American Express Company

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q3 2019 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If you wish to ask a question, please press star, then 1 on your touch-tone phone. You will hear a tone indicating that you've been placed in queue. You may remove yourself from the queue at any time by pressing the pound key. If you're using a speakerphone, please pick up the handset before pressing the numbers. Should you require assistance during the call, please press star, then zero. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Head of Investor Relations, Ms. Rosie Perez. Please go ahead.

Thank you, Alan, and thank you all for joining today's call. As a reminder before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squirey, Chairman and CEO, who will start with some remarks about the company's progress and results. And then Jeff Campbell, CFO, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Thanks, Rosie. Good morning, everyone, and thanks for joining us. As you saw in our release earlier today, our third quarter results are a continuation of the consistent, steady performance we've been delivering over the last few years. We had strong FX-adjusted revenue growth of 9% in the quarter, and our EPS of $2.08 was 11% higher than last year. The consistently high levels of revenue growth we're delivering is the result of the focused approach we've taken in executing our strategy and the strength of our differentiated business model. This was the ninth straight quarter where FX-adjusted revenue growth was 8% or higher. I'm especially pleased that our revenue growth continues to be driven by a well-balanced mix of spend, loans, and fees. Card fee revenues were particularly strong, growing 19% and exceeding $1 billion this quarter for the first time. Nearly 70% of the cards we've acquired this year are fee-based products, providing us recurring subscription-like revenues. The trends we saw in the business remain consistent with an economy that continues to expand, albeit at a more modest pace than last year. RFX adjusted proprietary billings through 7%, led by strong growth in our U.S. and international consumer businesses. We continued to deliver healthy loan growth, and our credit performance remained at industry-leading levels, in fact, better than the expectations we had at the beginning of the year. So as you can see, even with some uncertainty in the global economic and political environment, our strategy of investing in share, scale, and relevance is enabling us to deliver steady, solid results. With that in mind, I'd like to discuss our progress on the three company-wide initiatives I laid out at Investor Day. As a reminder, these cut across all of our strategic imperatives. They are focusing on our customer as a platform for growth, expanding and leveraging our network of strategic partners, and prioritizing our investments in international to drive growth. Let's start with customers as a platform for growth. Our global, diverse customer base has become a major source of growth for us. One of the ways we're deepening relationships with existing customers is through the disciplined strategic approach we've taken to continuously refresh our products. These refreshes are not just cosmetic changes. We're redefining membership by adding innovative, experiential, and rational value that our customers respond well to, and we're pricing for that additional value. In the third quarter, we continued the refresh of our Platinum Card portfolio across several international markets, And we're following a similar playbook with our gold cards. Now we're updating our iconic green card. A few weeks ago, we introduced a new ocean plastic design. And later this month, we'll announce an array of changes to the product, including new benefits, broader payment flexibility, and a digital focus. And just yesterday, we announced a major refresh of our corporate card program, which includes a number of new features, including newer enhanced benefits with Uber, Hilton, and Clear, which is the biometric identification system that expedites the airport security process. As part of that announcement, we introduced an extension of our corporate card program designed to meet the needs of startups with features that include corporate liability and dynamic spending capacity. As I've said on prior occasions, we typically see a significant increase in spending when our customers add an additional Amex product to their wallets, and our corporate card members represent a great opportunity here. For many of our customers, the corporate card is their first American Express product. To encourage them to add a personal card, we're creating ways to provide benefits for carrying both, such as a new program that offers an incentive for corporate card members to obtain one of our select consumer cards. These initiatives are proving to be a terrific platform for growth. We're seeing a lift in spending and engagement on our refreshed products. Over 60% of our total loan growth is coming from existing card members, and we're earning a steady stream of revenues as more customers move to fee-based products, which are priced for the additional value we're delivering. Our customers have also become one of the best and most efficient ways to bring new card members into the franchise. Through our Member Get Member referral program, we've acquired over 250,000 new customers this year so far. In addition, successful referrals have increased 35% compared to last year's third quarter. Turning to partnerships. The third quarter continued to demonstrate the benefits of our powerful network of partners who help us deliver enhanced value across the enterprise. As I've said before, partnerships are essential to each of our strategic imperatives, and they take many forms. From the over 50 co-brand relationships we have around the world, to our recent digital partnerships, to expanding our merchant network. When we talk about partnerships, we have to start with Delta, our largest, deepest, and longest-running relationship. At the end of September, we announced seven refreshed Delta SkyMiles co-brand cards as part of our renewed 11-year agreement with the airline. The new cards, which will be available in January in the U.S., will feature a range of customized travel benefits for both consumers and small business card members. Also in the third quarter, we launched a new small business credit card in the U.K. with British Airways and one in Singapore with Singapore Airlines. And we announced refreshed consumer cards in Canada with Air Miles and Scotiabank. In addition to co-brands, we've been expanding our digital partnerships. Earlier this week, we announced two new offerings with PayPal and Venmo for U.S. consumer card members. First is the ability to pay for purchases made through PayPal with membership rewards points. and we're also introducing split the bill functionality within the Amex mobile app. On the merchant side, with the help of our blue partnerships, we remain on track to achieve virtual parity coverage in the U.S. by the end of the year. In international, our strategy of selectively increasing our investments to drive share scale and relevance through a country by country approach is delivering strong results. Despite political and economic uncertainty in some regions, International remains the highest growth area of our business. Third quarter results showed continued strong growth across both consumer and small business segments, driven by results in our top strategic countries where we've allocated incremental investments. Since the beginning of the year, we've launched 18 newer refresh proprietary cards, three co-brand cards, and 30 network cards across international. As a result, we're taking share and generating strong billings growth in most of our proprietary countries with overall FX-adjusted consumer proprietary billings up 14% in the quarter and FX-adjusted SME billings up 18%. And finally, we're making good progress on expanding merchant coverage, which is key to our overall international growth strategy. As you can see, we've made a lot of progress in each of our three priority areas since March, and there's more to come. In summary, I feel very good about our performance in the quarter and year to date. As we look ahead, I expect the consistent trends we've seen to continue into Q4, translating into revenue growth of 8% to 10% in the quarter, and we're reaffirming our full-year guidance of adjusted EPS between 785 and 835. Our performance reinforces my confidence in our ability in today's environment to sustain high levels of revenue growth and consistent double-digit EPS growth, which creates value for our shareholders. I'm excited about the opportunities that lie ahead and look forward to updating you on our progress. Now let me turn it over to Jeff.