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A-Mark Precious Metals Reports Fiscal Third Quarter and Nine Month 2017 Results

EL SEGUNDO, Calif., May 09, 2017 (GLOBE NEWSWIRE) -- A-Mark Precious Metals, Inc. (NASDAQ:AMRK), a full-service precious metals trading company and an official distributor for all the major sovereign mints, reported results for the fiscal third quarter and nine months ended March 31, 2017.

Fiscal Q3 2017 Financial Highlights

  • Revenues increased 14% to $1.73 billion from $1.51 billion for the three months ended March 31, 2016 and decreased 19% from $2.13 billion for the three months ended December 31, 2016
  • Gross profit increased 7% to $7.3 million from $6.9 million for the three months ended March 31, 2016 and decreased 26% from $9.9 million for the three months ended December 31, 2016
  • Net income decreased 3% to $1.2 million or $0.16 per diluted share from $1.2 million or $0.17 per diluted share for the three months ended March 31, 2016 and decreased 58% from $2.8 million or $0.39 per diluted share for the three months ended December 31, 2016
  • Gold ounces sold decreased 13% to 579,000 ounces from 662,000 for the three months ended March 31, 2016 and decreased 25% from 772,000 for the three months ended December 31, 2016
  • Silver ounces sold decreased 23% to 20.9 million ounces from 27.3 million ounces for the three months ended March 31, 2016 and decreased 8% from 22.8 million from the three months ended December 31, 2016
  • Trading ticket volume increased 27% to 27,580 tickets from 21,807 for the three months ended March 31, 2016 and decreased 21% from 35,198 for the three months ended December 31, 2016
  • As of March 31, 2017, the number of secured loans increased 176% to 2,138 from 775 as of March 31, 2016 and increased 26% from 1,698 as of December 31, 2016

Fiscal Q3 2017 Financial Results
Revenues increased 14% to $1.73 billion from $1.51 billion in the same year-ago quarter. The increase in revenues was mainly due to an increase in precious metal prices and higher forward sales, which was partially offset by a decrease in gold ounces and silver ounces sold.

Gross profit increased 7% to $7.3 million (0.42% of revenue) from $6.9 million (0.45% of revenue) in the same year-ago quarter. The increase in gross margin was primarily due to improved performance of the company’s finance portfolio, improved trading profits and cost efficiencies, offset by lower demand for the company’s physical products.

Selling, general and administrative expenses increased 12% to $6.0 million from $5.4 million in the same year-ago quarter. The increase was due to costs related to SilverTowne’s minting operations (which were acquired in the first quarter of fiscal 2017), increased headcount, and other expenses.

Interest income increased 46% to $3.3 million from $2.3 million in same year-ago quarter, driven primarily by an increase in the size of the company’s loan portfolio as well as increased utilization of the company’s inventory finance products by its customers.

Interest expense increased 63% to $2.7 million from $1.7 million in same year-ago quarter. The increase was primarily the result of greater usage of the company’s lines of credit and other product financing arrangements, arising from continued growth in the business. The increase was also partially due to higher LIBOR interest rates that went into effect subsequent to the Federal Reserve rate increases.

Net income was generally flat at $1.2 million or $0.16 per diluted share as compared to $1.2 million or $0.17 per diluted share in the same year-ago quarter.

Fiscal Nine Months 2017 Financial Highlights

  • Revenues increased 12% to $5.66 billion from $5.05 billion for the nine months ended March 31, 2016
  • Gross profit decreased 6% to $25.3 million (0.45% of revenue) from $27.0 million (0.53% of revenue) for the nine months ended March 31, 2016
  • Net income decreased 29% to $5.9 million or $0.82 per diluted share from $8.2 million or $1.15 per diluted share for the nine months ended March 31, 2016
  • Gold ounces sold decreased 17% to 1.9 million ounces from 2.3 million for the nine months ended March 31, 2016
  • Silver ounces sold decreased 35% to 65.5 million ounces from 100.6 million for the nine months ended March 31, 2016
  • Trading ticket volume increased 26% to 84,809 tickets from 67,522 for the nine months ended March 31, 2016
  • As of March 31, 2017, the number of secured loans increased 176% to 2,138 from 775 as of March 31, 2016

Fiscal Nine Months 2017 Financial Results
Revenues increased 12% to $5.66 billion from $5.05 billion in the same period last year. The increase in revenues was primarily due to an increase in precious metal prices and higher forward sales, which was partially offset by a decrease in the total amount of gold ounces and silver ounces sold. 

Gross profit decreased 6% to $25.3 million (0.45% of revenue) from $27.0 million (0.53% of revenue) in the same year-ago period. The decrease in gross margin was primarily due to lower demand for the company's physical products resulting in lower premiums, offset by improved performance of the company's finance product portfolio, trading activities and cost improvement efficiencies.

Selling, general and administrative expenses increased 9% to $17.8 million from $16.3 million in the same year-ago period. The increase was due to higher consulting expenses related to the development and implementation of a new enterprise resource system, costs related to SilverTowne’s minting operations (acquired in the first quarter of fiscal 2017), and other non-recurring expenses. The increase was partially offset by lower compensation costs, primarily due to lower performance-based compensation accruals.

Interest income increased 43% to $9.1 million from $6.4 million in the same year-ago period. The improvement was primarily due to an increase in the size of the company’s loan portfolio as well as growth in finance products.

Interest expense increased 75% to $7.4 million from $4.2 million in the same year-ago quarter. The increase was primarily due to a greater usage of the company’s lines of credit and other product financing arrangements, arising from continued growth in the business. The increase was also due, in part, to higher LIBOR interest rates that went in to effect subsequent to the Federal Reserve rate increases.

Net income decreased 29% to $5.9 million or $0.82 per diluted share from $8.2 million or $1.15 per diluted share in the same period last year. The decrease was primarily due to lower gross profit, higher interest expense and higher selling, general and administrative expenses, offset by higher interest income.

Management Commentary
“Our results for the third quarter were in line with our expectations, given the relatively slow market activity that persisted throughout the period, both in terms of demand and volatility,” said company CEO Greg Roberts. “In fact, sales of both gold and silver bullion by the U.S. Mint were down significantly compared to the same year-ago period. Although these market conditions worsened from the prior quarter, primarily due to the continued strength of the U.S. dollar and equities, we were still able to generate solid growth in several metrics, especially gross profit and net interest income. These results helped drive our 13th consecutive quarter of profitability since we became public in March 2014, a track record we believe reflects our operating discipline and supports our increasingly diversified business model. In particular, our continued focus on building our finance portfolio, which grew 26% from the prior quarter, has added yet another meaningful source of income and predictability to our business model, both of which have helped mitigate the effects of the recent subdued market conditions.  

“Our business and financial results also benefited from the addition of our majority investment in SilverTowne Mint, a leading producer of fabricated silver products, which we completed in fiscal Q1. SilverTowne has not only increased our capacity to meet unforeseen surges in silver demand during volatile markets, but it has also bolstered our capability to develop truly unique silver offerings, like the innovative ‘Stackable’ coins that we released in Q2. Along that line, we are continuing to expand our broader portfolio of custom coins. This area of our business continues to experience moderate demand, albeit at lower unit volumes, but at relatively higher gross margins. We remain focused on leveraging the mint’s capabilities to drive additional growth and profitability.

“Another key objective in fiscal 2017 is to further expand our suite of ancillary services at our logistics facility in Las Vegas.
During the third quarter, A-Mark continued to benefit from the operational and cost efficiencies provided by the facility. We are also seeing demand for our turnkey logistics and storage services. In addition to securing new logistics customers, our marketing and sales efforts remain focused on attracting additional customers for our new storage program for precious metal investment options for self-directed IRA accounts.

“Looking ahead, we continue to experience slower market activity in our current quarter. We expect the current market trends to continue for the near-term, although we remain of the view that certain geopolitical issues have the potential to quickly alter the precious metals environment. We intend to pursue strategic investments with the goal of positioning ourselves to take advantage of dynamic opportunities created by market volatility and changes in customer demand.  Furthermore, we remain focused on expanding our platform of high-margin and turnkey solutions. In the more immediate future, we will rely on our diversified business model and seek to generate predictable streams of revenue and profits, which ideally will enable us to capitalize on favorable trading opportunities and market conditions as they arise.”

Conference Call
A-Mark will hold a conference call today (May 9, 2017) to discuss these financial results. The company's CEO Greg Roberts, President Thor Gjerdrum and CFO Cary Dickson 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

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 Liolios Group at 949-574-3860.

A replay of the call will be available after 7:30 p.m. Eastern time through May 23, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Conference ID: 13657545

About A-Mark Precious Metals
A-Mark Precious Metals, Inc. is a full-service precious metals trading company and an official distributor for many government mints throughout the world. The company offers gold, silver, platinum and palladium in the form of bars, plates, powder, wafers, grain, ingots and coins. Its Industrial unit services manufacturers and fabricators of products utilizing or incorporating precious metals, while its Coin & Bar unit deals in over 200 coin and bar products in a variety of weights, shapes and sizes for distribution to dealers and other qualified purchasers. The company operates trading centers in El Segundo, California, and Vienna, Austria, for buying and selling precious metals.

In addition to wholesale and trading activity, A-Mark offers customers a variety of services, including financing, consignment and various customized financial programs. 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 in Australia, Austria, Canada, China, Mexico and South Africa. Customers of A Mark include mints, manufacturers and fabricators, refiners, coin and metal dealers, banks and other financial institutions, jewelers, investors and collectors. For more information about A-Mark Precious Metals, visit www.amark.com

Through its subsidiary Collateral Finance Corporation, a licensed California Finance Lender, the company offers loans collateralized by numismatic and semi-numismatic coins and bullion to coin and metal dealers, investors and collectors. Through its Transcontinental Depository Services subsidiary, it offers a variety of managed storage options for precious metals products to financial institutions, dealers, investors and collectors around the world. Through its A-M Global Logistics subsidiary, the company provides its customers an array of complementary services, including storage, shipping, handling, receiving, processing, and inventorying 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. SilverTowne Mint is a leading producer of fabricated silver bullion and specialty products. For more information about SilverTowne Mint, please visit www.silvertownemint.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.


A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for share data)
(unaudited)
       
  March 31,
 2017
  June 30,
 2016
ASSETS      
Current assets:      
Cash $ 6,440     $ 17,142  
Receivables, net 42,863     43,302  
Derivative assets 4,638     33,732  
Secured loans receivable 92,676     70,004  
       
Inventories:      
Inventories 189,081     185,699  
Restricted inventories 156,450     59,358  
  345,531     245,057  
       
Income taxes receivable 1,247     7,318  
Income taxes receivable from Former Parent     203  
Prepaid expenses and other assets 1,348     1,503  
Total current assets 494,743     418,261  
       
Plant, property and equipment, net 6,746     3,482  
Goodwill 8,881     4,620  
Intangibles, net 4,172     1,987  
Long-term secured loans receivable     500  
Long-term investments 7,946     7,873  
Deferred tax assets - non-current 517     424  
Total assets $ 523,005     $ 437,147  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Lines of credit $ 213,000     $ 212,000  
Liability on borrowed metals 6,437     4,352  
Product financing arrangements 156,450     59,358  
Accounts payable 44,151     46,769  
Derivative liabilities 15,845     36,454  
Note payable - related party 500      
Accrued liabilities 5,602     7,660  
Income taxes payable 6,038      
Total current liabilities 448,023     366,593  
Deferred tax liabilities - non-current 1,679     7,245  
Other long-term liabilities 1,117      
Total liabilities 450,819     373,838  
       
Commitments and contingencies      
       
Stockholders’ equity:      
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none
as of March 31, 2017 and June 30, 2016
     
Common Stock, par value $0.01; 40,000,000 shares authorized; 7,031,450 and 7,021,450
 shares issued and outstanding as of March 31, 2017 and June 30, 2016, respectively
71     71  
Additional paid-in capital 23,205     22,220  
Retained earnings 45,338     41,018  
Total A-Mark Precious Metals, Inc. stockholders’ equity 68,614     63,309  
Non-controlling interest 3,572      
Total stockholders’ equity 72,186     63,309  
Total liabilities, non-controlling interest and stockholders’ equity $ 523,005     $ 437,147  
               


A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share and per share data)
(unaudited)
           
    Three Months Ended   Nine Months Ended  
    March 31, 2017   March 31, 2016   March 31, 2017   March 31, 2016  
Revenues   $ 1,730,845     $ 1,512,750     $ 5,662,859     $ 5,048,829    
Cost of sales   1,723,513     1,505,892     5,637,604     5,021,871    
Gross profit   7,332     6,858     25,255     26,958    
                   
Selling, general and administrative expenses   (5,989 )   (5,366 )   (17,784 )   (16,302 )  
Interest income   3,283     2,250     9,101     6,365    
Interest expense   (2,700 )   (1,658 )   (7,388 )   (4,214 )  
Other income   191     107     270     613    
Unrealized (loss) gain on foreign exchange   21     (102 )   12     9    
Net income before provision for income taxes   2,138     2,089     9,466     13,429    
Provision for income taxes   (833 )   (894 )   (3,482 )   (5,226 )  
Net income   1,305     1,195     5,984     8,203    
Less: Net income attributable to non-controlling interest   139         118        
Net income attributable to the Company   $ 1,166     $ 1,195     $ 5,866     $ 8,203    
                   
Basic and diluted income per share attributable to A-Mark Precious Metals, Inc.:  
Basic   $ 0.17     $ 0.17     $ 0.83     $ 1.18    
Diluted   $ 0.16     $ 0.17     $ 0.82     $ 1.15    
Weighted average shares outstanding:                  
Basic   7,023,300     6,983,400     7,028,700     6,976,800    
Diluted   7,129,500     7,146,100     7,121,500     7,111,900    
                           


A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
 
Nine Months Ended   March 31, 2017   March 31, 2016
Cash flows from operating activities:        
Net income   $ 5,984     $ 8,203  
Adjustments to reconcile net income to net cash used in operating activities:        
Depreciation and amortization   1,120     911  
Amortization of loan cost   583      
Deferred income taxes   (5,659 )   4,540  
Interest added to principal of secured loans   (50 )   (65 )
Accrued earn-out   (198 )    
Share-based compensation   675     224  
Earnings from equity method investment   (73 )   (613 )
Changes in assets and liabilities:        
Receivables   439     4,097  
Secured loans   (18,163 )   2,404  
Secured loans to Former Parent   (6,595 )   (1,363 )
Derivative assets   29,094     278  
Income tax receivable   6,071     (999 )
Inventories   (100,474 )   (82,472 )
Prepaid expenses and other current assets   (428 )   (460 )
Accounts payable   (2,618 )   (7,801 )
Derivative liabilities   (20,609 )   (6,824 )
Liabilities on borrowed metals   2,085     (3,927 )
Accrued liabilities   (2,266 )   1,270  
Receivable from/payables to Former Parent   203     1,605  
Income taxes payable   6,038      
Net cash used in operating activities   (104,841 )   (80,992 )
Cash flows from investing activities:        
Capital expenditures for property and equipment   (1,932 )   (1,112 )
Purchase of long-term investments       (4,672 )
Secured loans, net   2,636     (16,487 )
Acquisition of majority-owned subsidiary, net of cash   (3,421 )    
Net cash used in investing activities   (2,717 )   (22,271 )
Cash flows from financing activities:        
Product financing arrangements, net   97,092     53,743  
Dividends   (1,546 )   (1,185 )
Borrowings under lines of credit, net   1,000     43,000  
Stock award grant   172     (250 )
Excess tax benefit of share-based awards   138      
Net cash provided by financing activities   96,856     95,308  
         
Net decrease in cash and cash equivalents   (10,702 )   (7,955 )
Cash and cash equivalents, beginning of period   17,142     20,927  
Cash and cash equivalents, end of period   $ 6,440     $ 12,972  
                 


Consolidated Results of Operations
 
The operating results of our business for the three months ended March 31, 2017 and 2016 are as follows:
 
in thousands, except per share data
Three Months Ended March 31, 2017   2016   $   %
  $   % of revenue   $   % of revenue   Increase/
(decrease)
  Increase/
(decrease)
Revenues $ 1,730,845     100.000 %   $ 1,512,750     100.000 %   $ 218,095     14.4 %
Gross profit 7,332     0.424 %   6,858     0.453 %   474     6.9 %
Selling, general and administrative expenses (5,989 )   (0.346 )%   (5,366 )   (0.355 )%   623     11.6 %
Interest income 3,283     0.190 %   2,250     0.149 %   1,033     45.9 %
Interest expense (2,700 )   (0.156 )%   (1,658 )   (0.110 )%   1,042     62.8 %
Other income 191     0.011 %   107     0.007 %   84     78.5 %
Unrealized (loss) gain on foreign exchange 21     0.001 %   (102 )   (0.007 )%   123     NM  
Net income before provision for income taxes 2,138     0.124 %   2,089     0.138 %   49     2.3 %
Provision for income taxes (833 )   (0.048 )%   (894 )   (0.059 )%   (61 )   6.8 %
Net income 1,305     0.075 %   1,195     0.079 %   110     9.2 %
Less: Net income attributable to non-controlling interest 139     0.008 %       %   139     %
Net income attributable to the Company $ 1,166     0.067 %   $ 1,195     0.079 %   $ (29 )   (2.4 )%
                       
Basic and diluted income per share attributable to A-Mark Precious Metals, Inc.:
Per Share Data:                      
Basic $ 0.17         $ 0.17             %
Diluted $ 0.16         $ 0.17         $ (0.01 )   (5.9 )%
                       


Consolidated Results of Operations
 
The operating results of our business for the nine months ended March 31, 2017 and 2016 are as follows:
     
in thousands, except per share data    
Nine Months Ended March 31, 2017   2016   $   %
  $   % of revenue   $   % of revenue   Increase/
(decrease)
  Increase/
(decrease)
Revenues $ 5,662,859     100.000 %   $ 5,048,829     100.000 %   $ 614,030     12.2 %
Gross profit 25,255     0.446 %   26,958     0.534 %   (1,703 )   (6.3 )%
Selling, general and administrative expenses (17,784 )   (0.314 )%   (16,302 )   (0.323 )%   1,482     9.1 %
Interest income 9,101     0.161 %   6,365     0.126 %   2,736     43.0 %
Interest expense (7,388 )   (0.130 )%   (4,214 )   (0.083 )%   3,174     75.3 %
Other income 270     0.005 %   613     0.012 %   (343 )   (56.0 )%
Unrealized (loss) gain on foreign exchange 12     %   9     %   3     NM  
Net income before provision for income taxes 9,466     0.167 %   13,429     0.266 %   (3,963 )   (29.5 )%
Provision for income taxes (3,482 )   (0.061 )%   (5,226 )   (0.104 )%   (1,744 )   33.4 %
Net income 5,984     0.106 %   8,203     0.162 %   (2,219 )   (27.1 )%
Less: Net income attributable to non-controlling interest 118     0.002 %       %   118     %
Net income attributable to the Company $ 5,866     0.104 %   $ 8,203     0.162 %   $ (2,337 )   (28.5 )%
                       
Basic and diluted income per share attributable to A-Mark Precious Metals, Inc.:
Per Share Data:                      
Basic $ 0.83         $ 1.18         (0.35 )   (29.7 )%
Diluted $ 0.82         $ 1.15         $ (0.33 )   (28.7 )%
                       
Company Contact:
Thor Gjerdrum, President
A-Mark Precious Metals, Inc.
310-587-1414
thor@amark.com

Investor Relations Contact:
Matt Glover or Najim Mostamand
Liolios Group, Inc.
949-574-3860
AMRK@liolios.com

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