American Express Company

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q3 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 you have been placed in queue. You may remove yourself from the queue at any time by pressing 1, then 0 again. If you are 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. Vivian Zhou. Please go ahead.

Thank you, Linda, 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 risk and uncertainties. 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 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 Squary, Chairman and CEO, who will start with some remarks about the company's progress and results, and then Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our third 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. Good morning, and thank you for joining us today. I hope you and your families are all healthy and safe. As you saw, this morning we announced third quarter earnings of $1.30 per share on $8.8 billion in revenues. While our results continue to be significantly affected by the impacts of the pandemic, we're increasingly confident that our strategy for managing through the current environment is the right one. Overall, I feel very good about the progress we've made in the quarter in a number of key areas. We've seen a steady recovery in our overall spending volume since the lows of mid-April. In fact, non-T&E spending in the quarter, which has long accounted for the large majority of our volumes, was up slightly year over year. Online consumer retail spending was particularly strong, up 32% over last year. And within our commercial business, AP automation volumes continued their rapid growth, although from a small base, doubling since last year's third quarter, as more businesses adopt digital payment solutions. Our credit metrics continue to be excellent. with delinquencies and net write-offs at the lowest levels we've seen in a few years. Nevertheless, we continue to be cautious about the direction of the pandemic impacts on the economy, and this is reflected in our reserve levels, which Jeff will cover in more detail. Voluntary attrition rates on our proprietary products remain lower than last year, demonstrating that our customers continue to see value in our products and services. We continue to invest in our business by launching our largest ever Shop Small initiative supporting small merchants in 18 markets around the world. Also, the enhancements we made to the value propositions on many of our card products have produced strong results, both in terms of increased spending and customer retention. In addition, we've begun to selectively increase customer acquisition activities across our businesses. Let me quickly review our four key priorities for 2020, which I'll remind you include supporting our colleagues in winning as a team, protecting our customers and the brand, structuring the company for growth, and remaining financially strong. This last priority, remaining financially strong, is critically important in any environment, and especially in these uncertain times, as it establishes the foundation for executing against our strategic imperatives across our businesses. I'm pleased to say that we've maintained a strong liquidity position, our capital ratios are well above our targets, and we continue to pay our dividend each quarter. In terms of our first priority, supporting our colleagues and winning as a team, from the beginning, our goal has been to take care of our colleagues so that they can continue to take care of our customers. As conditions begin to improve in a number of countries since moving virtually all of our 64,000 colleagues to work from home arrangements in March, we've begun the phased reopening of our offices in 25 of our locations, including our headquarters in New York. with a range of new safety procedures to ensure the health and wellbeing of our colleagues. And we are giving our colleagues the flexibility to continue working from home through June of 2021, should they choose to do so. We're really proud of the resiliency and dedication our colleagues have demonstrated through this period, which has helped to drive our progress on our next priority, protecting our customers and the brand. Throughout this period, thanks to the efforts of our frontline staff, our customer satisfaction levels have remained strong and have actually improved globally on a year-over-year basis. Our customers have recognized our commitment to service excellence, ranking us number one in the J.D. Power 2020 U.S. Credit Card Satisfaction Study, the tenth time we've achieved the top spot. In addition to the expansion of our Shop Small program and the enhancements to our value propositions, A key differentiator for us has been the timely rollout of short-term and enhanced longer-term relief programs for customers who have experienced financial challenges during the pandemic. We're no longer seeing new inflows into our short-term programs in the U.S., and we've expanded our longer-term programs to 20 countries around the world. Our last priority is structuring the company for growth. We continue to selectively invest for the long term, You've seen this in the announcements, such as our recent acquisition of Cabbage, a leading financial technology company serving small businesses in the U.S., and in the official launch of our network in mainland China, where in addition to signing merchants and cementing relationships with key digital partners, WeChat and Alipay, we're currently working to develop debit capabilities on our network to capture some of the significant debit usage within China. Let me step back for a moment and tell you how we're thinking about our financial decisions moving forward. We've been looking at our strategy for managing through this cycle through the lens of three phases. The first phase has been about navigating through the peak of the crisis, and we've been focused on this phase the past few quarters. The second phase, which we're now in the early stages of, is about rebuilding our growth momentum by increasing investments in key strategic areas. Our goal in doing this is to enable us to enter the third phase, generating pre-COVID levels of earnings and returning to our financial growth algorithm. While we hope that the worst is behind us, we do not know for certain that that's the case. We recognize that there remains a high degree of uncertainty in the environment, and that's why we'll continue our strategy of focusing on the four priorities I just discussed. What's different is that now, as we're beginning to see improvements in our business, we'll be placing even a greater emphasis on accelerating investments in core strategic areas in order to build momentum and position a company for long-term growth as economic conditions improve. Key areas of investment will include accelerating customer acquisition activities across our businesses, continuing to refresh value propositions on our card products, including new, broader lifestyle benefits and additional business-centric offerings. developing additional solutions beyond the card to expand our relationships with small businesses, maintaining virtual parity coverage in the U.S., and expanding merchant coverage in key international markets, while strengthening and broadening critical partnerships and enhancing our digital capabilities across our business. The pace of our investment acceleration will be driven by the economic environment, which, as you know, is highly dependent on the course the pandemic takes, and the availability of additional government stimulus in the U.S. and key international regions. In addition, while we plan to ramp up investments, we'll maintain our flexibility by controlling operating expenses and pulling back on investments if conditions deteriorate significantly. Now, I can't tell you when Phase 3 will begin, but we're confident that the groundwork we will lay in Phase 2 will provide us with the foundation we need to generate momentum to gain share, scale, and relevance as we exit the recovery phase and return to pre-COVID levels of earnings and our financial growth algorithm. Before I hand the call over to Jeff, I want to take a moment to share my personal thoughts on the current environment. Over the past few months, I've spent a lot of time talking with other key leaders across industries, but particularly with our partners, our customers, and our board. I would say that while I'm personally less optimistic in the near term, I am more optimistic about the longer-term prospects for our economy and for American Express. Near term, there continues to be a high degree of uncertainty about the direction of the virus and its impact on the economy, developments in a political environment, the availability of future stimulus packages, and how local governments will react to changes in local conditions. However, I believe we're well positioned to continue operating successfully through this period by being prepared for the unexpected, maintaining financial flexibility, and quickly adjusting our strategies as necessary. Looking at the longer term, I am more optimistic. I believe there is a pent-up demand among consumers to travel again once they feel safe to do so after many months sheltering at home. At the same time, I believe the increases we see in online spending and the creative pivoting of business models in the small business community will continue, and I believe we are poised to take advantage of the opportunities these trends present. I also believe that this crisis has made us even more resilient and agile and flexible as a company, which will continue beyond this crisis and make us even stronger over the longer term. Having said that, no one knows what the future will bring, but regardless, we'll continue to do what we're best at, focusing on what we can control, such as taking care of our colleagues and serving our customers, putting the right building blocks in place, and creating momentum to drive future growth. Thank you, and let me now hand it over to Jeff, who will walk you through our financial results. Well, thanks, Steve, and good morning, everyone.