Navient Corporation · NASDAQ:NAVI
Navient — Q1 2024 Earnings Presentation
24 slides from Navient's earnings presentation, Apr 24, 2024
Slide 1: 1Q 2024 Earnings Call Presentation
1Q 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. • Began implementing variable cost outsourced servicing model, which align
Slide 4: 1Q 2024 Results
1Q 2024 Results “We have made substantial progress on the three strategic actions launched earlier this year to outsource student loan servicing, explore strategic options for our business processing division, GAAP Core Earnings 1 and streamline our shared service infrastructure and corporate footpr
Slide 5: Federal Education Loans – 1Q 2024 Core Earnings Results
Federal Education Loans – • Net income was $40 million compared to $87 million 1Q 2024 Core Earnings Results • Net interest income decreased $72 million primarily due to: - the impact of increased interest rates 1Q24 1Q23 on the different index resets for the segment’s assets and debt - the paydown
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 – 1Q 2024 Core Earnings Results
Consumer Lending – • Originated $259 million of Private Education Loans compared to $168 million 1Q 2024 Core Earnings Results - Refinance Loan originations were $228 million compared to $135 million - In-school loan originations were $31 million compared to $33 million 1Q24 1Q23 • Net income was $7
Slide 8: 1Q 2024 Allowance for Loan Losses
1Q 2024 Allowance for Loan Losses ($ in millions) • Our total provision expense was $12 million in 1Q24 $1,058 • This primarily consists of: - $1 million for our FFELP portfolio - $6 million related to a general reserve build for our Consumer Lending portfolio $961 - $5 million for new Private Educa
Slide 9: Business Processing – 1Q 2024 Core Earnings Results
Business Processing – 1Q 2024 Core Earnings Results 1Q24 1Q23 Revenue $77 million $72 million • Revenue was $77 million, $5 million higher due to continued organic Operating Expense $69 million $67 million growth • Net income was $6 million compared EBITDA 1 $9 million $5 million to $4 million • EBI
Slide 10: 1Q 2024 Capital Allocation
1Q 2024 Capital Allocation • Adjusted Tangible Equity 1 ratio of 8.4% • We distributed $61 million in 1Q24 to shareholders through dividends and share repurchases • We ended the quarter with 83% of our Total Education Loan Portfolio funded to term 7.7% 8.5% • We have $5.9 billion in unsecured 1 1 de
Slide 11: 1Q 2024 Total Expenses
1Q 2024 Total Expenses • We are focused on becoming more ($ in millions) efficient across all segments $220 $189 • Expenses are lower from a year ago $184 quarter across non-regulatory-related $200 categories, with the exception of $2 BPS which has offsetting increasing $180 $4 $13 revenue $1 $160 •
Slide 12: 1Q 2024 Earnings Impacts to EPS Outlook
1Q 2024 Earnings Impacts to EPS Outlook Operating Changes Lower FFELP Increase in Operating NIM, Primarily Accrual for Improvement, Driven by CFPB Matter net Prepayment • Elevated FFELP prepayments accelerate loan premium expense, a non-cash item, and contribute to other NIM impacts • Other line ite
Slide 13: Forward-Looking Statements and Non-GAAP Financial Measures
Forward-Looking Statements and Non-GAAP Financial Measures The following information is current as of March 31, 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 14: Differences Between GAAP and Core Earnings
Differences Between GAAP and Core Earnings Quarters Ended Core Earnings adjustments to GAAP: Mar. 31, Mar. 31, (Dollars in Millions) 2024 2023 GAAP net income $73 $111 Net impact of derivative accounting (21) 27 Net impact of goodwill and acquired intangible assets 3 3 Net income tax effect (1) (8)
Slide 15: 1Q 2024 GAAP to Core Earnings
1Q 2024 GAAP to Core Earnings ($ 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 16: Appendix
Appendix Confidential and proprietary information © 2024 Navient Solutions, LLC. All rights reserved. 16
Slide 17: Loan Portfolio Cash Flows Greater than Debt Outstanding
Loan Portfolio Cash Flows Greater than Debt Outstanding • Projected loan portfolio cash flows as of March 31, 2024 - Principally securitization trust distributions • Net interest income • Servicing fees • Total projected loan portfolio • Return of initial equity undiscounted cash flows after repayme
Slide 18: Federal Education Loans – Projected Cash Flows
Federal Education Loans – Projected Cash Flows • FFELP portfolio of $36 billion ($ 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 19: Consumer Lending – Projected Cash Flows
Consumer Lending – • Private Education Loan portfolio of $17 billion Projected Cash Flows - Refinance education loan ($ in millions) originations since 2017 $1,000 5-Year Projected Annual Private Education Cash Flows 2 - In-school loan originations starting in 2019 and the seasoned loan portfolio •
Slide 20: Total Education Loan Portfolio – Projected Cash Flows
Total Education Loan Portfolio – Projected Cash Flows • Total Education Loan portfolio of ($ in millions) $52 billion, undiscounted projected cash flows are: $1,800 5-Year Projected Annual Education Portfolio Cash Flows 2 - $6.4 billion through end of 2028 - $12.6 billion generated over $1,500 20 ye
Slide 21: 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 22: 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 23: 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 24: Confidential and proprietary information © 2024 Navient Solutions, LLC. All rights reserved.
Confidential and proprietary information © 2024 Navient Solutions, LLC. All rights reserved. 24