The paragraph is an introduction to the American Express Q1 2025 Earnings Call. The operator introduces the session, noting that all participants are currently in listen-only mode, and that a Q&A session will follow. Kartik Ramachandran, Head of Investor Relations, then explains that the discussion will include forward-looking statements and non-GAAP financial measures, with relevant documents available on their website. Steve Squeri, Chairman and CEO, reports a strong quarter with revenues of $17 billion (up 8-9% year-over-year) and a net income of $2.6 billion or $3.64 per share. A review of financial performance by CFO Christophe Le Caillec will follow the initial remarks.

In the first quarter, the company saw healthy spending levels among its premium customers, with total card member spending increasing by 6%, or 7% excluding leap year effects. While growth in airline billings slowed, spending in restaurants and lodging remained robust. The company added 3.4 million new cards, predominantly among Millennials and Gen-Z, and saw a 20% increase in card fee growth on an FX-adjusted basis. Retention and credit performance were strong. Early second-quarter data indicates consistent spending levels. The company maintains its annual revenue growth guidance of 8% to 10% and EPS of $15 to $15.50, acknowledging some uncertainty in the environment. Despite this, the business is considered resilient due to its global premium customer base, many of whom have high incomes, loyalty, and excellent credit profiles.

The paragraph highlights the company's revenue model, which relies more on spending and fees rather than lending, making it less sensitive to credit cycles. It emphasizes expense management and flexibility, enabling cost control while investing for long-term growth. The company is committed to supporting customers and employees, practicing disciplined expense management, and investing strategically in technology, control management, and customer acquisition to strengthen its foundational capabilities and expand its membership model. The company operates from a position of strength, guided by principles focused on long-term shareholder growth.

In the first quarter, the company experienced a revenue growth of 8% when adjusted for foreign exchange, which increases to 9% when excluding the leap year impact. Earnings per share were reported at $3.64, aligning with the annual guidance. Key indicators such as spending, retention, credit performance, and demand for premium products remained strong despite macroeconomic uncertainties. Year-over-year, total Billed Business grew by 7.5%, a rate higher than the previous year, 2024. The growth in Goods and Services spending accelerated from the previous quarter, while Travel and Entertainment (T&E) spending stayed consistent. However, airline spending decelerated, though front cabin ticket sales were robust, increasing by around 11%.

The paragraph discusses spending trends and financial performance across various segments of the business. Key points include an 8% growth in spending by affluent U.S. consumers, with Millennials and Gen-Z driving significant growth. Commercial Services spending increased by 3%, and there was modest growth in U.S. SME spending. International Card Services spending rose by 14% with strong growth in the top five markets. Lending performance saw a 7% year-over-year increase in loans and card receivables, driven by premium products and high-creditworthy customers. Credit performance remains strong, with delinquency and write-off rates below pre-pandemic levels. Recent acquisitions have also shown improved delinquency rates. The quarter included approximately $1.2 billion in provision expenses, reflecting strong portfolio quality and a stable macroeconomic outlook.

The paragraph discusses the financial performance of a company, highlighting an 8% increase in total revenues year-over-year on a foreign exchange (FX) adjusted basis, or 9% excluding the leap year. It notes the ongoing impact of a strong U.S. dollar as a challenge to revenue growth. Discount revenue, the largest revenue line, increased by 5% FX adjusted, driven by spending trends. Net card fees reached record levels with a 20% FX adjusted increase, marking the 27th consecutive quarter of growth. The company acquired 3.4 million new cards, with 70% being fee-paying products. The average card fee per new account rose by 40% over three years due to premium product demand and effective pricing. Net interest income grew by 11% FX adjusted, while the VCE to revenue ratio was 43%. Rewards expense increased by 16% year-over-year, noting a prior benefit from changes to the URR model.

The paragraph discusses several key financial metrics and strategic updates for the company. It explains that small program changes have led to a short-term increase in the URR, but rewards growth is expected to align with historical trends moving forward. The company highlights expense management through marketing and operational expenses, maintaining a CET1 ratio of 10.7%, and returning $1.3 billion to shareholders through dividends and share repurchases. A recent dividend increase and a strong return on equity (ROE) of 34% enhance capital flexibility. The company reports stable spending trends across various customer segments and maintains its 2025 guidance with revenue growth projected at 8% to 10% and earnings per share between $15 and $15.50, despite an anticipated unemployment rate peak of 5.7%.

The paragraph is part of a financial call involving Christophe and Kartik Ramachandran, where they discuss their confidence in the company's long-term growth despite macroeconomic uncertainties. They are opening the floor to questions, and Sanjay Sakhrani from KBW asks about the effect of spending pull forward on spend volumes and how the company plans to protect earnings if there is spending and revenue volatility. Stephen Squeri responds, stating that they haven't observed significant pull forward, only minor instances in small business and wholesale sectors. He notes that it is still early in the year, and the situation may evolve.

The paragraph discusses the consumer behavior related to travel bookings and spending, emphasizing that there has been no decrease or "pull forward" in consumer activities. The speaker notes that travel bookings have reached record highs, especially internationally, and consumer spending remains unaffected by the stock market or consumer confidence levels. Despite external economic factors, the company remains committed to long-term growth and will continue investing wisely, even if it means not meeting short-term financial targets. The company is confident in staying within its revenue and earnings per share (EPS) guidance range, with an aspirational goal of 10% revenue growth.

In response to a question from Mark DeVries of Deutsche Bank about potential impacts of steep tariffs, Stephen Squeri explains that the company is actively managing risk by frequently modifying their models. He predicts that small businesses would be most affected by increased tariffs, as they might struggle to compete effectively due to rising costs. Squeri notes that consumers might respond by spending and revolving credit less, as seen during COVID-19. The company is proactively monitoring small businesses and evaluating customer lines to mitigate risks, and he highlights that their customer base is now more premium compared to 2019, with higher credit scores.

In the paragraph, Stephen Squeri discusses the performance of Millennial and Gen-Z customers, who are doing better than the industry average in terms of FICO scores and delinquency rates. He also mentions that low-tenure card members have better delinquency rates compared to 2019. In response to a question about card refreshes and fee growth, Squeri states that the company remains committed to updating their card products, having refreshed over 150 products in the last five years. They plan to continue this strategy, ensuring significant value is added before raising any fees. Fee increases are only implemented when the added value justifies the higher cost to cardholders.

The paragraph discusses a conversation involving Richard Shane from J.P. Morgan asking Stephen Squeri about investment strategies and capital use at their company. Stephen explains that they aim to return about 80% of earnings to shareholders and mentions that first-quarter capital returns are typically lower. However, the capital returned in the first quarter was only slightly less than the previous quarter. They also noted the recent completion of the Center acquisition, indicating ongoing investment activities.

The paragraph emphasizes the importance of continuous investment in technology infrastructure and product development for long-term success, despite short-term financial pressures. The speaker argues against cutting technology projects or refreshing strategies merely to meet short-term earnings targets, as doing so would be detrimental to both customers and shareholders. Such investments are crucial for maintaining and enhancing products and services, and the speaker is committed to ongoing improvements on a three to four-year cycle, regardless of current economic challenges.

In the mentioned paragraph, Christophe Le Caillec talks about the company's strong financial position, highlighting that its CET1 ratio is a key factor in determining the extent of share repurchase activities. He notes the current ratio is at 10.7% and has been slightly higher in the past. Despite this slight increase, the company's capital distribution aligns with their plans, and they notably increased the dividend by 17% in the first quarter. Following this, Erika Najarian from UBS asks about the company's revenue growth projections of 8% to 10% despite considering a 5.7% unemployment rate, and seeks insights into consumer spending, particularly among affluent customers, amid stock market volatility. Stephen Squeri is set to provide further details on spending patterns.

The paragraph discusses consistent spending trends in the first quarter, with slight increases observed at the end of March and early April. It highlights potential impacts on spending in April due to Easter and variations in corporate and retail expenditures. The unemployment rate is projected at 5.7%, with a focus on white-collar unemployment affecting spending more significantly due to the company's cardholder demographic. Despite a higher unemployment forecast, the company remains confident in its financial guidance. Christophe Le Caillec mentions that they run multiple scenarios to inform their credit reserve strategy, providing insights for investors and analysts.

The paragraph covers a discussion about American Express (Amex) and its Millennial and Gen-Z customer base. Jeffrey Adelson inquires about potential issues within this group related to student loan repayments affecting their spending, especially since they form a significant part of Amex's account growth and acquisitions. Stephen Squeri from Amex responds that they haven't observed any negative trends and highlights strong growth, with U.S. consumer spend increasing by 15% and international spend by 22% for this cohort during the quarter. He also notes that Millennials and Gen-Z represent 35% of the overall spend and are key contributors internationally, though he clarifies that not every individual in these demographics holds an Amex card.

The paragraph discusses the current state of delinquency rates compared to industry standards, highlighting that these rates are lower than pre-COVID levels and associated with higher FICO scores and newer tenure individuals entering the franchise. Christophe Le Caillec adds that Millennial and Gen-Z spend 20% less and revolve credit less than older generations, with an average FICO score of 750. Craig Maurer raises concerns about potential economic changes in the upcoming months, questioning how consumer confidence and wealth effects might impact spending, especially among younger demographics, referencing past issues like FICO Creep during the last recession.

In the paragraph, Stephen Squeri explains that he cannot provide specific data on the percentage of SMB business related to e-commerce. He emphasizes that historical consumer confidence and the wealth effect, based on the experiences of their cardholders during various crises, have not been the primary drivers of credit issues for the company. Instead, the company examines several factors, with white collar unemployment being a significant concern for credit risk. Christophe Le Caillec adds that delinquency rates show more variability among new card members, and the company focuses on this factor to assess credit risk. The paragraph highlights the emphasis on comprehensive data analysis beyond just FICO scores to make informed credit decisions.

The paragraph discusses the improved delinquency rate of low tenure card members, those with less than two years of membership, which is now 30% lower than in 2019. This improvement is attributed to the strategic acquisition of premium card members and careful management practices over the past five to six years. The paragraph also transitions to a discussion where Christopher Kennedy asks Stephen Squeri about the company's journey of acquiring technology firms like Center, Kabbage, and Nipendo to enhance SME technology investments. Squeri explains that these acquisitions are part of building more capabilities for SME customers, increasing relevance, automating B2B processes, and incorporating expense management to provide a comprehensive platform for SME clients.

The paragraph discusses a company's strategy to enhance its offerings for small businesses by integrating various services, such as One AP and Nipendo, to boost B2B payments and create a cohesive ecosystem. The aim is to improve customer retention, acquisition, and organic spending, which fluctuated during and after COVID. Though there are challenges like Center not yet being integrated into the Kabbage platform, the company is optimistic about its capabilities for SMEs. The conversation then shifts to a question from Terry Ma of Barclays regarding the company's refresh strategy of planning 35 to 50 product updates despite macroeconomic uncertainties and the unclear ROI, questioning whether there might be adjustments or delays in these plans.

In the paragraph, Stephen Squeri addresses questions about the company's marketing strategies and budget, particularly in relation to credit card refreshes. He mentions that there are no changes to the marketing budget despite ongoing refreshes, even during the pandemic. Squeri emphasizes that card refreshes, such as their platinum and green cards, take a long time to develop and continue regardless of short-term challenges. He also notes the importance of understanding the credit market when acquiring new cards. Additionally, he discusses the company's focus on capturing the Gen-Z and Millennial market by enhancing value propositions in areas like dining and experiences, highlighting these segments' significant spending in restaurants compared to other groups.

The paragraph discusses the strategy of enhancing the value of the Gold Card by integrating features like the rewards accelerator, Resy credit, and Global Dining Collection, aiming to create a competitive edge in the restaurant industry. This approach is part of a broader strategy to form a "closed-loop" system that benefits both card members and restaurant partners, focusing particularly on attracting Millennials and Gen-Z. The text also notes the similar approach being taken with the Platinum Card in the travel sector, emphasizing value through services like Platinum travel booking, fine hotels and resorts benefits, and connections with airline partners. Overall, these strategies are geared towards adding value and appealing to younger customers.

The paragraph features a conversation during an earnings call about the integration of technology platforms for small and medium-sized businesses, specifically around the acquisition of Center by a company that already owns Kabbage. Stephen Squeri explains that while customers can currently access various services through the Kabbage platform, the next step is integrating Center into this ecosystem. He mentions that there are regulatory requirements to be addressed before full integration can happen. The conversation also notes that the acquisition of Center was just finalized.

In the paragraph, Steve Squeri discusses the company's approach to managing costs and investments amid uncertain macroeconomic conditions. He emphasizes maintaining their technology and marketing plans despite potential fluctuations in spending. While there is flexibility to adjust expenses, especially in marketing and operational expenditures, the company is not willing to cut costs solely to meet EPS targets if there are growth opportunities. Squeri cites the COVID-19 period as an example, where they reduced acquisitions due to credit uncertainties but redirected funds to enhance their value propositions.

The paragraph discusses American Express's strategy for long-term growth through strategic investments in value propositions, which have led to higher customer retention and engagement. The company emphasizes flexibility in its marketing and operational expenses. The call concluded with Kartik Ramachandran thanking participants and noting that a webcast replay will be available on their Investor Relations website and through a digital replay line shortly after the call, with access until April 24.

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