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spk00: Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q3 2024 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 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, Mr. Kartik Ramachandran. Thank you. Please go ahead.
spk12: Thank you, Donna, 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 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 Squeary, Chairman and CEO, who will start with some remarks about the company's progress and results. And then Christophe Lecayac, 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 Christoph. With that, let me turn it over to Steve.
spk04: Good morning, and thanks for joining us for our third quarter earnings call. We had another strong quarter that reflects the steady earnings power of our business model and our continued investments for growth. Earnings per share in the third quarter were $3.49. and revenues were $16.6 billion, up 8% over last year, marking our 10th consecutive quarter of record revenues. Based on our performance to date and the strong earnings we're generating, we are raising our full-year EPS guidance to between $13.75 and $14.05, up from $13.30 to $13.80. and we continue to expect full-year revenue growth that is within the guidance range we provided at the beginning of the year at around 9%. I feel good about our performance to date and the ongoing strength of our business, and I remain confident in our long-term growth prospects. A key reason for my confidence is the sustainability of our product refresh strategy and the growth it is generating across our portfolio. We have already achieved our plan of refreshing 40 products globally this year, and we expect to do several more by year end. As we do so, we're adding value to our offerings by embedding new benefits and services that reflect the financial and lifestyle needs of our existing premium card members and attract new ones. A great example of this is the U.S. Consumer Gold Card. We talk a lot about the Platinum Card and with good reason, but the Gold Card is also a critically important product in our portfolio. Gold is a very popular product with total U.S. consumer gold acquisitions currently running at about 30% higher than platinum. And it's our number one premium product for millennial and Gen Z consumers, with 80% of U.S. gold cards we acquire coming from this cohort. In designing the Refresh Gold Card, which we launched in the third quarter, we know that millennials and Gen Zs are especially interested in dining. in fact these younger card members transact almost two times more on dining and make up a higher percentage of users on our resi restaurant booking platform than other generations in our card member base with that in mind we enhance the already rich dining benefits that come with gold card membership and as we've done with other refreshes the value of the additional benefits is greater than the annual fee increases while it's very early days we're seeing strong new account acquisitions and continued high retention levels among existing U.S. Gold Card members, indicating that our customers see that real value in the enhancements we've made. This is a pattern we see when we refresh our products. We add value that resonates with premium customers, and we price for that enhanced value, which results in strong acquisition and retention numbers that drive spending and consistently strong growth in subscription-like fee revenues. The gold card is just one example of how dining is playing an increasingly integral role in our membership model. Dining is an important category across our premium customer base. In fact, spending on restaurants continues to be one of our fastest growing T&E categories in our U.S. consumer business, increasing 7% in Q3 versus last year and growing at nearly twice the industry rate overall since 2019. And with total restaurant and food service spend estimated at $1 trillion in the U.S., dining represents a significant opportunity for us to further differentiate Amex membership. This is why we're investing in building out our dining capabilities, first with the acquisition of Resi in 2019, and more recently with the additions of Talk in Rome, both of which have closed since we announced them in Q2. We've made significant progress to date. We've successfully scaled Resi since acquiring a company with over 50 million registered users, and in the last 12 months alone, the platform has seeded over 350 million diners. We're also embedding Resi benefits in several of our value propositions, including the U.S. Gold Card I just mentioned, as well as our U.S. Consumer Platinum Card and the Refresh Premium Delta SkyMiles co-brand cards we announced in February. In addition to the many benefits for card members, Resi strengthens our membership model in other important ways. It connects our restaurant merchants with high-spending premium customers while also providing them with state-of-the-art technology platform that helps them grow their businesses. Furthermore, Resi's large user base gives us access to a pool of potential prospects who enjoy dining but do not yet have an American Express card. Our newest acquisitions will expand on the benefits we offer consumers and merchants, driving value for both. TOC extends our dining footprint with millions of additional users and thousands more bookable venues, including wineries, hotels, and certain events in addition to restaurants. With Roam, hospitality merchants can have access to sophisticated integration capabilities across various restaurant management platforms and the ability to enhance live event and stadium experiences. While the competition is fierce in the dining space, we believe our business model advantages, including our premium customer base, the strong merchant relationship we have with restaurants and other hospitality providers, and our membership model position us well to continue our growth in this important category. As we demonstrated, the investments we continue to make in our value propositions as reflected in our product refresh strategy And in our capabilities, as seen in the example of dining, are fueling our momentum. And these are just a couple of the examples of why I remain confident that our long-term growth aspirations are the right ones. Thank you, and I'll now turn it over to Christoph for a more detailed look at our performance in the quarter.
spk10: Thank you, Steve, and good morning, everyone. Before going into the details of our third quarter results, I'd like to take a few minutes to step back and highlight the key takeaways from our year-to-date performance. First, our business model is performing really well. We had another solid quarter of earnings generation with EPS of $3.49, even as we continue to invest significantly in marketing and technology. The spend environment has been stable over the course of the year, and revenue growth is in line with our expectations, with a year-to-date FX-adjusted growth of 10%. We continue to add many more customers to the franchise, Transaction engagement is deepening, and we benefit from our diverse set of customer types, revenue streams, and geographies. In addition, as Steve discussed, our focus on continuously refreshing products is resulting in an acceleration in our card fees revenue, which grew by 18% this quarter. And our focus on premium products continues to be the foundation of our very strong credit performance. We continue to manage our expense base with discipline. Year-to-date, excluding the gain from Assertify, operating expenses have grown very modestly as we fully leverage the scale and the digitization of our operations. This business model is yielding very strong earnings, which is enabling us to increase investments to grow the franchise and also to return excess capital to our shareholders. Compared to last year, we reduced the number of shares outstanding by $24 million. Turning now to our Q3 spend performance on slide three. Build business grew 6% on an FX-adjusted basis, continuing the trend of stable volume growth that we've been seeing over the past several quarters. And while T&E growth rates are now more in line with what we're seeing on goods and services spending, the picture hasn't changed very much since last quarter. Our customers continue to deepen their engagement with their American Express card as the number of transactions was up 9% in Q3. This is a function of growth in the number of customers and merchants, as well as growth in the number of transactions per customer. For instance, transactions per customer are up around 30% from five years ago. As you look at the spend trends by segment over the next few slides, I want to highlight a few key points to take away. Spend across our affluent US consumer base continued to be very stable with strong growth from millennial and Gen Z customers, up 12%. Notably, we continue to see very strong loyalty with this younger cohort with new customer retention higher than that of older generations. Within commercial services, spend growth was up modestly and consistent with what we've seen over the past few quarters. Our fastest growing segment again this quarter is international card services with spend growth of 13%. The breadth of this continued performance is especially worth noting. Every one of our five top markets is growing in double digits with four out of the five in mid to high teens. For example, Japan is up 17% and Mexico 15% on an FX-adjusted basis. We also see strong engagement from millennial and Gen Z customers in international, with the age cohort growing 23% effect-adjusted in Q3. Let me now turn to lending and credit performance on slides seven through nine. Total loans and card member receivables growth was strong at 10% year-over-year and continued to moderate as expected. Loan growth was 15% this quarter, consistent with Q2. Our enhanced lending capabilities, such as pay over time, continue to be the largest contributor to our loan growth. In addition, over 70% of revolving loan growth continues to be driven by tenured customers. Looking ahead, we continue to see a long runway for growth as we expand our share of land with our premium club members. While revolve rates have largely built back since the pandemic, we expect to see continued upward momentum over time as we meet more of our customers' borrowing needs on our premium products and grow our charge and co-brand portfolios. Our focus on growing lending through our premium customer base also continues to pay off in the strength of our credit performance. Delinquency rates remain very low, and in line with our prior quarters, especially taking into account the seasonal downtick we saw in Q2. And write-off rates declined to 1.9% this quarter. Looking forward, I still expect modest upward buyers to these rates as we continue to acquire new customers at elevated levels and increase our share of lending from existing customers. This quarter, we had about $1.4 billion of provision expense. This includes a reserve bill of $264 million which was predominantly driven by loan growth, but loan volume growth. The reserve rate was 2.9% consistent with recent quarters. Taking a step back, this best-in-class credit metrics are a reflection of our strategy. Our product value propositions create a powerful positive selection effect, which carries through to better credit performance. Our risk management strategies and capabilities widen the margin of safety and ensure profitable growth. Focusing next on revenues, starting on slide 10. As I noted earlier, we grew total revenues net of interest by 8%. Discount revenue, our largest revenue line, grew 4% versus last year and is driven by the spend trends I discussed earlier. Net card fees increased 18% on an FX-adjusted basis, accelerating two points sequentially, driven in part by the product refreshes. And we continue to see strong demand for our products, as we bring new customers into the franchise, with new cars acquired of 3.3 million in the quarter. Our strong acquisition and retention levels, along with our ongoing cycle of refreshing products, continue to drive sustainable growth in car fee revenue. This strong growth represents a real proof point of the success of our strategy and the continued engagement of our customers. Turning to our lending economics on slide 14, net interest grew 17% on an FX-adjusted basis and continues to moderate as we previously communicated. Growth in this line is driven by increases in revolving loan balances and net yield versus the prior year. I'll turn now to our expense performance on slide 15. Our VC to revenue ratio remains stable at 41% this quarter. with variable customer engagement expenses up 10% versus last year. Looking at some of the components of VCE, rewards expense this quarter grew 10%, outpacing spend growth. We are continuously evolving the MR value proposition to increase the ease of redemption for our club members and also to maintain the economics of the program. In the short term, those changes drive a very small increase in the ultimate rate of redemption But over time, we are confident in the economics with minimal impact to the VCE ratio. And we continue to invest in our card member benefits to deliver superior experiences for our customers. For example, this year, we've added over 300 new hotels to the hotel collection program, one of the benefits on the gold card. And we see that year-to-date bookings on the program are six times higher than five years ago. Marketing expense was $1.5 billion in line with our run rate so far this year as we continue to invest at elevated levels versus last year. As I mentioned last quarter, we expect our full year marketing spend for 2024 to be around $6 billion as we lean into the attractive growth opportunities available to us. Lastly, operating expenses of about $3.8 billion were up 5% versus last year. There is some seasonality to operating expense levels, and we expect to see a slight uptick in Q4, consistent with prior year's trend. On a full year basis, we continue to expect operating expenses to remain fairly flat year over year, adjusting for the F-certified gain. Taking a step back, total expenses year-to-date are up about 5% relative to 10% growth in FX-adjusted revenues. This is a reflection of our ability to invest at elevated levels and drive strong expense leverage. Let me now move to capital on slide 16. Our CET1 ratio was 10.7%, well within our 10 to 11% range, and we returned $2.4 billion in capital to our shareholders. This is the highest return included This capital return included $1.9 billion of share repurchases, the highest level in the past two years, and $0.5 billion in dividends. Also, we continue to have a very robust and diverse funding stack at our disposal. Our high-yield savings balances grew by 19% year-over-year this quarter. Notably, over 75% of balances come from existing card members, though less than 10% of our U.S. consumer customers of the high yield savings account with us. This brings me to our 2024 guidance. For the full year, we expect revenue growth of around 9% within the revenue guidance range we provided at the beginning of the year. We are also raising our full year EPS guidance to 13.75 to 14.05, reflecting both the momentum and the earnings power of our business. This represents 23 to 25% year-over-year growth. It is higher than we expected at the start of the year and above our long-term aspiration of mid-teens growth. With that, I will now turn the call back over to Kartik, and we will take your questions.
spk12: Thank you, Christoph. Before we open up the lines for Q&A, I will ask those in the queue to please limit yourself to just one question. Thank you for your cooperation, and with that, the operator will now open up the line for questions. Operator?
spk00: Ladies and gentlemen, if you wish to ask a question, please press star then one on your touch tone phone. You'll hear a tone indicating that you've been placed in queue. You may remove yourself from the queue at any time by pressing star then two. If you are using a speakerphone, please pick up the handset before pressing the numbers. One moment please for the first question. Our first question is coming from Sanjay Sakrani of KBW. Please go ahead.
spk07: Thank you. Good morning. Appreciate the solid results in what clearly is a softer spending backdrop. You know, I guess I'm just thinking about the updated guidance. And as we think about that 10% plus revenue expectation in the future, I mean, is that possible in the current spending backdrop? You know, next year, as I think about it, NII will be slower. card fees obviously should be stronger, but does build business have to accelerate to get to double digits, or is there another way? Thanks.
spk04: Thanks, Sanjay. Look, I think that build business definitely has to accelerate to get to our aspirational goal of 10% revenue growth. You know, when you think about the three legs of the stool that we have to grow our revenues, I think we absolutely have the right balance, the balance of spending, NII, and card fees. And card fees continue to grow at accelerated rates. It's 25 straight quarters now of double digit. We had 18%. this quarter. NII, you know, continues to chug along, but I don't think anybody wants to see us really accelerate too much from there. And I think that as we think about our overall aspiration, that aspiration was set in a more robust environment. And so for us to hit that 10%, we would need to have an acceleration in billing, certainly an acceleration from 6%. Having said that, and I said this about a year ago at the Goldman Sachs Conference, we have driven the scale of this business at this point to such a place that even with a softer, albeit consistently, you know, it's been consistently soft for the last, you know, pretty much for the last year. If you go back, our billings overall for pretty much the last year, other than the second quarter when we had the extra day, have been about 6% overall. But yet, we are able to deliver on our mid-teens EPS growth. And I think that's That's what our focus is really on. And so as the economy gets stronger, when that is, I don't know. But I think it's absolutely the right aspiration for us as a company to strive for 10% revenue growth. But we will need an acceleration in billings.
spk00: Thank you. The next question is coming from Ryan Nash of Goldman Sachs. Please go ahead.
spk03: Hey, good morning, guys, and Steve, thank you for the branding of our conference on the prior response. So maybe just to follow up on Sanjay's question, when you think about the three legs to the stool, if we don't see an acceleration in buildings growth, can you maybe just talk about the drivers of EPS growth into 2025? Can you continue to sustain the mid-teens growth? even in the face of a slower than aspirational revenue growth environment. Thank you.
spk04: I mean, just look at this year. You know, as I just said, we've had billings growth of pretty much 6% for almost a year now. And so I'll just go back to my comments that I just made to Sanjay. I think at the level of, you know, that 6% overall billings growth and, you know, we continue to acquire cards and we continue to, you know, upgrade card members and we continue to grow, you know, NII, you know, where we are. Yeah, I think EPS growth in the range in our mid-teens range is absolutely, you know, something that should be expected from us. The other thing that I would say is that, you know, while we are not, if you look at this year, you know, we've acquired 3.4 million cards in the first quarter and 3.3 million cards in the second quarter and 3.3 million cards in the third quarter. And, you know, that's all about really the future for us. And, you know, as the economy gets stronger, these are cohorts. And most of these people that we're acquiring are, you know, millennials and Gen Zs. These are cohorts that will continue to grow with us, that will see an uptick in organic spending over time. that will wind up being upgraded from, you know, a green to a gold, a gold to a platinum and so forth. And so, you know, once again, I think that we're really laying the foundation with the investments that we're making for strong growth going forward.
spk10: Maybe I will just add one point. This year, indeed, is a good reference, right? And we're going to grow EPS north of the meat teams. even when you control for the certified gain. And that's after increasing the marketing investments year over year by as much as $800 million, right? And so that speaks about the power of generating meetings EPS growth despite a 6% billing growth.
spk00: Thank you. The next question is coming from Craig Moore of FT Partners. Please go ahead.
spk11: Yeah, good morning. Thanks. I wanted to ask about business development spend came in well below what consensus was expecting, and I was curious what is happening there, whether it was a short-term phenomenon or something more long-term. And just second, was there any impact from weather in the guide for the rest of the year? Thanks.
spk04: I'll answer the second question, and Christoph will answer the first one. No, there was no impact at all from weather in the guide at all.
spk10: Yeah. And under business or partner payments line and business development, a lot of those expenses are about the agreements that we have with customers and co-brand partners in terms of sharing costs. the economics of the co-brands. And specifically in terms of this quarter, the reason why that number is not growing as much as maybe you were expecting is because on the corporate side, we also have agreements in terms of incentives that we pay back to our customers. And since the billing is coming at a lower level so are those incentives that we pay back to their customers.
spk00: Thank you. The next question is coming from Rick Shane of JP Morgan. Please go ahead.
spk02: Thanks for taking my question this morning. Look, as we move into the fourth quarter, the setup is that earnings will be way above initial guidance and even above the second quarter increase, and revenues are gravitating towards the low end of your range. That suggests credit and operating leverage are better than you expected. You've talked about the ramp in marketing the incremental $800 million. Historically, when earnings or the earnings setup is this strong, you really pull forward investments, planting seeds for long-term revenue growth. I'm curious this year why you're letting so much fall to the bottom line. Are you starting as you ramp up that $800 million incremental?
spk04: you starting to see the marginal return on those investments diminish in a way that it's no longer attractive no i don't think we're seeing the marginal return i think it's you know it's it's a matter of you know ramping it's just ramping up to the level that we are i mean when you think about how much we are how much we are spending um on a relative basis you know, at 1.5, you know, almost 1.5, $1.6 billion in marketing. And we're stepping up that marketing almost $800 million. We've also stepped up technology spend. We've invested, we're investing more in, you know, control management as we move from a category four bank to a category three bank. And so we're not walking away from, from any, any investments in, But we're also not, Rick, what we're also not doing is we're not lowering our standards in any way either. So no, I think that we've ramped up our investments all year long. It is just really hard to then just jam a bunch more investment into next year. Having said that, You know, we expect that we will grow our investment levels from here as we move into 2025. I would not expect a pullback in marketing because as we start to look at next year, we're looking for more efficiencies, obviously, in our marketing spend. But additionally, we're looking to invest more in marketing as we move into next year and more in technology and so forth. So when you think about the business from a quarter-to-quarter basis, yeah, it's easy to have the assumption that you have. But when you think about the business on a continuum, you have to layer in your investments over time. So it's not as easy just to pull sort of investments in from the first quarter of next year into the fourth quarter of this year. Years ago, we could do that because our investment levels were probably half of where they are today. And so as you get to that level that we are today, it is easier to go on a continuum the way we're going as opposed to, hey, look, there's an opportunity, let's just pull it forward. So we feel good about the investment opportunities over the medium to long range, and we'll continue to invest in the business.
spk00: Thank you. The next question is coming from Erica Najarian of UBS. Please go ahead.
spk08: Hi, good morning. When I look at the supplement, it does seem like spend on a per-member basis has been a little bit flatter than overall spend growth, 2% versus 6%, and clearly that's a result of your success in adding so many new customers. If we don't get the rebound and spend growth next year, and obviously everyone's trying to figure out whether we're going to have the soft landing or not the soft landing, how much runway do you feel you have to continue to add new customers to keep the spend growth at the current level? And maybe as a compound question to that, maybe give us some color on, you know, where we are on the product refresh cycle.
spk04: Yeah, so let me answer the second part and then go to the first. I think on the product refresh cycle, we're at our 40 that we had committed to at the beginning of the year, and there will be some more refreshes that will be done over the rest of this year. And We will continue refreshing, you know, on next year. I'll let Christoph comment a little bit, but I'll just give you a couple of other points as it relates to your first question. We still see line of sight as we move into next year to acquire more cardholders. I think when you look at the overall spending, organic spending in our customer base is not as robust as it was in a more robust environment. And that's what our cardholders do. What our cardholders will do is pull back slightly if they lose any confidence. see any sort of signs of their own stress, but they will continue to pay their bills, and that's why our credit numbers are so good. I think when you look at the organic piece of this, you see this especially within our small business. Our small business has been hit from a macro perspective. I think just like a lot of other companies' small business, in that the organic spend or the same-store sales spend that is occurring on the card in small businesses is certainly not as, not as robust as it, as it was coming out of the, out of the pan, out of the pandemic. In fact, it is, it is negative because when you look at our small business, our acquisition is good and our retention is really good. It is, it is that organic spend that's down. And so that organic spend leads to a slight depression in the spend per card member.
spk10: Yeah. And so to, to add up to the other part of your question, you know, the metric you're looking at is an average, is a global average. So that adds up, you know, customers in Australia and Japan as well in the US. So it's hard to read a lot of insights out of that metric. So to give you a bit more color on how to think about those new con members that are joining the franchise, we do see that they are more engaged than their past vintages, if you want. When we look at the number of transactions per new card member, that number is trending up. And in my prepared remarks, I cited the metric of 30% more transactions per new card member now than five years ago. And we see that, right? And this is a function of better coverage, not only in the U.S., but also outside of the U.S. And we stick to the premiumness of our acquisition. Not only we grew the number of card members, as you pointed out, but we are maintaining the fact that about 60% of them are coming up on our fee-paying products. So they are very engaged. And so each vintage, if you want, is definitely showing progress. And what's impacting this average are the things that Steve talked about, and that the tenured card members and what we call the organic spend that is a little bit more challenged.
spk00: Thank you. The next question is coming from Don Sandetti of Wells Fargo. Please go ahead.
spk09: Steve, the general consensus pretty much among everyone is that the affluent U.S. consumer is in good shape. I just wanted to get your sense if you're seeing anything in your data bookings that would you know, raise concern around the sustainability of that? You've got an election coming up and things of that nature.
spk04: No, I mean, look, you know, this company's been around a long time. I mean, obviously we didn't have cards 174 years ago, but, you know, we've been around for lots of different elections, lots of different configurations of the House, the Senate, and so forth. You know, our customer base is very different than our competitors' customer base. And it's really resilient and pretty stable. I think that, you know, they're, they're continuing, they're continuing to spend, albeit at not, not levels that we saw coming out of the, uh, coming out of the, uh, come out of the pandemic, but the U S consumer just to pick the U S consumer, um, you know, has been, has been really stable. I mean, it's been, you know, just about 6%, um, you know, for the last few quarters. And if you look at the international consumer, And, you know, a lot of people forget we do have the international side of our business. The international consumer business has been growing 13% for the last four quarters as well. So we're not seeing anything that would indicate that spending would go down. And we're not seeing anything that would indicate our credit metrics are getting, you know, any worse. In fact, you saw write-offs go sequentially down. And so, you know, we feel good about, you know, the consumer. We would like to see more organic spend. And I think, you know, to go back to the beginning, when Sanjay opened this up with that question, I think an uptick in that organic spend will help us reach our overall aspiration of 10%. But that's why our aspiration of 10% is, in fact, an aspiration, and I think still the right aspiration for this company, because We do expect organic to come back. Organic will not stay at this level forever. When that comes back, I don't know. But regardless, and as we've proven this year, we're able to still deliver that mid-teen TPS growth.
spk00: Thank you. The next question is coming from Jeff Adelson of Morgan Stanley. Please go ahead.
spk06: Hey, good morning. Thanks for taking my question. I guess just if we look at the approximately 9% revenue growth for the year, as you said, only 18 days into the quarter, does that suggest that you're maybe looking for a little bit of a revenue growth reacceleration in the fourth quarter here? Or how are you thinking about that 9% for the year? Could it maybe slip a little bit below that? And when we look at the discount revenue growth, go under the bill business growth a little bit this quarter. I think the implied discount rate did drop a little bit. Is there any noise in there or is there something we should be aware of there?
spk10: So I'll take the second part of your question first in terms of how to think about the discount revenue versus the bill business. As Steve just mentioned, international is growing at a faster clip than the U.S. And as you probably know, the discount rate in international is lower than in the US. So that creates a little bit of a disconnect between the growth you see in discount revenue and on bill business globally. As far as the first part of your question in terms of how to think about revenue growth and how to think about Q4, the key word that we've been using this morning is stability. We see stability in terms of billings, in terms of the trends, and no inflection points. You know, as you said, we are only like a few weeks into Q4, but my projection for Q4 is to be a continuation of a lot of these trends. So, you know, Q3 is a good proxy for what to expect about Q4, and that's why we're guiding towards 9% revenue growth. I want to point out, though, that, you know, the EPS, you know, in terms of, you know, foodier performance is also way north of what we guided towards at the beginning of the year, even when you adjust for certified. So we're generating a lot of earnings, even with being at their, you know, a 9% revenue growth, which still, when I listen to peers, you know, it compares really well to most of our peers.
spk00: Thank you. The next question is coming from Chris Kennedy of William Blair. Please go ahead.
spk14: Good morning. Thanks for taking the question. Steve, you mentioned how customers generally move from green cards to gold cards to platinum cards. Is there any way to think about the lifetime value or average spend by category? Thank you.
spk04: I think when you start to move up the food chain, you move up because you're going to, for example, you're moving from, if you're a millennial, for example, and you're on a gold card, you're probably not traveling as much, but you're dining out a lot, and you may be just starting with the franchise. As you start to move along, you might have a little bit more discretionary income, you're traveling more, you're taking advantage of lounges, you're taking advantage of find hotels and resorts and hotels. And so you will see higher spending on platinum cards than you will on gold cards and on green cards. Because if you're going to pay a higher fee for a product, you're going to engage in that product more. You're going to use that product for what the benefits of that product, in fact, is. And when you think about it, the platinum card, while it's morphing into much more of a lifestyle card overall, still has heavy travel benefits to it. And to really take full advantage of that, you want to be traveling and airline tickets cost money and hotels cost money and so forth. So I think as people do move along the continuum, you do have a higher lifetime value depending upon when you enter the franchise, right? So if you enter the franchise at a gold card level and then ultimately upgrade to a platinum, yes, you will have a higher lifetime value overall to us If you enter as a Gen Xer or a Boomer into the Platinum franchise, which we still acquire, you know, Gen Xers and Boomers, obviously you probably have a lower lifetime value than you would as a millennial who entered in as a Gold Card member. So it all depends on the entry point. But in general, as they move up, we get more value out of them.
spk00: Thank you. The next question is coming from Saul Martinez of HSBC. Please go ahead.
spk05: Hey, good morning. I wanted to ask about how to think about that interest income dynamics as we head into 2025 and just, you know, what the building blocks are. You know, Steve, I think you mentioned that you don't want to accelerate too much from here. But if you could just, Kristof, if you could just give us, you know, some of the building blocks in terms of how to think about NII in this rate environment, your liability sensitive, deposit dynamics, revolve rates, balances, stuff like that. If you could just kind of help us think through how to think about the evolution as we head out into 2025.
spk10: Yeah. So the first thing maybe is to remind ourselves that we are slightly liability sensitive, but only very slightly. And the impact of you know, Fed funds rate cuts on our NII is actually quite small. And we regularly update this sensitivity in our 10Q, and you'll see later this afternoon we updated those numbers as well. They're really small. And so maybe we can put this one out of the equation. The rest is a volume rate balance. So from a volume standpoint, we have said that you should expect the volume, the AR, especially the revolving balances, to moderate in terms of growth. And the dynamic, I mean, we're all familiar with it, right? During the pandemic, people pay back their balances and have been rebuilding slowly their balances. And the revolve rates that we see now are starting to stabilize and moderate. I think we are, you know, this, I would say this normalization is for the most part is behind us. And so you expect now the growth rate to very much moderate. And from a yield standpoint, there are two things here, right? The first one is we are, we keep shifting the funding of those balances towards high yield savings accounts. which is the lowest funding cost for us. And so this creates a positive impact, a positive effect on the yield. And on the interest income, we keep working in terms of, you know, making sure we have the right price points. We constantly compare our price as well against our peers, and we make sure that we are, you know, well positioned there. And so we should expect the yield to benefit from this dynamic. But the way to think about it is moderation in terms of volume. We're going to maintain the strong yield that you see now and very, very limited impact from any change in the rate environment from a Fed fund rate standpoint.
spk00: Thank you. The next question is coming from Terry Ma of Barclays. Please go ahead.
spk13: Hi, thank you. Good morning. So your card acquisitions continue to run at a pretty healthy level, and your net card fee growth this quarter has already exceeded the exit rate of last year, I guess. Are you running ahead of your expectations for some of these product refreshes in terms of adoption or engagement in general?
spk04: No, I think it's what we really expected from an adoption and engagement perspective. You know, as I said, there'll be a few more uh product refreshes uh this is where we pretty much expected the overall growth rate to be a little bit you know a little obviously higher than when we entered entered the year because that's what happens right people uh people get attracted i think you know the get attracted to the products i think you know one of the things that you know we've said this before but i think it's worth worth repeating when you refresh the product what it does it creates more demand in the marketplace, and it helps your marketing dollars work even harder for you. And so when you look at how that category of revenue grows, early on, those categories are from new cardholders. Remember, we amortize that over a 12-month period and not everybody gets repriced all at once. So it does build in for us a ramping up effect of that overall category. So not only is it important to upgrade these products because it enables you to attract new cardholders, but it enables you to continue to engage with your existing cardholders But it does add to that, obviously, that overall subscription-like and SaaS-like revenues that card fee subscriptions are. And we're over $2 billion in this particular quarter. So we continue to focus on that because what we know is our fee-paying card members are our most engaged cardholders that we have because we want them to use the benefits and services.
spk00: Thank you. The next question is coming from Mark DeVries of Deutsche Bank. Please go ahead.
spk01: Yeah, thank you. I have a related question to the impact of Fed easing on your business. Have you looked at kind of, you know, what the impact is, you know, from Fed easing and, you know, the effort to stimulate the economy on your built business growth?
spk10: So this is a good point. So At this point in time, the reduction is too small, it's too early to see any impact in terms of the spend patterns. And we looked into it, but there's like nothing visible, as you would expect, probably too small. But the expectation is that either consumer and small business confidence is going to improve as a result of the rate environment being more supportive. Because as we said this morning, right, We see no evidence of stress in terms of credit. We see demand in terms of our premium products. We see very strong renewal rates, even when car members are moving to a higher price point. So there's definitely capacity to spend and to spend more. And my expectation is that the accumulation of cuts will provide some support for the consumer and small business confidence, and that will provide some support to billing. And in order to go back to the first question we addressed this morning, especially to that organic growth, that would benefit from that.
spk00: Thank you. Our final question will come from Mahir Bhatia of Bank of America. Please go ahead.
spk15: Hi, good morning, and thank you for taking my question. I wanted to turn to T&E spend for a second, and just a two-part question on that. The first is just on airline spend. I think it accelerated this quarter. Can you just talk about the drivers there? Was it corporate, consumer, both, what you saw there? And then just on restaurant spending, I think it decels a little bit this quarter, but just going back to the opening remarks, you referenced just the investments you're making in that category between resi and talk and just adding those benefits to various cards. Do you expect restaurant spending as a category to become a bigger part of your business and grow? Should we expect acceleration in that spending from here?
spk04: Thanks. Yeah. So let me talk about restaurant spending. When you look at before we made our foray into sort of the restaurant reservation business here with Resi, restaurant spending was not our biggest T&E category. Our biggest T&E category and still our fastest growing T&E category right now is restaurants. And our expectations are that we will continue to gain share in that, in that restaurant space. If you look at it, we've just over the last five years, we've grown twice what the industry, you know, growth rate has been from a restaurant perspective. Yeah, there's a little bit of a decel, uh, this quarter, but, you know, uh, I guess eight, eight to seven, but I'm not really all that concerned about that. And I think with our, with our talk acquisition and so forth, I think we will continue to punch above our weight, uh, from a restaurant perspective. Let's give you a high level on, on airline, I don't think there's really a lot of change, whether it's from a corporate perspective or a consumer perspective from airline. I mean, you went from five to six. I mean, that's not, uh, you know, in, in some cases it can just be a little rounding up or a little rounding down quarter to quarter, but, um, you know, rest airline is still, is still strong. And as, as we said, we saw international international bookings, um, I mean, I didn't say this, but we saw international bookings in the third quarter from our travel business actually be at the highest levels since before the pandemic. So our card members are still looking to travel. They're looking at, you know, when you're traveling internationally, you tend to spend a little bit more than when you're traveling domestically. So I don't think there's much to read into the airline piece of it or the restaurant piece other than Restaurant is still a very, very strong category for us. But the one point, the one point up and one point down, I wouldn't make too much about for this particular quarter. But I think that from a restaurant perspective, you know, we've obviously are doubling down on on restaurant, not only from restaurants, perspective of what we've done with the Taken to Rome acquisition, but just look at the Gold Card Refresh, which is a heavy dining product, and it's targeted at a cohort, millennial and Gen Zs, that spend more in dining than any other cohort that we have. So we're pretty bullish on the restaurant industry.
spk12: With that, we'll bring the call to an end. Thank you again for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Operator, back to you.
spk00: Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at 877-660-6853 or 201-612-7415 Access code 13749052 after 1 p.m. ET on October 18th through October 25th. That will conclude our conference call for today. Thank you for your participation. You may now disconnect.
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