[April 18, 2019] |
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American Express Reports First-Quarter Earnings Per Share of $1.80, Adjusted EPS of $2.011
American Express (News - Alert) Company (NYSE: AXP) today reported first-quarter
net income of $1,550 million or $1.80 per share, compared with net
income of $1,634 million or $1.86 per share a year ago.
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(Millions, except percentages and per share amounts)
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Quarters Ended March 31,
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Percentage Inc/(Dec)
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2019
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2018
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Total Revenues Net of Interest Expense
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$
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10,364
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$
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9,718
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7
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Net Income
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$
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1,550
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$
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1,634
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(5)
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Diluted Earnings Per Common Share2
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$
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1.80
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$
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1.86
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(3)
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Adjusted Diluted Earnings Per Common Share1
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$
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2.01
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$
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1.86
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8
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Average Diluted Common Shares Outstanding
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843
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861
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(2)
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First-quarter earnings per share of $1.80 included an addition to legal
reserves of $0.21 per share related to a merchant litigation that has
now been resolved. Excluding that litigation-related charge, adjusted
earnings per share for the quarter was $2.01.1
First-quarter consolidated total revenues net of interest expense were
$10.4 billion, up 7 percent from $9.7 billion a year ago. Excluding the
impact of foreign exchange rates, adjusted revenues net of interest
expense grew 9 percent.3 The increases were broad-based and
reflected higher Card Member spending, loan volumes and fee income.
Consolidated provisions for losses were $809 million, up 4 percent from
$775 million a year ago. The increase reflected continued growth in the
loan and receivable portfolios and higher net lending write-offs,
partially offset by a smaller reserve build compared to a year ago.
Consolidated expenses were $7.6 billion, up 11 percent from $6.9 billion
a year ago. The increase reflected, in part, higher customer engagement
costs. Operating expenses were up 10 percent from a year ago,4
primarily driven by the litigation-related charge.
The consolidated effective tax rate was 20.8 percent, down from 21.5
percent a year ago.
"With FX-adjusted revenues up 9 percent we are off to a solid start in
2019," said Stephen J. Squeri, chairman and chief executive officer.
"This growth was broad based and well-balanced across spend, lend and
fee revenues, reflecting the benefits of our integrated business model.
"We continued to expand our merchant network and added 3.1 million new
proprietary cards in the quarter driven primarily by our digital
acquisition initiatives. Billings growth remained solid across customer
segments and geographies, with strong performance internationally,
especially among consumers, small and mid-sized business customers. Loan
growth continued to be strong, and credit quality remained at
industry-leading levels.
"During the quarter, we signed an extension of our partnership with
Delta Air Lines that will take us to 2030. Delta is our largest cobrand
partnership, and it's one of the most valuable portfolios in the
industry. Spending on our Delta cobrand products has grown by double
digits annually for the past several years, and together we've acquired
more than 1 million new accounts in each of the past two years. The
partnership contributes significant revenue and earnings to both
companies and, from a customer and shareholder perspective, we feel
great about the opportunity it represents.
"We are affirming our revenue and EPS guidance for the full year.5
"Looking ahead, we continue to see a number of attractive growth
opportunities across our businesses, and we're going to invest to take
advantage of those opportunities in order to drive revenue growth over
the moderate to longer term."
Global Consumer Services Group reported first-quarter net income
of $821 million, down 1 percent from $826 million a year ago.
Total revenues net of interest expense were $5.6 billion, up 9 percent
from $5.1 billion a year ago. The rise primarily reflected higher loan
volumes, Card Member spending and fee income.
Provisions for losses totaled $552 million, up 4 percent from $530
million a year ago. The rise primarily reflected continued growth in the
loan portfolio and higher net lending write-offs, partially offset by a
smaller reserve build compared to a year ago.
Total expenses were $4.0 billion, up 12 percent from $3.5 billion a year
ago. The increase was primarily driven by higher customer engagement
costs.
The effective tax rate was 21 percent, unchanged from a year ago.
Global Commercial Services reported first-quarter net income of
$586 million, up 7 percent from $546 million a year ago.
Total revenues net of interest expense were $3.2 billion, up 6 percent
from $3.0 billion a year ago. The increase primarily reflected higher
Card Member spending.
Provisions for losses totaled $254 million, up 6 percent from $240
million a year ago.
Total expenses were $2.2 billion, up 7 percent from $2.1 billion a year
ago. The rise primarily reflected higher marketing and business
development costs and increased operating expenses.
The effective tax rate was 21 percent, down from 23 percent a year ago.
Global Merchant and Network Services reported first-quarter net
income of $631 million, up 22 percent from $516 million a year ago.
Total revenues net of interest expense were $1.6 billion, unchanged from
a year ago.
Total expenses were $787 million, down 11 percent from $887 million a
year ago, primarily due to a charge related to the sale of the company's
prepaid operations in the prior year.
The effective tax rate was 25 percent, down from 27 percent a year ago.
Corporate and Other reported first-quarter net loss of $489
million, compared with a net loss of $254 million a year ago, primarily
reflecting the impact of the litigation-related charge mentioned earlier.
About American Express
American Express is a globally integrated payments company, providing
customers with access to products, insights and experiences that enrich
lives and build business success. Learn more at americanexpress.com
and connect with us on facebook.com/americanexpress,
instagram.com/americanexpress,
linkedin.com/company/american-express,
twitter.com/americanexpress,
and youtube.com/americanexpress.
Key links to products, services and corporate responsibility
information: charge
and credit cards, business
credit cards, travel
services, gift
cards, prepaid
cards, merchant
services, Accertify,
InAuth,
corporate
card, business
travel, and corporate
responsibility.
This earnings release should be read in conjunction with the
company's statistical tables for the first-quarter 2019, available on
the American Express website at http://ir.americanexpress.com
and in a Form 8-K filed today with the Securities and Exchange
Commission.
An investor conference call will be held at 8:30 a.m. (ET) today to
discuss first-quarter earnings results. Live audio and presentation
slides for the investor conference call will be available to the general
public on the above-mentioned American Express Investor Relations
website. A replay of the conference call will be available later today
at the same website address.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This release includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, which are subject
to risks and uncertainties. The forward-looking statements, which
address American Express Company's current expectations regarding
business and financial performance, including management's outlook for
2019, among other matters, contain words such as "expect," "anticipate,"
"intend," "plan," "aim," "will," "may," "should," "could," "would,"
"likely" and similar expressions. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as
of the date on which they are made. The company undertakes no obligation
to update or revise any forward-looking statements. Factors that could
cause actual results to differ materially from these forward-looking
statements, include, but are not limited to, the following:
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the company's ability to achieve its 2019 earnings per common share
outlook, which will depend in part on revenue growth, credit
performance and the effective tax rate remaining consistent with
current expectations, the company's ability to control operating
expense growth and generate operating leverage, and the company's
ability to continue executing its share repurchase program; any of
which could be impacted by, among other things, the factors identified
in the subsequent paragraphs as well as the following: issues
impacting brand perceptions and the company's reputation; the impact
of any future contingencies, including, but not limited to,
restructurings, impairments, changes in reserves, legal costs, the
imposition of fines or civil money penalties and increases in Card
Member reimbursements; the amount and efficacy of investments in
customer engagement; changes in interest rates beyond current
expectations (including the impact of hedge ineffectiveness and
deposit rate increases); a greater impact from new or renegotiated
cobrand agreements than expected, which could be affected by spending
volumes and customer acquisition; and the impact of regulation and
litigation, which could affect the profitability of the company's
business activities, limit the company's ability to pursue business
opportunities, require changes to business practices or alter the
company's relationships with partners, merchants and Card Members;
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the ability of the company to achieve its 2019 revenue growth outlook,
which could be impacted by, among other things, weakening economic
conditions in the United States or internationally, a decline in
consumer confidence impacting the willingness and ability of Card
Members to sustain and grow spending and revolve balances, growth in
Card Member loans and the yield on Card Member loans not remaining
consistent with current expectations, the average discount rate
changing by a greater amount than expected, the strengthening of the
U.S. dollar beyond expectations, the willingness of Card Members to
pay higher card fees, lower spending on new cards acquired than
estimated, and the company's inability to address competitive
pressures and implement its strategies and business initiatives,
including within the premium consumer segment, commercial payments,
the global network and digital environment;
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changes in the substantial and increasing worldwide competition in the
payments industry, including competitive pressure that may impact the
prices charged to merchants that accept American Express cards,
competition for new and existing cobrand relationships, competition
from new and non-traditional competitors and the success of marketing,
promotion and rewards programs;
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the company's delinquency and write-off rates and growth of provisions
for losses being higher or lower than current expectations, which will
depend in part on changes in the level of loan and receivable balances
and delinquencies generally as well as in macroeconomic factors, the
mix of balances, newer vintages and balance transfers, loans and
receivables related to new Card Members and other borrowers performing
as expected, credit performance of new and enhanced lending products,
unemployment rates, the volume of bankruptcies, collections
capabilities and recoveries of previously written-off loans and
receivables;
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the company's ability to continue to grow loans, which may be affected
by increasing competition, brand perceptions and reputation, the
company's ability to manage risk, the behavior of Card Members and
their actual spending and borrowing patterns, and the company's
ability to issue new and enhanced card products, offer attractive
non-card lending products, capture a greater share of existing Card
Members' spending and borrowings, reduce Card Member attrition and
attract new customers;
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the company's rewards expense and cost of Card Member services growing
inconsistently from expectations, which will depend in part on Card
Member behavior as it relates to their spending patterns, including
the level of spend in bonus categories, and their redemption of
rewards and offers, as well as the degree of interest of Card Members
in the value proposition offered by the company; increasing
competition, which could result in additional benefits and services
and greater rewards offerings; the company's ability to enhance card
products and services to make them attractive to Card Members; and the
pace and cost of the expansion of the company's global lounge
collection;
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the actual amount to be spent on marketing and business development,
as well as the timing of any such spending, which will be based in
part on management's assessment of competitive opportunities; overall
business performance, corporate and GNS billings and changes in
macroeconomic conditions; costs related to advertising and Card Member
acquisition; the company's ability to continue to shift Card Member
acquisition to digital channels; contractual obligations with business
partners and other fixed costs and commitments, including as a result
of partnership renegotiations; management's ability to identify
attractive investment opportunities and make such investments, which
could be impacted by business, regulatory or legal complexities; and
the company's ability to realize efficiencies, optimize investment
spending and control expenses to fund such spending;
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the company's ability to control operating expense growth, which could
be impacted by increases in costs, such as cyber, fraud or compliance
expenses or consulting, legal and other professional fees, including
as a result of increased litigation or internal and regulatory
reviews; higher than expected employee levels; an inability to
innovate efficient channels of customer interactions, such as chat
supported by artificial intelligence, or customer acquisition; the
impact of changes in foreign currency exchange rates on costs; the
payment of civil money penalties, disgorgement, restitution,
non-income tax assessments and litigation-related settlements;
impairments of goodwill or other assets; management's decision to
increase or decrease spending in such areas as technology, business
and product development and sales forces; greater-than-expected
inflation; and the level of M&A activity and related expenses;
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the company's ability to realize the benefits from its strategic
partnerships, including Delta Air Lines, which is dependent in part on
the ability of the companies to collaborate, develop and market value
propositions that appeal to Card Members and new customers and offer
attractive services and rewards programs, which will depend in part on
the competitive environment, brand perceptions, ongoing investments,
new product innovation and development, Card Member acquisition
efforts and enrollment processes, and infrastructure to support new
products, services and benefits;
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the company's ability to grow Personal Savings deposits consistent
with expectations, including as a result of market demand, changes in
benchmark interest rates or regulatory restrictions on the company's
ability to obtain deposit funding or offer competitive interest rates,
which could affect the company's net interest yield and ability to
fund its businesses;
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a failure in or breach of the company's operational or security
systems, processes or infrastructure, or those of third parties,
including as a result of cyberattacks, which could compromise the
confidentiality, integrity, privacy and/or security of data, disrupt
its operations, reduce the use and acceptance of American Express
cards and lead to regulatory scrutiny, litigation, remediation and
response costs, and reputational harm;
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legal and regulatory developments, which could require the company to
make fundamental changes to many of its business practices, including
its ability to continue certain cobrand and agent relationships in
their current form in the EU; exert further pressure on the average
discount rate and GNS volumes; result in increased costs related to
regulatory oversight, litigation-related settlements, judgments or
expenses, restitution to Card Members or the imposition of fines or
civil money penalties; materially affect capital or liquidity
requirements, results of operations, or ability to pay dividends or
repurchase stock; or result in harm to the American Express brand; and
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factors beyond the company's control such as changes in global
economic and business conditions, consumer and business spending
generally, the availability and cost of capital, unemployment rates,
geopolitical conditions, Brexit, trade policies, foreign currency
rates and interest rates, as well as fire, power loss, disruptions in
telecommunications, severe weather conditions, natural disasters,
health pandemics or terrorism, any of which could significantly affect
demand for and spending on American Express cards, delinquency rates,
loan and receivable balances and other aspects of the company and its
results of operations or disrupt the company's global network systems
and ability to process transactions.
A further description of these uncertainties and other risks can be
found in American Express Company's Annual Report on Form 10-K for the
year ended December 31, 2018, the company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2019 and the company's other
reports filed with the Securities and Exchange Commission.
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American Express Company
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Appendix I
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Reconciliations of Adjustments
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Q1'19
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Q1'18
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Percentage Inc/(Dec)
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Diluted earnings per common share
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$1.80
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$1.86
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(3)
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Litigation-related charge (pre-tax)
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0.27
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-
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Tax impact of litigation-related charge
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(0.06)
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-
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Net Impact of Q1'19 litigation-related charge
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0.21
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-
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Adjusted diluted earnings per common share
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$2.01
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$1.86
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8
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2019 EPS Range
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GAAP EPS Outlook
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$7.64
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$8.14
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Litigation-related charge (pre-tax)
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0.27
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0.27
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Tax impact of litigation-related charge
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(0.06)
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(0.06)
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Net Impact of Q1'19 litigation-related charge
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0.21
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0.21
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Adjusted EPS Outlook
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$7.85
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$8.35
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_______________________________
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Notes:
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1 Adjusted diluted earnings per common share (EPS), a
non-GAAP measure, excludes the impact of a litigation-related
charge in Q1 '19. Management believes adjusted EPS is useful in
evaluating the ongoing operating performance of the company. See
Appendix I for a reconciliation to EPS on a GAAP basis.
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2 Earnings per common share - diluted was reduced by
the impact of (i) earnings allocated to participating share awards
and other items of $11 million and $13 million for the three
months ended March 31, 2019 and 2018, respectively, and (ii)
dividends on preferred shares of $21 million for both the three
months ended March 31, 2019 and 2018.
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3 As reported in this release, FX-adjusted information
assumes a constant exchange rate between the periods being compared
for purposes of currency translations into U.S. dollars (e.g.,
assumes the foreign exchange rates used to determine results for the
three months ended March 31, 2019 apply to the period(s) against
which such results are being compared). Management believes the
presentation of information on an FX-adjusted basis is helpful to
investors by making it easier to compare the company's performance
in one period to that of another period without the variability
caused by fluctuations in currency exchange rates.
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4 Operating expenses represent salaries and employee
benefits, professional services, occupancy and equipment, and other
expenses.
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5 The company's 2019 revenue growth guidance remains 8-10
percent. The company's 2019 EPS guidance on a GAAP basis, which
includes the impact of a litigation-related charge in Q1'19, is
between $7.64 and $8.14. The 2019 adjusted EPS guidance, a non-GAAP
measure, remains between $7.85 and $8.35. See Appendix I for a
reconciliation. Management believes the presentation of adjusted EPS
guidance is useful in evaluating the ongoing operating performance
of the company.
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