The paragraph is from the American Express Q3 2024 Earnings Call. The operator introduces the session, mentioning that it is being recorded and will include a Q&A. Kartik Ramachandran, Head of Investor Relations, states that the discussion will include forward-looking statements and non-GAAP financial measures, with relevant information available on their website. Steve Squeri, Chairman and CEO, reports strong third-quarter earnings, with earnings per share at $3.49 and revenues reaching $16.6 billion, an 8% increase from the previous year, marking their 10th consecutive quarter of record revenues.

The company is raising its full-year EPS guidance due to strong earnings and expects revenue growth to align with previous guidance. Confidence in long-term growth is bolstered by a successful product refresh strategy, which includes upgrading 40 products and adding new benefits to attract card members. A key focus is the US Consumer Gold Card, which sees high acquisition rates, especially among Millennials and Gen-Z, who are drawn to enhanced dining benefits. This demographic's dining habits influenced the latest Gold Card refresh, resulting in increased value outweighing the annual fee hike.

The paragraph discusses the positive impact of enhancements made to the US Gold Card on new account acquisitions and retention rates, attributing this success to adding value that resonates with premium customers. Dining is highlighted as a key growth area, with restaurant spending being a fast-growing category in their US Consumer business. American Express (Amex) views dining as an opportunity to differentiate its membership and has invested in this area, notably by acquiring Resy in 2019 and Tock recently. Resy has been successfully integrated and scaled, with significant user growth, and its benefits have been embedded into various Amex cards, thereby strengthening the overall membership model.

The paragraph discusses how the company's restaurant technology platform connects merchants with high-spending customers and offers growth opportunities. Recent acquisitions, such as Resy, Tock, and Rome, enhance the company's reach and benefits by adding users and integration capabilities across various hospitality sectors. Despite strong competition, the company's business model, strong merchant relationships, and premium membership base support growth and its long-term aspirations. The investments in value propositions and product refresh strategies are driving momentum. The speaker expresses confidence in the company's growth strategy before passing the discussion to Christophe for a detailed review of their performance.

The paragraph outlines a strong financial performance for the quarter, with earnings per share (EPS) at $3.49. The company has seen stable spending and a 10% growth in revenue for the year after adjusting for foreign exchange. It has been successful in attracting more customers and increasing transaction engagement across various customer types, revenue streams, and geographies. There is a notable acceleration in card fees revenue, up by 18% this quarter, driven by a focus on refreshing products and premium offerings. Operating expenses have grown modestly, benefiting from digitization and operational scale, which supports increased investments and shareholder returns, including a reduction of 24 million shares outstanding. The Q3 spend performance shows a 6% increase in build business on an FX adjusted basis, with a consistent trend of volume growth and a 9% rise in transactions, attributed to both customer and merchant growth. Transactions per customer have increased by approximately 30% over the past five years.

The paragraph discusses spend and growth trends within various customer segments, highlighting stable and strong growth among Millennial and Gen-Z consumers in the affluent US market, with new customer retention outperforming older generations. In Commercial Services, spend growth was modest, while international card services experienced a 13% increase, with notable growth in markets like Japan and Mexico. The international Millennial and Gen-Z cohort also grew by 23% in Q3. On the lending side, total loans and card member receivables grew by 10% year-over-year, with lending enhancements contributing to a 15% rise in loan growth. Revolving loan growth is primarily driven by tenured customers, and there's optimism for continued growth as the company expands lending among Premium Card members, with a focus on maintaining strong credit performance.

The paragraph reports that delinquency and write-off rates are low and align with previous quarters, while a modest increase in these rates is anticipated due to the acquisition of new customers and increased lending to existing ones. A provision expense of $1.4 billion was noted, with a reserve build driven by loan volume growth. Credit metrics reflect a successful strategy with effective risk management. Total revenues grew 8%, with a 4% increase in discount revenue and an 18% rise in net card fees, partly due to product refreshes. Strong customer acquisition and retention continue to drive growth in card fee revenue, demonstrating the strategy's success. Net interest income grew 17% and continues to moderate as expected.

The paragraph discusses the financial performance and strategic investments of a company. It highlights growth driven by increased revolving loan balances and net yield. The variable customer engagement (VCE) ratio remained stable, with expenses rising 10%. The company is enhancing its rewards program to improve redemption ease while maintaining economic balance. Investment in card member benefits has led to a significant increase in hotel bookings. Marketing expenses are projected to be around $6 billion for 2024. Operating expenses rose 5% year-over-year, with a slight uptick expected in Q4 due to seasonality. Overall, total expenses increased by 5% year-to-date, reflecting the company's strategic investments and strong expense management. The paragraph concludes by mentioning a transition to discussing capital on the next slide.

The paragraph discusses a company's financial performance and future guidance. The CET1 ratio was 10.7%, within the target range, and the company returned $2.4 billion to shareholders, including $1.9 billion in share repurchases, the highest in two years, and $0.5 billion in dividends. High-yield savings grew by 19% year-over-year, with over 75% from existing card members. The company expects 2024 revenue growth of around 9% and raised its EPS guidance to $13.75 to $14.05, representing 23% to 25% growth, exceeding earlier expectations. Before opening for Q&A, Kartik Ramachandran mentioned limiting questions to one per person. The first question by Sanjay Sakhrani concerns the feasibility of achieving over 10% revenue growth given the current spending environment.

In the paragraph, Stephen Squeri discusses the company's focus on achieving 10% revenue growth, highlighting the need for an acceleration in their bill business to reach this aspirational goal. While card fees have demonstrated strong and consistent growth, with 25 consecutive quarters of double-digit increases, the bill business has remained relatively stable at around 6% growth. He mentions that to achieve their revenue target, they will need a boost in billings, despite the general economic softness over the past year. Nevertheless, they have managed to maintain mid-teens EPS growth, suggesting a robust business scale. Squeri acknowledges that the 10% revenue growth target was set in a previously more robust environment, and an economic improvement would support this aspiration. Following his response, the operator directs a question from Ryan Nash of Goldman Sachs, acknowledging Squeri's prior mention of their conference.

In this discussion, Stephen Squeri and Christophe Le Caillec express confidence in achieving mid-teens EPS growth into 2025, despite a modest 6% billing growth. Squeri highlights the consistent card acquisition and upgrades, particularly among Millennials and Gen-Z, as foundational for future growth. Le Caillec adds that even after enhancing marketing investments by $800 million, they project EPS growth above the mid-teens, demonstrating resilience and strategic planning despite slower billing growth rates.

In a financial discussion, Craig Maurer from FT Partners inquires about a lower-than-expected business development spend and any potential weather impact on guidance. Stephen Squeri confirms no weather impact, while Christophe Le Caillec explains that business development expenses related to customer and co-brand partner agreements were lower due to reduced billing and incentive payments. Following this, Richard Shane from JPMorgan questions why, given strong earnings and revenue expectations, the company isn't pulling forward more investments for long-term growth as they ramp up marketing spending.

Stephen Squeri discusses the company's investment strategy, emphasizing that they are not seeing diminishing marginal returns. Instead, the company is in the process of ramping up investments in areas like marketing and technology, with spending reaching nearly $1.5 billion to $1.6 billion. The transition from a Category 4 to a Category 3 bank has also prompted increased control management investments. Squeri indicates that while they are not pulling back on investments, they are also not compromising on standards. He highlights a strategy of layering investments over time rather than concentrating them in a short period, which was more feasible when investment levels were lower. He anticipates continued growth in investment through 2025, with a focus on gaining efficiencies and further increasing spending in marketing and technology.

The paragraph discusses the company's outlook on investment opportunities and strategies for customer growth. Erika Najarian from UBS asks about spending growth, noting that per-member spending has been flatter compared to overall growth and inquires about future customer acquisition strategies if spend growth doesn't rebound. Stephen Squeri responds by mentioning that the company has surpassed its goals in its product refresh cycle and plans to continue refreshing products into next year. He notes that there is still potential to acquire more cardholders, even though organic spending growth is not as strong due to customers exercising caution during uncertain times. Despite potential spending pullbacks, customers continue to pay their bills, which maintains strong credit numbers, especially within the small business segment.

The paragraph discusses challenges faced by a small business due to a decline in organic spend per card member, resulting in a slight decrease in spending. Despite strong acquisition and retention rates, the organic spend has decreased, affecting overall performance. Christophe Le Caillec adds context by noting that while global averages can be misleading, new card members are showing increased engagement, with 30% more transactions compared to five years ago. This improvement is attributed to better coverage and maintaining a focus on premium acquisitions. Although new card members are performing well, the overall average is impacted by challenges in organic spending from tenured card members.

In the paragraph, Stephen Squeri discusses the stability and resilience of the affluent U.S. consumer base and the company's performance amidst various political and economic conditions. He states that both U.S. and international consumer spending have been stable, with international consumers growing at 13% over the past four quarters. Despite a desire for more organic spending growth, he is optimistic about achieving a 10% growth aspiration in the future. Additionally, credit metrics are stable, with sequentially decreasing write-offs, allowing the company to maintain mid-teens EPS growth.

In the paragraph, Jeffrey Adelson from Morgan Stanley asks about the company's approximately 9% revenue growth projection for the year, questioning whether this suggests a potential acceleration in revenue growth for the fourth quarter and any reasons for changes in discount revenue growth. Christophe Le Caillec responds by explaining that the lower discount rates internationally, where growth is faster than in the US, create a difference in growth trends between discount revenue and bill business. He states that the company views the current trends as stable, with Q3 serving as a good indicator for Q4 projections, and maintains guidance for 9% revenue growth. He also highlights that the company's full-year EPS is exceeding initial guidance.

In the paragraph, Stephen Squeri explains that as customers upgrade from Green Cards to Gold Cards to Platinum Cards, their spending and engagement generally increase. He highlights that transition to higher-tier cards is often associated with increased travel and lifestyle expenses, leading to higher lifetime value for customers. Moving up the card levels often correlates with more discretionary income, allowing customers to take full advantage of the travel benefits offered by the Platinum Card, ultimately resulting in greater spending compared to lower-tier cards.

The paragraph discusses the dynamics of net interest income (NII) leading into 2025, focusing on the factors affecting it. Christophe Le Caillec explains that while the company is slightly liability-sensitive, the impact of changes in Fed funds rates on NII is minimal. The key factors affecting NII are volume and rate balance, with expectations for moderate growth in revolving balances due to changes during the pandemic. As people paid back balances during the pandemic and have been gradually rebuilding them, revolve rates are stabilizing. The process of normalization in these dynamics is largely completed.

The paragraph discusses the company's strategy for maintaining a strong yield by shifting funding towards high-yield savings accounts, which reduces funding costs and positively impacts yield. They focus on competitive pricing compared to peers to sustain interest income. The company anticipates moderation in volume but expects to preserve the current strong yield with minimal impact from changes in the federal funds rate. During the Q&A, Terry Ma from Barclays inquires about card acquisitions and product adoption. Stephen Squeri responds that the outcomes align with expectations, noting that product refreshes typically generate increased demand, enhancing the effectiveness of marketing efforts.

The paragraph discusses the growth in revenue from new cardholders and the importance of upgrading products to attract and engage cardholders. It highlights the subscription-like nature of card fee revenues, noting they have surpassed $2 billion in the quarter. The conversation shifts to the potential impact of Federal Reserve easing on business growth. Although current reductions are too small to detect changes in spending patterns, there's optimism that consumer and small business confidence will improve with a more supportive rate environment. There's no evidence of credit stress, and demand for premium products remains strong.

The paragraph discusses trends in travel and entertainment (T&E) spending, focusing on airline and restaurant expenditures. Airline spending accelerated in the recent quarter, while restaurant spending, although slightly decelerating from an 8% to a 7% growth rate, remains the company's fastest-growing T&E category. The speaker indicates confidence in continued growth, especially with investments in restaurant reservations through acquisitions like Resy and Tock, expecting to gain further share in the restaurant sector over time.

The paragraph discusses the performance of the airline and restaurant sectors for American Express, highlighting that there hasn't been much change from both corporate and consumer perspectives, with a slight increase in airline spending. International bookings have reached their highest levels since before the pandemic, indicating strong demand for travel among Card Members. It also notes that spending tends to be higher when traveling internationally compared to domestically. The restaurant category remains strong, and American Express is focusing on it with efforts like the Tock acquisition and the Gold Card refresh, targeting Millennials and Gen-Zs who spend more on dining. The paragraph concludes with information about accessing a replay of the call for further insights.

The conference call has ended, and participants are thanked and told they can disconnect.

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