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Press Release

A-Mark Precious Metals Reports Fiscal Fourth Quarter and Full Year 2017 Results

EL SEGUNDO, Calif., Sept. 12, 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 fourth quarter and full year ended June 30, 2017.

Fiscal Q4 2017 Financial Highlights

  • Revenues decreased 24% to $1.33 billion from $1.74 billion for the three months ended June 30, 2016 and decreased 23% from $1.73 billion for the three months ended March 31, 2017
  • Gross profit decreased 20% to $6.1 million from $7.6 million for the three months ended June 30, 2016 and decreased 17% from $7.3 million for the three months ended March 31, 2017
  • Net income was increased 14% to $1.2 million or $0.17 per diluted share from $1.1 million or $0.15 per diluted share for the three months ended June 30, 2016 and decreased 5% from $1.2 million or $0.16 per diluted share for the three months ended March 31, 2017
  • Gold ounces sold decreased 59% to 290,000 ounces from 711,000 for the three months ended June 30, 2016 and decreased 50% from 579,000 for the three months ended March 31, 2017
  • Silver ounces sold decreased 45% to 14.1 million ounces from 25.8 million ounces for the three months ended June 30, 2016 and decreased 32% from 20.9 million from the three months ended March 31, 2017
  • Trading ticket volume increased 34% to 28,098 tickets from 20,964 for the three months ended June 30, 2016 and increased 2% from 27,580 for the three months ended March 31, 2017
  • As of June 30, 2017, the number of secured loans increased 103% to 2,375 from 1,173 as of June 30, 2016 and increased 11% from 2,138 as of March 31, 2017

Fiscal Q4 2017 Financial Results
Revenues decreased 24% to $1.33 billion from $1.74 billion in the same year-ago quarter. The decrease in revenues was mainly due to a decrease in the total amount of gold and silver ounces sold, primarily related to slower market conditions in the current period compared to the prior year.

Gross profit decreased 20% to $6.1 million (0.46% of revenue) from $7.6 million (0.44% of revenue) in the same year-ago quarter. The decrease in gross profit was primarily related to a decrease in the total volume of gold and silver ounces sold offset by increased trading profits. The decrease in volume of gold and silver ounces sold was primarily related to slower market conditions in the current period compared to the prior year.

Selling, general and administrative expenses decreased 6% to $5.6 million from $5.9 million in the same year-ago quarter. The decrease was primarily due to lower overall compensation expense (particularly incentive compensation) offset by increased expenses related to the development of a new enterprise resource system, selling, general and administrative expenses related to our acquisition of SilverTowne Mint and a one-time disposal of fixed assets related to the move of the company’s headquarters. 

Interest income increased 42% to $3.5 million from $2.4 million in same year-ago quarter. The increase in interest income was primarily due to an increase in the size of the company’s loan portfolio (which generated $2.2 million in interest income compared to $1.4 million in the same year-ago quarter, an increase of 55%), as well as increased use of the company’s inventory finance products by its customers.

Interest expense increased 30% to $2.7 million from $2.1 million in 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. The increase was also due, in part, to higher LIBOR interest rates which went in to effect subsequent to the Federal Reserve rate increases and increased amortization of loan facility costs.

Net income increased 14% to $1.2 million or $0.17 per diluted share as compared to $1.1 million or $0.15 per diluted share in the same year-ago quarter.  This increase was due primarily to higher interest income and lower tax provision, offset by lower gross profit and higher interest expense.

Full Year 2017 Financial Highlights

  • Revenues increased 3% to $6.99 billion from $6.78 billion for the full year ended June 30, 2016
  • Gross profit decreased 9% to $31.3 million (0.45% of revenue) from $34.5 million (0.51% of revenue) for the full year ended June 30, 2016
  • Net income decreased 24% to $7.1 million or $1.00 per diluted share from $9.3 million or $1.30 per diluted share for the full year ended June 30, 2016
  • Gold ounces sold decreased 27% to 2.2 million ounces from 3.0 million for the full year ended June 30, 2016
  • Silver ounces sold decreased 37% to 79.6 million ounces from 126.3 million for the full year ended June 30, 2016
  • Trading ticket volume increased 28% to 112,907 tickets from 88,486 for the full year ended June 30, 2016
  • As of June 30, 2017, the number of secured loans increased 103% to 2,375 from 1,173 as of June 30, 2016

Full Year 2017 Financial Results
Revenues increased 3% to $6.99 billion from $6.78 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, partially offset by a decrease in the total amount of gold ounces and silver ounces sold.

Gross profit decreased 9% to $31.3 million (0.45% of revenue) from $34.5 million (0.51% of revenue) in the same year-ago period. The decrease in gross margin was primarily due to subdued market conditions during the second half of 2017, which constrained both volume and premiums spreads, partially offset by increased trading profits during 2017. Furthermore, the decrease in gross profit was due to higher premium spreads on the company’s primary products in the first fiscal quarter of 2016, when the company experienced atypical volatility and supply constraints.

Selling, general and administrative expenses increased 5% to $23.3 million from $22.2 million in the same year-ago period. The increase was due to various acquisition costs, increased selling, general and administrative expenses related to SilverTowne Minting operations, increased consulting costs related to the development of a new enterprise resource system and a one-time disposal of fixed assets related to the relocation of the company’s headquarters. The increase was offset by a decrease in overall compensation costs, primarily related to discretionary incentive compensation.

Interest income increased 43% to $12.6 million from $8.8 million in the same year-ago period. The increase in interest income was primarily due to an increase in the size of the company’s loan portfolio (which generated $7.7 million in interest income compared to $4.8 million in the same year-ago period, an increase of 62%) as well as increased use of the company’s inventory finance products by its customers.

Interest expense increased 60% to $10.1 million from $6.3 million in the same year-ago period. The increase was primarily due to a greater usage of the company’s lines of credit and other product financing arrangements, which resulted in $8.0 million of interest compared to $5.7 million in fiscal 2016, an increase of 39%. The increase was also due, in part, to higher LIBOR interest rates which went in to effect subsequent to the Federal Reserve rate increases.

Net income decreased 24% to $7.1 million or $1.00 per diluted share from $9.3 million or $1.30 per diluted share in the same period last year. The decrease was primarily due to lower gross profit and higher interest expense, offset by higher interest income.

Management Commentary
“Our results for Q4 were consistent with our expectations, given the continued subdued market activity that persisted during the quarter,” said A-Mark CEO Greg Roberts. “Most notably, we achieved our 14th consecutive quarter of profitability since becoming public, which is a testament to our continued execution of and ability to capitalize on our business plan. With historically low sales levels at the U.S. mint reinforced by the sustained strength of the U.S. equities market as a whole, we continued to face headwinds which impacted demand for precious metals. Nevertheless, we were able to take advantage of trading opportunities in the period and experienced continued growth in our finance product offerings, further establishing our finance book as a meaningful source of income and predictability to our business model. In fact, net interest income in Q4 increased 42% year-over-year and 43% for the full fiscal year.

“Our results for the fourth quarter were also reflective of fiscal 2017 as whole, showcasing the viability of our increasingly diversified business and its effectiveness in mitigating the effects of current market conditions.  Operationally, fiscal 2017 marked another fundamental year in our company’s development, laying the foundation for future growth and increased profitability when market conditions create greater volatility and demand. In the meantime, we have been focused on expanding our trading capacity, adding new value-added services and also making strategic acquisitions to more vertically align our operations, as we did with SilverTowne Mint in August 2016. This joint venture has now been operational for 12 months and, in that time, has significantly expanded our capacity to meet unforeseen surges in demand during volatile market environments. Over the course of the year, our initiatives with SilverTowne have been to drive growth through new marketing efforts and consignment offerings as well as through the development of a variety of unique product offerings including customer branded silver products and legal tender coins.

“A-Mark has also continued to benefit from the operational and cost efficiencies provided by our logistics facility in Las Vegas and its wholesale operations consolidation. One of our key initiatives in fiscal 2017 was to further expand our suite of ancillary services at the facility. In addition to securing new logistics customers, our marketing and sales efforts also remain focused on attracting additional customers for our precious metals storage programs, including precious metal custody options for self-directed IRA accounts. Along that line, in fiscal Q1 2018, we acquired substantially all of the operating assets of Goldline International, a leading direct retailer of precious metals to the investor community. Historically, Goldline has sold more than $600 million worth of precious metals for inclusion in self-directed IRAs; we are optimistic that many of these buyers will take advantage of our secured storage facilities. The acquisition also provides us with a significant opportunity to leverage our value-added services to Goldline’s 150,000 clients and 1.2 million prospective client leads. In all, Goldline marks the culmination of our three-pronged vertical integration strategy―first with our Las Vegas logistics facility, followed by SilverTowne Mint, and now with Goldline―to build a world-class, vertically integrated precious metals company.

“As we look ahead to our current quarter, we continue to experience the slower market activity that characterized the second half of fiscal 2017. And although these tepid market trends are expected to persist in the near term, we remain increasingly cognizant of the geopolitical climate and its ability to effect immediate change on the precious metals environment. We’ve made significant progress along our strategic roadmap, positioning us effectively for the future. Moving forward, we aim to leverage that progress, as well as our diversified business model, to further expand our margins and capitalize on a more favorable market environment. We continue to believe A-Mark is in a strong position to grow, and we are focused on delivering this growth through the competitive advantages we’ve established over the last several years. Collectively, our achievements have allowed us to deepen our customer relationships, which we believe will drive more predictable growth and profitably in the quarters and years ahead.”

Conference Call
A-Mark will hold a conference call today (September 12, 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 September 26, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Conference ID: 13670031

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.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for share data)
 
  June 30,
 2017
  June 30,
 2016
ASSETS      
Current assets:      
Cash $ 13,059     $ 17,142  
Receivables, net 39,295     43,302  
Derivative assets 17,587     33,732  
Secured loans receivable 91,238     70,004  
       
Inventories:      
Inventories 149,316     185,699  
Restricted inventories 135,343     59,358  
  284,659     245,057  
       
Income taxes receivable     7,318  
Income taxes receivable from Former Parent     203  
Prepaid expenses and other assets 1,183     1,503  
Total current assets 447,021     418,261  
       
Plant, property and equipment, net 6,607     3,482  
Goodwill 8,881     4,620  
Intangibles, net 4,065     1,987  
Long-term secured loans receivable     500  
Long-term investments 7,967     7,873  
Deferred tax assets - non-current 3,959     424  
Total assets $ 478,500     $ 437,147  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Lines of credit $ 180,000     $ 212,000  
Liability on borrowed metals 5,625     4,352  
Product financing arrangements 135,343     59,358  
Accounts payable 41,947     46,769  
Derivative liabilities 34,582     36,454  
Note payable - related party 500      
Accrued liabilities 4,945     7,660  
Income taxes payable 1,418      
Total current liabilities 404,360     366,593  
Deferred tax liabilities - non-current     7,245  
Other long-term liabilities 1,117      
Total liabilities 405,477     373,838  
       
Commitments and contingencies      
       
Stockholders’ equity:      
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of June 30, 2017 and 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 June 30, 2017 and June 30, 2016, respectively
71     71  
Additional paid-in capital 23,526     22,220  
Retained earnings 45,994     41,018  
Total A-Mark Precious Metals, Inc. stockholders’ equity 69,591     63,309  
Non-controlling interest 3,432      
Total stockholders’ equity 73,023     63,309  
Total liabilities, non-controlling interest and stockholders’ equity $ 478,500     $ 437,147  
               


A-MARK PRECIOUS METALS, INC.  
CONSOLIDATED STATEMENTS OF INCOME
 
(in thousands, except for share and per share data)  
   
Years Ended June 30,   2017   2016  
Revenues   $ 6,989,624     $ 6,784,039    
Cost of sales   6,958,290     6,749,518    
Gross profit   31,334     34,521    
           
Selling, general and administrative expenses   (23,343 )   (22,233 )  
Interest income   12,553     8,795    
Interest expense   (10,117 )   (6,319 )  
Other income   298     701    
Unrealized gain on foreign exchange   60     99    
Net income before provision for income taxes   10,785     15,564    
Provision for income taxes   (3,721 )   (6,293 )  
Net income   7,064     9,271    
Add: Net loss attributable to non-controlling interest   (22 )      
Net income attributable to the Company   $ 7,086     $ 9,271    
           
Basic and diluted income per share attributable to A-Mark Precious Metals, Inc.:  
Basic   $ 1.01     $ 1.33    
Diluted   $ 1.00     $ 1.30    
Weighted average shares outstanding:          
Basic   7,029,400     6,981,900    
Diluted   7,121,500     7,120,300    
               


A-MARK PRECIOUS METALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
 
Years Ended,   June 30, 2017   June 30, 2016
Cash flows from operating activities:        
Net income   $ 7,064     $ 9,271  
Adjustments to reconcile net income to net cash used in operating activities:        
Depreciation and amortization   1,521     1,216  
Amortization of loan cost   892     204  
Deferred income taxes   (10,780 )   6,695  
Interest added to principal of secured loans   (68 )   (83 )
Accrued earn-out   (198 )    
Share-based compensation   996     419  
Earnings from equity method investment   (94 )   (701 )
Loss on disposal of fixed assets   178      
Changes in assets and liabilities:        
Receivables   4,007     (13,277 )
Secured loans   8,765     4,345  
Secured loans to Former Parent   1,370     (1,369 )
Derivative assets   16,145     (22,368 )
Income tax receivable   7,318     528  
Inventories   (39,602 )   (53,556 )
Prepaid expenses and other current assets   (572 )   (505 )
Accounts payable   (4,822 )   (3,870 )
Derivative liabilities   (1,872 )   18,557  
Liabilities on borrowed metals   1,273     (5,148 )
Accrued liabilities   (2,923 )   2,594  
Receivable from/payables to Former Parent   203     892  
Income taxes payable   1,418      
Net cash used in operating activities   (9,781 )   (56,156 )
Cash flows from investing activities:        
Capital expenditures for property and equipment   (2,265 )   (1,466 )
Purchase of long-term investments       (4,672 )
Secured loans, net   (30,801 )   (24,081 )
Acquisition of majority-owned subsidiary, net of cash   (3,421 )    
Net cash used in investing activities   (36,487 )   (30,219 )
Cash flows from financing activities:        
Product financing arrangements, net   75,985     19,933  
Dividends   (2,110 )   (1,675 )
(Repayments) borrowings  under lines of credit, net   (32,000 )   65,000  
Stock award grant   172     1  
Excess tax benefit of share-based award   138      
Repurchase and retirement of restricted stock for payroll taxes       (669 )
Net cash provided by financing activities   42,185     82,590  
         
Net decrease in cash and cash equivalents   (4,083 )   (3,785 )
Cash and cash equivalents, beginning of period   17,142     20,927  
Cash and cash equivalents, end of period   $ 13,059     $ 17,142  
         
 
A-MARK PRECIOUS METALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(amounts in thousands)
 
  ( - Continued from preceding page - )        
Years Ended,   June 30, 2017   June 30, 2016
Supplemental disclosures of cash flow information:        
Cash paid during the period for:        
Interest expense   $ 9,448     $ 6,143  
Income taxes   $ 11,874     $ 149  
         
Non-cash investing and financing activities:        
Interest added to principal of secured loans   $ 68     $ 83  
Contribution of assets from minority interest   $ 3,454     $  
Payable to minority interest partner for acquired business   $ 500     $  
Earn out obligation payable to minority interest partner   $ 1,523     $  
                 

Consolidated Results of Operations

The operating results of our business for the years ended June 30, 2017 and 2016 are as follows:

in thousands, except per share data    
Years Ended June 30, 2017   2016   $   %
  $   % of
revenue
  $   % of
revenue
  Increase/
(decrease)
  Increase/
(decrease)
Revenues $ 6,989,624     100.000 %   $ 6,784,039     100.000 %   $ 205,585     3.0 %
Gross profit 31,334     0.448 %   34,521     0.509 %   $ (3,187 )   (9.2 )%
Selling, general and administrative expenses (23,343 )   (0.334 )%   (22,233 )   (0.328 )%   $ 1,110     5.0 %
Interest income 12,553     0.180 %   8,795     0.130 %   $ 3,758     42.7 %
Interest expense (10,117 )   (0.145 )%   (6,319 )   (0.093 )%   $ 3,798     60.1 %
Other income 298     0.004 %   701     0.010 %   $ (403 )   (57.5 )%
Unrealized gain on foreign exchange 60     0.001 %   99     0.001 %   $ (39 )   NM  
Net income before provision for income taxes 10,785     0.154 %   15,564     0.229 %   $ (4,779 )   (30.7 )%
Provision for income taxes (3,721 )   (0.053 )%   (6,293 )   (0.093 )%   $ (2,572 )   (40.9 )%
Net income 7,064     0.101 %   9,271     0.137 %   $ (2,207 )   (23.8 )%
Add: Net loss attributable to non-controlling interest (22 )   %       %   $ 22     NM  
Net income attributable to the Company $ 7,086     0.101 %   $ 9,271     0.137 %   $ (2,185 )   (23.6 )%
                       
Basic and diluted income per share attributable to A-Mark Precious Metals, Inc.:
Per Share Data:                      
Basic $ 1.01         $ 1.33         $ (0.32 )   (24.1 )%
Diluted $ 1.00         $ 1.30         $ (0.30 )   (23.1 )%
                                     

The operating results of our business for the three months ended June 30, 2017 and 2016 are as follows:

in thousands, except per share data    
Three Months Ended June 30, 2017   2016   $   %
  $   % of
revenue
  $   % of
revenue
  Increase/
(decrease)
  Increase/
(decrease)
Revenues $ 1,326,765     100.000 %   $ 1,735,210     100.000 %   $ (408,445 )   (23.5 )%
Gross profit 6,079     0.458 %   7,563     0.436 %   $ (1,484 )   (19.6 )%
Selling, general and administrative expenses (5,559 )   (0.419 )%   (5,931 )   (0.342 )%   $ (372 )   (6.3 )%
Interest income 3,452     0.260 %   2,430     0.140 %   $ 1,022     42.1 %
Interest expense (2,729 )   (0.206 )%   (2,105 )   (0.121 )%   $ 624     29.6 %
Other income 28     0.002 %   88     0.005 %   $ (60 )   (68.2 )%
Unrealized (loss) gain on foreign exchange 48     0.004 %   90     0.005 %   $ (42 )   NM  
Net income before provision for income taxes 1,319     0.099 %   2,135     0.123 %   $ (816 )   (38.2 )%
Provision for income taxes (239 )   (0.018 )%   (1,067 )   (0.062 )%   $ (828 )   (77.6 )%
Net income 1,080     0.081 %   1,068     0.062 %   $ 12     1.1 %
Add: Net loss attributable to non-controlling interest (140 )   (0.011 )%       %   $ 140     NM  
Net income attributable to the Company $ 1,220     0.092 %   $ 1,068     0.062 %   $ 152     14.2 %
                       
Basic and diluted income per share attributable to A-Mark Precious Metals, Inc.:
Per Share Data:                      
Basic $ 0.17         $ 0.15         $ 0.02     13.3 %
Diluted $ 0.17         $ 0.15         $ 0.02     13.3 %
                                     

 

Company Contact:
Thor Gjerdrum, President
A-Mark Precious Metals, Inc.
310-587-1414
thor@amark.com

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

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