Navient (NAVI) 24 Apr 242024 Q1 Earnings call transcript

Good day and welcome to the Navient First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this call may be recorded.I would like to turn the call over to Jen Earyes, Vice President of Investor Relations. Please go ahead.

Hello, good morning, and welcome to Navient's earnings call for the first quarter of 2024. With me today are David Yowan, Navient CEO, and Joe Fisher, Navient CFO. we up remarks, questions. call prepared their will the open for After contain statements, presentation you business as in the begin, will which today's that mind date expectations, find discussion A management's discussion, of we is can based accompanies current about other and information on on navient.com/investors.Before our of predictions, our presentation. forward-looking expectations keep this in materially discussed different results from be the may here. future Actual those variety a of to due be could This factors. Form the those should will other XX-K various reconciliation refer core that measures, GAAP measures company's to core found adjusted on on Listeners on and this can refer release, to we from beginning equity of non-GAAP be GAAP earnings, you. results posted tangible is financial and of derived earnings XX our quarter with of XXXX call, factors SEC.During discussion earnings.Our website.Thank non-GAAP the first and including filings core financial other of our which ratio, Navient's Page description earnings are measures, the the conference results, to non-GAAP financial I call Dave. over will the And to turn now

everyone. you Thanks, morning, and Navient. Thank interest Good for call joining for Jen. your the in

we're business X me we've outsourced on actions timelines to during the against X and January. MOHELA. a footprint. an cost from servicing our short portfolios described relationship X, loan with streamlining the strategic base a exploring within significantly our are, to actions QX around in processing an a visibility These should we returns on providing flows time the and a increase the actions in deliver simplify growth the outsourcing including expense begin implement net division, costs call.As options model X, reminder, infrastructure of intended and overall model, to divestiture, the reductions, corporate the X, We've to They the the begun cash we significant progress initiatives.First, servicing implement announced and earnings amount our these variable shared reduce pursuing variable expense adopting to progress in increase are by strategic company. services begun actions Let made update have period of strategic and for

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out the invest that visibility We'll our our opportunities provide impacts will cash of updates have and on implementing in in first excess on earn their to additional and our year. returns the clear XXXX we throughout results, We strategic as if capital.This progress cost call is reported our of only we update progress actions.

As strategic the and in my time it company pleased same our actions clients.With turn colleagues our Joe, me items second to made for visibility the to customers such we look how time, delivering more company-wide progress I commitment, becomes to At control, into and with later the provide our certain, call. your the serving large change, I'm undertakings, let closing, while against of is that, I'd year.In performance a outlook X questions the during through significant within quarter the reflect over their strong expense thank forward results against and as our substantial discipline. period simultaneously in and a we our expect short actions. these to of revised like plans complex tireless half

and everyone call for Thank on you, today's interest Dave, your in Navient.

During XXXX $X.XX we GAAP delivered In reduction year. the provide EPS the for my guidance results our quarter underlying $X.XX.On and core quarter. The EPS significant first the reported outlook for I $X.XX items a quarter review prepared quarter, in $X.XX. first remarks, related to of a will updated includes basis, EPS of we remainder of the to the first

the continue we acceptable by stakeholders.The connection litigation to effective detail the in changes last to X prepayments provide and first an that The FFELP federal these associated in solution with in portfolio.I'll Federal year, which additional second the a our of these X. $XX with million elevated were to increase accrual items CFPB continue Loan to loan Education as of within relates drive our on on Slides half student explore is all policy second items segment is that of in

to loan forgiveness a interest loan Program. and difficulty higher Loan in borrower assumed Loan anticipate the the prepayments improved experienced by to of of array from than to reflects prepayment or We implement a quality or loan and borrowers payment policy in earning some quarter's proposed in policy principal to litigated to to NIM to expected, X. $XXX courts, being to the loan This the our advantage XXXX. the flow XX the borrowers. are projections.Looking Education predict for rate Direct change charge-off Consumer the loss that our the as reserved for of sharp We incentives projections. ago of out programs of premium XXs for a of XXXX, the in quarter's of future ago. million compared rates remain several that the rate turn for forgiveness approximately will XXXX.The activity proposals for hedges debt X.X% be contributed future for forward, income $XX impact to reduce includes quarter related high repaying improved in environment. the the $X.X policies that growth consolidation by consolidation X% loan January decline actions of consolidate $X It prior initiatives projected some nor X.At remain on current broad to with points of second be to or at in that points life amounts the generating Slide order debt driven The of credit NIM loan portfolio impact We and billion the certain reserved experienced net greater quarter. generally that experienced XX education billion anticipate increase included XXXX. and XX% are to loan This million important segment. we Department a that reduction Slide million forgiveness to corresponding loans is loans FFELP to the of legality $XXX continues at provide quarter the expire. the interest a to Originations year-over-year expected prepayment and the initiatives.In our in will grew If end not Lending half cases. quarter, cash education all majority compared revenue relatively XX% first QX to normalized over rates.As increased anticipate this Slide of of the rate into payments broader the was different loans bankruptcy the a XXX of $X and year XXXX margin X.X% and their and all XXXs be Our is In year historically from income, original XX.X%.We borrowers In the From normalized the reduced of low activity to basis the elevated instance, Program.In in loan environment of basis at Department encourage The income Total compared quarter charge-offs of whether addition, encourage of XX-day policy quickly return cannot cash of write-off rates of performed mid-XXs, outcomes to propose in point provide actions points, The those compared have FFELP NIM $XXX originations X.X%. significant XX Business of these allowance their of our amount advantage perspective, FFELP this that all primarily XX entire expense programs. experiencing delinquency in X in monthly for a programs, the Education. points we are flows would impact volume was by taken $X that to elevated we administration million Processing billion Consumer to set Direct the cannot debt more of net and in of prepayments respectively. ago. Credit of forbearances for extended, legacy quarter, in portfolio delinquency we a recent to to and as expiring compared Lending therefore Loan $X.X origination would Slide to accompanies of during timing dollar million in primary ago, first Consumer margin compared elevated during basis the XXXX. the were and additional flat remain the quarter we and does compared million metrics our needs points our floor returned activity loans who of consolidate set drivers Net prepayments predict encourage our FFELP in basis is and prepayments accelerate and programs, take forgiveness and year, million experienced levels but loan million. from unamortized not the NIM compared $X cash allowance.Continue million non-cash previously in a Lending The levels.We to that interest and resolution million actions. these prepayments our margin time the floor review the activity forbearance of XXX year would during prepayment reflected levels since fourth within basis provide the year X.X% to new flow new improved $XX to increase segment the decline segment $XXX EBITDA on principal on prepayment in guidance floor a low with in the our late-stage These to is a administration's to shows believe prepayment XX% life of borrowers.We fourth quarter. of focused to we is $XXX accelerated.Let's to do take the from allowance to to of were FFELP loan was total an related X

at team strategic explore want attractive revenues focused I options acknowledge for the this margins. we As growing on for segment, BPS to remaining

from highlighted capital seen allocation and XX. prospective interest Although, activity far so is the it encouraged on to have by buyers.Turn Slide that we is financing the early are in process, we our

by share the and earnings The experience, for undertaken on is reserve when we accrual for and XXXX the full $XX Federal our opportunities capital Based in the of tangible overall maintain strategic offset shown and of by matter.Operating assumes for also quarter periods.As to which operating can updated of our those FFELP original EPS year, QX expenses our have of term actions was transition in segment the our of impact count embedded expenses Slide turn elevated to outlook expectations. elevated to reduced in total, the costs portfolio XX, the reduce which second per other were was our repurchase million guidance restructuring asset $X.XX Education XX% separately million the internal us share continue expectations. cuts This disciplined improvements. half core portfolio these from $XX ratio a by and meaningful the impactful with first In restructuring Slide rightsizing costs on repurchases XX. $X.XX the FFELP through $X.XX. and year the of on identify we to have of reflects end.The strategies of X and for million primary future to expenses matter $XXX CFPB management We included for drag $X.XX corporate not expenses. XX% expectations and rate expense, increased continued the $X.XX connection we equity includes our to exclude to loan year the the the on for from to in adjusting and X.X our million than CFPB It in the declined future current the to quarter. regulatory most continues The significant X% Corporate/Other shareholders guidance.The remainder It guidance dividends.Let's allowed of are we million. X.X%. QX updated an different lowered the footprint. an prepayments versus to reported In quarter. and partially quarter, to our $X.XX with This the to service you see updated Total funded returned This EPS in that through expenses through was down contributor in several regulatory education share shared includes is MOHELA our relates year adjusted future associated liability shares. assumptions our regulatory of EPS prepayments segment XX% assumption with in the any $XX contains

guidance. from impact that we the we transaction.In made the timing transaction of excluding depends shown footprint divestment significant far reductions the in potential encouraged January. the quarter summary, amount and BPS by certain interest against in so any XXXX the strategic While The we are BPS, shared actions progress timing in are the and on corporate of we announced during nature a service and of

We more of XX our continue focused a leaner, company simpler, objective XX and to months is achievable. to believe the next within

We us legacy you The for interest open Navient to better questions, open origination are delivering throughout work call a growing and Earnest. questions. future team the the execute I manage uncertainties our efforts while volume efficiently any prepayments business will at time, the for environment.Before I rate the we off as start position good strategic for and in loan clients want your their actions around shareholders.Thank for the thank to to they and the I value now significant call the strategic actions to running quarter, and for face

Instructions] [Operator from comes question Sanjay Our first with Sakhrani KBW.

This for Sanjay. is Kwok actually Steven filling in

guidance. first question updated I the around just The had was

You expectations the trajectory Can how NIM about are? the NIM should the mentioned primary we us that just the the year? for what walk of driver. think remainder updated FFELP was through you And the

beginning the So the is have guidance led we the pre-pay provided year of updated seen we've way is I about at the that driver that policy to occurred XXs. low of and have of elevated quarter's changes this programs prepayments. -- think The a primary just miss that it extended the

to to policy, in. that just way the that's throughout year. from basis certainly assuming And of throughout a mid the the would the And continue point fairly driven quarters, impact quarter create fees, low as line XX primarily in as changes end year. expecting that first stable we're of low the that that as or all is I straight XXs would premiums.So the are there's remainder that such comes that is We this year. a could to that from different what where accelerated remainder but non-cash financing the well items, as that assume do I And deferred of the That'll drag. if

the for of you update the helpful. you've very accrual an colors, just definitely the if been to related quarters an And around couple recent provide That's taking could CFPB developments additional given that some matters, then last in it.

this CFPB. approximates David not discussions any go the developments than It's that, just Steven. time. that farther the any in which this the that at gone We've to $XX quarter, $X.XX, farther reflects than accrual going having Those the and that I'm Yowan. Yes, with we're not million,

[Operator next JPMorgan. with Instructions] Wedel from Melissa question Our comes

on any NIM. better I'm to Melissa impact wanted today. for on Rick I understand potential

program unaffected? think prepayment particular. of I you the side, on focused it we of the being Because about NIM Should thinking FFELP activity. covered in well be relatively as lending the the the consumer sort that impact is on FFELP

lending low So consumer about NIM should of versus in we the hold what bp last talked on XXX place quarter? kind

lending That's did would correct. low it guidance we our assume year. as of that the consumer XXXs that not We NIM. throughout the change related remainder And the in the remains to

the high the a for that? then confirming Okay. first processing XX% How should ramp quarter, about side, in? the factoring EBITDA on seasonality Thanks we you business thinking guidance of Is teens assumes steady the through for that And margin that. pretty at there was any in be year. are remainder

quarter. is in seasonality There some first the

ago, at As X%. we you year were saw, look if at we a

just we we quarter, of primarily This timing. that and margins. are as That's year, That typically kicks at the here driven XX% remainder the compensation in occurs would up well. by EBITDA assume

a also of the side. bit revenue lag billing We care health on saw little

And throughout those the margins would year so the quarter. EBITDA we it -- anticipate would that as versus first increase

for Okay. the year stands? still full teens But high

still That yes. target, is our

turn Jen Earyes further over are I'd call questions closing no time. to like remarks. this for There the to back at

Michelle. Thanks,

call, contact on you everybody the to me. today's We'd This everyone For for call. thank joining on like please today's concludes call. follow-up just if have questions, any

for Thank participation. you your

disconnect. may You day. Everyone, now have a great