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A-Mark Precious Metals Reports Fiscal First Quarter 2019 Results

EL SEGUNDO, Calif., Nov. 08, 2018 (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, 2018.

Fiscal Q1 2019 Financial Highlights

  • Revenues for the three months ended September 30, 2018 decreased 28% to $1.57 billion from $2.16 billion for the three months ended September 30, 2017 and decreased 11% from $1.77 billion for the three months ended June 30, 2018
  • Gross profit for the three months ended September 30, 2018 increased 16% to $8.5 million (0.5% of revenue) from $7.3 million (0.3% of revenue) for the three months ended September 30, 2017 and increased 46% from $5.8 million (0.33% of revenue) for the three months ended June 30, 2018
  • Net income for the three months ended September 30, 2018 totaled $1.5 million or $0.21 per diluted share, compared to net income of $478,000 or $0.07 per diluted share for the three months ended September 30, 2017 and net loss of $3.0 million or $(0.43) per diluted share for the three months ended June 30, 2018  
  • Gold ounces sold in the three months ended September 30, 2018 increased 61% to 535,000 ounces from 332,000 for the three months ended September 30, 2017 and decreased 9% from 586,000 for the three months ended June 30, 2018
  • Silver ounces sold in the three months ended September 30, 2018 increased 26% to 18.3 million ounces from 14.5 million ounces for the three months ended September 30, 2017 and increased 112% from 8.6 million from the three months ended June 30, 2018
  • As of September 30, 2018, the number of secured loans decreased 31% to 1,705 from 2,454 as of September 30, 2017 and decreased 51% from 3,507 as of June 30, 2018

Fiscal Q1 2019 Financial Results
Revenues decreased 28% to $1.57 billion from $2.16 billion in the same year-ago quarter. The decrease in revenues was mainly due to lower forward sales and lower gold and silver prices, offset by an increase in the total amount of gold and silver ounces sold.

Gross profit increased 16% to $8.5 million (0.5% of revenue) from $7.3 million (0.3% of revenue) in the same year-ago quarter. The increase in gross profit was primarily due to improved market conditions offset by lower trading profits and gross profit of the company’s Direct Sales segment (Goldline).

Selling, general and administrative expenses increased 11% to $7.7 million from $7.0 million in the same year-ago quarter. The increase was primarily due to selling, general and administrative expenses related to the company’s Direct Sales segment (Goldline) of $0.9 million and higher compensation costs of $0.5 million, partially offset by a reduction of $0.5 million of investigatory acquisition costs.

Interest income increased 44% to $4.6 million from $3.2 million in same year-ago quarter, driven primarily by increases in interest rates and an increase in the weighted-average value of the secured loan portfolio and other finance product income.

Interest expense increased 30% to $3.6 million from $2.7 million in same year-ago quarter. The increase was related primarily to greater usage of the company’s trading credit facility, the related-party debt financing agreement associated with the acquisition of Goldline, the company’s newly issued notes payable in our lending business, as well as higher LIBOR interest rates. 

Net income totaled $1.5 million or $0.21 per diluted share, as compared to net income of $478,000 or $0.07 per diluted share in the same year-ago quarter.

Management Commentary 
“We generated solid improvements across our various business segments in the fiscal first quarter, highlighted by expanded gross profit margins as well as a return to profitability,” said A-Mark CEO Greg Roberts. “Our performance was driven, in part, by more favorable conditions in the precious metals market, which was characterized by a decrease in silver and gold prices, leading to increased volatility, higher demand for our products and improved premium spreads.

“Our financial results were also enhanced by our larger, more diversified platform of products and services. In particular, our Secured Lending segment continued to generate steady and predictable cash flow for our overall business. While the total number of secured loans decreased in Q1 due to margin call activity related to these volatile market conditions, the $100 million asset-based securitization we completed in the quarter specifically earmarked for our direct lending business, CFC, enables us to more aggressively expand this business to new levels going forward. By growing our finance book and introducing new complementary financing products, A-Mark will increasingly benefit from the revenue diversification and interest income that CFC provides.

“We continue to see heightened volatility and continued demand for A-Mark’s physical products in the current quarter, both from retail and institutional customers. We remain cautiously optimistic, especially given the backdrop of the present geopolitical environment, volatile equity markets, and rising interest rates. We will continue to act opportunistically in an effort to capitalize on attractive near-term trading opportunities while strategically scaling our business for long-term success.”

Conference Call
A-Mark will hold a conference call today (November 8, 2018) 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 at 1-949-574-3860.

A replay of the call will be available after 7:30 p.m. Eastern time through November 22, 2018.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Conference ID: 13684493

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 and online retailers, financial institutions, industrial users, investors, collectors and 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 Mint. 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 in Australia, Austria, Canada, China, Mexico, South Africa and the United Kingdom. Through its TDS subsidiary, A-Mark provides customers with storage and management solutions for precious metals worldwide. Through its A-M Global Logistics subsidiary, A-Mark provides customers an array of complementary services, including storage, shipping, and delivery 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, which enables A-Mark to mint proprietary products as well as provides greater access to fabricated silver products.

The company operates its Secured Lending segment through its wholly-owned subsidiary, CFC. Founded in 2005, CFC is a California 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.

A-Mark operates its Direct Sales segment through its wholly-owned subsidiary Goldline Inc., a direct retailer of precious metals to 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 and with offices and facilities in Vienna, Austria and Las Vegas, Nevada. 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.
310-587-1414
thor@amark.com

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

 
A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for share data)
       
  September 30,
 2018
  June 30,
 2018
       
ASSETS      
Current assets:      
Cash $ 22,714     $ 6,291  
Receivables, net 51,275     35,856  
Derivative assets 2,706     7,395  
Secured loans receivable 81,891     110,424  
Precious metals held under financing arrangements 232,476     262,566  
Inventories:      
Inventories 236,679     166,176  
Restricted inventories 53,126     113,940  
  289,805     280,116  
       
Income taxes receivable 1,561     1,553  
Prepaid expenses and other assets 2,830     2,782  
Total current assets 685,258     706,983  
       
Plant, property and equipment, net 7,694     8,018  
Goodwill 8,881     8,881  
Intangibles, net 6,609     6,861  
Long-term investments 8,636     8,388  
Deferred tax assets - non-current 3,417     3,870  
Total assets $ 720,495     $ 743,001  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Lines of credit $ 179,000     $ 200,000  
Liability on borrowed metals 227,198     280,346  
Product financing arrangements 53,126     113,940  
Accounts payable 60,993     45,997  
Derivative liabilities 29,917     20,457  
Accrued liabilities 4,838     5,129  
Total current liabilities 555,072     665,869  
Debt obligation (related party) 7,257     7,226  
Notes Payable 87,056      
Other long-term liabilities (related party) 296     798  
Total liabilities 649,681     673,893  
       
Commitments and contingencies      
       
Stockholders’ equity:      
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of September 30, 2018 and June 30, 2018      
Common stock, par value $0.01; 40,000,000 shares authorized; 7,031,450 shares issued and outstanding as of September 30, 2018 and June 30, 2018 71     71  
Additional paid-in capital 25,628     24,717  
Retained earnings 42,391     40,910  
Total A-Mark Precious Metals, Inc. stockholders’ equity 68,090     65,698  
Non-controlling interest 2,724     3,410  
Total stockholders’ equity 70,814     69,108  
Total liabilities, non-controlling interest and stockholders’ equity $ 720,495     $ 743,001  
               


 
A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)
           
  Three Months Ended September 30,   2018   2017
Revenues   $ 1,565,090     $ 2,163,790  
Cost of sales   1,556,615     2,156,484  
Gross profit   8,475     7,306  
           
Selling, general and administrative expenses   (7,719 )   (6,976 )
Interest income   4,551     3,161  
Interest expense   (3,552 )   (2,733 )
Other income   248     61  
Unrealized loss on foreign exchange   (70 )   (101 )
Net income before provision for income taxes   1,933     718  
Income tax expense   (499 )   (274 )
Net income   1,434     444  
Add: Net loss attributable to non-controlling interest   (47 )   (34 )
Net income attributable to the Company   $ 1,481     $ 478  
           
Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.:
Basic   $ 0.21     $ 0.07  
Diluted   $ 0.21     $ 0.07  
         
Dividends per share   $     $ 0.08  
         
Weighted average shares outstanding:        
Basic   7,031,400     7,031,400  
Diluted   7,091,900     7,122,400  
             


 
A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
 
Three Months Ended September 30,   2018   2017
Cash flows from operating activities:        
Net income   $ 1,434     $ 444  
Adjustments to reconcile net income to net cash used in operating activities:        
Depreciation and amortization   697     529  
Amortization of loan cost   211     233  
Deferred income taxes   453     4,687  
Interest added to principal of secured loans   (5 )   (15 )
Share-based compensation   272     436  
Earnings from equity method investment   (247 )   (57 )
Changes in assets and liabilities:        
Receivables   (15,419 )   (1,792 )
Secured loans   93     (77 )
Secured loans to Former Parent   6,824     (2,215 )
Derivative assets   4,689     (1,914 )
Income tax receivable   (8 )   (5,881 )
Precious metals held under financing arrangements   30,090      
Inventories   (9,689 )   (14,384 )
Prepaid expenses and other assets   (208 )   (802 )
Accounts payable   14,996     1,417  
Derivative liabilities   9,460     (10,593 )
Liabilities on borrowed metals   (53,148 )   436  
Accrued liabilities   (793 )   (3,147 )
Earn-out payment to related acquisition of joint venture       (208 )
Income taxes payable       (1,418 )
Net cash used in operating activities   (10,298 )   (34,321 )
Cash flows from investing activities:        
Capital expenditures for property and equipment   (122 )   (318 )
Secured loans, net   21,621     4,674  
Acquisition of subsidiary, net of cash       (9,548 )
Net cash provided by (used in) investing activities   21,499     (5,192 )
Cash flows from financing activities:        
Product financing arrangements, net   (60,814 )   (10,478 )
Dividends       (562 )
Borrowings and repayments under lines of credit, net   (21,000 )   39,000  
Proceeds from issuance of debt obligation payable to related party       7,500  
Repayments on notes payable to related party       (500 )
Proceeds from issuance of notes payable   90,000      
Debt funding issuance costs   (2,964 )   (149 )
Net cash provided by financing activities   5,222     34,811  
         
Net increase (decrease) in cash, cash equivalents, and restricted cash   16,423     (4,702 )
Cash, cash equivalents, and restricted cash, beginning of period   6,291     13,059  
Cash, cash equivalents, and restricted cash, end of period   $ 22,714     $ 8,357  
         

Overview of Results of Operations for the Three Months Ended September 30, 2018 and 2017

Condensed Consolidated Results of Operations

The operating results of our business for the three months ended September 30, 2018 and 2017 are as follows:

in thousands, except per share data    
Three Months Ended September 30, 2018   2017   $   %
  $   % of
revenue
  $   % of
revenue
  Increase/
(decrease)
  Increase/
(decrease)
Revenues $ 1,565,090     100.000 %   $ 2,163,790     100.000 %   $ (598,700 )   (27.7 )%
Gross profit 8,475     0.542 %   7,306     0.338 %   $ 1,169     16.0 %
Selling, general and administrative expenses (7,719 )   (0.493 )%   (6,976 )   (0.322 )%   $ 743     10.7 %
Interest income 4,551     0.291 %   3,161     0.146 %   $ 1,390     44.0 %
Interest expense (3,552 )   (0.227 )%   (2,733 )   (0.126 )%   $ 819     30.0 %
Other income 248     0.016 %   61     0.003 %   $ 187     306.6 %
Unrealized loss on foreign exchange (70 )   (0.005 )%   (101 )   (0.005 )%   $ 31     NM  
Net income before provision for income taxes 1,933     0.124 %   718     0.033 %   $ 1,215     169.2 %
Income tax expense (499 )   (0.032 )%   (274 )   (0.013 )%   $ 225     82.1 %
Net income 1,434     0.092 %   444     0.021 %   $ 990     223.0 %
Add: Net loss attributable to non-controlling interest (47 )   (0.003 )%   (34 )   (0.002 )%   $ (13 )   38.2 %
Net income attributable to the Company $ 1,481     0.095 %   $ 478     0.022 %   $ 1,003     209.8 %
                       
Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.:
Per Share Data:                      
Basic $ 0.21         $ 0.07         $ 0.14     200.0 %
Diluted $ 0.21         $ 0.07         $ 0.14     200.0 %
                       

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A-Mark Precious Metals