American Express Company

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q2 2021 earnings call. At this time, all participants are on 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 touch-tone phone. You will hear a message indicating you've been placed in queue. You may remove yourself from 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, 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, Kevin, 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'll begin today with Steve Squarey, 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. Welcome to our second quarter earnings call. Earlier today, we reported second quarter revenues of $10.2 billion and earnings per share of $2.80. These results reflect an acceleration of the momentum we've seen in our core business and a strengthening macro environment. Our improving performance is a clear indication that the steps we've taken to manage the company through the pandemic and our investments to rebuild growth momentum are paying off. We're particularly pleased with the progress we're seeing in several key areas, including engaging and retaining our existing customers, acquiring new customers, continued excellent credit performance, and an acceleration in spending. Since the onset of the pandemic, we've been investing in short-term value enhancements to several of our premium products, which has helped drive card member engagement and contributed to retention levels that remain higher than the last few years. We've also ramped up our acquisition engine over the past several quarters, and we're really pleased to see that overall acquisitions of proprietary cards, which include our co-brands, have continued to increase, with 2.4 million new cards acquired in the quarter. In fact, demand for our premium fee-based products accelerated this quarter, with acquisitions of U.S. consumer and small business platinum and gold cards well above 2019 levels and exceeding prior quarters, contributing to the continued double-digit growth in net card fees. Early spending on these new accounts is strong. We're also pleased to see that acquisitions are increasing in many of our co-brand portfolios. For example, as Ed Bastian mentioned on Delta's earnings call last week, Delta co-brand acquisitions reached 90% of 2019 levels in Q2. Turning to credit, we continue to see excellent credit performance with both delinquency and write-off rates improving further and reaching near historic lows in the quarter. We're also seeing continued improvements in court member spending. Spending recovery accelerated in Q2 with overall billed business volumes growing 51% in the quarter on an FX-adjusted basis versus last year and exceeding pre-pandemic levels in June. Goods and services volumes continue to strengthen, increasing 16% globally on an FX-adjusted basis versus Q2 2019. Travel and entertainment spending also accelerated in the quarter, particularly in the U.S., where a growing percentage of the population is now fully vaccinated. In fact, we saw a surge in spending by U.S. Consumer Corps members across all T&E categories, with overall U.S. consumer T&E spending reaching 98% of pre-pandemic levels in June and continuing to grow into July. T&E spending outside the U.S. continues to recover more slowly due to lower overall vaccination rates and government-imposed restrictions in some geographies. In our consumer business, the largest contributor to spending growth in goods and services came from millennial and Gen Z customers, and they are also leading the recovery in T&E spending, with total spending up over 30% on an FX-adjusted basis versus 2019 levels in Q2 for this age cohort. In our commercial business, overall small and mid-sized enterprise volumes exceeded pre-pandemic levels in Q2, driven by continued strong growth globally in B2B spending on goods and services. which was up 18% on an FX-adjusted basis versus 2019, while the T&E recovery also accelerated with the fastest total growth coming from smaller-sized businesses in the U.S. We're also seeing solid spending growth in key travel-related co-brand portfolios. Volumes on both Delta and Hilton co-brand cards increased by double digits versus pre-pandemic levels in the quarter, driven by the same trends of continued strong growth in goods and services spending and an acceleration in the recovery of T&E spending. In addition to investing in retention and acquisition activities as a customer-focused company led by innovation, a key part of our investment strategy is geared toward delivering a continuous stream of differentiated products, services, and capabilities that provide additional value to our current customers and attract new ones to the franchise. We invest in innovation in a number of ways, through internal development, acquisitions, co-brand relationships, and partnerships with both digital startups and large, well-known brands across a range of industries. A great example of our approach to innovation is our strategy for regularly refreshing our unique value propositions by leveraging our digital ecosystem and our diverse network of partners. On July 1st, we marked the restart of this strategy with the launch of our new enhanced Platinum Card for consumers in the U.S. The American Express Platinum Card created the premium card category nearly 40 years ago and has continued to define the category ever since. We intend to make sure it remains a competitive standard for many years to come. The reason for Platinum's success over the years, I believe, is twofold. First is our continual focus on knowing our customers and delivering value that meets their evolving needs and preferences. And second is our willingness to change our value propositions, even as our products are at the peak of their performance. And that's the case with our most recent refresh. Despite just coming off our best quarter ever for U.S. Platinum account acquisitions, we introduced our new U.S. Consumer Platinum Card, featuring a broader set of lifestyle benefits, while doubling down on travel-related benefits. The new benefits are enabled by working with an expanded range of partners, as well as the continued integration of our growing portfolio of digital assets, such as Resi and LoungeBuddy. I would note that the last time we refreshed our U.S. Platinum card, we doubled the customer base, bringing in a larger number of younger card members, and our intent with our current refresh is to attract an even broader pool of customers to the franchise. In developing the new Platinum Card, we listened to our card members and gleaned insights from their spending behavior to determine what features and benefits would be most relevant for the way they live now. For example, some of the spending patterns on certain everyday goods and services categories that emerged during the pandemic, such as streaming services and personal fitness, have continued into the recovery. This led us to add a series of annual credits for digital entertainment services and Equinox Club memberships or digital subscriptions to their on-demand app. Our Platinum Card members have always cared a lot about travel and entertainment, and as our recent quarterly results demonstrate, our U.S.-based customers are eagerly returning to travel and in-person dining. So we added a series of new travel-related benefits to the Refresh product on top of those Platinum Card already offers, including a significant expansion of our proprietary Centurion lounge network and a new global dining access program powered by Resi, our online reservation platform that provides exclusive access to some of the world's best restaurants and premium dining experiences. The enhancements we've made to the U.S. Platinum Card represent a significant increase in value, which we believe will be very attractive to both current and new customers, even with an increase in its annual fee. As we have seen from previous refreshers, customers are willing to pay more for what they see as Platinum's unique value, and we believe it will be no different in this case. In fact, the very early indications are encouraging Applications and acquisitions have outpaced our expectations in the first two weeks since a new Platinum card became available. The U.S. Platinum refresh is just one example of how we're leveraging partnerships in our digital ecosystem to innovate and add differentiated value to our products and services. We'll be refreshing other products and rolling out new digital capabilities for both consumer and commercial customers throughout the remainder of the year and beyond. We're really excited about the new U.S. Platinum Card and the potential that it and other innovations we have in the pipeline represent. And there are many other reasons why I feel very good about where we are at the halfway point in the year, including the progress we're making to rebuild momentum in our core business is accelerating and better than we expected at the beginning of the year. The improvements we're seeing across many of our key metrics are a sign that our strategy for managing through the pandemic and investing in activities to rebuild our growth momentum is working. We're particularly pleased with the strength we're seeing in customer retention, new account acquisitions, credit performance, and overall spending volumes, with goods and services volumes now well above pre-pandemic levels globally, and travel and entertainment spending recovering faster than we expected, driven by significant improvement in the United States. Taking all of these factors together, we are increasingly optimistic that the strength we've seen in our core business through the first half will continue, particularly in the U.S., even as the pace of recovery remains uneven in different regions around the world. With this in mind, we remain committed to executing our investment strategy for growing our business over the long term. And based on current trends, we are confident in our ability to be within the high end of the range of EPS expectations we had for 2020 and 2022, and to resume our financial growth algorithm beyond 2022. Now I'll turn it over to Jeff, who will discuss our second quarter results in detail, and then we'll take your questions. Thank you.