American Express Company (NYSE:AXP) Barclays Global Financial Services Conference September 22, 2022 2:00 PM ET
Company Participants
Jeff Campbell – CFO
Conference Call Participants
Mark DeVries – Barclays
Mark DeVries
All right. Thank you for joining. We’re going to get started. Very pleased to have Jeff Campbell, CFO of American Express, joining us. We’re going to be doing a fireside chat. So the format is I’ve got a number of prepared questions I’ll go through with Jeff. We’ll pause in the middle for the audience response section. I appreciate your participation there. And then I’ll open it up to the audience for questions if there are any.
So Jeff, thanks for joining. We always enjoy the conversation.
Question-and-Answer Session
Q – Mark DeVries
Just wanted to lead off with your long-term growth plan aspirations. My sense is the biggest contributor to AXP’s outperformance in 2022 was the change in aspirational guidance from 6.5% plus revenue growth from kind of the prior decade to greater than 10% in 2024 and beyond. Can you discuss what’s changed that gives you the confidence that the growth outlook has changed so materially?
Jeff Campbell
Well, first, thanks for having me. It’s good to be back at an in-person conference, Mark, with you. Let me maybe step back in answering that question. And I think you just cited sort of a decade average. What I would say is, if you go back to the couple of years prior to the onset of the pandemic, you had American Express reporting 10 consecutive quarters of revenue growth in the 8% to 10% range. And we’ve made a lot of changes versus the way we were running the Company in kind of the mid-2010 mark, and we thought we had a lot of momentum.
Then the pandemic hit. And we did a lot of things from a strategy perspective as a company that were about really stepping up our level of investment in our value propositions, in our technology, in our colleagues. It was about stepping up our investments in marketing. It was about really redoubling our efforts to be on the consumer side, very focused on the premium consumer, particularly the younger premium consumer. It was about continuing to steadily expand merchant coverage and really focus on the small business part of our Commercial segment, which has always been the fastest-growing part of our Commercial segment.
So all of those strategy changes over the last couple of years were then combined with some secular shifts, Mark. And if you — these are all things I don’t think I can spend much time talking about. In our view, the acceleration and movement towards e-commerce over the last couple of years is not something that’s going to reverse. The pressure on businesses, small to large, to more rapidly digitize payments has stepped up. I don’t think that’s going to change.
And something that maybe probably gets less attention is the premium consumer market, particularly in the U.S., has really become the fastest-growing part of the card market on the consumer side. So, those secular shifts, combined with the strategies that we’ve had in place over the last few years, have caused us to have a tremendous amount of momentum.
So in the most recent quarter, we reported volume growth of over 30%. We have revenue guidance for the full year out there of 23% to 25%. And as we thought about our longer-term objectives, the combination of all those strategic changes with the secular shifts with the momentum that we had, we really reached a conclusion, Mark, that we weren’t reaching for a much higher sustainable level of revenue growth, above 10% versus that 8% to 10% we were at pre-pandemic, we really weren’t reflecting all the things that had happened in the industry, all the things that had happened in the Company, and frankly, we weren’t reaching high enough.
So that’s the growth plan that we first began to talk about in January of this year. And as we sit here today on, what is today, September 12, I would say, frankly, we feel even better about the multiyear growth trajectory that we laid out back in January than we probably did in January when we first laid it out. So that’s really the shift, I think. You were at the sort of 8% sort of revenue growth pre-pandemic, but strategies, the secular shifts and just the sheer momentum we built, we think easily push us sustainably above 10%.
Mark DeVries
Okay. Great. And is there any difference that you’re seeing in the margins on the mix of business from this slightly higher level of growth than the prior decade where growth was more muted?
Jeff Campbell
Yes. So the short answer is no. But what I would say is our company for many, many years, including pre-pandemic, we’ve talked about the fact that if you look at revenues relative to what we like to often call our variable customer engagement cost. So, this is providing rewards to people, it’s paying our partners like our co-brand partners, doing things like building out the lounges that at least a sub-segment that our customers really cares about.
There is margin pressure on that variable customer engagement line relative to revenues, which is why pre-pandemic and going forward into the future, Mark, it’s really important when you think about our business model that margin pressure at what I might call the gross margin line.
We have a history of — and going forward, we have a focus on offsetting by the fact that our marketing costs have historically grown more slowly than our revenues because we’re able to use digitization and better targeting each year to become more efficient in how we spend our marketing dollars.
And of course, as you would know, Mark, because you’ve followed us for a long time, we have a very long track record of needing to grow the infrastructure costs of the Company, what the — I like to call the operating cost at a much slower pace than you have revenue growth.
So you have a little bit of margin pressure at that gross margin line being offset by the fact that, frankly, as we expand revenue growth even further, Mark, we have an even better platform to get steady leverage the marketing line and steady leverage on the operating expense line. So that’s how I would think about our model.
And frankly, that really hasn’t changed. What has changed is because of all the things that I talked about a few minutes ago, that top of that pyramid at the revenue growth line is faster now, which gives us an even better platform for producing the leverage for marketing and operating expenses.
Mark DeVries
Okay. Great. Turning next to spend trends, I was hoping we could get an update on the overall environment and see how consumer spend has been trending since last quarter. When you last spoke, you mentioned consumer spending increased through 2Q and momentum continued in early July. Has that momentum held up so far in 3Q? And can you drill down a little bit on the different spend categories?
Jeff Campbell
Well, so the short answer is yes. And in fact, I said a few minutes ago that our confidence level in the multiyear growth plan we laid out back in January really higher than it was back in January. And so, if you think about all of the trends that we talked about in sort of excruciating detail back on the July earnings call, they really all continued.
So goods and services spending continues to look very strong. The U.S. consumer continues to look very strong. You, of course, Mark, actually see our monthly numbers in terms of credit. They continue to look far stronger than they were pre-pandemic. I would say probably the cure is that if anything have ticked up a little bit since the second quarter, it won’t surprise anyone. And that is that travel and entertainment spend outside the U.S. has actually ticked up a little bit.
If you think about the second quarter, you still had quite a number of cross-border travel restrictions in place around the world. The U.S. still had the requirement to get back into the U.S., you had to show a positive test. All those went away. That’s helped international travel show up even more strongly in July and August.
The other thing I would say that’s continued to step up a little bit, Mark, is Travel & Entertainment spend on the commercial side, both by our smallest businesses, all the way up through our large Fortune 500 clients who mainly use the card for their Travel & Entertainment spend.
So look, you have quite a diversity of companies at this conference. You have quite a diversity of companies Mark that you cover. I do often point out to people American Express is not representative of 100% of the global economy, right? We have a slice of premium-oriented consumers. We have a slice of small businesses, and then we have large Fortune 500 kinds of companies.
And so, when you look at our slice of the economy, despite all the headlines, despite — I’ll tell you, we have lots of people at American Express scouring every bit of data that we have from across the globe every day to make sure we’re not missing anything, but you just don’t see any significant signs of weakness anywhere in the slice of the economy that we cover as we sit here today on September 12.
And I think that is reflected in both the second quarter results that we presented the fact that the trends still look the same. And of course, you do see some of — from us but also from many of our competitors, some monthly numbers that you can look at on the credit side.
Mark DeVries
Okay. Turning next to competition, it seemed like in the wake of the financial crisis, several competitors came out with new cards, a very rich reward propositions targeting your core customer. And then you subsequently responded with a steady stream of product refreshes and have been in part funded by merchant partners that have been difficult for those competitors, honestly, to match. Could you discuss how you leverage your large base of high-spending customers to develop the kind of differentiated partnerships that enhance the value prop for your cards and are kind of sustaining very attractive issuer economics?
Jeff Campbell
Yes. I think this is a really important point. And if any of you came to or looked at some of the presentations that we did back at an Investor Day earlier this year, we began to use the term virtuous cycle, right? And so look, our business, we’ve been around 170 years. It’s a very competitive business, particularly in the U.S. consumer market. And I would point out that’s 35%, 40% of our business.
When you go beyond U.S. consumer, it’s really not quite as competitive, particularly outside the U.S. But boy, the U.S. consumer space, particularly, as you point out, Mark, since the great financial crisis, is a highly, highly competitive place. And so it is really important that we continually innovate, grow and better leverage our partners in what we call a virtuous cycle.
So what do we mean by that? Well, we do start, of course, with a premium consumer base that is global and absolutely unmatched by any of our competitors. And we start with a selection of small businesses that is absolutely unmatched by any of our competitors. Here in the U.S., as you would know, Mark, we are actually larger in the small business card space than our next five competitors combined.
So that customer base is very attractive to partners. And it’s what allows us to work with partners across many different industries to have the partners who want access to that customer base to help fund our value propositions. And I will say, we have become much more focused on this, Mark, over the last probably five or six years. This is one of the strategic changes that I would say has helped accelerate our momentum.
And the trick here is, it’s our customer base that is attractive to those partners. And then, of course, we can use the fact that the partners are helping to provide value that we don’t have to pay for to create value propositions that, to your point, are very difficult for competitors to match, which is what allows us to keep growing the customer base and stay ahead of the customers in terms of being appealing to both our Card Members and to our partners.
In many ways, when you think about the growth plan that we laid out beginning in January, I would argue that the higher levels of revenue growth that you are seeing us achieve now and that we aspire to achieve sustainably, that’s not just offense. Part of it is defense because it is such a competitive industry, right? In other words, if we slow down and our competitors catch up in terms of the attractiveness of their overall customer bases, we will cease to have the advantage we have today in being better able to attract partner value.
So, we see the growth plan and the virtuous cycle as both offensive because we think we can produce even better returns for our shareholders at these higher levels of growth, but there is a defensive angle to it as well. And so that whole virtuous cycle applies across the globe, but I am going to maybe end, Mark, by coming back to the fact that, that U.S. consumer segment is where it is most critical because it is most competitive.
The U.S. small business segment is probably the second most competitive target area we have across the globe. And then when you go outside the U.S. our competitors, of course, vary in every country. But for the most part, I think it’s fair to say our competitors outside the U.S. are not as focused on the card market, both small business and premium consumer, as what you saw the big money center banks in the U.S. do post financial crisis.
Mark DeVries
Okay, excellent. I wanted to touch on inflation for a minute. Have you seen any noticeable impacts on your consumer base from inflation? I mean, I think you’ve touched on this a little bit, but either pulling back purchases or substituting certain things. And if we’re at a new kind of norm for inflation, it stays elevated in 2023 and beyond, how does that start to impact your business or your consumer base?
Jeff Campbell
So I’m going to make a few comments. First, when you look at our recent growth — so in the second quarter, we had volume growth of about 30%. The majority of that growth is just coming from more transactions. There’s a small component of it that you can see coming from higher prices, but it’s a small portion of that 30%. That would be point one.
Point two is that as a general matter for our business model, a modest and steady level of inflation is actually a positive for our business because the majority of our revenue is fairly naturally inflate with inflation and only a minority of our costs fairly naturally inflate. Now don’t get me wrong, inflation does and has put some pressure on our cost structure. But those impacts are smaller than the natural inflation you see on the revenue side.
Our risk in an environment where you have inflation lasting for a long time is really only if and when you see unemployment spike. So at the point at which inflation trends cause the economy to crash, unemployment to spike up, small business failures to go way up, well, that’s a cycle. That’s not good for us.
But if you are in the current — I won’t say unprecedented because that word’s overused, but I’ll say unusual environment, where we have pretty high levels of inflation, unemployment is still near record lows in the U.S. and most of the other countries in which we do business, our particular slice premium consumers and small businesses are continuing to spend strongly. That’s actually a pretty good environment for our business.
Now you also asked, Mark, about do we see the impact of inflation on spending. Remember, given the nature, particularly of our consumer/customer base, customers, while they use it a little bit at what I might call the essentials, in general, our customer base is a premium customer base, where they’re not making trade-offs between, boy, if I got to fill the gas tank, I can’t buy the carton of milk. That’s not our customer.
And so with our customers — Delta is a great partner of ours. Look, demand for airfares, I don’t need to tell anyone in this room, is off the charts. So people when they go to take that vacation this last summer to Europe or to Hawaii or to the Caribbean, they may spend a little bit more on airfare than they intended that may cause them to maybe go out to eat one less time. But if you think about the nature of our business model that the overall spend level on that vacation is still what that customer would have expected. It doesn’t actually affect our business.
So look, I don’t want to be overly, what’s the word I want to use, Pollyanna-ish almost. We are very focused on all the risks to the global economy right now, and we are watching every part of our business every single day and being very thoughtful about the things we’re getting from a risk management perspective. But for our slice of customer and our slice of geographies that we do business in around the globe, the current environment continues to look and perform very strongly.
Mark DeVries
Okay. Turning next to the commercial side of the business. Can you talk about the recent trends for SME and whether that segment’s strong performance has continued and kind of what the drivers for continued growth are in that segment?
Jeff Campbell
So if you look just at — let’s talk about the U.S. because that is where we have the largest portion of our small business franchise. So there’s lots of industry data out there, Mark, that would point out that growth amongst new small businesses has actually accelerated over the last few years. And while we talk about what we call our SME customer segment, so that’s actually customers going all the way up to about $300 million a year in revenue.
I will tell you that the highest levels of growth that are driving our growth in that segment are actually coming from the very small businesses where you have seen a little bit of an explosion of new start-ups. And I think that actually is part in some ways of the flip side of the great reshuffling or the great resignation wherever you want to talk about it. And when you are an industry leader in a segment, from my earlier comment, we’re bigger in the U.S. than our next five competitors combined.
Look, when a segment suddenly sees an acceleration in growth, that generally is a good thing for the market leader. So those are some of the industry dynamics. And of course, all of that is further accelerated by the relentless pressure over the last few years to, boy, you have to be more digital in how you think about B2B payments, whether you’re a little one person starting up a bakery or a larger organization, that helps us.
When you think about our franchise, the first thing I’d say is our scale itself gives us an advantage because it helps us understand so much about every different sector of small businesses and helps us be better partners to our small business Card Members because we can provide a lot of insights about what other people are doing in their industries, what kind of trends we see in spending, in sales. That’s value number one.
Value number two is we have from the very inception of American Express going into the card business in the 1950s been all about a charge card product with no preset spending limit. That may sound really geeky. It’s less critical on the consumer side, but small businesses use the card to run their business. It’s the bike shop on the Jersey Shore that needs to buy a bunch of bikes in April, May to get ready for the big summer. They need a couple of months of float. That’s how they use the card.
And our risk management systems have been tuned since day one to provide dynamic spending capacity to small businesses in a way that our competitors struggle to match. That is a admittedly fairly geeky but really important advantage we have in the small business sector that I think often goes a little bit unnoticed.
Now we then combine that with some of the same strengths you see on the consumer side, the strength of the brand, the strength of the service, the fact that we also have lots of partners who want access to our small business customers. So that helps us fund the value propositions that are difficult for others to match.
So when I look at the small business sector, I guess I’ll just summarize by saying you have a variety of industry or external factors that are actually accelerating growth. And then you combine that with our historically strong position in our strategies, which I just talked about, and that’s what’s leading to the results you’ve seen in the last few quarters, and it’s what makes us very confident about our ability to continue with those trends going forward.
Mark DeVries
Okay. On Card Member acquisitions, it seems like every quarter, you’re setting a new record for cards acquired both on Gold and Platinum as well as co-brands like Delta. How have acquisitions been quarter-to-date? And you’ve had very strong acquisition growth for the last several quarters. Can you just talk more about the drivers there and kind of…
Jeff Campbell
Yes. So boy, there’s a couple of things. We have, for a couple of quarters now, been achieving record results in terms of bringing new members into the franchise. And I think what’s more important than the overall numbers — and I would tell you internally, Mark, we don’t actually focus that much on the total number because a customer is not a customer and a product is not a product. What’s really exciting to us is that we have focused for several years running now on trying to find a way to bring more premium customers into both, the consumer and small business franchise as well as a younger set of customers.
So the first thing that has really changed over the last 5 to 10 years and we believe is super important to our longer-term growth trajectory is that on the consumer side, depending on the period, 60% to 70% of those new premium Card Members paying us those fees that we love to collect and put into our card fee line are actually millennial and Gen X consumers. That is very different from what you would have seen 10 years ago.
10 years ago, we would have said, “Well, we need a no-fee product so we can kind of start the 25-year old and get them into the franchise, and then we’ll grow him over time.” This is tied to something I said earlier, which I think is probably not been as noticed as it should be, and that is just explosion in the growth of the premium card market size. And so, we feel really good about that younger set of Card Members that we’re bringing in.
We also feel really good about the much heavier weighting towards our premium card products in terms of the numbers. And so that’s why each quarter for the last several quarters, we’ve not only talked as we always do about the total number of new people we’re bringing into the franchise, but we’ve in particular called out the fact that on the Platinum and Gold proprietary products, both consumer and small business, we have consistently been setting records each month. And it’s due to all the things that I’ve spent the last 25 minutes talking about, Mark.
It’s really key to what is making us more confident about our longer-term growth aspirations, right? If you bring that younger customer in on a fee product, first of all, customers on fee-based products are much more loyal and put a much higher share of wallet on our product. And of course, you’re bringing someone in at an age where you then have many, many years because ours is a business where once we get a customer, they stay a very, very long time. Our retention rates are in the high-90% range. And so you suddenly have someone who you are growing with as they grow in their career and lifetime path of earnings.
So, I might close by saying, look, I don’t expect every single quarter to set a brand-new record for how many premium Card Members we bring in. We’re also very pleased with the credit quality of these people. But we feel really good because while our momentum is demonstrated in the volume and revenue results you’re seeing each quarter, as you think about making judgments about, well, okay, what’s that going to look like in the future, who you’re bringing into the franchise on what products is really key, and it’s a key source of our confidence right now.
Mark DeVries
Okay. I’m going to pause here and shift to the audience response questions. If you’re willing, please pick up one of the controls in front of you and register your response. First question, what factor do you view as the most likely to determine whether AXP outperforms over the next year? One, better-than-expected build business growth; two, better-than-expected loan growth; three, benign credit; four, upside to the NIM; five, other?
So 48% better-than-expected billed business growth. Not surprising. Did you want to have a chance to respond or…
Jeff Campbell
Well, I do find that very interesting. I think the one that perhaps surprises me a bit is the low score in number two. So when you think about our revenue growth, our revenue growth is 80% driven by volumes and discount revenues and uniquely our ability to collect fees and card fees from our customers.
Still, 20% of our revenues do come from loan growth. If you look pre-pandemic, we for about a five- or six-year period consistently outgrew the industry because we are so underpenetrated historically. And I fully expect that to be to be the case in the coming years.
On the other hand, it — that’s the tail. That’s not the dog, if you will. But we expect to outperform the industry on volume, but we also expect to outperform the industry on loan growth just given our historical underpenetration.
Mark DeVries
Okay. Next question, what do you view is the best risk to shares? One, lower-than-expected discount revenue growth; two, lower-than-expected loan growth; three, normalizing credit; four, higher-than-expected marketing and engagement expenses; five, other?
Okay. 45% said normalizing credit. Although I’ll tell you, Jeff, for the other consumer letters, I’ve done today, that number is usually 90% to 95%.
Jeff Campbell
Really? Oh, that’s interesting. Well, let me talk about credit for a second. So I’d remind you all that as I said a second ago, we had five or six years, not five or six quarters, five or six years pre- free pandemic where we were growing our lending faster than the industry. And I sat in many rooms like this where we said, “Oh my gosh, this can’t end well.” We did that while maintaining by far best-in-class credit metrics. And if you do a little math of what’s happened during the pandemic, our difference versus the industry on credit metrics, Mark, has actually grown.
So in other words, we are outperforming the industry even more today than we were three years ago. And when you look at the credit profiles that the people we’re bringing into the franchise right now, they’re actually stronger than the average of what we were bringing in pre-pandemic, which makes sense if you think about the more premium mix of products. So I’ve been very clear in my public comments that certain — because a common question I get is, gosh, when will you even get back to the pre-pandemic levels of credit metrics, which were not awful spike — bottom-of-the-cycle metrics but were BAU metrics.
And our view has been, well, we’re certainly not getting back anywhere near them this year, and I don’t know if we ever get back because our product mix today is more premium than it was before the pandemic. I’d still remind you, we are still 80% of our discount revenue and fees — and while we do, do some lending and yes, even our premium card members, sometimes like bar on cards, which always surprises people, still, the biggest piece of our business is all about volume, right?
There was the answer to that first question, and it’s all about people who are using it as a charge card where we have a long history of having really strong risk management. So I guess, as I think about things I can control, I like this slide because I control the marketing and customer engagement expenses, and I’m pretty confident about our credit hands. So I like this slide.
Mark DeVries
Okay. Great. Next question, please. AP will likely flank its aspirational EPS range of nine. So meet, miss, beat?
Okay. 51% are looking for a beat, Jeff.
Jeff Campbell
Interesting, I am curious how this compares to some of your other companies that have…
Mark DeVries
Well, this question is unique.
Jeff Campbell
Oh, it’s unique. Thanks so much. Can I just — let me be very precise, though, just a little bit of language? We do and not all of our competitors do, but — which part of this industry you look at. But we do provide — pre-pandemic, we’ve provided annual guidance, and we went back to doing that this year. And so the EPS range of $9.25 to $9.65 is what we provided as guidance, which I — not just sounded like a lode, but that is different from an aspiration. So no, that’s our full expectation.
In fact, just to remind everyone what I said in July is that on current trends, we are certainly trending to be at or even above the high end of that range. But I — we didn’t change the range because of the caveat that we are a financial institution. We do have this lovely accounting standard known as CECL. And as you think — put yourself back in July and all the economic uncertainty. As you have all, if you follow financial services, painfully learned over the last 2.5 years, there’s a large component of the CECL accounting entry each quarter that is just driven by what your economic forecast is.
And so if we get to December and our business is performing great, credit is performing great and suddenly, we don’t have in-house economists. We just use Moody’s. Moody’s says, “Oh, no, our come our economic forecast has gotten a lot worse. We have to look into credit reserves.” So that made us a little cautious about change in the range. But to be clear, this is guidance.
Beyond 2022, we have given you an aspiration where in 2024 and beyond, we’d expect our sustainable level of revenue growth to be over 10%. We’ll certainly be above that next year because we still have some recovery tailwinds helping us probably in the mid-teens somewhere. We’ll have to see, but we’ll have to see what economic forecasts look like December 31 to see exactly where we end up here.
Mark DeVries
Okay. That’s helpful context. And then I think we’ve got one more question.
Jeff Campbell
Okay.
Mark DeVries
Over the next year, would you expect your position in AXP to, one, increase; two, decrease; three, remain the same?
All right. So that’s a pretty high percentage of increase. That’s…
Jeff Campbell
Yes. I can’t resist point out not to be overly focused on the map, but we’re not going to issue any shares. And in fact, we steadily buy back shares because Warren Buffett owns 20% of the Company. And steadily, he owns more as he bought back shares. So, I think we’re going to have an equal number of people buy and sell the stock between now and the end of the year, just mathematically. But I’m not sure. You guys can check me on that. But still, I like that result.
Mark DeVries
Okay. Great. We’ve got a few minutes left. If anybody in the audience has any questions for Jeff, if not — okay, I see at least one hand here.
Jeff Campbell
Hard to see.
Mark DeVries
Yes.
Unidentified Analyst
You talked about the growth of the millennial and Gen Z cohort. Curious if you’re modeling any differing behavior for them versus your traditional boomer client. You did talk about capturing a greater share of wallet with them, but just curious, if you’re putting any guardrails about — around that or any differing expectation?
Jeff Campbell
Yes. It’s a really good question. Let me make a few comments. First — and these are sweeping generalizations of course, there’s lots of exceptions. But as a cohort, the younger customers tend to be much more digitally engaged. That shouldn’t surprise anyone. They also tend to be much more engaged with the value proposition.
So they are a little bit more likely to say, “Okay, I’ve done the math.” I know people may say, “Why in the world would you pay $700 for a year for something you could get free?” But they’ve done the math and they say, “Because, boy, I think about all the travel credits, I think about the retail credits, I think about all the benefits, this is a great deal.”
Your baby booming customers who’ve been with us 20 years tend to be a little less engaged sometimes with some of those services. So they are more digitally engaged. They are more engaged in the value proposition. We do tend to have a higher share of their wallet, and that I would believe goes really along with those first two. Because you’re being rational, you’re saying I’m paying the fee. I want to use the card.”
We also, of course, have found that from a credit quality perspective, we have not changed our credit standards at all. So I said earlier that when you look at our overall portfolio and the people we’re bringing into the franchise, the overall credit profile is actually a little stronger than it was pre-pandemic. So I do want to be clear that we’re not appealing to the younger generation by saying, “Okay, we’re going to have a different credit profile of who we bring in.” We’re bringing in very strong credit profile people.
The other thing that we do and my colleague, Doug Buckminster, who runs all of our Global Consumer businesses, sometimes likes to describe our business as saying, “We have this amazing kind of engineering foundation of analytics over which we put a little bit of marketing innovation.”
And the relevance of that, to your question, is we are tracking every single month, every single customer and feeding them into our machine learning algorithms about, okay, the 24-year old who joined us three years and six months ago, exactly what has happened every six months as we think about our forecasting models of how people who we’re bringing in tomorrow come in, let’s take every bit of knowledge we have.
So every bit of data that we have today tells us that this is a cohort that is going to stay with us a long time with good credit quality, very engaged, which is a good thing. And we will be able to grow as their incomes grow.
Now to be clear, I don’t have 30 years of data on bringing 25-year olds into the franchise on $695 a year Platinum product. So back to your risk slide, I suppose, maybe we’re wrong. But I just want you to understand how — what we see, how analytically we focused are — focused we are on using every bit of data we have. And we do have decades of watching other customers stay with the franchise.
And maybe I would just end Mark by saying we have, in recent quarters, been talking a lot about our retention rates. And retention rates in the high-90% percentages, we think, bode pretty well and are a strong comment on the franchise and the way people stick with the brand once we get them into the brand, and that gives us a lot of confidence in our longer-term growth aspirations.
Mark DeVries
Okay, great. Well, I think we need to close on that note. But please join me in thanking Jeff for his thoughts.
Jeff Campbell
Thanks, Mark, and thanks for your interest.
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