American Express Company

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q1 2020 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 1, then 0 on your touchtone phone. You will hear a message indicating that you've been placed in queue. You may remove yourself from the queue at any time by pressing the 1, then 0 again. If you are using a speakerphone, Please pick up your handset before pressing the numbers. Should you require assistance during the call, 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. Vivian Zhao. 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 uncertainty. Factors that could cause actual results to differ materially from these statements are included in today's presentation 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 will begin today with Steve Squarey, Chairman and CEO, who will start with some remarks about the company's key priorities for 2020 in light of the COVID-19 pandemic. And then Jeff Campbell, Chief Financial Officer, will provide review of our first quarter financial performance. After that, we will move to a Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Thanks, Vivian. Hello, everyone, and thanks for joining us on the call today. First of all, I hope you and your families are healthy and staying safe as we go through this COVID-19 crisis. As we set our investor call on March 17th, we're in unprecedented times. Our results in January and February continue the strong trends we've seen over the past 10 quarters. but we're now operating in a very different world. The deterioration in the economy due to COVID-19 impacts that began during the first quarter and accelerated in April has dramatically impacted our volumes. Looking ahead, it's impossible to know when the economy will improve. In the meantime, we're focused on supporting our colleagues and customers while remaining financially strong so that we can be in a position to grow when the crisis ends. Jeff will take you through some detail on how this environment is impacting various components of our financial results. My comments will focus on what we're doing to manage the company through the near term so that we can be in a position to take advantage of the growth opportunities that will be available when the economy improves. Last year, as many economists were predicting an economic slowdown at some point, we put together a plan for managing through a range of potential economic scenarios, and we modeled what our response might look like in those scenarios. Of course, the economic situation we're facing right now is nothing like those we modeled. However, we developed a framework that we're using to guide us in managing the company through the short term as we plan for the future. Our framework for managing through this cycle is built on four principles you will see on slide two. Supporting our colleagues and winning as a team, protecting our customers and our brand, structuring the company for growth in the future, and remaining financially strong. I'll spend a few minutes talking about each of these principles, which represent our priorities for 2020. Turning to slide three. From day one of this crisis, our priority has been to take care of our people, the 64,000 American Express colleagues around the world. We wanted to ensure our colleagues felt secure in their jobs, which is why we committed to no COVID-19 related layoffs for the remainder of 2020. In addition, we're continuing to pay the salaries of colleagues who are affected by the virus without having to use their paid leave. We also committed to paying all out-of-pocket COVID-related medical expenses for colleagues in our U.S. medical plans. As the virus spread rapidly around the world, we wanted to keep our colleagues safe and secure. So we moved quickly to a full-time work-from-home arrangement in all our locations, including thousands of our frontline service colleagues. core value of our company from our earliest days has been supporting the communities from where we do business and where our colleagues live and work. When the COVID-19 pandemic hit, we committed over $6 million in grants to the American Express Foundation to a number of charitable organizations around the world that are supporting frontline workers in this crisis. We also pledged to match more than $1 million in card member donations to Feeding America when U.S. card members use their membership rewards points to donate through to the organization through JustGiving.com. In addition, we're working with our partners to support our communities. For example, we're partnering with Hilton to donate up to 1 million hotel room nights to frontline medical professionals across the U.S., and we're backing Marriott's Rooms for Responders initiative to provide hotels for healthcare professionals in some of the hardest-hit regions. The next principle is protecting our customers and our brand. Our global customer base is one of our most important assets. And like everyone, they're going through a difficult time right now. We're offering a range of financial assistance options to help our customers weather the storm, adding new product benefits to be relevant in today's environment, and continuing to provide the world-class customer service our customers expect and rely on. Our consumer and small business card members are taking advantage of the various short-term financial assistance options we offer to help them navigate through this period, including temporary payment deferrals interest in late fee waivers, and protections from collection calls and negative credit bureau reporting. We also offer a range of longer-term assistance programs for certain customers who require more time. We're expanding eligibility for these programs and enhancing them to provide for additional payment flexibility based on a customer's circumstances. To enable our U.S. small business customers to obtain the financial assistance provided under the SBA's Paycheck Protection Program, we've been authorized as an SBA PPP lender and began to accept applications from our customers earlier this week, which we'll submit to the SBA as soon as that window opens. In addition to our financial assistance initiatives, we've enhanced our membership rewards programs, and we're adding new offers, benefits, and rewards to our premium products that are particularly relevant for the times we're in now. For example, since people are not currently traveling, eating out, or shopping in-store, we've adjusted our MR program to include discounts at Amazon when you pay with points and the ability to earn double points with orders from Grubhub and Seamless through the end of the year. We're also adding a range of limited-time offers, credits, and rewards on stay-at-home services, such as wireless, streaming, grocery, and food delivery for our consumer and certain co-brand card customers, as well as business essentials like wireless, office equipment, and shipping for our small business customers. For our co-brand customers, we're also working with our partners to extend card member benefits such as airline companion certificates and hotel free night awards so our mutual customers will have more time to enjoy these benefits. And for our travel customers, we're waiving fees for any flight changes or new bookings made through American Express Travel now through May 31st. In addition to our card members, we're supporting small businesses as we have for many years through Shop Small initiatives like Small Business Saturday and many others around the world. During the COVID-19 crisis, we're continuing to promote the positive impact consumers can have on their local communities and small businesses through our Stay Home and Shop Small campaign. Earlier this week, we launched Stand for Small in the U.S., a coalition of more than 40 companies across various industries that have come together to back small businesses by providing a wide range of offers, complementary services, access to corporate assistance programs, and other resources designed to help support them as they manage through the crisis. We look forward to many more companies joining this initiative over the coming weeks. For our merchant partners, we're also temporarily extending the amount of time businesses must respond to disputes and have increased contactless transaction thresholds to reduce physical contact at the point of sale in 28 countries. Finally, our customer care professionals made a quick transition from a brick-and-mortar operation to a home-based servicing one, and we did so with minimal disruption. In fact, our servicing levels quickly came back to BAU levels and our customer satisfaction results improved during the crisis and are at significantly higher levels now than in January. Our next principle is structuring the company for future growth. While we believe that the COVID-19 pandemic will generate certain changes in our business in the near term, and likely over the long term, it will also generate opportunities. And we intend to be in a position to take advantage of the opportunities as they present themselves. We're starting with a strong foundation. The assets we have, our differentiated business model, particularly our brands, our customers, and our merchant network, give us a great base to build upon. In addition, The strategic imperatives we've been focused on over the past few years remain just as relevant today. And while we'll make some adjustments considering the current environment, we'll continue to pursue our overall strategies in the following areas, expanding our leadership in the premium consumer space, building on our strong position in commercial payments, strengthening our global integrated network to provide unique value, and making American Express an essential part of our customers' digital lives. As the crisis unfolded, we knew that we had to reprioritize our investments in each of these areas to focus on those initiatives that are critical to retaining our premium customer base and strengthening our merchant network, while at the same time continuing to invest in those areas that are key to our long-term growth strategy. This led us to a thorough and thoughtful process to identify activities that we should stop, slow, accelerate, and continue. What we're stopping for the time being includes items that are less critical in today's environment, including traditional advertising, marketing, sponsorships, and customer acquisition activities. We're slowing down the development and launch of some of the new products we had in the pipeline for this year. We're accelerating investments in mobile, servicing, and credit and collections capabilities that are not only important today, but are also important for our continued growth over the longer term. And we're continuing our activities in a number of areas, including acquiring new merchants globally, our ongoing efforts to launch our new network in China, our network replatforming initiative, our premium product refresh strategy in both consumer and commercial, and continuing to integrate and develop new digital capabilities, as well as making longer-term enhancements in our servicing platform and other key areas that are important for our future success. Finally, we enter this crisis with particularly strong capital and liquidity positions that will enable us to remain financially strong. While some of our expense categories such as rewards cost and the cost of card member services will decline automatically as spending declines and customer behaviors change, we're taking aggressive actions to reduce discretionary expenses across the enterprise by nearly $3 billion from our original plan in the areas I mentioned before And we are redirecting some of those funds into new product benefits and longer-term investments I described a few moments ago. Looking ahead, in the near term, our earnings will be driven by the answers to two questions that no one yet can answer. First, when and how strongly does spending rebound as the global economy recovers? Second, how long do the challenges of high unemployment levels and small business shutdowns last, perhaps often by the record levels of government support? And what does that mean for our credit losses? Until we all get to the answers to these questions, we're reducing our spending in every area that doesn't make sense in the current environment, consistent with our intention to not have any COVID-related layoffs in 2020, and consistent with our intention of protecting our customers and the brand. So those are our principles we've established for managing through this period in a way that will position us to return to growth when the economy rebounds. Without a doubt, these are times that are unlike any that I've encountered in my 35 years at American Express. But while the magnitude and uncertainty of today's challenges are more intense, the lessons we've learned through other crises will serve us well as we work through this one. As always, we'll remain focused on what we can control in the short term while keeping an eye on the long term. And like before, we intend to come back stronger. Our teams are working day and night all over the world to help our card members and our merchants, just as we have done throughout our history. And when this is over, we intend to be in a position of strength, ready to capitalize on the opportunities ahead because we've managed the short-term challenges while remaining focused on growth over the longer term. Thank you for your time, and now I'll turn it over to Jeff.