Synchrony Financial (SYF) Earnings Call Transcript & Summary

Good morning, and welcome to the 2020 Annual Meeting of Stockholders of Synchrony Financial. I am Margaret Keane, Chief Executive Officer of Synchrony Financial. The meeting is now called to order. I want to start by first thanking all of those working around the clock, especially our health care professionals and first responders on the front lines as well as those behind the scenes, including our dedicated employees who are working to serve our customers and partners. While all of us have been impacted in different ways and we may suffer from sadness and loss, I am also encouraged and inspired by the resolve of our society to come together in this crisis. I've seen so much goodness, selfless act and community support. It is one of the things I hope continues long after this is done. I also commit to our employees, our partners, our customers and our communities. We will continue to do all we can to support you. On behalf of our directors, officers and employees, I want to thank you for joining us at our sixth annual meeting of stockholders. We are again conducting this meeting virtually through the Internet. We believe this forum allows us to increase stockholder participation and reduces the cost and environmental impact of our annual meeting. I will now turn the meeting over to our Corporate Secretary, Jonathan Mothner, for the formal business of the meeting.

Thank you, Margaret. Good morning, everyone. With us on the webcast today is our Board of Directors, members of our senior management team, representatives from our independent registered public accounting firm, KPMG LLP, and Doug Czarnecki, who will act as inspector of election. As required by law, Mr. Czarnecki has taken the signed oath of inspector of election. Before turning to the formal items of business, we'd like to make several announcements relating to the meeting. The record date for determining stockholders entitled to vote at the meeting is March 26, 2020. A certified list of stockholders entitled to vote is available at the offices of the company and during this meeting, on the virtual meeting site. As of the record date, 583,232,644 of the company's common shares were outstanding, each share being entitled to 1 vote on all matters properly brought before the meeting. Notice was mailed on or about April 26, 2020, to each holder of record on the record date. The count of shares taken immediately prior to the meeting shows that over 88% of the outstanding shares are represented in person or by proxy. Quorum being present, we may now proceed with the business of the meeting. Any stockholder may submit questions while the meeting is in progress. Before the polls are closed, we will answer questions submitted by stockholders. We are here today to consider and vote upon the following matters, each of which is described in detail in our proxy statement. First, the election of each of Margaret Keane; Fernando Aguirre; Paget Alves; Arthur Coviello, Jr.; William Graylin; Roy Guthrie; Richard Hartnack; Jeffrey Naylor; Laurel Richie; Olympia Snowe; and Ellen Zane as a Director of the company. Second, an advisory vote to approve our named executive officers' compensation. Third, a vote to ratify the selection of KPMG LLP as the company's independent registered public accounting firm for 2020. The polls for voting on all matters are hereby open. you may vote your shares by clicking on the Vote Here button on your screen. You'll need the control number provided on your proxy in order to vote your shares online. If you've already given your proxy to management, you need not vote again because the persons designated as proxies will vote for you. If you wish to rescind your proxy or change your vote, you may do so now. At this time, I would like to read a brief legal disclaimer. It is possible that our responses to your questions 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. We may also 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 SEC filings. We will now pause to allow stockholders to vote. [Voting]

If you have logged into the meeting with your control number and wish to ask a question of our Board of Directors, management or independent accounting firm, you may do so now by typing your questions into the box on the bottom of the screen.

We have a question that is directed to our CEO, Margaret Keane. The question relates to the competitive environment. Say a competitor wants to replace Synchrony in an existing relationship with a partner, what would you -- what would that competitor have to offer the partner or what unique capabilities would he have to develop in order to do that? And do you think it is any different for e-retailer partners?

Thank you for that question. Yes. I think the competitive environment certainly is shifting. And I would say that as in any good process of going back and forth to win a partnership, a big part of that conversation is around capabilities. And I would just say, given the world that we're in, e-capability or digital capability is becoming a bigger part of our discussion and that's the areas that we've invested in to really deliver for our partners. So it really starts with capabilities and what you're able to bring to the table. And then obviously, then you move to the broader conversation on deal economics.

Thank you, Margaret. We have another question also directed at Margaret Keane. Regarding e-tailers or digital-focused partners, at what point in their life cycle would you consider a partnership with Synchrony?

Yes. I think the most important thing is we really want to look at scale and size and growth rate of that e- or digital partner, and that's the factors that we look at. We do create prospect list that kind of frame out who are the partners we'd like to work with, and we continually work to grow our e-tail business as that becomes a bigger part of how customers are shopping.

Thank you, Margaret. We have a question that is directed at our Chief Financial Officer, Brian Wenzel. This question relates to stock repurchases. The question is, during these turbulent financial times, financial liquidity is critically important. What will the Board or senior management's decision-making criteria be in determining whether to purchase -- repurchase shares in the future?

Thank you for your question. I want to start with the fact that we had $24.8 billion in liquidity, which represented 25.3% of our total assets as of March 31, 2020. So we believe we, first of all, have ample liquidity. We have $366 million remaining under our existing share repurchase plan, and we've halted repurchases of our share as a prudent nature. We will continue to assess the current environment and how that environment develops. And at that point in time, we will consult with our Board with regard to potentially restarting repurchases. We do not see that in the short term.

Thank you, Brian. We have another question that's directed at our CFO, Brian Doubles. This question relates to the increased size of passive mutual funds investments and the increase in their corporate ownership. And the question is, whether Synchrony sees this growing ownership concentration as a positive or negative development in regard to long-term capital planning and performance?

This is Brian Wenzel. Thank you for your question. We do not believe that the ownership of mutual funds is, in any way, shape or form positive or really negative in our strategy. We determine the strategy in the best interest of all our shareholders. And we execute that strategy and investment in the capital allocation of dollars regarding all of our investments aligned with all of our shareholders, not taking consideration any particular type of shareholder when we're making that decision.

Thank you, Brian. For the record, I misspoke and identified you mistakenly as Brian Doubles. Obviously, Brian Wenzel is our CFO. At this time, we have no further questions, the polls are now officially closed, and this concludes the voting portion of the meeting. At this time, I would like to announce the preliminary results of the voting. I'm pleased to report that each of the 11 Director nominees has been elected to serve as a member of the Board of Directors until the annual meeting in 2020 or until his or her successor is duly elected and qualified. Regarding the second proposal, I can confirm that stockholders have approved the compensation of our named executive officers in an advisory vote. Third, regarding the third proposal, I can confirm that stockholders have ratified the selection of KPMG LLP as the company's independent registered public accounting firm for 2020. Thank you for participating today and I want to wish you and your families all the very best as we continue to deal with this very difficult situation. The meeting is now adjourned.