American Express Company

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q1 2021 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've 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 your handset before pressing any 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 call over to our host, Head of Investor Relations, Ms. Vivian Jull. 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 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. And hello, everyone. We appreciate you joining us for today's call. Earlier this morning, we reported first quarter revenues of $9.1 billion and earnings per share of $2.74. I'm pleased to say that our overall core business performance was slightly better than our expectations, with credit performance continuing to be best in class. And we're especially encouraged about the progress we're making toward our aspiration of returning to the original EPS expectations we had for 2020 and 2022. As I discussed in January, we're looking at 2021 as a transition year where our focus is on investing to rebuild growth momentum by firing up our core business, scaling next horizon opportunities, while continuing to retain financial flexibility. And while I feel good about our results for the quarter, what I feel really good about is the progress we're making to rebuild momentum. When we talk about firing up the core, we're looking for meaningful progress in four areas. spending volumes coming back to pre-pandemic levels, bringing new customers into the franchise, retaining and deepening relationships with our current customers, and signing up additional merchants. We're making good progress in all these areas. Overall, spending on American Express cards in Q1 continued the sequential improvements we saw through the last two quarters of 2020. U.S. volumes exceeded our expectations in the quarter, and spending in March from U.S. consumer and small and medium-sized enterprise customers was higher than March 2019 levels. Non-US volume lagged a bit due to renewed lockdowns in certain international countries. Excluding travel and entertainment categories, spending on our cards in Q1 was up 11% on an FX-adjusted basis versus 2019 levels. This marked the third straight quarter of positive growth. And although the T&E volumes were significantly lower in the first quarter versus last year, we've seen a steady sequential upward trend in monthly T&E spending and a noticeable improvement in recent weeks, particularly in the U.S., as the vaccine rollout accelerated. These trends indicate that the pent-up demand for consumer travel we've been talking about is real, and it increases our confidence that domestic consumer travel will continue to recover as the year progresses. In terms of bringing new customers into the franchise, card acquisitions are also gaining momentum, and were up sequentially in the quarter globally. In fact, new accounts acquired on key premium U.S. consumer and small business products were above 2019 levels and exceeded the prior quarters. Initial spending on these new cards is strong, and the average FICO scores of these new U.S. consumer and small business card members are higher than those acquired pre-pandemic. In addition, card acquisitions in some of our largest travel co-brand portfolios have accelerated since the fourth quarter, an important indicator that travel remains an attractive category for consumers over the long term. Another indicator of building momentum in our core business is retaining and increasing engagement with existing card members. We have a good story to tell here as well. Card member attrition on our proprietary products, which also includes our co-brands, continues to be lower than in the previous years, and customer satisfaction levels remain higher than pre-COVID levels. The additional value we provided on several of our premium products helped drive card member loyalty and spending in 2020, and as we believed, has been sustained into this year. For example, 95% of U.S. Platinum card members who took advantage of the streaming credits and 88% who used wireless credits offered last year are continuing to spend in these categories months later. We're also seeing good engagement on the new offers we rolled out earlier in the first quarter for Platinum card members, which includes statement credits with PayPal and other select merchants. The uptake on these offers are in line with the wireless and streaming offers we announced last year. Overall, card member engagement with our digital channels and capabilities is at an all-time high in most areas. For example, over 88% of our U.S. card members are making their payments digitally, and 87% use our website or app for self-service. The number of Amex offers redeemed in Q1 increased fivefold versus last year's first quarter, topping 5.3 million redemptions. Finally, we continue to see strong adoption of Pay It Planet, our Buy Now, Pay Later feature, after we recently expanded the capability to all U.S. consumer cards. Since launching Pay It Planet, card members have created over 6 million plans, totaling over 5 billion of accounts receivable. Another key driver of momentum is expanding merchant coverage. In the first quarter, we continue to make progress growing merchant coverage internationally while maintaining our coverage levels in the U.S. When it comes to building momentum, we aren't just focused on the near term. We're also focused on scaling next horizon opportunities that will drive growth over the longer term. China represents an exciting opportunity in this regard. As you know, developing our card processing network in mainland China has been a priority for us and we're pleased with our progress. Since getting to green light to start processing payments in China eight months ago, we have reached mobile wallet parity coverage through our partnerships with China's major mobile wallet providers. And to date, we have added over 14 million merchants to the network at the point of sale, with more to come. A key enabler of our coverage growth in China is the progress we're making to modernize our network, particularly in adding the capability to process debit transactions globally, which is an essential need for customers in China, and helps us prepare for potential additional debit applications elsewhere. We'll remain focused on scaling our China business by acquiring card members through the relationships we've established with 16 issuing partners, and I look forward to sharing more highlights of our progress over the course of the year. In our commercial business, our growth has been and will continue to be driven primarily by small and medium-sized enterprises. A key element of our longer-term growth strategy for SMA Franchise is to deepen our relationships with current customers and attract new ones by offering a range of supplier payment and cash flow management solutions, both on and beyond the card, giving business owners more tools to help them manage their businesses. Cabbage is one example of how we plan to bring this strategy to life. We've been focused on integrating Cabbage's digital capabilities into our business, and in Q1, we began the rollout of the Cabbage platform, which includes a business checking account and working capital solutions to our small business customers. In our consumer business, Resi, our online dining platform, helps drive bookings and spending at restaurants, which is a top category for our card members. When a pandemic hit, Resi quickly pivoted its value proposition for restaurant owners to help them expand their offerings and find new ways to attract customers, including enabling takeout, meal kits, family meals, and virtual events. Resi also provided a number of special offers for our Amex card members. As a result, over the past year, Resi has seen significant growth in engagement for both consumers and restaurants. In fact, we've seen a number of reservations booked on the platform more than double since December. And Amex card members who use Resi are some of our highest spending and most profitable customers. Those are just some of the examples of our progress in rebuilding our growth momentum, both in our core business and with next horizon opportunities. Importantly, as we've increased our investments in both categories, we've also been focused on maintaining our financial strength and flexibility. We resume share repurchases this quarter, and our capital ratios continue to be well above our targets. Before I hand the call over to Jeff, I want to share some thoughts on where I see things heading in the near term. As I sit here a little over a year since the global COVID pandemic started, I'm optimistic that the hopeful signs we're seeing as vaccine distribution accelerates will continue and get stronger as we move through the year. Of course, we're still cautiously keeping an eye on the progression of the virus, and its impact on local lockdowns and cross-border travel restrictions in certain areas. But there are clear indicators that the economy is improving, particularly in the U.S., and I believe this will translate into continued steady improvements for American Express. Given all of this, we remain firmly committed to executing on our 2020 investment strategy for rebuilding growth momentum for the longer term. As I said last quarter, we're not focused on achieving a particular EPS target this year. Instead, we're focused on achieving our aspiration of returning to the original EPS expectations we had for 2020 and 2022, and for the company to be positioned to execute on our financial growth algorithm going forward. I'm encouraged by the results we've seen thus far in 2021, which makes me even more confident in our roadmap for achieving our 2022 aspirations. I'm particularly proud of our colleagues who have remained nimble and focused through the uncertainties of the past year. Their dedication and hard work, along with the flexibility of our business model, the loyalty of our customer base, the strength of our partnerships, and the value of our brand make me feel very good about the future. Jeff will now walk you through our results, and we will take questions after that.