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EL SEGUNDO, Calif., May 07, 2020 (GLOBE NEWSWIRE) -- A-Mark Precious Metals, Inc. (NASDAQ: 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
Fiscal Q3 2020 Financial ResultsRevenues 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
Fiscal Nine Months 2020 Financial ResultsRevenues 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 CallA-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: 1-888-224-1005International number: 1-856-344-9316Conference 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: 1-844-512-2921International replay number: 1-412-317-6671Conference ID: 9392853
About A-Mark Precious Metals Founded in 1965, A-Mark Precious Metals, Inc. (NASDAQ: 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 StatementsStatements 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, PresidentA-Mark Precious Metals, Inc.1-310-587-1414thor@amark.com
Investor Relations Contact:Matt GloverGateway Investor Relations1-949-574-3860AMRK@gatewayIR.com
A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIESCONDENSED 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 SUBSIDIARIESCONDENSED 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 SUBSIDIARIESCONDENSED 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 | $ | % | ||||||||||||||||
| $ | % ofrevenue | $ | % ofrevenue | 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 | $ | % | ||||||||||||||||
| $ | % ofrevenue | $ | % ofrevenue | 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 | % | ||||||||||||
