American Express Company (AXP) — Q3 2019 Earnings Call Transcript

Thank you, Alan, and thanks to 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 slides and on our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results. Then Jeff Campbell, CFO, will provide a more detailed review of our financial performance. After that, we'll move to the Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Thanks, Rosie. Good morning, everyone, and thanks for joining us. As you saw in our release earlier today, our third-quarter results are a continuation of the consistent steady performance we've been delivering over the last few years. We had strong FX-adjusted revenue growth of 9% in the quarter, and our EPS of $2.08 was 11% higher than last year. The consistently high levels of revenue growth we are delivering is the result of the focused approach we've taken in executing our strategy and the strength of our differentiated business model. This was the 9th straight quarter where FX-adjusted revenue growth was 8% or higher. I'm especially pleased that our revenue growth continues to be driven by a well-balanced mix of spend, loans, and fees. Card fee revenues were particularly strong, growing 19% and exceeding $1 billion this quarter for the first time. Nearly 70% of the cards we've acquired this year are fee-based products, providing us recurring subscription-like revenues. The trends we saw in the business remain consistent with an economy that continues to expand, albeit at a more modest pace than last year. Our FX-adjusted proprietary billings grew 7%, led by strong growth in our U.S. and international consumer businesses. We continue to deliver healthy loan growth, and our credit performance remained at industry-leading levels. In fact, better than the expectations we had at the beginning of the year. So, as you can see, even with some uncertainty in the global economic and political environment, our strategy of investing in share, scale, and relevance is enabling us to deliver steady, solid results. With that in mind, I'd like to discuss our progress on the three company-wide initiatives I laid out at Investor Day. As a reminder, these cut across all of our strategic imperatives. They are focusing on our customer as a platform for growth, expanding and leveraging our network of strategic partners, and prioritizing our investments in international to drive growth. Let's start with customers as a platform for growth. Our global diverse customer base has become a major source of growth for us. One of the ways we're deepening relationships with existing customers is through the disciplined strategic approach we've taken to continuously refresh our products. These refreshes are not just cosmetic changes. We're redefining membership by adding innovative, experiential, and rational value that our customers respond well to, and we're pricing for that additional value. In the third quarter, we continued the refresh of our Platinum Card portfolio across several international markets, and we're following a similar playbook with our Gold Cards. Now, we're updating our iconic Green Card. A few weeks ago, we introduced a new Ocean Plastic design, and later this month, we'll announce an array of changes to the product, including new benefits, broader payment flexibility, and a digital focus. Just yesterday, we announced the major refresh of our Corporate Card program, which includes a number of new features, including enhanced benefits with Uber, Hilton, and CLEAR, the biometric identification system that expedites the airport security process. As part of that announcement, we introduced an extension of our Corporate Card program designed to meet the needs of start-ups with features that include corporate liability and dynamic spending capacity. As I've said on prior occasions, we typically see a significant increase in spending when our customers add an additional Amex product to their wallets, and our Corporate Card members represent a great opportunity here. For many of our customers, the Corporate Card is their first American Express product. To encourage them to add a personal card, we're creating ways that provide benefits for carrying both, such as a new program that offers an incentive for Corporate Card members to obtain one of our select consumer cards. These initiatives are proving to be a terrific platform for growth. We're seeing a lift in spending and engagement on our refreshed products. Over 60% of our total loan growth is coming from existing card members, and we're earning a steady stream of revenues as more customers move to fee-based products, which are priced to the additional value we're delivering. Our customers have also become one of the best and most efficient ways to bring new card members into the franchise. Through our Member-Get-Member referral program, we've acquired over 250,000 new customers this year so far. In addition, successful referrals have increased 35% compared to last year's third quarter. Turning to partnerships. The third quarter continued to demonstrate the benefits of our powerful network of partners who help us deliver enhanced value across the enterprise. As I've said before, partnerships are essential to each of our strategic imperatives, and they take many forms from the over 50 co-brand relationships we have around the world to our recent digital partnerships to expanding our merchant network. When we talk about partnerships, we have to start with Delta, our largest, deepest, and longest-running relationship. At the end of September, we announced seven refreshed Delta SkyMiles co-brand cards as part of our renewed 11-year agreement with the airline. The new cards, which will be available in January in the U.S., will feature a range of customized travel benefits for both consumers and small business card members. Also in the third quarter, we launched a new small business credit card in the U.K. with British Airways and one in Singapore with Singapore Airlines, and we announced refreshed consumer cards in Canada with AIR MILES and Scotiabank. In addition to co-brands, we've been expanding our digital partnerships. Earlier this week, we announced two new offerings with PayPal and Venmo for U.S. consumer card members. First is the ability to pay for purchases made through PayPal with membership rewards points. We're also introducing bill functionality within the Amex mobile app. On the merchant side, with the help of our OptBlue partnerships, we remain on track to achieve virtual parity coverage in the U.S. by the end of the year. Internationally, our strategy of selectively increasing our investments to drive share, scale, and relevance through a country-by-country approach is delivering strong results. Despite political and economic uncertainty in some regions, international remains the highest growth area of our business. Third-quarter results showed continued strong growth across both consumer and small business segments, driven by results in our top strategic countries where we've allocated incremental investments. Since the beginning of the year, we've launched 18 new or refreshed proprietary cards, three co-brand cards, and 30 network cards across international. As a result, we're taking share and generating strong billings growth in most of our proprietary countries, with overall FX-adjusted Consumer Proprietary Billings up 14% in the quarter, and FX-adjusted SME billings up 18%. Finally, we're making good progress on expanding merchant coverage, which is key to our overall international growth strategy. As you can see, we've made a lot of progress in each of our three priority areas since March, and there's more to come. In summary, I feel very good about our performance in the quarter and year-to-date. As we look ahead, I expect the consistent trends we've seen to continue into Q4, translating into revenue growth of 8% to 10% in the quarter, and we are reaffirming our full-year guidance of adjusted EPS between $7.85 and $8.35. Our performance reinforces my confidence in our ability, in today's environment, to sustain high levels of revenue growth and consistent double-digit EPS growth, which creates value for our shareholders. I'm excited about the opportunities that lie ahead and look forward to updating you on our progress. Now, let me turn it over to Jeff.

Well, thank you, Steve, and good morning, everyone. It's good to be here today to talk about yet another solid quarter of steady and consistent performance. Let's get right to our summary financials on Slide 3. Third-quarter revenues of $11 billion grew 9% on an FX-adjusted basis, with this growth driven again by a well-balanced mix of spend, lend, and fee revenues. We continue to see a spread between our reported revenue growth of 8% and FX-adjusted revenue growth of 9%. Although the U.S. dollar has strengthened recently, the spread between our reported and FX-adjusted revenue growth has lessened slightly relative to Q2. As you recall, the year-over-year strengthening of the U.S. dollar began in the third quarter of last year. Assuming the dollar stays roughly where it is today, you should see reported and FX-adjusted revenue growth levels more similar to each other in the fourth quarter 2019. Our strong topline revenue performance drove net income of $1.8 billion, up 6% from a year ago, and earnings per share was $2.08, representing EPS growth of 11% in the third quarter. This EPS growth was supported by the 4% reduction in our share count enabled by our continued prudent management of the capital generating capabilities of our business model as we returned $5.5 billion in excess capital to shareholders through dividends and share repurchases in the last four quarters. Turning now to the details of our performance, I'll start with billed business, which you see several views of on Slides 4 through 6. Starting on Slide 4, our FX-adjusted total billings growth for the third quarter was 6%. We think it is important, though, to continue to break out the billings growth between our proprietary and network businesses due to the differing trends as we exit our network business in Europe and Australia. We expect to fully lap the billings impact from these exits in 2020. Our proprietary business, which makes up 86% of our total billings and drives most of our financial results, was up 7% in the third quarter on an FX-adjusted basis. The remaining 14% of our overall billings, which comes from our network business, was down 2% in the third quarter on an FX-adjusted basis. Turning to our proprietary billed business growth on Slide 5. The trends this quarter continue to be consistent with the economic tone. The U.S. consumer continues to show solid growth with even some modest acceleration as we have gone through 2019. The international consumer shows even higher levels of growth and our commercial customers are lapping a particularly strong 2018 with spending trends that have diverged a bit from the consumer segment. You see this as you turn to Slide 6. We first spoke last quarter about potential signs of caution in commercial spending trends relative to the strong and steady growth we see in consumer. Over the last few months, the headlines and macro data suggest that these trends continue, particularly among the larger corporations within our customer base. We see these dynamics in our large and global corporate card trends, where we had a 1% decline in billed business on an FX-adjusted basis in the third quarter. So, adjusting for the reduction in spending from just two large customers, where we saw some client-specific decreases, the growth rate would have been a bit above 1% this quarter. In contrast, spending from our U.S. small and mid-sized enterprise card members or SMEs grew a solid 6% in the third quarter with relatively stable growth throughout the three months of the quarter. We continue to feel great about the long-term opportunities with both of these customer types. As Steve highlighted a few minutes ago, we are making investments that leverage our strong leadership position and differentiated business model to take advantage of these opportunities. International SME remains our highest growing customer type with 18% FX-adjusted billings growth in the third quarter. Given our focus on this segment and the low penetration we have in the top countries where we offer international small business products, we believe we have a long runway to sustain this strong growth. Moving to U.S. consumer, which made up 33% of the company's billings in the third quarter, billings were up 8%. This growth reflects continued strong acquisition performance and solid underlying spend growth from existing customers. These trends also highlight the continued strength of the consumer in the U.S. Moving to the right, international consumer growth remained in the teens at 14% on an FX-adjusted basis. As we mentioned earlier, we continue to have widespread growth in our proprietary business across key markets, despite the mixed macroeconomic and geopolitical environment. While growth in Australia and Mexico moderated to the high-single digits this quarter, we continued to see strong growth of 19% in both the U.K. and Japan as well as double-digit growth in our top markets across the EU, all on an FX-adjusted basis. Finally, on the far right, as I mentioned earlier, Global Network Services was down 2% on an FX-adjusted basis, driven by the impacts of regulation in the European Union and Australia, where we are in the process of exiting our network business. Although network billings are down in these regions, if you were to exclude the European Union and Australia, the remaining portion of GNS was up 3% on an FX-adjusted basis. Overall then, we continue to feel good about the breadth of our billings growth and the opportunities we see across the range of geographies and customer segments in which we operate. Turning next to loan performance on Slide 7. Total loan growth was 9% in the third quarter, with over 60% of that growth again coming from our existing customers. We feel good about our lending strategy, which is focused on taking advantage of the unique opportunity we have to deepen our share of our existing customers' borrowing. We believe we have a long runway to continue this strategy. Moving to the right-hand side of Slide 7. Net interest yield was 11.1% in the third quarter, up 30 basis points relative to the prior year, reflecting continued positive impacts from mix and pricing for risk. We remain focused on optimizing our lending capabilities and pricing constructs, and we have seen lower loan balances on promotional offers, as we have shifted towards more premium products. The combination of loan growth and yield increases are contributing to the 12% growth in net interest income that we delivered this quarter. Slide 8 then shows the credit implications of our strategy. As you can see, the trends on both write-off rates and delinquencies continued to be stable and benign, reflecting in part the low unemployment rate in a relatively stable economy. We see these trends across both our consumer and commercial segments. The GCP net loss ratio remains lower than last year. Both consumer and small business credit trends also remained steady. These trends lead to the same conclusion we have reached in each quarter so far this year. We do not see anything in our portfolio that would suggest a significant change in the credit environment, both on the consumer and commercial side. In fact, all of these portfolios are performing much better than we expected at the beginning of the year. This brings us to provision expense. In the third quarter, provision expense growth was 8%, reflecting the greater stability in our credit trends that began in the second half of 2018. Clearly, as we've gone through the year, credit performance for us as well as for others in the industry has been better than expected. That's what we saw again in the third quarter, and as a result, we now expect full-year provision growth of around 10%. While we are on the subject of provision, let me take a few minutes to talk about CECL. We are making good progress on our efforts to prepare for implementation on January 1, 2020. We stick with our comments from last quarter; based on our work so far, we estimate that if we implemented CECL today, our current total reserves of $2.8 billion would increase by roughly 25% to 40%. This estimate includes a roughly 55% to 70% increase in lending card reserves, somewhat offset by a significantly lower charge card reserve, given the extremely short life of a charge receivable. Stepping back, there are three important takeaways on CECL that I would like to leave you with. First, we believe that the capital impact of the one-time implementation increase in reserves will likely be very manageable, given our strong balance sheet, over 30% ROE, and spend-centric model. Next, it is important to keep in mind that CECL will have an impact on our provision expense going forward. Although the ultimate impact will be heavily dependent on many factors, we will likely have higher provision expense under CECL relative to the current accounting methodology, as we continue to grow our loan book. Since we are currently finalizing our CECL models and working on our 2020 plan, we'll provide more color on the expected 2020 impact from CECL on next quarter's call. Finally, CECL is merely an accounting-driven acceleration of estimated losses. There is no change to the underlying economics, our view of the risk profile, or the ultimate expected losses in our portfolios. Given this, as well as our strategy of investing for growth, we do not intend to change our investment plans because of the impact CECL will have on provision expense growth in 2020. Now, let's get back to our results and turn to the strong revenue growth of 9% on an FX-adjusted basis that you see on Slide 10. The consistent execution of our strategies and our focus on investing in share, scale, and relevance has driven topline revenue growth of 8% or more for over two years. This consistent revenue performance has occurred in both the robust economic environment of 2018 and the somewhat slower growth environment of 2019. Despite the modest sequential deceleration in volume growth we saw this quarter, our revenue growth of 9.4% in the third quarter was relatively flat compared to the 9.6% growth we delivered last quarter. This revenue growth was again driven by broad-based growth across spend, lend, and fee revenues as you can see on Slide 11. Importantly, the portion of our revenue coming from spend and fee revenues remained at 80% in the third quarter, in line with both recent history and a much longer view of our history. Discount revenue was up 6% on a reported basis and was up 7% on an FX-adjusted basis, making this the eighth consecutive quarter with discount revenue growth above 6%. We view this as continued evidence that our strategy of focusing on driving discount revenue, not the average discount rate, is working. Moving on to the things we are investing in to drive our strong revenue growth. Customer engagement costs, which you can see on Slide 13, were $5 billion in the third quarter, up 11% versus last year. Marketing and business development costs were up 11% in the third quarter and were in line with Q2. This line has two components, our traditional marketing and promotion expenses, and payments we make to certain partners, primarily corporate clients, GNS partner banks, and co-brand partners. This is the second quarter, where we are seeing the impact of our renewed agreement with Delta, which increased our marketing and business development costs by $200 million relative to our original outlook for the full year. Continuing on to rewards expense, it was up 9% relative to the prior year, a bit higher than our billing trends, given our evolving value propositions. Moving to the top of the slide, Card Member services costs were up 22% in the third quarter. We continue to expect this line to be our fastest-growing expense category, as it includes the cost of many components of our differentiated value propositions such as airport lounge access and other travel benefits, which we believe are difficult for others to replicate and help support the strong acquisition and engagement we are seeing on our fee-based products. Moving on to operating expenses on Slide 14. We saw a 5% increase in the third quarter, consistent with a long track record of getting operating expense leverage by growing OpEx more slowly than revenues. I would offer two comments here. As I mentioned last quarter, some of the investments we are making to deliver continued strong revenue growth, like in sales force, premium servicing, and digital capabilities, will cause us to see more growth in this line than we have seen in recent years. Through our Amex Ventures group, we have a strategic investment portfolio of over 40 investments. This quarter's OpEx included a net benefit of roughly $0.05 related to mark-to-market adjustments on our strategic investment portfolio, which is somewhat higher than the benefit we saw last year. Altogether, I would just sum up by saying that we are confident that we have a long runway to continue to grow our operating expenses more slowly than our revenues. Turning to capital on Slide 15. Our CET1 ratio in the second quarter was 11%, at the top end of our 10% to 11% target range and we returned $1.8 billion of capital to our shareholders. Our primary focus is on maintaining our CET1 ratio within our 10% to 11% target range as the governor of our capital distribution plan. We've historically focused on maintaining capital strength while aggressively returning excess capital to our shareholders, and we will continue with that philosophy going forward. So, that brings us to our outlook, and then we'll open the call for your questions. With each quarter of this year, we've demonstrated consistent progress against our objectives of delivering high levels of revenue growth and double-digit EPS growth. Now looking ahead, given today's economic environment, we see a long runway to sustain this performance. In the near term, to give you a bit more color on the fourth quarter, we expect revenue growth to continue with the strong levels we have seen and to be within our 8% to 10% guidance range for the quarter. If FX rates stay where they are, the headwind from the strong dollar should lessen in the fourth quarter. We expect the stability we have seen in our credit trends to continue; the full-year provision growth of around 10%. Given the consistent operating performance trends we have seen throughout the first three quarters of the year, we expect our Q4 EPS results to be very much in line with our year-to-date results, excluding the $0.05 mark-to-market benefit from our investment portfolio that we saw in the third quarter and any other contingencies that may occur in the fourth quarter. This reaffirms our adjusted earnings guidance of $7.85 to $8.35 for the full year. We are working towards a 2020 plan showing high revenue growth and double-digit EPS growth off of the middle part of our 2019 EPS guidance range. This assumes we do not see a material deterioration in the economic environment versus where we are today, and it does not factor in any potential impacts from CECL in 2020. To close, our year-to-date performance and expectations for the full year demonstrate consistent execution against our strategies as well as the financial growth algorithm I shared with you at our last Investor Day. We remain focused on sustaining high levels of revenue growth and, in today's environment, double-digit EPS growth. With that, I'll turn the call back over to Rosie.

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

I have a question on net card fees. What I'm trying to get at is, you showed some acceleration in net card fee growth, but cards in the U.S. and basic cards-in-force have been largely range-bound throughout the year. So, can net card fees continue to accelerate if cards remain somewhat flat? Should card growth in the U.S. accelerate again, or how should we think about that?

Craig, as you recall, we tend to discourage people a little bit from looking at that gross cards-in-force number because what's really important here is the quality of the cards you have and the quality of the cards you're bringing in. Both Steve and I talked about the fact that 70% of the new card members we're bringing in are on fee-based products. We've talked for a couple of quarters now about bringing in a generally more premium-oriented mix of card members, and that cards-in-force number is influenced by our periodic efforts to clean out and cancel some inactive card members. So, we feel tremendously strong about the breadth of the products that are driving card fee growth, and I think there is a long runway to continue.

Yes. To add one other point, the recent strategy of consistently refreshing our products is critically important to not only growing card fees but also to growing spending from existing cardholders. Thus, I think the numbers can be somewhat deceptive due to the cleaning out of inactive cards, and there are a lot of upgrades as well. So we feel really confident about the strategy we're on.

A question on your B2B payment strategy. You acquired ACOM Pay during the quarter, which does automated AP. You have a lot of different partnerships there, and it's an area with a massive market TAM. It could move the needle for American Express. Can you update your thoughts on your investments in the B2B payment space in AP and AR automation, and if that can materially move the needle for Amex over the long term?

Yes, Bob, as we've said at Investor Day, our belief is this is a long-term opportunity. Having said that, we have entered into partnerships with companies like bill.com at the small end of the market. We've done MineralTree and WEX in the mid-space, Tradeshift, and Ariba. We now have an investment in ACOM to automate those processes. While it is a long-term play, much of our spending in the SME segment today is B2B spending, and that continues to grow. So we feel really confident about what we're doing, but as I've said before, the integration into the procurement process is tough and takes time, which is why we do these partnerships and make these investments. We still believe it's a long-term play, but we are seeing value, especially in SME, where most of our spending is B2B.

I want to delve into the divergence between acceleration of billed business on an account basis at the consumer level and a deceleration on the commercial business. Historically, has that provided any signal that we should be paying attention to?

No, not necessarily. If you look at the last recession, you would have seen the reverse; consumer coming down first and then commercial. So, I don't think that is a signal at all. As Jeff pointed out, our consumer business has shown solid growth in the U.S. quarter-over-quarter across all segments. Let me comment on where you may be seeing some softness as we look at the numbers. We've seen a 1% decline in global billed business, with some adjustments due to jet fuel and other factors, but we are coming off a high of almost 10% growth in the third quarter of last year. So, to me, that's almost stable. When I think about large and global accounts, I'm pretty comfortable. Overall, while we've seen a tick down in spending, our metrics show that it hasn't declined significantly. Credit quality is still pristine.

I have a follow-up question on your fee-based products. Some innovative fintech players, like Square, are enjoying success targeting the unbanked and underbanked customer segment. You guys were well ahead of this trend with products like Bluebird and Serve. Can you give us color on how you're thinking about those products today? Do you still see growth opportunities in that segment? How focused are you on growing those products, considering the continued innovation and enhancement of the underlying app?

We're not focused on it at all. In fact, we sold that last year to InComm. That isn't a segment that we see as an opportunity. We took a run at it, hoping to upgrade those customers into traditional products, but that was a bridge too far. We sold off our portfolio of Bluebird, Serve, and gift cards to InComm. They seem quite pleased with that transaction, and so are we. We don't see it as a growth opportunity for us.

Recognizing that credit shows no signs of deterioration, in fact, it has probably improved over the course of the year. Any sense of how to think about the impact of CECL on ongoing provisions relative to the kind of 50% increase on the credit piece, as we think about the growth of provisions into next year?

That's a fair question that we're still not ready to quantify. I do think the range we've given for the one-time impact can provide some back-of-the-envelope calculations, but there are many complexities involved with CECL. CECL will require us to incorporate forward-looking economic forecasts among the other variables that will be part of our customer segments and models. I am comfortable saying that given our levels of growth, some higher provision expense is expected in a normal economic environment under CECL. However, the ultimate impact will depend on multiple factors. I want to emphasize, however, that this accounting-driven change is ultimately an acceleration of losses that would have occurred in our financial statements anyway. It has no impact on real economics or our view of risk, and that’s why we’re willing to manage our investments for long-term growth without changing our plans.

So I just wanted to dig in a little more, Steve, to your comment about the opportunity to penetrate your corporate card customers with personal cards. It seems like this is not something that has been maximized yet. Can you clarify the go-to-market strategy and how you see the growth opportunity there?

The reality is we have not focused on penetrating our corporate card base with personal cards until now. We did some tests last year, largely out of a reluctance with our corporate card customers to access the base, but that has changed. Companies are approaching us seeking to bring more value to their employees, which opens a great opportunity for us. So, this is new territory for us, and we expect this will lead to more overall card growth.

On the mark-to-market, I want to clarify that we and all companies began to mark-to-market various investments since last January. This quarter, those margins netted to about $0.05 positive. This is an ongoing part of our business. The specific guidance about Q4 means we expect operating performance to look similar to the past quarters. You should consider our results in the context of our consistent operating performance throughout the year.

Given how strong your revenue growth has been, I'm surprised that some investors are asking how much room you have to control and further growth of OpEx. Can you share your thoughts on this?

Look, we've controlled OpEx growth over the last eight years, averaging about 6%. When considering our current strategy of high revenue growth, it makes sense to take advantage of some OpEx opportunities. While I'm confident we can manage OpEx, we won’t make any reckless decisions. We still have operating leverage opportunities, as our goal is to grow OpEx more slowly than revenues, targeting a positive delta.

David, you there?

David? Please check your mute feature on your phone.

I had a question about marketing spend. Over the past year, you had elevated marketing spend related to the brand refresh and the Delta agreement. As we think about 2020, will you see easier comparisons on spending or are there things in the pipeline that will likely absorb marketing spend in 2020?

In many ways, Chris, those examples illustrate why we've begun to promote the concept of customer engagement costs instead. We adjust our spending across various components, whether traditional marketing, rewards, or partnerships. We expect those collective costs will grow somewhat faster than revenue but they're key to driving high levels of revenue growth. So while we’ve seen elevated costs recently, we see them as necessary investments for future growth.

Thanks for taking my question. The diversity of the revenue growth is really strong. One thing that has taken some investors by surprise is the fee for card or the NIM expanding this quarter. Can you just talk about what's contributing to the discount rate expanding?

I really don't focus on the discount rate that much. It's been consistent and a little up. There are strategic renegotiations we lapped on, as well as some volatility in mix across geographies impacting results. What we focus on is consistent growth in discount revenue, understanding the relationship between discount rates and costs. We’re pleased with the growth we've seen, and we're seeing our discount revenue grow consistently.

I just wanted to ask Jeff about the GNS Slide. Is the 3% growth what we should view as a new norm for contact business?

The most important aspect of our GNS network is driving coverage in around 170 countries. Not all GNS billings have the same financial contribution. We advise caution in assuming 3% as a standard, since it can vary country to country. Once we finish lapping, we likely see it tick up a bit. The focus remains on driving global coverage with partners.

I wanted to clarify your EPS guidance. It seems you're guiding toward around $2.03 for Q4, which would get us to around $8.19 for the full year. Also, do you believe we've troughed in terms of large enterprise volume growth?

Let me provide some guidance context. We initially shared our expectations for the year and now we just inform you of changes if our performance dramatically alters our guidance. We focus on long-term performance rather than purely quarterly outcomes. As for specific math, your projections align with our expectations for consistent operating performance. We expect Q4 to resemble the earlier quarters.

Large accounts had a great year in 2018. Looking forward, we expect the growth to stabilize around the 0% to 3% range moving into the next year. As we increase our penetration into B2B, we expect to see growth resume, but currently, the focus is on assisting companies in managing their T&E spend rather than pushing for growth in that area.

I wanted to dig in on the small business year-over-year spend growth rate. Are you still seeing secular penetration happening at the same rate? What's the position against competitors, and when does B2B kick in as the small businesses automate accounts payable?

Yes, on your last question, it’s early in the process of automation, and you may see some uptick in 2020 and 2021 as that progresses. Regarding secular penetration, we’re still acquiring billed business at a similar rate, while our overall market position remains basically unchanged. We’re facing more competition than before, but we're consistently larger than the next five issuers combined. I feel good about our position and continue to enhance our small business products to maintain our leading edge.

When you consider your comfort in maintaining high levels of revenue growth next year, how achievable are these numbers given projected moderation in billed business volumes? Are your comfort levels stemming from your investments sustaining that business growth, or do you expect ongoing high levels of fee income growth?

You're correct that many investments we make today will not pay off immediately; they pay off over time. When considering delta fees and acquired cards, we are confident that these elements will sustain growth even if billed business slows slightly. We have a diverse revenue structure that includes fee income, discount revenues, and interests which gives us broad confidence in our guidance for 8% to 10% growth. We expect international growth to contribute positively, reinforcing our revenue base.

Thank you, Steve. Thank you, Jeff. 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.