A-Mark Precious Metals Inc (AMRK) 2018 Q3 法說會逐字稿

Good afternoon, and welcome to A-Mark Precious Metals conference call for the fiscal third quarter ended March 31, 2018.

My name is Lynn, and I will be your operator this afternoon.

Before this call, A-Mark issued its results for the fiscal third quarter and 9 months of 2018 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 bottom of the homepage.

Joining us on today's call are A-Mark's CEO, Greg Roberts; President, Thor Gjerdrum; and CFO, Cary Dickson.

Following their remarks, we will open the call to your questions.

Then before we conclude today's 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 will be made available for replay via a link available in the Investor Relations section of the company's website.

Now I would like to turn the call over to A-Mark's CEO, Mr. Greg Roberts.

Sir, please proceed.

Thank you, Lynn, and welcome, everyone.

Thank you for joining us this afternoon.

During the fiscal third quarter, we continued to execute on our plan to expand our platform and increase our market share.

And while the precious metals market environment remained at levels that are truly unprecedented, we were still able to take advantage of attractive trading opportunities and achieve further growth in our finance business.

To briefly illustrate the unprecedented market environment, A-Mark's physical silver ounces sold during the third quarter dropped 46% as compared to the same quarter last year from 20.9 million ounces to 11.4 million ounces and dropped 42% from 65 million ounces to 37.9 million ounces for the first 9 months of the fiscal year over the comparable prior period.

As I've talked about in our prior calls, an increasingly important area of our business is our finance portfolio, which continues to perform well.

This was demonstrated in Q3 by the 46% year-over-year increase in the total number of secured loans outstanding from 2,138 to 3,124 as well as the 18% year-over-year increase in the aggregate value of our CFC loan portfolio, which went from $92.7 million to $109.5 million.

Importantly, the growth in our loan portfolio also helped drive a 25% year-over-year increase in interest income to $4.1 million.

In addition, we saw steady improvements in our TDS storage business with a number of both gold and silver ounces in custody up double digits, both sequentially and year-over-year.

Putting all this together, our diversified platform and business model provides us with additional sources of income and predictability for our overall business.

This helps to mitigate the effects of the continuous subdued market conditions for small coin and bars that we have experienced throughout fiscal 2018.

Before I talk more about our operational progress, I'd like to invite our CFO, Cary Dickson, to walk us through the financial details of our fiscal third quarter and our first 9 months of 2018.

Then our President, Thor Gjerdrum, will discuss key operational metrics for the periods.

Afterwards, I will return to talk more about our operational progress and initiatives as well as our outlook for the balance of fiscal 2018.

And with that, I turn it over to Cary.

Cary, take it away.

Thank you, Greg, and good afternoon, everyone.

Turning to our financial results for the fiscal third quarter and 9 months ended March 31, 2018.

Our revenues for fiscal Q3 2018 increased 15% to $1.99 billion from $1.73 billion in the same year ago quarter.

For the first 9 month of the year, our revenues increased 3% to $5.84 billion from $5.66 million in the same period last year.

The increase in the -- for the fiscal third quarter of 2018 was mainly due to an increase in gold ounces sold, gold prices and forward sales, offset by lower silver ounces sold and lower silver prices.

For the 9-month period, the increase was mainly due to an increase in gold prices and forward sales offset by a decrease in the total amount of gold and silver ounces sold.

Gross profit for the fiscal third quarter of 2018 increased 1% to $7.4 million or 0.37% of revenue from $7.3 million or 0.42% of revenue in Q3 of last year.

For the 9-month period, our gross profit decreased 6% to $23.6 million or 0.41% of revenue from $25.3 million or 0.45% of revenue in the same year ago period.

The increase in gross profits in the third quarter of 2018 compared to Q3 of last year was primarily related to gross profit from our recently acquired direct sales segment, Goldline, and increased trading profits, offset by lower silver volume and margin resulting from continued subdued market conditions.

The decrease in gross profit for the 9-month period was primarily due to lower overall volume and margins due to subdued market conditions compared to the prior year ago period, offset by gross profits from our direct sales segment.

Turning to our expenses.

Selling, general and administrative expenses for the fiscal third quarter of 2018 increased 57% to $9.4 million from $6.0 million in Q3 of last year.

The increase was primarily due to expenses related to our recently acquired direct sales segment of $3.6 million, including $0.6 million of severance expense, partially offset by a $0.1 million reduction in incentive compensation expense.

For the first 9 months of 2018, SG&A increased 45% to $25.7 million from $17.8 million in the same year ago period.

The increase was primarily due to expenses related to our direct sales segment of $8.4 million, including $0.6 million of severance expense, $0.3 million of stock compensation expense, $0.5 million of nonrecurring legal expense, $0.3 million of professional consulting fees, partially offset by a $1.5 million reduction in incentive compensation expense.

For the fiscal third quarter of 2018, our interest income increased 25% to $4.1 million from $3.3 million in the same year ago quarter.

For the 9-month period ending -- ended March 31, 2018, our interest income increased 16% to $10.5 million from $9.1 million in the same year ago period.

The increase for both periods is primarily due to increases in interest rates as well as the aggregate value of our secured loan portfolio.

Interest expenses for fiscal Q3 2018 increased 35% to $3.6 million from $2.7 million in the same year ago quarter.

For the first 9 months, interest expense increased 32% to $9.7 million from $7.4 million in the same year ago period.

The increase for both periods was related primarily to greater uses of our line of credit, a new debt financing agreement associated with the acquisition of Goldline, amortization costs related to loan fees and higher LIBOR interest rates that went into effect subsequent to the Federal Reserve rate increases.

Net loss for the fiscal third quarter of 2018 totaled $0.6 million or negative $0.09 per diluted share as compared to net income of $1.2 million or $0.16 per diluted share in the same year ago quarter.

For the 9-month period, our net loss totaled $0.4 million or 0.05% (sic) [$0.05] per diluted share as compared to net income of $5.9 million or $0.82 per diluted share in the same year ago period.

On a reportable segment basis for the fiscal third quarter of 2018, Goldline, our direct sales segment, had a $3.2 million pretax loss; while A-Mark, our wholesale trading and ancillary services segment, had a $1.7 million pretax profit.

For the 9-month period, Goldline, our direct sales segment, had a $4.8 million pretax loss; while A-Mark, our wholesale trading and ancillary services segment, had a $4.4 million pretax profit.

Now turning to the balance sheet.

At quarter end, we had $4.9 million of cash compared to $12 million at the prior quarter end.

It's important to remember that we are a net borrower, and we typically pay down our balances daily to minimize interest expense.

It's also worth mentioning that at the end of the quarter, we had $7.0 million of long-term debt related to our acquisition of Goldline.

Also this quarter, we renewed $216 million of our credit facility with existing bank facility partners.

Though this facility meets our current liquidity requirements, we are assessing other sources of cost-efficient capital as we look to further expand our platform of product and services.

Our tangible net work -- worth at the end of Q3 totaled $53.3 million, which compares to $54 million at the end of fiscal 2Q.

In an effort to increase our financial flexibility and strengthen our balance sheet, the board has determined to suspend our quarterly dividend for the fiscal third quarter.

The board plans to reassess the company's capital resources for the fiscal fourth quarter and may or may not determine to reinstate the dividend based on that assessment.

Additionally, the board recently approved a share repurchase program that enables us to purchase up to 500,000 shares of common stock from time to time in the open market or in block purchase transactions.

The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors.

The share purchases will be funded from cash from operations and may be suspended or discontinued at any time.

That completes my financial summary.

I will turn the call over to Thor who'll provide an update on our key performance metrics.

Thor?

Thanks, Cary.

Turning to our key operational metrics in the third quarter and first 9 months of fiscal 2018.

Looking at our first key metric, gold and silver ounces sold, which represents the ounces of metal we sell and deliver to customers during the period, excluding any ounces recorded on forward contracts.

This is an important metric because it reflects the volume of business we are doing without regard to changes in commodity pricing, which figure into revenue and can mask underlying business trends.

During the third quarter, we sold 618,000 ounces of gold, which is up 64% from prior quarter and up 7% from fiscal Q3 of last year.

For the 9 months fiscal -- of the fiscal year, we sold 1.3 million ounces of gold, which was down 30% compared to the same period last year.

Turning to silver.

During Q3, we sold 11.4 million ounces of silver, which is down 5% from the prior quarter and down 46% from Q3 of last year.

The second key metric we track is trading ticket volume, which tracks the total number of orders processed by our trading desk in Europe and the U.S. In periods of high volatility, there's generally increased trading in the commodity markets and increased demand for our products, which translates into higher business volume.

During fiscal Q3, our trading ticket volume decreased 5% to 28,869 tickets from the prior quarter and increased 5% from Q3 of last year.

For the 9-month period, our trading ticket volume increased 5% to 89,016 tickets compared to the same period last year.

The third key metric we evaluate is inventory turnover, defined as the cost of sales during the period divided by the average inventory during the period.

As many of you know, inventory turn is a measure of how quickly inventory is moved.

Those who have followed our company know that we typically experience a higher inventory turn ratio during periods of increased volatility when trading is more robust, reflecting a more efficient use of our capital.

For the third quarter, our inventory turnover ratio was a 4.8, which was down 8% from 5.2 in the prior quarter and down 11% from 5.4 in Q3 of last year.

And finally, the fourth key metric is the size of our lending business, determined by using the number of secured loans we have at the end of the quarter.

The number of loans we secured at the end of the quarter was up 11% to 3,124 from the end of the prior quarter and up 46% from the end of Q3 last year.

The significant year-over-year improvement in the number of secured loans was primarily due to the acquisition of bullion-based loan portfolios.

As of March 31, 2018, the dollar value of our CFC loan portfolio totaled $109.5 million, up 13% from prior quarter and up 18% year-over-year.

That concludes my prepared remarks.

I'll now turn it back over to Greg to talk about the progress we've been making on our key operational initiatives.

Greg?

Thank you, Thor.

Building up my earlier comments, we continue to focus our efforts on initiatives and activities to further diversify and strengthen our platform.

Perhaps the most important of these initiatives was our acquisition of Goldline, which we acquired last August, which is dramatically expanding our retail distribution.

While the integration and optimization of Goldline has been challenging than initially anticipated, we are now implementing certain measures to optimize the subsidiary structure and expand its marketing programs.

Additionally, we expect the benefits of our optimization measures to be in full effect starting in the new fiscal year.

It's worth pointing out, however, that if you exclude Goldline from our third quarter results, A-Mark was profitable on a pretax basis.

We continue to believe that Goldline presents us with a number of opportunities.

We remain optimistic about the long-term potential for this subsidiary due to the sale synergies it provides us and to upsell and cross-sell our expanding suite of services to Goldline's 150,000 clients as well as their prospective client leads.

In parallel with this, in the rest of our operations, we are continuing to plan and judiciously invest in strategic growth areas to further diversify our business and offerings.

Our overachieving goal is to ensure that we are ready and in a strong position to capitalize on profitable opportunities when the market and conditions improve.

To that end, during the third quarter, we launched our new 24/5 online trading platform.

Integrative in both our portal and trained API, this unique offering provides A-Mark clients with extended access to our robust trading portal, featuring real-time pricing, all in an effort to better serve our growing needs across any time zone.

We are actively marketing this service to new and existing customers, and although we have just launched it, the initial feedback has been very positive.

Shifting gears, our Las Vegas logistics facility continues to provide A-Mark with valuable complementary products and service offerings, including storage services.

To that end, in Q3, we saw double-digit increases in the number of gold and silver ounces we have in custody.

In fact, gold was up 39% year-over-year, while silver increased by 14%.

We continue to target select new customers to drive additional revenue and margin opportunities with the goal of achieving sustainable and stand-alone profitability.

Another key component of our business model is our minting operations.

Through our majority ownership of SilverTowne Mint, the mint continues to perform well and provides us valuable production capabilities and supply.

From a strategic standpoint, we continue to focus on initiatives to drive growth and profitability through new marketing initiatives, efficiencies and special offerings.

One of these efforts is investing in newer equipment to minimize overages and improve production efficiency.

Looking ahead to our current quarter, we are still dealing with the same stagnant market activity, which has unfortunately characterized the entire fiscal year to this point.

However, we are monitoring the uncertain geopolitical climate and remain cognizant of the fact that conditions can and do change quickly, which would have an immediate impact on the precious metals environment.

During fiscal 2018, we have made meaningful progress on our strategic road map, which has positioned us effectively for the longer term.

We continue to believe A-Mark is in a strong position to grow, and we are focused on delivering this growth through the competitive advantages we've established over the last several years.

Our platform, customer base and capabilities have never been stronger.

We are confident these factors will translate into more predictable growth and profitability in the quarters and years ahead.

Now with that, we're ready to open the call for your questions.

Operator, please provide the appropriate instructions.

(Operator Instructions) And our first question comes from Sarkis Sherbetchyan with B. Riley FBR.

You spoke about the integration and optimization of Goldline as it's been more challenging than anticipated.

Can you maybe dive into a little bit more detail as far as optimizing the structure and the marketing programs you just mentioned?

How much time would you like me to take on it?

Yes, of course.

I -- we have been diligently working to find the right size for the Goldline model.

Just as an example, the amount of sales that Goldline can make to the retail public is directly influenced by the environment out there that has been what's going on in the macro world.

Their clients are much more sensitive to political change.

They're very sensitive to threats against what they believe are certain rights.

And that really -- those outside influences tend to motivate Goldline customers to purchase as well as new customers to make their initial purchases.

Historically, Goldline had a model that relied extensively on radio and TV advertising.

And as an example, in the 12 months ended June 30, 2017, prior to A-Mark's acquisition, their marketing and advertising expenses exceeded $10 million on an annualized basis.

We believe that quite a bit of that marketing and advertising today is ineffective.

And we have been working to work those numbers down as it relates to not only the growth spend from an advertising perspective as well as the efficiency of that advertising.

I believe that we are very close through the renewals and expirations of certain advertising contracts that our target advertised spend where we think we will get the best return for our money is in the $500,000 per quarter range or $2 million annually, which is significantly lower than what had been spent historically.

On an overall OpEx basis, kind of looking at things the same way, June 30, 2017, 12 months ending, Goldline's overall cash OpEx was in the $23 million range.

And we believe that currently, the optimal OpEx is probably around $9 million annually.

And we believe that we're very close to achieving that.

We made some significant cuts in March.

We made some changes to management that we acquired in the acquisition.

We took about $600,000 in March, a onetime charge related to some -- letting some people go.

We've revamped the management and other divisions at Goldline.

Accounting has been brought in to A-Mark and is under the A-Mark roof.

We have let go of the former CEO, sales manager and marketing manager, and we have some new people in those positions.

And we are continuing to make changes to properly size the business for the sales that we believe the company can make as well as the margin that we think is appropriate for the current market environment.

It is -- it's important to note that A-Mark core business does continue to enjoy some synergies from Goldline as it relates to logistics, storage and trading.

And those benefits, we keep track of and we believe are moving in the right direction, and that we are benefiting from the other services that A-Mark provides Goldline.

But it -- we're getting it sized right as well as retaining the right staff and marketing relationships to put us in a position to take advantage of market changes is a balancing act, and we're confident that we're moving in the right direction, albeit a little bit slower than we thought.

But we still like the opportunities that we see in driving profitability off of the assets we purchased.

But the management and the sizing of the operational business is -- has been, as I said, a little bit challenging.

But the mailing list and the assets that we bought, I think we're quite confident that, that asset can be monetized.

And we see good -- very good potential in monetizing the existing client base, whether it be through new sales, whether it be through storage, whether it be through CFC and finance purchases; as well as we see very good growth in the future in buying back product from customers who purchased over the last 15 to 20 years.

If that wasn't specific enough, push me, please -- point me in the direction you'd like to hear more about.

No, that was very helpful.

It's color there.

If I may kind of ask around.

The optimal path you mentioned for Goldline OpEx now down to a range of about $9 million annually, does that change the kind of, call it, the annual retail sales outlook you provided when you acquired the asset?

I think the number was between $75 million to $120 million, depending on market conditions.

Can you maybe talk about what that $9 million annual OpEx range could support from a sales standpoint?

I think that we're looking at probably closer to $50 million to $60 million annually is probably the right size in this environment that we think is doable.

I think that what we are very close to understanding is what level of business can we do at the right margin.

There's always more business to do out there at lower margins.

A company like JM Bullion is probably doing -- they're doing hundreds of millions of dollars.

Their product offerings are different, and they are doing it at a different profit margin level.

I think what we believe is the right level in this environment is probably around $50 million annually.

Obviously, it would be much lower OpEx than what we've projected in the past.

It doesn't mean that if things were to turn in the environment tomorrow that the infrastructure of Goldline couldn't handle $100 million.

In fact, I think, even with our cuts and even with the infrastructure we currently have in place and the $9 million OpEx, I think if the market was to change, what would change would be the order size would be bigger.

What's challenging right now is that the reason -- the number of transactions isn't down so much, but the actual order size is down.

So with higher precious metals prices or more volatility or more enthusiasm in the purchases, the order size will be bigger, which it doesn't cost us anymore to sell 25,000 in an order than 10,000.

So I think that we feel that we're going to size the business and size the OpEx and size the marketing to be profitable at what we think we can be profitable at a $50 million run rate at a top line number.

And we should be there within the next month or 2.

That's also very helpful.

And maybe switching gears here.

If we think about the recent volatility in the financial markets clearly causing some turbulence, any read through on what that means with regards to precious metals volume growth and/or kind of price volatility if it's been maybe impacting your spreads in either direction?

And then kind of an adder to that is we saw the calendar quarter silver ounces sold from the U.S. Mint increased.

Just wondering if you're seeing any kind of impacts from those trends.

Sure.

Let's -- those are both really good questions.

Let's start with the first one with how the volatility we saw in our Q3 affects us.

On a -- what we look at here from a real positive note is that we had a short period in Q3 of extreme volatility in the equities market, and we -- and it lasted for a week to 10 days.

And it was a -- it seemed to be driven by a number of things: the potential trade tariffs, the threat of North Korea, the -- other areas that seemed to affect the equities we saw came together for a few days or a week or 10 days.

And the great news is that all of A-Mark's business lines performed well in that volatility, and we did see increases in some volumes, in some spreads, even some increases for a few days at Goldline, that were a little bit unusual as it related to the size of some transactions.

Goldline had some -- in that week had a few sales in the high 6-figure range.

So you did see -- we did see that the business performed very well.

The problem was there was no carry-through.

That volatility, although proving that the business is going to be very profitable when those conditions exist, there was no follow-on.

There seemed to be a day or 2 of articles online or in the newspapers about the Vick's and the Crédit Suisse meltdown of their fund, and there was a lot of things that drove some volatility fears.

But it just -- it didn't seem to sustain itself.

So the one thing to keep in mind is that gold and silver buyers are very comfortable right now.

They're very happy with what the president is achieving.

They're very comfortable in that there is no threat from the other side to some of their rights.

And they are -- but when they -- that when fear is in the marketplace, and those that calm gets threatened, we definitely see it in our business.

The only problem in Q3 was that it was very short-lived.

And on the other hand, our finance business and our -- the borrowing of money against metals is -- we're very, very happy with that.

And that's been a very steady growth, and it's something that it seems to be defined some of the negative market influences that, that product is growing.

And we have been quite successful in the last -- just the last 2 weeks that Goldline has integrated CFC into their business and their sales programs, and that we are seeing a good response from Goldline's clientele to shipping metal to Vegas to our storage facility and then borrowing metal -- borrowing at CFC against that metal to purchase additional precious metals.

So it's not fresh dollars coming in, but it's a customer taking advantage of equity that [E&P] has to make another purchase.

And we are, for the very first time at Goldline, seeing a nice steady pipeline of loans, which was something -- if you look back on our calls, something we were hoping to integrate much sooner even back in October, November.

But that we've now checked that box, that's going on.

And can you give me again the second part of your question just I...

The U.S. Mint products.

U.S. Mint products.

The issue with the U.S. Mint today is very simple.

Our cost on U.S. Mint 1 ounce silver coins is about $2 an ounce.

In comparison, we sell wholesale a SilverTowne 1 ounce round between $0.40 and $0.50 premium over melt.

A Canadian Mint product sells a 1-ounce product, we paid the Canadian Mint around $1.60 an ounce premium over.

What has happened in the small silver market is the willingness of retail buyers to pay the very top price premium for a U.S. silver 1-ounce coin has dropped negligibly, and that's why you're seeing such low numbers on the U.S. Mint on their reported monthly numbers.

And that not only is the demand way down, which you can see from our numbers in total ounces sold, but whatever is getting sold is shifting to the lower premium products.

There's a lot of overhanging supply right now in silver products, both at the U.S. Mint and at the Canadian Mint as well as the lower private mint products.

There's plenty of product out there.

And we're not seeing -- although, as you said, there was a small increase in the U.S. Mint numbers month over month, it really isn't anywhere close to that demand that we have seen historically for the U.S. Mint.

And our purchases continue to track percentage-wise, historically, around the numbers that we've always had.

We generally purchase between 20% and 30% of whatever the U.S. Mint produces in silver, and those numbers are consistent.

So if the mint numbers go up by $100,000, we're going to sell an extra 20,000 ounces.

But it's -- but that demand for that U.S.-made product and that U.S. buyer is just -- they're not firing right now.

We are seeing some increases in ounces outside of the U.S., particularly in Europe, we're seeing some increases in silver, nothing substantial.

But for us, our biggest market is the U.S. And historically, one of our biggest profit numbers has been through silver.

And I mean, if you just look at our 9-month numbers, we go from 65.5 million ounces sold a year ago, 9 months, to 38 million in this period.

I mean, at a very minimum, we usually make $0.10 an ounce.

I mean, that's a big driver as to why our performance is down in just our silver ounces sold as our GEP is down $4 million in 9 months.

Our next question comes from Robert Maltbie with Singular Research.

So it looked like a good quarter to us.

The top line, it had some good healthy growth, so congrats, [both] good.

Wanted to ask about the gold, your increase in ounces sold.

What do you think drove that?

Increased market share?

Increased volatility?

I mean, I know it's hard to tell.

But what's your take on that?

Well, it's interesting.

The last 9 months has been -- there's been a -- in hindsight, a very obvious shift in precious metals buyers.

And if you look at what's happened, generally, gold buyers are a little higher net worth and are a little more institutional and certainly, much bigger as it relates to dollar volume.

And gold is traditionally a hedge against crisis and a hedge against inflation, a hedge against ForEx uncertainty.

And gold does serve, from an investment standpoint, a different purpose than silver.

Now silver will also respond favorably to economic changes as it is an industrial metal that's used for things other than investment.

But for the last 9 to 12 months since the election, what we're seeing right now, which is clearer than day, is that the precious metal investment dollars are being driven by higher dollar volume trades, and they're being driven by higher actual bigger investors.

And what's really dropped off is the small silver buyer who is buying, let's call it, $2,000 to $3,000 at a time.

Now there's a huge quantity of those buyers, but those buyers aren't buying silver right now, and they're in a position where they just aren't gold buyers because their purchase amount, their ticket amount doesn't really work with gold.

I was at a conference about 3 weeks ago where an analyst from HSBC was discussing where the precious metals market is today versus pre-election.

And there was a very interesting metric that he threw out that I really didn't grasp, that I was unaware of.

Clearly, you can look at all the mints and all the sovereign mints, and you can look at A-Mark's numbers, and you can look at other companies that deal in silver, and it's fairly obvious, the silver demand is way off.

The gold demand is a little bit different animal.

It was up in this quarter for us, which was probably more of a timing thing where we had a couple of mints who were developing some products, needed raw metal, and we were able to provide it to them.

But what's really interesting to me is that if you combine the ounces owned in gold in the ETF GLD and the long positions in COMEX, the actual long positions in those 2 products is near -- is over 90% of the all-time high as it relates to ounces.

So that the large sophisticated gold transactions out there today are very bullish -- are very, very high.

What's -- what hasn't trickled down is -- to the 1-ounce gold buyers as -- and even more dramatically not to the silver buyer.

So I don't know what that means as it relates to timing.

I don't know if the institutional and higher net worth buyers that are trading the COMEX futures or the GLD are ahead of the curve, and that the rest of the precious metal market needs to catch up.

But I do believe that, that's a fairly bullish sign, which is probably, in spite of some pretty strong headwinds in gold, has caused the gold prices to hold up pretty well in spite of the continued performance of the equities markets.

So I think our gold ounce performance for this quarter, which we've highlighted, is due a little bit to timing.

But I do think that out there, overall, there is a lot of interest in gold and precious metals.

It's just not yet being translated in the small gold coin and bar products that we sell.

So silver might be a little bit of a head scratcher/aberration, maybe pick up soon, who knows.

Yes.

I don't know if it's price.

I don't know if silver was at $23.

If you'd see that trigger [bind], which sometimes happens, I'm fairly certain just with my knowledge of what goes on with our customer, JM Bullion, their volume tends to really be driven by dips and drops, so I'm fairly certain if you saw silver at $13 next week, you would see our silver ounce counts increase dramatically.

But if you look at it, there's not a real call to action on silver right now.

It's not in the news.

There's not that same financial volatility that gold is somewhat tied to.

And silver is traded in a fairly narrow range, so it's clearly stagnant right now.

But we've seen these things turn.

I'm not going to say that the ounces aren't going to go down from here or stay the same, but we've -- we can see dramatic increases, very quickly, we've seen historically in silver.

And it tends to happen very, very rapidly, whereas I think gold right now, clearly, you just look at all these numbers and particularly, at the institutional level, there's definitely been a fairly -- it's been a few quarters that we have seen these numbers increasing in gold, not in what we usually deal in but in the overall gold market, which, I think, is bullish long term.

Okay.

And a couple of questions, I'll hop back into queue; final questions.

Regarding your secured loans, it seems there's some pretty strong growth in that segment, in that product.

And would you say -- what were your thoughts on the impact of some more rate hikes this year on that?

And are you seeing any penetration of that product into your Goldline customer base?

Yes.

As I said a few minutes ago, we have introduced a leveraged CFC product at Goldline, and it's a product that focuses on customers who have existing metal that are willing to send that metal to us at our Las Vegas storage facility and enter into a -- open a storage account with us, which is a good ancillary benefit to A-Mark from Goldline.

And then take either create a line of credit that they can use for anything with CFC or use that line of credit or that borrowing to purchase more metals.

And we have, as I said, that just really got going the last couple of weeks of April and the first week of May here.

And we are cautiously optimistic that we have smoothly integrated this new product, and we believe that it's a product that Goldline has that their competitors don't.

And we're hoping it gives them a competitive advantage, and it allows them to grow their top line sales, which is what we're very focused on right now.

So -- and as far as interest rates, most of our CFC loans are 6-month loans, so we do adjust our interest rates we're charging, either up or down based on our cost of funds and what's going on in the interest rate markets.

And we have been able to increase our overall CFC rate that we're getting over the last 6 months as well as you can see increase the gross value of the loans as well as the number of loans.

And we feel we're in very good position right now to continue to grow this.

We think that looking out over the next 4 quarters, the $109 million that we're reporting right now, I'm very comfortable that we -- if everything else remains equal, price of gold, price of silver, rates, I do see easily a 15% to 20% growth over the next 12 months in that area of our business.

As well as we are -- A-Mark has been working and continues to work on alternative financing for that particular business line, we're currently using our own working capital as well as our existing working capital credit lines.

But we are exploring other ways to finance that business and feel like we're -- we found some alternatives that we think will be very good for us long term, and we're exploring those now.

(Operator Instructions) It appears we have no questions at this time.

I will turn the program back over to Mr. Roberts for his closing remarks.

Thank you for joining us today.

We appreciate your continued support, and we look forward to updating you on our next call.

Operator?

Before we conclude today's call, I would like to provide A-Mark's safe harbor statement that includes important cautions regarding the forward-looking statements made during the call.

During today's call, there were forward-looking statements made regarding future events.

Statements that relate A-Mark's 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 the company's growth strategy as planned; greater-than-anticipated cost incurred to execute the strategy; changes in the current domestic and international political climate; increased competition for A-Mark's higher-margin services, which could depress pricing; the failure of the company's 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 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 date 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 statement.

Readers are cautioned to place undue reliance on these forward-looking statements.

Finally, I'd like to remind everyone that a recording of today's call will be available for replay via a link in the Investors section of the company's website.

Thank you for joining us today for A-Mark's fiscal Q3 2018 Earnings Call.

You may now disconnect.