Synchrony Financial

Good morning and welcome to the Synchrony Financial first quarter 2024 earnings conference call. Please refer to the company's investor relations website for access to their earnings materials. Please be advised that today's conference call is being recorded. Currently, all callers have been placed in a listen-only mode. The call will be open for your questions following the conclusion of the management's prepared remarks. If at any time you should need operator assistance, please press star zero. If you wish to ask a question following the prepared remarks, please press star one. I will now turn the call over to Katherine Miller, Senior Vice President of Investor Relations. Thank you. 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. Good morning, everyone. Today, Synchrony reported strong first quarter results, including the successful completion of two previously announced transactions, the sale of our PetsBest insurance business, which generated an $802 million after-tax gain in the quarter, and will extend our reach in the rapidly growing pet industry through a minority interest in international pet holdings we received as part of that sale. and the acquisition of Ally Lending's $2.2 billion point of sale financing business, which will augment the existing offerings in our home and auto and health and wellness sales platforms. Together, these transactions expand Synchrony's differentiated offerings in the market and strengthen our position as the partner of choice as we drive long-term value for our many stakeholders. Excluding the impact of the Pets Best gain on sale, Synchrony delivered adjusted first quarter, net earnings of $491 million, or $1.18 per diluted share, a return on average assets of 1.7%, and a return on tangible common equity of 16.8%. This performance highlights the resiliency of Synchrony's earnings power over time, as we deliver results while positioning the business for strong, risk-adjusted growth ahead. Our differentiated model enables us to assess and react quickly through cycles and environments as our broad product suite, compelling value propositions, and innovative technology continue to resonate with both our consumers and partners. We opened 4.8 million new accounts in the first quarter and grew average active accounts by 3%. Our products and value propositions drove $42 billion in first quarter purchase volume, 2% above the prior year, and our highest ever first quarter performance. Health and wellness purchase volume increased 8%, led by pet, dental, and cosmetic, and reflecting broad-based growth in active accounts. In diversifying value, purchase volume increased 4%, driven by spend both at our partners and outside of our partners. Digital purchase volume increased 3%, reflecting continued consumer engagement through growth in average active accounts. In home and auto, purchase volume decreased 3%, as the strong growth in home specialty and auto network and the impact of the Ally lending acquisition was offset by a combination of lower customer traffic, fewer large ticket purchases, and lower gas prices. And in lifestyle, purchase volume decreased 4%, reflecting the impact of lower transaction values. Dual and co-branded cards accounted for 42% of total purchase volume for the quarter and increased 6% as our value propositions continue to drive increased engagement and growth. Synchrony's out-of-partner spend reflects a comprehensive range of categories, industries, and products and offers a deeper view into consumer behavior throughout the quarter. Spending in January was impacted by challenging weather conditions as average transaction frequencies declined 4% versus the prior year. In February and March, however, we saw a rebound, particularly in non-discretionary categories. Overall, consumers focused on more non-discretionary spend in the quarter and shifted out of certain discretionary categories like home furnishings, travel, and entertainment. Despite the change in mix, however, we continue to see broad-based growth in many discretionary and non-discretionary categories. Across the business, Synchrony continues to see indications that non-prime borrower spend has slowed, and our portfolio's purchase volume growth continues to be driven by higher credit grade consumers. Average transaction values among super prime borrowers continue to increase, and similarly, we see average transaction frequency growth from our prime and super prime segments. These relative adjustments in consumer spend behavior generally reflect a financially healthy consumer who is continuing to become more selective in their purchases and align their cash flows, a trend which has also continued to take shape in Synchrony's credit performance. Portfolio payment rates continue to moderate and reach 15.8% for the first quarter, about 90 basis points lower than last year, and about 60 basis points higher than the average payment rate level across our first quarters from 2015 to 2019. The relative pace of payment rate moderation has continued to slow from both a generational and credit grade perspective. which, when combined with the spending trends we've observed, reinforces our view that borrowers are generally reverting to spending and payment behaviors that are more consistent with pre-pandemic norms. These trends are also supported by a number of our other consumer financial health indicators, including a strong labor market and external deposit data that has shown relative stability across industry savings account balances. Taken together, these dynamics are contributing to Synchrony's recent delinquency performance highlighted on slide 11, where the year-over-year rate of change has slowed as our portfolio has reached pre-pandemic ranges. The normalization and recent stabilization of our delinquency performance has occurred at a more gradual pace than the majority of our industry peers, underscoring the powerful combination of our discipline underwriting, advanced analytics, and sophisticated credit management tools. We're encouraged by these trends and continue to expect our portfolio's net charge-offs to peak in the first half of this year. We continually monitor indicators across our portfolio, along with the broader industry's credit performance, and continue to take credit actions to optimize our portfolio's positioning for 2024 and beyond. Synchrony utilizes a broad range of proprietary and external data, including payment behavior characteristics, billions of transactions, and credit bureau alerts. to deliver actionable insights that inform our underwriting, product, and credit management strategies across the account, channel, and portfolio levels. Our ability to leverage these insights and deliver optimized financing solutions and experiences for our customers and partners, even as needs evolve and market conditions shift, is what enables Synchrony to consistently deliver the outcomes that matter most for our many stakeholders and increasingly positions us as the partner of choice. To that end, Synchrony added or renewed more than 25 partners in the first quarter, including BRP, and added two new technology partnerships with Addit, Practice Management Software, and Service Titan. We are excited about our new partnership with BRP, a global leader in power sports and marine products, which will enable their U.S. dealers to offer secured installment loan products for their well-known line of power sports products, including the Ski-Doo, Sea-Doo, and Can-Am on- and off-road vehicles. Synchrony will deliver our financing offers with flexible terms through their online or in-dealership application process, highlighting our ability to address the diverse needs and preferences of our customers. And Synchrony's strategic technology partnerships with ADiT Practice Management Software and ServiceTitan each represent opportunities to drive seamless customer experiences while also expanding access to our diversified suite of financial solutions and services. Inquity's partnership with Addit, an industry-leading dental practice management software provider, will expand care credit access to dental practices nationwide and includes integration with AdditPay for patients, enabling a seamless and easy-to-use experience for both patients and practitioners. Connecting patients to payment solutions at their dentist office is an essential part of ensuring their care journey is as smooth as possible and dental practices benefit from more timely and effective revenue cycle management. Similarly, Synchrony will integrate with Service Titans, a leading software platform built to power trades businesses, enabling contractors to offer their home improvement financing through a direct-to-device application process. By providing access to flexible financing at their fingertips, customers are empowered to make a choice that gets them closer to their goal, while their contractors benefit from a frictionless sales experience. So whether we are building new relationships or supporting and enhancing existing ones, Synchrony deeply understands where our customers need and expect and what our partners, merchants, and providers are seeking to achieve. Our ability to deliver for these stakeholders and consistently achieve strong outcomes through varying conditions demonstrates the strength of Synchrony's business model and commitment of our incredible team. And speaking of our team, in today's world, it has never been more important for us to attract and retain the best talent, which we do through our unwavering commitment to our employees and our culture. So I'm proud to share that we've been named among the top best companies to work for in the U.S. by Fortune Magazine and Great Places to Work. Synchrony moved up 15 positions to number five in the 2024 rankings, reflecting our unique and special culture and our relentless focus on putting people first as we continuously strive to achieve best-in-class experiences for our many stakeholders. With that, I'll turn the call over to Brian to discuss our financial performance in greater detail. Thanks, Brian, and good morning, everyone.