10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-36347

A-MARK PRECIOUS METALS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation)

11-2464169
(IRS Employer I.D. No.)

2121 Rosecrans Ave. Suite 6300
El Segundo, CA 90245

(Address of principal executive offices) (Zip Code)

(310) 587-1477

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	AMRK	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes. ☑ No. ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such ﬁles). Yes. ☑ No. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes. ☐ No. ☑

As of May 2, 2023, the registrant had 23,260,606 shares of common stock, par value $0.01 per share outstanding.

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended March 31, 2023

TABLE OF CONTENTS


			Page
PART I		FINANCIAL INFORMATION	3

	Item 1.	Financial Statements	3
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	83
	Item 4.	Controls and Procedures	84

PART II		OTHER INFORMATION	84

	Item 1.	Legal Proceedings	84
	Item 1A.	Risk Factors	84
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	98
	Item 3.	Defaults Upon Senior Securities	98
	Item 4.	Mine Safety Disclosures	98
	Item 5.	Other Information	98
	Item 6.	Exhibits	99

Signatures			100

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Index to the Condensed Consolidated Financial Statements and Notes thereof


	Page
Condensed Consolidated Balance Sheets as of March 31, 2023 and June 30, 2022	4
Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2023 and 2022	6
Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended March 31, 2023 and 2022	7
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2023 and 2022	8
Notes to the Condensed Consolidated Financial Statements	9
Note 1. Description of Business	9
Note 2. Summary of Significant Accounting Policies	10
Note 3. Assets and Liabilities, at Fair Value	21
Note 4. Receivables	24
Note 5. Secured Loans Receivable	24
Note 6. Inventories	26
Note 7. Leases	27
Note 8. Property, Plant, and Equipment	28
Note 9. Goodwill and Intangible Assets	28
Note 10. Long-Term Investments	30
Note 11. Accounts Payable and Other Current Liabilities	30
Note 12. Derivative Instruments and Hedging Transactions	30
Note 13. Income Taxes	33
Note 14. Related Party Transactions	34
Note 15. Financing Agreements	36
Note 16. Commitments and Contingencies	38
Note 17. Stockholders' Equity	39
Note 18. Customer and Supplier Concentrations	41
Note 19. Segments and Geographic Information	43
Note 20. Subsequent Events	46

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except for share data)


	March 31, 2023			June 30, 2022
	(unaudited)
ASSETS
Current assets
Cash(1)	$	78,101		$	37,783
Receivables, net		90,076			97,040
Derivative assets		58,456			91,743
Secured loans receivable(1)		96,856			126,217
Precious metals held under financing arrangements(1)		24,014			79,766
Inventories:
Inventories(1)		675,414			458,347
Restricted inventories		292,104			282,671
		967,518			741,018
Income tax receivable		861			—
Prepaid expenses and other assets(1)		8,460			7,558
Total current assets		1,324,342			1,181,125
Operating lease right of use assets		5,410			6,482
Property, plant, and equipment, net		11,473			9,845
Goodwill		100,943			100,943
Intangibles, net		64,281			67,965
Long-term investments		80,995			70,828
Other long-term assets		5,459			5,471
Total assets	$	1,592,903		$	1,442,659
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Lines of credit	$	230,000		$	215,000
Liabilities on borrowed metals		25,730			59,417
Product financing arrangements		292,104			282,671
Accounts payable and other payables		10,164			6,127
Deferred revenue and other advances		253,688			175,545
Derivative liabilities		83,330			75,780
Accrued liabilities(1)		19,763			21,813
Income tax payable		—			382
Notes payable(1)		94,644			—
Total current liabilities		1,009,423			836,735
Notes payable (2)		1,752			94,073
Deferred tax liabilities		14,788			15,408
Other liabilities		4,802			5,972
Total liabilities		1,030,765			952,188
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of March 31, 2023 and June 30, 2022		—			—
Common stock, par value $0.01; 40,000,000 shares authorized; 23,596,341 and 23,379,888 shares issued and 23,260,606 and 23,379,888 shares outstanding as of March 31, 2023 and June 30, 2022, respectively		236			234
Treasury stock, 335,735 and 0 shares at cost as of March 31, 2023 and June 30, 2022, respectively		(9,762	)		—
Additional paid-in capital		168,253			166,526
Accumulated other comprehensive loss		(1,229	)		—
Retained earnings		403,473			321,849
Total A-Mark Precious Metals, Inc. stockholders’ equity		560,971			488,609
Noncontrolling interest		1,167			1,862
Total stockholders’ equity		562,138			490,471
Total liabilities, noncontrolling interest and stockholders’ equity	$	1,592,903		$	1,442,659

(1)

Includes amounts of the consolidated variable interest entity, which are presented separately in the table below.

(2)

Notes payable as of June 30, 2022 includes amounts of the consolidated variable interest entity, which is presented separately in the table below.

See accompanying Notes to the Condensed Consolidated Financial Statements

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands; unaudited)

In September 2018, AM Capital Funding, LLC (“AMCF”), a wholly owned subsidiary of Collateral Finance Corporation (CFC”), completed an issuance of Secured Senior Term Notes, Series 2018-1, Class A in the aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million (collectively, the "AMCF Notes"). The Class A Notes bear interest at a rate of 4.98% and the Class B Notes bear interest at a rate of 5.98%. The AMCF Notes have a maturity date of December 15, 2023.

The Company consolidates a variable interest entity ("VIE") if the Company is considered to be the primary beneficiary. AMCF is a VIE because its equity may be insufficient to maintain its on-going collateral requirements without additional financial support from the Company. The securitization is primarily secured by cash, bullion loans, and precious metals, and the Company is required to continuously hedge the value of certain collateral and make future contributions as necessary. The Company is the primary beneficiary of this VIE because the Company has the right to determine the type of collateral (i.e., cash, secured loans, or precious metals) placed into the entity, has the right to receive (and has received) the proceeds from the securitization transaction, earns on-going interest income from the secured loans (subject to collateral requirements), and has the obligation to absorb losses should AMCF's interest expense and other costs exceed its interest income.

The following table presents the assets and liabilities of this VIE, which are included in the condensed consolidated balance sheets above. The holders of the AMCF Notes have a first priority security interest in the assets as shown in the table below, which are in excess of the AMCF Notes' aggregate principal amount. Additionally, the liabilities of the VIE include intercompany balances, which are eliminated in consolidation. (See Note 15.)


	March 31, 2023		June 30, 2022
ASSETS OF THE CONSOLIDATED VIE
Cash	$	1,578	$	3,264
Secured loans receivable		48,632		92,246
Precious metals held under financing arrangements		17,865		13,524
Inventories		50,106		4,752
Prepaid expenses and other assets		28		23
Total assets of the consolidated variable interest entity	$	118,209	$	113,809
LIABILITIES OF THE CONSOLIDATED VIE
Deferred payment obligations(1)	$	27,572	$	21,081
Accrued liabilities		594		832
Notes payable(2)		99,644		99,073
Total liabilities of the consolidated variable interest entity	$	127,810	$	120,986

(1)

This is an intercompany balance, which is eliminated in consolidation and hence is not shown on the condensed consolidated balance sheets.

(2)

$5.0 million of the AMCF Notes are held by the Company, which is eliminated in consolidation and hence is not shown on the condensed consolidated balance sheets.

See accompanying Notes to the Condensed Consolidated Financial Statements

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 March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022
Revenues	$	2,317,150		$	2,109,115		$	6,167,206		$	6,069,450
Cost of sales		2,241,652			2,037,032			5,951,147			5,875,435
Gross profit		75,498			72,083			216,059			194,015
Selling, general, and administrative expenses		(23,841	)		(20,494	)		(62,438	)		(55,884	)
Depreciation and amortization expense		(3,340	)		(7,548	)		(9,784	)		(24,077	)
Interest income		6,087			5,343			16,167			16,125
Interest expense		(9,237	)		(5,429	)		(22,603	)		(16,297	)
Earnings (losses) from equity method investments		(70	)		1,608			7,276			4,317
Other income, net		641			493			2,001			1,335
Unrealized gains (losses) on foreign exchange		35			(135	)		250			(128	)
Net income before provision for income taxes		45,773			45,921			146,928			119,406
Income tax expense		(9,775	)		(8,375	)		(32,096	)		(23,797	)
Net income		35,998			37,546			114,832			95,609
Net income attributable to noncontrolling interest		78			164			306			409
Net income attributable to the Company	$	35,920		$	37,382		$	114,526		$	95,200
Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.:
Basic	$	1.53		$	1.64		$	4.89		$	4.19
Diluted	$	1.46		$	1.53		$	4.64		$	3.92

Weighted average shares outstanding:
Basic		23,421,300			22,859,600			23,435,700			22,712,800
Diluted		24,655,400			24,425,800			24,690,900			24,275,200

See accompanying Notes to the Condensed Consolidated Financial Statements

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except for share data; unaudited)


	Common Stock				Additional Paid-in			Retained			Accumulated other comprehensive		Treasury Stock				Total A-Mark Precious Metals, Inc. Stockholders'			Non-controlling		Total Stockholders’
	Shares		Amount		Capital			Earnings			income (loss)		Shares		Amount		Equity			Interest		Equity
Balance, June 30, 2021		22,459,314	$	113	$	150,420		$	212,090		$	—		—	$	—	$	362,623		$	1,319	$	363,942
Net income		—		—		—			26,024			—		—		—		26,024			100		26,124
Share-based compensation		—		—		473			—			—		—		—		473			—		473
Exercise of share-based awards		120,630		—		762			—			—		—		—		762			—		762
Net settlement of share-based awards		670		—		(13	)		—			—		—		—		(13	)		—		(13	)
Common stock issued for increase in long-term investments		123,180		1		2,977			—			—		—		—		2,978			—		2,978
Dividends declared ($1.00 per common share)		—		—		—			(22,639	)		—		—		—		(22,639	)		—		(22,639	)
Balance, September 30, 2021		22,703,794		114		154,619			215,475			—		—		—