A-Mark Precious Metals, Inc. (NASDAQ:AMRK) Q1 2024 Earnings Call Transcript
A-Mark Precious Metals, Inc. (NASDAQ:AMRK) Q1 2024 Earnings Call Transcript November 7, 2023
Operator: Good afternoon and welcome to the A-Mark Precious Metals Conference Call for the Fiscal First Quarter ended September 30, 2023. My name is Jenny, and I will be your operator this afternoon. Before this call, A-Mark issued its results for the fiscal first quarter 2024 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 to the Investor Relations section at the top of the home page. 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 will open the call to 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 would like to remind everyone that this call is being recorded, and we will be made available for replay via link available in the Investor Relations section of A-Mark's website. Now, I would like to turn the call over to A-Mark's CEO, Mr. Greg Roberts. Sir, please proceed.
Greg Roberts: Thank you, John, and good afternoon to everyone. Thank you for joining our call today. As you can see, our first quarter results demonstrate the strength and scalability of our fully integrated platform to generate profitable results, even during conditions. Despite facing a less favorable macroeconomic environment and softened levels of demand compared to recent quarters, we still delivered $30 million plus of EBITDA and diluted earnings of $0.77 per share and continued to grow our direct-to-consumer customer base. Consistent with our commitment to generate shareholder value, the company also repurchased a total of 171,268 shares of our common stock for $5 million during the first quarter, bringing our total treasury stock to 14.8 million.
We continue to view our share repurchase program as an attractive investment opportunity for the company and another way to deliver value to our shareholders. Finally, we amended our trading credit facility during the quarter, resulting in increased liquidity and the reclassification of debt to long-term. With that, I will now turn the call over to our CFO, Kathleen Simpson-Taylor, to walk you through our financials in more detail. Then our President, Thor Gjerdrum, will discuss our key operating metrics. Afterwards, I will provide a further update on our business and growth strategy and welcome your questions. Kathleen?
Kathleen Simpson-Taylor: Thank you, Greg and good afternoon everyone. Our revenues for fiscal Q1 2024 increased 31% to $2.5 billion from $1.9 billion in Q1 of last year. Excluding an increase of $660.1 million of forward sales, revenues decreased $75.8 million or 5%, which was due to a decrease in gold and silver ounces sold, partially offset by higher average selling prices of gold and silver. The DTC segment contributed 13% and 23% of the consolidated revenue in fiscal Q1 2024 and fiscal Q1 2023, respectively. Revenue contributed by JMB represented 12% of the consolidated revenues for Q1 of 2024 compared to 20% in Q1 of last year. Gross profit for fiscal Q1 2024 decreased 36% to $49.4 million or 1.99% of revenue from $76.6 million or 4.03% of revenue in Q1 of last year.
The decrease in gross profit was due to lower gross profits earned from both the wholesale sales and ancillary services and DTC segment. Gross profit contributed by the DTC segment represented 43% of the consolidated gross profit in fiscal Q1 2024 compared to 55% in the same year ago period. Gross profit contributed by JMB represented 36% of the consolidated gross profit in fiscal Q1 2024 compared to 48% in Q1 of last year. SG&A expenses for fiscal Q1 2024 increased 23% to $21.8 million from $17.8 million in Q1 of last year. The increase was primarily due to an increase in consulting and professional fees of $2 million and increase in compensation expense including performance-based accruals of $1.2 million, higher advertising costs of $0.4 million, and increase in insurance costs of $0.3 million, and an increase in information technology costs of $0.2 million.
Depreciation and amortization expense for fiscal Q1 2024 decreased 12% to $2.8 million from $3.2 million in Q1 of last year. The decrease was primarily due to a $0.5 million decrease in amortization of acquired intangibles related to JMB. Interest income for fiscal Q1 2024 increased 20% to $6.1 million from $5.1 million in Q1 of last year. The aggregate increase in interest income was primarily due to an increase in other finance product income of $0.7 million and an increase in interest income earned by our secured lending segment of $0.3 million. Interest expense for fiscal Q1 2024 increased 60% to $9.8 million from $6.1 million in Q1 of last fiscal year. The increase in interest expense was primarily due to an increase of $3.2 million associated with our trading credit facility due to an increase in interest rates as well as increased borrowings and the AMCF notes, including amortization of debt issuance costs, as well as an increase of $0.5 million related to product financing arrangements.
Earnings from equity method investments in Q1 2024 increased 1% to $2.71 million from $2.68 million in the same year ago quarter. Net income attributable to the company for the first quarter of fiscal 2024 totaled $18.8 million or $0.77 per diluted share. This compares to net income attributable to the company of $45.1 million or $1.83 per diluted share in Q1 of last year. Adjusted net income before provision for income taxes, a non-GAAP financial performance measure, which excludes acquisition expenses, amortization, and depreciation for Q1 fiscal 2024 totaled $26.8 million, a decrease of 56% compared to $61.3 million in the same year ago quarter. EBITDA, a non-GAAP liquidity measure for Q1 fiscal 2024 totaled $30.4 million, a 51% decrease compared to $62.2 million in Q1 fiscal 2023.
Turning to our balance sheet. At quarter end, we had $48.2 million of cash compared to $39.3 million of cash at the end of fiscal year 2023. Our tangible net worth at the end of the quarter was $421.7 million, down from $436.8 million at the end of the prior fiscal year. As Greg mentioned, we amended our trading credit facility during the quarter, resulting in increased liquidity and a reclassification of the debt to long-term. The facility now matures in September 2025 and provides for automatic annual renewals. 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 2024.
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?
Thor Gjerdrum: Thank you, Kathleen. Looking at our key operating metrics for the first quarter of fiscal 2024, we sold 495,000 ounces of gold in Q1 fiscal 2024, which was down 21% from Q1 of last year and down 39% from the prior quarter. We sold 30.4 million ounces of silver in Q1 fiscal 2024, which was down 15% from Q1 of last year and down 33% from last quarter. 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 39,100 in Q1 fiscal 2024, which was down 20% from Q1 of last year and down 57% from last quarter. Approximately 32% of the new customers from the last quarter were attributable to the acquired customer list of BullionMax in June 2023.
The number of total customers in the DTC segment at the end of the first quarter was approximately 2.4 million, which was a 16% increase from the prior year, The year-over-year increase in total customers was due to organic growth of our JMB customer base as well as the acquired list of BGASC and BullionMax in October of 2022 and June 2023 respectively. The DTC segment average order value, which represents the average dollar value of products ordered, excluding accumulation program orders, delivered to DTC segment customers during Q1 fiscal 2024 was $2,440, which is up 5% from Q1 fiscal 2023, but down 26% from the prior quarter. For the first fiscal quarter, our inventory turnover ratio was 2.5, which was a 7% decrease from 2.7 in Q1 of last year and a 22% decrease from 3.2 in the prior quarter.
Finally, the number of secured loans at the end of September totaled 803, a decrease of 26% from September 30, 2022, and a decrease of 9% from the end of June. The dollar value of our loan portfolio at the end of September totaled $99.2 million, a decrease of 1% from the end of last fiscal year. That concludes my prepared remarks. I'll now turn it over to Greg for closing remarks. Greg?
Greg Roberts: Thanks Thor.
Operator: [Operator Instructions] Is everything okay?
Greg Roberts: Yes. I'm sorry. We had a problem with the phone. Where did it? Where did I leave off?
Operator: Sir, we got to your closing remarks, Greg, but did you want me to run the Q&A and see if we have anybody in Q&A?
Greg Roberts: Fine.
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