PriceSmart Inc

NASDAQ:PSMT

Earnings Call Transcript 2020-Q3

[Operator]

Good day everyone and welcome to the PriceSmart, Incorporated Earning Release Conference Call for the Third Quarter of Fiscal Year 2020, which ended on May 31, 2020.

After remarks from our company representatives, Sherry Bahrambeygui, Chief Executive Officer and Michael McCleary, Chief Financial Officer, you will be given an opportunity to ask questions as the time permits.

As a reminder, this conference call is limit to one hour and is being recorded today, Friday, July 10, 2020. A digital replay will be available following the conclusion of today’s call through July 17, 2020 by dialing 1-877-344-7529 for domestic callers or 1-412-317-0088 for international callers by entering replay access code 10143985.

For opening remarks, I would now like to turn the call over to PriceSmart’s Chief Financial Officer, Michael McCleary. Please proceed, sir.

[Michael McCleary, Chief Financial Officer]

Thank you and welcome to the PriceSmart's earnings call for the third quarter of fiscal year 2020. We will be discussing the information that we provided in our earnings press release and our 10-Q, which we both released yesterday afternoon, July 9, 2020. You can find both documents on our Investor Relations website at investors.pricesmart.com where you can also sign up for e-mail 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, will, may, should, estimate, and similar expressions.

All forward-looking statements are based on current expectations and assumptions as of today, July 10, 2020. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2019 as filed with the Securities and Exchange Commission on October 29, 2019.

The company updated those risks in response to the coronavirus outbreak as detailed in the company’s quarterly report on Form 10-Q for the quarter ended February 29, 2020 has filed with the Securities and Exchange Commission on April 8, 2020.

These risks may be updated from time-to-time and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. The company undertakes no obligation to update forward-looking statements made during this call.

Now, I will turn the call over to Sherry Bahrambeygui, PriceSmart’s Chief Executive Officer.

[Sherry Bahrambeygui, Chief Executive Officer]

Thanks, Michael. Good day, everyone and thank you for joining us. I hope that you and your families are all safe and healthy in these challenging times.

During the third quarter of our fiscal year 2020, our company has traversed an extraordinary arc that started with rapidly responding to unexpected challenges created by the pandemic to predicting the needs of our members and of our employees and then swiftly moving to implement ideas and capabilities that we believe will position us well for the future.

As addressed on the last Q2 earnings call held on April 9, we organized our focus around a number of major priorities. Those priorities remain the same today; people, supply, demand and cash management, in addition to seizing on opportunities for the future.

As to people with our top priority firmly placed on the wellbeing of our employees and our members, the quarter began with rapid adaptation to remote work without compromising effectiveness. Since March, we've successfully off-sited almost all office-based employees in the U.S. and internationally. I believe this early move is a major reason why we can report today that we're aware of only one confirmed COVID case among our office-based employees throughout the company.

At the beginning of this last quarter, we identified a group of 16 executives who together oversee all aspects of the company's operations. Until recently this leadership team has met for at least a couple of hours every single day, seven days a week via video conference. This has allowed us to create an efficient communication channel that enabled us to nimbly respond to the rapidly changing dynamics in our 13 different markets.

Although, we've now been able to dial back the frequency of these meetings to several times a week, we follow the same format setting many of the other previously routine meetings. This has proven to be effective in dealing real-time with the unexpected, while providing a form to quickly expedite new business initiatives.

We were also an early mover on preventative measures in our clubs. These include enhanced cleaning protocols, use of personal protective equipment, social distancing practices, installation of protective barriers for cashiers and other member facing areas, elimination of food sampling, elimination or reduction of food service areas, assignment of exclusive shopping hours from members at high risk, a generous and liberal paid leave policy for sick or high-risk employees, offsite-ing employees whose functions could be performed remotely, the creation of cohorts with staggered schedules, development of reserves since we’re paid to self-quarantine preventatively, and who are at the ready in the event ofan outbreak, contact, tracing, mapping, and strict quarantining protocols, implementing procedures for temperature taking and health certification questionnaires when employees report to work and many other measures.

We've implemented an education campaign for employees about the health risks, and we've recently extended our efforts to provide education, masks, and sanitizers to family members and cohabitants of our employees.

We continue to follow all public health guidelines in each of our markets with measures such as metering traffic inside of our clubs to promote social distancing, more stringent cleaning protocols providing sanitizers and masks to members, mandating masks where permitted by law, and working closely with local health officials to report and track cases.

Now, given that we have over 9,000 employees with each market approaching the pandemic differently, we feel positive about the results so far from our efforts to minimize the risks to our employees and to our members.

Second, we remain laser focused on supply. As to our supply chain, we prepared alternative distribution flows and shipping routes to minimize the risk of disruption to the flow of merchandise. We've prepared backup sites to our Miami distribution facility within the U.S. We've increased the use of our regional distribution centers such as the one in Costa Rica and the use of ocean freight between Central American countries on the occasions that we've been faced with border closing to truck traffic.

We've anticipated potential issues and work closely with our vendors to protect the supply chain upstream since the global nature of this pandemic has created significant risk of disruption at all links of the supply chain.

As to inventory supply during the last few months, we have faced some volatility because of shift in demand. Initially, there was a big surge in demand for basic essential items and not as much interest in discretionary items. As the quarter progressed, we experienced a rather abrupt shift towards non-essential products more oriented toward improving amenities at home such as domestic, exercise equipment, small appliances, and in-home office equipment.

In response to the shifting trends, we've worked closely with our vendors to adjust who by the way has been extremely supportive because of our longstanding relationships and our reputation in our markets. We've developed alternative local sourcing of quality products that meet the standards of our six rights to reduce out of stocks. And when warranted, we've placed limits on certain items to maximize access for those products most in demand.

With regard to demand, we've been paying close attention to how to meet our members where they are. And that really varies from market-to-market. For example, each of our markets has been responding differently at different times. Just as we’ve seen with the rest of the world, the trajectory of and reaction to the pandemic varies by geography. This creates such a dynamic situation we monitor and adjust on a daily basis, because sometimes we receive very little notice about new developments and restrictions. We've even experienced varying mandates within the same market.

It's important to note here that although we're considered an essential business, our markets generally don't provide the same latitude and predictability that essential businesses in the United States enjoy. For example, during the third quarter, we faced temporary club closures limitations on hours, the number of members in a club at any given time, restrictions on in-club dining and food service and restrictions on areas of our business like optical and tire service. Even though we've seen an increase in our average ticket, we have also seen a decrease in our in-club throughput capacity in terms of traffic.

And we believe that is probably attributable to a combination of restrictions on the club's restrictions requiring people to stay-at-home or limiting their mobility and general concerns or even fear about going out in public because of the pandemic.

I should note that these restrictions have also impacted us this quarter in terms of membership renewal rate and membership income, as well as reduction in margins because of limitations on food service and our other businesses that include optical, tires, and bakery.

But despite these challenges, our team has rallied together to keep serving our members in the most efficient and effective ways possible, which leads to one of our most important achievements during this COVID period: the transformation of our online capabilities. We now have higher quality direct communication with our members through online channels and can share important current information, thanks to our digital, tech, and member experience teams. Our following online through social media is rapidly growing. This helps us better predict the needs and preferences of our members.

Our digital platform now combines online membership sign up and renewal, which started in FY 2019, with our companywide online catalog, which went live in Q2 of this year and then in Q3 with the launch of Click & Go. Click & Go enables minimal contact shopping for our members who can now research and select merchandise on our website, order and pay online, and then have their purchases placed directly into their cars.

We rolled out Click & Go in about three months and it is now available in all 13 of our markets and in all, but one of the clubs. This includes implementation at new operational procedures, as well as on-boarding and teaching our frontline employees additional skills to support this needs service.

From what we're seeing, our members are embracing the service. In just June the first month where we were operational in all of our markets Click & Go represented 2.7% of net merchandise sales. We're now advancing into the next phase of combining our Click & Go program with home delivery options.

This could not have been implemented without tremendous collaboration, incredibly long hours, intense coordination, teaching and the strong determination of our team to make it happen, and then make it happen fast. Our team demonstrated a strong sense of united purpose to serve our members in a time of need.

We also believe that these efforts strengthen our foundation for growth and offers sustainable benefits for our future. So, I have to take a moment to call out and congratulate our team on this very important accomplishment.

Finally, we've been and remain focused on cash management and liquidity. At the beginning of the quarter, we took appropriate steps to conserve cash. As the quarter progressed, our view evolved and we are striking a balance between ensuring we have access to sufficient liquidity to weather this storm of unknown duration, while maintaining funds needed to take calculated risks to invest in opportunities that we believe will support the future of this company. In addition, several of the capital projects that we initially suspended have been resumed. With regard to liquidity management, Michael will cover that in just a few minutes.

Before moving on to our quarterly results, I'd like to mention that we opened our 46th club, our smaller format in Liberia, Costa Rica on June 17 of this year. The Liberia club is our eighth club in Costa Rica and it's located in the Guanacaste province, approximately 130 miles from the nearest PriceSmart club and three hours from the capital city of San José.

The opening of the Liberia club marked a special milestone. For us for the first time in the history of our company, the U.S. based team remotely orchestrated, guided and participated in the opening of a new club and our capable in-country team manage the process and executed flawlessly showing that we can and will adapt and grow under the most challenging of circumstances.

We're also looking forward to opening our third warehouse club in the greater metropolitan area of Bogota, our eighth club in Colombia, which we expect to open in the second quarter of fiscal year 2021.

We know we're navigating an unprecedented time at least in our lifetime, but I'm pleased with how we come together and tackle these challenges. I applaud the team for the progress and performance we've made this past quarter is evidence that this team is inspired maybe more than ever about the important purpose of our business to improve the lives and businesses of our members.

Now, I'd like to turn our attention to our results for the third quarter of fiscal 2020. Total revenues for the quarter were $799.9 million, an increase of 1.4% over the comparable prior year period. Net merchandise sales were $768.4 million, an increase of 1.8% over the prior year period.

Currency fluctuations in our markets had a $19.3 million or 250 basis point negative impact on net merchandise sales for the quarter. Comparable net merchandise sales decreased by 3.6% with currency fluctuations impacting comparable sales negatively by 2.5%.

By segment in Central America where we had 25 clubs at quarter-end, including three clubs opened since May, 2019, net merchandise sales increased 1.2% with a 6.4% decrease in comparable net merchandise sales. Our comparable net merchandise sales were negatively impacted by significant traffic reductions in our warehouse clubs due to the various local government travel restrictions that I referenced earlier. Additionally, as expected, we've seen sales transfer from our existing warehouse clubs to our recently opened warehouse clubs.

In the Caribbean region where we had 13 clubs at quarter-end, total net merchandise sales grew 9.6% with comparable net merchandise sales growth of 6.4%. Our Dominican Republic, Trinidad and Jamaica markets led the way in this segment with 21.4%, 16.4%, and 11.8% growth for the third quarter ended May 31, 2020.

In the Dominican Republic, our net merchandise sales growth was primarily attributable to the opening of our fifth club in June, 2019 and strong comparable sales growth. Jamaica and Trinidad comped strongly for the quarter with the same number of clubs as last year.

In Colombia where we currently have seven clubs, net merchandise sales decreased 14.5% for the quarter and there was a decrease in comparable net merchandise sales of 14.8%. The impact of currency on total and comparable net merchandise sales in Colombia were significant at negative 18.7% and 18.3% for the quarter, respectively.

Turning to merchandise. In terms of merchandising categories, we continue to experience strong growth in our foods and fresh categories, driven primarily by growth in health and beauty groceries, and produce departments. Due to shifting purchasing patterns during the pandemic in early Q3, we experienced a shift compared to the same period last year away from non-essential categories such as apparel, housewares, and hardware.

However, as Q3 progressed and continuing into Q4, we've seen reversals at this trend. Additionally, due to safety protocols and restrictions in place departments such as food services, tires and optical centers were negatively affected by the impact of the pandemic. Again, as Q3 progressed, we've seen some improvements in our food service, optical and tire departments because of easing of restrictions in some markets.

Now, I'd like to turn to membership. Our total number of membership accounts decreased 2.2% when comparing the number of accounts as of May 31, 2020 versus May 31, 2019. Similarly, our trailing 12-month renewal rate was 82.5% and 85% for the periods ended May 31, 2020 and May 31, 2019, respectively.

We believe the primary contributing factor to this overall decreases the reduced warehouse club traffic from COVID-19 restrictions as we previously mentioned. Historically, our members would primarily renew at or near the time of expiration while at the register in clubs. So, reduction of traffic obviously can impact this practice.

Colombia has the largest decline of 8.3% followed by a decline in Central America of 1.4%. The Caribbean partially offset these declines with a 1.1% growth in membership accounts. To date Colombia and Central American has been the hardest hit regions for the most part in terms of the severity and duration of the governmental restrictions.

However, due to the notable increase of online traffic and the new visibility of inventory online and opportunity to shop through our Click & Go program, membership sign ups and renewals completed online have also been steadily increasing.

Despite the decrease in membership accounts, membership income increased 3% during the quarter. The growth in membership income during fiscal year 2020 in our Central America segment is primarily the result of the opening of three new warehouse clubs, Santiago de Veraguas and Metropark in Panama and San Cristobal in Guatemala.

During calendar 2019 platinum membership launched in two Central America markets, which also contributed to the increase in membership income. While it didn't have an impact in Q3, it's important to note that we launched the platinum membership program in Colombia during the month of June.

In our Caribbean market, membership income growth was primarily attributable to the opening of the new Bolivar warehouse club in the Dominican Republic in June, 2019. In the past calendar year platinum membership launched in three Caribbean markets.

Membership income in Colombia declined in the third quarter due to the decline in total Colombia membership accounts, which we believe is primarily driven by the reduction in traffic caused by the pandemic. Johns Hopkins University data indicates within our operating markets that currently Colombia has the highest reported COVID-19 cases exceeding over 106,000 cases as of July 3, 2020.

Net income for the third quarter of fiscal year 2020 decreased 9.9% to $12.7 million or $0.41 per diluted share compared to $14.1 million or $0.46 per diluted share in the comparable period last year.

As a reminder, we ended this quarter with 45 warehouse clubs compared to 42 clubs at the end of the third quarter of fiscal year 2019. The new clubs include one in Panama referred to as Metropark, one in the Dominican Republic, the Bolivar club; and the San Cristobal club that opened in November of 2019 in Guatemala. Following the opening of the Liberia club in June, we now operate 46 clubs with our 47th expected to open in Bogota, Colombia in Q2 of fiscal year 2021.

Now turning to June sales, which we released earlier this week. May and June improved sequentially versus April sales when compared to the prior year. Net merchandise sales were $249.2 million, a decrease of 1.5% versus a year ago. FX fluctuations adversely impacted net merchandise sales by 3.1%. For the four-week ended June 28, 2020 comparable net merchandise sales decreased 4.9% with a negative FX impact of 3.1%.

In closing, our commitment to our members, to our employees and to our values remain steadfast. The challenges brought on by the pandemic as trying as it has been for everyone has also provided us with great opportunities, and we're not going to waste it. We're prepared to respond to what is still a dynamic environment.

We will continue to try to predict the best ways to meet the needs of our members and we will continue to implement new and improved initiatives as we champion this business for our employees, for our members and for our shareholders.

I want to thank all of our shareholders for their commitment and trust. We are grateful to our employees, especially those on the frontline you continue to inspire all of us in these ever changing times. I wish you all safety and good health.

I'll now turn the call over to Michael.

[Michael McCleary, Chief Financial Officer]

Thank you, Sherry. Good morning or afternoon to everyone and thanks for joining us today. As Sherry mentioned, in many ways the pandemic has accelerated some of our plans in addition to quickly evolving our adaptability to unforeseen market conditions.

We shifted some of our priorities in the short-term, never losing sight of the tenets of our business model and our long-term goals. While we do expect continued uncertainty in the economies of our 13 markets due to COVID-19 and will continue to proceed cautiously, we will do so with an eye on opportunities to solidify the company and our market position for the future.

During the third quarter of fiscal 2020, total revenues were $799.9 million, an increase of 1.4% and net merchandise sales were $768.4 million and grew 1.8%. The third quarter increase in net merchandise sales was driven by a 21.7% increase in average ticket, partially offset by a 16.4% decrease in transactions partially due to capacity and other government restrictions as a result of the COVID-19 pandemic.

Comparable net merchandise sales were down 3.6%, which includes the impact of sales transfers to our newly opened clubs in existing markets. Currency negatively impacted both our net merchandise sales and our comparable net merchandise sales by 2.5%.

Total gross margin of net merchandise sales was inline with the same quarter last year at 13.9%, but was down during the quarter when compared to recent quarters. The decrease versus recent quarters was largely due to a significant dropoff in sales in our higher margin areas of food service, bakery and optical that were particularly impacted by the pandemic.

Total revenue margins decreased 20 basis points to 15.9% compared to 16.1% in the third quarter of fiscal 2019. The slight decrease in total revenue margins is primarily due to lower margins in our casillero business and a one-time reimbursement from one of our credit card vendors in the comparable period of the prior year.

SG&A expenses for the quarter were 12.9% of total revenues, a decrease of 40 basis points versus the same period last year. There are two main factors that contributed to our positive leverage of SG&A. First, we took proactive measures to control costs. These measures included furloughing some U.S. employees, temporarily reducing compensation for higher paid U.S. employees and carefully managing warehouse expenses during these times of uncertainty.

Second, we benefited from lower pre-opening expenses compared to the same period in the prior year. These savings were partially offset by incremental cost to implement additional safety measures in our clubs to protect and better serve our employees and members as well as costs related to our Click & Go program and other omnichannel initiatives.

Operating income was $24 million or 3% of total revenue in Q3 of fiscal 2020 compared to $22 million or 2.8% of total revenue for the same period last year. Net interest expense increased for the quarter, primarily due to higher average long-term loan balances to fund our capital projects and recent draw-downs on short-term lines of credit as part of our COVID-19 related efforts to secure cash. Our effective tax rate for the third quarter of fiscal 2020 was 38% versus a rate of 34.7% a year ago.

The unfavorable net impact is mainly driven by the loss of benefit of foreign tax credits, which are no longer recoverable as a result of the U.S. tax cuts and JOBS Act. However, we had a significant favorable impact from improvements in uncertain tax positions, partially offset by the unfavorable impact from the tax treatment of changes in the value of foreign currency.

While our quarterly rates may vary due to specific events based on our current trends and results, we expect our full year fiscal 2020 effective tax rate to be between 34% and 35%.

Net income decreased 9.9% to $12.7 million with diluted earnings per share of $0.41 in the third quarter of fiscal 2020 compared to $14.1 million with diluted earnings per share of $0.46 in the third quarter of last year.

Moving onto our balance sheet. We ended the quarter with a strong position of cash, cash equivalents and restricted cash totaling $266 million [technical difficulty] versus the same period a year ago.

Cash provided by operating activities increased $61.2 million versus the same period last year, primarily due to significantly lower merchandise levels as we adjusted to dramatic shifts in demand throughout the third quarter. Inventory per club was $6 million at quarter-end versus $7.9 million in the prior period. Assuming the sales did not vary significantly from current levels, we would expect inventories to shift back toward historical norms beginning in Q4.

Net cash used in investing activities increased by $43 million, primarily due to the increase in investments in certificates of deposit of Trinidad dollars we have on hand, while we work actively to convert those Trinidad dollars into U.S. dollars as availability allows.

The $123.1 million increase in cash provided by financing activities is primarily the result of a net increase of proceeds from long-term borrowings of $59.8 million compared to a year ago to finance our warehouse club construction projects and a net $61.5 million increase in cash provided by short-term borrowings.

As I mentioned in our last call, we have increased our short-term borrowings to increase available cash on hand and secure cash for any future potential operational cash needs because of COVID-19.

As Sherry mentioned, one of our main priorities during the COVID-19 pandemic has been liquidity management. While some uncertainty remains in our markets due to the pandemic, we have confidence in our ability to continue our operations successfully, while managing our cash position.

In response to the adverse impact imposed by the pandemic, we proactively made the following adjustments to mitigate further risks. First of all, in addition to the draw-down on lines of credit that I mentioned previously, we have negotiated extended terms with many of our vendors and have taken advantage of tax deferral arrangements where available.

Second, we continue to target inventory management by focusing on shifts in consumption patterns and by adjusting merchandise buying accordingly in addition to focusing on supply chain efficiencies. Third, we initially furloughed approximately 80 employees in the United States and implemented temporary salary reductions for U.S. employees and executives on a tiered basis increasing from 10% to 30% based on compensation level in addition to our board members voluntarily waving their next quarter's cash compensation.

Finally, shortly after the onset of the pandemic, we put a halt to almost all of our capital projects. However, as we have gained a better understanding of the climate we are operating in, we are gradually restarting certain of our previously postponed capital expenditures such as construction of our third club in Bogota, Colombia, which we expect to open in Q2 of fiscal 2021.

Although, it has been a challenging time over the past few months, we believe that we are emerging as a stronger company. Thank you all for your support during these times of uncertainty. We believe that we are on the right path for continued growth.

I will now turn the call over to the operator to take your questions. Operator, you may now start taking our callers' questions.

[Operator]

We will now begin the question-and-answer session [Operator Instructions]

Our first question comes from Jon Braatz of Kansas City Capital.

[Jon Braatz, Kansas City Capital]

Good morning Sherry and Michael.

[Sherry Bahrambeygui, Chief Executive Officer]

Good morning.

[Jon Braatz, Kansas City Capital]

Sherry, just wanted to touch base with you on gross margins. I know that it came down sequentially to 13.9% and you talked a little bit about the change in merchandise mix driving that. And can you give me -- can you give us a sense as to the proportionality of that -- the change in the margin as a result of the change in merchandise mix? How significant it was, and maybe how quickly you can envision that it rebuilding again from the third quarter level?

[Sherry Bahrambeygui, Chief Executive Officer]

Well, our total gross margins of 13.9% were flat with Q3 of last year, but down from where we've -- what we've been achieving in FY 2020. We attribute this in large part to areas of our business. It's not so much the merchandise as it is the fact that we had restrictions on tire service, op, all those types of things that would require more physical contact, our OBs including bakery just the environment is such that you wouldn't have as much gathering and people having -- ordering the cakes as much. And those kinds of things that are generated that would impact gross margins significantly, those areas were most affected. Demos, for example, is another example. Demo income was reduced.

But in terms of the margin for our merchandise and the merchandise margins, those have been holding pretty firm and in line with our pricing strategy and consistent with our value proposition and our discipline with the six rights. So, there has been some shift in emphasis from imports to domestic to make sure that we're covering out of stocks. But that's about as much color as I think I can give you on the reason for the margins being at 13.9%.

[Jon Braatz, Kansas City Capital]

Do you -- when you look at those higher value-added services like optical and bakery, maybe compared to where you were a month ago, are those services beginning to incrementally improve? Are you seeing some gains in that area versus maybe -- like I said maybe a month ago?

[Sherry Bahrambeygui, Chief Executive Officer]

The short answer is yes, but it is a dynamic situation.

[Jon Braatz, Kansas City Capital]

Okay.

[Sherry Bahrambeygui, Chief Executive Officer]

Because it's highly correlated with the kind of restrictions that we're seeing in the markets and that's why -- because those are the types of services that require more physical contact, and as a result it can be being more impacted by what the more global environment is.

[Jon Braatz, Kansas City Capital]

Okay. Are -- do you -- obviously, you operate in a lot of different countries and a lot of different variables, are you seeing any sense that maybe if there is a resurgence of COVID cases or continuing high case -- high level of cases that there might be additional restrictions placed on people in your markets and maybe on your operating hours and so on?

[Sherry Bahrambeygui, Chief Executive Officer]

The best answer I can give you is, just like we've handled this entire process over the last three months is that we are getting prepared for all sorts of scenarios. And we think that's the most responsible thing to do, and it puts us in best position to maximize sales and meet the needs of our members.

If I were to ask you in the United States what you think is going to happen with the pandemic, it would be a tough question to answer. I think the same holds true [ph] in our markets, but we're clearly seeing that there is a cause and effect. As cases go up, the restrictions tend to be greater, and we don't have a crystal ball. So, the best we can do is prepare our business to be ready and at the ready to be able to best serve our members given any kinds of restrictions that are thrown our way.

[Jon Braatz, Kansas City Capital]

Okay. Okay. One last question. From a competitive standpoint, are -- your Click & Go, are you as advanced or more advanced than maybe than some of your competitors? Have you dealt with this do you think from a -- in a better way than -- in a quicker way than some of your competitors?

[Sherry Bahrambeygui, Chief Executive Officer]

I don't really spend a lot of time comparing us to our competitors in that regard. All I can tell you is that we've launched, expedited, rolled out in a way that I haven't seen elsewhere, and we're getting very positive reception from our members. We still have a lot of work to do and a lot of upside potential in terms of creating greater efficiencies, and we're learning and we're implementing new ideas to get better and better. We're going to be layering on the delivery aspects to this program, which I think is also going to be well-received by our members.

So, all I can tell you is that given the numbers that we saw in June, there seems to be a good response from our members and that there is more potential there.

[Jon Braatz, Kansas City Capital]

Okay. Thank you, Sherry.

[Sherry Bahrambeygui, Chief Executive Officer]

Thank you.

[Operator]

This concludes the question-and-answer session. I would now like to turn the conference back over to the management team for any closing remarks.

[Sherry Bahrambeygui, Chief Executive Officer]

Well, I just like to say thank you to everyone and thank you for the support and for the understanding. We are all in this together. We are learning a lot from this process. And we -- as I said earlier, plan to put it to good use going forward. And I'd like to most especially recognize our employees.

Michael?

[Michael McCleary, Chief Financial Officer]

Yeah. Thank you very much everybody and have a good weekend. Take care.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.