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Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q1 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] 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.

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 Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results; and then Christophe Le Caillec, 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 Christophe. With that, let me turn it over to Steve.

Thanks, Kartik. Good morning, and thanks for joining us. We had another strong quarter to start the year. We delivered revenues of $17 billion, up 8% year-over-year on an FX adjusted basis, or 9% excluding the leap year impact, and we generated net income of $2.6 billion or $3.64 per share. During the first quarter, our premium customer base continued to spend at healthy levels. Total card member spending grew 6% in the quarter, or 7% excluding the impact of leap year, with spending on goods and services continuing to grow at a faster rate than in 2024. In T&E, while we saw a sequential slowdown in airline billings growth, billings in restaurants and lodging remained strong in the quarter, and overall T&E growth was in line with the steady levels we saw through most of last year. We also continued to grow our customer base, adding 3.4 million new cards in the quarter. As in past quarters, Millennial and Gen-

Thank you, Steve, and good morning, everyone. In the first quarter, we generated 8% FX adjusted revenue growth or 9% excluding the impact of leap year and earnings per share of $3.64. These results are tracking in line with the guidance we gave for the full year. Key business indicators such as spend, retention, credit performance, and demand for our premium products continued to be strong and stable in the quarter, while the level of macroeconomic uncertainty has increased, the activity that we see across our customer base is consistent with, and in many cases, better than what we saw in 2024. Turning to Billed Business performance, starting on Slide 3. I'd remind you that the grow over from leap year in 2024 drove about a percentage point drag on year-over-year growth rates across segments and spend categories. As we look at spend trends over the next few slides, I'll speak to Billed Business growth rates that are adjusted for leap year as well as FX. Total Billed Business was up around 7.5% year-over-year. This growth is around a percentage point higher than what we saw for the full year 2024. Goods and Services spending sustained the uptick we saw in Q4 of last year, continuing to grow at a faster pace than what we saw in 2024. And T&E grew in line with the steady levels we saw for most of the last -- most of last year, reflecting continued strength in restaurant and lodging spending. We did see a deceleration in airline spending relative to 2024 trends. Although, spending on front of cabin tickets remained strong, up around 11% in the quarter. As we break down spend trends across our business over the next few slides, there are a few key points I want to highlight. We continue to see solid growth across our affluent U.S. consumer base, with spend up 8%. Millennial and Gen-

Thank you, Christophe. Before we open up the lines for Q&A, I will ask those in the queue to please limit yourselves to just one question. Thank you for your cooperation. And with that, the operator will now open up the line for questions. Operator?

[Operator Instructions] Our first question comes from Sanjay Sakhrani of KBW. Please go ahead.

Sanjay?

Sanjay, just make sure your phone is not on mute.

Sorry, I was on mute. Good morning. Sorry. So Steve, we've heard a lot about pull forward of spending. And I'm just curious, if you guys have seen any indication that that's sort of propping up spend volumes. And then just sort of along the lines, if we do see some volatility or weakness in spending and revenues, how far do you want to go in terms of sort of protecting earnings? How low does revenues need to go for you to sort of just cut the line in terms of expense reductions? Thanks.

So look, we really haven't seen any pull forward at all. I think when you look at -- when you look at the entire first quarter, and I think you really want to focus in on March and then in early April, there's really been no pull forward at all. We see a little bit in small business and a little bit in wholesale pull forward, but I mean, you're talking a couple of points here. You're not talking about anything significant. So I don't think that's -- that has been a phenomenon. Having said that, it's still early in the game, right? I mean, we're early innings here, and we'll just have to see how it all plays out. But just to be clear, from a consumer perspective, we see no pull forward at all. And people continue to book, and we didn't talk about this in the call, but we had the highest number of travel bookings that we've had -- that we've ever had in Internet -- and that included -- that includes a high in international as well, international bookings from our travel related services. So I think that we haven't seen -- we haven't seen a pull forward. We're seeing our customers act as they have acted in the past. The other two points I'll make, and then I'll get to the revenue one is that, one thing that has not been associated with our card member spending has either been what's happened with the stock market or what's happened with consumer confidence. Our card members may say they don't have any confidence into the economy, but they still continue to spend, and they're not spending off what's in the market. So those two factors, which I get asked a lot about are not really factors in our customer spending. I think, look, as we've said before, from a guidance perspective, and I said this at conferences, we believe that -- at that 8% range, we can make our EPS number. And -- but the other thing that I will say is that I'm not going to pass up good opportunities to invest for the future just to hit a number. I mean, it's not how I've run the company over the last seven years or so. And as I said, even during COVID, we continue to invest when others might have pulled back. And so I just want to reinforce, we are running this company for the longer term. If I see a good opportunity, I'm going to continue to invest in it. But I do believe, where we are right now with the macroeconomic situation the way it is, that we can continue to be within our guidance range on both revenue and EPS. And as we've said in the past, we have the aspirational goal of 10% revenue, however, we also have said that we can make -- we can hit our EPS range if revenue goes lower.

Thank you. The next question is coming from Mark DeVries of Deutsche Bank. Please go ahead.

Yeah. Thanks. So, if some of these steeper tariffs go through as initially proposed, Steve, can you just talk about which segments of your business you would expect to be under the most pressure? And is there anything you can do from a risk management perspective to get out in front of that?

Well, I mean, look, from a risk management perspective, we're constantly, on a daily basis modifying -- our inputs in modifying our models and looking on that. So we always like to think we're way out in front of that anyway. But I think that where you would wind up looking is, you would look at small businesses first. I think small businesses might be the ones that would be impacted first. And if you think about our consumers, what our consumers tend to do is what they would tend to do is they spend a little bit less, revolve a little bit less. And I'll just take you back to COVID. Remember, we have a -- we have really a self-liquidating balance sheet, right? And so our balance sheets made up a lot of our AR. And as consumers spend a little bit less, that's how they regulate risk. And so, but small businesses, I think small businesses are the ones that we would pay a lot more attention to, just because costs may not make -- they could be put in a situation that will not be able to compete effectively in the market. So we'll continue to look at small businesses as this situation evolves. But rest assured, we're looking at this proactively right now, much like we did pre-COVID in terms of looking at people's lines, looking at who we bring into the franchise. And what I would say is that, if you look at our card base now versus our card base in 2019, it is more premium than it was at that point with higher FICOs. And the other thing that I'll say, because people will start looking at Millennials and low tenure card members, our Millennial and Gen-

Thank you. The next question is coming from Don Fandetti of Wells Fargo. Please go ahead.

Hi. Good morning. Steve, can you talk a little bit about card refresh and fee growth? I know one of your competitors recently raised fees on co-brand cards. In this environment, do you still feel like you have the ability to sort of grow fees?

I think that, look, we're still committed to doing refreshes. We've refreshed over 150 products over the last five years or so. We've got a bunch of refreshes in progress, how many we wind up doing. We'll see how it all plays out. It's more due. I think there's a lot of them in progress. The question becomes how -- from a value proposition development, technology development, how they all get through the -- through this -- through the pipeline this year, but we're still committed to doing refresh. As far as raising fees, we don't raise fees indiscriminately. You raise fees when you add value. And our playbook has been, we will raise the fee when we raise value that is even more commensurate than with the fees. So as we think about refreshes, what I will tell you is that whatever fee we wind up raising -- and look, the reality is, we don't do a lot of refreshes without raising the fees, but we also don't do any refreshes without significantly enhancing the value that we put in. So you can rest assured that when someone does a rational calculation of what the fee raise is and what the value is, it becomes an easy decision to continue with the product or even a better decision to get the product at that particular point in time. So that -- the environment will not impact our fee decisioning with our cards because that fee decision is totally based on value, and our card members wind up getting back more than they put in. And one might argue, it might even be a better investment at this time than in a good environment.

Thank you. The next question is coming from Rick Shane of J.P. Morgan. Please go ahead.

Hey, guys. Thanks for taking my questions this morning. Hey, Steve. You talked about investing across the cycle basically as a strategic initiative. I'm curious tactically, given where we are, where you see opportunities? And I'm curious, sort of, where you're going to be more aggressive, where you're going to be more defensive? And I did note that the amount of capital you retain from first quarter profits was the highest it's been since COVID. So I'm curious, how you're looking at capital aggressive -- offensively, defensively as well?

Yeah. So I'll let Christophe answer the capital question. I mean, there's always, we look to return about 80% of our earnings to our shareholders. And you'll notice from quarter-to-quarter, it does swing. And particularly in the first quarter, just go back historically, the first quarter is usually one of our lowest quarters where we do return capital. But the capital that we return this particular quarter was only about $300 million less than we actually returned in the fourth quarter of last year, so it wasn't all that much. They're checking the slides to make sure that my comment was correct there. But look, from an investment perspective, you just saw that we just completed the Center acquisition. We believe that -- that's an important acquisition for us for small business and for middle market and that obviously has some capital implications, especially, in the second quarter as we closed it. But when you look at our business and specifically in technology, we're constantly upgrading our technology infrastructure. When I talk about technology infrastructure, I'm not only just talking about the hardware aspects of it, but I'm talking about all the systems that run behind it. And the reality is that some of these projects go for a couple of years, and some of them are months, and what have you, but you can't stop the upgrading and the investment from a technology infrastructure because you anticipate, times may be a little bit tough. It has to continue because we're running this company for the long-term, and anybody that's ever been involved in this realize you don't stop and start long-term projects. The other thing that you don't stop and start is, you don't stop and start your refresh strategy. I mean, we have been committed to continually enhancing and developing our products and services over the long-term. And we're on a program that basically says, we're going to refresh all of our product, and I'll put all in quotes from a three to four year cycle. And so, you just can't stop that. If you did, then I think you're doing a disservice to your customers and you're doing a disservice to your shareholders. And this goes back to Sanjay's earlier question about how much potentially would you cut to make EPS guidance? And my perspective is that again, we're running it for the longer term and for me to stop a technology project or for me to stop a refresh or an enhancements because I want to make another $0.20 for the year is fool hearted. And it's not something that you would ever -- you shouldn't ever expect me to do. So we're looking to make sure that this company continues to become stronger day-by-day, and you do that by continuing to invest and continuing to stay true to what your core principles are.

So maybe to add a bit of color on capital, there's not a lot to add as a matter of fact, because you covered most of it. But as you know, Rick, the governor here is our CET1 ratio, that is what will define the amount of share repo that we're going to do and we target between 10% and 11%. We're a little bit on the high side at 10.7%, but you shouldn't read anything in that. And if you look at overtime, we have been at 10.8%, 10.5%. So we're ending up a little bit on the high side at the end of the quarter and that's it, right? But, we distributed exactly the amount that we had in our plans in terms of capital. I will mention though that this is the first quarter where we increased the dividend by 17%.

Thank you. The next question is coming from Erika Najarian of UBS. Please go ahead.

Hi. Thank you. I just wanted to confirm, the 8% to 10% revenue guide, you said something is effective that now takes into account a 5.7% unemployment rate. I just wanted to confirm that, a, you feel like you can generate 8% to 10% revenue growth even in light of an unemployment rate that we haven't seen in a while. And to that end, I think, Steve, you mentioned that the stock market really didn't impact spend. I'd be curious to understand since your data is so good in terms of how spend progressed January through March, particularly in your affluent consumer segment. As you had mentioned in the last call that January is off to a strong start. And then just wondering whether or not the resilience had sort of carried through, even though we had all the headline risk and stock market volatility in March?

Yeah. So I'll give you a little color on the spending here. The reality is January, February, and March pretty much looked exactly the same, 0.2% here, 0.2% there. And the first 11, 12 days in April are slightly stronger than that, so it has been consistent. There has been really no movement, really up or down. The only thing I would say is that when you looked at small business, you did see a little bit of a tick-up as we moved into the end of March, but I'm talking minor 0.5 point or something like that. And then you saw a little bit of a pickup in the first 11 days, but we'll see how all that plays out. And I think April will be an interesting month because you have Easter and traditionally, you don't have as much corporate spend, you may not have as much small business spend, the retail spend, so forth and so on. So we'll see how April plays out. And last year, Easter was, I think at the end of -- at the end of March. As far as unemployment, look, we have 5.7% incorporated in our macro. I think for us, what -- when we look -- when we really look at unemployment, it's really more white collar unemployment that is more of a driver of potentially spending than it is total overall unemployment, because of how our card base tends to skew. So here we watch that -- we'll watch that very carefully, but we feel really comfortable with the -- even though the unemployment level that we have in our outlook is higher than it's been, we feel comfortable with holding the guide at this particular point in time. So, obviously, there'll be more to come as the months go by. But right now from a spend perspective, very consistent and we feel comfortable with the -- I mean, we feel comfortable with the unemployment level as far as our guidance goes.

Let me -- maybe Erika, give you a bit more color in terms of how to think about that 5.7%. We thought it would be useful to investors, to analysts to share with you how we've been thinking about their credit reserve. And as you know, we run multiple scenarios. The math is very complicated, it's lifetime losses. So the 5.7% represents the peak unemployment rate for the purpose of this reserve calculation. So it doesn't mean that we are anticipating that tomorrow either unemployment will jump to 5.7% and will stay there for the balance of the year, right? You have to think about it in the context of the CECL calculation.

Thank you. The next question is coming from Jeff Adelson of Morgan Stanley. Please go ahead.

Hey, good morning. Thanks for taking my questions. Steve, I know the Millennial and Gen-

Yeah. We haven't seen anything and I'll just take you back to -- we'll just throw a couple of statistics out. When you look at spend growth for that cohort for the quarter, it was up about 15% in the U.S. consumer business, and it's representing about 35% of our overall spend. When you look at it internationally, it actually was up 22% in the quarter. So Millennial and Gen-

So maybe what I can add to those, if you're looking for numbers, their Millennial and Gen-

Thank you. The next question is coming from Craig Maurer of FT Partners. Please go ahead.

Yeah. Thanks. I appreciate you taking the questions. I wanted to go back to something you said it earlier. Investors are spending time hardening their books for what is expected to be a significant change in the economy over the next, sort of, nine months to 12 months. So you had mentioned FICO scores as consumer confidence wealth effect. Not to channel John Wick, but the Boogeyman of the last recession was FICO Creep and -- was FICO Creep and companies getting caught thinking they were making better loans, plus with consumer confidence falling and the wealth effect, especially how that might impact the younger cohorts. Maybe you can talk about what you're basing your view on that, that consumer confidence and wealth effect won't impact spend. And sorry, not sneak this in, but could you also let us know what percentage of SMB build business is related to e-commerce businesses? Thanks.

Yeah. I don't have your -- the sneak in I can't answer because I don't have that at my fingertips here either. But I guess that will become potentially more important as time goes on, and so we'll look into that. Craig, as far as, what we're basing it on in terms of the wealth effect and consumer confidence, history. The history of our cardholders, I mean it's just -- look, I've been here for 40 years and been through 9/11, financial crisis, COVID, and everything else. And the reality is that, that has not been sort of the determining driver from a credit crunch perspective for us. So -- and again, look, I think, we'll continue to look at FICO scores. And I think there has been -- we've said this and I think the industry has said this, there has been an acceleration probably in some of the FICO scores, but it's not the only thing we look at. It's an easy metric to talk about. But certainly, that's not what was in our -- it's not within our models. The only thing in our models, there's a lot more in our models that go into making credit decisions. But look, we look at historically at what our card base has done and what has impacted our card base. And I would say that white collar unemployment from a credit perspective has probably been our John Wick, if you will, than -- more than anything else.

So I'll add just one thing, Craig. If you put -- if you take a step back away from FICO and you look at, say, delinquency rate, as you would expect, the variability from a credit standpoint is either higher with the low tenure card members. And therefore, we are looking -- and that's why we -- in my prepared remarks, I share this new data point for you guys to get an appreciation in terms of how we're thinking about that credit risk. If you look at the low tenure card members, so those who have been with us less than two years and you look at their delinquency rate today for that -- for those balances versus what it was for this same group of customers back in 2019, the delinquency rate of 30% lower, right? So that reflects a lot of things, including the SKU that we saw in the preview -- in the five, six years, in the previous five, six years, in terms of acquiring premium card members and managing the book very, very carefully. So delinquency rate is just -- it's a good metric to look at, and that looks much better than where we were pre-COVID. And at that time, we were already best in the industry.

Thank you. The next question is coming from Chris Kennedy of William Blair. Please go ahead.

Good morning. Thanks for taking the question. Steve, you mentioned the acquisition of Center that comes after a string of other deals, whether it's Kabbage, Nipendo, others. Can you just talk about that journey and kind of give a state of the union on the SME technology investments? And then how can that translate into better organic spend over time? Thank you.

Yeah. I think, look, what we've been on a journey here is to build more capabilities up for our SME customers. And if you look at it, one of the things that we've said is, we wanted to increase our relevance with our SME customers. And Kabbage has become the platform where we want our SMEs to live that platform, obviously, you have the ability to look at your card information, to do cash flow analysis, to have a checking account, to apply for loans. When you look at One AP and Nipendo, that's really all about automating the B2B piece of it. And then I think one of the things that was missing for us, and we were doing this through partnerships, but it became apparent it needed to be more core to our -- more core to us overall, is the expense management piece. We already have the travel piece with our travel service. And so what we're doing is we're constantly building out on the offerings that we have for our -- for our small -- for our small businesses. How that affects organic spend, I think we'll have to see. But I think what it does, it will certainly help from a retention perspective and an acquisition -- and an acquisition perspective as well. I think from an organic perspective, the more we can utilize One AP and Nipendo, the more we can get B2B pay -- more B2B payments in there through that channel. But, we're on a journey, and now it all needs to continue to be knitted together. Obviously, Center is not integrated into the Kabbage solution, but that's -- that into the Kabbage platform. But ultimately, what you will do is you will have one ecosystem where all of these things live. And I think that will help drive more retention, more acquisition, and potentially more organic spending. I mean organic spending traditionally is more of how they're running their businesses and we saw pre-COVID or just during COVID, how all that organic spend went down and then we saw post-COVID how it went up as they stocked up on inventory. So we'll have to see how that plays out. But we're excited about Center and we're excited about the suite of capabilities that we've built out from an SME perspective now.

Thank you. The next question is coming from Terry Ma of Barclays. Please go ahead.

Hi. Thank you. Good morning.

Good morning.

Maybe to just follow up on your comments around refresh strategy. You called out about 35 to 50 planned product refreshes for this year, last quarter. And I get that you want to invest in the long-term, and you don't want to stop the refresh strategy. But just given that there's so much macro uncertainty and maybe potential uncertainty around the ROI of those refreshes, do you kind of adjust or delay some of those until there's more clarity? And what does that mean for your marketing budget for the year? Thank you.

Yeah. So at the moment, no changes to the marketing budget at all. I don't think, the refresh itself, when you're looking at the refresh, I think that as I said before, we haven't stopped refreshes in the phase of even the pandemic. I mean, we were working through our platinum refresh at that particular level and green at that particular point in time. And also working on others behind the scenes because, as I've said before, refreshes don't happen overnight. Years ago, we got a lot of credit for reacting to the Chase Sapphire, but it's something that we started nine months to 10 months ago. So no, we're not going to stop the refresh strategy. I don't think that from an ROI perspective, there is -- there will be -- there would be what, as I would say a reason to do that, as we go to acquire cards, we look at, where the credit box is at that particular point in time. So we'll see, but that's a -- these refreshes happen over a period of time. So it's hard to stop them once they're in progress, and I think we have a lot of confidence once they're done to put them out into the marketplace.

Thank you. The next question is coming from Gus Gala of MCH. Please go ahead.

Hey. Good morning, Steve. Good morning, Christophe. I wanted to ask around restaurants. It seems like a lot of the work done there has been key in winning Gen-

Well, Millennials and Gen-

Thank you. The next question is coming from Rob Wildhack of Autonomous Research. Please go ahead.

Good morning, guys. I wanted to follow up a little bit more on the SMB technology side with Kabbage, Center, etc. Steve, I think you mentioned eventually having one ecosystem. Could you speak to the integration effort there? How all these platforms come together? How that looks for the end customer today? And then, when do you expect you could go to market with the full expanded product suite inclusive of Center? Thanks.

Well, we just closed on Center yesterday. So that's a -- it will happen over time here. But if you look at -- if you're an SME customer, you go on to the Kabbage platform, you can reach MYCA, which is, if you're a card holder and a lot of our card holders just do business right now with us through the app anyway, but pre-app, it was through My Card Account. And so as you go through Kabbage, you can access My Card Account, you can apply for the loan, you can access your transaction checking account. So that's pretty much there at this point. What the next step is, is to really then as we integrate Center on in, is to link that right in. I don't have an exact time on that. As a bank holding company, there are certain hardening that we need to do, let's say that around the Center project -- product and so we're going to do that. But part of all of that will be integrating it on into that platform. But again, just to remind everybody, we closed on yesterday.

Thank you. Our final question today is coming from Mihir Bhatia of Bank of America. Please go ahead.

Hi. Good morning, and thank you for taking my question. Steve and Christophe, you're striking a pretty confident tone on the call today about the outlook in a variety of macro environments. I think you've also talked before about being more confident in achieving the mid-teens EPS versus maybe some noise in year-over-year revenue. So I just wanted to go back to where we started the Q&A, where Sanjay side of the Q&A. Can you just talk a little bit more about the cost structure and the potential for cost optimization if things get choppy? Like, I understand there's rewards costs and things like that, that naturally get lower. But big picture, just talk a little bit about the expense flex in the model as you continue to invest? Thanks.

Yeah. I mean, here's what you can expect. I mean, obviously, you've got the story as it relates to rewards and as it relates to sort of cost of card member services, as spending goes down, those go down. From a technology perspective, we're not going to veer off our technology plan. I mean, it just doesn't make any sense to stop and start from a technology perspective. Our marketing budget is a lot bigger than it ever has been. And in an environment of uncertainty, you would raise the thresholds. You may not have as much line of sight into the credit box as you'd like to have. And so, there's a tremendous amount of expense flexibility within that line, and there's expense flexibility within our OpEx line as well. So -- but what we will not do, as I said earlier and I started this way, we're not going to just cut expenses to make the EPS number, if we see good opportunities for growth. And one of the things that we did during COVID was, we really ratcheted back on acquisition tremendously because we didn't have good line of sight into creditworthy card holders. But what we did do is, we pivoted a large percentage of that money and added incremental value to our value propositions at that particular point in time, which the end result of that was two-fold. Number one, it led to higher retention for us, and it led to more stickiness in terms of where we actually made those value proposition investments. And so, we'll play the whole thing out. But again, quarter-to-quarter, year-to-year, it's about really investing for the long-term here and making the right longer term decisions, but there is flex in the model as it relates to marketing and as it relates to OpEx.

With that, we will 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.