PriceSmart(US:PSMT)2025-07-10 20:02PART I - FINANCIAL INFORMATION This section presents PriceSmart, Inc.'s unaudited consolidated financial statements and management's discussion for the period ended May 31, 2025 Financial Statements PriceSmart, Inc.'s unaudited consolidated financial statements for the period ended May 31, 2025, detail financial position, performance, and cash flows Consolidated Balance Sheets As of May 31, 2025, total assets were $2.14 billion, an increase from $2.02 billion at August 31, 2024, driven by increases in cash and cash equivalents and property and equipment, while total liabilities rose to $930.2 million and total stockholders' equity increased to $1.21 billion Consolidated Balance Sheet Highlights (USD in thousands) | Account | May 31, 2025 (Unaudited) | August 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $900,779 | $832,347 | | Cash and cash equivalents | $167,961 | $125,364 | | Merchandise inventories | $553,123 | $528,678 | | Total Assets | $2,144,440 | $2,022,694 | | Total Current Liabilities | $701,786 | $680,148 | | Accounts payable | $499,088 | $485,961 | | Total Liabilities | $930,247 | $899,729 | | Total Stockholders' Equity | $1,214,193 | $1,122,965 | Consolidated Statements of Income For the third quarter ended May 31, 2025, PriceSmart reported net income of $35.2 million on total revenues of $1.32 billion, with diluted EPS of $1.14, compared to $32.5 million net income on $1.23 billion revenues in the prior-year period Key Income Statement Data (USD in thousands, except per share data) | Metric | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net merchandise sales | $1,289,997 | $1,194,531 | $3,848,411 | $3,590,461 | | Total revenues | $1,317,289 | $1,229,428 | $3,939,119 | $3,687,853 | | Operating income | $56,230 | $49,909 | $179,760 | $171,740 | | Net income | $35,158 | $32,489 | $116,346 | $109,807 | | Diluted EPS | $1.14 | $1.08 | $3.80 | $3.62 | Consolidated Statements of Cash Flows For the nine months ended May 31, 2025, net cash provided by operating activities increased to $179.2 million, while net cash used in investing activities decreased to $95.8 million and financing activities significantly decreased to $41.9 million Cash Flow Summary (USD in thousands) | Activity | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $179,160 | $165,754 | | Net cash used in investing activities | ($95,788) | ($149,379) | | Net cash used in financing activities | ($41,888) | ($124,279) | | Effect of exchange rate changes | $5,324 | ($3,956) | | Net increase (decrease) in cash | $46,808 | ($111,860) | Notes to Consolidated Financial Statements Detailed notes explain PriceSmart's accounting policies, financial data, growth strategy, revenue recognition, debt, and subsequent events - As of May 31, 2025, the Company operated 55 warehouse clubs in 12 countries and one U.S. territory, with plans to open 2 new clubs by spring 202632 - The company's growth strategy focuses on three drivers: new locations, increased membership value, and enhanced e-commerce capabilities37 - Subsequent to quarter-end, in June 2025, the company purchased a San Diego office building for $20.8 million, partially funded by a $12.5 million loan171 - In July 2025, the Trinidad subsidiary secured over $50 million in financing transactions to enhance U.S. dollar liquidity, including a bond issuance and loan agreements172 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses PriceSmart's Q3 and nine-month fiscal 2025 financial performance, highlighting revenue growth, currency impacts, strategic initiatives, and liquidity Q3 FY2025 Financial Highlights vs. Q3 FY2024 (USD) | Metric | Q3 FY2025 | Q3 FY2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1.32B | $1.23B | +7.1% | | Net Merchandise Sales | $1.29B | $1.19B | +8.0% | | Comparable Net Merchandise Sales | - | - | +7.0% | | Operating Income | $56.2M | $49.9M | +12.7% | | Net Income | $35.2M | $32.5M | +8.3% | | Diluted EPS | $1.14 | $1.08 | +5.6% | - The company's growth strategy focuses on three pillars: new locations, increased membership value, and enhanced digital sales capabilities205 - Digital channel sales increased 19.8% year-over-year in Q3, reaching a record $79.0 million, or 6.1% of total net merchandise sales207 - The company is actively evaluating Chile as a potential new market for multiple warehouse clubs189205 Results of Operations For Q3 FY2025, net merchandise sales grew 8.0% to $1.29 billion, driven by increased transactions and average ticket, with all segments showing growth despite adverse currency fluctuations, leading to a 12.7% increase in operating income Net Merchandise Sales Growth by Segment (Q3 FY2025 vs Q3 FY2024) | Segment | Sales Growth | Constant Currency Sales Growth | Impact of Foreign Currency | | :--- | :--- | :--- | :--- | | Central America | 7.5% | 7.6% | (0.1)% | | Caribbean | 8.2% | 9.7% | (1.5)% | | Colombia | 10.1% | 19.3% | (9.2)% | | Consolidated | 8.0% | 9.5% | (1.5)% | - Membership income increased 13.4% to $21.9 million in Q3, driven by 5.1% growth in member accounts, with a stable 88.0% trailing twelve-month renewal rate237238241 - SG&A expenses increased by 20 basis points as a percentage of total revenue, primarily due to technology investments252256 - The effective tax rate for Q3 decreased to 28.4% from 30.8% in the prior year, driven by tax optimization initiatives268 Liquidity and Capital Resources The company maintains strong liquidity, primarily from operations, with $183.1 million in cash and equivalents, while facing U.S. dollar illiquidity challenges in Trinidad and Honduras, and declared an annual dividend of $1.26 per share Cash and Investments (USD in thousands) | Account | May 31, 2025 | August 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents, and restricted cash | $183,119 | $136,311 | | Short-term investments | $94,408 | $100,165 | - The company faces U.S. dollar illiquidity in Trinidad, with $73.9 million in Trinidad dollar-denominated assets, and in Honduras, with $2.0 million in lempira-denominated assets as of May 31, 2025275 - Capital expenditures for the first nine months of FY2025 totaled $101.6 million, allocated as $51.4 million for maintenance and $50.2 million for growth280 - The Board declared an annual cash dividend of $1.26 per share for fiscal 2025, payable in two installments279 Critical Accounting Estimates Management identifies income taxes, tax receivables, and long-lived asset impairment as critical accounting estimates, requiring significant judgment in assessing uncertain tax positions and recoverability - Significant judgment is required for income taxes, particularly in assessing uncertain tax positions and the recoverability of deferred tax assets across multiple jurisdictions290291 - The company holds significant VAT and income tax receivables, classified based on expected recovery time, with no allowance currently placed as recovery is deemed more likely than not293297299 - Long-lived assets are evaluated quarterly for impairment indicators, with no significant impairment charges recorded during Q3 FY2025298 Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in market risks since fiscal year-end 2024, but reiterates ongoing U.S. dollar illiquidity challenges in Trinidad and Honduras - No material changes in market risk factors, including interest rate and currency exchange rate risk, have occurred since the FY2024 Annual Report on Form 10-K301 - The company continues to face U.S. dollar illiquidity in Trinidad and Honduras, hindering the conversion of local currency sales to settle liabilities302 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of May 31, 2025, with no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were deemed effective at a reasonable assurance level by the Principal Executive Officer and Principal Financial Officer as of the reporting period end305 - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter306 PART II - OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, and other disclosures Legal Proceedings The company is involved in various claims arising from the ordinary course of business, which management does not expect to have a material adverse effect on its financial condition or results of operations - The company is involved in ordinary course claims, but does not anticipate a material adverse effect on its financial condition or results309 Risk Factors This section highlights the company's vulnerability to political and economic conditions, including potential negative impacts from U.S. tariffs and a decline in remittances to key Latin American markets - The company is vulnerable to U.S. tariffs, which could increase prices or affect product sourcing, potentially harming sales and profitability311 - A decline in remittances to key markets, potentially due to U.S. policy changes or new taxes, could negatively impact local economies and consumer spending312 Unregistered Sales of Equity Securities and Use of Proceeds During Q3 FY2025, the company repurchased 1,298 shares of common stock at an average price of $96.15 per share to cover employee tax withholding obligations, noting no formal share repurchase program is currently in place Common Stock Repurchase Activity (Q3 FY2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | March 2025 | 466 | $88.82 | | April 2025 | 832 | $100.26 | | May 2025 | 0 | $0.00 | | Total | 1,298 | $96.15 | - Repurchases were for employee tax withholding on vested restricted stock, not a formal buyback program314 Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None316 Mine Safety Disclosures This item is not applicable to the company - Not applicable317 Other Information On May 14, 2025, Michael McCleary, then EVP and CFO, adopted a Rule 10b5-1 trading plan for the sale of up to 6,322 shares of common stock, plus tax-related shares, from September 2025 to January 2026 - Michael McCleary, former EVP and CFO, adopted a Rule 10b5-1 Trading Plan on May 14, 2025, for stock sales starting September 9, 2025318 Exhibits This section lists the exhibits filed with the Form 10-Q, including employment and separation agreements for CFOs and Sarbanes-Oxley certifications - Key exhibits include employment and separation agreements for CFOs, and Sarbanes-Oxley certifications320