American Express Company

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q4 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'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. Vivian Zhou. 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 presentation slides 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 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 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 belated Happy New Year to everyone, and hope you and your families are healthy and safe. As you saw, we earned $1.76 per share on $9.35 billion in revenues in the fourth quarter. And while we're still seeing the impacts of the COVID pandemic on our business, the trends have steadily improved as the year went on. At the beginning of the pandemic, we had little visibility into the future, but we did have a plan for managing the company through this period of uncertainty, focusing on four priorities, supporting our colleagues, protecting our customers and our brand, remaining financially strong, and at the same time, taking steps to structure our company for longer-term growth. We've made substantial progress against each of these priorities. As I talked about last quarter, we see this cycle playing out in three phases. Phase one has been about managing through the peak of the uncertainty, which is what we focused on for most of 2020. We are now solidly in phase two, which is about investing to rebuild our growth momentum. Our goal in phase two is to prepare us for phase three, a return to pre-COVID levels of earnings and our financial growth algorithm. Our progress in managing through phase one confirms the strength and resilience of our differentiated business model. Key elements of this model, such as the diversity and scale of our customer base, our brand, our global merchant network, and our integrated payments platform, have given us a solid foundation to build on as we move into the next phase. As we've seen throughout this period, our customers have been resilient and adaptive. Since the lows in mid-April, overall card member spending has steadily improved. Our card members quickly adapted to the current environment with an acceleration in their shift to online and card not present spending. Non-T&E spending recovered to pre-COVID levels in Q3 and continued to grow throughout the holiday season in Q4. Consumer holiday spending was up 11% globally year over year, exhibiting particularly strong online growth of 40%. In addition, our value propositions and brand continue to resonate with our customers. Attrition rates on our proprietary products remain lower than last year, and our customer satisfaction levels remain above pre-COVID levels We again ranked number one in J.D. Power's annual credit card satisfaction study of U.S. consumers for the 10th time in the 14 years the study has been conducted. Throughout the year, our merchant network continued to grow globally. We sustained virtual parity coverage in the United States, and we added more than 3.7 million merchant locations internationally in 2020. Credit performance continued to be outstanding thanks to our robust underwriting and risk management capabilities, and the quick adjustments we've made as the pandemic hit. Our Q4 delinquencies and write-offs are at some of the lowest levels we've seen in a few years and are best in class. Our business model has also helped to further strengthen our already strong capital and liquidity position over this period. And our colleagues have proven to be even more agile and highly engaged in moving the company forward, despite dealing with disruptions of the pandemic, which has been brought to their lives at work and at home. All in all, I feel good about all that we accomplished in 2020 and some of the highlights of which you can see on slide two. I am even more confident that our strategy is the right one to position us for growth going forward. That being said, the effects of the pandemic will continue to linger in the short term. The pace of economic recovery is dependent on the course of the virus and the speed with which vaccines can be distributed. For us, the timing of how quickly we can get to phase three and return to pre-pandemic levels of earnings depends is also tied to recovery in consumer travel and entertainment spending, and therefore dependent on how soon lockdowns ease, travel restrictions lift, and the general public begins to feel comfortable traveling again. We continue to be confident that consumer spending on travel and entertainment will come back to pre-COVID levels. We just can't predict right now how quickly. Given this environment, we are looking at 2021 as a transition year, during which our focus will be on rebuilding growth momentum. By rebuilding growth momentum, we mean firing up our core acquisition and retention engines, scaling key next horizon opportunities, and retaining the flexibility in our financial model. To accomplish this, we plan to aggressively increase investments in our core strategic business areas with a specific focus on the following. In our consumer and commercial businesses, we plan to continue to ramp up our card member acquisition activities, inject additional value into targeted products, and continue our strategy of periodic refreshes of our premium products. Additionally, in our commercial business, we plan to continue to invest in scaling our cash flow and supplier payment solutions beyond the card. A few examples of how we're doing this include the work already underway to integrate and relaunch Cabbage's suite of products, including a digital business checking account for small businesses, as well as continuing our efforts to expand the penetration of our AP automation solutions, where we have seen volumes double in the last year alone. On the network side, we plan to continue our focus on increasing coverage, as well as improving perceptions of coverage and welcome acceptance globally. We're also investing in enhancements to our network to deliver value to our various partners and to support the growth of debit capabilities in China Finally, we plan to continue investing heavily in new and expanded digital capabilities across our businesses. The nature of the pandemic has accelerated customer engagement with many of our digital features, services, and experiences we rolled out in 2020 and over the past several years, and we think these trends are here to stay. At a high level, those are the key areas where we plan to increase investments this year to generate the momentum that will help carry us through the recovery and into the future. Before I hand the call over to Jeff, let me end with a few words about how we're thinking about our financial performance in 2021 and beyond. On last quarter's earnings call, I talked about how my confidence in the long term was growing, though the near term remained harder to predict. Today, I'm even more confident about our growth potential in the medium and long term, so I'm still cautious about predicting the precise pace of the recovery in 2021. As I discussed, our plan for this year calls for maximizing investments in those areas that enable us to rebuild growth momentum. With this in mind, we will not be focused on a particular EPS target in 2021, though Jeff will provide you with some scenarios of potential outcomes in a few minutes. In reflecting on COVID's impact on the economy and our business in 2020 and where we are as we begin 2021, We look at this two-year period as a pause in the growth momentum we had been generating for the previous 10 consecutive quarters before the pandemic began. As a result, we will be focused on achieving our aspiration of being back to the original EPS expectations we had for 2020 in 2022, and for the company to be positioned to execute on its financial growth algorithm going forward. I believe we have the right plan for achieving this aspiration. The foundation of our business is solid. Our brand, customer relationships, and partnerships are strong. Our colleagues are focused and committed, and we have shown that we can adapt to rapidly changing conditions. I'll now hand the call over to Jeff to review our financial results, and then we'll take your questions after that. Thank you for your time. Well, thank you, Steve, and good morning, everyone.