Q4 2024 American Express Co Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the American Express Q4 2024 earnings call. At this time, all participants are in a listen only mode.
We will conduct a question and answer session. If you wish to ask a question. Please press Star then one on your Touchtone phone.
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Speaker Change: As a reminder, today's call is being recorded.
Speaker Change: I'd now like to turn the conference over to our host head of Investor Relations. Mr. Kartik Ramachandran. Please go ahead.
Speaker Change: Thank you Daryl 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.
Speaker Change: 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 prior periods, we discussed.
Speaker Change: All of these are posted on our website at IR Dot American Express Dot com.
Speaker Change: We'll begin today with Steve <unk>, Chairman and CEO, who will start with some remarks about the company's progress and results and then Christopher <unk> Chief Financial Officer, who 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: Thank you Kartik good morning, and thanks for joining US 2024 was another strong year for American Express we delivered record revenues of 66 billion for the year up 10% on an FX suggested basis, achieving our long term aspiration.
Steve: We had record net income was $10 billion with earnings per share of $14 one.
Steve: Of 25% for the year, which is higher than our long term aspiration.
Steve: Great work of our colleagues around the World drove 2024 results that were strong across our key metrics setting New records in many categories. In addition to record revenues and net income we had record levels of annual card member spending record net card fees and a record 13 million new card acquisitions.
Steve: We also saw continued high card member retention best in class credit performance and disciplined expense management, notably we exited the year with increased momentum as fourth quarter billings growth accelerated to 8% overall driven by robust holiday spend.
Steve: We continue to enrich our membership model refreshing over 40 products globally in 2024, including the U S consumer gold card, which is particularly appealing to millennial and Gen Z consumers as well as refreshing our Delta co brand cards. We also enhanced our dining portfolio with the acquisitions of <unk> in Rome, and we launched several new top tier.
Steve: Sponsorships and experiences such as our multi year global partnership with Formula One.
Steve: Our U S small and medium size enterprise customer base continued to grow with strong new card acquisitions throughout the year and we saw an improvement in small business sentiment in the fourth quarter, which linked to stronger organic spending by our small business customers through the holiday season.
Steve: A key driver of our growth is the ongoing global expansion of our merchant network. We added millions of new merchant locations globally in 2024, and we reached an average of 80% coverage across our top 12 international countries with coverage and travel and entertainment categories, well above 80% Thats, an increase of eight percentage points from three <unk>.
Steve: Years ago.
Steve: These results clearly show that our strategy of backing our customers by investing in our value propositions coverage marketing technology and talent is working as we look ahead to 2025 American express will be celebrating a major milestone or 175th year in business, our company's history as one of innovation and growth from.
Steve: Start in $18 50, as a freight delivery company operated with forces wagons and trains to becoming a global travel services company in the early 20th century pivoting into acquired focused payments company by the 19 sixties and ultimately evolving into a global premium financial and lifestyle company powered by technology, we are today.
Steve: All longevity has been fueled by talented colleagues, who have delivered a steady stream of innovative products and services that are focused on serving premium consumers and businesses of all sizes and who have stayed true to our brand that has been built on trust security in service since our earliest days as.
Steve: As I've discussed over the past several years, we've continued to cycle of customer focused innovation, which has been largely responsible for resetting the growth trajectory of the company. We believe our growth is sustainable we are confident that we will continue to bring in large numbers of new premium customers, especially millennial and gen Z consumers and small businesses.
Steve: While also maintaining high growth across our international business.
Steve: And looking at the external marketplace, we continue to see strategic opportunities to sustain our growth for example in the U S fee based consumer premium cards are the fastest growing part of the industry and we have about 25% of those cards, indicating a continued upside opportunity.
Steve: Across the industry, the number of millennials and Gen Z consumers with premium products are growing at an even faster rate and we're adding highly credit worthy customers in these cohorts faster than the industry with substantial room to continue this growth. It is clear that our premium products are resonating well with these age groups, whose spending needs will continue.
Steve: To expand as they move forward in their lives and careers with many likely to also start new small businesses in the coming years.
Steve: In SME, we see continued growth opportunities in the U S, where we expect to continue adding new small business customers and expanding our offerings to meet more of their needs beyond the card such as lending checking and cash flow management.
Steve: And when we look at international which is our fastest growing segment. We are underpenetrated in both consumer and SME, we have an average of 6% spend share across our top five countries, which represent almost a third of the revenues outside the U S.
Steve: International SME in particular is growing off a small base and with the differentiated products and capabilities. We offer we have an opportunity to continue our rapid growth in this part of our business.
Steve: The long runway for growth, we see both in international consumer and SME, coupled with the opportunities we have to continue expanding our merchant coverage across the globe gives us confidence that we can sustain our growth trajectory outside the U S.
Steve: So as we look at this year and beyond we're going to continue with our strategy of investing at high levels and innovated value propositions marketing and technology to drive growth.
This includes our ongoing focus on our product refresh strategy. Currently we're refreshing between 35 and 50 products a year and we're planning to maintain that pace in 2025, along with other enhancements to our membership model for both our consumer and commercial customers.
Steve: Turning to guidance for the year, we expect 2025 revenue growth of 8% to 10% and EPS at $15 to $15 50.
Steve: Or a 12% to 16% increase over 2024 adjusted for the a certified game.
Steve: Regarding our thinking and establishing this year's guidance as we've said card member spending is the largest component of our total revenues in putting our plan together our assumption had been that steady billings growth. We saw through most of 2024 would continue in 2025, but the fourth quarter spend numbers.
Steve: Stronger than we expected.
While it's too soon to tell how this year will play out we're encouraged by that increased momentum. We saw exiting 2024 for now we're assuming 2025 billings growth will be similar to full year 2024 number. However, if spend growth continues at the elevated Q4 levels throughout this year, we would.
Steve: To come in at the higher end of our revenue range all else being equal I'll now turn it over to Christophe for additional commentary about our results and our 2025 guidance.
Christophe: Thank you, Steve and good morning, everyone. Given we are at year end I will discuss our Q4 and full year results.
Christophe: Turning first with our full year performance 2024 was a strong year with 10% revenue growth on an FX adjusted basis, and EPS of $14 in <unk> up 25%.
Christophe: And we continue to deliver superior returns driven by our spin and fee led model as we ended the year with Anoro <unk>.
Christophe: 35%.
Christophe: Notably, we also returned $7 $9 billion of capital to shareholders. This year, which included certified game.
Christophe: We saw a stable spending environment for most of 2024 with an acceleration in spending as we exited the year.
Christophe: We continued to see healthy loan growth and we achieved record net card fees. We achieved these results while maintaining our best in class credit performance investing at high levels for growth as well as driving significant operating leverage in some of the building blocks of our financial model are performing well.
Christophe: And drive our confidence in the year ahead.
Christophe: Now taking a closer look at total billed business performance on slide three robust spending during the holiday period by a premium customer base helped generate 8% FX adjusted growth year over year in Q4, an uptick from the 6% range. We saw for the past few quarters.
Christophe: The increase in growth was broad base across both TNT and goods and services categories across geographies and across every customer segment as we will see in a moment in.
Christophe: In addition transaction growth also accelerated to 10% in the quarter, reflecting greater engagement from our recon members.
Christophe: I'll highlight a few key points as we look at spend trends across our businesses over the next few slides.
Christophe: U S consumer spend was up 9% year over year in the quarter.
Christophe: Strong holiday inventory momentum versus Q3 grew.
Christophe: Growth accelerated in booth, GNL and TNT categories with performance a bit more concentrated in the strong holiday shopping period compared to the rest of the quarter.
Christophe: Looking across generations millennial and Gen Z spend continues to grow faster than the other each cohorts up 16% in Q4 versus last year.
Christophe: All generation saw an uptick in spend this quarter compared to Q3.
Christophe: Commercial services spend was up 4% versus last year for the quarter with U S SME growing 3%.
Christophe: <unk> from the past few quarters as organic spend growth improved a bit sequentially.
Christophe: We also saw an increase in spending from our large and global client base with improvement in TNF spend across client industries as well as improvement in goods and services spend.
Christophe: Lastly, international grew 15% in Q4 versus last year on an FX adjusted basis as we continued to make strides in our international business.
Christophe: This rapid growth was visible across spend categories and across our consumer and commercial businesses with each of our top five markets growing in mid to high teens.
Christophe: As you can see Q4 spend results were strong across our businesses and we feel good about the spin acceleration we saw.
Christophe: <unk> growth in Q1 will be impacted by the grow over from leap year in 2024, so far the first three weeks of January look more in line with Q4 trends at the same time, we need to see the momentum will sustain so as we think about 2025, we are assuming at this point.
Christophe: A similar spend environment to what we saw in 2010 before on a full year basis.
Christophe: Moving on to loans on slide seven.
Christophe: Q4, total loans and card member receivables grew at 9% on an FX adjusted basis versus last year.
As a reminder, these growth rates moderated over the course of the year is expected as we lap the period when customers were still building back revolving balances coming out of the pandemic.
Christophe: With that process largely behind us for 2025, we expect loans and receivables growth to continue to grow a bit faster than spend.
Christophe: We continue to meet more as we continue to meet more of the borrowing needs of our premium customers.
Christophe: Turning to slides eight and nine our credit performance continues to be excellent delinquency rates and write off rates are stable versus last quarter and are still below levels from five years ago.
Christophe: Total provision expense was down from a year ago as we build fewer reserves.
Christophe: These results are an outcome of our premium strategy that attracts high credit quality customers combined with our risk management capabilities. This strategy has widened the margin of safety and enduring profitable growth.
Christophe: We continue to expect some modest upward bias to write off and reserve rates overtime.
Christophe: We continue to acquire new customers at elevated levels and increase our share of lending from existing customers.
Christophe: Turning next to revenue starting on slide 10.
Christophe: We saw another strong year over year revenue growth with revenues up 10% on an FX adjusted basis for both Q4.
Christophe: And the full year discount.
Christophe: <unk> revenue grew 8% FX adjusted in Q4 in line with billed business growth.
Christophe: Our cycle of product refreshes helped drive card fee growth to 19% FX adjusted in the quarter and a few new card acquisition to a record level of $13 million for the new year for the year.
Christophe: With around 70% of new accounts required on a fee paying products. We expect card fee growth in 2025 to continue to grow in the mid to high teens, but to moderate as we progress through the year.
Christophe: Turning to slide 13, Q4, NII was up 13% on an FX adjusted basis.
Christophe: Growth was driven by increases in revolving loan balances and net yield versus the prior year.
Christophe: As expected growth moderated this quarter as it has over the course of the year.
Christophe: An important long term driver of yield is that wood ability to improve our funding mix as a result of our growing deposits program.
Christophe: Our high yield savings account balances grew 17% in 2024.
Christophe: Our premium cards, we see that our high sub product is resonating with younger customers millennial and Gen Z customers make up over half of the accounts.
Christophe: About a third of the total balances today.
Christophe: As we think about 2025, we expect NII growth to outpace the growth in total loans and receivables supported by growth in revolving balances.
Christophe: And while there is uncertainty in the rate outlook as a reminder, we are markedly liability sensitive.
Christophe: A relatively small impact from changes to the fed funds rate.
Christophe: I'll turn next to expenses on slide 15.
Christophe: In Q4, <unk> to revenue ratio was 43%.
Christophe: Rewards expense in particular grew 15% in the fourth quarter, largely driven by the slow growth in rewards expense in the prior year in.
Christophe: In addition, as we mentioned last quarter, we made some small changes to the program that are good for both customers and the overall economy of the program, but drive a very small increase in the <unk> in the short term.
Christophe: Stepping back we expect overall <unk> expenses to grow slightly faster than revenues in 2025, as we continue to invest in our products and drive card member engagement and as our portfolio continues to become more premium.
Christophe: We expect rewards growth to remain a bit elevated in Q1 as a result of the <unk> model changes from the year ago before growing more in line with historical trends.
Christophe: We ended the year with $6 billion in marketing expenses up 16% for the full year as we invested at elevated levels based on the attractive growth opportunities we saw.
Christophe: Given the significant increase of the investment pool in 2024, we expect a modest increase in marketing expense for 2025.
Christophe: Finally operating expenses for the quarter were down 1% versus last year of $4 2 billion.
Christophe: On a full year basis operating expenses of $14 6 billion were down 2%, excluding the gain on sale of the <unk> business in Q2.
Christophe: Operating expenses were up 1% for the full year.
In 2025, we expect operating expenses to grow in the low single digits versus 2024 levels adjusted for the <unk> gain.
Christophe: This continues our strong record track record of disciplined expense management as we maintain the low levels of growth from last year, while still investing in key areas such as technology.
Christophe: Let me move now to capital on Slide 16, our Q4 CET one ratio was 10, 5% and continues to be within our 10% to 11% range.
Christophe: We returned $7 9 billion of capital to our shareholders for the year, including $2 billion of dividends and $5 9 billion of share repurchases.
Christophe: In 2025, we also expect to increase our quarterly dividend by 17% to <unk> 82 per share consistent with our approach of growing our dividend in line with our earnings and our 20% to 25% target payout ratio.
Christophe: With this planned increase we expect to more than doubled the dividend.
Christophe: Since the beginning of 2019, we have also reduced the share count by 17% demonstrating our confidence in the sustainability of earnings with our differentiated model.
This brings me to our 2025 guidance.
Christophe: We continue to run our business with an aspiration to achieve 10% plus revenue growth and mid teens EPS growth.
Christophe: As Steve noted for the full year 2025.
Christophe: We expect revenue growth between 8% to 10% and earnings per share between $15 and $15 50.
Christophe: The EPS range reflects 12% to 16% growth year over year adjusted for the <unk> certified gaining 2020.
Christophe: I will note that the revenue guidance reflects a balance between the spin environment, we saw for the most of the year.
Christophe: <unk> spend growth we saw in Q4.
Christophe: If the spend momentum we saw in Q4 were to continue we would expect revenue growth to be closer to the high end of the range all else equal.
Christophe: Our guidance also factors in a range of scenarios based on what we're seeing in our business to date.
Christophe: It assumes a stable economy and reflects what we moved to date about the regulatory and competitive environment.
Christophe: At the same time, there was uncertainty in the environment, whether it's tax policy interest rates while currency movements.
Christophe: Our outlook is based on the FX rates as they are today.
Christophe: As a global company the strengthening of the U S. Dollar is a headwind to our growth in.
Christophe: In closing as you've heard 2024 was a strong year for the company.
Speaker Change: We're well positioned to continue our track record of strong growth in 'twenty into 2025, and we feel good about the year ahead with that I will now turn the call back over to car T and we will take your questions. Thank you Christophe and before we open up the lines for Q&A I'll ask those in the queue to please limit yourselves to just one question.
Speaker Change: Thank you for your cooperation and with that the operator will now open up the line for questions operator.
Speaker Change: Ladies and gentlemen, if you wish to ask a question. Please press star one on your Touchtone phone.
Speaker Change: Hear a tone, indicating that <unk> been placed in Q you may remove yourself from the queue at any time by pressing Star then Q, if you're using a speakerphone. Please pick up the handset before pressing the numbers one moment. Please for the first question.
Speaker Change: Yeah.
Ryan Nash: Our first question comes from the line of Ryan Nash with Goldman Sachs. Please proceed with your question.
Ryan Nash: Hey, good morning, everyone.
Speaker Change: Good morning, Ryan.
Steve: I didn't want to disappoint, Steve I am going to ask about revenue growth.
Speaker Change: So you.
Speaker Change: You gave a lot of different comments, obviously eight to 10.
Speaker Change: Sitting at 10, you highlighted that.
Speaker Change: Billings are started the year at.
Speaker Change: At an elevated level some of the fourth quarter. So Steve maybe just talk a little bit about.
Speaker Change: What could be the potential headwinds to revenue growth that would put you towards the lower end.
Speaker Change: I guess given.
Speaker Change: GDP is strong U.
Speaker Change: Quired a ton of cards in 2024, why is 2025 not in.
Speaker Change: In line with sort of the aspirational revenue growth given it feels like this is sort of the right kind of environment, where we could see that type of top line growth. Thank you.
Speaker Change: So I would say that it.
Speaker Change: It is in line I mean, we've got we give a range and that range has our top end.
Speaker Change: The 10% at the top end is in line with our long term aspiration just like this year, we did hit our long term aspiration not only for the quarter, but for the year on a full year basis. So what would cause you to go sort of below middle or at.
Speaker Change: I think what you have to look at last year is a lot of our a lot of our consumer customers. We're building balances and so you had some pretty strong NII growth.
Speaker Change: And that's sort of moderated a little bit.
Speaker Change: As we as we got into the year. So if you look at it it really does come down to one billing story for <unk>.
Speaker Change: For 2025, and I think the way that we guide it is absolutely right.
Speaker Change: We've guided that if in fact bill.
Billings are.
Speaker Change: They were in the fourth quarter.
Speaker Change: You will see us at the top end of the revenue range and as Christoph said and I said all else being equal you don't have any any sort of surprises, but and as we've said at your conference just given you another plug for your conference.
Speaker Change: It really becomes billings and and I think if billings continue at where they were in the fourth quarter than I think what you will see is us at the top end of that of that revenue of that revenue range. If you see them, where they want for the whole year. You can assume we will be in the middle and and I don't think this will happen but.
Speaker Change: This is why you give ranges if they were below last year you would be.
Speaker Change: At the lower end, so I think it really truly is a billing story I think we're very confident.
With card fees, where we had 26 consecutive quarters of double digit card fees, we expect that to continue more to the to the mid teens to the lower high teens.
Speaker Change: <unk>.
Speaker Change: NII will continue, albeit at a little bit of a lower growth rate than you saw in the first two quarters of last year. So I think I think the guide is truly in line with what we said I mean last year. We went 90 to 911 and we came in at 10, and we said it was about billings and we got billings in the in the fourth quarter, which pushed us pushed us over over the line.
Speaker Change: So.
Speaker Change: We're just we're just providing guidance that incorporates all of those scenarios.
Speaker Change: Thank you. Our next question comes from the line of Sanjay <unk> with <unk>. Please proceed with your question.
Sanjay: Thank you good morning.
Speaker Change: Maybe just.
Speaker Change: You see for getting in front of that question on the revenue guide I appreciate that I guess, just a follow up if we were to.
Speaker Change: Think about where the acceleration came from and spending I know Christophe you kind of mentioned it was balanced but maybe can we get a little bit more deeper into that so that we can figure out like how much could sustain itself over the course of the year and then.
Speaker Change: Our discretionary versus travel time, and then if we think about the upside to the revenues I mean, do you think that that would be an upside to the EPS range or that's pretty static.
Speaker Change: So so.
Speaker Change: So, let's let me deal with the with the EPS range I mean.
Speaker Change: One of the things that we've done over the years is.
Speaker Change: If we've had opportunities to invest we have invested in now just take a look at this year. This year. We provided we provided our guidance at the beginning of the year was obviously.
Speaker Change: Lower than what we ended the year with and our expectation was that we were going to reinvest these certified game, but we wound up using that to buy shares back.
Speaker Change: And we increased our marketing by $800 million. So we want to keep the flexibility if.
Speaker Change: If we have.
Speaker Change: Good investment options to invest back in the business, having said that.
Speaker Change: If in fact, we had a year like we had this year would not only do we have good investment options, but we could also exceed EPS. We would do that so I think as you start to get to the high end of that revenue range.
Speaker Change: What winds up happening is management has to make a decision do we reinvest in the business do we dropped some more of that back to back to shareholders and that will be a decision that we will make on an on an ongoing basis as we see what the opportunities would be whether those will be opportunities in in technology, whether it be opportunities in March.
<unk> more value proposition and so forth. So we want to leave ourselves that flexibility to be able to make those investments, but having said that there is a top end of the range is $15 50. It is at 16% revenue, 16% growth and that is more likely to happen. If you have.
Speaker Change: Our revenue growth again with the commentary that I made that we could make a decision that we want to invest that back in so it's plausible that that in fact would happen as far as billings go for the quarter and then I'll, let christophe comment a little bit a little bit more I think what you saw across the board.
Christophe: You saw consumer come up it was.
Christophe: 9%, which was two points above where we had been running we saw more organic spend lift in SME.
Christophe: Which made SME from one to three and Thats still not where we want to be from an SME perspective and international continues.
Christophe: To perform very very well, both from an SME perspective and from a and.
Christophe: And from a consumer perspective also picking up two points travel was higher this particular quarter and particularly.
Christophe: Particularly airlines airline doubled sequentially quarter over quarter.
Christophe: 13%, so more surprising number I think was front of the cabin up 19% and restaurant continues to be strong. So <unk> was very very strong in the quarter for us and Christopher I also want to add anything I don't have a lot because you covered most of it yes. The only thing I will say is that the.
Christophe: The holiday shopping season was especially strong for us and you ask the question about the sustainability and Thats the key word right.
Christophe: The team here is looking at either whether it's going to extend into 2025, that's the key question.
Christophe: And that's a real Peter it's really hard to answer this in a definitive way as I said in my remarks. The first three weeks of January theory, much look like in line with what we saw in Q4.
Christophe: But there is like 49 more weeks to come and we don't know how it's going to it's going to play. So so more to come on this but what we saw so far looks looks very strong.
Speaker Change: Thank you. Our next question comes from the line of Erika Najarian with UBS. Please proceed with your question.
Erika Najarian: Hi, Good morning, just wondering team continued to impact the billings story for 2025.
Speaker Change: Look the part.
Erika Najarian: Net card acquired.
Erika Najarian: It looks like it slowed down a little in the fourth quarter after being up double digits in the second and third quarter.
Erika Najarian: Of course at six 5% year over year.
Speaker Change: As you think about what's going to drive the billing strength in 2025, particularly in light of Christophe your comment about modest increase in marketing expenses.
Speaker Change: We think about what is the split between an increase in new clients acquired in terms of versus that six 5%.
Speaker Change: Better spend per account.
Speaker Change: This of course that spend per account was up a little bit in the fourth quarter up 3% versus 2% for the year.
Speaker Change: Yes.
Eric: So there's a lot in your question, Eric Let me try to address most of the points. The first thing is that.
Speaker Change: Yeah.
Speaker Change: There, it's very hard to read a lot in the quarterly distribution of NCA.
Speaker Change: And there is definitely not a good alignment between the marketing spending in the quarter and the NCAA the quarter. There is like a time difference between the two because of.
Speaker Change: They're the accounting around how we account for the welcome incentives, but the point here is that we invested a lot in 2024, and we got a lot of cards 13 million Congress, which is a record for the company as you think about how this is going to play out in the math, we're doing about the 2025 spend.
Speaker Change: As you know we the way we think about billings growth is like we split it between what's coming from this recently acquired card members, what's coming from organic which you're either the growth coming from the tenured card members and the last piece of the puzzle is attrition.
Speaker Change: The expectation that we have up to 25 around attrition is consistent with <unk> seen over the last almost the last four five years is that it's going to be like very stable very low theres not a lot of.
Speaker Change: Either attrition going on here in terms of the 1 billion grows their contribution coming from organic is the one that is the hardest to predict.
Speaker Change: And that's the source of the softness we saw in Q4, and that's what either is or the positive performance.
Performance that we saw the softness we saw in 2024 and that's the organic that was stronger in Q4. So it's hard to see how that organic is going to perform in 2025.
Speaker Change: But it is the source of the volatility for sure.
Speaker Change: And we provided some of the details in the past, but I would say a good 7% of the billing growth comes from these new customers and the balance is typically the organic spending the attrition.
Speaker Change: Thank you. Our next question comes from the line of Mark Devries with Deutsche Bank. Please proceed with your question.
Speaker Change: Thanks.
Speaker Change: As we've been discussing youre seeing accelerating billed business growth in the year.
And we're also getting consumer and business confidence that's only been climbing so Steve I was hoping.
Speaker Change: To hear about what you may have learned both from any conversations you've had with customers recently about kind of their optimism and spend and also just looking at your historic.
Speaker Change: Billed business numbers and how that is historically kind of respond to rising confidence.
Speaker Change: Well I think look I think.
Speaker Change: I think we saw rising confidence in the fourth in the fourth quarter certainly you saw it from a consumer perspective.
Speaker Change: 9% I think as I will just go back and comment on on travel I mean travel traditionally for us, especially airline in the fourth quarter is not.
Speaker Change: It's not a big number but it doubled sequentially in front of the cabin I think front of the cabin is a really good indicator of consumer confidence because what you do is when people don't have confidence they may not cancel the trip, but they may downgrade downgrades of hotel downgrade the airlines.
Speaker Change: This class of service and so forth so.
Speaker Change: I think we're seeing more consumer confidence we've done a survey of small businesses and the sentiment is really really good and it's higher than it's been in a long time and I think we saw that come up with from an organic growth perspective International is just been strong international has been a strong story for us since.
Speaker Change: Two years after Covid it has just been.
Speaker Change: It's been marching on so I think that that's what gives us hope.
Speaker Change: Hope for the year that this will continue but again hope is not a plant and so we do our plan based upon what we saw at the time of the plan and as we look at the first the first couple of months in the first quarter, we will see where we are and provided that we have this continued.
Growth, we would expect again to be at the high end of the range from a revenue perspective, the only thing that I will throw out there from a timing perspective is that we will have one less day.
Speaker Change: In.
Speaker Change: In this first quarter due to leap year. So we'll have to we'll manage that but we like to look at things on a day's mix adjusted basis anyway, and so we will be able to see through that and determine what that will mean for the second quarter. So I think theres more to come but I think the basic story here is.
Speaker Change: There is consumer confidence at this point.
Speaker Change: There is small business confidence.
Speaker Change: Don't want one quarter to the color of what a whole year's going to be we'd like to see that be repetitive before we do anything with it.
Speaker Change: Thank you. Our next question comes from the line of Craig Maurer with Ft Partners. Please proceed with your question.
Craig Maurer: Yes, good morning. Thanks.
Speaker Change: Wanted to I had two.
Craig Maurer: Two questions the first on.
Craig Maurer: SME.
Speaker Change: We've seen very strong growth from some of your competitors some newer competitors like ramp.
Speaker Change: And was wondering how you feel about your customer facing tech in SME and whether that might be an area.
Speaker Change: <unk> acquisition in the future and second Delta had very strong commentary about.
Speaker Change: The co brand card growth and their expectation.
Speaker Change: For 2025 that that growth will be at least as good.
Speaker Change: So I wanted to ask you how that lines up with your thought process on that.
Speaker Change: Travel space and how the Delta books been Comping versus the rest of the book Thanks.
Speaker Change: Yes, I think well remember.
Speaker Change: Look we align very closely with Ed and his team and so we're aligned with that but also remember that that Delta book is not just what's spent on delta. It is spent what delta card members.
Speaker Change: Thus card member spend on on everything else and so.
Speaker Change: Look I think.
Speaker Change: The renewed narration net we provide delta we would expect that to continue to increase we are happy to see that increase because that means spending is increasing and we're getting our piece of the pie.
Speaker Change: We're getting our piece of the pie as well so.
Speaker Change: I think it bodes well for travel.
Speaker Change: And I think that.
Speaker Change: We saw that in the fourth quarter and we hope that that continues and I know in my conversations with Ed. He feels very confident about about this year and I think thats, how we spoke about it.
Speaker Change: During his his earnings call.
Speaker Change: As far as SME.
Speaker Change: Look we constantly look at ways to improve the customer experience and obviously I'm not going to comment on.
Speaker Change: Acquisitions or things like that but we feel good about.
Speaker Change: Where we are and the progress that we're making especially with our <unk> acquisition and so forth and yes, we keep our eye on on ramp.
Speaker Change: <unk> and everybody else that's out there.
Speaker Change: They are working from a smaller base, but they have good products and theyre, making some inroads and we will make sure that we are responsive to that.
Speaker Change: Thank you. Our next question comes from the line of Don Vendetti with Wells Fargo. Please proceed with your question.
Speaker Change: Good morning, Steve It looks like the capital one discover merger its going to go through any thoughts on the competitive impacts I know that all.
Speaker Change: Incremental affluent consumers, but it's more scale ability to belt mild jazz and they do compete SMA.
Speaker Change: SMA.
Speaker Change: Yes look I think rich is a really smart CEO and I think it's a really good I think it's a really good deal for them.
Speaker Change: Picks up a debit network.
Speaker Change: Picks up a lot more scale at.
Speaker Change: Yes, I think he becomes the largest credit card lender.
Speaker Change: In the United States.
With that.
Speaker Change: Discover.
Speaker Change: No.
Speaker Change: It's a multifaceted company not only with the debit and credit cards, but with a bunch of loans and what have you from a car student and what and so forth. So I think I think it fits very nicely in with their with their strategy.
Speaker Change: Capital one with venture Axis is making inroads.
Within the premium space I think we continue though to more than hold our own.
And look they're a formidable competitor but.
I think also they will have.
Speaker Change: Their hands full with integrating.
Speaker Change: Discover over the next couple of years, and we will continue to evolve our products with our product refreshes and we look forward to competing with them.
Speaker Change: Thank you. Our next question comes from the line of Rick Shane with J P. Morgan. Please proceed with your question.
Rick Shane: Thanks for taking my question, Hey, Steve one of the key initiatives of your team and your tenures the increased focus on experiences and incentive versus reward.
Rick Shane: The impact on account growth has been significant well understood.
Rick Shane: Is it fair to say that the.
Rick Shane: Other benefits besides growth is that there's higher operating leverage because theres more fixed costs associated with it.
Rick Shane: Experienced than there is with traditional rewards.
Rick Shane: It's a good point I think that you're absolutely right. I mean, you have you do have.
Rick Shane: More fixed cost when youre doing sort of experiential sponsorships you have more fixed cost when youre doing lounges and things like that.
Rick Shane: Then you do when you're on a variable rewards basis. The trick is with that piece of it though is that as you continue to grow it's just like technology right.
Rick Shane: You have X amount of mainframe capacity or servers or what have you and then as you get big you need to add a little bit more but then you grow into that scale and so I think thats, what youre seeing and as we expand some of our lounges, we'll be making some more investments not only new lounges, but we'll be expanding some of the existing lounges as well, but I think thats part of the.
Rick Shane: The calculus for us is that.
Rick Shane: Our card members.
Rick Shane: While they like the rewards.
Rick Shane: They also like all the experience and the access that we put around it and so by making sure that we're balancing our investments in these areas, we're able to give people the best of both worlds and that's what we strive to do and it also enables us again to lever a little bit more fixed costs across a wider base.
Speaker Change: Thank you. Our next question comes from the line of Jeff <unk> with Morgan Stanley. Please proceed with your question.
Jeff: Hey, good morning, Thanks for taking my question.
Jeff: Steve I was wondering if you could shed a little bit more light into the planned product refresh strategy for this year, where you might go with that I know you've previously talked about refreshing every three years to four years and platinum U S. Platinum is one that's sort of been sitting out there since 2021 and.
Speaker Change: Christoph I was wondering if you could maybe shed a bit of it a little bit more light into your credit commentary.
Speaker Change: Credit has been doing pretty well it seems like it's outperformed what you've been looking for stable this year.
Speaker Change: You talk about why you might be expecting a little bit of a modest increase from here.
Speaker Change: Is that conservatism on your part or do you think you could actually see a better result in that.
Speaker Change: Yes, so I'll disappoint, you with the first answer but.
Speaker Change: So look we're going to we're going to do between 35, and 50, I am not going to comment on which ones and pre announce I think that will let.
Speaker Change: We will let you speculate on what's going to happen, but yes, we look to refresh products on a on an ongoing basis and also when we feel the need that those products need refreshing. So.
Speaker Change: You'll just have to wait and see what we come out with but.
Speaker Change: We had 11 more months to go.
Jeff: Good morning, Jeff under on the credit metrics.
Speaker Change: First thing that are going to face.
Speaker Change: We are still materially below where we were.
Speaker Change: Pre COVID-19.
Speaker Change: I think most of our competitors.
Speaker Change: So that tells you something about.
Speaker Change: The performance from a credit standpoint, it says as well that the all the growth that we generated over the last few years was very much focused on.
Speaker Change: Premium space.
Speaker Change: So unlike unlike that so the comment on the upward buyers I made a similar comment at the beginning of last year and it turned out that.
Speaker Change: The credit metrics, where it should be fairly stable, especially towards the later part of the year, but still believe that.
Speaker Change: Those metrics should trend up a little bit why.
Speaker Change: Either remain best in class, they're going to trend up because we are acquiring a lot of customers.
Speaker Change: And theyre going to be some seasoning happening for for those vintages and the performance either of those metrics are so little still good that to some extent they can only go up a little bit from here.
Speaker Change: But neither of these are.
Speaker Change: We're very comfortable with the performance on the credit side.
Speaker Change: The premium Ness of the strategy is just working in translating really well and the credit performance, we issuing either premium products soon that attracts a lot of either very low credit risk customers and so where we are it's just like there is a very good position.
Speaker Change: No.
Hope that by the time I get to get to the end of the year are we looking at this reason I can see it was wrong and the credit were stable, but I think in the enrollment from the trend is that you should expect those metrics to trend up a little but it's very modest but a little bit.
Speaker Change: Yes.
Speaker Change: Thank you. Our next question comes from the line of Chris Kennedy with William Blair. Please proceed with your question.
Speaker Change: Good morning, Thanks for taking the question marketing investment has increased a lot in recent years can you just talk about how the allocations have evolved between the different buckets, such as customer acquisition General brand marketing and sponsorship activity. Thank you.
Speaker Change: General either brand sponsorship has been fairly stable.
Speaker Change: Either the past years.
Speaker Change: And the lion's share of the growth that you saw in marketing. So we'll see over the last 12 months the $83 million between last year and this year. The lion's share of that is screaming into acquisition.
Speaker Change: Then Peter is we split it between what we call consumer acquisition versus prospect acquisition.
Speaker Change: Consumer acquisition.
Speaker Change: Customer acquisition story refers to.
Speaker Change: Upgrading and companion cars and these are very attractive investments. So we're trying to find the right balance between investing in deepening the relationship with our current customers and prospect acquisition. So.
Speaker Change: I don't have the split between the two but we typically try to fund FERC that customer acquisition, which is the most attractive in terms of return and.
Speaker Change: And we look at the opportunities that exist in the market.
Speaker Change: We maintain our very strict standards in terms of underwriting and returns.
Speaker Change: And try to maximize that so we have as you know are sophisticated process to optimize those marketing dollars, but either very high level I think thats there thats the story.
Speaker Change: Thank you. Our next question comes from the line of Moshe Orenbuch with TD Cowen. Please proceed with your question.
Speaker Change: Great. Thanks, Matt most of my questions have already been asked and answered, but maybe could you drill down a little more on the.
Speaker Change: Semi business.
You saw a little bit of acceleration in the fourth quarter.
Any thoughts either.
Speaker Change: The trends in momentum there more specifically.
Speaker Change: Or.
Speaker Change: Plant I know, Steve you said, you didn't really want to talk about plans for refresh but are there things that we should be looking for in 2025.
Speaker Change: I think most of the.
Speaker Change: What I would say about SME, which is.
Speaker Change: We still continue to acquire.
Speaker Change: The same amount of SMB customers that we've been acquiring our attrition is the same it really continues to be an organic story.
Speaker Change: And organic spending has still not come back to the levels that we saw.
Speaker Change: Sort of pre Covid and so if you look at what's happening from an SME perspective during COVID-19 organic spending one all the way down coming.
Speaker Change: Added Covid really started to ratchet up and then it sort of normalized a little bit and then you had inflation higher interest rates and so forth. So I think we started to see the T cell of the deceleration of organic spending stop and start to turnaround what I think the story will be with SME.
Speaker Change: So we can get that back to a 3% organic the lift you will see that you will see SME then be more of a contributor to overall billings than it is than it is right now so.
Speaker Change: It truly is an organic story.
Speaker Change: And I'd, just say as you pointed out I'm not going to talk about refreshes, but I think it really comes down to small business confidence.
Speaker Change: And it's not an acquisition story, it's an attrition story. It truly is still an organic story for us and I think the industry is still seeing that as well.
Speaker Change: Thank you. Our next question comes from the line of Brian <unk> with the Truest. Please proceed with your question.
Speaker Change: Hey, good morning, I hate to use my question on FX, but.
Speaker Change: Is the eight to 10.
Speaker Change: FX adjusted guide or gas.
Speaker Change: Because I think you mentioned you assume the dollar stays here.
Speaker Change: Can you remind us the EPS impact I know theres, some expense and hedging.
Speaker Change: So is there any appreciable EPS drag we should think about embedded in that 15% to $16 50 range.
Speaker Change: Yeah. So thank you for your question Brian.
Speaker Change: The first thing.
Speaker Change: I'm going to say on this debt.
Speaker Change: We talk about FX, adjusted and FX reported because we think it is useful to you and to us.
Speaker Change: Think about the momentum that we see from a revenue from a billing standpoint.
Speaker Change: Sure.
Speaker Change: Due to stable currency like once we control for currency movements, because that reflects the true momentum in terms of transaction.
Speaker Change: Either new.
Speaker Change: FX noise. So for that reason, we speak about it.
Speaker Change: FX adjusted terms as we think about forecast and predictions.
Speaker Change: It's impossible for us to predict where we're going to be from an FX standpoint. So we cannot talk about it either in terms of FX reported at year end, because we don't know which way the dollar is going to go.
Speaker Change: And therefore.
Speaker Change: Not trying to.
Speaker Change: The way to think about the impact of these currency movements.
Speaker Change: In Q4 right here, we have actual movements the difference.
Speaker Change: <unk> gross standpoint was one percentage point FX adjusted revenue growth was 10%.
Speaker Change: <unk> reported GAAP reported was 9%. So the impact is material was one percentage point of revenue growth in terms of EPS impact its or its a far more complicated stories, because behalf expenses spread out across the world. We have centers of excellence. So it's really a complicated.
One.
Speaker Change: I.
Speaker Change: Refer you I think it's in the K or in the Q, where we have sensitivity and it goes something like this you can check the numbers precisely, but a 10% increase in the in the dollar or 1% increase over the 10% increase in the dollar translating to $136 million.
Speaker Change: Dollar negative impact on PCI and so that's the kind of sensitivity. So it's not hugely impactful, but it is a little bit impactful steel.
Cellular Martinez: Thank you. Our next question comes from the line of cellular Martinez with HSBC. Please proceed with your question.
Cellular Martinez: Hi, good morning, Thanks for taking my question.
Cellular Martinez: Double click a little bit on the international business.
Speaker Change: Well I think you've said each of your top five markets you grew mid to high teens.
Speaker Change: <unk> range can you just comment on what some of the drivers are.
Speaker Change: What kind of momentum youre seeing in terms of merchant acceptance.
Speaker Change: The sales changes you made a couple of years ago, we are impacting it and I guess I'm just trying to get at.
Speaker Change: How you feel about the trajectory and the sustainability of that kind of growth.
Speaker Change: Well, we feel really good about the trajectory and the sustainability merchant acceptance and international continues to grow.
Speaker Change: <unk> acquired millions of merchants in a comment that I made is.
Speaker Change: We're at <unk>.
Speaker Change: 80%.
Speaker Change: Coverage in the in the key markets and from a <unk> perspective, where over 80% you saw that go up by by eight points over the last three years. So.
Speaker Change: Merchant acceptance internationally continues to grow very very rapidly for us as far as.
Speaker Change: Overall growth.
Speaker Change: We invest quite a bit in card acquisition in international and <unk>.
Speaker Change: Our opportunities in international card acquisition is still really really good and lot of that growth comes from new cards for us.
Speaker Change: So we think with less than 6% market share in the top five markets and in a.
Speaker Change: And in SME environment, which is really nascent at this point, we think there is still big opportunities in SME and in consumer for us and so our expectation is at double digit billings will will continue.
Speaker Change: For the foreseeable future and remember pre Covid. That's what we saw international was the fastest growing part of our business because we added merchant locations and we added more cards during COVID-19 It was <unk>.
Speaker Change: Internationally, you recall was.
Speaker Change: More than a two year stoppage, but it's right back to where it was pre COVID-19 and we continue to we continue to feel that that's going to continue.
Speaker Change: Thank you. Our next question comes from the line of Terry MA with Barclays. Please proceed with your question.
Terry MA: Hey, Thank you good morning.
Terry MA: I just wanted to ask about net card fee growth I think you guided to mid to high teens growth in 2005 with some moderation. So maybe just unpack that a bit you've historically had more of a runway to accelerate that kind of growth.
Terry MA: Some major refreshes. So I'm just curious why that would actually moderate this year.
Terry MA: I mean.
Terry MA: The first thing is that these growth rates have been.
Terry MA: Very strong for a very long period of time as a matter of fact.
Terry MA: This quarter marks the 26th consecutive quarter, where we've seen card fee growth in double digit and it's Mike.
Mike: Double digits I think the CAGR of 13% over the spirit of time, but something of that magnitude so very strong growth.
Terry MA: At the beginning of the year.
Terry MA: We started the year at like 16% and we said we should expect to exit the year with an acceleration, which is exactly what happened we were at 18% last quarter and 19%.
Terry MA: 18% in Q3, 19% in Q4, so theory strong growth, which.
Terry MA: It's always a complicated.
Terry MA: Theres always a lot of moving factors here, so it's not easy to simplify it too much but the big driver of that acceleration was actually the cycle of a product refreshes and we can we can see in our remodels.
Terry MA: And therefore as you think about 2025.
Terry MA: The acceleration that we saw in Q3 Q4 is still going to play out in Q1.
Terry MA: 2025, and afterwards, it should trend in a little bit more like what you saw at the beginning of 2024, which is this mid teens.
Terry MA: Growth rates, so still continuing a theory strong trajectory of card fee growth.
Terry MA: And just wanted to remind as well that on this 13 million cards that we acquired this year, 70% or joining the franchise on a fee paying product right. So that supports that growth.
Terry MA: Together with the very strong renewal rates that we see as well. So it's just it's been a series of successful story for us not only recently, but over the last five years and that success going to coupon.
Terry MA: In 2025.
Thank you our final question will come from the line of Mihir Bhatia with Bank of America. Please proceed with your question.
Terry MA: Okay.
Mihir Bhatia: Good morning, and thank you for taking my question, maybe I just wanted to take a little bit of a step back in a big picture question for you just about.
Speaker Change: Competition from Fintech.
Speaker Change: That has been evolving you talked a little bit about it on the commercial side earlier in response to Craig's question, but maybe just talk about it on the consumer side as well.
Speaker Change: Typically I was wondering we've been seeing some.
Speaker Change: Pretty rich cashback offers from some of the newer entrants in the market. If you will is that starting to have any impact on drawing customers away from the traditional revolt, Scott and just what are you seeing on the competition. Therefore.
Speaker Change: In the consumables I think you know I would say I'd go back to the answer I gave before I think Rick Shane asked the question before about how we invest I think our card member is a little bit different.
Speaker Change: They are really not really focused on cash back with cashback products for those that like it but our card members are more focused on a balanced between rewards experience and service and so from a fintech perspective on the consumer side, we really have not seen seen anything not that we don't look at it not that we're not aware of it.
Speaker Change: But again, it's about knowing your customer and our customer.
Speaker Change: Is one that really does value that experience.
Access and service as well as having rewards with it so.
Speaker Change: And thats not something that the fin techs have been able to to really replicate.
Speaker Change: Again, it is more of a more of a cash back more of a cashback product.
Speaker Change: On the SME side, it's technology.
Speaker Change: Integrated with card and.
Speaker Change: We're very aware of that and as I said, we will we will take the appropriate steps to address that so on a consumer side don't know we have not seen any inroads.
Speaker Change: At all and if you look at it our card acquisition, we don't unpack it put our card acquisition from a from a consumer perspective was at record levels as well so.
Speaker Change: We had we had high high consumer cards that we've acquired so.
Speaker Change: Yeah.
Nothing to see there at this point, but again, we'll continue to we'll continue to watch it.
Speaker Change: Thank you with that we will bring the call to an end.
Speaker Change: 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.
Speaker Change: Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at IR Dot American Express Dot com shortly after the call.
Speaker Change: You can ask that also access the digital replay of the call at 870 76606853 or 201.
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Speaker Change: That will conclude our conference call for today. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.