Good afternoon, everyone, and welcome to PriceSmart, Inc.'s Earnings Release Conference Call for the Third Quarter of Fiscal Year 2023, which ended on May 31st, 2023. After remarks from our company's representatives Robert Price, Interim Chief Executive Officer; and Michael McCleary, Chief Financial Officer, you will be given an opportunity to ask questions as time permits. As a reminder, this conference call is limited to one hour and is being recorded today, Tuesday, July 11th, 2023. A digital replay will be available following the conclusion of today's conference call through July 18th, 2023 by dialing 1-877-674-7070 for domestic callers or 1-416-764-8692 for international callers and by entering the replay access code 780477#. For opening remarks, I would like to turn the call over to PriceSmart's Chief Financial Officer, Michael McCleary. Please go ahead, sir.

Thank you, operator, and welcome to PriceSmart, Inc.'s earnings call for the third quarter of fiscal year 2023, which ended on May 31st, 2023. We will be discussing the information that we provided in our earnings press release and our 10-Q, which were both released yesterday afternoon, July 10th, 2023. Also in these remarks, we will refer to non-GAAP financial measures. You can find a reconciliation of our non-GAAP measurement of adjusted earnings in our earnings press release and our 10-Q. These documents are available on our Investor Relations website at investors.pricesmart.com, where you can also sign up for email alerts. As a reminder, all statements made on this conference call, other than statements of historical fact are forward-looking statements concerning the company's anticipated plans, revenues and related matters. Forward-looking statements include, but are not limited to, statements containing the words expect, believe, plan, will, may, should, estimate and some other expressions. All forward-looking statements are based on current expectations and assumptions as of today, July 11th, 2023. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company's most recent Annual Report on Form 10-K, the quarterly report on Form 10-Q filed yesterday, and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These risks may be updated from time to time. The company undertakes no obligation to update forward-looking statements made during this call. Now, I will turn the call over to Robert Price, PriceSmart's Interim Chief Executive Officer.

My sincere thanks and appreciation to our employees here in the United States and in our 12 countries and one US territory for their amazing dedication and hard work. Congratulations for a job well done during the third quarter. Our Chief Financial Officer, Michael McCleary, will soon provide a detailed narrative for our third quarter results. In advance of his remarks, I would like to offer some comments. Our year-over-year increased sales performance was supported by a significant strengthening of the Costa Rica currency, the Colon, along with the strong opening of our new location in San Miguel, El Salvador by improvements in buying and operations and by growth in online sales. The third quarter results are definitely encouraging. However, I want to remind our investors that PriceSmart markets, the countries in which we operate, are impacted by challenging economic and political events outside of our control. After operating in the region for 26 years, we have the experience and skills required to successfully operate the club business in the region to US standards, but we are often faced with country-specific events that result in risks to our financial results. We continue to address these risk factors with improved risk prevention systems, along with meeting with government officials as needed. One final comment relates to the announcement of the company's plan to repurchase stock. We believe that the decision to repurchase stock is in the best interest of our shareholders. We also want to assure our investors that our company's balance sheet and cash flow support both the stock repurchase and our plans to continue to grow PriceSmart. Now, Michael will continue with his presentation.

Thank you, Robert. We had a strong third quarter, with both revenues and net merchandise sales exceeding $1 billion. Net merchandise sales increased by 7.1% or 5.6% in constant currency. Comparable net merchandise sales increased by 5.8% or 4.3% in constant currency. For the nine months ended May 31st, 2023, total net merchandise sales exceeded $3.2 billion and revenues reached almost $3.3 billion. Net merchandise sales increased by 8.7% or 9% in constant currency and comparable net merchandise sales increased by 6.5% or 6.7% in constant currency for the nine month period. By segment, in Central America, where we had 28 clubs at quarter-end, net merchandise sales increased 11.8% or 6.1% in constant currency with an 11% increase in comparable net merchandise sales or 5.3% in constant currency. All of our markets in Central America had positive comparable net merchandise sales growth. Our Central American segment contributed approximately 650 basis points of positive impact to our total consolidated comparable net merchandise sales for the quarter. The Costa Rica Colon appreciated significantly against the dollar as compared to the same three month period a year ago and was the primary contributor to the favorable currency fluctuations in this segment. In the Caribbean, where we had 14 clubs at quarter-end, net merchandise sales increased 7.3% or 6.9% in constant currency and comparable net merchandise sales increased 4.2% or 3.8% in constant currency. All of our markets in this segment had positive comparable net merchandise sales growth. Our Caribbean region contributed approximately 120 basis points of positive impact to total consolidated comparable net merchandise sales for the quarter. In Colombia, where we had nine clubs open at quarter-end, net merchandise sales decreased 15.7% or increased 0.6% in constant currency and comparable net merchandise sales decreased 15.2% or increased 0.7% in constant currency. The…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Jon Braatz at Kansas City Capital. Please go ahead.

Good morning, Robert, Michael.

Good morning, Jon.

Michael, on the gross margins, obviously, I knew that the -- about the pricing actions that you were taking in Colombia, but you seem to have extended that throughout all your markets. And a couple of questions. Number one, were those pricing actions in place for the full quarter? And I guess, secondly, how long do you see these pricing actions actually remaining in place?

Yeah. Well, yeah, we kind of started that towards probably end of Q2, early Q3, just a variety of actions kind of sharpening our pencils a little bit on price points. And at this point those -- that fine tuning is continuing. I don't know, Robert, if you want to add anything on that?

Not too much. I think the results in the third quarter indicate that, I mean, gross -- pricing is somewhat of an art and we're in so many different markets that we have to be very nimble in how we think about the pricing to maintain the membership value, weigh and factor in risk, and constantly trying to improve our expense structure so that our bottom line is going to remain strong as we continue to offer better values to our members. And it's a bit of a dance and, particularly, operating in small markets -- this many small markets. So I wouldn't want to leave the impression that we're locked in to any particular number, but we are -- this is a -- just a constant effort to make sure that we're delivering value, that we're doing it in a way that's going to increase volume and that we do it in a way that also brings the right profit to the bottom line.

Sure.

It's not quite as formulistic as you might think.

Okay. With the Colombian currency showing relative strength here, would that at all influence any new pricing actions in Colombia, given the strength in the peso?

Well, Colombia is by far the largest market we operate in. I mean, Colombia as a GDP is probably close to the same as all our other markets combined. So, for us, to be able to continue to gain market share in Colombia is extremely important, looking to the longer run. The other -- so one thing I would say is that I think, and the competition level, by the way, is much, much more intense in Colombia than any place else we operate, because we are operating against major chains in South America that are very, very strong competitors. But the other thing, I don't know whether you're aware of this or not, but the largest retailer in Colombia, Exito, has made an announcement recently that they're for sale and not -- we're not interested obviously in that, but what I -- the reason that's relevant is because we think given the strengthening of the peso and some disruption in terms of Exito's situation, this is the time to really -- and also with the opening of El Poblado this is the time to really be aggressive about solidifying and growing our position in Colombia because, honestly, for our future at this time, the market that offers us the most expansion opportunity in terms of sales is Colombia. So I think we -- our mentality is that we want to be strong in Colombia and also the imports that we bring in from around the world distinguish us from other competitors in the market, and I think now that the peso is stronger, we have an opportunity to even become a bigger factor with our imported merchandise.

Okay. That's good. Michael, on the Honduras situation, do you see that potentially morphing into something like we saw in Trinidad, where you begin to restrict the imports there and raise prices to offset the currency issue?

Well, yeah, this is kind of new to this quarter. So we're monitoring it actively. Obviously, you can see it by the numbers that we disclosed about the cash on hand is not near as extreme as it got to at one point in Trinidad, but we did think it was important to call it out. So I think it was somewhere around $15 million versus a peak of about $100 million in Trinidad. But at this point, we're monitoring it. We haven't taken any actions to restrict flow of merchandise at this point and we're just working with the banks and the local officials to continue to monitor this and we'll see as we go forward.

Okay. One last question on the repurchase program, $75 million. I think, domestically, you hold $42 million in cash and I think that was on the 10-Q. Let's just -- for the sake of convenience, let's say, you were looking to complete this repurchase over the next year. Would that mean you would most likely have to repatriate some money from your markets down south or would you borrow money or would there be enough domestic cash flow to, let's say, pay the dividend and make any CapEx spending and do the complete repurchase?

Let me put it this way. We're not expecting to enter into any debt or to fund the buyback and/or any tax leakage from moving the funds around between the countries anything significant. So I think we can fund it with the existing cash flows.

All right. Thanks, Michael.

Thank you, Jon.

Thank you. Next question comes from Victor Cardenas at Scotiabank. Please go ahead.

Congratulations on the result, Robert and Michael, and thank you for taking my question. I only have a question in regards to the repurchase program and, in particular, with the -- just to understand a little bit about the rationale and as opposed to using other alternatives like a special dividend and any other sort of guidance regarding the timing and the size of the repurchase? I think that you mentioned that in Q4, the program maybe starting to make the first repurchases. But looking into understanding the rationale as to for other alternatives and also some soft guidance on the sizes of the repurchase if I may?

As I think I mentioned, we've never, in the history of PriceSmart, entered into a repurchase program. This is the first time. And I think, partly, it's going to be a learning experience for us, because what we're hoping to accomplish by this is to provide some opportunity for certain stockholders who might want to go beyond the dividend in terms of cash benefits and sell some of their stock. But the other thing in my mind is, it is certainly a learning experience, because we really don't know how this is going to work until it's out there. But the other thing is, we're a very thinly traded stock. And what's been the pattern is that we release earnings and then when it's good, the stock jumps up for a few days, and then it goes back down and then we're back in this kind of pattern where there isn't much going on. And I think that by having the stock repurchase program in place, I think, we can provide a little more stability and put some kind of a little more, well, I guess, it would be stability into the pricing of the stock because -- we are an unusual company. I mean, we don't trade very much and we're not a US company in terms that nobody can go in and actually see what we're doing unless you live in one of our countries. And so I think we're going to learn. I mean, we don't know what's going to happen. I think the most important thing, though, we have the cash to do this, number one. And number two is that, looking beyond the repurchase, the real focus has to be on running this company well. And if we run the company well, we will have good results for the shareholders in terms of the stock price and I think that's where we're -- that's our bottom line. But we're in a learning phase really here and I don't know how to predict exactly how this all plays out, but we will see.

Thank you, Michael. Thank you, Robert.

Is that it?

Thank you. There are no further questions at this time. I will now turn the call back over for closing comments.

Okay. Thank you, everybody. We hope you all have a good day. Thank you for joining us today. Bye-bye.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.