American Express Company

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q2 2023 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 star, then 1 on your touchtone phone. You will hear a tone indicating that you have been placed in queue. You may remove yourself from the queue at any time by pressing star, then 2. 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 will now turn the conference over to our host, Head of Investor Relations, Ms. Carrie Bernstein. Thank you. Please go ahead.

Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, this discussion contains certain 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 that 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'll move to a Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Good morning, everyone. Thanks for joining us today for our second quarter earnings call. This was the sixth consecutive quarter of strong performance since we announced the growth plan in January of 2020. Revenues of $15 billion grew 12% year-over-year and reached a record high for the fifth straight quarter. Earnings per share of $2.89 is also a quarterly record and is also up 12% over the last year. Based on our performance through the first half, we are reaffirming our guidance for the year of delivering revenue growth of 15% to 17% and EPS of $11 to $11.40. We also remain focused on achieving our growth plan aspirations of annual revenue growth in excess of 10% and mid-teens EPS growth in 2024 and beyond in a steady state macro environment. I continue to feel very good about our ability to achieve these long-term aspirations. Let me tell you why. As I've said on previous calls and at investor conferences, we have a business model that's differentiated from others in the industry, which gives us some important advantages. Our business model is built largely around our fee-based premium products, which drive our spend-centric economics and produce a fast-growing stream of subscription-like revenues. Spending is the largest contributor of revenues, while lending plays a more modest role in our model. This revenue mix is a key differentiator for us. It all starts with our premium customer base, which is built on our trusted brand. We have a global scale that's unmatched in the industry and leadership positions with a diverse range of high-quality customers. We build long-term relationships through our unique membership model, which we constantly evolve to attract new customers and grow with them over time. Our high-spending card members attract a wide range of merchants and business partners, giving our customers and partners even more reasons to stay with us, which fuels a virtuous cycle of growth. Partnerships play an important role in our model, We have a long history of partnering with brands who share our values of backing customers with world-class products and services and who value developing broad-based and long-term relationships with us. Hilton is one of those long-standing partnerships. Our relationship started 70 years ago when we opened a travel office at a Hilton hotel in Madrid, then grew into a merchant relationship after we began issuing cards, and then became our first co-brand partner in the 90s. The partnership has lasted and grown over time because we evolved together and put our customers at the center of what we do. Today, I'm pleased to announce that we've signed a 10-year extension of our relationship with Hilton, which includes continuing as the exclusive co-brand issuer of Hilton consumer and small business cards in the United States, as well as extensions of our travel and merchant relationships. This extension builds on the strong foundation we've built over the years with Hilton, and gives us a long runway to invest in products and services that attract new customers and deepen our relationships with existing ones. It's a great example of the strength of our business model in that it touches virtually all aspects of our business, providing our customers and our partner with exceptional value. Our philosophy of making continuous strategic investments in our business model is what's driving our growth today, and it's the way we plan to run our business going forward. our second quarter performance the power of our differentiated model can be seen in our results card members spending hit another all-time high in the quarter with u.s consumers and card members outside the u.s both up by double digits which offsets some softness in u.s small business millennial and gen z consumers continue to be the fastest growing portion of our card member base with u.s buildings up 21 in the quarter a particular note you'll recall that our international card business was our fastest growing segment for several years prior to the pandemic, and it's again the fastest-growing. We continue to see strong growth in travel and entertainment spending, which increased by double digits in the quarter and remain strong across customer categories and geographies. Q2 is a record quarter for restaurant reservations through our Resi platform, and bookings to our consumer travel business reached their highest levels since before the pandemic. We also saw continued strong demand for our premium products in the quarter. with over 70% of the new accounts we acquired on fee-based products, and more than 60% of new customer accounts acquired globally are coming from millennials and Gen Zs. While the number of new accounts is important, we pay particular attention to the quality and potential revenues they represent. And when you look at the accounts we've acquired over the last year compared to those we acquired over a comparable period pre-pandemic, the overall revenue being generated by these new accounts is up substantially over 2019. Importantly, We continue to be thoughtful about who we grow with and how, and you see that in our results. Our credit metrics remain best in class, supported by the premium nature of our customer base, our robust risk management capabilities, and the thoughtful underwriting actions we take on an ongoing basis that we've discussed with you on these calls over the last several quarters. Before I turn it over to Jeff, I want to take a couple of minutes to talk about our CFO transition. As we announced last month, Jeff will be stepping down as our CFO on August 14th. at which time our deputy CFO, Christophe LeCayac, will become CFO of the company. First, I want to recognize Jeff and thank him for his outstanding tenure as our CFO for the past decade. He's been an invaluable partner and friend to me and to American Express throughout his time at the company. Jeff's insights, strategic acumen, and calm, focused approach has helped us navigate through numerous challenges, including the unprecedented COVID pandemic. while strengthening the company's overall financial position and the flexibility of our business model. Jeff is a person of exceptional integrity, and our company is stronger today because of him. While Jeff will officially be stepping down as CFO in mid-August, he'll be staying on as our vice chairman until next March, during which time he'll be available to me, Christoph, and our executive committee as we work on many of the important matters facing the company. Jeff, I know I speak for all of us at American Express when I say that it's truly been an honor and a pleasure working with you as our CFO these last 10 years. I also want to welcome Christoph, who has been a trusted partner to our leadership team and a key contributor to our company's growth for 25 years. As our Deputy CFO, Christoph works closely with our executive committee, Jeff, and me to drive our financial strategy and performance. Over his tenure, he has served in finance leadership roles across the company. Christoph has gained a deep knowledge of all aspects of our business, and his experience and thoughtful analysis play a key role in our strategic decision-making. I'm sure you all enjoy getting to know him. With that, I'll now turn it over to Jeff for his 85th earnings call as a public company CFO and his 41st and final call as a CFO of American Express.