Good morning, and welcome to the American Express Global Business Travel Second Quarter 2024 Earnings Conference Call. As a reminder, please note today’s call is being recorded. I will now turn the call over to the Vice President of Investor Relations, Jennifer Thorington. Please go ahead.

Hello. And good morning, everyone. Thank you for joining us for our second quarter 2024 earnings conference call. This morning, we issued an earnings press release, which is available on sec.gov and on our website at investors.amexglobalbusinesstravel.com. A slide presentation, which accompanies today’s prepared remarks is also available on the Amex GBT Investor Relations webpage. We would like to advise you that our comments contain certain forward-looking statements that represent our beliefs, our expectations about future events, including industry and macroeconomic trends, cost savings and acquisition synergies among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today’s conference call. More information on these and other risks and uncertainties is contained in our earnings release issued this morning and in our other SEC filings. Throughout today’s call, we will also be presenting certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, free cash flow and net debt. All references during today’s call to such non-GAAP financial measures have been adjusted to exclude certain items. Definitions of these terms and the most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the supplemental materials of this presentation and in the earnings release. Participating with me today are Paul Abbott, our Chief Executive Officer; and Karen Williams, our Chief Financial Officer; and David Thompson, our Chief Information Technology Officer. Also joining for the Q&A session today, is Eric Bock, our Chief Legal Officer and Head of Global M&A. With that, I will now turn the call over to Paul. Paul?

Thank you, Jennifer. Welcome to everyone and thank you for joining our second quarter 2024 earnings call. In the second quarter, we delivered strong adjusted EBITDA growth, significant margin expansion, and accelerated free cash flow. These strong bottom-line results were in line with our expectations and put us on track to deliver against our full year guidance. Our focus on controlling costs and driving operating leverage is clearly evidenced in our Q2 results. Adjusted operating expenses increased just 2% compared to 6% revenue growth. And we drove significant adjusted EBITDA margin expansion of 240 basis points year-over-year and adjusted EBITDA growth of 20%. Our progress to positive and accelerating free cash flow remains an important focus for the company, providing us with additional opportunities to invest in our growth and drive shareholder returns. And a strong second quarter gives us the confidence to raise our free cash flow guidance for the full year. Last quarter, we mentioned an opportunity to refinance our debt, which we have now successfully completed in July. We've significantly lowered our interest cost, extended our debt maturities and upsized our revolver and we continue to deleverage our balance sheet. Increased demand for our software and services resulted in continued share gains on a strong foundation. We have sustained our pace of new wins and importantly, further increased our customer retention rate. Starting with revenue growth. Revenue was up 6% to reach $625 million for the quarter, driven by growth in transactions, TTV and increased demand for our products and professional services. Transactions were up 4%. We saw a slowdown in the second quarter, driven primarily by slower same-store sales and the impact of the Olympics in France. We expect France will bounce back in the fall. Excluding France, transactions were up 5% in the quarter. TTV…

Thanks Paul, and hello everyone. As previously shared on our Q4 earnings call, Amex GBT launched our AI program focused on driving innovation through new and existing artificial intelligence technologies. We are already delivering operational efficiencies through safe, secure and scaled AI capabilities. Through our AI initiatives, we are adopting next generation AI technologies focused across four key objectives. First, increased service efficiencies; second, increased engineering velocity; third, streamline our financial processes; and fourth, enabling our workforce. These four areas account for approximately 70% of our total adjusted operating expenses, representing a huge opportunity to continue driving productivity improvements. And as Karen will elaborate on, automation and AI initiatives are a component of the $100 million in total saving opportunities we expect to deliver this year. Our strategy is broader than Generative AI. We are taking advantage of multiple capabilities, including natural language processing, large language models, third party SaaS Solutions, and our own proprietary machine learning capabilities to accomplish these objectives. And so let me share some of these thoughts and progress to date. Dealing with a massive amount of data is a common challenge for organizations. The effort required to exploit that data is very complex and labor intensive. Amex GBT is looking to harness the power of AI to gain insights from our two largest communication channels to understand why clients are contacting us, which in turn allows us to direct them to the most efficient channel to meet their needs. To garner these insights, we are utilizing our own internally deployed large language models, which sits behind Amex GBT firewalls and is not available to the public Internet. By supplementing our own LLM with Amex GBT proprietary data and third-party SaaS technologies, we identify customer intent and analyze demand to provide optimized routing and develop future…

Thank you, David and hello everyone. I've previously talked about my three key priorities when it comes to managing our financial performance: accelerating cash flow generation, driving operating leverage and continued margin expansion, and importantly, creating capacity to invest and drive long-term sustained growth both organically and through strategic M&A. And again in the second quarter I am really happy with the progress we have made in all three areas. The significant margin expansion and accelerating free cash flow we reported in the second quarter, a testament to this in addition to the momentum we are seeing in our investment spend. So now let's turn to our financial performance in more detail. We delivered strong results that were in line with our expectations from an adjusted EBITDA perspective. Revenue reached $625 million, up 6% year-over-year. Revenue yield, which we define as revenue divided by TTV, was 8% flat year-over-year in the quarter. As we turn to total operating expenses, which are a key area of focus for us, I am incredibly pleased with the momentum we are seeing across the enterprise when it comes to increasing productivity. Importantly, we are delivering cost savings that not only drive our margin expansion, but also drive growth by investing in technology and content, including our software platforms and AI. As a reminder, in 2024 we expect to invest an incremental $40 million with a 70/30 split between OpEx and CapEx. Together, the net impact of these resulted in adjusted operating expense growth of just 2% year-over-year versus revenue growth of 6%. And critically, this strong operating leverage translated into 240 basis points of adjusted EBITDA margin expansion. Adjusted EBITDA grew 20% to $127 million. I'm very happy with the continued momentum and acceleration when it comes to cash flow generation. In the quarter,…

Absolutely. [Operator Instructions] Our first question goes to the line of Lee Horowitz with Deutsche Bank. Your line is now open.

Great. Thanks for the question. Can you just maybe expand on the state of the macro environment and your expectations for the rest of the year? We've obviously seen some things slow down. You guys are pointing towards acceleration, but can you just give a little bit more detail on some of the maybe spend pressures you're seeing in SME or any more color that you're seeing in this hypervolatile macro environment at the moment?

Yes. Surely, Lee. Thanks for the question. Thanks for the question. I would say it's a continuation of the themes we discussed in Q1. We have seen a slowdown in same store sales, particularly in the SME segment. On global multinational I would say it's more of a stabilization. We're starting to grow over the ramp up that we saw last year, particularly from the tech sector. That was pretty steep ramp up in the second quarter of last year. So I would say the outlook for global multinationals actually pretty stable. SME, same store sales have softened again, a couple of points in that second quarter, but that's a trend we discussed in the last quarter. It's also a trend that's been discussed on quite a lot of earnings calls across various industries. I think we are seeing a tightening of spending from smaller to mid-sized companies that are generally more exposed to interest expense, some lending costs. But as it relates to the balance of the year, we're sort of expecting to see a moderate acceleration in SME because of the net new wins that we've already signed. As those start to get implemented in the second half of the year. There is also a point of benefit in the sort of workdays in the second half of the year. So those two things combined are going to give us a very moderate acceleration in the second half of the year. And I think, as Karen said in her comments there, we're sort of guiding to around 6%, 7% growth in the second half of the year. And we're seeing 1 points to 2 points of acceleration. But really based on, frankly, things that we can control, which is the implementation of the new business that we have in the pipeline. We're not assuming any improvement in the macro environment. We're assuming that the kind of underlying trends continue for the second half.

Okay. Thanks. And then maybe one on NDC, we often feel questions from investors regarding your economics and NDC world. Can you maybe elaborate a bit more on how you expect to keep your economics within the business, travel, ecosystem sort of stable as NDC content proliferates?

Yes. Sure. I mean, there is no change to our economics whether a transaction comes through EDIFACT or NDC. They are simply different technical standards. NDC provides our business partners, airlines in particular the opportunity to retail their products and services in a more flexible and a more personalized way. And so you should really just think of EDIFACT versus NDC as being two different technical standards, one being more modern. That gives suppliers more flexibility, but it has no impact to our underlying economics or our contractual relationships with those business partners. We actually think over time, now that we're starting to build NDC volumes, and I think we'll start to see more introduction of ancillary services and personalized offers. We think over time that could actually create additional revenue opportunity for us because we don't participate really in the revenue stream from ancillary services today, and that's something that could build over time. So the real takeaway is no difference to our economics today, but some opportunity potentially in the future.

Hopeful. Thank you.

Thank you, Lee. Our next question goes to the line of Duane Pfennigwerth with Evercore ISI. Your line is now open.

Hey, thank you. I thought the France stats were interesting and pretty aligned with what the airlines have been saying. Apologies if you've already said this, but how much was business travel down in France in 2Q? And how do you see that kind of comparing with the rest of Europe? And then I guess what, we're a week or so away from the [indiscernible]. How do you see kind of forward bookings for France in particular recovering?

Yes. Thanks, Duane. We did see an impact, and that impact was a little earlier, frankly, than we anticipated. Companies actually did start to pull back on travel into and out of Paris earlier than we anticipated. We actually had a really strong Q1 in France. I think we were up 13% in the first quarter. We actually ended the second quarter minus 4. So it was actually a pretty significant swing. But that strong performance in Q1 is what actually gives us confidence that we're going to see that rebound, I think once we get into September. And frankly, it's really all about September. I mean, July and August are slower months for business travel, particularly in Europe and particularly in France. And so if you look at our second quarter, 40% of our sales in the – excuse me, our third quarter, 40% of our third quarter sales come in September. So really the question is more about what are we going to see kind of post Labor Day in terms of September demand, and do we see that that recovery in France? And we believe we will. We believe we'll be back to solid levels of growth in France from September onwards.

Thanks for that. That makes sense. And I wonder if you’d be willing, can you just touch on what transpired with American this quarter on the travel supplier side? They called out a new agreement with you. Obviously, they had a big push around NDC, but claim that the execution of that was unhelpful to a lot of travel management partners and travel management companies. So I guess if you’re willing, like, what role did you play historically at American? How did that role change in their aggressive push to NDC, which they are now unwinding? And does this new agreement kind of get you back to where you were, or are you doing kind of new and different things with them?

Yes. I think we certainly welcome the changes that American have announced. They’ve already put their content back into all of the available channels. And I think importantly, they’ve said publicly, and Robert said this on several occasions, that they kind of recognized the importance of the travel management channel and they recognized the importance of the relationship with Amex GBT. And also they have been clear, they recognize the importance of working collaboratively with customers and with distributors to drive the changes that they would like to see in terms of the introduction of modern retailing and NDC. And frankly, we very much welcome that position from American. I think certainly, I’ve said on many times in public forums that the best way to drive change in our industry is to make sure that we work collectively to drive that change in that, critically, that the customer is at the center of that change in that whatever we’re trying to do, we have to make sure we bring customers with us and that we’re delivering more value to customers. And I think that’s certainly what you’ve heard from me on many occasions. And I think that’s what you’re hearing from Robert as well. So, yes, Duane, we welcome that change in position from American.

Okay. Thanks for the thoughts.

Thank you, Duane. Our next question goes to the line of Toni Kaplan with Morgan Stanley. Your line is now open.

Hi, guys. This is Hilary Lee on for Toni. I was just wondering if we could possibly go into the CWT acquisition, like any details I could provide of why it was pushed into Q1 of 2025?

Yes, sure. Maybe I’ll ask Eric to come in here. As you know, Eric is our Chief Legal Officer and also runs M&A. So, Eric, maybe you’d like to share your thoughts here.

Sure. Hi, Hilary, how are you? Yes, primarily the reason we switched into Q1 is because of the CMA Phase 2, which we announced and Paul commented on during the main call. That process lasts approximately 24 weeks. So that would push our original H2 this year into Q1 next year. So that’s primarily why we pushed it into Q1.

Got it. And it wasn’t any particular regulatory issue, just pretty much the process itself?

Well, the CMA did publish a decision or when they move to a Phase 2, and they, the bar is relatively low when you go from a Phase 1 to a Phase 2. And they were focused on the competitive environment, which we believe we will be able to show, continues to be intense with lots of competitors post transaction. So we believe the facts will play out in our favor and are very confident that we will close this in the first quarter.

Got it. And just as a follow-up, different subject, but just wondering what kind of trends you saw through the end of 2Q into July and August. I know they’re typically slower months for you, like you had said earlier, but just wondering if you’ve seen anything. And regarding the CrowdStrike issue, like how much, if any, effect did it have on the business? Like did you guys get a lot more customer service calls or a lot more cancellations on your end? Just wondering if you could provide any detail there. Thanks.

Sure. Yes. I mean, the trends into July, as you quite rightly said, Hilary, July always tend to be softer months for us. I would say the trends into July are consistent with the guidance that Karen gave for H2 earlier. Obviously, we factored those trends into the guidance for the second half of the year. In terms of the impact of CrowdStrike, I have to say that our teams responded to the situation very quickly and very well. We picked up on some issues as our business opened up in APAC, that it was clear that some issues were coming from the CrowdStrike software upgrade. And we work extensively with CrowdStrike. And so we were able to go into the firewall and stop that upgrade – update in other parts of the world, including, critically, the U.S. And so I’m very pleased to say we actually managed to work through the issues very successfully. And we were operational throughout. And of course, that was extremely important because there was a significant amount of disruption to the airline industry and to our customers. And of course, when there’s disruption, that’s when our customers, frankly, need us the most. So we certainly saw increased call volume. We obviously saw increased changes, cancellations. We utilized our Proactive Traveler Care solution extensively, which reaches out to customers to advise them of cancellations and changes and proactively supports them to make sure they get where they need to go. And so it was an incredibly busy period. We had a lot of people working overtime through the weekend to ensure that we’re there for our customers. But the bottom-line is we’ve managed through the process very, very well, both our technology teams and our servicing teams were absolutely outstanding, and we have had so many notes from customers thanking us for our support through that period. So I think we managed through it very successfully. In terms of the impact of the business, look, I don’t expect that to have a material impact. Yes, there was some disruption over two or three day period. But I don’t think when we come to the end of the quarter that we’re going to see that as a significant impact.

Got it. Great. And thanks for the answers and color. Congrats again on quarter.

Thank you.

Thank you. There are currently no other questions registered at this time. [Operator Instructions] There are no questions waiting at this time, so I’ll pass the conference back over to you, Paul, for closing remarks.

Okay. Well, in closing, just thank you very much to our team across the world for their dedication to our customers, the strong results they delivered in the first half of this year. We are very confident that 2024 is going to be another year of share gains, strong growth in profitability and free cash flow, and continued margin expansion. Thank you to all of you for joining us today and your continued interest in the company. Thank you.

That concludes today’s conference call. Thank you for your participation. I hope you have a wonderful rest of your day.