A-Mark Precious Metals Inc (AMRK) 2025 Q1 法說會逐字稿

Good afternoon and welcome to a A-Mark Precious Metals conference call for the fiscal first quarter ended September 30th 2024.

My name is Matthew and I will be your operator this afternoon before this call. A mark issued its results for the fiscal first quarter, 2025 and 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 Amar CEO Greg Roberts, President Thor Gjerdrum and CFO Kathleen Simpson Taylor.

Following the 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 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 A-mark's website.

Now I would like to turn the call over to Aar'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 37% diluted share and generated almost 18 million in NonGAAP 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 Silvertown 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 amar 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 and ancillary services segment partially offset by an increase in gross profits earned by the direct consumer segment.

Gross profit contributed by the direct consumer segment 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 fiscal 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 three months ended. September 30th 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 intangible 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 increased 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 method investees. Net income attributable to the company for the first quarter of fiscal 2025 totaled 9 million or 37% diluted share. This compares to net income attributable to the company of 18.8 million or 77% 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 quarter, EBIDA a NonGAAP 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 30th 2024.

Our tangible net worth excluding non controlling interest at the end of the quarter was 313.3 million. Up from 306 million at June 30th 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 20% 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.

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 a 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 $2967 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 will now turn it over to Greg for closing remarks. Great.

Thank you, Thor and Kathleen Aar'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 will be conducting a question-and-answer session. If you have any questions or comments, please press star one on your phone at this time.

We do ask that while posing your question. Please pick up your handset. If you're listening on speakerphone to provide optimum sound quality.

Once again, if you have any questions or comments, please press star one on your phone.

Your first question is coming from Thomas Forte from Maxim Group. Your line is live.

Great. So first talking team congrats on your ability to once again generate profits in a challenging quarter. I'm going to ask two questions and then 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, you know, it's pretty challenging because you have kind of 2 1 way trades now in gold and essentially in equities. So, but I do think that you do a lot in such an environment So I would 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, you know, use marketing to try to bring in new customers, which we've done. We can't really control how much they are going to spend or what their average order value is going to be. But we believe that, you know, when markets are slower trying to, to get new customers is, is a great investment in the future. Throughout this quarter, you know, we once again had kind of hit and miss weeks. We, we would have we probably had two or three very exceptional weeks, particularly in August.

And, you know, we were able to, to really capitalize when we saw an increase in demand and we were very well positioned in our, our new customer accounts, our, our profitability, our sales, you know, we had, we, we were able to pull some levers as you say that what we felt was able to take advantage, you know, when the market allowed us to do it. You know, what we haven't been able to do is sustain, you know, multiple weeks or months where we, you know, where we are, where we're seeing this, this increased demand. You know, I will say that, you know, towards the end of September and, and through October, we did, 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, you know, we, we did, we did feel we were in good shape there. We, you know, we feel that in this quarter, our, our inventory and our buys and ourselves and, you know, we, we felt like we had a very good, you know, very good match there. And then obviously, you know, coming into to the election yesterday, you know, the last, you know, the last few weeks there was activity that was good and then, you know, today, clearly there was a risk on movement in back into equities. A little bit of a price drop in the spot price of gold and silver, which, you know, traditionally should, should help with premiums and as well as demand with a, with a drop in price. So, we'll have to see how that plays out and how the customer base responds. But, you know, for the most part, you know, we, we still felt, felt really good about, you know, almost 18 million in EBITDA and almost 15 million in adjusted net and, and it was a, you know, for us, we felt like, you know, we continue to get, get as much as we can out of what the environment gives us the, as I've said before, the good news is we, we clearly see that when we get a little bit of a shift from headwind to tailwind, The businesses all performed very well albeit in, 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, 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 Silvert Town. But can you give your current thoughts on Strategic M&A.

I mean, I, you know, I thought the Silvertown acquisition was, you know, just, just great for us re really good timing for us with, with premiums low and profitability at the, the the 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, I believe that, you know, for us to really pick up, you know, an extra 20 million ounces a year of struck product, which is what we believe we will get out of this acquisition when, when we get all the equipment set up and working and, and you know, really getting up to that 100 million market, Silvertown Minute, if you include the cast bar products, you know, that, that, that was just a, you know, what we felt was just perfect timing and, and, and very good from a strategic standpoint. I will say in the last 30 days, we have, really filled the funnel in, in, in things we're looking at on the M&A side. We, we, we're very, you know, we're cautiously optimistic that in, you know, in the next 90 days, we're going to, we're going to be able to, to, to do some acquisitions that are, you know, we believe very favorable for us. So we're, we're very busy in that area right now to answer the question directly. And, you know, again, I believe the timing is very good for us. And, you know, we, we very much look forward to going through the process and, and, you know, and, 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. Your next question is coming from Michael Baker from D.A Davidson. Your line is live.

Okay. Thanks. One of the last things Greg you said on your prepared remarks was something along the lines of, looking ahead. You think the macro headwinds will begin to shift, leading to increased demand. What makes you say that? Does it have anything to do with the election? Is it one of the things you just said to answer? Tom's question, you talked about gold and silver pricing coming down a little bit and that's helping premiums. Is that what you're referring to or just, you know, what, why do the macro headwinds which seem to have been against you for, you know, the last several quarters? Why, why do you think that begins to shift?

You know, as we talked about on the last call, you know, as we have gone through this quarter of continuing record gold spot prices in particular and silver, you know, trading at a, at a, at a price above $32 that we, we hadn't seen in a very long time. And as I talked about on the last call, when you go day after day after day and week after week after week of, of higher spot prices or world record spot prices, which is, you know, what we talk about around here. We're just going to buy back more product and that's going to, you know, hurt our margins a little bit. It's going to hurt our premiums a little bit. And, you know, we talked about this on the last call when I, I said earlier that I believe that was shifting a little up until today. You know, we continue to see very high spot prices but our percentage and our buybacks that we've been buying back or, or taking back in on the secondary market. It did seem to, to, to, to diminish a bit and it did seem to wane. So I feel like, you know, a lot of that selling has is behind us and, and, and I believe we're very well positioned that we work through a lot of inventory. So we, we aren't, you know, we feel, we feel like we're very well positioned when you get a drop in the spot price as we did today. I mean, that, that has historically, you know, changed sentiment a little bit on the buy side. So, you know, I believe that that leading up and then the drop in price today is what I was referencing. Clearly moving forward. We're going to have to see you know how the, how the public responds and how the you know, how things have gone. I do believe that for the first time in the last few weeks, we did see a little bit different attitude with the retail buyer. That for the first time in a while, there appeared to be some, you know, fear of missing out purchasing and, and people were, you know, customers were, you know, buying the higher prices with a little more gusto. So, you know, we'll see, we'll see if that continues or, you know, if, if you know the drop in price triggers, you know, more buying or, or what happens, but generally in a, in a, in a lower spot price environment, our premiums are going to expand a little bit. So that's what I was referring to.

Okay. Yeah, that, that makes sense and, and, and by way of follow up any way you can sort of quantify or, or a little more detail on the ratio of what you, what you were buying in versus what you were selling, I think in my notes. So, you know, it, it's historically around 10% of you know, you're, you're buying in what you're selling. I knew it had gone up to, I think 30% last quarter. If my numbers are right, well, or the quarter, that's the quarter, the, the the June quarter. What was it in September, the September quarter? How is that trending?

Right? I, I think when I was referencing this before we were looking more at weekly, week, over week and, and weekly numbers. So, you know, it would be possible that we, in the past we may have had, you know, at our DTC segment, there may have been a number close to 30% that we, we had bought back and the 10% number, you know, in a week is, is a little more, is a little more normalized. You know, we did have a couple of, you know, real good weeks in the quarter where that ratio, you know, dropped down to 5%. So, you know, if you get some increased sales and you buy back the same amount, the percentage is going to go down. So that's not, that's not a revelation. But, you know, as I said, I mean, I think that the basic feel that I have right now is that the selling, the selling of our retail customers is shifting a little bit more to the buy side. And the, and the, and the sales in general have slowed down the kinds of products we're buying back have have shifted a little bit. So, you know, cautiously optimistic, as I said.

Awesome. Thank you. Fair enough. I'll pass it on.

Thank you.

Thank you. Once again, everyone. If you have any questions or comments, please press star, then one on your phone, your next question is coming from Lucas Pipes from B. Riley. Your line is live.

Thank you very much operator. This is actually fer shoveling asking question on behalf of Lucas Pipes and Greg. I would like to follow up a little bit on previous question looking forward. So you, you, you pretty good described your expectations for calendar Q4, but for 2025 once Trump gets into the office based on your experience from his previous presidency, what what would you expect from buyers and sellers sentiment?

Thank you.

Yeah, I, I mean, it's very hard for me to predict what, what the political wins are going to create for our business. I, I think that, you know, historically, we've talked about very close, you know, contested elections are beneficial for us. This clearly was not contested and it was a real referendum on a change of attitude, you know, and, and clearly what looks to be a shift in the Senate is something we haven't had or experienced in a while. So how, how the new administration manages taxes and how they, you know, administer the printing of money and where they're going to spend the money and, and you know, what really does, where really inflation kind of ends up? You know, I, I think that's to be determined and, you know, you may not see it until 26 but from, from my viewpoint, our job here is just to manage whatever, whatever the markets throw at us and, and I, I feel we're really good at that. I feel like we, we can make money, you know, we made money through a Biden administration, we made money historically in the Trump administration. You know, the, from my viewpoint, as it relates to A mark's business, I wasn't particularly concerned about who won from a pure business standpoint. I, I felt like a lot of what was going to happen in the future was going to happen either way. And, and I think that, you know, we're in the precious metals business, we're in the hard asset business and, and, you know, continued and unsustainable deficits. And, and borrowing of money is likely to be good for our business. And, and we'll have to see how that plays out.

Thank you very much for this and, in my second follow up, maybe on this SGN a growth quarter over quarter, if I remember correctly is 22% up. And can you frame up a little bit? Is it, sorry if I missed, can, is it related to, to the acquisitions and how we should look to, to this expense going forward?

I, I think if you listen to Kathleen and go back and look at her comments, I believe a little over 5 million of the SG&A increase was related to the new acquisitions, which is just, you know, brand new expenses we're bringing on. So I think if you back that out, you know, I think our SG&A was, you know, fairly consistent.

Got you. Thank you very much.

Okay.

Thank you. Your next question is coming from Greg Gibas from Northland Securities. Your line is live.

Great. Thanks for taking the questions. Appreciate the color Greg Roberts for you wanted to follow up. I, I think, you know, if you could speak to maybe which markets you're looking at on the M&A side, I think you noted, you know, potentially something within the next 90 days or so. And just wanted to get a sense of, you know, where, where in terms of geographies, you're, you know, leaning towards, on, on that front.

It's probably a little premature to focus on, on specifically where, where we're, where we're looking at. I can just say that, you know, the deals we're looking at right now are broad and, and they cover, you know, a number of parts of our business. And I haven't been, you know, this optimistic in a while I think, you know, we, we, we've got some really good opportunities we're looking at and I think, you know, we feel good about them. We feel good about the timing. You know, we're always looking to increase our, our, our direct to consumer business as well as our wholesale business. And, you know, there, there's, there's, there's good reason for us here that we're, we're going to be very busy and, and we're optimistic, we're going to be able to get, get, get at least one or two deals over the goal line.

Got it, we'll look forward to updates there.

You know, appreciate your commentary on kind of the goal and civil prices and then just kind of expectations into the election and after election. You know, I guess I wanted to ask more broadly speaking, if you're seeing any changes on the competitive front. You know, whether it's within kind of traditional retail or anything you're seeing online, but that would be great to kind of get your overall thoughts on, on any dynamics there.

Yeah, I mean, I, I mean, we, we track, as I've said on previous calls, we track pretty closely our new customer data and, and our new customer numbers. You know, we, we have, we have picked up a lot of new clients and then a lot of new buyers in the last, you know, 90 to 120 days. I, and we've also, you know, done a pretty good job of re energizing and, and getting old clients who haven't bought for a while to buy. And, and so I, I believe that, you know, we're growing and I believe our message to our retail customers is resonating and I, and I think there's, you know, there's good reason to believe we, we have the best, you know, retail customer base out there right now, at least in small fabricated silver and gold products. So, very, very pleased with, with our DTC customer base. You know, wholesale continues to be a bit of a struggle just because of the premiums and there's a lot of product out in the marketplace right now. So you'll see, you'll see our wholesale numbers, you know, lag a little bit here. But we have, you know, we have managed the inventory and we believe we, we have, have a good mix of inventory right now and when we have seen, you know, a real busy week or, you know, a home run kind of week we've seen in the last few months, we really were able to take advantage of it. So, you know, I think we're doing a good job of continuing to take market share and, and, and add new customers.

Got it. That's helpful.

Thanks, Greg.

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.

Before we conclude today's call, I'd like to provide a Mark's safe harbor statement that includes important cautions regarding forward-looking statements made during this 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 meanings 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 costs incurred to execute the strategy changes in the current domestic and international political climate, increased competition for A Mark's higher margin service which could depress pricing the failure of the company's business model to respond to change 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 such forward-looking statements which speak only as of the date of which they were made.

Additionally, any statements related to future improved performance and estimates of revenue 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.

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 earnings call. You may now disconnect.