AMRK - NASDAQ

Good afternoon, and welcome to the A-Mark Precious Metals Conference call for the Fiscal First Quarter Ended September 30, 2024. My name is Matthew, and I’ll be your operator this afternoon. Before this call, A-Mark issued its results for the fiscal first quarter 2025 in a press release, which is available in the Investor Relations section of the company’s website at www.amark.com. You can find the link in the Investor Relations section at the top of the homepage. Joining us for today’s call are A-Mark’s CEO, Greg Roberts; President, Thor Gjerdrum; and CFO, Kathleen Simpson-Taylor. Following their remarks, we’ll open the call for your questions. Then, before we conclude the call, I’ll provide the necessary cautions regarding the forward-looking statements made by management during this call. I’d like to remind everyone that this call is being recorded and will be made available for replay via a link available on the Investor Relations section of A-Mark’s website. Now, I’d like to turn the call over to A-Mark’s CEO, Mr. Greg Roberts. Sir, please proceed.

Thank you, Matthew, and good afternoon, everyone. Our first quarter results reflect the continued strength of our fully integrated platform to deliver profitable results, even during slower market conditions. Despite facing a less favorable macroeconomic environment, including elevated precious metal prices and softened levels of demand, we delivered $0.37 per diluted share and generated almost $18 million in non-GAAP EBITDA. During the quarter, we amended our Trading Credit Facility extending its maturity to September 2026, providing us with the liquidity for our future capital needs. We also advanced our A-Mark Global Logistics facility expansion and logistics automation initiatives, which are expected to be completed in the next few months. We anticipate these measures will increase operational capacity and produce efficiencies and long-term cost savings. We have also continued to make substantial progress towards establishing a trading office and DTC presence in Singapore and broadening our reach into the surrounding region. Finally, as previously announced, Silver Towne Mint recently acquired all the assets of Regency Mint Manufacturing, including its minting equipment and its customer list, further enhancing our minting capability and expanding our customer base. We believe these initiatives position A-Mark for future success as we continue to grow and expand our business. Now, I will turn the call over to our CFO, Kathleen Simpson-Taylor, who provide a more detailed overview of our financial performance. Then our President, Thor Gjerdrum, will discuss our key operating metrics. Finally, I will provide further insights into our business and growth strategy. Kathleen?

Thank you, Greg, and good afternoon, everyone. Our revenues for fiscal Q1 2025 increased 9% to $2.72 billion from $2.48 billion in Q1 of last year, excluding an increase of $217.4 million of forward sales, our revenues increased $13.1 million or 0.9%, which was due to higher average selling prices of gold and silver, partially offset by a decrease in gold and silver ounces sold. The DTC segment contributed 18% and 13% of the consolidated revenue in fiscal Q1 2025, and fiscal Q1 2024, respectively. Revenue contributed by JMB represented 11% of the consolidated revenues for fiscal Q1 of 2025 compared to 12% in Q1 of last year. Gross profit for fiscal Q1 2025 decreased 12% to $43.4 million, or 1.6% of revenue from $49.4 million or 1.99% of revenue in Q1 of last year. The decrease in gross profit was due to lower gross profits earned from the Wholesale Sales & Ancillary Services segment, partially offset by an increase in gross profits earned by the Direct-to-Consumer segment. Gross profit contributed by the Direct-to-Consumer represented 54% of the consolidated gross profit in fiscal Q1 2025 compared to 43% in the same year ago period. Gross profit contributed by JMB represented 37% of the consolidated gross profit in fiscal Q1 2025, compared to 36% in Q1 of last year. SG&A expenses for Q1 2025 increased 22% to $26.6 million from $21.8 million in Q1 of last year. The increase was primarily due to an increase in compensation expense, including performance-based accruals of $2.6 million, higher advertising costs of $0.7 million, an increase in consulting and professional fees of 0.2 million, an increase in information technology costs of $0.2 million, and an increase in insurance costs of $0.2 million. SG&A expenses for the 3 months ended September 30, 2024, include $5.3 million of expenses incurred by LPM and SGB, our recently consolidated subsidiaries which were not included in our prior year Q1 results. Depreciation and amortization expense for fiscal Q1 2025 increased 69% to $4.7 million from $2.8 million in Q1 of last year. The increase was primarily due to an increase in amortization expense of $2.2 million related to intangible assets acquired through our acquisition of LPM and our acquisition of a controlling interest in SGB. This was partially offset by a decrease in JMB in tangible asset amortization of $0.5 million. Interest income for fiscal Q1 2025 increased 16% to $7.1 million from $6.1 million in Q1 of last year. The increase in interest income was primarily due to an increase in other finance product income of $0.6 million and an increase in interest income earned by our Secured Lending segment of $0.3 million. Interest expense for fiscal Q1 2025 increase 2% to $10 million from $9.8 million in Q1 of last fiscal year. The increase in interest expense was primarily due to an increase of $0.7 million associated with our Trading Credit Facility due to increased borrowings as well as an increase in interest rates and an increase of $0.7 million related to product financing arrangements. This was partially offset by a decrease of $1.4 million related to the AMCF Notes, including amortization of debt issuance costs, due to their repayment in December 2023. Earnings from equity method investments in fiscal Q1 2025 decreased 79% to $0.6 million from $2.7 million in the same year ago quarter. The decrease was due to decreased earnings of our equity methods investees. Net income attributable to the company for the first quarter of fiscal 2025 totaled $9 million or $0.37 per diluted share. This compares to net income attributable to the company of $18.8 million or $0.77 per diluted share in Q1 of last year. Adjusted net income before provision for income taxes, a non-GAAP financial measure, which excludes depreciation, amortization, acquisition costs, and contingent consideration fair value adjustments for fiscal Q1 2025 totaled $14.8 million, a decrease of 45% compared to $26.8 million in the same year ago. EBITDA, a non-GAAP liquidity measure for fiscal Q1 2025 totaled $17.8 million, a 41% decrease compared to $30.4 million in Q1 of last year. Turning to our balance sheet. At quarter end, we had $46.9 million of cash compared to $48.6 million at June 30, 2024. Our tangible net worth, excluding non-controlling interests at the end of the quarter was $313.3 million, up from $306 million at June 30, 2024. As Greg mentioned, we executed an extension of our primary credit facility, which provides $422.5 million in committed lines now through September 2026, providing the company with stable long-term access to capital for the business. This facility, in conjunction with our repo lines and lease facilities, provides the company with a diversified portfolio of liquidity tools going forward. A-Mark’s Board of Directors has continued to maintain the company’s regular quarterly cash dividend program of $0.20 per common share. The most recent quarterly cash dividend was paid in October. It is expected that the next quarterly dividend will be paid in January 2025. That completes my financial summary. Now, I will turn the call over to Thor, who will provide an update on our key operating metrics. Thor?

Thank you, Kathleen. Looking at our key operating metrics for the first quarter of fiscal 2025, we sold 398,000 ounces of gold in Q1 fiscal 2025, which was down 20% from Q1 of last year, and down 11% from the prior quarter. We sold 20.4 million ounces of silver in Q1 fiscal 2025, which was down 33% from Q1 of last year, and down 20% from last year. The number of new customers in the DTC segment, which is defined as the number of customers that have registered or set up a new account or made a purchase for the first time during the period was 55,300 in Q1 fiscal 2025, which was up 41% from Q1 of last year, and down 90% from last quarter. Approximately 92% of the new customers from the last quarter were attributable to the acquisition of a controlling interest in SGB. The number of total customers in the DTC segment at the end of the first quarter was approximately $3.1 million, which was a 31% increase from prior year. The year-over-year increase in total customers was due to the organic growth of our JMB customer base, as well as the acquisition of a controlling interest in SGB. The DTC segment average order value, which represents the average dollar value of third-party product orders, excluding accumulation program orders delivered to DTC segment customers during Q1 fiscal 2025 was $2,967, which was up 22% from Q1 fiscal 2024, and up 3% from the prior quarter. For the fiscal first quarter, our inventory turnover ratio was 2.3, which was an 8% decrease from 2.5 in Q1 of last year, and comparable with the prior quarter. Finally, the number of secured loans at the end of September totaled 562, a decrease of 30% from September 30 2023, and a decrease of 4% from the end of June 2024. The dollar value of our loan portfolio at the end of September totaled $101.9 million, a decrease of 10% from June 30, 2024. That concludes my prepared remarks. I’ll now turn it over to Greg, for closing remarks. Greg?

Thank you, Thor and Kathleen. A-Mark’s fully integrated precious metals platform continues to demonstrate its ability to deliver profitable results even during slower market conditions. Looking ahead, we remain cautiously optimistic that the macro headwinds we face will begin to shift leading to increased demand across both our wholesale and retail segments. We remain committed to pursuing opportunities that expand our market reach and deliver value to our shareholders over the long-term. Operator?

Certainly. Everyone at this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Your first question is coming from Thomas Forte from Maxim Group. Your line is live.

Hi, Tom.

Great. So first, Greg and team, congrats on your ability to once again generate profits in a challenging quarter. I’m going to ask two questions, and then I’m going to get back in the queue to give other people an opportunity. So, Greg, the first question I had is how should we think about the levers you can pull to stimulate demand when you have an environment? It seems like there’s – it’s pretty challenging, because you have kind of two one-way trades now in gold and essentially in equities. But I do think that you do a lot in such an environment. So, I’d like to hear some additional details on the leverage you can pull when facing that.

Yeah, I mean, I think we can increase our marketing expenses. We can use marketing to try to bring in new customers, which we’ve done. We can’t really control how much they’re going to spend or what their average order value’s going to be. But we believe that when markets are slower, trying to get new customers is a great investment in the future. Throughout this quarter, we once again had kind of hit and miss weeks. We would have – we probably had 2 or 3 very exceptional weeks particularly in August. And, we were able to really capitalize when we saw an increase in demand and we were very well positioned in our new customer counts, our profitability, our sales, we had – we were able to pull some levers, as you say, that what we felt was able to take advantage, when the market allowed us to do it. What we haven’t been able to do is sustain multiple weeks or months, where we’re seeing this increased demand. I will say that towards the end of September and through October we did start to see a little bit of positive movement in the premiums. So some of the premiums and some of the products, not all of them, but some of them we did. We did see some premium expansion to the positive. So, we did feel we were in good shape there. We feel that in this quarter our inventory, and our buys, and ourselves and we felt like we had very good match there. And then, obviously, coming into to the election yesterday, the last few weeks there was activity that was good. And then, today, clearly there was a risk on movement in back into equities a little bit of price drop in the spot price of gold and silver, which traditionally should help with premiums and as well as demand with a drop in price. So, we’ll have to see how that plays out and how the customer base responds. But, for the most part, we still felt really good about almost $18 million in EBITDA and almost $15 million in adjusted net. And it was for us we felt like we continue to get as much as we can out of what the environment gives us. As I’ve said before, the good news is, we clearly see that when we get a little bit of a shift from headwind to tailwind the businesses all perform very well, albeit in shorter periods of time.

And then for my follow-up, and I’ll get back in the queue. So the longer-term question is during periods like this, it seems like historically you’ve done an amazing job on the strategic M&A side to find assets attractively valued that have you then well positioned for that next increase in demand? It sounds like you made an acquisition through the Silver Towne, but can you give your current thoughts on strategic M&A?

I mean, I thought the Silver Towne acquisition was just great for us, really good timing for us with premiums low and profitability at the target was down a little, they were looking to, the sellers were looking to move out of the business and move into something else. So, I believe that for us to really pick up an extra 20 million ounces a year of struck product, which is what we believe we will get out of this acquisition, when we get all the equipment set up and working and really getting up to that $100 million market Silver Towne Mint, if you include the cash bar products. That was just a – what we felt was just perfect timing and very good from a strategic standpoint. I will say in the last 30 days, we have really filled the funnel in things we’re looking at on the M&A side. We’re very – we’re cautiously optimistic that in the next 90 days, we’re going to be able to do some acquisitions that are we believe very favorable for us. So we’re very busy in that area right now to answer the question directly. And, again, I believe the timing is very good for us. And we very much look forward to going through the process and trying to finish up a couple of these deals we’ve been looking at.

Great. Thank you. I’m going to get back in the queue.

Thank you.

Okay.

Thank you. At this time, this concludes our question-and-answer session. I’d now like to turn the call back over to Mr. Roberts, for his closing remarks.

I’d like to thank our shareholders for joining the call today and for your ongoing support and investment in A-Mark. I also want to express my gratitude to all of our employees for their dedication and commitment to our success, and we look forward to talking to you next quarter, if not before. Thank you.