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PriceSmart(PSMT) - 2024 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This section covers PriceSmart, Inc.'s comprehensive financial data, including statements, management's analysis, market risks, and internal controls ITEM 1. FINANCIAL STATEMENTS This section presents PriceSmart, Inc.'s unaudited consolidated financial statements, including balance sheets, income, equity, and cash flows Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of specific dates | ASSETS (in thousands) | May 31, 2024 (Unaudited) | August 31, 2023 | | :-------------------- | :----------------------- | :---------------- | | Cash and cash equivalents | $128,271 | $239,984 | | Short-term investments | $99,904 | $91,081 | | Merchandise inventories | $516,464 | $471,407 | | Total current assets | $822,828 | $877,107 | | Property and equipment, net | $938,336 | $850,328 | | Total Assets | $2,020,698 | $2,005,608 | | LIABILITIES AND EQUITY (in thousands) | May 31, 2024 (Unaudited) | August 31, 2023 | | :---------------------------------- | :----------------------- | :---------------- | | Short-term borrowings | $10,078 | $8,679 | | Accounts payable | $491,203 | $453,229 | | Dividends payable | $17,771 | — | | Long-term debt, current portion | $36,672 | $20,193 | | Total current liabilities | $694,391 | $634,477 | | Long-term debt, net of current portion | $98,426 | $119,487 | | Total Liabilities | $925,344 | $898,565 | | Total Stockholders' Equity | $1,095,354 | $1,107,043 | | Total Liabilities and Equity | $2,020,698 | $2,005,608 | - Total assets increased by $15.1 million to $2.02 billion as of May 31, 2024, compared to August 31, 2023, primarily driven by an increase in property and equipment, net, and merchandise inventories, partially offset by a decrease in cash and cash equivalents15 - Total liabilities increased by $26.8 million to $925.3 million, mainly due to higher accounts payable and current portion of long-term debt, partially offset by a decrease in long-term debt, net of current portion15 - Total stockholders' equity decreased by $11.7 million to $1.095 billion, primarily due to an increase in treasury stock at cost17 Consolidated Statements of Income This section details the company's financial performance over specific periods, presenting revenues, expenses, and net income | (Amounts in thousands, except per share data) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net merchandise sales | $1,194,531 | $1,070,263 | $3,590,461 | $3,211,725 | | Total revenues | $1,229,428 | $1,096,654 | $3,687,853 | $3,293,649 | | Total operating expenses | $1,179,519 | $1,053,602 | $3,516,113 | $3,141,270 | | Operating income | $49,909 | $43,052 | $171,740 | $152,379 | | Net income | $32,489 | $29,572 | $109,807 | $93,824 | | Basic net income per share | $1.08 | $0.95 | $3.62 | $3.02 | | Diluted net income per share | $1.08 | $0.94 | $3.62 | $3.01 | - Total revenues increased by 12.1% to $1.229 billion for the three months ended May 31, 2024, and by 12.0% to $3.688 billion for the nine months ended May 31, 2024, compared to the prior-year periods19200201 - Net income for the three months ended May 31, 2024, was $32.5 million ($1.08 per diluted share), up from $29.6 million ($0.94 per diluted share) in the prior-year period. For the nine months, net income was $109.8 million ($3.62 per diluted share), up from $93.8 million ($3.01 per diluted share)19200201 Consolidated Statements of Comprehensive Income This section presents the company's total comprehensive income, including net income and other comprehensive income components | (Amounts in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :--------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $32,489 | $29,572 | $109,807 | $93,824 | | Other Comprehensive Income (Loss), net of tax: | | | | | | Foreign currency translation adjustments | $(5,181) | $15,285 | $5,053 | $26,599 | | Total defined benefit pension plan | $91 | $15 | $302 | $30 | | Total derivative instruments | $299 | $(1,200) | $(1,443) | $(646) | | Other comprehensive income (loss) | $(4,791) | $14,100 | $3,912 | $25,983 | | Comprehensive income | $27,698 | $43,672 | $113,719 | $119,807 | - Comprehensive income for the three months ended May 31, 2024, was $27.7 million, a decrease from $43.7 million in the prior-year period, primarily due to negative foreign currency translation adjustments21 - For the nine months ended May 31, 2024, comprehensive income was $113.7 million, down from $119.8 million in the prior-year period, mainly due to lower foreign currency translation adjustments and unrealized losses on derivative instruments21 Consolidated Statements of Equity This section details changes in the company's equity, including common stock, retained earnings, and other comprehensive loss | (Amounts in thousands) | May 31, 2024 | May 31, 2023 | | :--------------------- | :----------- | :----------- | | Common Stock (Shares) | 32,563 | 31,935 | | Common Stock (Amount) | $3 | $3 | | Additional Paid-in Capital | $509,901 | $494,382 | | Accumulated Other Comprehensive Loss | $(160,080) | $(169,603) | | Retained Earnings | $861,158 | $802,002 | | Treasury Stock (Shares) | 1,924 | 871 | | Treasury Stock (Amount) | $(115,628) | $(37,091) | | Total Equity | $1,095,354 | $1,089,693 | - Total equity increased from $1,089.7 million as of May 31, 2023, to $1,095.4 million as of May 31, 2024, primarily driven by net income and stock-based compensation, partially offset by dividends paid and treasury stock purchases2427 - The Company purchased 969 thousand treasury shares for $71.85 million during the nine months ended May 31, 2024, significantly increasing treasury stock compared to the prior year27 Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities | (Amounts in thousands) | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :--------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $165,754 | $184,681 | | Net cash used in investing activities | $(149,379) | $(197,814) | | Net cash used in financing activities | $(124,279) | $(13,051) | | Effect of exchange rate changes on cash | $(3,956) | $11,183 | | Net decrease in cash, cash equivalents | $(111,860) | $(15,001) | | Cash, cash equivalents and restricted cash at end of period | $140,342 | $236,372 | - Net cash provided by operating activities decreased by $18.9 million to $165.8 million for the nine months ended May 31, 2024, primarily due to shifts in working capital from merchandise inventory and accounts payable276 - Net cash used in investing activities decreased by $48.4 million to $149.4 million, mainly due to a $103.6 million increase in proceeds from settlements of short-term investments, partially offset by higher property and equipment expenditures277 - Net cash used in financing activities significantly increased by $111.2 million to $124.3 million, driven by treasury stock repurchases and a special dividend payment278 NOTE 1 – COMPANY OVERVIEW AND BASIS OF PRESENTATION This note provides an overview of PriceSmart's operations, business model, and the basis for its financial statement presentation - PriceSmart operates 54 international membership shopping warehouse clubs across 12 countries and one U.S. territory, with plans to open a 55th club in Cartago, Costa Rica, in spring 202535 - The Company's growth strategy focuses on three major drivers: investing in remodeling existing clubs, adding new locations and distribution centers; increasing membership value; and driving incremental sales via PriceSmart.com and enhanced digital capabilities39 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and methods used in preparing the company's consolidated financial statements | Restricted Cash (in thousands) | May 31, 2024 | August 31, 2023 | | :----------------------------- | :----------- | :-------------- | | Short-term restricted cash | $2,832 | $2,865 | | Long-term restricted cash | $9,239 | $9,353 | | Total restricted cash | $12,071 | $12,218 | | VAT Receivables (in thousands) | May 31, 2024 | August 31, 2023 | | :----------------------------- | :----------- | :-------------- | | Prepaid expenses and other current assets | $9,442 | $2,774 | | Other non-current assets | $30,275 | $36,060 | | Total amount of VAT receivables reported | $39,717 | $38,834 | | Income Tax Receivables (in thousands) | May 31, 2024 | August 31, 2023 | | :------------------------------------ | :----------- | :-------------- | | Prepaid expenses and other current assets | $15,703 | $17,749 | | Other non-current assets | $27,074 | $19,176 | | Total amount of income tax receivables reported | $42,777 | $36,925 | - In January 2024, the Company purchased a previously leased club building and land in Panama City for $33.0 million, resulting in the termination of related ROU assets and lease liabilities and an expected annual saving of approximately $1.1 million, net of tax, in operating expenses62 - The Company uses derivative financial instruments for hedging interest rate and currency exchange rate risks, with effective hedges recorded using hedge accounting and changes in fair value reported in accumulated other comprehensive loss7579 NOTE 3 – REVENUE RECOGNITION This note details the company's policies and methods for recognizing revenue from merchandise sales and membership fees | Contract Liabilities (in thousands) | May 31, 2024 | August 31, 2023 | | :---------------------------------- | :----------- | :-------------- | | Deferred membership income | $36,192 | $31,079 | | Other contract performance liabilities | $11,977 | $12,347 | | Net Merchandise Sales by Category (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :----------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Foods & Sundries | $576,433 | $537,567 | $1,745,350 | $1,601,613 | | Fresh Foods | $358,764 | $319,706 | $1,055,562 | $940,470 | | Hardlines | $132,004 | $106,937 | $408,774 | $342,225 | | Softlines | $62,483 | $54,947 | $189,441 | $175,736 | | Food Service and Bakery | $53,211 | $42,980 | $159,086 | $129,784 | | Health Services | $11,636 | $8,126 | $32,248 | $21,897 | | Net Merchandise Sales | $1,194,531 | $1,070,263 | $3,590,461 | $3,211,725 | - Membership income is recognized ratably over the 12-month term, with Platinum Memberships offering a 2% rebate recorded as a reduction of revenue at the time of sale101102 NOTE 4 – EARNINGS PER SHARE This note provides a breakdown of basic and diluted earnings per share calculations, including adjustments for unvested stock | (Amounts in thousands, except per share amounts) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :----------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $32,489 | $29,572 | $109,807 | $93,824 | | Less: Allocation of income to unvested stockholders | $(67) | $(456) | $(1,033) | $(1,098) | | Net income available for distribution | $32,422 | $29,116 | $108,774 | $92,726 | | Basic weighted average shares outstanding | 29,968 | 30,800 | 30,052 | 30,752 | | Diluted average shares outstanding | 29,968 | 30,829 | 30,052 | 30,770 | | Basic net income per share | $1.08 | $0.95 | $3.62 | $3.02 | | Diluted net income per share | $1.08 | $0.94 | $3.62 | $3.01 | - Diluted net income per share increased to $1.08 for the three months ended May 31, 2024, from $0.94 in the prior-year period, and to $3.62 for the nine months, from $3.01113 NOTE 5 – STOCKHOLDERS' EQUITY This note details changes in stockholders' equity, including dividends, comprehensive loss, and share repurchase activities | Dividends Declared (per share) | Amount | Record Date | Date Paid | Payable Date | | :----------------------------- | :----- | :---------- | :-------- | :----------- | | April 3, 2024 (Special) | $1.00 | 4/19/2024 | 4/30/2024 | N/A | | February 1, 2024 (Annual) | $1.16 | 2/15/2024 | 2/29/2024 | 8/30/2024 | | February 3, 2023 (Annual) | $0.92 | 2/16/2023 | 2/28/2023 | 8/31/2023 | | Accumulated Other Comprehensive Loss (in thousands) | May 31, 2024 | May 31, 2023 | | :-------------------------------------------------- | :----------- | :----------- | | Beginning balance, March 1 | $(155,289) | $(183,703) | | Foreign currency translation adjustments | $(5,181) | $15,285 | | Defined benefit pension plans | $91 | $15 | | Derivative instruments | $299 | $(1,200) | | Ending balance, May 31 | $(160,080) | $(169,603) | | Share Repurchase Activity (in thousands, except per share) | Nine Months Ended May 31, 2024 | | :----------------------------------------- | :----------------------------- | | Number of common shares acquired | 935,663 | | Average price per common share acquired | $74.13 | | Total cost of common shares acquired | $69,362 | - The Company declared a one-time special dividend of $1.00 per share on April 3, 2024, in addition to its annual cash dividend of $1.16 per share114 - The $75 million share repurchase program, authorized in July 2023, was successfully completed in the first quarter of fiscal year 2024, with approximately 1,007,000 shares repurchased122 NOTE 6 – COMMITMENTS AND CONTINGENCIES This note outlines the company's future lease obligations, construction commitments, land purchase agreements, and joint venture exposures | Future Lease Payments (in thousands) | Amount | | :----------------------------------- | :----- | | Twelve Months Ended May 31, 2026 | $1,132 | | Twelve Months Ended May 31, 2027 | $1,655 | | Twelve Months Ended May 31, 2028 | $1,616 | | Twelve Months Ended May 31, 2029 | $1,577 | | Twelve Months Ended May 31, 2030 | $1,540 | | Thereafter | $19,808 | | Total future lease payments | $27,328 | | Real Estate Joint Ventures (in thousands) | Company's Variable Interest in Entity | Commitment to Future Additional Investments | Maximum Exposure to Loss in Entity | | :---------------------------------------- | :------------------------------------ | :------------------------------------------ | :------------------------------- | | GolfPark Plaza, S.A. | $6,894 | $99 | $6,993 | | Price Plaza Alajuela PPA, S.A. | $3,667 | $785 | $4,452 | | Total | $10,561 | $884 | $11,445 | - The Company has $12.5 million in non-cancelable construction service obligations as of May 31, 2024136 - The Company has signed a lease agreement for a new facility in Miraflores, Guatemala, with estimated future minimum lease commitments of $27.3 million and plans to invest approximately $12.1 million in cash to outfit the club137138 - The Company has four land purchase agreements that, if completed, would require approximately $13.7 million in cash138 NOTE 7 – DEBT This note details the company's short-term borrowings, long-term debt, and annual maturities, including new loan agreements | Short-term Borrowings (in thousands) | May 31, 2024 | August 31, 2023 | | :----------------------------------- | :----------- | :-------------- | | Total Amount of Facilities | $171,000 | $166,000 | | Facilities Used | $10,078 | $8,679 | | Facilities Available | $160,838 | $157,624 | | Weighted average interest rate (Uncommitted) | 11.4% | 13.2% | | Long-term Debt (in thousands) | August 31, 2023 | May 31, 2024 | | :---------------------------- | :-------------- | :----------- | | Total long-term debt | $139,680 | $135,098 | | Current portion of long-term debt | $20,193 | $36,672 | | Long-term debt (net of current portion) | $119,487 | $98,426 | | Annual Maturities of Long-term Debt (in thousands) | Amount | | :------------------------------------------------- | :----- | | Twelve Months Ended May 31, 2025 | $36,672 | | Twelve Months Ended May 31, 2026 | $14,881 | | Twelve Months Ended May 31, 2027 | $39,122 | | Twelve Months Ended May 31, 2028 | $14,410 | | Twelve Months Ended May 31, 2029 | $4,411 | | Thereafter | $25,602 | | Total | $135,098 | - The Company entered into a $16.5 million loan agreement in Q2 FY2024 to partially fund the purchase of its Via Brasil club in Panama, with a 15-year term and an interest rate of 1.80% plus 3-month SOFR146 NOTE 8 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES This note describes the company's use of derivative financial instruments for hedging interest rate and currency exchange rate risks | Interest Expense on Hedged Items (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest expense on borrowings | $1,333 | $1,108 | $3,449 | $3,538 | | Cost of swaps | $703 | $210 | $1,775 | $747 | | Total | $2,036 | $1,318 | $5,224 | $4,285 | | Notional Balance of Interest Rate Swaps (in thousands) | May 31, 2024 | August 31, 2023 | | :----------------------------------------------------- | :----------- | :-------------- | | U.S. Bank | $29,113 | $30,069 | | Citibank N.A. | $73,102 | $65,599 | | Total | $102,215 | $95,668 | | Net Fair Value of Derivatives (in thousands) | May 31, 2024 | August 31, 2023 | | :------------------------------------------- | :----------- | :-------------- | | Net fair value of derivatives designated as hedging instruments | $(1,894) | $4,496 | - The Company uses interest rate swaps and cross-currency interest rate swaps as cash flow hedges to manage interest rate and currency exposure on U.S. dollar denominated debt within its international subsidiaries150151152 - Non-deliverable forward foreign-exchange contracts are used to economically hedge exposure to U.S. dollar merchandise inventory expenditures but do not qualify for derivative hedge accounting153164 NOTE 9 – SEGMENTS This note provides financial information by operating segment, including revenues, operating income, and total assets | Segment Revenues (in thousands) | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2024 | | :------------------------------ | :------------------------------ | :----------------------------- | | United States Operations | $11,587 | $30,107 | | Central American Operations | $744,626 | $2,225,507 | | Caribbean Operations | $333,219 | $1,016,608 | | Colombia Operations | $139,996 | $415,631 | | Total Revenue from external customers | $1,229,428 | $3,687,853 | | Segment Operating Income (in thousands) | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2024 | | :-------------------------------------- | :------------------------------ | :----------------------------- | | United States Operations | $1,636 | $19,481 | | Central American Operations | $54,874 | $173,086 | | Caribbean Operations | $22,915 | $72,965 | | Colombia Operations | $3,289 | $11,498 | | Total Operating income | $49,909 | $171,740 | | Segment Total Assets (in thousands) | May 31, 2024 | August 31, 2023 | | :---------------------------------- | :----------- | :-------------- | | United States Operations | $222,690 | $302,115 | | Central American Operations | $1,060,211 | $995,881 | | Caribbean Operations | $438,578 | $425,145 | | Colombia Operations | $299,219 | $282,467 | | Total assets | $2,020,698 | $2,005,608 | NOTE 10 – SUBSEQUENT EVENTS This note confirms that the company has evaluated all events subsequent to May 31, 2024, and found no requiring disclosure - The Company has evaluated all events subsequent to May 31, 2024, and determined there are no subsequent events requiring disclosure172 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on PriceSmart's financial condition and operational results, discussing performance, key factors, growth drivers, and financial metrics Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements regarding future revenues, earnings, cash flows, omni-channel initiatives, club openings, and competitive performance, subject to risks and uncertainties detailed in the report175 Overview This section provides a general description of PriceSmart's business, including its operations, membership model, and strategic focus - PriceSmart operates 54 warehouse clubs in 12 countries and the U.S. Virgin Islands, with nearly two million membership accounts and almost four million cardholders, generating over $4.4 billion in fiscal year 2023 revenues177 - The Company's business model relies on annual membership fees (Diamond: $35-$40, Platinum: $75-$80 with a 2% cash-back rebate) to offer lower product prices and foster loyalty, reducing advertising needs178 - PriceSmart sources over half its merchandise regionally and invests in technology to improve online shopping, supply chain efficiency, and back-office operations, while also expanding services like optical, audiology, and pharmacy179 Factors Affecting the Business This section discusses various external and internal factors that can influence the company's sales, profits, and financial results - Sales and profits are influenced by general economic factors, foreign currency exchange rates, political and social conditions, and competition, with currency fluctuation being a significant variable186188 - The Company faces challenges from U.S. dollar illiquidity in certain markets, notably Trinidad and Honduras, which impedes conversion of local currencies and increases foreign exchange exposure193194 - Political instability and changes in tax laws, such as minimum tax rules in one operating country, can materially impact financial results, leading to increased costs or disputes190192 Mission and Business Strategy This section outlines PriceSmart's core mission and strategic approach to delivering value, operating profitably, and ensuring investor returns - PriceSmart's mission is to improve lives and businesses by delivering quality goods and services at low prices, operating profitably, and providing a good return to investors, while prioritizing member and employee well-being and social responsibility195 Growth This section details the company's strategic initiatives for growth, focusing on club expansion, membership value, and digital capabilities - The Company's growth strategy is centered on three major drivers197 - 1. Invest in Remodeling Current PriceSmart Clubs, Adding New PriceSmart Locations and Opening More Distribution Centers: This includes remodeling clubs in Honduras, Dominican Republic, and Trinidad, expanding clubs in El Salvador, Costa Rica, and Jamaica, relocating the Miraflores club in Guatemala, purchasing the Via Brasil club in Panama, and planning a new club in Cartago, Costa Rica, by spring 2025, alongside expanding distribution centers197 - 2. Increase Membership Value: Efforts include expanding benefits, increasing membership fees by $5 in most markets in FY2024, offering optical and audiology services, and promoting the 'Member's Selection' private label brand, which accounted for 27.4% of total merchandise sales in the first nine months of FY2024197 - 3. Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities: This involves improving website functionality, expanding online product offerings, using data analytics to understand member preferences, and rolling out a new website platform to tailor delivery zones and improve the shopping experience198 Financial Highlights for the Third Quarter of Fiscal Year 2024 This section summarizes key financial performance metrics for the third quarter of fiscal year 2024, including revenue and net income growth - Total revenues increased 12.1% over the comparable prior-year period200 - Net merchandise sales increased 11.6%, with constant currency sales up 9.1%200 - Comparable net merchandise sales increased 7.8%, with constant currency sales up 5.6%200 - Membership income increased 15.2% to $19.3 million200 - Operating income was $49.9 million, an increase of 15.9%200 - Net income was $32.5 million, or $1.08 per diluted share, compared to $29.6 million, or $0.94 per diluted share, in the prior-year period200 - Adjusted EBITDA was $71.0 million, up from $63.9 million200 Financial Highlights for the Nine Months Ended May 31, 2024 This section summarizes key financial performance metrics for the nine months ended May 31, 2024, including revenue and net income growth - Total revenues increased 12.0% over the comparable prior-year period201 - Net merchandise sales increased 11.8%, with constant currency sales up 8.3%201 - Comparable net merchandise sales increased 8.2%, with constant currency sales up 5.0%201 - Membership income increased 13.9% to $55.6 million201 - Operating income was $171.7 million, an increase of 12.7%201 - Net income was $109.8 million, or $3.62 per diluted share, compared to $93.8 million, or $3.01 per diluted share, in the prior-year period201 - Adjusted EBITDA was $232.9 million, up from $218.4 million201 Non–GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, such as Adjusted Net Income and Adjusted EBITDA, to GAAP equivalents | Adjusted Net Income (in thousands, except per share data) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :-------------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income as reported | $32,489 | $29,572 | $109,807 | $93,824 | | Adjustments (prior year) | — | $2,970 | — | $12,292 | | Adjusted net income | $32,489 | $32,542 | $109,807 | $106,116 | | Net income per diluted share | $1.08 | $0.94 | $3.62 | $3.01 | | Adjusted net income per diluted share | $1.08 | $1.04 | $3.62 | $3.41 | | Adjusted EBITDA (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :----------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income as reported | $32,489 | $29,572 | $109,807 | $93,824 | | Interest expense | $3,579 | $2,747 | $9,688 | $8,310 | | Provision for income taxes | $14,483 | $12,019 | $49,895 | $44,647 | | Depreciation and amortization | $21,129 | $17,821 | $61,114 | $53,264 | | Interest income | $(2,521) | $(3,161) | $(8,612) | $(6,260) | | Other expense, net | $1,882 | $1,885 | $11,044 | $11,795 | | Adjustments (prior year) | — | $2,970 | — | $12,842 | | Adjusted EBITDA | $71,041 | $63,853 | $232,936 | $218,422 | - Adjusted net income and adjusted net income per diluted share are presented to exclude non-recurring items like CEO separation costs and VAT/Aeropost write-offs, providing a clearer view of core operating performance203 Adjusted Net Income and Adjusted Net Income per Diluted Share This subsection details the calculation and reconciliation of adjusted net income and adjusted net income per diluted share Adjusted EBITDA This subsection explains the calculation and reconciliation of Adjusted EBITDA, a non-GAAP measure of operational profitability Net Merchandise Sales – Constant Currency and Comparable Net Merchandise Sales – Constant Currency This subsection defines and presents net merchandise sales and comparable sales adjusted for foreign currency fluctuations Comparison of the Three and Nine Months Ended May 31, 2024 and 2023 This section provides a detailed comparative analysis of the company's financial performance for the specified periods Net Merchandise Sales This subsection analyzes net merchandise sales performance across different segments and the impact of currency exchange | Net Merchandise Sales by Segment (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Central America | $730,022 | $656,719 | $2,183,189 | $1,955,437 | | Caribbean | $328,013 | $311,578 | $1,001,544 | $942,196 | | Colombia | $136,496 | $101,966 | $405,728 | $314,092 | | Total Net merchandise sales | $1,194,531 | $1,070,263 | $3,590,461 | $3,211,725 | | Net Merchandise Sales Growth & Currency Impact | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2024 | | :--------------------------------------------- | :------------------------------ | :----------------------------- | | Consolidated Net Merchandise Sales Growth | 11.6% | 11.8% | | Consolidated Net Merchandise Sales - Constant Currency Growth | 9.1% | 8.3% | | Consolidated % Impact of Foreign Currency Exchange | 2.5% | 3.5% | - Overall net merchandise sales grew by 11.6% for the third quarter and 11.8% for the nine-month period, driven by increases in both transactions (9.4% and 9.2%) and average ticket (2.0% and 2.3%)213 - Colombia segment sales increased significantly by 33.9% (Q3) and 29.2% (9M), primarily due to the appreciation of the Colombian peso against the U.S. dollar216 Comparable Merchandise Sales This subsection examines comparable net merchandise sales growth, including constant currency adjustments, across operating segments | Comparable Net Merchandise Sales Growth | Thirteen Weeks Ended June 2, 2024 | Thirty-Nine Weeks Ended June 2, 2024 | | :-------------------------------------- | :-------------------------------- | :----------------------------------- | | Central America | 7.4% | 8.2% | | Caribbean | 5.0% | 5.8% | | Colombia | 19.4% | 15.7% | | Consolidated comparable net merchandise sales | 7.8% | 8.2% | | Comparable Net Merchandise Sales - Constant Currency Growth & Currency Impact | Thirteen Weeks Ended June 2, 2024 | Thirty-Nine Weeks Ended June 2, 2024 | | :---------------------------------------------------------------------------- | :-------------------------------- | :----------------------------------- | | Consolidated Comparable Net Merchandise Sales Growth | 7.8% | 8.2% | | Consolidated Comparable Net Merchandise Sales - Constant Currency Growth | 5.6% | 5.0% | | Consolidated % Impact of Foreign Currency Exchange | 2.2% | 3.2% | - Consolidated comparable net merchandise sales increased by 7.8% for the thirteen-week period and 8.2% for the thirty-nine-week period ended June 2, 2024226 - The Colombia segment showed the highest comparable sales growth (19.4% for 13 weeks, 15.7% for 39 weeks), primarily driven by foreign currency appreciation230 Membership Income This subsection analyzes membership income performance, including growth drivers, member accounts, and renewal rates by segment | Membership Income by Segment (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Central America | $11,114 | $10,126 | $32,128 | $29,504 | | Caribbean | $4,998 | $4,431 | $14,419 | $13,184 | | Colombia | $3,167 | $2,178 | $9,019 | $6,118 | | Total Membership income | $19,279 | $16,735 | $55,566 | $48,806 | | Number of Member Accounts | May 31, 2024 | May 31, 2023 | | :------------------------ | :----------- | :----------- | | Central America | 1,048,736 | 987,025 | | Caribbean | 479,564 | 462,634 | | Colombia | 343,224 | 336,171 | | Total | 1,871,524 | 1,785,830 | - Total membership income increased by 15.2% for the three months and 13.9% for the nine months ended May 31, 2024, driven by a 4.8% increase in member accounts and a $5 membership fee increase in most markets237238 - The trailing twelve-month renewal rate improved to 88.1% as of May 31, 2024, from 87.1% in the prior year240 Other Revenue This subsection details the components and growth of other revenue streams, such as miscellaneous and rental income | Other Revenue (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :--------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Miscellaneous income | $3,418 | $2,754 | $9,949 | $7,771 | | Rental income | $614 | $555 | $1,771 | $1,660 | | Total Other revenue | $4,032 | $3,309 | $11,720 | $9,431 | - Other revenue increased by 21.8% for the three months and 24.3% for the nine months ended May 31, 2024, primarily due to higher incentive fee revenue from increased average outstanding balances on co-branded credit cards242 Results of Operations Consolidated This subsection provides a consolidated overview of the company's operating results, including gross margin and operating income | Consolidated Results (in thousands, except percentages) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :------------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total gross margin | $185,810 | $163,650 | $566,327 | $508,582 | | Total gross margin percentage | 15.6% | 15.3% | 15.8% | 15.8% | | Total revenue margin | $209,772 | $184,060 | $635,056 | $567,973 | | Total revenue margin percentage | 17.1% | 16.8% | 17.2% | 17.2% | | Operating income - Total | $49,909 | $43,052 | $171,740 | $152,379 | | Operating Income by Segment (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Central America | $54,874 | $46,023 | $173,086 | $152,786 | | Caribbean | $22,915 | $21,184 | $72,965 | $71,161 | | Colombia | $3,289 | $2,961 | $11,498 | $12,491 | | United States | $1,636 | $4,066 | $19,481 | $24,622 | - Total gross margin as a percentage of net merchandise sales increased by 30 basis points to 15.6% for the three months ended May 31, 2024, mainly due to general margin improvement across most sales categories246 - Operating income increased to $49.9 million (4.1% of total revenue) for the three months and $171.7 million (4.7% of total revenue) for the nine months ended May 31, 2024255256 Selling, General and Administrative This subsection analyzes trends in selling, general, and administrative expenses, including their components and impact on profitability | SG&A Expenses (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :----------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Warehouse club and other operations | $119,053 | $106,172 | $346,792 | $306,694 | | General and administrative | $40,434 | $34,343 | $114,682 | $100,274 | | Separation costs associated with Chief Executive Officer departure | — | — | — | $7,747 | | Total Selling, general and administrative | $159,863 | $141,008 | $463,316 | $415,594 | - Total selling, general and administrative expenses increased by $18.9 million for the third quarter and $47.7 million for the nine months ended May 31, 2024249250 - General and administrative expenses increased to 3.3% of total revenues for the third quarter and 3.1% for the nine months, primarily due to investments in technology and increased compensation expense from stock grants to Executive Leadership252253 - Expected savings of $2.5 million per quarter in SG&A expenses are anticipated due to the Interim Chief Executive Officer declining compensation for his services254 Interest Income This subsection examines the company's interest income, detailing its sources and changes over the reporting periods | Interest Income (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :----------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest income | $2,521 | $3,161 | $8,612 | $6,260 | - Interest income decreased for the three-month period but increased by $2.35 million for the nine-month period ended May 31, 2024, primarily due to increased investments at higher yields259 Interest Expense This subsection analyzes the company's interest expense, including costs related to loans and hedging activities | Interest Expense (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest expense on loans | $2,939 | $3,152 | $8,702 | $8,870 | | Interest expense related to hedging activity | $703 | $209 | $1,775 | $746 | | Less: Capitalized interest | $(63) | $(614) | $(789) | $(1,306) | | Total Interest expense | $3,579 | $2,747 | $9,688 | $8,310 | - Interest expense increased for both the three and nine-month periods ended May 31, 2024, primarily due to higher interest expense related to hedging activity and less capitalized interest262 Other Expense, Net This subsection details other net expenses, including transaction costs from currency conversions and revaluation gains | Other Expense, Net (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Other expense, net | $1,882 | $1,885 | $11,044 | $11,795 | - Other expense, net, for the three and nine months ended May 31, 2024, included $3.8 million and $9.8 million, respectively, in transaction costs related to converting local currencies in countries with liquidity issues266 - These costs were partially offset by a revaluation gain in Costa Rica of $2.5 million (three months) and $0.2 million (nine months) due to the appreciation of the Costa Rican colón266 Provision for Income Taxes This subsection analyzes the company's provision for income taxes and effective tax rates, explaining key influencing factors | Provision for Income Taxes (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Provision for income taxes | $14,483 | $12,019 | $49,895 | $44,647 | | Effective tax rate | 30.8% | 28.9% | 31.3% | 32.2% | - The effective tax rate increased to 30.8% for the three months ended May 31, 2024, from 28.9% in the prior year, primarily due to a comparably unfavorable net tax impact from recurring items related to CEO compensation cost savings in the prior year267 - For the nine months, the effective tax rate decreased to 31.3% from 32.2%, mainly due to fewer valuation allowances on deferred tax assets from foreign tax credits268 Other Comprehensive Income This subsection details the components of other comprehensive income or loss, primarily focusing on foreign currency translation adjustments | Other Comprehensive Income (Loss) (in thousands) | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :----------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Other Comprehensive Income (Loss) | $(4,791) | $14,100 | $3,912 | $25,983 | - Other comprehensive loss for the third quarter of fiscal year 2024 resulted primarily from negative foreign currency translation adjustments270 - For the nine months, other comprehensive income of $3.9 million was primarily due to a $5.1 million comprehensive gain from foreign currency translation adjustments, partially offset by $1.4 million in unrealized losses on derivative obligations270 LIQUIDITY AND CAPITAL RESOURCES This section assesses the company's ability to generate and manage cash, detailing financial position, cash flow, and capital structure Financial Position and Cash Flow This subsection analyzes the company's cash and short-term investments, including restricted cash, and summarizes cash flow activities | Cash and Cash Equivalents, including Restricted Cash (in thousands) | May 31, 2024 | August 31, 2023 | | :---------------------------------------------------------------- | :----------- | :-------------- | | Amounts held by foreign subsidiaries | $110,890 | $139,050 | | Amounts held domestically | $29,452 | $113,152 | | Total cash and cash equivalents, including restricted cash | $140,342 | $252,202 | | Short-term Investments (in thousands) | May 31, 2024 | August 31, 2023 | | :------------------------------------ | :----------- | :-------------- | | Amounts held by foreign subsidiaries | $99,904 | $74,294 | | Amounts held domestically | — | $16,787 | | Total short-term investments | $99,904 | $91,081 | | Cash Flows Summary (in thousands) | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $165,754 | $184,681 | | Net cash used in investing activities | $(149,379) | $(197,814) | | Net cash used in financing activities | $(124,279) | $(13,051) | | Net decrease in cash and cash equivalents | $(111,860) | $(15,001) | - The Company continues to experience U.S. dollar illiquidity in Trinidad and Honduras, impeding the conversion of local currencies and funding operations275 Capital Expenditures This subsection details the company's capital expenditures, distinguishing between maintenance and growth-related investments - Capital expenditures for the nine months ended May 31, 2024, totaled $141.9 million, comprising $61.6 million for maintenance and $80.3 million for growth initiatives281 - Significant growth expenditures included the $33.0 million purchase of a leased club building and land in Panama City and the acquisition of land in Cartago, Costa Rica, for a new warehouse club281 Short-Term Borrowings and Long-Term Debt This subsection outlines the company's financing strategy, including short-term borrowings and long-term debt management - The Company's financing strategy focuses on ensuring liquidity and access to capital markets while minimizing borrowing costs, with proceeds used for general corporate purposes including working capital, capital expenditures, and debt repayment282 Future Lease and Other Commitments This subsection addresses the company's future lease obligations and other contractual commitments, and its ability to meet them - The Company emphasizes managing future lease commitments for facilities and equipment, confident that current liquidity and cash flow projections can cover these obligations283 Derivatives This subsection describes the company's use of derivative financial instruments to manage interest rate and currency exchange risks - The Company utilizes derivative financial instruments for hedging and non-trading purposes to manage exposure to changes in interest and currency exchange rates284 Off-Balance Sheet Arrangements This subsection confirms the absence of material off-balance sheet arrangements that could significantly impact the company's financials - The Company has no off-balance sheet arrangements that have had, or are reasonably likely to have, a material current or future effect on its financial condition or consolidated financial statements285 Repurchase of Common Stock and Reissuance of Treasury Shares Related to Employee Stock Awards This subsection details the company's common stock repurchase activities for tax withholding and reissuance of treasury shares for employee awards - The Company repurchases a portion of vested restricted stock to cover employees' minimum statutory tax withholding requirements and reissues treasury shares as part of its stock-based compensation programs286287 Share Repurchase Program This subsection provides an overview of the company's share repurchase program, including shares acquired and total cost | Share Repurchase Activity (in thousands, except per share) | Nine Months Ended May 31, 2024 | | :----------------------------------------- | :----------------------------- | | Number of common shares acquired | 935,663 | | Average price per common share acquired | $74.13 | | Total cost of common shares acquired | $69,362 | - The $75 million share repurchase program, authorized in July 2023, was successfully completed in the first quarter of fiscal year 2024, with approximately 1,007,000 shares repurchased288 Critical Accounting Estimates This subsection discusses management's significant judgments and estimates in preparing financial statements, particularly for complex areas - The preparation of financial statements requires management to make estimates and judgments, particularly concerning business acquisitions, contingencies, income taxes, VAT, and long-lived assets, which are inherently uncertain290 Income Taxes This subsection details the company's estimation of annual effective tax rates and recognition of uncertain tax positions - The Company estimates an annual effective tax rate for interim reporting and records benefits of uncertain tax positions only when it is more likely than not they will sustain challenge by taxing authorities291292 Tax Receivables This subsection explains the accumulation and management of VAT and income tax receivables, including refund claim processes - The Company accumulates VAT and income tax receivables due to advance payment mechanisms in operating countries, often requiring significant refund claims that can take months to years to complete294295 - Despite unclear an