NAVI - Earnings call transcript Q1 2019

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Operator

Good day ladies and gentlemen and welcome to the Navient’s First Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we’ll have a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder this conference call is being recorded. I will now like to introduce your host for today's conference Mr. the of Head Fisher, Investor Relations. Joe Mr. may you begin. Fisher

Joe Fisher

CFO. welcome Thank me first XXXX up Good the Lown, today will questions. remarks, And you, morning. to our Chris quarter and Jack call our Navient’s their open Remondi, prepared we Nova. are CEO; After earnings for call. With

could Actual a mind from future the may XX-K of materially different Before the in will with should the predictions, in our we refer begin, SEC. to expectations other and factors discussion results contain discussed be here. factors. Listeners of This those filings discussion Form variety on keep and due forward-looking statements. to company’s the be those

ask our Canyon core and the preliminary first entirely During Thank can questions XXXX to navient.com. all the will proxy we This With X, respect SEC to this in our to April refer on would measures, and with We we you, following our be focus I’ll company’s and call, Jack. the if our we matter. on reconciliation found contest supplemental would XXXX at non-GAAP refer this call is we Investors to GAAP a posted now GAAP earnings, you questions the over full have that filed on proxy description prepared results with any the remarks the Capital measures earnings. core disclosure. that earnings conference on of quarter call you earnings. to A turn page

Jack Remondi

quarter morning to first call. earnings and welcome Good Joe. everyone Thanks our

in loan legacy include they processing contributions businesses. portfolios particularly our results Our were and this and momentum growing lending quarter student our strong; from

of year full exceed track for a to range $X.XX metrics per we’re to to $X.XX range from a meet per of year raising we’re and financial share $X.XX the established the original $X.XX share. guidance on to Importantly, or we EPS the

execute and operating to also flows maximize plans. management our efficiency, ongoing cash on result demonstrates our ability quarter’s increase capital This

also business opportunities the delivering we value origination loan and services. show process are creation We on in student

Let our million is highlights earlier year. of track $X the than in me $XXX approximately In initially quarter. portfolio over to loan billion forecasted first generate quarter share this XXXX, on more of cash some the flow student

$XXX addition, in financing we In raised through quarter. activity over million the

in securitization a due the benefiting in Our and performance FFELP loans driven past ongoing to over quarter requirements our portfolios. more are reductions and lowering to borrowing the a Credit of our the year Portfolio successes than Private strong is and in loans significant end our performance $XXX both expense. originated principal interest borrowers. the We be in balance million private assist declining leveraging our to collateralization our over We and unsecured continues compared the positive saw with loans re-fi XX delinquencies from efforts trust economy days in ago. XX% success in of FFELP in a in quarter. XX% data education here reducing first

and pay helps free credit faster. their their the loans off lower of and product flow, Our cost strong student loans with cash borrowers

Our their higher and margins. mobile quarter their decisioning. doubling financial from the our application objectives. a nearly a ago solution It year volume design simple with combined quick allows for was solution digital customers provides customized budget repayment and This first the also

and X% growth Our business revenue. generated segment processing in strong margins EBITDA

million the million via $XX dividends A capital. return purchased million solutions $XXX quarter. and demonstrating the without proposition. healthcare core to several opportunity services strong to municipal investors shares consuming We to cash allowed incremental million an flows in to Earnings, our and us X.X areas segment processing our This performance and leverage workflow capital in value and paid. create $XXX ratios clients also in new added strong our value a represents

comparable expect remaining $XXX for operating fell in each Last utilize A improving We XXXX. year repurchase million our expenses our year efficiency. authority is goal in us operating share consistent XX%. to

in to these the important in the $XXX measure. For families and students launched education achieving expect company-wide results This continued we and all loan delivered experience improved a and leveraged we modern with developed this more I'm families. first declined We and friendly another efficiency experience students innovative can Earlier loan to we on here. ramp the opportunities production produce our user month, segments cost return efficiency improvements operating quarter, up new comparable product and this expenses helps X% high-teens our create in and for continue our In finance historical of excited for students. we undergraduate the refinanced going for we user and space a equity about technology efforts million. solution this ongoing informative along financial operating operating generate to to believe graduate finance to college. student as product

value can creating towards stakeholders. the momentum positive you see very we are on We very and for focused have

Our the focus maximize amount the of accelerate legacy flows be timing cash to portfolios. our and continues to from

December more projected here delivered separation. the at in our itself. cash $XX than billion XXXX, record flow, model Through track for Our speaks we $X billion

$XXX margins still developed shared XXX% with We've EBITDA create this quarter quarter skills our to we're continue improve capital a value in ratio. this a in million business BPS this and with margin investors in delivering at processing infrastructure We're representing expense our We you returning X% $XXX business quarter. deliver of to-date clear to XX%. the and payout operating in leveraging our reduction value. by in million lending, finally, to to evidenced efficiency best generated operating loans return with plan in and And our create

we of demonstrate the listening now for call a executing and are to results deeper Thank quarter's today you this I turn for this the successfully plan. As Chris quarter. over review

Chris Lown

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

digital found on I EPS core investor on in will was the be X, first can from results be quarter company's quarter the versus year the the Starting prepared slide the referencing XXXX. ago quarter. website presentation, my remarks, $X.XX call in of During earnings $X and adjusted $XXX and XXX% school will originations FFELP in credit quarter which first for $X.XX the the return review our improvement section. I of our portfolios Key of of payout capital the and strong profitability highlights nearly credit loan and from ratio. the loan shareholders legacy a metrics, improved with million further refinanced launch product, representing include to billion

resulted In pre-tax to an $XX benefited addition, of $XX repurchase million opportunity from which we gain. a debt, unsecured million in attractive

points $XXX guidance. FFELP Total segment from significantly from quarter. year. has The XX performed the education increase This performance ago loans year our to in is loans with $XX $X.X for the expectations charge-offs XX% with revenue. delinquencies as the have in federal volume on This earnings billion a X. Let's asset increased beginning a net year-over-year in-line quarter. delinquency and declined expected. ago move our to for year consistent Core reporting margin was were basis million first with resulted the growth prior over slide from Contingency in billion collections, as rates declined by inventory recovery interest

earnings in a this Now were our let's turn year compared for slide $XX segment quarter million to ago. $XX million consumer in lending segment. to the X Core

education of During refinance the $XXX million we originated loans. quarter,

scores, Importantly average winning this at consistent and meaningful FICO improved was average coupons increase in higher volume executed profitability. origination

a at The basis XXX first year XXX with net margin points points consumer lending, basis compared ago. quarter interest in-line expectations to was

X% have stable to shift lending interest At continues refinance consumer education portfolio as of or financing to or our Our billion year represented XX% refinance quality operational ago. net quarter compared in higher portfolio and a margins initiatives loans. our resulted end billion loans to $X $X.X

of segment. Total continued a in Let's disciplined quarter continue to processing driven margins slide in management XX% revenue year-over-year. on million business achieved our the by was We cost in X $XX healthcare EBITDA quarter the automation. to efficiency review revenue in and focus increase XX% with

of through Let's expenses. turn corporation on FP&A The our of to comprised are services to total costs the are primarily costs X accounting, services few portion directly treasury, segments. the human efficiencies. include entire slide examples allocated XX% the insurance of by color additional of business our expenses The and provided shared management unallocated that and teams. benefits and is provide audit, shareholders to increased to resources expenses related these Nearly

cost and XX% infrastructure operations across improving primarily IT the this and efficiencies federal and company security are expenses across are expenses significant the consumer shared lending include by focused within our education reduced on segments. remain business services IT Our segment our and that laser and year-over-year. most We shared

Let's turn financing to activity. our slide X, which highlights

$XXX under million have to facilities the X.X million we During repurchase authority five our the through loan program. remaining shares securitizations. $X.X issued we over involving issued billion repurchase company In and million and the totaling previously quarter transactions raised ABS private of for million education quarter, $XXX $XXX additional repurchased share

targeted end tangible a ratio at maintaining times range. while Importantly, X.XX high we did our is the this asset of net which of

targets turning X. slide like GAAP remind to on I'd established quickly to Before results, of investors our

established the puts provide During metrics performance achieve business. the for full we of us The path fourth year-to-date on exceed metrics the year. greater clarity a or on quarter these our these to to view

confidence share recorded quarter million compared $X.XX GAAP to Let's of restructuring slide net $X.XX share first XX. the in of $X.XX for million $XXX first all income share per a $XXX net our turn GAAP remainder to strong with call from of regulatory on or results we and We income our increasing the $X.XX and to open or in as accounting In quarter intangible $X.XX of result to results of expenses. related quarter GAAP The for and the which guidance are derivative and the the the core of range positions goodwill a a summary, I'll earnings core a first are XXXX. our now and segments of our excludes marks X% between our differences per assets. $X.XX the by in questions. range year, across earnings to per full-year performance

Operator

first Mark you. Barclays. Instructions] Thank the Our from DeVries line question comes [Operator of of

Mark DeVries

thanks. Yes,

changed missed outlook exactly comfortable I but this guidance the if what EPS for that year? raising you Sorry made the the in

Jack Remondi

profitability outlook and portfolio improvement of a income cost efficiency. net student continued terms the There's our performance, in interest a and in combination fee here. interest margin contributing and loan Certainly, ongoing our increases credit of factor factors is and of rates

a of So, combination those forecast to it's up that here. the factors combine drive really

Mark DeVries

competition? did origination next your are you loan Okay. the seeing the the benefit what environment, from is you non-compete? the what of student portfolio. intense quarter how if I on question to any And my front Jack, of guess the comment expiration the profitability get this Tyson competitive And on about

Jack Remondi

-- loan designed to and what's of debt a the who've or the in liabilities borrowers, student really is help loan they're base little And And designed designed their than the payments those very cash in fit successful to this kind number of is demonstrated also really them managing student or an this cash that is excellent an a flow credits. on that fits borrower have is been a really do to application and flow. bit income in think an allow competition space workforce we this customer for pick unique so I flow particular that free pattern focused make with payment to is their term cash we've have product budget. And their years, about simpler what their origination,

majority flexibility payment customers So, objectives their they to the to the in And best. budget make gives their to loan want financial them their of rather are set term. than month of our want that they that the each picking payment to fit that kind amount

a meet than product end. comparison that we are and customer of really borrower acquiring cost spending allows is loan competition is stand competition where a the customer a we out ability to I this or a what think price to our in in And others you dollar-per-dollar the direct compared lower concept. those about more significantly loan to our acquire relationship to the how customers' space without working So, front is needs customize us and is the the the kind with think

Mark DeVries

got was of benefit the any it. saw from Okay, the that in the And expiration there non-compete? originations you

Jack Remondi

competing where an customers We for into certainly mode. have saw the are to been our some area volume this is we've area we pick-up who get but in that repayment

private originated yet. eligible the private of for some the student -- loans refinance student the loans, be wouldn’t necessarily newly so, And

Mark DeVries

Okay, got it. Thank you.

Operator

question next of Cyganovich our And from the Citi. line comes Arren of

Arren Cyganovich

Thanks.

of bit pressure quarter-over-quarter. downward Just net little on a would driving think the basis? that. just a adding consumer have as the refinancings to on that additional was that a that the interest would lending, margin, I what on sequential I curious us popped was

Joe Fisher

at look I quarter-on-quarter basis. have think year-on-year at you've you to also on a

basis And so, obviously have they inevitably adjusted risk I a NIM. loans the refi while very on do lower are a attractive,

the again I'd beginning but year the And X.XX time of still track X.XX for say we're adjusted into that's on three portfolio at for attractive so NIM the return that through risk NIM flowing - that range. within we over portfolio. to at guidance to will at the the be a reduce gave

Arren Cyganovich

off lending disaster rate the by still in recovery the And [indiscernible] coming on X.X. same impacted kind down refinancing relief that charge the also further Why of of the the consumer year for aspect given is those to But was new X.X the efforts. the net terms was adding that of of guidance kind of kind isn’t book? for

Joe Fisher

So, who that been is loan impact book. some what quarter. same you going the be improving in it just the residing correct phenomena terms portfolio is and areas. you the felt our well of - private of portfolio borrowers the the as the if in you're as reset to will We in on for at are seeing really that both the look they’ve the first and And defaults significantly the second FFELP -- year-over-year were delinquencies disaster forbearance see

the so the little a of year. second rate And to half that normal the elevated to periods creates it during bit in returns charge-off before be those

Arren Cyganovich

thank Okay, you.

Operator

comes line Sanjay Woods. the Keefe, of from Sakhrani Thank Bruyette our next And & you. from question

Sanjay Sakhrani

just talk your Thanks, on could future. on wondering about more going strategy more was good just in-school you much you the I the Perhaps to you're bit there. how product, comment in guess I on a morning. of following the strategy little execute this if Jack, expand

as such versus goes, product And tell to For of far how example, skew, as as then, are Thanks. to it you undergrad indirect will grad. through. more the thinking work will it banks channels skew us

Jack Remondi

something participating goal brought marketplace we products. advantage refi together some those think our along student innovation origination been this to take is the of unique in to in experience in that is school with our to have So, loan marketplace now we combine of right that of offer has the And front. XX the that pretty the over to years

the consumers through is at audience versus target and working partners through Our directly with -- this point. is

to over bear the kind we Some or not they so of college the here have are can brought and quickly whether be product of can million that understand next anxiety features innovative That the education. will to about equates our and innovation for but their also but they they originate quickly ramp consumer about here. $XXX the think of over this finance we be, approval education checks that that experience, to what they'll this able and finance quick at address college not disbursements. And The cost families years. the components just last years is pretty give what product their better unique. of how modest $XXX cost and invited loans are us application what expectations about year way process helping then, about competitive think We're something in part will of think design a think to is those And to life worth we that been the we is the million would loan. we've of up understand participate a on advantage of of we co-borrower here really we and talking we the the our reduce ways capitalize for several that is students the couple pretty

Sanjay Sakhrani

work well? And as so direct or just is to plan other the through parties be

Jack Remondi

expectations as be is a the direct generate space. it that I in this mean is to attractive consumer this to will in can think very is lending - game, mid-teens At we which we are stage in ROEs product And say I the our generate originator.

Sanjay Sakhrani

maybe And then Okay. question. a follow-up

through the politics. is how of way affecting any of in you noise in all Maybe see just headlines, the you your you obviously political on that could lot and Just background. views there a on maybe talk these Thanks.

Jack Remondi

rates in political think in programs terms front a you our I programs past, I go And loan graduate are the not circumstances debt have stories here just We from this that of it's time are like of the of but that been recession. coverage. doesn't have large loans. wrong you we this credit borrowers Well, a underwritten products. set default performance of borrowing, those the portrayed. and the number see is since those seat think are as in that and delinquency has the for situation think students student mean and is see And row borrowers like there media the to and each that told the bar we've it lot large that federal type with for really and every of continued improving drives number the And and and very of of belling talked not debt almost different gets any numbers the individuals who norm. who a dramatically often become and of of the a and in school topic of year a of still improvement the we kind when again, end it last outstanding have

you other have dollar dollar that the borrowed in the significant being a being of number the where side are are the the On both kids barbell number, meeting terms a is the not of and of in and the amount graduating. of students amount borrowing who borrowed, number increase

equation don’t graduate longer extent the four more struggling students as sets So, less the lesser from front X/Xrds it's the kind going solutions all defaults or families end typically to helping significantly circumstances. really need in cost view in side that about before, to educational our of here come and that process and what It's the of And into complete on makes students more program the income package financing financing and addressed in we've career understand years whether That's are traditional they than the shared or borrow the their given who start pursuing. $XX,XXX. take and that occurs. education where to they're degree federal of a not earn sense the than you to the of planning and and that potential see of to how they be six the

It the helping decisions it equation end. the end symptoms solve giving solve better problem. of cures back and the at front it make on the problem, the For families students doesn't but doesn't the

Sanjay Sakhrani

thank Alright, you.

Operator

the from comes Cooperman of Leon question Omega next Our of Advisors. line

Leon Cooperman

question I remember forthright I in low ago to forcefully we and time we buying that process thought focus stock Several response think you conference said in we at Thank the the asking a if started same and very would your very XXs had rationale call back program. and and buying I were business the it's XXs. you. back stock your could behind the like repurchase is because on in years worth think you the think it the We undervalued. we're on

highest a think decade I'm want is have you're XXs to $XX. market stock the of business I program, is in your relative price when a prices material really values thought etcetera. expectation stock I'm suggesting. with half almost you're discuss back be behind Thank the could not and the what being worth analyst average the think last create so stock bought you. learn. critical, to if you that that unrealistic just to rationale Those years you retiring ago average you will bought value. seem buying just three you curious lower bunch I or $XX.XX, in XX. Obviously, we the under is back The the the price

Jack Remondi

Leon. Thanks, Sure.

capital of is and we've had would that repurchases. with through So, dividends businesses. our share our pay invested company loan ongoing we the below believe intrinsic accrete the been plus priced reflection that discounted And the program is is is components We that stock company that. still as and value has the the that designed and say flows off it return a previously returning back as what our then do from portfolio share FFELP investors it are the cash repurchase trades in of today of and associated believe private earnings to student the been and loans portfolio those been to really

that number reflected changed, different obviously the has And so, price stock here. has expectations

we for suits the the some back today to weigh is value think see much buying today's significant and regulatory heavily that I intrinsic buy of back price investors we stock issues less a at very value on but before than creator way our the see. stock our that ability the today's prices law as

Leon Cooperman

extreme? dollar Do think you for a bull $X.XX is are you buying too or that

Jack Remondi

for Well, back are this dollar. stage think it than significantly dollar than a at less we a buying certainly and I less

would I as think expectations is the people's say the we you the range company of in has a stock the XXs. wide the of value intrinsic range point that out

Leon Cooperman

Thank luck. you Thank much. Good Got you. very it.

Operator

of the question Valentin Scott Compass next line from Point. of Our comes

Scott Valentin

taking refer you of Good for question. Jack to increase. It factors. about Chris morning a was asked everyone. think Thanks I guidance the of my and as one number

and go for rates On but competitive I change long there assume together, still have increased competitive. environment either the Is term kind your very wondering it's of given forward? side interest interest just they rate the your something outlook going the in margin I margin or that confidence guess in the term short

Chris Lown

gain as a one well. taken mentioned gives but lot of Yes, the guidance guidance the was as of or Jack based. the that which that think the That's benefits a end things it repurchase are broad couple too. $X.XX. is in very It into account business of entire across of is other there is us increase this Obviously confidence price so increase I

to curve corporate back about mean I There people thought have of to in interest was, what The were all flat Take dramatic and are was there October, in yourself tightening still estimates also look and rates increases You is XXXX. has shift now inverted. talking like. been remember two the there November where a rate going meaningfully.

to our were helpful. that and in inevitably And than different so benefit we are is significantly environment just is a so we

that The amortization into slowed. XXXX the is happened through year thing other

expectation obviously was bigger little which accursed our benefit. So portfolio store a size than it

what raising there for single based which wasn't comfort XXXX. because positive gives a of us are a one of points it number lot our and So around broad thing and guidance is very it's

Scott Valentin

to outlook mean say look for going take little the the a confidence in rates I it's more maybe much And not up assume I of LIBOR, the some that really on as as helpful. provided further Okay outlook?

Jack Remondi

right. That's

Scott Valentin

much. very Thanks

Operator

of Our of John next Jeffries. Hecht from line comes the question

John Hecht

Yes, much my for thanks very taking questions.

is one respect expenses. the with to First just

You this of be of and guide do guys middle and to have that we respect adjustments I year. any about the think should that there? thinking FDC efficiency we think How pass-through with expires the

Jack Remondi

So that until that margin million was roughly will revenues use revenue a that guidepost. you I as continue and it system are TBD expenses other. the expenses in $X quarter. a mean wash off and inevitably their we That element. but can It each the is zero is a washes

the can So think that I give you guidance.

give still We updates moves it but the when TBD. of is will and you on that obviously depends everything systems off

John Hecht

I we ratio making modeling and adjustment guess efficiency for we're expenses? that the make should

Jack Remondi

Yes.

John Hecht

second is little more question a bit strategic. And

of the over building private to your about that the lot the portfolio. about replenishing How that in term a rates category? nice past origination done billion that education in think intermediate and job You've acquisitions and a do runoff seems loan just of goals a several quarterly along segment quarters, be growth now the up we dollars but origination

Jack Remondi

XXs a replenishing. be off a that few but high it we'll runoff run portfolio will to that the state a and to portfolio call steadier come obviously but assets still So a the these continue so obviously years size from have number will build portfolio be wouldn't teens, growing. in Obviously and low

John Hecht

of pattern? kind do two you origination or where So in you a in terms guys of want what see we do to origination maybe year --

Jack Remondi

year guidance out we at X put I of this billion. least think,

gotten percentage with grow quarter-on-quarter will having after that I long guidance the think still room over the think if teens. business to we down in a year and come to term exceeding feel increases year we on it. more this there's not but of it portfolio even ramps the comfortable scale the Obviously in

John Hecht

Thanks very much.

Operator

the of Bank question Mark Our of comes America. next Hammond of from line

Mark Hammond

the I Chris bonds? of yen the couple quarter. structure. slug you on cap a that Were another Jack, during repurchased questions the on Hi bond first and thanks. Hi, Joe. they One, had

Jack Remondi

The That's XX? right.

Mark Hammond

Yes.

guess one do there is to more I more there is So remaining? there?

Jack Remondi

finally So, got the we again you purpose to not is return to but left a come use to or felt in things I investors to I'm us in the with perspective uncertain. but wouldn't from capital they it amount this dialog expect little it to contact is there allocation we that little inevitable tell with do. talking there's a from received bond us the I is Obviously we a to still few What investor say. all and to capital that more is us a There is, being not it anytime whether time. come This soon. point where not for meaningful a made XXs sense and given a see have

Mark Hammond

moving to from credit private XX, residual billion down went cash forecasted report the that's one X.X And slide cumulatively last just flow on quarter's by flow cash what's going there?

Jack Remondi

the over Hold on. That the collateralization represents against securitization the trust. structured financing do that we in

debt unsecured structured cash debt. flows net before those of and are So

against reduces debt liability an to unsecured other cash flows now our there's in borrow the proceeds balances So do a when over introduction reduce money it because a the those are we collateralization or things. used of

Mark Hammond

do frame way facilities capacity of Thanks any to is there or can more a the private side? the repurchase Jack. on And quantity then the you

Jack Remondi

capacity. more is there Well,

and some will looking we we're we structure the price saw at if it what were financing capacity of be an think optimize that alternatives. best as I tap all what to at to our looking is There and always opportunity at cost financing us utilize. benefit is optimization our of should structures at be those greater and ability is a facilities cash than to that flow still financing to other times but us

Mark Hammond

Got that capacity? Chris you it quantify and could

Chris Lown

billion. sub time over but It obviously a changes

Mark Hammond

enough me. good you all. for Thank That's

Operator

J.P. from of [Operator Shane Instructions] line Our from the Rick next question comes Morgan.

Rick Shane

may next change debt the to the questions. guidance that Good outlook move look that morning guys. reserve driving on better of as are and favorable Is function biggest lower that this credit the we trends out look from was levels was When the delinquency XX% a a repurchase. and year? from a the we revision pointed benefit XX% year-over-year Thanks basis. my roughly you at through component to for of guidance the When at taking

Jack Remondi

our I raise really I across we end to the think said quarter in of by mean the contributions at contribution board. driven guidance the confidence here is the as ability the

BPS as on and terms mentioned expect related improved uptake from amortization BPS We us generating. the contributions the you our trends of we're margin significant that to year. And to add of the balance as as our in saw example are programs and component. there a So first in better also contributing value have margin equation, through you of fee share course in continue revenue businesses that quarter in of the the in but we're that those and the performance just in to then portfolio, repurchase both our side origination FFELP to net Similarly profitability interest factor the revenue fee well. our for OpEx revenue then for re-fi seeing a of better

one would So two this at contribution single or look I as versus areas. across-the-board or really area a

Rick Shane

Got it.

Okay. That's helpful.

consolidation The ways student a your on many has second talked lending refinance. question and emphasis you been guys lot and and opportunity the about private in

different and part the on lists electronically Is class to asset we've seen been of going a consumer. you market the but different origination in of I'm getting preferred you an part that is there's it's new market. opportunity chance loan if opportunity that re-enter approach think strategy? to other about that that do direct lending there's the in a The in classes as go way? to Historically be to curious as increasing

Jack Remondi

our a first approach. digital approach here certainly is Well, marketing

example generating the of So a of big acquisitions related of we the function marketplace equation. in for customer instead and chunk direct are on the on re-fi a related digital focused this and leads mail is some side business

direct Today the encouraged than at back-office loans students variety are they lists move how still with channels of much their different private lender information and those working today. school for very where in through what about closely years expected including the vehicle the today did family office purpose office serve source financial of operations financial channels The different families financial preferred ago were get In customers or ten and very understand originate campus finance in a student school. in aid The a because financing are the be we'll it level of what aid students digital their terms the office. to contribution to aid it. and five, through through needs family oftentimes how the will to simplified

though products the by school. be with and are, certified underwritten directly disbursed proceeds our school of disbursed All will to the

Rick Shane

thank helpful, Very you much very guys.

Operator

of next Our Gabriel from line Dominic Oppenheimer. question of the comes

Dominic Gabriel

my that And your taking remind original strong in for many had year. just obviously how you to questions. nice you start guidance? Thanks a hikes rate had Can then guys us the you

acceleration businesses you plan various B from continued pretty the broad-based yourself where a your XXXX? adding repurchase you was Thanks in XXX you some maybe remaining it came and quarter. to If your so for said saw see of Could much. this

Jack Remondi

remember our one or we was in So, on in rates guidance future have expecting another hike flat original hikes the increase that rate curve. but the market and also the decline so

like clearly We are the do on we X.XX are will feel like the pretty shareholders ratio. are capital C So through that but return feel is into excess a increased TNA and one times capital in we right was capital we etc. return an to position we X.XX guidance excess out shareholders great returning committed of a hike a going rate up to buybacks, capital on B if that we but curve we then to and to put is the of where where we and steep still

capital what think think continue the of store you for our could sort to in rest that generation year. the at in about of look I So can ratio and leverage be

Dominic Gabriel

you the better just amortization FFELP if and then it across or was one? it talk the both private about and portfolios could was Thanks

Jack Remondi

internal both FFELP our versus It thoughts. was

Dominic Gabriel

the takes can to? looking the about continue to core obviously there be there given you some much. for where some nice origination talk efficiency on you're to Thanks there on segment leverage ramp other additional disclosure then, the the expense seems see some give so and just X which that yet the of slide Can your appreciate. the I do really And of you breakdown

Jack Remondi

on important I our as very that this to scale the to very help these amortizes shared it's So it's the great and portfolio think we're segment a us. them and are because us focused business question services trying operate

IT we shared transaction expenses big last control with that a and know in of first entered variable you expense a lies, data and some help services. to our reduce us to as So, was year move

in world a reduce think And so to fixed changes leverage place using technology to still that changes the can model, we IT things costs. and infrastructures cloud, is business we our and platforms etcetera like the

our clearly continue clearly be and manage finance, risk, facilities focused used think should something hope be to regulatory will IT management, saved on we scale that clearly obviously regular we'll that's business all our benefit as clear there we then and related we reductions. side in our expectation time them and down our something drive down be corporate and to and these over So audit footprint is things of to that all that are can expenses goes on can the and vendor legal

across break actually there That down we've go change two as or it's will after we immediately So, them as year. variable. costs for now won't down are that down fixed the that's I they but year you them think converted but as scaling next a see over board plateau to the far

is that system. through a in to there a half that the and work year year, variablization benefit about inherent take will So

Dominic Gabriel

answering Thanks so question. much for my

Operator

Moshe next Our comes Credit Orenbuch of from from question the line Suisse.

Moshe Orenbuch

lawsuit? lawsuit. itself but the kind meaningful kind on student I CFPB the with respect guys to a former in any in and not depose that saw sure a legal that of Navient Thanks. that to all you is process Ombudsman updates loan that got blog on of ability had the of the that I'm

Jack Remondi

in sole the that is systems place move continues takes it slow So federal which to the pace unfortunately. at court

game in the present the two it are have think than searching most is beginning. was after I that moving this claims that been had that the call facts has discussed here. more hopeful some the to CFPB that of special yet discovery legal phone the from still we to support important in through the stage There past at faster years process of of all are open had listened do initial considering a to it's they helping claims single along to items they for unfounded. is and expect will master little a lawsuit a appointed the before is customers matches on a the process in that accelerate up continue who allegations that that their their support. and we but harmed We're these example to a the their What deposition move not filed said surprising bit process process against a single we way customer customer that

Moshe Orenbuch

of percent question markets on back by probably kind that to go teens in if did Lee's earlier kind comparable following And strategy the shift just the in stocks a almost up you upper earnest and amount. you before of in up down

with So question to you I has ask how has I the do to what that Navient to value? get struggle even but strategy guess do recognize investors think to that

Jack Remondi

legacy see think strong what very have what we equation. results component do we returns attractive each at portfolio you of on this did can very you generate our this the if I so Well, we that from the look the to which is business quarter quarter demonstrate returns is of side and

see margins. You growth with strong higher said origination we

see you and increasing see You revenue declining. operating fee expense

stock we'll to we noise the focused prefer creating and control side executing see that's delivering the need what and what the that from plan the delivering a we value to that's very soon. now think our very, with our the Canyon price shareholders proxy business within growing certainly to value and doesn't recent be I in we regulatory the of of we company unfortunately value for and of equation the We business and where on associated and and retraction hopefully even proposal be The here some process. the is That's piece do. for it and stakeholders. think reflect this

Moshe Orenbuch

you. Thank

Operator

the of from comes Coffey Henry Our next from Wedbush. question line

Henry Coffey

good morning. Yes,

on me if professional business of one questions classical super doctor, borrowers sort and it's wrong I'm prime obviously lawyer, focusing any on going correct further food pretty the there's impression banker, much thought a product there high dollar business FICO of a the would process that work other Is focused my two degrees; engineer. down is investment Just down high-end refinance on with refinance that see successful down traditional economic of chain the, professionals but still chain Or not market? kind to if whatever mainly teachers the there? it to is further that

Jack Remondi

be have tremendous to that products correct is mode mentioned significantly and look offer there who ability stable and that to product focused for better offer customer we consumer and them very that consumers a of a repayment to and able who of you're record in you this cash their with the before the earlier be marketplace identify Certainly significant in are much insight and origination payment consumers that a for student an saving space be repayment teachers extent nurses very cycles to part XX interest we're predictive is debt and to saying exiting are and professions are free flexibility point prime if student bring might and well. on us have the in customers support incomes to rate payment level at for in to that that several that flow there and very and to expense great as federal ones some they that streams the is, than is to private second needed. to one the demonstrated that is and track exist loan and customers other here are super think customers like through larger loans loans earlier the of attractive this customers at this stable time. interest So we might designed be years your the now But years loan both program the they to and as that the been almost includes the able get of servicing we to move those federal how examples I options those the some having here advantages want the

Henry Coffey

higher. are moving And then earnings

be moving but You to involved return wonderful some per the stock the talk are seem to your not people higher? income. dividends that Why in capital stock are earnings is buying put which of of a are now that back share that for increased of into we there lot

Jack Remondi

did think buybacks price. share in be return from a and honest pretty and from is the that result we're perspective Clearly capital around paying today to of the the the the produce compared decision same inevitably suggest theory would perspective I dividend discussion allocation corporate to capital high and return shareholder we're dividends in to market we do would do talk something good a averages. I place the think consider internally about I like but think and and we if so it's signal that. obviously compares about do that we about. the something to we feel change and to were

Henry Coffey

to I to up that if mean you to is it high add dividend is go X% fear react? much going the it's you won't view yield is as if the the or dividend would the stock pretty and a that the as go there a add dividend stock

Jack Remondi

the so top perspective yield benefit almost -- other there any think incremental program. and it back returned one to versus a a there if in capital either towards from rest the we to you some we shareholders the buyback is in look it coming but way Again we stock the the from or leans at degree stock buybacks, buying where to are probably dividend is being or that versus is other --

Henry Coffey

very congratulations you a much great and quarter. Thank on

Jack Remondi

you. Thank

Operator

I'm turn for no the questions I'd further call closing time. at Joe showing this queue the to in back to like you, And Fisher remarks.

Joe Fisher

for everyone call. to Thank like you, joining thank on We'd us Nova. today's

This have you me. concludes today's free call. questions to contact any other feel If follow-up

Operator

now thank Ladies does wonderful for day. Everyone conference. and may conference disconnect. conclude you This the today's participating a in you and gentlemen, have

Navient (NAVI) 24 Apr 192019 Q1 Earnings call transcript