American Express Q1 2025 Earnings Report

American Express EPS Results

• Actual EPS: $3.64
• Consensus EPS: $3.47
• Beat/Miss: Beat by +$0.17
• One Year Ago EPS: $3.33

American Express Revenue Results

• Actual Revenue: $16.97 billion
• Expected Revenue: $17.04 billion
• Beat/Miss: Missed by -$74.72 million
• YoY Revenue Growth: N/A

American Express Announcement Details

• Quarter: Q1 2025
• Date: 4/17/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 17, 2025
• Conference Call Time: 8:30AM ET

American Express (NYSE:AXP) is a global financial services company primarily known for its payment card products, travel services and merchant network. Founded in 1850 as an express mail business, the company evolved through the 20th century into a payments and travel-focused organization. Its core activities include issuing consumer and commercial charge and credit cards, operating a global card acceptance and processing network, and providing travel-related services and customer loyalty programs.

American Express issues a range of products for individuals, small businesses and large corporations, including personal cards, business and corporate cards, and co‑brand partnerships with airlines, hotels and retailers. The company operates the Membership Rewards loyalty program and offers concierge and travel booking services through American Express Travel. On the merchant side, American Express provides acquiring and network services, data analytics, fraud prevention and payment acceptance solutions that enable businesses to process card transactions and engage customers.

In addition to card and merchant services, American Express conducts banking activities through its affiliated bank, offering deposit products, savings accounts and consumer lending in selected markets. Historically notable milestones include the introduction of traveler’s cheques in the late 19th century and the establishment of the American Express card business in the mid‑20th century, milestones that helped shift the company’s focus toward payments and travel services.

American Express serves customers globally, with operations and partnerships across the United States, Europe, Latin America, Asia‑Pacific and other regions. The company’s businesses are organized to serve consumer and small business clients, global commercial customers and merchant partners. As of recent years the company has been led by CEO Stephen J. Squeri, who oversees strategy across its payments, merchant and travel businesses as the firm continues to expand digital offerings and deepen customer relationships worldwide.

American Express Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1 American Express reported $17 billion in revenues, up 8% on a FX‐adjusted basis (9% excluding leap year), and net income of $2.6 billion or $3.64 per share.
• Total cardmember spending grew 6% (7% ex-leap year) with goods & services outpacing last year and T&E spending steady overall, led by strong restaurant and lodging performance despite a slowdown in airline billings.
• The company added 3.4 million new cards in the quarter—with millennials and Gen Z accounting for over 60% of acquisitions—and net card fees rose 20% on an FX‐adjusted basis.
• American Express maintained its 2025 guidance of 8%–10% revenue growth and $15–$15.50 earnings per share, incorporating a macro outlook that includes a peak unemployment rate of around 5.7%.
• Credit quality remained best‐in‐class with delinquency and write‐off rates below pre‐pandemic levels, and first‐quarter provisions included a small reserve release reflecting portfolio strength.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q1 2025 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 one, on your touch-tone 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 two. 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.

[Kartik Ramachandran, SVP and Head of Investor Relations at American Express]

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 iramericanexpress.com. We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results.

[Kartik Ramachandran, SVP and Head of Investor Relations at American Express]

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.

[Steve Squeri, Chairman and CEO at American Express]

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. 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.

[Steve Squeri, Chairman and CEO at American Express]

We also continued to grow our customer base, adding 3.4 million new cards in the quarter. As in past quarters, Millennial and Gen Z consumers made up over 60% of new consumer accounts acquired globally in Q1. In addition, card fee growth was up 20% on an FX-adjusted basis. Retention continued to be high, and our credit performance remained excellent. While it's still very early in the second quarter, through the first week and a half in April, overall spending levels have remained consistent with what we saw in the first quarter in both goods and services and T&E and across all customer segments. Based on the steady spend and credit trends we've seen to date, we're maintaining our full-year revenue growth guidance of 8%-10% and EPS of $15-$15.50.

[Steve Squeri, Chairman and CEO at American Express]

While we recognize that uncertainty in the environment has increased, the guidance incorporates the changes that we see in the macroeconomic outlook as of today. As we think about the near future, we have a resilient and differentiated business model that positions us well to navigate a range of economic environments. First and foremost, we have a global premium customer base at scale. In fact, as our customer base has grown over the past several years, it has gotten even more premium. Our card members have high incomes, are loyal, high spending, and have excellent credit profiles. As you know, we underwrite all our card members through the credit cycle. Another key differentiator of our model is our mix of revenues.

[Steve Squeri, Chairman and CEO at American Express]

The combination of spend and fees accounting of 75% of our overall revenue base, which makes us less reliant on lending revenues and less sensitive to credit cycles compared to our competitors. Also, we have significant expense leverage and flexibility that has grown as our scale has increased over the past several years, enabling us to effectively control our cost while continuing to invest for the long term. In addition to the natural hedges and our customer engagement expenses, we have several levers across our marketing and operating expense lines, enabling us to quickly pivot if the environment changes. Looking ahead, we'll need to see how things play out in the coming months. That said, we are operating from a position of strength, and we have a set of principles that guide us.

[Steve Squeri, Chairman and CEO at American Express]

Our fundamental objective, as it is with everything we do, is to manage the company for the long-term growth for our shareholders. As we do so, we are focused on four core principles. Above all, we'll back our customers through ongoing enhancements to our products and services, as well as providing support for those who may need it. We'll also back our colleagues so they continue to focus on innovating for our customers and providing a world-class experience that is core to our brand. We'll exercise disciplined expense management using the various levers in our business model to maintain financial flexibility. We'll continue to invest strategically for the long term in areas that strengthen our foundational capabilities, such as technology, control management, and customer acquisition, as well as capitalizing on opportunities that emerge for expanding our membership model with new and enhanced products, services, and experiences.

[Steve Squeri, Chairman and CEO at American Express]

As we move ahead, we are committed to following these principles and leveraging the advantages of our business model, which makes me confident that we are well-positioned for continued growth over the long term. I'll now turn it over to Christophe to provide more color on our first quarter results, and then we'll answer your questions.

[Christophe Le Caillec, CFO at American Express]

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 continue 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 bill business performance, starting on slide three, I'd remind you that the growover from leap year in 2024 drove about a percentage point drag on year-over-year growth rates across segments and spend categories.

[Christophe Le Caillec, CFO at American Express]

As we look at spend trends over the next few slides, I'll speak to bill business growth rates that are adjusted for leap year, as well as FX. Total bill 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. T&E grew in line with the steady levels we saw for 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.

[Christophe Le Caillec, CFO at American Express]

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 continued to see solid growth across our affluent U.S. consumer base. We spent up 8%. Millennial and Gen Z customers once again drove our highest bill business growth within the segment. Commercial services spend was up 3% versus last year, consistent with the trends we saw in 2024. U.S. SME spending at wholesale merchants saw a modest acceleration in growth over the quarter, possibly reflecting higher purchases in advance of potential price increases. International card services spend was up 14%. The strong growth was seen across geographies, with each of our top five markets growing by double digits. We continued to see strong demand for and engagement with our products.

[Christophe Le Caillec, CFO at American Express]

Turning to lending performance on slide seven, loans and card member receivables increased 7% year-over-year on an FX-adjusted basis. Our premium products continue to be the primary driver of that growth, with our Pay Over Time and co-brand portfolios driving around 80% of growth in card member revolving loans in the first quarter. These products tend to attract high-credit-worthy customers, supporting our model of growing lending while maintaining best-in-class credit performance. Turning to slides eight and nine, our credit performance continues to be very strong. Both delinquency and write-off rates were below pre-pandemic levels and flat to the prior year. The profile of the portfolio has strengthened over the past few years. Looking at our recent acquisitions, the delinquency rate of low-tenure customers, defined as those with 24 months or less of tenure, is about 30% lower than 2019 levels for U.S. consumer card members.

[Christophe Le Caillec, CFO at American Express]

This quarter, we had about $1.2 billion of provision expense. This included a small reserve release, mostly reflecting the strength and quality of the portfolio and the macroeconomic outlook as of quarter end. Turning next to revenue on slide 10, total revenues were up 8% year-over-year on an FX-adjusted basis, or 9% excluding leap year. Before we discuss this quarter's trends, I'd remind you that the strengthening of the U.S. dollar that occurred throughout last year continues to be a headwind to reported revenue growth, although a bit less than we anticipated earlier in the quarter. Also, starting this quarter, we consolidated process revenue within service fees and other revenue. Starting with discount revenue, our largest revenue line was up 5% year-over-year FX-adjusted and is mostly driven by the spend trends I discussed earlier.

[Christophe Le Caillec, CFO at American Express]

Net card fees were at record levels and increased 20% FX-adjusted, as shown on slide 12, reflecting our 27th consecutive quarter of double-digit card fee growth. We saw strong demand for our products as we acquired 3.4 million new cards in the quarter. A key driver of our strong card fee growth over the past few years has been the acquisition of new card members on fee-paying products, which accounted for around 70% of new accounts in the quarter. Another important contributor has been our ability to attract customers on higher fee products over time. Over the past three years, the average card fee per new account acquired has increased by around 40%, reflecting strong demand for our premium products and our success in pricing for the increased value we provide customers as we refresh our products.

[Christophe Le Caillec, CFO at American Express]

Turning to slide 13, net interest income increased 11% on an FX-adjusted basis, growing slightly faster than loans and receivables as we saw increases in net yield versus last year. Turning now to expense performance on slide 15, the VCMR to revenue ratio came in at 43% this quarter. Rewards expense grew 16% year-over-year. As a reminder, this quarter, we are growing over the benefit we saw in Q1 of last year from changes to our URR model. In addition, as we mentioned last quarter, some small changes we made to the program that are good for both customers and our overall economics are driving a small increase in the URR in the short term. Now that we have lapped the impact from the URR model change last year, we expect rewards to grow more in line with the historical trend for the remainder of this year.

[Christophe Le Caillec, CFO at American Express]

As you can see, marketing and OPEX continue to be key sources of expense leverage for our business. Our flexible model is an important advantage that allows us to dial up or down expenses as needed through different economic environments. Let me move to capital on slide 16. Our CET1 ratio was 10.7% within our 10%-11% target range. We returned $1.3 billion of capital to our shareholders, including $0.6 billion of dividends and $0.7 billion of share repurchases. This quarter, we increased our dividend by 17%. Our differentiated spend and fee-driven business model generates a strong ROE, which was 34% in the quarter, providing us with very strong capital flexibility. Before we turn to our 2025 guidance, let me talk about the trends we're seeing in recent weeks.

[Christophe Le Caillec, CFO at American Express]

As Steve discussed, looking at the first week and a half of April, overall spending trends are consistent with Q1. We are seeing this performance for both T&E and goods and services, as well as across our U.S. consumer, international, and commercial customer segments. Given the environment, we have also seen SME purchases accelerate with wholesale merchants. Additionally, demand for our products is in line with our expectations. This brings me to our 2025 guidance. Given the stability of our performance to date, we are maintaining our guidance of revenue growth of 8%-10% and earnings per share between $15 and $15.50. This guidance incorporates a macroeconomic outlook with a peak-weighted average unemployment rate of around 5.7%, higher than the outlook as it stood at quarter end.

[Christophe Le Caillec, CFO at American Express]

Of course, there are clearly many uncertainties in the macroeconomic environment, but given the balance of factors, we believe this guidance is appropriate. More importantly, we remain confident and focused on the long-term growth of the company. With that, I will now turn the call back over to Kartik, and we will take your questions.

[Kartik Ramachandran, SVP and Head of Investor Relations at American Express]

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. With that, the operator will now open up the line for questions. Operator.

[Operator]

Ladies and gentlemen, if you wish to ask a question, please press star, then one on your touchtone 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 comes from Sanjay Sakrani of KBW. Please go ahead.

[Operator]

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

[Sanjay Sakhrani, Managing Director at KBW]

Sorry, I was on mute. [crosstalk] Good morning. Sorry. 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.

[Steve Squeri, Chairman and CEO at American Express]

Look, we really haven't seen any pull forward at all. I think when you look at the entire first quarter, and I think you'd really want to focus in on March and early April, there's really been no pull forward at all. We see a little bit in small business, 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. I don't think 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. Just to be clear, from a consumer perspective, we've seen no pull forward at all.

[Steve Squeri, Chairman and CEO at American Express]

People continue to book, and we did not talk about this in the call, but we had the highest number of travel bookings that we have ever had. That includes a high in international as well, international bookings from our travel-related services. I think that we have not seen the pull forward. We are seeing our customers act as they have acted in the past. The other two points I will make, and then I will get to the revenue one, is that one thing that has not been associated with our card member spending has either been what has happened with the stock market or what has happened with consumer confidence. Our card members may say they do not have any confidence in the economy, but they still continue to spend, and they are not spending off what is in the market.

[Steve Squeri, Chairman and CEO at American Express]

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. 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. As I said, even during COVID, we continued to invest when others might have pulled back. 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.

[Steve Squeri, Chairman and CEO at American Express]

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. As we've said in the past, we have the aspirational goal of 10% revenue. However, we also have said that we can hit our EPS range if revenue goes lower.

[Operator]

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

[Mark DeVries, Senior Research Analyst at Deutsche Bank]

Yeah, thanks. 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? Is there anything you can do from a risk management perspective to get out in front of that?

[Steve Squeri, Chairman and CEO at American Express]

I mean, look, from a risk management perspective, we're constantly, on a daily basis, modifying our inputs and modifying our models and looking on that. We always like to think we're way out in front of that anyway. 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. 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. I'll just take you back to COVID. Remember, we have really a self-liquidating balance sheet, right? Our balance sheet's made up a lot of our AR. As consumers spend a little bit less, that's how they regulate risk.

[Steve Squeri, Chairman and CEO at American Express]

Small businesses, I think small businesses are the ones that we would pay a lot more attention to just because cost may not, they could be put in a situation that will not be able to compete effectively in the market. We will continue to look at small businesses as this situation evolves. Rest assured, we are 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. 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.

[Steve Squeri, Chairman and CEO at American Express]

The other thing that I'll say, because people will start looking at Millennials and low-tenure card members, our millennial and Gen Zs are performing significantly better, both from a FICO perspective and from a delinquency perspective than the industry. Secondly, our low-tenure card members, their delinquency rates are actually lower than our low-tenure card members were back in 2019.

[Operator]

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

[Donald Fandetti, Managing Director at Wells Fargo]

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?

[Steve Squeri, Chairman and CEO at American Express]

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 pipeline this year. 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. Our playbook has been, we will raise the fee when we raise value that is even more commensurate than with the fees.

[Steve Squeri, Chairman and CEO at American Express]

As we think about refreshes, what I will tell you is that whatever fee we wind up raising and look, the reality is we do not do a lot of refreshes without raising the fees, but we also do not do any refreshes without significantly enhancing the value that we put in. 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. 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.

[Steve Squeri, Chairman and CEO at American Express]

One might argue it might even be a better investment at this time than in a good environment.

[Operator]

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

[Rick Shane, Senior Equity Research Analyst at J.P. Morgan]

Hey, guys. Thanks for taking my questions this morning. Hey, Steve, you talk 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. I did note that the amount of capital you retained from first-quarter profits was the highest it's been since COVID. I'm curious how you're looking at capital offensively, defensively as well.

[Steve Squeri, Chairman and CEO at American Express]

Yeah. I'll let Christophe answer the capital question. I mean, we always look to return about 80% of our earnings to our shareholders. You'll notice from quarter to quarter, it does swing. Particularly in the first quarter, just go back historically, the first quarter is usually one of our lowest quarters where we do return capital. The capital that we returned this particular quarter was only about $300 million less than we actually returned in the fourth quarter of last year. It was not all that much. They are checking the slides to make sure that my comment was correct there. From an investment perspective, you just saw that we just completed the Center acquisition. We believe that that is an important acquisition for us, for small business and for middle market.

[Steve Squeri, Chairman and CEO at American Express]

That obviously has some capital implications, especially in the second quarter as we closed it. 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. 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 realizes you don't stop and start long-term projects.

[Steve Squeri, Chairman and CEO at American Express]

The other thing that you do not stop and start is you do not 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. We are on a program that basically says we are going to refresh all of our products, and I will put all in quotes, from a three to four-year cycle. You just cannot stop that. If you did, then I think you are doing a disservice to your customers, and you are doing a disservice to your shareholders. This goes back to Sanjay's earlier question about how much potentially would you cut to make EPS guidance. My perspective is that, again, we are running it for the longer term.

[Steve Squeri, Chairman and CEO at American Express]

For me to stop a technology project or for me to stop a refresh or an enhancement because I want to make another 20 cents for the year is foolhardy. It is not something that you should ever expect me to do. We are looking to make sure that this company continues to become stronger day by day. You do that by continuing to invest and continuing to stay true to what your core principles are.

[Christophe Le Caillec, CFO at American Express]

Maybe to add a bit of color on capital, there's not a lot to add, as a matter of fact, because we covered most of it. 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. We target between 10-11. We're a little bit on the high side, at 10.7%, but you shouldn't read anything in that. If you look at over time, we've been at 10.8, 10.5. We're ending up a little bit on the high side at the end of the quarter, and that's it. 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%.

[Operator]

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

[Erika Najarian, Managing Director and Equity Research Analyst at UBS]

Hi. Thank you. I just wanted to confirm the 8%-10% revenue guide. You said something to the effect of that now takes into account a 5.7% unemployment rate. I just wanted to confirm that, A, you feel like you can generate 8%-10% revenue growth even in light of an unemployment rate that we have not seen in a while. To that end, I think, Steve, you mentioned that the stock market really did not impact spend. I would 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 was off to a strong start. I am 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.

[Steve Squeri, Chairman and CEO at American Express]

Yeah. 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. The first 11, 12 days in April are slightly stronger than that. 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, half a point or something like that. You saw a little bit of a pickup in the first 11 days. We'll see how all that plays out. I think April will be an interesting month because you have Easter. Traditionally, you do not have as much corporate spend.

[Steve Squeri, Chairman and CEO at American Express]

You may not have as much small business spend, retail spend, so forth and so on. We'll see how April plays out. Last year, Easter was, I think, at the end of March. As far as unemployment, look, we have 5.7% incorporated in our macro. I think for us, 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. We'll watch that very carefully, but we feel really comfortable with the unemployment, 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. Obviously, there'll be more to come as the months go by. Right now, from a spend perspective, very consistent.

[Steve Squeri, Chairman and CEO at American Express]

We feel comfortable with the, I mean, we feel comfortable where the unemployment level is as far as our guidance goes.

[Christophe Le Caillec, CFO at American Express]

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. As you know, we run multiple scenarios. The math is very complicated. It's lifetime losses. The 5.7 represents the peak unemployment rate for the purpose of this reserve calculation. It does not mean that we are anticipating that tomorrow unemployment will jump to 5.7 and will stay there for the balance of the year. You have to think about it in the context of the CECL calculation.

[Operator]

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

[Jeffrey Adelson, Executive Director at Morgan Stanley]

Hey, good morning. Thanks for taking my questions. Steve, I know the millennial and Gen Z cohort continues to be a source of strength for AmEx. You're calling out the continued 60%+ of acquisitions, the better FICO and DQs versus industry, and your spend growth is running higher there. Just curious, are you noticing any sort of under-the-hood issues with that group from things like student loan repayment starting? There has been some reporting of some servicing issues for that group with the repayments starting. I'm just wondering if there's any stats you can give on maybe spend per card or account for that cohort, just given that it's represented so much of your account growth so far. Thanks.

[Steve Squeri, Chairman and CEO at American Express]

Yeah. We haven't seen anything. 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 Z is even a larger contributor internationally. I'll take you back to Investor Day, where we talked about how they continue to grow year to year. We're still seeing that. The thing I will point out is that our millennial not every millennial, not every Gen Z have our card. As I think I mentioned a little bit earlier, the delinquency rate that we're seeing is a lot less than what the industry sees.

[Steve Squeri, Chairman and CEO at American Express]

The FICO is a lot higher. A lot of them tend to be lower tenure as they come into the franchise. That delinquency rate is better than it was back pre-COVID. We do not disclose the actual card account billings on it. We did disclose it as we did that last at the Investor Day. Maybe we will do that at another point in time. Today, I am not going to share that because I do not have it at my fingertips either.

[Christophe Le Caillec, CFO at American Express]

Maybe what I can add to those, if you're looking for numbers, the millennial and Gen Z combined spend about 20% less than the older generation. They do spend a bit less. They've revolved a bit less as well. The other data point that we have shared in the past as well that echoes what Steve just said is that at acquisition, the average FICO of this cohort is 750. Very strong, very strong.

[Operator]

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

[Craig Maurer, Managing Director at FT Partners]

Yeah. Thanks. Appreciate you taking the questions. I wanted to go back to something you said 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 9-12 months. You had mentioned FICO scores, consumer confidence, wealth effect. Not to channel John Wick, but the boogeyman of the last recession was FICO creep. It 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 consumer confidence and wealth effect won't impact spend. Sorry not to sneak this in, but could you also let us know what percentage of SMB build business is related to e-commerce businesses? Thanks.

[Steve Squeri, Chairman and CEO at American Express]

Yeah. I don't have your sneak in. I can't answer because I don't have that at my fingertips here either. I guess that will become potentially more important as time goes on. 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 just, I've been here for 40 years and been through 9/11, financial crisis, COVID, and everything else. The reality is that that has not been sort of the determining driver from a credit crunch perspective for us. Again, look, I think we'll continue to look at FICO scores. 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.

[Steve Squeri, Chairman and CEO at American Express]

It's not the only thing we look at. It's an easy metric to talk about. Certainly, that's not what's in our models. The only thing in our models. There's a lot more in our models that go into making credit decisions. Look, we look at historically at what our card base has done and what has impacted our card base. I would say that white-collar unemployment from a credit perspective has probably been our John Wick, if you will, more than anything else.

[Christophe Le Caillec, CFO at American Express]

Just one thing, Craig. 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 higher with the low-tenure card members. Therefore, we are looking and that is why we might prepare a remark. I share this new data point for you guys to get an appreciation in terms of how we are 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 those balances versus what it was for this same group of customers back in 2019, the delinquency rate is 30% lower, right?

[Christophe Le Caillec, CFO at American Express]

That reflects a lot of things, including the skew that we saw in the previous five, six years in terms of acquiring premium card members and managing the book very, very carefully. Delinquency rate is just a good metric to look at. That looks much better than where we were pre-COVID. At that time, we were already best in the industry.

[Operator]

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

[Cristopher Kennedy, Research Analyst and Financial Services and Technology at William Blair]

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? Then how can that translate into better organic spend over time? Thank you.

[Steve Squeri, Chairman and CEO at American Express]

Yeah. I think, look, what we've been on a journey here is to build more capabilities up for our SME customers. If you look at it, one of the things that we've said is we wanted to increase our relevance with our SME customers. Kabbage has become the platform where we want our SMEs to live. Within 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 OneAP and Nipendo, that's really all about automating the B2B piece of it. 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 us overall, is the expense management piece.

[Steve Squeri, Chairman and CEO at American Express]

We already have the travel piece with our travel service. What we are doing is we are constantly building out the offerings that we have for our small businesses. How that affects organic spend, we will have to see. I think what it does, it will certainly help from a retention perspective 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 more B2B payments in there through that channel. We are on a journey. Now it all needs to continue to be knitted together. Obviously, Center is not integrated into the Kabbage solution, to the Kabbage platform. Ultimately, what you will do is you will have one ecosystem where all of these things live. I think that will help drive more retention, more acquisition, and potentially more organic spending.

[Steve Squeri, Chairman and CEO at American Express]

I mean, organic spending traditionally is more of how they're running their businesses. We saw pre-COVID or just during COVID how all that organic spend went down. We saw post-COVID how it went up as they stocked up on inventory. We have to see how that plays out. We are excited about Center. We are excited about the suite of capabilities that we've built out from an SME perspective now.

[Operator]

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

[Terry Ma, Senior Equity Research Analyst at Barclays]

Hi. Thank you. Good morning. Maybe to just follow up on your comments around the refresh strategy. You called out about 35-50 planned product refreshes for this year, last quarter. I get that you want to invest in the long term, and you do not want to stop the refresh strategy. Just given that there is 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 is more clarity? What does that mean for your marketing budget for the year? Thank you.

[Steve Squeri, Chairman and CEO at American Express]

Yeah. At the moment, no changes to the marketing budget at all. I do not think the refresh itself, when you're looking at the refresh, I think that, as I said before, we have not stopped refreshes in the face of even the pandemic. I mean, we were working through our Platinum refresh at that particular and Green at that particular point at that particular point in time, and also working on others behind the scenes because, as I've said before, refreshes do not happen overnight. Years ago, we got a lot of credit for reacting to the Chase Sapphire. But it is something that we started 9 to 10 months ago. No, we are not going to stop the refresh strategy. I do not think that from an ROI perspective, there will be, there would be, as I would say, a reason to do that.

[Steve Squeri, Chairman and CEO at American Express]

As we go to acquire cards, we look at where the credit box is at that particular point in time. We will see. These refreshes happen over a period of time. It is hard to stop them once they are in progress. I think we have a lot of confidence once they are done to put them out into the marketplace.

[Operator]

Thank you. The next question is coming from Gus Gala of Monness, Crespi, Hardt. Please go ahead.

[Gus Gala, Senior Equity Research Analyst at MCH]

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 Z millennial share versus other premium value props available in North America. How do you think about enhancing the value proposition there? In a similar vein, can you talk about other categories or maybe your experiential differentiation where you're not really competing on the rewards, but more like the services could further help capture that Gen Z millennial base? Thanks.

[Steve Squeri, Chairman and CEO at American Express]

Millennials and Gen Z are spending way more in restaurants from a transaction perspective than any other cohort that we have. If you just look at the refresh strategy, look at what we did with Gold. I mean, Gold could have been renamed the restaurant card between the Rewards Accelerator, the Resy Credit, and the Global Dining Collection. I think, look, you go back to the acquisition of Resy, you go back to the acquisition of Tock, you look at Rooam. All three of those things are really targeted at sort of trying to build a moat around the restaurant industry, not only from a card member perspective, but also from a restaurant perspective. I mean, it is a microcosm of our closed loop, right?

[Steve Squeri, Chairman and CEO at American Express]

When you think about what we've done with Resy and Tock, and then as we integrate the Rooam capabilities in, it's a closed loop within a closed loop. I think that's something that's really appealing to our restaurant customers. It's also appealing to our card members, and especially millennials and Gen Z. Look, we'll look for other verticals where that makes sense. One would argue that the other verticals where it does make sense with our travel business is also with lodging and with airline, right? I mean, if you think about it, look at the Platinum Card and being able to book through Platinum Travel Services. It's another example of a closed loop within. When you look at the Platinum Card value proposition with Fine Hotels and Resorts, it is really a way to provide value, especially to our younger customers.

[Steve Squeri, Chairman and CEO at American Express]

I mean, when you book a Fine Hotels and Resorts, the value proposition there is pretty good, right? I mean, it's early check-in, late checkout, upgrades, free breakfast, $100 credit. That is another example of where we're connecting our card members with our partners from a hotel perspective. Obviously, we've been doing that with airlines for years. I think when you think about millennials and Gen Z, I think leaning in in those areas for them are pretty critical. The Gold Card relaunch is a really good example. Our partnership with Dunkin' was a really good example of really leaning in to the transaction affection that they have for dining and for all things that are dining.

[Operator]

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

[Rob Wildhack, Director and Equity Research Analyst at Autonomous Research]

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? When do you expect you can go to market with the full expanded product suite inclusive of Center? Thanks.

[Steve Squeri, Chairman and CEO at American Express]

We just closed on Center yesterday. It will happen over time here. If you look at if you are an SME customer and you go onto the Kabbage platform, you can reach MyCA, which is if you are a cardholder, and a lot of our cardholders just do business right now with us through the app anyway. Pre-app, it was through My Card Account. As you go through Kabbage, you can access My Card Account. You can apply for the loan. You can access your transaction checking account. That is pretty much there at this point. The next step is to really then, as we integrate Center on in, link that right in. I do not have an exact time on that. As a bank holding company, there is certain hardening that we need to do, let us say, around the Center project, product.

[Steve Squeri, Chairman and CEO at American Express]

We are going to do that. Part of all of that will be integrating it into that platform. Again, just to remind everybody, we closed on it yesterday.

[Operator]

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

[Mihir Bhatia, Director and Senior Equity Research Analyst at Bank of America]

Hi. Good morning. 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. I just wanted to go back to where we started the Q&A, where Sanjay started 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? I understand there's rewards, costs, and things like that that naturally get lower. Big picture, just talk a little bit about the expense flex in the model as you continue to invest. Thanks.

[Steve Squeri, Chairman and CEO at American Express]

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. 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. There is a tremendous amount of expense flexibility within that line and there's expense flexibility within our OpEx line as well.

[Steve Squeri, Chairman and CEO at American Express]

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. 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 cardholders. 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 twofold. 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. We will play the whole thing out.

[Steve Squeri, Chairman and CEO at American Express]

Again, quarter to quarter, year to year, it's about really investing for the long term here and making the right longer-term decisions. There is flex in the model as it relates to marketing and as it relates to OpEx.

[Kartik Ramachandran, SVP and Head of Investor Relations at American Express]

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.

[Operator]

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 13752401 after 1:00 P.M. Eastern Time on April 17th through April 24th. That will conclude our conference call for today. Thank you for your participation. You may now disconnect.

Participants

Executives

• Kartik Ramachandran, SVP and Head of Investor Relations
• Steve Squeri, Chairman and CEO
• Christophe Le Caillec, CFO

Analysts

• Rob Wildhack, Director and Equity Research Analyst at Autonomous Research
• Rick Shane, Senior Equity Research Analyst at J.P. Morgan
• Mihir Bhatia, Director and Senior Equity Research Analyst at Bank of America
• Mark DeVries, Senior Research Analyst at Deutsche Bank
• Donald Fandetti, Managing Director at Wells Fargo
• Gus Gala, Senior Equity Research Analyst at MCH
• Terry Ma, Senior Equity Research Analyst at Barclays
• Cristopher Kennedy, Research Analyst and Financial Services and Technology at William Blair
• Sanjay Sakhrani, Managing Director at KBW
• Craig Maurer, Managing Director at FT Partners
• Erika Najarian, Managing Director and Equity Research Analyst at UBS
• Jeffrey Adelson, Executive Director at Morgan Stanley