The American Express Q2 2024 Earnings Call began with a reminder about forward-looking statements and non-GAAP financial measures. CEO Steve Squeri and CFO Christophe Le Caillec provided an overview of the company's progress and financial performance, followed by a Q&A session. The company reported strong second quarter results and raised their EPS guidance for the full year.

The company's revenue and earnings have reached record highs, allowing them to increase investments in marketing and other strategic areas without using proceeds from a recent sale. They are raising their EPS guidance and expect revenue growth in line with previous projections. The company's strong performance is due to factors such as their loyal premium customer base, increasing scale, well-controlled expenses, successful investments, and talented employees. The company has consistently attracted high-quality customers and experienced significant growth in recent years.

The company has seen significant growth in revenues, card member spending, and cards-in-force globally, which has allowed them to invest in their business and drive efficiencies. They attribute their success to strategic investments in marketing, technology, and talent, as well as regularly refreshing their products. They plan to refresh approximately 40 products by the end of the year and have already updated nearly two dozen. They are also adding new capabilities and benefits through both internal innovation and acquisitions.

In the fourth paragraph, the speaker discusses the growth and success of American Express in the dining industry, citing the acquisition of Resy and planned acquisitions of Tock and Rooam. They also credit the company's talented employees for driving this growth and providing a superior customer experience. The speaker expresses confidence in the company's ability to meet expectations and achieve long-term success. The summary financials for the second quarter are also briefly mentioned, with revenues of $16.3 billion and net income of $3 billion, which includes a gain from the sale of the Accertify business. Excluding this gain, earnings per share grew 21%.

In this paragraph, the company reports on their Billed Business growth, which increased by 6% on an FX adjusted basis compared to the previous year. This growth was stable and in line with the current spending environment. The growth was driven by a 6% increase in goods and services spending and a 7% increase in travel and entertainment spending. While there was slower growth in certain T&E categories, overall spending remained stable and the number of transactions from card members grew by 9%. In the US consumer segment, billings grew by 6% with balanced growth in goods and services and T&E. The company saw strong growth from their premium customer base and all generations, particularly Millennials and Gen-Z who showed a 13% increase in spending. In commercial services, there was a 2% growth, and in international card services, there was a 13% growth.

The company has seen double-digit growth in spending from international consumers and corporate customers, as well as stable spend growth across all regions. Loan and card member receivables have also shown strong year-over-year growth, but are expected to moderate in the future. The company's disciplined growth strategy and risk management practices have resulted in strong credit performance, with write-off rates expected to remain stable. The company ended the second quarter with $5.6 billion in reserves, representing 2.8% of its loans and card member receivables.

The company's reserves have a seasonal component, but their portfolio performance is strong. Total revenues increased by 9%, driven by diversification across revenue streams, customer segments, and geographies. Discount revenue grew by 5%, while net card fee revenues were up 16%. The company acquired 3.3 million new cards and maintained disciplined underwriting standards. Net interest income increased by 20% due to an increase in revolving loan balances, but growth is expected to moderate throughout the year.

The company's diversified model has led to strong revenue growth in all major revenue lines and geographies. Variable customer engagement expenses are expected to remain in-line with the current level for the rest of the year, while marketing expenses will be higher compared to last year. The company plans to invest in a disciplined manner, with a focus on profitability. Operating expenses were down in the second quarter due to a gain from the sale of a business, but excluding this gain, they were up 3%, still below the pace of revenue growth. The company expects operating expenses for the year to be fairly flat compared to 2023.

The company's second quarter results demonstrate their ability to generate efficiencies and invest in growth while still driving strong earnings growth. Their CET1 ratio is within their target range and they returned $2.3 billion to shareholders. The recent CCAR results show their portfolio remains profitable and they plan to continue returning excess capital to shareholders. They expect mid-teens EPS growth and are investing more in marketing compared to last year.

The company has exceeded its expectations for investments and is raising its EPS guidance for the year. They are confident in their ability to support growth while also delivering mid-teens EPS growth. The company expects to maintain their initial revenue growth range and has opened the call for questions. The first question asks about the US consumer and SMEs, to which the company responds that there has been a slight slowdown in US consumer growth, but this may be due to the extra day in the previous quarter. They have seen a slight uptick in SME growth.

The speaker discusses the strong performance of the US consumer, particularly among Millennials and Gen-Z, and notes that while organic spending could be higher, the slower economic environment is a factor. However, the consumer is still paying their bills, leading to strong credit numbers and a widening gap with competitors. Small business and international segments also show growth. The speaker reiterates the revenue guidance for 2024 but acknowledges that the results may lean towards the mid-to-lower end of the range.

American Express CEO Stephen Squeri discusses the company's current investments in marketing for the US consumer, commercial, and international sectors. He notes that quarter-to-date, they are at 10% both reported and FX, and for the quarter, they were at 8% and 9%. Squeri also mentions that they will allocate investments based on opportunities to acquire more cardholders, with a focus on the US consumer business. However, he clarifies that these investments are for the medium and longer term and will not impact spending this year. Chief Financial Officer Christophe Le Caillec adds that the revenue growth is stable, as expected.

In the paragraph, the speaker discusses the growth of card fees and NII, stating that they are on track with expectations. They also mention a potential upcoming card refresh, which will help card fees next year and make marketing dollars work harder. The speaker also mentions that there were no significant changes in spending trends during the quarter.

Craig Maurer of FT Partners asks about American Express's increased marketing spend and whether it is due to a slowdown in competitors' market activity or a strategic opportunity. American Express CEO Stephen Squeri explains that the decision to increase marketing spending was made based on the company's own growth opportunities and not due to a slowdown in billings or competitors pulling back. He also notes that the market remains highly competitive.

Christophe Le Caillec and Craig are discussing the company's decision to invest more in marketing in order to gain more traction with cardholders and increase market share. Le Caillec explains that the decision is also influenced by the company's strong earnings and visibility in credit performance and operating expenses. The operator then asks a question about business development expenses, to which Le Caillec responds that there were some efficiencies in commercial spend and incentives, but nothing significant related to co-brand partners. The next question comes from Rick Shane of JPMorgan, who is trying to understand the incremental marketing spend and whether it has changed from prior guidance. Stephen Squeri responds that the company plans to fund the marketing spend organically, rather than using the Accertify gain, and that it has increased expectations for the spend.

The company entered the year with plans to invest more due to attractive opportunities, but their core business is generating more earnings than expected. This allows them to fund the investments and increase marketing spending. The credit quality outlook has shifted to a more stable outlook for the rest of the year, with a potential stable reserve rate. The CEO and CFO discuss the company's performance and outlook during a conference call.

The speaker confirms that there has been a change in the way credit write-offs are being handled for the remaining of the year. They predict that the delinquency rate will increase and the reserve rate will be around 2.8-2.9%. They also expect stability in credit losses for the rest of the year. In response to a question, the speaker mentions that it is unusual for a gain like the Accertify gain to fall to the bottom line and they do not give guidance for 2025, but they still expect mid-teens EPS growth off the higher 2024 EPS level.

Stephen Squeri discusses a one-time gain and how it will affect the company's EPS for next year. He explains that the gain will not be used within the business and instead, the company plans to use it to elevate their marketing spending. This will allow for higher growth in the future. Additionally, Squeri mentions that digital banking is a key area of investment for the company in order to better engage with small businesses and consumers. This will be a continuous journey for the company, with investments in capabilities and customer usage.

The company has announced product refreshes and is at the beginning of this journey. There is still a long way to go, but the company feels good about net card fee growth and expects it to increase in the coming months. The product refreshes are going well and the company is on track with its goal of 40 products. The next big refresh is for the gold card. It is too early to tell how each individual product has performed, but overall, the company has acquired 3.4 million cards and retention rates remain strong. More information will be provided as the year progresses.

The speaker from HSBC, Saul Martinez, asks a question about the EPS guidance for the company. He notes that the mid-point of the range suggests a 2.6% growth in the second half, which is lower than the higher end of the range. He asks if there are any other factors besides higher marketing expenses that could be driving this deceleration. The speaker responds by mentioning the one-off gain from the previous quarter, the need to build credit reserves, and investments in technology as potential factors affecting the EPS.

The speaker discusses the impact of seasonal factors on American Express's operating expenses and marketing expenses, which may lead to a slight decrease in EPS cadence. They also mention that the growth rate of net interest income is still higher than the growth rate of loans, but this may moderate in the future due to a potential decrease in loan volume and a shift towards high yield savings accounts for funding.

The speaker is discussing the expected growth rate of NII for the rest of the year, stating that it may moderate. They then take a question about spending and revenue, and clarify that they are planning for a softer spending environment to continue for the next few quarters. They also mention that there was a decrease in global and large spend, but it was not significant and there were no major changes in corporate card spend.

The speaker thanks the audience for joining the call and for their interest in American Express. The IR team is available for any follow-up questions. The webcast replay will be available on the Investor Relations website shortly after the call, and a digital replay can be accessed through a specific code until July 26th. The call is now concluded and participants can disconnect.

This summary was generated with AI and may contain some inaccuracies.