for our Consumer Lending portfolio - $6 million for new Private Education Loan
Slide 9: Business Processing – 2Q 2024 Core Earnings Results
Business Processing – 2Q 2024 Core Earnings Results 2Q24 2Q23 Revenue $81 million $83 million • Revenue was $81 million, $2 million lower Operating Expense $62 million $75 million • Net income was $15 million compared to $6 million • EBITDA 1 was $20 million, up EBITDA 1 $20 million $8 million $12 m
Slide 10: 2Q 2024 Capital Allocation
2Q 2024 Capital Allocation • Adjusted Tangible Equity 1 ratio of 8.2% • We distributed $55 million in 2Q24 to shareholders through dividends and share repurchases • We ended the quarter with 84% of our Total Education Loan Portfolio funded to term 7.7% 8.5% • We have $5.9 billion in unsecured 1 1 de
Slide 11: 2Q 2024 Total Expenses
2Q 2024 Total Expenses • We are focused on becoming more ($ in millions) efficient across all segments $220 $197 • Expenses are nearly 15% lower compared to a year ago quarter $200 $2 across non-regulatory-related and $182 non-restructuring-related categories $15 $180 $12 - excluding regulatory and
Slide 12: Forward-Looking Statements and Non-GAAP Financial Measures
Forward-Looking Statements and Non-GAAP Financial Measures The following information is current as of June 30, 2024 (unless otherwise noted) and should be read in connection with Navient Corporation’s “Navient” Annual Report on 2023 Form 10-K for the year end December 31, 2023 (the “2023 Form 10-K”)
Slide 13: Differences Between GAAP and Core Earnings
Differences Between GAAP and Core Earnings Quarters Ended Core Earnings adjustments to GAAP: Jun. 30, Jun. 30, (Dollars in Millions) 2024 2023 GAAP net income $36 $66 Net impact of derivative accounting (8) 17 Net impact of goodwill and acquired intangible assets 3 3 Net income tax effect 2 2 Total
Slide 14: 2Q 2024 GAAP to Core Earnings
2Q 2024 GAAP to Core Earnings ($ in millions) • We evaluate our business segments on a basis that differs from GAAP • We refer to this different basis as Core Earnings 1 • The two items we remove to result in Core Earnings are: - mark-to-market gains/losses from our use of derivative instruments tha
Slide 15: Appendix
Appendix Confidential and proprietary information © 2024 Navient Solutions, LLC. All rights reserved. 15
Slide 16: Loan Portfolio Cash Flows Greater than Debt Outstanding
Loan Portfolio Cash Flows Greater than Debt Outstanding • Projected loan portfolio cash flows as of June 30, 2024 - Principally securitization trust distributions • Net interest income • Servicing fees • Total projected loan portfolio • Return of initial equity undiscounted cash flows after repaymen
Slide 17: Federal Education Loans – Projected Cash Flows
Federal Education Loans – Projected Cash Flows • FFELP portfolio of $33 billion ($ in millions) - no newly originated FFELP loans 5-Year Projected Annual FFELP Cash Flows 2 $800 since 2010 - 97-100% of principal and interest guaranteed by U.S. government • Holding 50 basis points of equity $600 capi
Slide 18: Consumer Lending – Projected Cash Flows
Consumer Lending – • Private Education Loan portfolio of $16 billion Projected Cash Flows - Refinance Loan originations since ($ in millions) 2017 $1,000 5-Year Projected Annual Private Education Cash Flows 2 - In-school Loan originations starting in 2019 and the seasoned loan portfolio • Holding eq
Slide 19: Total Education Loan Portfolio – Projected Cash Flows
Total Education Loan Portfolio – Projected Cash Flows • Total Education Loan portfolio of ($ in millions) $49 billion, undiscounted projected cash flows are: $1,500 5-Year Projected Annual Education Portfolio Cash Flows 2 - $5.7 billion through end of 2028 - $12.1 billion generated over 20 years $1,
Slide 20: Responsibility to Our Customers and Communities
Responsibility to Our Customers Team engagement, and Communities development and inclusion Supporting education and economic opportunity We are committed to creating a Our education finance solutions help people pursue higher education and successfully workplace where employees are manage their fina
Slide 21: For More Information
For More Information www.navient.com/investors www.navient.com/abs • Environmental Social Governance (ESG) information - Navient Corporate Social Responsibility report • Student loan asset-backed security (ABS) trust data - Static pool information – detailed portfolio stratifications by trust as of
Slide 22: Footnotes
Footnotes 1. Item is a Non-GAAP Financial Measure. 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 in the bo
Slide 23: Confidential and proprietary information © 2024 Navient Solutions, LLC. All rights reserved.
Confidential and proprietary information © 2024 Navient Solutions, LLC. All rights reserved. 23