Synchrony Financial

Good morning and welcome to the Synchrony Financial second 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 listen-only mode. The call will be opened up for your questions following the conclusion of management's prepared remarks. If at any time you should require 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 Catherine 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, and good morning, everyone. Today, Synchrony reported strong second quarter results, including net earnings of $643 million, or $1.55 per diluted share, a return on average assets of 2.2%, and a return on tangible common equity of 20.2%. This performance is a testament to our differentiated business model. We continue to leverage our diversified portfolio of products and sales platforms, disciplined approach to credit underwriting and management, and innovative digital capabilities to further progress on our strategic objectives and to deliver sustainable risk-adjusted growth and returns over the long term. Customer demand for Synchrony's product and value propositions remained strong during the second quarter, as Synchrony added 5.1 million new accounts, grew average active accounts by 2%, generated $47 billion of purchase volume, and delivered ending receivables growth of 8% compared to last year. Synchrony's proprietary data and analytics in combination with our flexible financing solutions and dynamic technology platform, have been core drivers of our performance through evolving market conditions, particularly as we seek to responsibly address the needs of our customers and partners. And while our credit trends relative to pre-pandemic levels have outperformed most of the industry to date, we have leveraged these strengths to take action in our portfolio where we have seen indications of higher probability of defaults. These credit actions, along with a more selectively spending consumer, have contributed to lower new account and purchase volume growth in the second quarter, but have also improved our recent delinquency trends and should strengthen our portfolio's credit trajectory in 2024 and beyond. At the platform level, purchase volume and receivables trends were generally consistent in the second quarter. Purchase volume growth ranged from up 2% to down 3% year over year, broadly reflecting lower consumer spend on bigger ticket items, particularly in categories like furniture, jewelry, and vision, as well as the impact of the credit actions. Meanwhile, receivables growth across the platforms ranged from 6% to 15% higher versus last year, driven primarily by payment rate moderation. Dual and co-branded cards accounted for 42% of total purchase volume for the quarter and increased 2%. Synchrony's out-of-partner spend gives us deeper insight into recent customer trends as the broad utility of our offerings and compelling value propositions attract purchases across a range of categories, industries, and products. Our customers continue to be discerning in their discretionary purchases, particularly in larger ticket categories such as home furnishings, travel, and entertainment. They have been spending more at restaurants, though, and continue to spend at the pharmacy and on health and wellness needs, and contributing to non-discretionary spend growth more broadly. That said, our customers are spending slightly less per transaction across most categories and credit grades, as average transaction values declined about 2% versus last year. Only our top credit segment saw growth in average ticket values during the second quarter. Customers across credit grades are transacting more frequently, however, which has generally offset most of the impact of lower transaction values. Altogether, we view these spend behaviors as appropriate and consistent with the payment rate normalization that began in our portfolio in 2023 and has continued since. Over the first six months of 2024, however, the pace of this payment rate moderation has decelerated across credit grades. And according to the external deposit data we monitor, there continues to be relative stability in savings balances compared to the rapid tapering that occurred through the middle of last year. When taken together, we believe these spend, payment, and savings trends support our view that consumers are making healthy decisions to actively manage their cash flows. And these trends, coupled with the impact of our credit actions, give us confidence that Synchrony's net charge-off rate should be lower in the second half of this year than in the first half. As we continue to monitor the health of the consumer, our portfolio credit performance, and that of the broader industry, Synchrony is also utilizing our proprietary insights and lending expertise to position our business for sustainable, risk-adjusted growth for many years to come. During the second quarter, we added or renewed more than 15 partners, including a program expansion and extension with Verizon and the addition of Virgin Red. We are excited about our continued partnership with Verizon and the opportunity we see to deliver maximum customer value on purchases made at Verizon. We are also proud to be the exclusive issuer of Virgin Red's multi-category travel card, the first-ever Virgin Red Rewards World Elite MasterCard, which will connect members across the Virgin family, from flights to cruises, hotels and experiences, with points that never expire. Cardholders will earn Virgin points on all of their Virgin Red Rewards card spend, which can be used for a range of gifts and rewards, all while enjoying a first-rate digital experience from application to servicing. And if Synchrony continues to extend our reach and further optimize outcomes for both our customers and partners, we are incorporating strategic and technology-oriented partnerships to power more seamless digital experiences. Synchrony selectively works with second look financing solutions to enhance the customer experience and our partner relationships. We recently announced an expanded relationship that will utilize a fully integrated solution spanning the full customer apply and buy experience across all points of sale. Synchrony will own the point of sale platform and connect to the second source provider in a way that's seamless to both the partner and the customer that's applying. This collaboration will utilize our innovative technology and data to responsibly expand access to credit to more consumers, while also driving stronger loyalty and sales for the many small businesses, healthcare providers, and retail partners we serve. Meanwhile, Synchrony launched our partnership with Installation Made Easy, a leading enterprise software and services company that supports retail-based home improvement programs. This partnership will enable floor and decor cardholders to use their synchrony issued credit card to finance both the materials and the installation service required for their home improvement projects through one streamlined process. We're excited about the opportunity we see to strengthen our position in the home improvement market and plan to scale this capability to additional retailers over time. The weather is through the continued expansion of our distribution networks. the addition and renewal of programs that span most consumer spend categories, or the enhanced functionality at point of sale, Synchrony is leveraging our proprietary data and analytics, our diverse product suite, and our innovative technology to drive greater access, flexibility, and utility for both our customers and partners. With that, I'll turn the call over to Brian to discuss our financial performance in greater detail.