Synchrony Financial (SYF) Earnings Call Transcript & Summary

Good morning. Thanks, everyone, for joining. Welcome. My name is Terry Ma, I'm the new consumer finance analyst at Barclays. I'm very pleased to have Brian Wenzel, the CFO of Synchrony with us. So welcome, Brian.

Great, Terry. Thanks for the invitation. [Technical Difficulty] I think, for the city for our nation and probably the world, right, when you think back 22 years, and my thoughts and prayers go after those that lost their lives in that terrific -- horrific day, and the families who lives are devastated, and tremendous appreciation really for the first responders, the military, in their days [indiscernible] kind of for our valves and support this nation. So tough day for here.

Okay. Great. So let's start. So Synchrony exited the first half of '23 with pretty good momentum. Second quarter account growth was up 7% year-over-year, and purchase volume was the highest ever for that quarter. So let's just get a mark-to-market in the third quarter. Can you maybe just talk about how volume trends are shaping up. And also maybe talk a little bit about the sales across each of the platforms?

Yes. The consumer continues to be incredibly resilient. I think when I look at the highest level, when I think about purchase volume, it's going to be down sequentially on a per account basis, that just follows mobile seasonality that we see. So they're hanging in there from the sales trajectory standpoint. I think if you look at the receivable growth is in the 14-plus percent range, down a little bit from the second quarter, but really kind of hanging in there. So the consumer is strong. The payment rate has declined a little bit. When I look underneath at the data, we look at the trends, we do still continue to see some transaction value decline but frequency up a little bit, non-troubling areas, our grocery generalist. So that's it there's remarkably consistent quarter-on-quarter. Again, as we move in the back half of the year, I think when people look at the fees, they're going to get tougher because last year was such a strong third and fourth quarter. So -- but absent that, it's very consistent. When I look at the platforms, we continue to see the leader being health and wellness and the spend that's going on in that platform. Digital continues to be our second strongest platform. And then follow then by diversified value with strong partners there, Sam's and TJX, they really pull them also across the franchise, we continue to see strength in the consumer continue to be very resilient through what is challenging for some.

Got it. Got it. That's helpful. Let's turn to receivables growth. Thanks for the managed data this morning, by the way. You guys increased through '23 -- you guys increased your 2023 growth outlook to 10% plus, and that's up from 8% to 10%. Again, you said managed [ Davis ] for August, so about 14.5% growth. So how should we think about the growth for the second half of the year in receivables?

Yes, we're going to maintain the same set of pace. Again, you have to go back and look at the third and fourth quarter growth, which was more outsized. One of the things that can outpost omicron last year, as you saw this incredible ramp up in the back half of the year. So we're really -- we're moving into that. I do think as that kind of comp comes down, the wildcard will be -- payment rate, which continues to decline, but it continues to decline at a slower rate. So I think when you thought about the 8% to 10% plus, probably the bigger movement there in our expectations has been the payment rate. We're probably a little bit more conservative with how we thought about it. But again, the consumer continues to be well above pre-pandemic levels when it comes to payments.

Got it. That's helpful. So I guess when you put these pieces together, the spend trends that you see, the revolve rates, payment rates, what's that kind of tell you about the health of the consumer?

The consumer is managing their balance sheet pretty well. It is clearly -- and we'll talk about I'm sure when you're probably going to ask me a question on credit, there is a K-shaped recovery, right? So the bottom end is revolving at a pace similar to the pre-pandemic period. The upper end is not revolving as much and not the payoff that are still incredible high. If that is the end of the company that's happening inside the consumer. When I look at the balance growth between here and what was pre-pandemic and you think about a CAGR rate, it's not an unusual high CAGR. So people look at the balance now versus '19, but forget that it's 3 years ago, right? So I look at that consumers are able to match on a very good basis the their debt load. So while the credit cards are an all-time high as an end, they're doing fairly well in total.

Got it. On the last earnings call, right, would be tightened on the edges. What did you see actually, how should implement those changes?

Yes, first, let me just highlight the fact our changes generally are idiosyncratic. So we look at partners, channels, credit grades in order to make decisions. In certain instances, and in June, we did this. We looked at the portfolio as the total one said, are there risks in the portfolio that we want to just make sure that we're taking care of. One of the things that we've seen is when we've seen significant score migration, right, which happened really when -- during the pandemic, if you see 50 points, so moving from 680 to 630, that was a total fund because they weren't going to perform well, and probably, we're not a 680. So what we did is we said, okay, significant for migration in that level going into non-prime, we're going to take action on that consumer. So that's the case. As we move forward, right, into the back half, we're going to continue to watch the performance of the consumer, right? The challenging thing is that we have a shared consumer. So to some degree, if people are making bad decisions, we just have to be careful about that take actions. So we really can deliver upon our credit outlook.

Got it. So speaking of credit. It seems you guys are outperforming your credit, your initial credit expectations this year. You pushed out the timing of delinquency normalization. So can you just talk about what the credit outlook is for the second half of the year and into 2024?

We are pleased with credit. I don't think we get enough credit as a company with regard to how we're outperforming our peers. If you look at today, we're at the low 90s percent of our delinquency relative to the pre-pandemic period. There's a lot of how people are through their pre-pandemic delinquency through their pre-pandemic mean loss rates, but we're not. And there's a couple of factors that really go into that. One, we talked about on our Investor Day, we continue to talk about as our PRISM data. We're less reliant upon credit scores more than attributes we take in. At time underwriting, we have up to 7,000 assets, we're taking in to make an informed business decision about either origination or account management. So we take a slightly different approach, mainly because we originated we don't have the ability to discern or pick out customers. So I think as you think about those tools being in place, the ability to surgically deal with problems. We feel comfortable with the guidance range that we had up to a rate of 4.85%. So again, probably 100 basis points below our kind of historic or meaning targeted underwriting percentage of 5.5% to 6%.

Got it. And then what about the RSA, how should you think about the RSA as we move in '24.

Listen, the RSA is acting as design. I know when I went above 6%, everyone was like, what's going on here because losses were half what they are today. And when you have that situation where the rate of charge-offs decline. So what that go through the RSA, some of the retailers really benefited from sharing in that mechanism. Now as we migrated back up, the RSA is coming back in line coming down. And we went public, we said the rate was going to be 4% to 4.5%. I think we have right now that's around 4%. We're guiding for this year. So it's acting as designed. So we expect it will continue to provide a cushion to the increase in charge-offs. It's going to be offset partially by margin and interest and fee income as that arises back up because paying rate declines. So you are saying we'll work in both ways, but really provide more reselling results for us versus a lot of our peers.

Got it. So you talked about your target loss range of 5.5% to 6% or maybe normalized. I guess, can you talk about [indiscernible] will actually stabilize around there. Because when I think about normalized losses, I tend to think about an average through the cycle. Mathematically, you should spend a number of periods below in the number of periods of years to kind of stabilize at. So just any color you can provide.

Yes. Listen, we underwrite to that 5.5% to 6%, right? That's really the goal of the organization. We do. And if we had a feeling above the 6%, we will take in for decisions in order to try to manage it into that for us. That charge-off rate is optimal for us with when you think about risk-adjusted margin. . We really don't want to operate about 6%. I mean, to be honest with you, we really don't want operate the 5.5%. I think there's a sweet spot when it comes to the math that we can charge and [indiscernible] rate. So again, I think if we get that that's going to happen, we'll take account managers that we try to maintain that 5% to 6% if it is going to come outside of our targeted underwriting framework.

Got it. And just to follow up on that. How quickly can you kind of react and how soon will those account changes kind of flow through?

Yes. The account changes tend to take 9 months. So you have to probably know 9 to 12 months you've been said, "Hey, listen, I want to do it." When we decide to take action, right, the tools in which we can put in place, we can have things implemented within a, call it, a 3- to 4-week time frame where we could cloud-based actions. Again, we're making refinements every day on our portfolio. So every day, we're making a small adjustment, but larger adjustment if we felt that we needed, we would do in the month and do that. The thing where we have to -- the reason why it takes long is we have partners on the other side, we have to the increase to let them now because they're going to feel the [indiscernible] when it comes to sales and other things. So we'll be very thoughtful if we have to do that, but that would be our adjustment.

Got it. Got it. Okay. So just to touch on the reserves, is it still your expectation it should drift that down towards CECL day 1 over time?

Yes. Over time, there's nothing in the portfolio today. We'll see a little bit of mix shift, but our intention is it should go back to that day 1%. Now unfortunately, we weren't at normal CECL, right? We adopted season of pandemic happened, and all that's raw. But the portfolio, there's nothing in the content in the portfolio that would tell me at the end of the day, I should have a different amount other than rate, when you get longer-term promotional finance, maybe some higher loss content was adjusted mix, we should be back over time to that CECL day worry. Again, the timing of that is going to be a little bit unclear, right? Because I think we're in a period now where we're still trying to figure out what's happening with the economy. We're still trying to figure out what's happening with the consumer. There's a lot to go with interest rates and what the Fed does. So -- but again, at some point, we do believe the fact that day 1 -- around that day 1 rate.

Got it. And can you just remind everyone how much is embedded in the reserves for macro. I guess what do you need to see to actually have those overlays moved?

Yes. So let me just talk a little bit about the overlays. We have overlays on for inflation, macroeconomics, student loans. So when you think about the overlay, the question is, has the overlap manifested itself from the data or the overlay not needed, right? So I think we would see potentially is that some of those overlays will begin to manifest themselves into the data and then you can release them or we just will release them. So they are really dependent upon how they were set. And when we have clarity is really the majority of the overlays are going to go back to the macroeconomic that get clarity of the macroeconomic background and all we have. So it's going to happen over time, but we'll try to be thoughtful with regard to that to be protected. So we don't have significant swings.

Got it. And then there is a topic of student loan forbearance ending. Any color you can give on any potential impacts to your portfolio or even maybe any color you can give on what portion of your portfolio is exposed?

So I'd say this, we've done a lot of work around identifying the consumers that have -- most have loans in for bearing inside our portfolio. And let me just remind people about a little bit of the statistics around the 46% of that population was underwritten when they were actually making payments. The remaining when they were in forbearance, probably another 30% or so were under in the early part of the pandemic. The remainder of the pandemic, the post-pandemic period, regardless whether it's pandemic or post-pandemic, we believe we try to take into account that forbearance relative to how they perform. So that -- when I look at the delinquency metrics, it's remarkably consistent, a little bit worse, but remarkably consistent with the overall book. That said, payments are turning back on, a fair number of folks have team services that servicing changes. So we expect there's going to be a little of noise. I think through the fourth kind of get settled then, we'll see what happens. So we feel good about the population because of the way in which we underwrote -- when we underwrote them, we will get in monitoring. Obviously, not reporting them bureaus, if they go delinquent, a little bit problematic, but we're working with the credit bureaus with regard to getting other data points on these types of accounts that we hopefully will be able to understand if they are feeling pressure where the hierarchy of payments are changing. So we will take appropriate action. But again, I think we provided incremental reserve on top to deal.

But can you, I guess, quantify how much you reserve for this?

No.

Fair enough. Try though. You have a view, I guess, on the potential benefit or impact of the 12 month new IDR plans, the new IDR plans for federal student loans?

Yes. Listen, we're going to evaluate those. It's going to be interesting. It's not a large population of accounts that would impact for us. So again, we continue to monitor those developments, but it sounds like going to be meaningful for us.

Okay. Fair enough. So I'm going to switch gears and probably talk about different topic. Regulatory action in late, will you just maybe give us your updated thoughts on timing and just the proposed change?

Yes. I will say it again and continue to say, unfortunately, we think this is a -- the proposal that was out there was incredibly deficient. It is going to contract credit for people. It's going to drive cost up a credit for people, and it really doesn't really provide significant value, I think, to the consumers as a whole. So unfortunately, we're disappointed with the proposed rule. Everything we believe that the proposed rule will not change significantly. And I think the intention that the CFPB has, has indicated that it will be sometime October or before the end of the year. So we're on that kind of time frame, give me for having them initiative old rules. In our team, we have a large number of people that are exclusively on this for us to understand that the of the strategies and how we would actually do that. And we'll be prepared to the extent that rule gets issued just like the proposal.

Got it. So it's a pretty large piece of revenue prospect. Can you maybe just talk about the levers that you have to potentially offset them?

Yes. First of all, for investors takes, we double something very similar about the CARD Act, right? And we made a series of changes, and I think we put out charts that kind of showed that we were able to manage through the CARD Act changes, which, again, we're a little bit longer part of implementation to it. So our intention is to mitigate this to the back to the same type of return threshold. I think some of the things that you're going to see in the industry, you'll see a higher APR structure. I think you'll see more penalty at this base breaking enter in [indiscernible] as well. I think you're going to see different types of fees that get assessed to the consumer. Some of which will be designed to provide us the current itself, when it's $8, if I look on this room, I say a lot at here. We're not going to have as much return. So how do you create these create to turns. So you'll see that. I think you'll see some practices change with regard to how leniency with regards to consumer uncertain things, waivers et cetera. So I think things will tighten the overall fee and account structure will generate higher. And well, certainly, I think you're going to see a contraction of credit to low card rates. And higher and credit ratios. So we have super prime who you evolve, they're going to pay a higher cost, people involvement access to credit or have to pay significantly for access to credit, which I think is an unfortunate outcome. I also think that there will be a movement to accelerate the reporting to the credit bureaus, if you are delinquent. Now what that will all do and the product here is if you do see a bunch of delinquency that just comes into the yet doesn't generally a lot come in for the cycle, everyone's models are going to get upside down, the mortgage, personal loan, auto, et cetera, and how you deal with it. So it just, unfortunately, has a lot of unintended consequences. But again, we want to do things that first provided a turn way, if that's the number that we chose is to say power, if that gets out that you're going to use pricing actions to create the terms.

Got it. maybe just dig a little deeper into your pet, you talked about APR, penalty pricing, additional fees. Is there a way to help us think about just the magnitude and timing of each one of these to offset the revenue?

Yes, listen, it's going to be a combination. Obviously, if the late rule goes in fact, the way it pose rules, there's an EBITDA effect when it comes to the reduction in late fees. We are using the combination in order to try to mitigate both the timing and the overall effect. I think it will be implemented, then I think we'll be back with the exact view of how the timing, the magnitude will show up in our financials, but I want to save that to see what the Fed actually -- sorry, CFPB actually does.

Got it. Okay. On some of the regulatory issues, can you maybe just talk about Bozena, TUAC and LTD and kind of what are the potential impact?

Yes. This is another frustrating piece for a lot of banks. I think it's the focus can go back to banks. You know unfortunately, as Vice Chair said, you wanted to hold us a review of the capital regime. And fortunately, we view this rule. I speak for myself or probably for others is it doesn't feel very holistic. There apparent double count when you think about us rule around operating risk and how that interaction to stress capital buffers, et cetera. So it was a big reactionary. I think there's a lot of gold standards that we put out there, some of which are much harsher than what you see in Europe. So it puts the banks here at a competitive disadvantage. So all in all, we think the rule has a lot of flaws. I think there's going to be pushback on proposed capital. When you think about the specifics of this, I mean, if I don't try to mitigate any of it in a place it has a modest impact on our capital stack. But I think when we think about the mitigation of things that we can do, it's very managed, I think, from a capital perspective for us. There is [indiscernible], right? So we benefit out of the credit cards getting a slightly lower RWA weighting, our open-to-buy structure creates a little bit of offsets that. So we'll have to Liquidify structure. Mostly, when you think about the reductions directly to the capital stack, it's not an issue for us. The rules that they changed around DTA, it's just probably a bit more significant. And again, that's something that the values, how you think about the intrinsic value of DTA. So we'll most certainly comment on that. And then when you think about operating risk, again, we have an RSA buffer that takes a lot of operating risk in terms of partners. So I think, again, absent the double count between there and the stress capital buffer, it will be manageable. I think when you go to the long-term debt piece of the equation, long-term debt is not an issue based on how we've done it, how we issued debt in the past. But today, we have a surplus under the calculation if we went in as is. And most certainly, we can manage it without any increased cost. The other items, the SLR, again, shouldn't be an issue for us. So again, it's unfortunate, we will provide comments back to trade associations, maybe directly as an institution that's where we feel that the tailing rules have essentially been taken away. So there's a little bit of probably cost for us to comply. But again, the overall effect and posing wasn't answer is the first time I was thinking about it is manageable for us.

Got it. Got it. I want to go back to credit for a second. I mean the managed data shows it's been pretty steady. And you talked about the K-shape recovery. Can you maybe just give additional color on how prime and non-prime segments are performing in terms of credit?

Sure. Let me first go for folks in the room, they have seen our credit to this morning or delinquencies up just over 2 basis points sequentially. The year-over-year fees declined, and the charge-offs were essentially flat month-on-month. So when I think about it -- so think about the non-prime segment for a second, when I talk about a K-shaped recovery, what we are seeing there is that those are performing at or maybe slightly worse than [indiscernible] to any time in the grade. But that's we expect number. Those are the people that are feeling inflation where they may have gotten wage growth is under pressure. Moving up the credit grades and you get into the prime customer and the super prime customers. Those are the folks that have benefited during the pandemic. They were not impacted as much with regard to the inflation. So they are actually performing better than the pre-pandemic period. I think when you look over last couple of years. And I want to stop at the point for a second. If you go to TransUnion data, part of bureau data, so not our data, the vintages over the last couple of years from an industry standpoint are performing worse [indiscernible]. And these, unfortunately, are some of the biggest vintages if you take the credit card in a hole. So during the pandemic, lots of issues, one ahead either open their credit standard, didn't account for form migration, but they are performing worse. If you looked at our data against that, we're performing better than those businesses partially because we didn't change our credit criteria. And we're probably as tight as not tighter than the pandemic period. So we try to protect ourselves. Now we got criticized a little bit for not having that downsized growth during that pandemic window, but we said we didn't want to make it up. And so now the effects of that, we have to watch that because we do have a share of consumer and we'll now leak over and we're trying to be very thoughtful with regard to that. But what you really do see at the top end, we have more super prime accounts than we had in the pandemic period. So super prime are that prime customer is performing better than the pre-pandemic period. And then the bottom end is performing at or maybe slightly worse than pre-pandemic period.

Got it. That's helpful color. What about on spending, when you look at spending behavior, anything to point out across the segments?

Yes, it's what you would expect. The higher-end consumers are continuing to spend at a good pace. They were paying at a good pace. So that's good. I think you're seeing at the lower in credit grades, they are moderating their spend. They've been very balanced with regard to how they allocate. So they're not pulling back. They're not facing, they're just reallocating dollars. So you see a little bit of shift in their spending. But we really don't see -- we're very broad-based. We don't see the consumer changing spending behavior patterns to date significantly. They've been remarkably consistent during this period.

Got it. Helpful. So I have one audience response question. So operator, can you just queue that, so we you can go to Q&A afterwards. So over the next year, would you expect to position in Synchrony to 1 increase 2 decrease or data set?

I think it's half the room to go into the lawn.

Okay. So we're going to open up the Q&A. Any questions? No questions at all? Okay. Maybe I'll just ask another question. Can you maybe just give a little more color on your growth by vertical. You touched on it a little bit earlier, but maybe just talk about the home vertical. Any changes in growth or anything that you've seen?

Yes. It will look remarkably like the -- if you look back to the second quarter, a 20-plus percent in health and wellness, that vertical continues to do well led by dental event, 2 largest ones. Our acquisition of Allegro which brought us a different product and audiology and long-term installment product has done incredibly well. So we see spending in that vertical now will be the sales platform that probably continues to be this in the short term higher. I think the next one, obviously, is digital. There, we just have tremendous opportunities. We have a relatively low penetration rate when you think about some of the big e-players into that platform. We have a couple of new startup programs that are in that. So that one, again, will continue to be -- have outsized with above average company average growth then you're then down a diversified value, right? If you think about 2 retailers in there that are doing very well, TJX and Sam's. They're doing incredibly well retailer great partner for us. So we continue to do well there. Then I think you get into the other 2, which will be company average to be slightly below is home and auto, right? In home, you do have a rotation, right? So we see maybe some home further coming down, but do you see some of the other things kind of coming up of balance it. So we will continue to have very, very good growth, albeit a little bit slower than some of the other sales platforms, then you're down to lifestyle, right? And again, there is an extra policy a little bit lower when you think about some of the luxury items, outdoor power outsource segment has done incredibly well over the pandemic period. That will flow just because you probably pull lot forward. But again, you'll see decent growth out of that sales platform probably just below the company average.

Got it. You spoke a while ago in your earnings call about monitoring call center trends, and you picking up any themes about inflation on the consumer. Can you maybe just update that? Is there anything noticeable you've gone to pick up?

Yes. It's really good for me to listen to calls and try to see what's happening with the consumer. When we were in the middle of the pandemic, we heard quite a bit around or I think about last maybe is regular pandemic around the inflation -- pressure on inflation, things like that. I think when you think about the collection calls today, they're probably reverted back to what I say is the pre-pandemic period, hey, I lost my job, I had health incident. So I can't make payments. I do think one of the signs you're beginning to see in a cycle like this, you see more people reaching out and using debt settlement companies. So we do have more of those kind of coming not alarming, but we're coming in. That's a question who decided that's a better avenue versus bankruptcy or just letting every account right off and try to settle it. And well, certainly, if we got into the back period, back to lever almost for lever in order to try to get as much money from a consumer who's not going to [indiscernible], just a little bit uptick and that's how that's alarming coming out of these calls.

Got it. Okay. Just last question for me. Maybe just update your thoughts on capital allocation and capital returns, I think, has been Synchrony preferred before you can get down the air target capital ratios. Maybe just update us on your thoughts on that.

Yes. The first thing for the folks on room here, we are in a very good position. We have a lot of excess capital. We want to be smart about deploying that excess capital back into it. We were on a very I'd say methodical journey that we separated from our former parent, we came out with 18% CET1. That was by design in order to get the Fed to approve the separation. From there, we've got 18%, we were down into the 14%, people didn't think we go lower than 14%. Now we're down into the 12s. So we'll continue to do that. Our first priority is RWA growth, we just have tremendous ability to grow at a high single-digit rate, long-term framework system of the 10%. This year, we're above that framework. So the first thing we will always look to is organic RWA growth that we can invest in that at the right risk-adjusted returns. So that's priority number one. Priority number two for us is the dividend. We increased the dividend just under 10% to $0.25 per share per quarter starting here in the third quarter. So that's really important for us to maintain cash back to our investors. Then the residual amount kind of goes into 2 buckets. One, is there an inorganic opportunity that makes sense for us to invest at the rate again price and return on invested capital metric. If there is, we would report it there. If not, then our view is a consistent share repurchase program in order to return to -- return that capital back to shareholders. So that's really the priority. And the last 2 was inorganic or share repurchases, they're kind of 1 bucket and you make that choice. So again, we come from a position of strength even with the new rules, we're going to be in a position of strength and our view is we get down. You are right, we cannot get to 11% target unless we do additional preferred. That market has been a little bit choppy. We're not in a rush to do it. We're not going to do something at a price structure that we don't think it's a good decision for us. But again, that's something over the coming year or so we're going to have to look into.

Got it. Okay. Great. So open it up for questions again.

You talked about the mitigation strategies for potential late fees going away. Can you talk about the conversations you're having with your, call it, top 10 or your largest retail partners. And should we expect, if it goes through as scripted that the RSA structures will change with them to account for the changing economics of the plan.

Yes. Great question. So the way I would characterize our discussions is very productive. I think the one thing that our partners realize this isn't a Synchrony issue. This is an issue for the industry, and they understand and they're committed to saying, "listen, we want to make the same levels of sales and the changes are going to have to go into place." Well, certainly, they'd love to know what everyone else is going to do in the industry and other peers are going to do. That unfortunately can happen. So we are having discussion with them. The rule comes into play. The mitigants will come in, depending upon the time in the medicines, some of that effect will run through the RSA, and that RSA will act as a buffer and offset to some of the revenue that may get suppressed if the rule goes into place. So again, I'd say productive. They understand it. They understand it's not our issue. It's an industry issue. But I think they also realize they want to keep the same level of sales on our products.

The buy now, pay later firms are starting to report the credit bureau. I was wondering how is that affecting your business? And what are you learning from that? .

Yes. What I sit back and say there's not -- we don't have a tremendous overlap with the buy now, pay later folks as they targeted a different consumer than we had. So we don't really see a significant of -- what we think it's good that we're actually reporting. So I think a lot of folks had stacked a lot of these loans on top of each other. And again, we always ask for a level playing field. So I think it's great that they're reporting, not a big impact to us. And most certainly, a lot of those players are now trying to migrate to other products because they realize merchants realize that they probably aren't getting the value add, it's very costly. So one product doesn't work. So again, not a big impact to us. When we continue to watch them as they will try to create new products to try to compete with us. But we're ready. We've been here for 90 years. And we believe we have a very broad and diverse multiproduct set and distribution channels to win.

Any more questions? I guess we just run out of that. Thank you.

Terry, thanks for the invitation.