Q2 2021 Navient Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Navient second quarter 2020.
1 earnings call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
You will need to press star 1 on your telephone keypad.
If you require any further assistance. Please press star zero I would now like to hand, the conference or would you.
Your speakers today, Mr. Nathan Red Lynch.
Sir Please go ahead.
Thanks Laurence.
Good morning, and welcome to Navient second quarter 2021 earnings call with me today are Jack Remondi, our CEO and Joe Fisher, our CFO after their prepared remarks, we will open up the call for questions.
Before we begin keep in mind, our discussion will contain predictions expectations and forward looking statements and other information about our business is based on management's current expectations as of the date of the presentation.
Actual results in the future may be materially different from those disclosed here this could be due to a variety of factors.
<unk>, including among other things uncertainties associated with the severity magnitude and duration of the COVID-19, pandemic and the related economic impact.
As reported previously the work from home policies and travel restrictions that have been put in place have not negatively affected our ability to close their books.
<unk> and maintain our financial reporting systems internal controls over financial reporting or disclosure controls and procedures.
Listeners should refer to the discussion of those factors on the Companys form 10-K, and other filings with the SEC.
During this conference call, we will refer to non-GAAP financial.
Including core earnings adjusted tangible equity ratio and other various non-GAAP financial measures derived from core earnings our GAAP results and description of our non-GAAP financial measures with a full reconciliation to GAAP can be found in the second quarter 2021 supplemental earnings disclosure.
This is posted on the investors page at Navient Dot com.
Thank you and now I'll turn the call over to Jack.
Thanks, Nathan good morning, everyone and thank you for joining us today and for your interest in Navient are.
Our business model continues to deliver exceptional results for our clients our teammates and our investors.
<unk>.
This quarters results were driven by stable margins in our lending segment's strong demand for our private education loan products and continued strength in delivering services to.
Our state clients and our business processing solutions segment.
In total we earned $165 million in core net income.
And delivered adjusted core earnings per share of <unk> 98.
An increase of 8% over the year ago quarter.
We continue to focus our efforts on increase.
In loan originations.
Growing business processing revenue and improving financing and operating efficiency.
This quarter, we originated $1.3 billion in private education loans up from a pandemic impacted 238 million in the year ago quarter.
We are also optimistic about demand for new in school lending as peak season for this product is underway.
As a result, we are committed to our forecast of at least $5.5 billion in combined refi and in school originations in 2021.
Demand for our business.
On his processing solutions also remained strong throughout the quarter.
Revenue remained above expectations as our performance and efficiency allowed us to maintain our pandemic related project assignments longer.
These projects have also allowed us to broaden the awareness of our technology enhanced capabilities.
With clients and we continue to expect the revenue.
From our Covid related work to decline significantly over the balance of the year as these projects come to an end.
Are felt in private education loan borrowers continue to show very strong payment performance of the economy.
Reopens.
Forbearance rates are at or near pre pandemic levels and delinquency rates remain near historic lows.
While we continue to offer payment relief for customers experiencing financial difficulty.
The request for this assistance continues to fall.
Our reserves for loan losses include the current economic outlook and the potential impact from the wind down of the various stimulus stimulus programs.
Yeah.
Net interest margins in our student loan portfolios have also contributed to our financial results.
We continue to reduce interest expense.
With the execution of new funding facilities at lower costs.
These new funding transactions include lower spreads higher advance rates and innovative designs that allow us to reduce both the cost of our facilities and the level of unsecured debt or highest cost funding source and.
<unk> folios.
Our actions in this area have delivered hundreds of millions of interest rate savings in the last 3 years.
We've also delivered operating efficiency gains through increased automation and incorporation of artificial intelligence.
This focus on building technology.
On our portable solutions has allowed us to improve our customer experience reduce costs and improve outcomes.
Our efforts to improve customer experience and our financing and operating efficiency remains a primary focus for us.
Our exceptional financial results.
G&A rate is a capital to exceed our targeted capital ratios ahead of forecast.
Deliver an attractive dividend.
And increase our original plan for share repurchases.
This is yet another example of how we create and deliver value for our investors.
Yeah.
A genomic created a very volatile and challenging environment, our business plan team and infrastructure allowed navient to respond to our customers and clients with the support and services needed to navigate the constantly changing and challenges challenging environment, while maintaining our focus on growth.
As I look to the second half of the year I remain very optimistic that we will continue to deliver exceptional results for each of our stakeholders.
Before I turn the call over to Joe for a detailed review of the quarter I would like to thank my colleagues for their continued commitment agility and effort to service our customers and clients.
Thank you. Thank you for your attention and I'll now turn the call over to Joe. Thank you Jack and thank you to everyone on today's call for your interest in Navient.
During my prepared remarks, I will review the second quarter results for 2021 and.
I'll be referencing the earnings call presentation, which can be found on the company's website in the investors section.
Yeah.
Our second quarter results compared to our original outlook for 2021 is provided on slide 4.
We are currently on pace to exceed all of our original targets provided at the beginning of the year.
As a result of the strong first half and updated outlook.
We're increasing the range of our adjusted.
Core earnings per share guidance to a range of $4.20 to $4.30.
An increase of over 34% compared to our original guidance.
Our outlook excludes regulatory and restructuring costs reflects a favorable interest rate environment includes the announced debt repurchases and utilize.
Section, meaning share repurchase authority of $300 million.
Yeah.
Key highlights from the quarter beginning on slide 5 include GAAP EPS of $1.5 and adjusted core EPS of <unk> 98.
Charge offs on both felt in private education loans remain at historic lows.
The room generated $1.3 billion of private education loans achieved bps EBIT margin of 30% in the quarter.
<unk>, our capital position and returned $227 million to shareholders in the form of repurchases and dividends.
Moving to segment reporting beginning with federal education loans on.
On slide 6.
Net interest margin declined 10 basis points from the prior year and remained flat at 97 basis points compared to the first quarter.
The decline from the prior year was expected following the annual resets on certain loans that occurred on July 1.2020, and reduce floor income by 30.
<unk> million dollars compared to the year ago quarter.
When adjusting for this event net interest income was flat year over year at $141 million. Despite a decline in the portfolio of 9%.
This portfolio continues to benefit from the favorable interest rate environment and ongoing improvement in funding costs.
Felt borrowers transition back to repayment total delinquency rates have remained stable at 8.3% while charge offs remain at historically low levels as more borrowers transition into repaying statuses, we expect these levels to revert towards pre pandemic levels.
Fee income and operating expenses in this segment declined.
Kelly as a result of the expected decreases in asset recovery volume impact of COVID-19 on certain operational activities and improvements in operating efficiencies.
Now, let's turn to slide 7 and our consumer lending segment.
The net interest margin of 295 basis points is above our guided.
Added range and is 25 basis points lower than the year ago quarter, largely driven by a shift toward our high quality private refi product within our consumer lending portfolio, which now accounts for 40% of total loans in this segment.
The negative $1 million provision in the quarter was comprised largely of 3 components.
Primarily.
First a $9 million decrease in the expected losses for the total portfolio.
A $5 million release in connection with the sale of $30 million of legacy private education loans and.
And third a $13 million increase related to $1.3 billion of newly originated high quality.
Component education loans in the quarter.
While we have seen an improvement in the current economic conditions, our allowance reflects the uncertainty related to the potential negative impact to the portfolio from the end of various payment relief and stimulus benefits that are currently forecasted to end this year.
As borrowers continue to.
<unk> share to repayment, we feel confident that we are adequately reserved given the well seasoned and high credit quality of our portfolio.
Let's continue to slide 8 to review our business processing segment.
The $66 million increase in revenue from the prior year is largely due to supporting states and their efforts to provide unemployment.
Employment benefits contact tracing and vaccine administration as well as an increase in revenue from our traditional business processing services.
Leveraging our existing technology and infrastructure allowed us to exceed our original EBIT targets and achieved EBITDA margins of 30%.
As the economy reopens.
And these contracts begin to wind down we expect to see a decline in associated revenue.
The growth in revenue in this segment resulted in a $35 million increase in expenses in the quarter, which led to increased total operating expenses for the company.
The overall efficiency ratio for the company of 51% in the quarter is outperformed.
Performing our original target set at the beginning of the year, even as our growth businesses contribute a larger proportion to our overall revenue and expenses.
Let's turn to our financing and capital allocation activity that is highlighted on slide 9.
During the quarter, we utilized the cash raised from our unsecured debt issuance and loan.
Transactions from earlier this year, along with operating cash flows to reduce our existing unsecured debt footprint by $692 million, resulting in a repurchase loss of $12 million subs.
Subsequent to our second quarter results on July 12, we retired an additional $750 million.
Of unsecured debt that was set to expire in January of 2022, which will result in an estimated repurchase loss of $20 million in the third quarter.
We have no existing maturities for the remainder of 2021 and have reduced our total unsecured debt due in 2022 to under $1 billion.
<unk> the quarter, we repurchased 11.8 million shares at an average price of $17 and <unk>.
All while improving our <unk> ratio to 6.3%.
Cumulative negative mark to market losses related to derivative accounting declined by 8% to $459 million in the quarter mainly.
Mainly due to the natural passage of time.
Excluding these temporary mark to market losses, which will reverse to zero as contracts mature our adjusted tangible equity ratio is <unk>, 8.0%.
We expect to execute the remaining $300 million of authority over the remainder of the year.
In the quarter we.
Sold $30 million of private education loans, resulting in a gain on sale of $2.5 million. This was a follow on sale related to the larger legacy loans sale that occurred at the end of the first quarter, we do not forecast any additional loan sales and our guidance for the remainder of the year.
During the quarter, we issued $2.1 billion.
Of term funded ABS the demand for both felt and private ABS continues to be strong. Our most recent issuance that price on July 19th was 11 basis points tighter or 15% better than the previous private education refi transaction and was 4 times oversubscribed.
These transactions.
<unk> combined with improved financing efficiency in our facilities demonstrate our ability to lower our cost of funds, while managing our debt maturity profile to better align to the cash flow projections of our total education loan portfolio.
Turning to GAAP results on slide 10.
<unk> second quarter GAAP net income.
<unk> of $185 million or $1 <unk> per share compared with net income of $125 million or <unk> 64 per share in the second quarter of 2020.
In summary, this quarter's results demonstrate the continued dedication from team navient to meet the challenges and needs of our customers the.
Performance, both in the quarter and year to date across the company positions us well for the remainder of 2021 to exceed all of our original targets maintain our strong capital position utilize the full remaining authority of $300 million for share repurchases and achieved earnings per share of $4.20 to $4.
<unk>.
Thank you for your time and I'll now open the call for questions.
At this time I would like to remind everyone in order to ask a question. Please press star 1 on your telephone keypad.
We will pause for just a moment to compile the Q&A roster. Thank you.
And your first question comes from the line of Mark Devries from Barclays. You May ask your question.
Yes. Thank you.
Joe You mentioned reserves kind of contemplating the end of payment holidays could you just talk a little bit more about what your expectations are for delinquency trends.
30 ultimate losses, once those payment holidays and.
So I think of them as on the <unk> portfolio coming back towards pre pandemic levels. So when you think about the total delinquencies, it's anywhere between 11, and 12% and forbearance ranges call.
And a 12%.
The charge offs similar with our guidance given at the beginning of the year, we had guided towards 10 basis points for the for the private portfolio. If you go back to pre pandemic levels you have to factor in that there is a mix of our refi book so for the the.
At around total delinquency levels I would think depending on the mix of refi loans, which are.
Very high quality and low delinquency I would expect that a more normalized environment to be in the mid to low 3% range and then from a charge off standpoint, I think again, it's contingent.
X, but you're and you're getting into the low 1% range. So off of our guidance here in our outlook at the beginning of the year. We were at 1.5% to 2% a lot of this is going to be a function of the overall refi mix for the private book, but ultimately we would think of this the stimulus and at some point and these repayments.
On the menu of options and that you would get back to more normalized levels, but our our overall quality will continue to improve just as we originate more refi loans.
Okay. That's helpful.
And then Jack you alluded to your optimism about kind of the in school originations.
Andrew.
<unk> really season.
Are you already getting a read on that just based on on applications. If so how.
Is that kind of tracking relative to what your expectations might have on.
Chart, So yes peaked.
GAAP location flow really starts to pick up in <unk>.
Second half of July and.
Move moves through August and so we are seeing some early trends on that side of the equation. There is there is a various measures that we look at just in terms of application flow completed applications approved approvals on and then of course, we are still in need to wait.
And the last piece that happens in this process.
Yes, they were waiting for his school certifications.
Where we stand right now we're optimistic about what we're seeing.
It is early still but.
I think the product enhancements, we made this year.
Some stronger partnerships that we have in place and.
The different marketing initiatives that we've launched I think all are coming together nicely.
Okay, and what are your expectations for the returns on the in school loans versus your refi product.
So we've been talking about mid to high ROE returns between between.
With the refi at the lower end and in school at the higher end of that range.
Okay on a loss adjusted basis.
Yes, okay.
Okay great.
Alright, thank you.
Oh.
Your next question comes from the line of Rick.
Shane from JP Morgan Your line is open.
Good morning, guys. Thanks for taking the questions. This morning on.
You guys have been clear during the year about the potential declines or offsets in our revenues from Governor government services.
And.
The 2 since processing segment on them.
I'm curious when we look at the operating expenses there when you think about that structure how much of the operating expense structure is fixed costs versus variable. So that way. We can start to think about what the efficiency ratio put that part of the business with day.
Although.
She's contra operating market.
Sure so.
These contracts were really on an example of our ability to kind of ramp up and respond to rapidly rising demand as that as the pandemic.
It really began to take hold in that area, we were doing work.
Such as helping states process unemployment insurance claims did some.
Contact tracing related work and then most recently, helping states get the message out about.
Vaccination.
Where to go how to get it how to sign up type of type of information of course all of that.
Well eventually.
Recede.
As these programs wind down.
We responded to your point, though with incremental variable expense. So there was certainly some technology hardware related issues that we had to bring it into play but for the most part.
We responded with temporary temporary workers.
And temporary expense solutions.
During this timeframe, we hired well over 5000 people.
To respond to these needs were down somewhere around 3600 right now.
And those.
Libraries, and expect us to continue to decline.
As the work.
Winds down over the balance of this year.
Got it okay. Thank you very much.
Is it for me.
Your next question comes.
Caroline <unk>.
John Hecht from Jefferies. Your line is open.
Good morning, guys.
Yeah, maybe kind of high level question. It seems like you guys are gaining share when you talk about the competitive environment.
So far is now formally public company Wells has left so there's some cross.
Sure.
How do you guys kind of define or characterize the competitive environment on the private amendment side.
So there are obviously in the private lending we have 2 main product.
Focus points, 1 is on the refi side of equation with a different set of competitors in that space.
Ross crowd than we have in say the in school and the in school origination I think our capacity our capability and demonstrated results in the refi area kind of speak for themselves, we've been able to rapidly grow our originations in that side of the equation and take share.
Demand right now.
Now.
For our products has been strong it is certainly muted by the fact that the department of education loans that are outstanding are at zero percent interest rate with no payments required.
So we're seeing a higher concentration of the demand coming from people with borrowers with private education loans.
But we expect as those loans come back into repayment will see refi demand increase and we fully expect that we are either the number 1 on number 2 originator for refined products in the country.
And the in school side of the equation that market dynamic operates a little bit differently.
It is very seasonal and it is.
And it builds on itself as you.
As you start the program. So when we began originating loans. We are very much focused on borrowers students and families who are borrowing for the first time and so.
<unk> then capture each each.
Currently on academic year, the opportunity to make subsequent loans to them and so you build on your origination flow volume, it's a slower it's a slower process because of the seasonality and because of that targeted approach.
But certainly with the exit of a number of banks from the in school originate.
Subsequent share business.
Excited about the offer more excited about the opportunity than we were when we launched the products and we fully expect that we'll be able to take increasing market share as we expand.
Each year going forward.
Okay, that's very helpful.
Originated and then any update on that.
The case with daily.
Do you mean, the CFPB or Oh, yes.
I am sorry, the CFPB I apologize.
So that case just.
Continues to grind its.
Way through the slow very very slow court process.
All of the <unk>.
Discovery at this stage in the game has been completed depositions have been taken and.
We're kind of waiting on the judge to begin to schedule. The next rounds of rulings and.
<unk>.
We'll hopefully get to a point, where we get to <unk>.
Have our day in court.
Said over the last several months.
During the through the different discovery process and the information that has been submitted to support the claims that the CFPB made.
Our.
Are the customers that they the witnesses that they believe support their claims have all acknowledged that navient did in fact tell them about.
On various income driven repayment programs.
I would also just point out.
Our track record here.
As exceptional we have the highest.
Percentage of borrowers.
Outside of the specialty programs like public student loan forgiveness.
Enrolled in income based repayment programs of any servicer in the country. So.
We are eager to have our day in court and be able to present, the evidence and hopefully move on.
From this case.
Great. Thanks, guys very much for the update.
Yeah.
Your next question comes from the line of Lee Cooperman from Omega family Office. Your line is open. Thank you very much I have really 2 or 3 questions. There.
On a bit.
Capital management.
Number 1 do you have a view of your normalized earnings we're in a very unusual environment, but in a normal year. What do you think you would earn.
That's number 1 number 2 what was the actual shares outstanding at the end of the second quarter.
In a typical year, what do you think you have available to buyback.
3.
200 million lift this year.
But you already bought a couple of hundred million dollars rate. So in a typical year do you think you could do for $500 million and lastly, and importantly at what price on the common stock we repurchase be secondary to a dividend increase you'd have not bump your dividend for over 6 years because of the money directly towards stock repurchase.
Really really that goes up repurchase becomes less attractive you want to share with us a view of what price on the stock would make a dividend more likely and dividend increase more likely than stock repurchase. Thank you.
Sure. So I'll answer your first question in terms of the ending <unk> in the quarter was 170 million.
I was just.
And your question about share repurchases going forward as you remember at the beginning of the year, we had guided towards $400 million of ship planned share repurchases for 2021 with loans sales and capital management and financing activities that we have done we increased that to 600 million.
In about 300 million left of that for the back half of this year, we haven't given guidance for 2022, but as you think about just our natural return and what's occurred over the last few years, we've tried to manage that with the natural amortization of our legacy portfolio. So as cash flows come off of that portfolio and that's.
We've got declining portfolio, you would anticipate that the amount available to repurchase shares would decline absent of any acceleration of capital into near periods. So from that standpoint.
I would anticipate that that would decline year over year, but those decisions will be taken up with the board and we will obviously publicly.
We announced that when we're through the reauthorization of this $300 million.
And I think to add to Joe's comments Lee.
We did we did take advantage of a very strong market for asset <unk>.
Demand for assets this year, selling loans accelerating earnings and using that accelerate those.
Accelerated earnings to increase our share repurchases.
These types of decisions are made on a.
As the facts and circumstances allow but.
Since we since Navient was created and we have now repurchased.
60% of the original shares that were outstanding.
At the creation of the company. So obviously, a very strong repurchase program and our commitment to returning that capital that Joe just described back to shareholders to the extent, we can grow our origination businesses faster.
Thats, obviously, a great alternative for us.
And we certainly look at when we have distributions.
The split between.
Dividend and share repurchases.
Certainly comes into consideration here.
So I'd say based on the P/e ratios of this company the price to book value.
<unk>, we are still trading below our peers in the industry.
And so we look at the at the value of the company on what we're able to do to drive earnings through origination growth through the bps revenue segment that we're building.
As a strong factor.
Factors that are yet to be fully fully perhaps recognized on the share price.
You're saying that the stock repurchase will be preferred to a dividend bump anywhere near current prices that we're seeing.
Yes.
Could you do you happen to have handy.
60% of the share repurchase with the average price you paid over the life of the program.
Since 2014, our average share price has been $14.46.
Got you Okay. Thank you good luck I appreciate the answers. Thank you.
Thanks, a lot. Thank you.
Yes.
Again, if you would like to ask a question. Please press star 1 on your telephone keypad again got a star 1 on your.
Keith.
Your next question comes from the line.
Launch Orenbuch from credit Suisse. Your line is open.
Great. Thanks.
At Jack and Joe any any ability to.
Telephone and talk a little bit about the trajectory in our net interest margin over the next several quarters, given you've had a little little probably less of an increase in rates than you expected, but you know all of the variability and the business mix issues, just kind of summarize that for us.
Yeah, So I'll talk.
Kind of tough felt in the consumer lending side separately. So from the felt perspective, if you look out on the forward yield curve I think youre seeing fairly stable rates at least in the near term and will continue to benefit from this interest rate environment here over the next several quarters. So I don't anticipate much.
Volatility on.
Felt net interest margin typically as you know Moshe that the second half of the year is a little better than the first half of the year just because of the mechanics of the program, but again shouldn't be shouldn't have very large movements here, 1 way or the other on the consumer lending side, its really going to be a function of the.
The mix of the portfolio, so as we move towards the.
A greater mix of the refi book Youre going to see a continued decline in the net interest margin. Obviously, we are exceeding our expectations here through year to date, even though we've originated $3 billion of of refi.
But from a capital perspective, we hold 5% of capital against that as Jack mentioned, we talked about mid to high teens return. So we view it as very attractive, but the net interest margin on the consumer lending segments should just continue to decline as the mix shifts from our legacy book to our refi portfolio.
Loans got you thanks and.
Joe You had mentioned.
Tighter and better spreads from a funding standpoint, any any ability to kind of do anything.
<unk> got.
A fair amount of unencumbered private loans still like what's the.
Are there any steps.
That youre going to be taking to enhance either net interest income or cash flow.
But certainly something that I evaluate every single day, we've been very busy through the first half of the year and I've said there is no.
Land sales in our guidance, but we continue to look at the financing options, we have $2.3 billion of.
On unencumbered private loans, another $300 million of unencumbered <unk> loans as well as the Overcollateralization of $6 billion on our on the rest of our book. So those are all things that we look at as ways to improved financing and also just make better use of our facilities and the capacity that that we have there. So it is something.
Definitely focused on but in terms of our guidance, we have no planned loan sales.
Great. Okay, and just lastly for me you mentioned the $5.5 billion origination target anyway, you can kind of you know.
Kind of tell us what proportion of that is expected to come from the in school program.
And do you think about the capital needs on those loans difference on the 5 per cent.
So so we definitely have different capital Ah.
Allocations for.
In school on refi and in principle the principal difference between the 2 products of course is the refi loans when you make an in school loan.
On your 2 risks or will the students graduate and does the does the degree.
On produce income sufficient to cover the loan in the refi space you know those 2 answers.
And so the credit risk profile and the ultimate delinquency in default of those portfolios are significantly smaller.
We're going on we're going to hold off and we'll talk more about the mix between in school and refi.
In October when we when recover peak seasons results.
Okay. Thanks very much.
Okay.
Your next question comes from the law.
Line of Sanjay <unk> from <unk>. Your line is open.
Thanks.
Wondering if you could give us an update on the servicing contract because I know 1 of your peers sort of backed out of their contract or would not renewing their contracts and maybe you could just talk about that a little bit Jack.
So we continue to.
Perform under the servicing contract that we have with the department of Ed. We're currently servicing $5.5 million accounts under that program or contract like all of the TV contracts expire.
Buyers in December.
And we will be working with the department of Ed to understand the new.
What their plans are and how we can help assist in that process, but it's.
Probably too early to say anything 1 way or the other here.
Got it.
And then just a follow up question.
A question that we had about.
Steady state earnings.
If we go back to sort of pre COVID-19.
Thank you guys had guided to a number in the $3 range roughly and we're probably adopt over a dollar higher today in terms of what the numbers are for this year, obviously, there's the the loan sales inside that number and such but.
Joe can you just speak to.
What do you think the core number is on a go forward basis, excluding some of the puts and takes there. Thanks.
Yeah. So year to date, we've got about 85 benefit from the loans sales and they're not going to give 2020.
Maybe guidance here Moshe.
Ask about the NIM going forward. So I think we've got enough color there to work on but certainly we have been getting closer and closer to that inflection point and you've been seeing growth in net interest income in.
The consumer lending and felt so.
Without giving 2022 guidance, we feel very confident about what we have said in the past and the outlook given this interest rate environment as I said I don't expect much volatility on.
Our federal education loans segment in the net interest margin there, we're going to look to achieve.
2 the efficiency ratios that we put forward as well so that's something that we're going to continue to monitor. So I think that's something that you can plug it into your models and the biggest driver. There is just going to be what does the shape of the bps revenue look like as these various programs wind down and the.
Cover it takes hold.
We feel fairly confident that youre going to start to see the pickup in the business as usual or call. It the legacy bps segment versus these.
Hopefully, what we see as a 1 time contracts related to the pandemic, but that's not something that continues into next year, but we'll continue to.
To work with states to expand on the on those contracts to to continue to do that work, but it's a little too early to give 2022 guidance.
Got it and maybe just 1 final 1 on.
In school originations.
Guess, what the big 1 of the big competitors coming out of the market I mean do you.
Feel like you can take your fair share of that market share or do you think it's a little bit on related to contemplate that.
Thanks.
Well I think there's a variety of factors that are at play here.
In terms of students enrolled in programs, we have a narrow.
<unk> focused on most in school originators on what types of schools.
We're focused on.
Heavy component heavy influence on encouraging borrowers, which are typically families.
To make payments, while they're in schools at the day loans are not negatively amortizing.
But yes, we're pretty excited about the opportunity here and.
With or without those competitors, we were excited about the opportunity that this marketplace presents for us.
Thank you.
Okay.
Your next question comes from the line of.
And so you kind of itch from Citi. Your line is open.
Thank you.
Federal loan payment suspension could potentially be pushed out another 6 months, how does that affect your business.
Pulp runoff flow a little bit during that period and.
Does it change anything for them.
Allowance on our reserving standpoint.
Yes, so the.
Certainly the end date is now currently is currently set at September 30th and there are various.
Our recommendations.
For extending that I think the most important thing for that processes, making sure. There is sufficient that once a day just picked that it that is set.
So both borrowers and other participants have a clear set of expectations on timing.
We've been through.
Smaller components and things like this before and never something this large but we think we would have a very we have a very very strong plan on how we would respond to customers and help them make that transition how does it impact the business. It certainly has.
There's 2 components to it there's certainly a benefit to consumer credit.
With consumer is not having to make payments on 1 product they have available resources to make payments in other areas.
But the bigger impact for us is really demand on the refi side of the equation.
As long as the interest rate is zero, that's not a rate that we obviously compete with on the refi side of the equation and so we're definitely seeing.
On borrowers who are looking to refinance their loans holding off but at least on that portion of their outstanding debt balance.
On.
Until the Department and Congress decides.
When the extension will land.
Okay. That's helpful. Thanks.
On the on the bps side of the revenues when I'm looking at the breakdown on slide 8.
It shows the increase in the health.
<unk> care I'm, assuming that's related to the Covid.
Increases, but the government services also.
On a pretty nicely year over year, when we talk about these programs kind of falling off do we think it gets back to that kind of Q2 'twenty type of level or is there.
And on some some of this.
Businesses.
Non COVID-19 pandemic related.
So the majority of the increase is related to <unk>.
Both government services and health care to pandemic related services here, so going back to Q2.2000.
That's a good starting point, but hopefully we can build upon obviously the good work that we've done here for the various states across the country and that will lead to additional contracts as well as just the natural reopening.
It's going to help some of our business processing groups here too just as hospitals begin to reopen and.
I think so on.
Sort of non.
Pandemic related items, I think thats going to benefit our health care services as well as just opening of the economy for tolling parking state collections all of those things. So I think going back to Q2 'twenty is a good baseline, but we'd certainly look to build upon that.
Focus with the work that we've done over the last year.
And I guess, just a follow up on that.
With.
The COVID-19 numbers worsening in recent weeks and discussion a booster shot that might be potentially necessary.
Okay.
<unk>.
Additional areas of work that you might be able to.
Extend that out further or is that something that you've been contemplating.
My first answer would be I hope, it's not needed.
And but to the extent it is.
Yes.
It does create some potential there yes.
Okay alright, thank you.
Thank you.
There are no more on phone questions Nathan back to you.
Thanks, Lawrence we'd.
Thank you everyone for joining us on today's call. Please contact me if you have any other follow up questions. This concludes today's call.
This.
Today's conference call you may now disconnect.
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