American Express Company (AXP) — Q3 2024 Earnings Call Transcript

Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results. And then Christophe Le Caillec, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Christophe. With that, let me turn it over to Steve.

Good morning, and thanks for joining us for our third quarter earnings call. We had another strong quarter that reflects the steady earnings power of our business model and our continued investments for growth. Earnings per share in the third quarter were $3.49 and revenues were $16.6 billion, up 8% over last year, marking our 10th consecutive quarter of record revenues. Based on our performance to date and the strong earnings we're generating, we are raising our full-year EPS guidance to between $13.75 and $14.05, up from $13.30 to $13.80. And we continue to expect full-year revenue growth that is within the guidance range we provided at the beginning of the year at around 9%. I feel good about our performance to date and the ongoing strength of our business, and I remain confident in our long-term growth prospects. A key reason for my confidence is the sustainability of our product refresh strategy and the growth it is generating across our portfolio. We have already achieved our plan of refreshing 40 products globally this year, and we expect to do several more by year end. As we do so, we're adding value to our offerings by embedding new benefits and services that reflect the financial and lifestyle needs of our existing premium card members and attract new ones. A great example of this is the US Consumer Gold Card. We talk a lot about the Platinum Card and with good reason, but the Gold Card is also a critically important product in our portfolio. Gold is a very popular product with total US Consumer Gold acquisitions currently running at about 30% higher than Platinum. And it's our number one premium product for Millennial and Gen-Z consumers, with 80% of US Gold Cards we acquire coming from this cohort. In designing the refreshed Gold Card, which we launched in the third quarter, we know that Millennials and Gen-Zs are especially interested in dining. In fact, these younger card members transact almost two times more on dining and make up a higher percentage of users on our Resy restaurant booking platform than other generations in our card member base. With that in mind, we enhanced the already rich dining benefits that come with Gold Card membership, and as we've done with other refreshes, the value of the additional benefits is greater than the annual fee increase. While it's very early days, we're seeing strong new account acquisitions and continued high retention levels among existing US Gold Card members, indicating that our customers see real value in the enhancements we've made. This is a pattern we see when we refresh our products. We add value that resonates with premium customers and we price for that enhanced value, which results in strong acquisition and retention numbers that drive spending and consistently strong growth in subscription-like fee revenues. The Gold Card is just one example of how dining is playing an increasingly integral role in our membership model. Dining is an important category across our premium customer base. In fact, spending on restaurants continues to be one of our fastest growing T&E categories in our US Consumer business, increasing 7% in Q3 versus last year and growing at nearly twice the industry rate overall since 2019. And with total restaurant, food service spend estimated at $1 trillion in the US, dining represents a significant opportunity for us to further differentiate Amex membership. This is why we're investing and building out our dining capabilities. First with the acquisition of Resy in 2019, and more recently with the additions of Tock in Rome, both of which have closed since we announced them in Q2. We've made significant progress to date. We've successfully scaled Resy since acquiring the company with over 50 million registered users, and in the last 12 months alone, the platform has seated over 350 million diners. We're also embedding Resy benefits in several of our value propositions, including the US Gold Card I just mentioned, as well as our US Consumer Platinum Card and the Refresh Premium Delta SkyMiles co-branded cards we announced in February. In addition to the many benefits for card members, Resy strengthens our membership model in other important ways. It connects our restaurant merchants with high-spending premium customers while also providing them with a state-of-the-art technology platform that helps them grow their businesses. Furthermore, Resy’s large user base gives us access to a pool of potential prospects who enjoy dining but do not yet have an American Express card. Our newest acquisitions will expand on the benefits we offer consumers and merchants, driving value for both. Tock extends our dining footprint with millions of additional users and thousands more bookable venues including wineries, hotels, and certain events in addition to restaurants. With Rome, hospitality merchants can have access to sophisticated integration capabilities across various restaurant management platforms and the ability to enhance live event and stadium experiences. While the competition is fierce in the dining space, we believe our business model advantages, including our premium customer base, the strong merchant relationships we have with restaurants and other hospitality providers, and our membership model position us well to continue our growth in this important category. As we have demonstrated, the investments we continue to make in our value propositions as reflected in our product refresh strategy and in our capabilities, as seen in the example of dining, are fueling our momentum. And these are just a couple of examples of why I remain confident that our long-term growth aspirations are the right ones. Thank you, and I'll now turn it over to Christophe for a more detailed look at our performance in the quarter.

Thank you, Steve, and good morning, everyone. Before going into the details of our third quarter results, I'd like to take a few minutes to step back and highlight the key takeaways from our year-to-date performance. First, our business model is performing really well. We had another solid quarter of earnings generation with EPS of $3.49, even as we continue to invest significantly in marketing and technology. The spend environment has been stable over the course of the year, and revenue growth is in line with our expectations with a year-to-date FX adjusted growth of 10%. We continue to add many more customers to the franchise. Transaction engagement is deepening, and we benefit from our diverse set of customer types, revenue streams, and geographies. In addition, as Steve discussed, our focus on continuously refreshing products is resulting in an acceleration in our card fees revenue, which grew by 18% this quarter. And our focus on premium products continues to be the foundation of our very strong credit performance. We continue to manage our expense base with discipline. Year-to-date, excluding the gain from our Accertify, operating expenses have grown very modestly as we fully leverage the scale and the digitization of our operations. This business model is yielding very strong earnings, which is enabling us to increase investments to grow the franchise and also to return excess capital to our shareholders. Compared to last year, we reduced the number of shares outstanding by $24 million. Turning now to our Q3 spend performance on Slide 3. Build business grew 6% on an FX adjusted basis, continuing the trend of stable volume growth that we've been seeing over the past several quarters. And while T&E growth rates are now more in line with what we're seeing on goods and services spending, the picture hasn't changed very much since last quarter. Our customers continue to deepen their engagement with their American Express card as the number of transactions was up 9% in Q3. This is a function of growth in the number of customers and merchants, as well as growth in the number of transactions per customer. For instance, transactions per customer are up around 30% from five years ago. As you look at the spend trends by segment over the next few slides I want to highlight a few key points to take away. Spend across our affluent US consumer base continued to be very stable with strong growth from Millennial and Gen-Z customers, up 12%. Notably, we continue to see very strong loyalty with this younger cohort with new customer retention higher than that of older generations. Within Commercial Services, spend growth was up modestly and consistent with what we've seen over the past few quarters. Our fastest-growing segment again this quarter is international card services with spend growth of 13%. The breadth of this continued performance is especially worth noting; every one of our top five markets is growing in double digits with four out of the five in mid-to-high teens. For example, Japan is up 17% and Mexico 15%, on an FX adjusted basis. We also see strong engagement from Millennial and Gen-Z customers in international, with the age cohort growing 23% FX adjusted in Q3. Let me now turn to lending and credit performance on Slides 7 through 9. Total loans and card member receivables growth was strong at 10% year-over-year and continued to moderate as expected. Loan growth was 15% this quarter, consistent with Q2. Our enhanced lending capabilities such as pay overtime continue to be the largest contributor to our loan growth. In addition, over 70% of revolving loan growth continues to be driven by tenured customers. Looking ahead, we continue to see a long runway for growth as we expand our share of lend with our Premium Card members. While revolve rates have largely built back since the pandemic, we expect to see continued upward momentum over time, as we meet more of our customers' borrowing needs on our premium products and grow our charge in co-brand portfolios. Our focus on growing lending through our premium customer base also continues to pay off in the strength of our credit performance. Delinquency rates remain very low and in line with our prior quarters, especially taking into account the seasonal downtick we saw in Q2, and write-off rates declined to 1.9% this quarter. Looking forward, I still expect modest upward buyers to these rates, as we continue to acquire new customers at elevated levels and increase our share of lending from existing customers. This quarter, we had about $1.4 billion of provision expense. This includes a reserve bill of $264 million, which was predominantly driven by loan volume growth. The reserve rate was 2.9%, consistent with recent quarters. Taking a step back, this best-in-class credit metrics are a reflection of our strategy. Our product value propositions create a powerful positive selection effect, which carries through to better credit performance. Our risk management strategies and capabilities widen the margin of safety and ensure profitable growth. Focusing next on revenues, starting on Slide 10. As I noted earlier, we grew total revenues net of interest by 8%. Discount revenue, our largest revenue line, grew 4% versus last year and is driven by the spend trends I discussed earlier. Net card fees increased 18% on an FX adjusted basis, accelerating 2 points sequentially, driven in part by the product refreshes. And we continue to see strong demand for our products as we bring new customers into the franchise with new cards acquired of 3.3 million in the quarter. Our strong acquisition and retention levels, along with our ongoing cycle of refreshing products continue to drive sustainable growth in card fee revenue. This strong growth represents a real proof point of the success of our strategy and the continued engagement of our customers. Turning to our lending economics on Slide 14. Net interest grew 17%. Net interest income grew 17% on an FX adjusted basis and continues to moderate as we previously communicated. Growth in this line is driven by increases in revolving loan balances and net yield versus the prior year. I will turn now to our expense performance on Slide 15. Our VCE to revenue ratio remained stable at 41% this quarter with variable customer engagement expenses up 10% versus last year. Looking at some of the components of VCE, rewards expense this quarter grew 10%, outpacing spend growth. We are continuously evolving the MR value proposition to increase the ease of redemption for our card members and also to maintain the economics of the program. In the short term, those changes drive a very small increase in the ultimate rate of redemption but over time, we are confident in the economics with minimal impact to the VCE ratio. And we continue to invest in our card member benefits to deliver superior experiences for our customers. For example, this year, we've added over three new hotels to the hotel collection program, one of the benefits on the Gold Card, and we see that year-to-date bookings on the program are six times higher than five years ago. Marketing expense was $1.5 billion, in line with our run rate so far this year as we continue to invest at elevated levels versus last year. As I mentioned last quarter, we expect our full year marketing spend for 2024 to be around $6 billion, as we lean into the attractive growth opportunities available to us. Lastly, operating expenses of about $3.8 billion were up 5% versus last year. There is some seasonality to operating expense levels, and we expect to see a slight uptick in Q4, consistent with prior year's trend. On a full-year basis, we continue to expect operating expenses to remain fairly flat year-over-year, adjusting for the Accertify gain. Taking a step back, total expenses year-to-date are up about 5% relative to 10% growth in FX adjusted revenue. This is a reflection of our ability to invest at elevated levels and drive strong expense leverage. Let me now move to capital on Slide 16. Our CET1 ratio was 10.7%, well within our 10% to 11% range, and we returned $2.4 billion in capital to our shareholders. This capital return included $1.9 billion of share repurchases, the highest level in the past two years, and $0.5 billion in dividends. Also, we continue to have a very robust and diverse funding stack at our disposal. Our high-yield savings balances grew by 19% year-over-year this quarter. Notably, over 75% of balances come from existing card members, though less than 10% of our US consumer customers have a high-yield savings account with us. This brings me to our 2024 guidance. For the full year, we expect revenue growth of around 9% within the revenue guidance range we provided at the beginning of the year. We are also raising our full-year EPS guidance to $13.75 to $14.05, reflecting both the momentum and the earnings power of our business. This represents 23% to 25% year-over-year growth. It is higher than we expected at the start of the year and above our long-term aspiration of mid-teens growth. With that, I will now turn the call back over to Kartik, and we will take your questions.

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

Thank you. Good morning. I appreciate the solid results in what clearly is a softer spending backdrop. I guess I'm just thinking about the updated guidance. And as we think about that 10% plus revenue expectation in the future, I mean is that possible in the current spending backdrop? Next year, as I think about it, NII will be slower, card fees obviously should be stronger, but does bill business have to accelerate to get to double digits? Or is there another way? Thanks.

Thanks, Sanjay. Look, I think that the bill business definitely has to accelerate to get to our aspirational goal of 10% revenue growth. When you think about the three legs of the stool that we have to grow our revenues, I think we absolutely have the right balance, the balance of spending, NII and card fees, and card fees continue to grow at accelerated rates. It is 25 straight quarters now of double-digit growth. We had 18% this quarter. NII continues to chug along, but I don't think anybody wants to see us really accelerate too much from there. And I think that as we think about our overall aspiration, that aspiration was set in a more robust environment. And so for us to hit that 10%, we would need to have an acceleration in building, certainly an acceleration from 6%. Having said that, and I said this about a year ago at the Goldman Sachs conference, we have driven the scale of this business at this point to such a place that even with a softer, albeit consistently, it has been consistently soft for the last pretty much the last year. If you go back, our billings overall for pretty much the last year other than the second quarter when we had the extra day have been about 6% overall. But yet, we are able to deliver on our mid-teens EPS growth. And I think that's what our focus is really on. And so as the economy gets stronger, when that is I don't know, but I think it is absolutely the right aspiration for us as a company to strive for 10% revenue growth, but we will need an acceleration in billings.

Good morning, everyone. Thank you, Steve, for the introduction of our conference. I would like to follow up on Sanjay's question. Considering the three key aspects, if we don't experience an increase in billings growth, could you discuss the factors influencing EPS growth into 2025? Is it possible to maintain mid-teens growth despite a slower than expected revenue growth environment? Thank you.

If we look at this year, we have experienced billings growth of about 6% for almost a year. I think with that level of overall billings growth, along with our efforts to acquire new cards, upgrade card members, and grow net interest income, we can expect EPS growth in the mid-teens range. Additionally, we have acquired 3.4 million cards in the first quarter, 3.3 million in the second quarter, and 3.3 million in the third quarter, all of which points to a positive future for us. As the economy strengthens, many of our new customers are Millennials and Gen-Z, which will lead to increased organic spending over time. These customers will likely upgrade from Green to Gold and then to Platinum. Overall, I believe we are establishing a solid foundation through our investments for strong growth moving forward.

Maybe I will just add one point. This year indeed, is a good reference, right? And we are going to grow EPS north of the mid-teens, even when you control for the Accertify gain. And that's after increasing the marketing investments year-over-year by as much as $800 million, right? And so that speaks about the power of generating mid-teens EPS growth despite a 6% billing growth.

Hi, good morning. Thanks. I wanted to ask about business development spend came in well below what consensus was expecting. And I was curious what is happening there, whether it was a short-term phenomenon or something more long-term? And just second, was there any impact from weather in the guide for the rest of the year? Thanks.

I will respond to the second question, and Christophe will address the first one. There was no impact from weather in the guidance at all.

Yes. And on their business or partner payments line and business development, a lot of those expenses are about the agreements that we have with customers and co-brand partners in terms of sharing the economics of the co-brands. And specifically, in terms of this quarter the reason why that number is not growing as much as maybe you were expecting is because on the small corporate side, we also have agreements in terms of incentives that we pay back to our customers. And since the billing is coming at a lower level, those are the incentives that we pay back to their customers.

Thanks for taking my question this morning. Look, as we move into the fourth quarter, the setup is that earnings will be way above initial guidance and even above the second quarter increase and revenues are gravitating towards the low end of your range, that suggests credit and operating leverage are better than you expected. You've talked about the ramp in marketing, the incremental $800 million. Historically, when earnings setup is this strong, you really pull forward investments planting seeds for long-term revenue growth. I'm curious this year why you're letting so much fall to the bottom-line? Are you starting as you ramp up that $800 million incremental? Are you starting to see the marginal return on those investments diminish in a way that it is no longer attractive?

No, I don't think we're seeing the marginal return. It's about ramping up to our current level. Given that we are spending nearly $1.5 billion to $1.6 billion on marketing and increasing that by almost $800 million, along with a higher technology spend and more investment in control management as we transition from a Category 4 bank to a Category 3 bank, we are not stepping back on our investments nor lowering our standards. We have ramped up our investments throughout the year, and it's challenging to inject a lot more funding into next year. However, I anticipate our investment levels will grow as we approach 2025, and I do not expect a decrease in marketing. We are focused on finding efficiencies in our marketing spend while also planning to increase our investment in marketing and technology moving forward. When considering the business on a quarter-to-quarter basis, it’s easy to make certain assumptions. However, investments must be layered in over time. It’s not straightforward to shift investments from the first quarter of next year back to the fourth quarter of this year. In the past, we could do that when our investment levels were likely half of what they are today. Now, it makes more sense to follow a continuous approach rather than pulling things forward. We feel positive about the investment opportunities in the medium to long term and will continue to invest in the business.

Hi, good morning. When I look at the supplement, it does seem like spend on a per member basis has been a little bit flatter than overall spend growth, 2% versus 6%. And clearly, that's a result of your success in adding so many new customers. If we don't get the rebound in spend growth next year, and obviously everyone is trying to figure out whether we are going to have the soft landing or not soft landing, how much runway do you feel you have to continue to add new customers to keep the spend growth at the current level? And maybe as a compound question to that, maybe give us some color on where we are on the product refresh cycle?

Yes. Let me address the second part first and then go back to the first. Regarding the product refresh cycle, we have already exceeded the 40 refreshes we committed to at the start of the year, and there will be additional refreshes before the year ends. We plan to continue refreshing products next year. I will let Christophe provide further details, but I want to highlight a few things related to your first question. We still see opportunities to acquire more cardholders as we move into next year. However, overall spending among our customer base is not as strong as it was in a better economic climate. Our cardholders tend to pull back a bit if they feel uncertain or experience any signs of stress, but they continue to pay their bills, which is why our credit metrics remain strong. This trend is particularly evident in our small business segment. Like many other companies, small businesses are facing macro challenges, and the organic spending or same-store sales on our cards in this sector are not as strong as they were after the pandemic. In fact, organic spending is down, even though our acquisition and retention rates are good. This decline in organic spending is leading to a slight decrease in spend per card member.

And so to add to the other part of your question, the metrics you are looking at is an average is a global average. So that adds up customers in Australia and Japan, as well in the US. So it's hard to read a lot of insights out of that metric. So to give you a bit more color on how to think about those new card members that are joining the franchise, we do see that they are more engaged than the past vintages, if you want. When we look at the number of transactions per new card member that number is trending up. And in my prepared remarks, I cited the metric of 30% more transactions per new card member now than five years ago, and we see that, right? And this is a function of better coverage, not only in the US but also outside of the US. And we stick to the premium-ness of our acquisition. Not only we grew the number of card members, as you pointed out, but we are maintaining the fact that about 60% of them are coming up on our fee-paying products. So they are very engaged. And so each vintage, if you want, is definitely showing progress, and what's impacting this average are the things that Steve talked about, and that the tenured card members and what we call the organic spend that is a little bit more challenged.

Steve, the general consensus, pretty much among everyone, is that the affluent US consumer is in good shape. I just wanted to get your sense if you are seeing anything in your data bookings that would raise concern around the sustainability of that. You've got an election coming up and things of that nature?

No. I mean, look, this company has been around a long time. I mean, obviously, we didn't have cards 174 years ago. But we've been around lots of different elections, lots of different configurations of the House, the Senate and so forth. Our customer base is very different than our competitors' customer base. And it's really resilient and pretty stable. I think that they are continuing to spend, albeit at not levels that we saw coming out of the pandemic. But the US consumer, just to pick the US consumer has been really stable. I mean, it's been just about 6% for the last few quarters. And if you look at the international consumer and a lot of people forget, we do have the international side of our business, international consumer business has been growing 13% for the last four quarters as well. So we are not seeing anything that would indicate that spending would go down. And we are not seeing anything that would indicate our credit metrics are getting any worse. In fact, you saw write-offs go sequentially down. And so we feel good about the consumer. We would like to see more organic spend. And I think to go back to the beginning, when Sanjay opens us up with that question, I think an uptick in that organic spend will help us reach our overall aspiration of 10%. But that's why our aspiration of 10% is in fact an aspiration, and I think still the right aspiration for this company because we do expect organic to come back. Organic will not stay at this level forever. When that comes back, I don't know. But regardless, and as we've proven this year, we're able to still deliver that mid-teens EPS growth.

Hi, good morning. Thanks for taking my question. I guess just if we look at the approximately 9% revenue growth for the year, as you sit here only 18 days in the quarter, does that suggest that you are maybe looking for a little bit of revenue growth reacceleration in the fourth quarter here? Or how are you thinking about that 9% for the year? Could it maybe slip a little bit below that? And when we look at the discount revenue growth, it did go under the bill business growth a little bit this quarter, I think the implied discount rate did drop a little bit. Is there any noise in there? Or is there something we should be aware of there?

I'll address the second part of your question first regarding the relationship between discount revenue and bill business. As mentioned, international growth is outpacing that of the US, and the discount rate internationally is lower than in the US. This difference results in a disconnection between the growth of discount revenue and bill business on a global scale. Regarding your first question about revenue growth and Q4, the key focus we've expressed today is stability. We're seeing consistent trends in billings without any major changes. Although we are just a few weeks into Q4, I anticipate it will reflect the ongoing trends we observed in Q3. Therefore, we are guiding towards 9% revenue growth. It's also important to note that our earnings per share for the full year are exceeding our initial guidance from the beginning of the year, even after accounting for the Accertify gain. We are achieving significant earnings alongside 9% revenue growth, which remains competitive compared to most of our peers.

Good morning. Thanks for taking the question. Steve, you mentioned how customers generally move from Green Cards to Gold Cards to Platinum Cards. Is there any way to think about the lifetime value or average spend by category? Thank you.

As customers progress through the card tiers, their spending habits change. For instance, someone with a Gold Card may not travel as frequently but tends to dine out more and might be new to the franchise. As they advance and potentially have more discretionary income, they'll travel more often and take advantage of perks like lounges and luxury hotels. This leads to higher spending on Platinum cards compared to Gold or Green cards because individuals who pay a higher fee for a product are likely to engage with and utilize the benefits more fully. While the Platinum Card is evolving into more of a lifestyle product, it still offers significant travel benefits, which require investment in airline tickets and accommodations. Therefore, customers who enter at the Gold Card level and later upgrade to Platinum will generally contribute more value over their lifetime. Conversely, those entering the Platinum franchise as Gen-X or Boomers might have a lower lifetime value compared to Millennials who started at the Gold Card level. Ultimately, the entry point matters, but as customers move up the tiers, we see increased value from them.

Hi, good morning. I wanted to ask about how to consider the dynamics of net interest income as we approach 2025 and what the key factors are. Steve, I understand you prefer not to accelerate too much from this point. Christophe, could you provide some insights on how to evaluate net interest income in the current rate environment, including aspects like liability sensitivity, deposit dynamics, revolving rates, and balances? It would be helpful to understand how this will evolve as we move into 2025.

Yes. First, it's important to note that we are only slightly sensitive to liabilities. The effect of Fed funds rate cuts on our net interest income is minimal. We keep this sensitivity updated in our 10-Q reports, and you'll see the latest figures later today; they are quite small. Therefore, we can set this issue aside. The focus now shifts to volume and rates. From a volume perspective, we expect growth in revolving balances, particularly accounts receivable, to continue to slow down. As we know, during the pandemic, individuals paid down their balances and are now gradually rebuilding them. Currently, revolving rates are beginning to stabilize. I believe most of the normalization process is behind us, so you should expect a significant moderation in growth rates. Regarding yield, we are actively adjusting our funding towards high-yield savings accounts, which provide us with the lowest funding costs. This transition positively affects our yield. Additionally, we continually assess our pricing relative to our competitors to ensure we remain competitive. Hence, you can expect yields to benefit from this approach. In summary, we anticipate moderation in volume but will maintain strong yields with very limited impact from any changes in the Fed funds rate.

Hi, thank you. Good morning. So your card acquisitions continue to run at a pretty healthy level and your net card fee growth this quarter has already exceeded the exit rate of last year. I guess are you running ahead of your expectations for some of these product refreshes in terms of adoption or engagement in general?

No, I think it is what we really expected in terms of adoption and engagement. As I mentioned, there will be a few more product refreshes. We anticipated that the overall growth rate would be higher than when we started the year because that’s typically how it works; people become attracted to the products. One thing worth repeating is that refreshing the product generates more demand in the marketplace, and it makes our marketing efforts more effective. When observing how that category of revenue grows initially, it largely comes from new cardholders. We amortize that over a 12-month period and not everyone gets repriced simultaneously, so it creates a ramp-up effect for that overall category. Upgrading these products is crucial because it helps us attract new cardholders and maintain engagement with our existing cardholders. This also contributes to our subscription-like and SaaS-like revenues from card fee subscriptions, which surpassed $2 billion this quarter. We continue to prioritize this because our fee-paying Card Members are our most engaged cardholders, and we want them to utilize the benefits and services available to them.

Thank you. I have a related question to the impact of Fed easing on your business. Have you looked at kind of what the impact is from Fed easing and the effort to stimulate the economy on your bill business growth?

So this is a good point. So at this point in time, the reduction is too small. It is too early to see any impact in terms of the spend patterns, and we looked into it, but there is like nothing visible, as you would expect, probably too small. But the expectation is that the consumer and small business confidence is going to improve as a result of the rate environment being more supportive. Because, as we said this morning, we see no evidence of stress in terms of credit. We see demand in terms of our premium products. We see very strong renewal rates even when Card Members are moving to a higher price point. So there is definitely capacity to spend – to spend more. And my expectation is that the accumulation of cuts will provide some support for the consumer and small business confidence and that will provide some support to billing. And in order to go back to the first question we addressed this morning, especially to that organic growth, that would benefit from that.

Hi, good morning and thank you for taking my questions. Wanted to turn to T&E spend for a second. And just a two-part question on that. The first is just on airline spend. I think it accelerated this quarter. Can you just talk about the drivers there? Was it corporate, consumer, both, what you saw there? And then just on restaurant spending. I think it was detailed a little bit this quarter, but just going back to the opening remarks, you referenced just the investments you're making in that category between Resy and Tock, and just adding those benefits to various cards. Do you expect restaurant spending as a category to become a bigger part of your business and grow? Like should we expect acceleration in that spending from here? Thanks.

Let me discuss restaurant spending. Before we entered the restaurant reservation business with Resy, it was not our largest travel and entertainment category. However, it is now our biggest and fastest-growing category. We expect to keep increasing our share in the restaurant space. Over the past five years, we've grown at twice the industry's rate in this area. There was a slight deceleration this quarter, from 8% to 7%, but I'm not overly worried about that. With our Tock acquisition and other efforts, we believe we will continue to excel in the restaurant sector. Regarding airlines, I don't see significant changes from either corporate or consumer perspectives. The growth shifted from 5% to 6%, which could simply be minor fluctuations from quarter to quarter, but airline travel remains strong. In the third quarter, our international bookings reached their highest levels since before the pandemic, indicating that our Card Members are eager to travel. Typically, international travelers tend to spend more than those traveling domestically. So, I don’t think there’s much to interpret from either the airline or restaurant sectors, other than the fact that restaurants are still a robust area for us. The slight variations in percentages shouldn't concern us for this quarter. From a restaurant standpoint, we are committed, not just through the Tock acquisition but also with the Gold Card refresh, which is heavily focused on dining and targets Millennials and Gen-Z consumers who spend more on dining than any other group we have. Therefore, we are optimistic about the restaurant industry.

With that, we will bring the call to an end. Thank you again for joining today’s call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Operator, back to you.