Synchrony Financial

Welcome to the Synchrony Financial Fourth Quarter 2021 Earnings Conference Call. My name is Brandon, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Katherine Miller, and Katherine, you may begin.

Thank you, and good morning, everyone. Welcome to our Quarterly Earnings Conference Call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address during our call. The press release, detailed financial schedules, and presentation are available on our website, synchronyfinancial.com. This information can be accessed by going to the investor relations section of the website. Before we get started, I wanted to remind you that our comments today will include forward-looking statements. These statements are subject to risks and uncertainty, and actual results can differ materially. We list the factors that might cause actual results to differ materially in our SEC filings, which are available on our website. During the call, we will refer to non-GAAP financial measures in discussing the company's performance. You can find a reconciliation of these measures to GAAP financial measures in our materials for today's call. Finally, Synchrony Financial is not responsible for and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website. On the call this morning are Brian Doubles, Synchrony's President and Chief Executive Officer, and Brian Wentzel, Executive Vice President and Chief Financial Officer. I will now turn the call over to Brian Doubles.

Thanks, Catherine, and good morning, everyone. We are really proud of our Synchrony team and the strong level of execution that enabled us to close the year out with such strong results, including several company records. Our core strategy to drive sustainable growth and attractive risk-adjusted returns is founded on three primary objectives. First, grow our existing partner programs and win new partners. Second, diversify our programs, products, and markets. And third, deliver best-in-class customer experiences. During 2021, we added 36 partners and renewed another 38. We're excited about the prospects in both our existing portfolio and new partner pipeline to power innovative financing experiences and serve the ever-changing needs of our customers. As you know, we are constantly seeking opportunities to extend our leadership position. And much of that will continue to be driven by the ongoing diversification and expansion of our distribution channels. To that end, we acquired Allegro Credit at the beginning of the year, a leading provider of point of sale consumer financing audiology products. This acquisition allowed us to deepen our foothold in the health and wellness space, reaching more providers and customers and empowering them with an expanded suite of financing products and services. We also announced our strategic partnership with Clover, which will enable us to deliver our innovative products and experiences to more merchants and customers. As a reminder, our integration with Clover will enable small businesses to access synchrony financing products and services and accept private label credit card payments via the Clover point of sale and business management platform. In addition, Synchrony continued to expand our two main consumer-facing marketplaces, mysynchrony.com and carecredit.com during the year. These marketplaces are broad and deep networks that provide consumers with a one-stop shop to find and shop with merchant partners and providers, as well as submit applications and service their accounts. And through the broad reach, easy accessibility, and strong utility of these networks, Synchrony is driving strong repeat sales. Combined annual visits across these networks surpassed 300 million by year end, and we drove about 1 million referrals and received almost 19 million provider views through CareCredit.com. Repeat sales across our networks were 52% in the fourth quarter of 21. An additional metric that we are focused on driving is sales per active account, which are about twice as high in our CareCredit and home and auto networks compared to the average buy-now-pay-later products that we see in the marketplace. This is a testament to the deep customer relationships that our network products foster. Synchrony's ability to leverage our networks and drive new customers and repeat sales to our partners at higher spend levels has been and will continue to be a meaningful, competitive differentiator and important growth driver for our business. Another element of our continued diversification and expansion over the last year includes our health system initiative, through which we successfully signed seven new systems bringing our total to 20. By integrating with health systems through technology platforms like Epic, Synchrony is able to meaningfully extend our customer and provider reach, while also enhancing the utility of our care credit card. For example, the Epic MyChart user base spans about 150 million patients. And by making our patient financing app available within the Epic app orchard, we're able to provide those patients with expanded access to financing options, wherever the provider or health system is part of the Care Credit Network across a broad range of needs from elective care to routine medical expenses and non-elective care needs. In an environment where insurance coverage is increasingly limited but health and wellness needs are rising, we are empowering more patients and providers with greater choice, flexibility, and utility as we expand our networks and integrate with more health systems. So overall, 2021 was a year in which we accelerated our business strategy. Through strategic partnerships like Clover, we can expand our reach by tens of thousands of new merchants. Through the expansion of our digital networks, we can reach hundreds of millions of consumers. And collectively, the health systems with which we have launched CareCredit in some capacity have over 40 million patient visits. No matter how you look at it, Synchrony is at the center of a large cross-section of commerce in the U.S., regardless of whether the purchase takes place in person or digitally. We connect almost 70 million average active accounts through seamless omnichannel experiences to nearly 450,000 locations. And we power their everyday purchases from furniture and home improvement to healthcare products and services, car care needs, and clothing, jewelry, and power sports with customized financing options that optimize value and outcomes for both our customers and partners. The more consumers, merchants, providers, and partners that Synchrony reaches, the more diverse the demand for products, services, and value propositions becomes. So we continue to diversify both our products and programs in 2021 with the launch of our industry-first program with Walgreens and the introduction of our set pay, pay-in-for product. In addition, we continue to advance the growth of our Synchrony MasterCard, which represents an important opportunity within our product strategy to drive highly scalable growth and above-average returns to our business over the long term. During the second half of the year, we broadened our Synchrony MasterCard acquisition efforts to include new digital channels, expanding our reach, and accelerating our speed to market. With the real-time activity and data capture, along with our sophisticated de-apply capabilities, which include advanced pre-fill and credit decisioning insights, we streamlined the application process and optimized the customer experience. As a result, active accounts grew 11% in the second half compared to the first half of the year. And thanks to the compelling value propositions we offer, our sales per active account grew 18% on the same basis. Of course, as we continue to expand our wallet share, Synchrony is able to reach and serve more customers and provide them with more choices and greater value. And as we strive to provide easy and comprehensive access to a broader set of financial products and services, we are excited to launch PayPal Savings in the first quarter. Through this expanded partnership with PayPal, we will broaden the distribution of our savings product to reach a unique set of customers with key features and functionality, including instantaneous fund movement between PayPal balances, no withdrawal limits, and a savings goal feature to empower customers to set and reach their financial goals. Existing PayPal customers will be able to quickly and easily open their PayPal savings account inside the new PayPal Super App. We're proud to partner in this transformative initiative and remain intensely focused on continuing to elevate the customer experiences we power across all our partnerships. It should come as no surprise that Synchrony's consistent investment in digital innovation has enabled each of our product and partner successes along our evolution. We are continuously enhancing the ways in which we deliver simple and seamless customer experiences because the outcomes are far stronger for all of our stakeholders. For example, during the past year, we upgraded close to 11 million accounts across 14 partners to our new alerts platform, which delivers customizable email, text messages, and push alerts with real-time enriched transaction data and notifications. We also rolled out some upgrades to our SciPy platform, including several new features like digital wallet provisioning and enhancements to push notifications and e-bills. Collectively, the availability of these features contributed to a 40% increase in unique visitors in 2021 and 56% growth in the number of payments we received in SidePi. With the rollout of enhanced native acquisition capabilities via SidePi and our client mobile apps, we've grown new accounts for that channel by 67% year over year. And more specifically, by enabling wallet provisioning for cardholders to add their synchrony account to their digital wallets, Fourth quarter wallet provisions grew 32% year-over-year, and wallet sales volume increased 63%. So when you put it all together, the unique combination of our deep lending expertise, the industry's most complete product set, and our advanced digital capabilities has enabled Synchrony to evolve into a leading financial ecosystem that delivers compelling outcomes for our partners and our customers. There is no other industry provider that offers the full breadth and depth of digitally powered financing products, services, and value propositions that Synchrony does today. And this ability to connect our partners and customers through best-in-class, omni-channel experiences is deeply resonating and driving record results for Synchrony and our stakeholders. In this past year, we achieved almost 25 million new account originations and record purchase volume of $166 billion and a 19% increase in spend per active account. These milestones combined with strong credit performance and our continued discipline around risk-adjusted returns and expense management enabled Synchrony to deliver record financial results for the full year, including $4.2 billion of net earnings, or $7.34 per diluted share, a 4.5% return on assets, and a 39% return on tangible common equity. As a result, we were able to return $3.4 billion of capital to shareholders, including $2.9 billion of share repurchases and $500 million of regular dividends. With that, I'll turn the call over to Brian to discuss the fourth quarter performance, which reflected broad-based momentum across our business.