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A-Mark Precious Metals Reports Fiscal Third Quarter 2020 Results

EL SEGUNDO, Calif., May 07, 2020 (GLOBE NEWSWIRE) -- A-Mark Precious Metals, Inc. (AMRK), a leading full-service provider of products and services to the global precious metals market, reported results for the fiscal third quarter ended March 31, 2020.

Fiscal Q3 2020 Financial Highlights

  • Revenues for the three months ended March 31, 2020 decreased 1% to $1.26 billion from $1.27 billion for the three months ended March 31, 2019 and increased 19% from $1.06 billion for the three months ended December 31, 2019

  • Gross profit for the three months ended March 31, 2020 increased 158% to $22.5 million (1.79% of revenue) from $8.7 million (0.69% of revenue) for the three months ended March 31, 2019 and increased 176% from $8.1 million (0.8% of revenue) for the three months ended December 31, 2019

  • Net income for the three months ended March 31, 2020 totaled $11.3 million or $1.61 per diluted share, as compared to net income of $990,000 or $0.14 per diluted share for the three months ended March 31, 2019 and net income of $1.2 million or $0.17 per diluted share for the three months ended December 31, 2019

  • Gold ounces sold in the three months ended March 31, 2020 increased 7% to 508,000 ounces from 474,000 for the three months ended March 31, 2019 and increased 19% from 428,000 for the three months ended December 31, 2019

  • Silver ounces sold in the three months ended March 31, 2020 increased 54% to 25.7 million ounces from 16.8 million ounces for the three months ended March 31, 2019 and increased 82% from 14.1 million from the three months ended December 31, 2019

  • As of March 31, 2020, the number of secured loans decreased 83% to 429 from 2,568 as of March 31, 2019 and decreased 88% from 3,725 as of December 31, 2019

Fiscal Q3 2020 Financial Results
Revenues decreased 1% to $1.26 billion from $1.27 billion in the same year-ago quarter. The decrease in revenues was mainly due to lower forward sales, offset by an increase in the total amount of gold and silver ounces sold and higher selling prices of gold and silver.

Gross profit increased 158% to $22.5 million (1.79% of revenue) from $8.7 million (0.69% of revenue) in the same year-ago quarter. This increase was due to higher gross profits earned by the Wholesale Trading & Ancillary Services and Direct Sales segments and was driven primarily by significantly wider trading spreads as a result of increased demand, and higher trading profits.

Selling, general and administrative expenses increased 26% to $10.4 million from $8.3 million in the same year-ago quarter. The increase was primarily due to increases in performance-based compensation accruals of $2.3 million and depreciation expense of $0.3 million, which were partially offset by decreases in consulting expenses of $0.1 million and operating expenses of $0.5 million associated with the Company’s Direct Sales segment.

Interest income increased 24% to $6.0 million from $4.8 million in the same year-ago quarter. The aggregate increase in interest income was primarily due to higher interest income from the Secured Lending segment and other finance product income.

Interest expense increased 19% to $5.1 million from $4.2 million in the same year-ago quarter. The increase in interest expense was primarily related to the Company’s notes payable, liabilities on borrowed metals, product financing arrangements, and loan servicing fees, partially offset by a reduction in interest expense related to our Trading Credit Facility.

Net income totaled $11.3 million or $1.61 per diluted share, an improvement from $990,000 or $0.14 per diluted share in the same year-ago quarter.

Fiscal Nine Months 2020 Financial Highlights

  • Revenues for the nine months ended March 31, 2020 decreased ­­4% to $3.80 billion from $3.93 billion for the nine months ended March 31, 2019

  • Gross profit for the nine months ended March 31, 2020 increased 53% to $39.0 million (1.03% of revenue) from $25.5 million (0.65% of revenue) for the nine months ended March 31, 2019

  • Net income for the nine months ended March 31, 2020 totaled $12.7 million or $1.80 per diluted share, as compared to net income of $3.0 million or $0.43 per diluted share for the nine months ended March 31, 2019

  • Gold ounces sold in the nine months ended March 31, 2020 increased 4% to 1,512,000 ounces from 1,449,000 for the nine months ended March 31, 2019

  • Silver ounces sold in the nine months ended March 31, 2020 increased 10% to 60.7 million ounces from 55.1 million for the nine months ended March 31, 2019

Fiscal Nine Months 2020 Financial Results
Revenues decreased 4% to $3.80 billion from $3.93 billion in the same year-ago period. The decrease was primarily due to lower forward sales, offset by an increase in the total amount of gold and silver ounces sold and higher selling prices of gold and silver.

Gross profit increased 53% to $39.0 million (1.03% of revenue) from $25.5 million (0.65% of revenue) in the same year-ago period. This increase was due to higher gross profits earned by the Wholesale Trading & Ancillary Services and Direct Sales segments and was driven primarily by significantly wider trading spreads as a result of increased demand, and higher trading profits.

Selling, general and administrative expenses increased 10% to $26.5 million from $24.1 million in the same year-ago period. The increase was primarily due to increases in performance-based compensation accruals of $2.8 million and depreciation expense of $0.3 million, which were partially offset by decreases in consulting expenses of $0.2 million and operating expenses of $0.6 million associated with the Company’s Direct Sales segment.

Interest income increased 28% to $18.0 million from $14.0 million in the same year-ago period. The aggregate increase in interest income was primarily due to interest income earned by the Secured Lending Segment and other finance product income.

Interest expense increased 23% to $15.3 million from $12.4 million in the same year-ago period. The increase in interest expense was related primarily to the Company’s notes payable, liabilities on borrowed metals, product financing arrangements, loan servicing fees, and Trading Credit Facility, partially offset by a reduction in interest expense related to the Goldline Credit Facility which was paid off in December 2018.

Net income totaled $12.7 million or $1.80 per diluted share, compared to net income of $3.0 million or $0.43 per diluted share in the same year-ago period.

Management Commentary
“Our record financial results and operational performance in the third quarter demonstrate the scalability of our platform and the demand for A-Mark’s physical products, which increased significantly during the quarter,” said company CEO Greg Roberts. “Recent macroeconomic and other events have created significant demand, related supply constraints and unprecedented volatility in the precious metals market. Our ability to successfully utilize our existing platforms to improve profitability in this environment is both a reflection of our combined team’s resiliency and a result of the investments we have made to increase capacity and operational capabilities in key areas such as our Direct Sales segment, Logistics, 24/7 online trading platform and Minting services.

“Our financial performance in fiscal Q3 was also a direct result of the flexibility in our business model, designed to maintain a baseline of profitability irrespective of market conditions but with the ability to adapt and capitalize on upside opportunities during periods of market volatility; the $22.5 million in gross profit and $11.3 million in net income we realized during the quarter exemplifies our model. In fact, Q3’s net income level was higher than any fiscal full year period since A-Mark became a publicly traded company in 2014.

“With one of the most expansive product and service offerings in the industry, we believe we are well positioned to continue to capitalize on the current market conditions by optimizing our business platform, while continuing to increase market share and driving growth over the long term.”

Conference Call
A-Mark will hold a conference call today (May 7, 2020) to discuss these financial results. The company's CEO Greg Roberts, President Thor Gjerdrum and CFO Kathleen Simpson-Taylor will host the call at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). A question and answer session will follow management's presentation.

To participate, please dial the appropriate number at least five minutes prior to the start time and ask for the A-Mark Precious Metals conference call.

U.S. dial-in number: 1-888-224-1005
International number: 1-856-344-9316
Conference ID: 9392853

The conference call will be broadcast simultaneously and available for replay via the Investor Relations section of A-Mark’s website at www.amark.com. If you have any difficulty connecting with the conference call or webcast, please contact A-Mark’s investor relations team at 1-949-574-3860.

A replay of the call will be available after 7:30 p.m. Eastern time through May 21, 2020.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Conference ID: 9392853

About A-Mark Precious Metals
Founded in 1965, A-Mark Precious Metals, Inc. (AMRK) is a leading full-service precious metals trading company and wholesaler of gold, silver, platinum and palladium bullion and related products. The company’s global customer base includes sovereign and private mints, manufacturers and fabricators, refiners, dealers, financial institutions, industrial users, investors, collectors, and e-commerce and other retail customers. The company conducts its operations through three complementary segments: Wholesale Trading & Ancillary Services, Secured Lending, and Direct Sales.

A-Mark operates several business units in its Wholesale Trading & Ancillary Services segment, including Industrial, Coin and Bar, Trading and Finance, Transcontinental Depository Services (TDS), Logistics, and the Mint (as more fully described below). Its Industrial unit services manufacturers and fabricators of products utilizing precious metals, while its Coin and Bar unit deals in over 200 different products for distribution to dealers and other qualified purchasers. As a U.S. Mint-authorized purchaser of gold, silver and platinum coins, A-Mark purchases bullion products directly from the U.S. Mint for sale to customers. A-Mark also has distributorships with other sovereign mints, including Australia, Austria, Canada, China, Mexico, South Africa and the United Kingdom. Through its TDS subsidiary, A-Mark provides customers with a variety of managed storage options for precious metals worldwide. Through its A-M Global Logistics subsidiary, A-Mark provides customers an array of complementary services, including receiving, handling, inventorying, processing, packaging and shipping of precious metals and custom coins on a secure basis. A-Mark also holds a majority stake in a joint venture that owns the minting operations known as SilverTowne Mint (Mint), which designs and produces minted silver products which provide greater product selection to customers, price stability within the supply chain as well as more secured access to silver during volatile market environments.

The company operates its Secured Lending segment through its wholly-owned subsidiaries, Collateral Finance Corporation (CFC) and AM Capital Funding, LLC (AMCF). Founded in 2005, CFC is a licensed finance lender that originates and acquires loans secured by bullion and numismatic coins. Its customers include coin and precious metal dealers, investors, and collectors. AMCF was formed in 2018 for the purpose of securitizing eligible secured loans of CFC.

A-Mark operates its Direct Sales segment primarily through its wholly-owned subsidiary Goldline Inc. (Goldline), a direct retailer of precious metals for the investor community. Goldline markets A-Mark’s precious metal products through various channels, including radio, television, and the Internet.

A-Mark is headquartered in El Segundo, California, with offices and facilities in Los Angeles, California, Vienna, Austria, Las Vegas, Nevada, and Winchester, Indiana. For more information, visit www.amark.com.

Important Cautions Regarding Forward-Looking Statements
Statements in this press release that relate to future plans, objectives, expectations, performance, events and the like are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Future events, risks and uncertainties, individually or in the aggregate, could cause actual results to differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ include the following: the failure to execute our growth strategy as planned; greater than anticipated costs incurred to execute this strategy; changes in the current international political climate which has favorably contributed to demand and volatility in the precious metals markets; increased competition for our higher margin services, which could depress pricing; the failure of our business model to respond to changes in the market environment as anticipated; general risks of doing business in the commodity markets; and other business, economic, financial and governmental risks as described in in the company’s public filings with the Securities and Exchange Commission.

The words "should," "believe," "estimate," "expect," "intend," "anticipate," "foresee," "plan" and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made. Additionally, any statements related to future improved performance and estimates of revenues and earnings per share are forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.

Company Contact:
Thor Gjerdrum, President
A-Mark Precious Metals, Inc.
1-310-587-1414
thor@amark.com

Investor Relations Contact:
Matt Glover
Gateway Investor Relations
1-949-574-3860
AMRK@gatewayIR.com

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for share data)

March 31,
2020

June 30,
2019

ASSETS

Current assets:

Cash

$

95,503

$

8,320

Receivables, net

96,753

26,895

Derivative assets

53,081

2,428

Secured loans receivable

49,621

125,298

Precious metals held under financing arrangements

187,005

208,792

Inventories:

Inventories

291,003

198,356

Restricted inventories

122,126

94,505

413,129

292,861

Income taxes receivable

1,438

1,473

Prepaid expenses and other assets

3,149

2,783

Total current assets

899,679

668,850

Operating lease right of use assets, net

4,508

Property, plant, and equipment, net

5,953

6,731

Goodwill

8,881

8,881

Intangibles, net

5,234

5,852

Long-term investments

12,277

11,885

Deferred tax assets - non-current

925

3,163

Other long-term assets

3,500

Total assets

$

940,957

$

705,362

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Lines of credit

$

175,000

$

167,000

Liabilities on borrowed metals

178,604

201,144

Product financing arrangements

122,126

94,505

Accounts payable and other current liabilities

231,920

62,180

Derivative liabilities

39,532

9,971

Accrued liabilities

10,919

6,137

Total current liabilities

758,101

540,937

Notes payable

92,347

91,859

Other liabilities

4,142

Total liabilities

854,590

632,796

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued
and outstanding: none as of March 31, 2020 and June 30, 2019

Common stock, par value $0.01; 40,000,000 shares authorized; 7,031,450
shares issued and outstanding as of March 31, 2020 and June 30, 2019

71

71

Additional paid-in capital

27,087

26,452

Retained earnings

55,818

43,135

Total A-Mark Precious Metals, Inc. stockholders’ equity

82,976

69,658

Non-controlling interests

3,391

2,908

Total stockholders’ equity

86,367

72,566

Total liabilities, non-controlling interests and stockholders’ equity

$

940,957

$

705,362


A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share and per share data)

Three Months Ended

Nine Months Ended

March 31,
2020

March 31,
2019

March 31,
2020

March 31,
2019

Revenues

$

1,258,722

$

1,266,986

$

3,795,326

$

3,932,988

Cost of sales

1,236,247

1,258,270

3,756,380

3,907,480

Gross profit

22,475

8,716

38,946

25,508

Selling, general, and administrative expenses

(10,388

)

(8,258

)

(26,528

)

(24,080

)

Interest income

5,968

4,807

17,968

14,010

Interest expense

(5,051

)

(4,239

)

(15,274

)

(12,447

)

Other income, net

463

373

447

1,303

Unrealized loss on foreign exchange

(45

)

(36

)

(42

)

(54

)

Net income before provision for income taxes

13,422

1,363

15,517

4,240

Income tax expense

(1,814

)

(402

)

(2,351

)

(1,143

)

Net income

11,608

961

13,166

3,097

Net income (loss) attributable to non-controlling interests

287

(29

)

483

49

Net income attributable to the Company

$

11,321

$

990

$

12,683

$

3,048

Basic and diluted net income per share attributable
to A-Mark Precious Metals, Inc.:

Basic

$

1.61

$

0.14

$

1.80

$

0.43

Diluted

$

1.61

$

0.14

$

1.80

$

0.43

Weighted average shares outstanding:

Basic

7,031,400

7,031,400

7,031,400

7,031,400

Diluted

7,042,800

7,084,400

7,063,100

7,087,300


A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)

Nine Months Ended March 31,

2020

2019

Cash flows from operating activities:

Net income

$

13,166

$

3,097

Adjustments to reconcile net income to net cash used in operating activities:

Provision (reversal) for doubtful accounts

(30

)

Depreciation and amortization

2,217

2,088

Amortization of loan cost

1,139

854

Deferred income taxes

2,238

975

Interest added to principal of secured loans

(15

)

(16

)

Change in accrued earn-out

(504

)

Debt extinguishment costs

7

Share-based compensation

635

842

Earnings from equity method investments

(392

)

(934

)

Changes in assets and liabilities:

Receivables

(69,858

)

20,161

Secured loans receivable

3,007

(1,747

)

Secured loans made to affiliates

2,315

4,007

Derivative assets

(50,653

)

1,152

Income taxes receivable

35

12

Precious metals held under financing arrangements

21,787

49,944

Inventories

(120,268

)

13,697

Prepaid expenses and other assets

(319

)

(447

)

Accounts payable and other current liabilities

169,740

14,680

Derivative liabilities

29,560

(18,350

)

Liabilities on borrowed metals

(22,540

)

(69,696

)

Accrued liabilities

4,431

567

Net cash (used in) provided by operating activities

(13,775

)

20,359

Cash flows from investing activities:

Capital expenditures for property, plant, and equipment

(686

)

(290

)

Purchase of long-term investments

(2,300

)

Purchase of intangible assets

(150

)

Secured loans receivable, net

70,370

(3,066

)

Other loans originated

(3,500

)

Net cash provided by (used in) investing activities

66,034

(5,656

)

Cash flows from financing activities:

Product financing arrangements, net

27,621

(48,217

)

Borrowings and repayments under lines of credit, net

8,000

(51,000

)

Repayments on notes payable to related party

(7,500

)

Proceeds from issuance of notes payable

90,000

Borrowings on unsecured advance

4,220

Debt funding issuance costs

(697

)

(3,748

)

Net cash provided by (used in) financing activities

34,924

(16,245

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

87,183

(1,542

)

Cash, cash equivalents, and restricted cash, beginning of period

8,320

6,291

Cash, cash equivalents, and restricted cash, end of period

$

95,503

$

4,749

Overview of Results of Operations for the Three Months Ended March 31, 2020 and 2019

Condensed Consolidated Results of Operations

The operating results of our business for the three months ended March 31, 2020 and 2019 are as follows:

in thousands, except per share data

Three Months Ended March 31,

2020

2019

$

%

$

% of
revenue

$

% of
revenue

Increase/
(decrease)

Increase/
(decrease)

Revenues

$

1,258,722

100.000

%

$

1,266,986

100.000

%

$

(8,264

)

(0.7

)%

Gross profit

22,475

1.786

%

8,716

0.688

%

$

13,759

157.9

%

Selling, general, and administrative expenses

(10,388

)

(0.825

)%

(8,258

)

(0.652

)%

$

2,130

25.8

%

Interest income

5,968

0.474

%

4,807

0.379

%

$

1,161

24.2

%

Interest expense

(5,051

)

(0.401

)%

(4,239

)

(0.335

)%

$

812

19.2

%

Other income, net

463

0.037

%

373

0.029

%

$

90

24.1

%

Unrealized loss on foreign exchange

(45

)

(0.004

)%

(36

)

(0.003

)%

$

9

25.0

%

Net income before provision for income taxes

13,422

1.066

%

1,363

0.108

%

$

12,059

884.7

%

Income tax expense

(1,814

)

(0.144

)%

(402

)

(0.032

)%

$

1,412

351.2

%

Net income

11,608

0.922

%

961

0.076

%

$

10,647

1107.9

%

Net income (loss) attributable to non-controlling interests

287

0.023

%

(29

)

(0.002

)%

$

316

1089.7

%

Net income attributable to the Company

$

11,321

0.899

%

$

990

0.078

%

$

10,331

1043.5

%

Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.:

Per Share Data:

Basic

$

1.61

$

0.14

$

1.47

1050.0

%

Diluted

$

1.61

$

0.14

$

1.47

1050.0

%


Overview of Results of Operations for the Nine Months Ended March 31, 2020 and 2019

Condensed Consolidated Results of Operations

The operating results of our business for the nine months ended March 31, 2020 and 2019 are as follows:

in thousands, except per share data

Nine Months Ended March 31,

2020

2019

$

%

$

% of
revenue

$

% of
revenue

Increase/
(decrease)

Increase/
(decrease)

Revenues

$

3,795,326

100.000

%

$

3,932,988

100.000

%

$

(137,662

)

(3.5

)%

Gross profit

38,946

1.026

%

25,508

0.649

%

$

13,438

52.7

%

Selling, general, and administrative expenses

(26,528

)

(0.699

)%

(24,080

)

(0.612

)%

$

2,448

10.2

%

Interest income

17,968

0.473

%

14,010

0.356

%

$

3,958

28.3

%

Interest expense

(15,274

)

(0.402

)%

(12,447

)

(0.316

)%

$

2,827

22.7

%

Other income, net

447

0.012

%

1,303

0.033

%

$

(856

)

(65.7

)%

Unrealized loss on foreign exchange

(42

)

(0.001

)%

(54

)

(0.001

)%

$

(12

)

(22.2

)%

Net income before provision for income taxes

15,517

0.409

%

4,240

0.108

%

$

11,277

266.0

%

Income tax expense

(2,351

)

(0.062

)%

(1,143

)

(0.029

)%

$

1,208

105.7

%

Net income

13,166

0.347

%

3,097

0.079

%

$

10,069

325.1

%

Net income attributable to non-controlling interests

483

0.013

%

49

0.001

%

$

434

885.7

%

Net income attributable to the Company

$

12,683

0.334

%

$

3,048

0.077

%

$

9,635

316.1

%

Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.:

Per Share Data:

Basic

$

1.80

$

0.43

$

1.37

318.6

%

Diluted

$

1.80

$

0.43

$

1.37

318.6

%