Synchrony Financial

Good morning and welcome to the Synchrony Financial First Quarter 2022 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. During the question and answer session, if you have a question, please dial 01 on your touchtone phone. Please note it is no longer star 1, it is 01. Please note this conference is being recorded. And I will now turn the call over to Catherine Miller, Senior Vice President of Investor Relations. and 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 websites. 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 could 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 nor 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 Wenzel, Executive Vice President and Chief Financial Officer. I'll now turn the call over to Brian Doubles.

Thanks, Catherine. Good morning, everyone. Synchrony delivered strong financial results for the first quarter of 2022, including net earnings of $932 million, or $1.77 per diluted share, a return on average assets of 4%, and a return on tangible common equity of 34.9%. This financial performance was driven by the core strengths of our business and the continued execution of our key strategic priorities to drive greater value for our partners, providers, and customers. We continue to expand and diversify our portfolio during the first quarter with the addition or renewal of more than 15 partners. We also continue to extend our reach and engage more customers, thanks to the powerful combination of our seamless experiences, attractive value propositions, and broad suite of flexible financing options. New accounts grew 10% during the first quarter, reaching 5.5 million, and average active accounts increased 6%. Turning to customer spend, we continue to experience broad-based demand across the many industries we serve. Purchase volume increased 17% versus last year, driven by double-digit growth in our diversified value, digital, health and wellness, and home and auto platforms. We also continue to see higher engagement across our portfolio as purchase volume per account grew 10% compared to last year. Customer spend reflected strong cross-generational growth. Millennial and Gen Z spend increased 23% year-over-year, and Gen X and Baby Boomer spend increased 15%. The combination of strong purchase volume and a slight moderation in payment rate drove loan receivables growth of 8% on a core basis. Dual and co-branded cards accounted for 42% of the purchase volume in the first quarter and increased 29% from the prior year. On a loan receivables basis, including the loan receivables held for sale, Dual and co-branded cards accounted for 25% of the portfolio and increased 16% from the prior year. In short, Synchrony has continued to see strong engagement across our customer base and momentum across our product suite, thanks to our ability to deliver flexible financing options that specifically address whatever our customers' transactions may look like on any given day. Whether they're looking to cover a healthcare need, purchase supplies for a home repair, or they're simply convenience or value shopping, our customers can access financing solutions that specifically address their needs while optimizing the value they seek. Of course, in an ever-changing consumer landscape, the financing needs and expectations of customers evolve, as do the strategic priorities of our partners. To an increasingly greater degree, it's no longer simply about reward points or cash back. It's also about delivering an end-to-end experience where the kinds of perks that attract a customer to the product are designed to anticipate and optimize value. The more dynamic and data-driven those experiences and value propositions are, the deeper the customer relationship and the stronger their lifetime value over time. In order to deliver consistent and compelling outcomes for both our customers and partners, we consistently invest in our digital capabilities, our product suite, and our value propositions so that we can continue to meet our customers where, when, and however they want to be met. These investments take shape in a number of different ways, whether it's through loyalty, technology, or marketing spend. Our partners' interests are aligned with ours, so we structure the majority of our economic arrangements such that the investment and upside opportunity are shared. Synchrony's innovative digital capabilities allow us to deeply integrate with our partners and providers to deliver seamless and engaging omnichannel experiences, while also leveraging our data and insights to optimize customer outcomes. In particular, we are often able to develop highly tailored value propositions to attract customers for whom we can predict transaction behavior and financing needs, which ultimately leads to more engaged and satisfied customers, higher spend, and better outcomes for all. We are always looking for ways to enhance our program performance. Value proposition refreshes are a particularly attractive and effective way to drive deeper engagement with existing customers and attract new customers, resulting in higher lifetime value of each account. We have far more data and insights to leverage based on our experience with an existing portfolio. And since our partners' interests are aligned with ours, the investment costs are generally shared. Simple program enhancements like deeper integrations, more relevant and universal value propositions and greater product flexibility enable us to deliver greater and more utility and value to our customers and stronger results for our partners. Our customers receive greater financial flexibility to address their broad range of needs and make smarter purchases, while also maximizing the rewards they care about. And our partners attract new customers and derive greater customer loyalty, larger ticket sizes, and more frequent transactions. Our partnership with PayPal is a great example of how together we continue to evolve and enhance our offerings to drive still greater outcomes for all. Earlier this month, we announced the launch of our new and refreshed co-branded PayPal Cash Back credit card. The consumer value proposition is a best-in-class cash back offering where the consumer will earn unlimited 3% cash back when paying with PayPal at checkout and 2% everywhere else MasterCard is accepted. The card has no annual fee, no category restrictions, and can be added to the digital wallet for easy, fast, and secure checkout. We're excited about this opportunity as it delivers exceptional consumer value while leveraging the innovative digital experiences from previously launched partner programs to deliver a truly seamless and elegant customer experience. In particular, the PayPal card experience will be fully integrated with the PayPal app and powered by native APIs. Customers will be able to apply for the card and service their accounts all within the app, as well as receive personalized notifications and alerts to manage their credit account. Thanks to our integration within the PayPal app, customers will be able to redeem their rewards into their PayPal balance to use for future purchases or transfer into their PayPal savings account powered by Synchrony Bank. The rollout of the new product, enhanced experience, and value proposition began earlier this month. and we expect it to be fully deployed this quarter. Given the level of integration and functionality we are launching with this card, as well as the best-in-class value proposition we're delivering, we expect to see meaningful growth in new accounts and spend on the card. We're truly excited to continue to raise the bar by consistently investing in and delivering innovative financing experiences for our partners and customers. With that, I'll turn the call over to Brian to discuss the first quarter financial performance in greater detail. Thanks, Brian, and good morning, everyone.