Financial News

A-Mark Precious Metals Reports Fiscal First Quarter 2021 Results

EL SEGUNDO, Calif., Nov. 10, 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 first quarter ended September 30, 2020.

Fiscal First Quarter 2021 Financial Highlights

  • Revenues for the three months ended September 30, 2020 increased 26% to $1.87 billion from $1.48 billion for the three months ended September 30, 2019 and increased 12% from $1.67 billion for the three months ended June 30, 2020
  • Gross profit for the three months ended September 30, 2020 increased 333% to $36.1 million (1.94% of revenue) from $8.3 million (0.56% of revenue) for the three months ended September 30, 2019 and increased 29% from $28.0 million (1.68% of revenue) for the three months ended June 30, 2020
  • Net income for the three months ended September 30, 2020 totaled $23.1 million or $3.09 per diluted share, as compared to net income of $128,000 or $0.02 per diluted share for the three months ended September 30, 2019 and net income of $17.8 million or $2.49 per diluted share for the three months ended June 30, 2020
  • Gold ounces sold in the three months ended September 30, 2020 increased 25% to 721,000 ounces from 576,000 ounces for the three months ended September 30, 2019 and increased 8% from 669,000 ounces for the three months ended June 30, 2020
  • Silver ounces sold in the three months ended September 30, 2020 increased 16% to 24.2 million ounces from 20.9 million ounces for the three months ended September 30, 2019 and decreased 18% from 29.6 million ounces for the three months ended June 30, 2020
  • As of September 30, 2020, the number of secured loans decreased 68% to 1,125 from 3,571 as of September 30, 2019 and increased 57% from 717 as of June 30, 2020

Fiscal First Quarter 2021 Financial Results
Revenues increased 26% to $1.87 billion from $1.48 billion in the same year-ago quarter. The increase was primarily due to an increase in the total amount of gold and silver ounces sold and higher selling prices of gold and silver.

Gross profit increased 333% to $36.1 million (1.94% of revenue) from $8.3 million (0.56% of revenue) in the same year-ago quarter. The increase was due to higher gross profits from the Wholesale Trading & Ancillary Services and Direct Sales segments.

Selling, general and administrative expenses increased 21% to $10.0 million from $8.3 million in the same year-ago quarter. The increase was primarily due to increases in compensation expense (including performance-based accruals) of $1.8 million and computer software expense of $0.2 million, which were partially offset by decreases in operating expenses of $0.2 million associated with the Direct Sales segment, and depreciation and amortization expense of $0.1 million.

Interest income decreased 31% to $4.0 million from $5.8 million in the same year-ago quarter. The aggregate decrease in interest income was primarily due to lower interest income earned by our Secured Lending segment, partially offset by higher other finance product income.

Interest expense decreased 17% to $4.3 million from $5.1 million in the same year-ago quarter. The decrease in interest expense was primarily due to lower interest rates related to the company’s Trading Credit Facility and lower loan servicing fees, partially offset by increases in interest expense related to liabilities on borrowed metals and product financing arrangements.

Net income totaled $23.1 million or $3.09 per diluted share, a significant improvement compared to net income of $128,000 or $0.02 per diluted share in the same year-ago quarter.

Management Commentary  
“During the first quarter of 2021, we built on the significant operating and financial momentum we established last fiscal year to further capitalize on the unprecedented volatility in the precious metals market,” said A-Mark CEO Greg Roberts. “Market volatility in Q1 coupled with heightened demand were instrumental in A-Mark realizing the most profitable quarter in our company’s history. We generated strong sequential improvements in our key financial metrics, including a 29% increase in both gross profit and net income which resulted in a 20.2% return on equity. These results reflect the benefits of our business model, which is designed to generate consistent and diverse revenue streams in normal market conditions and outsized profitability during volatile market periods such as we have experienced since March.

“Our record financial performance continues to demonstrate the scalability of our platform which, combined with the complementary services we provide to our customers, has allowed us to capture significant value across the precious metals market and enabled us to more effectively take advantage of supply constrained and volatile market conditions. As I’ve mentioned previously, the strategic investments we’ve made over the last several years to expand capacity and operational capabilities have ideally positioned A-Mark to capitalize on the current market conditions while increasing our market share and driving growth over the long term.

“Looking ahead, the current economic uncertainties give us optimism for fiscal 2021 as we seek to capitalize on future opportunities. We continue to believe that our favorable competitive position, industry-leading platform, robust customer base, and proven business model will help drive growth and profitability in the years ahead.”

Special Dividend
A-Mark’s Board of Directors approved a second non-recurring special dividend of $1.50 per common share. The special dividend will be paid on or about November 30, 2020 to stockholders of record as of November 23, 2020.

Conference Call
A-Mark will hold a conference call today (November 10, 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: 1-877-407-0789
International number: 1-201-689-8562
Conference ID: 13712757

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 November 24, 2020.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Conference ID: 13712757

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, Storage, 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 Transcontinental Depository Services 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) (unaudited)

  September 30,
2020
   June 30,
2020
 
ASSETS         
Current assets:         
Cash $24,370   $52,325 
Receivables, net  75,668    49,142 
Derivative assets  113,600    46,325 
Secured loans receivable  84,223    63,710 
Precious metals held under financing arrangements  158,756    178,577 
Inventories:         
  Inventories  311,582    246,603 
  Restricted inventories  101,599    74,678 
   413,181    321,281 
Prepaid expenses and other assets  3,128    2,659 
Total current assets  872,926    714,019 
Operating lease right of use assets  3,935    4,223 
Property, plant, and equipment, net  5,799    5,675 
Goodwill  8,881    8,881 
Intangibles, net  4,820    4,974 
Long-term investments  20,889    16,763 
Other long-term assets  3,500    3,500 
Total assets $920,750   $758,035 
LIABILITIES AND STOCKHOLDERS’ EQUITY         
Current liabilities:         
Lines of credit $214,000   $135,000 
Liabilities on borrowed metals  153,752    168,206 
Product financing arrangements  101,599    74,678 
Accounts payable and other current liabilities  210,922    140,930 
Derivative liabilities  13,497    25,414 
Accrued liabilities  9,222    10,397 
Income tax payable  2,906    2,135 
Total current liabilities  705,898    556,760 
Notes payable  92,692    92,517 
Deferred tax liabilities  62    62 
Other liabilities  3,457    3,802 
Total liabilities  802,109    653,141 
Commitments and contingencies         
Stockholders’ equity:         
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued
and outstanding: none as of September 30, 2020 and June 30, 2020
       
Common stock, par value $0.01; 40,000,000 shares authorized; 7,066,529
and 7,031,500 shares issued and outstanding as of September 30, 2020
and June 30, 2020, respectively
  71    71 
Additional paid-in capital  27,883    27,289 
Retained earnings  86,174    73,644 
Total A-Mark Precious Metals, Inc. stockholders’ equity  114,128    101,004 
Non-controlling interests  4,513    3,890 
Total stockholders’ equity  118,641    104,894 
Total liabilities, non-controlling interests and stockholders’ equity $920,750   $758,035 


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

  Three Months Ended 
  September 30,
2020
   September 30,
2019
 
Revenues $1,866,116   $1,481,014 
Cost of sales  1,829,971    1,472,674 
Gross profit  36,145    8,340 
Selling, general, and administrative expenses  (10,006)   (8,270)
Interest income  3,983    5,768 
Interest expense  (4,293)   (5,142)
Other income (expense), net  4,485    (166)
Unrealized losses on foreign exchange  (97)   (122)
Net income before provision for income taxes  30,217    408 
Income tax expense  (6,511)   (105)
Net income  23,706    303 
Net income attributable to non-controlling interests  623    175 
Net income attributable to the Company $23,083   $128 
Basic and diluted net income per share attributable
to A-Mark Precious Metals, Inc.:
         
Basic $3.28   $0.02 
Diluted $3.09   $0.02 
          
Weighted average shares outstanding:         
Basic  7,034,700    7,031,400 
Diluted  7,475,000    7,091,000 


A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands) (unaudited)

Three Months Ended September 30, 2020  2019 
Cash flows from operating activities:        
Net income $23,706  $303 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
Depreciation and amortization  501   668 
Amortization of loan cost  396   353 
Deferred income taxes     92 
Interest added to principal of secured loans  (4)  (5)
Share-based compensation  178   166 
Earnings from equity method investments  (4,126)  (11)
Changes in assets and liabilities:        
  Receivables  (26,526)  3,252 
  Secured loans receivable  (358)  1,543 
  Secured loans made to affiliates  4,642   5,154 
  Derivative assets  (67,275)  (17,118)
  Income tax receivable     (27)
  Precious metals held under financing arrangements  19,821   7,983 
  Inventories  (91,900)  (79,337)
  Prepaid expenses and other assets  (292)  (17)
  Accounts payable and other current liabilities  69,992   23,225 
  Derivative liabilities  (11,917)  (3,281)
  Liabilities on borrowed metals  (14,454)  (4,406)
  Accrued liabilities  (1,227)  (1,016)
  Income tax payable  771    
Net cash used in operating activities  (98,072)  (62,479)
Cash flows from investing activities:        
Capital expenditures for property, plant, and equipment  (476)  (137)
Secured loans receivable, net  (24,793)  (31,868)
Other loans originated     (3,000)
Net cash used in investing activities  (25,269)  (35,005)
Cash flows from financing activities:        
Product financing arrangements, net  26,921   64,625 
Dividends paid  (10,553)   
Borrowings and repayments under lines of credit, net  79,000   37,000 
Debt funding issuance costs  (398)   
Net settlement on issuance of common shares on exercise of options  416    
Net cash provided by financing activities  95,386   101,625 
Net (decrease) increase in cash, cash equivalents, and restricted cash  (27,955)  4,141 
Cash, cash equivalents, and restricted cash, beginning of period  52,325   8,320 
Cash, cash equivalents, and restricted cash, end of period $24,370  $12,461 


Overview of Results of Operations for the Three Months Ended September 30, 2020 and 2019

Condensed Consolidated Results of Operations

The operating results of our business for the three months ended September 30, 2020 and 2019 are as follows:

in thousands, except per share data                        
Three Months Ended September 30, 2020  2019  $  % 
  $  % of
revenue
  $  % of
revenue
  Increase/
(decrease)
  Increase/
(decrease)
 
Revenues $1,866,116   100.000% $1,481,014   100.000% $385,102   26.0%
Gross profit  36,145   1.937%  8,340   0.563% $27,805   333.4%
Selling, general, and administrative expenses  (10,006)  (0.536)%  (8,270)  (0.558)% $1,736   21.0%
Interest income  3,983   0.213%  5,768   0.389% $(1,785)  (30.9)%
Interest expense  (4,293)  (0.230)%  (5,142)  (0.347)% $(849)  (16.5)%
Other income (expense), net  4,485   0.240%  (166)  (0.011)% $4,651   2,801.8%
Unrealized losses on foreign exchange  (97)  (0.005)%  (122)  (0.008)% $(25)  (20.5)%
Net income before provision for income taxes  30,217   1.619%  408   0.028% $29,809   7,306.1%
Income tax expense  (6,511)  (0.349)%  (105)  (0.007)% $6,406   6,101.0%
Net income  23,706   1.270%  303   0.020% $23,403   7,723.8%
Net income attributable to non-controlling interests  623   0.033%  175   0.012% $448   256.0%
Net income attributable to the Company $23,083   1.237% $128   0.009% $22,955   17,933.6%
Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.:                        
Per Share Data:                        
Basic $3.28      $0.02      $3.26   16,300.0%
Diluted $3.09      $0.02      $3.07   15,350.0%

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