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 September 30, 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 November 2, 2023, the registrant had 23,210,984 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 September 30, 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	44
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	68
	Item 4.	Controls and Procedures	69

PART II		OTHER INFORMATION	69

	Item 1.	Legal Proceedings	69
	Item 1A.	Risk Factors	70
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
	Item 3.	Defaults Upon Senior Securities	84
	Item 4.	Mine Safety Disclosures	84
	Item 5.	Other Information	84
	Item 6.	Exhibits	85

Signatures			86

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 September 30, 2023 and June 30, 2023	4
Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2023 and 2022	6
Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended September 30, 2023 and 2022	7
Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 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, Net	23
Note 5. Secured Loans Receivable	24
Note 6. Inventories	25
Note 7. Leases	26
Note 8. Property, Plant, and Equipment	27
Note 9. Goodwill and Intangible Assets	27
Note 10. Long-Term Investments	29
Note 11. Accounts Payable and Other Current Liabilities	29
Note 12. Derivative Instruments and Hedging Transactions	29
Note 13. Income Taxes	32
Note 14. Related Party Transactions	33
Note 15. Financing Agreements	34
Note 16. Commitments and Contingencies	36
Note 17. Stockholders' Equity	37
Note 18. Customer and Supplier Concentrations	40
Note 19. Segments and Geographic Information	40
Note 20. Subsequent Events	43

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share data)


	September 30, 2023			June 30, 2023
	(unaudited)
ASSETS
Current assets
Cash(1)	$	48,245		$	39,318
Receivables, net		34,315			35,243
Derivative assets		87,573			77,881
Secured loans receivable(1)		99,167			100,620
Precious metals held under financing arrangements(1)		19,279			25,530
Inventories:
Inventories(1)		611,194			645,812
Restricted inventories		389,615			335,831
		1,000,809			981,643
Prepaid expenses and other assets(1)		5,535			6,956
Total current assets		1,294,923			1,267,191
Operating lease right of use assets		4,823			5,119
Property, plant, and equipment, net		13,693			12,513
Goodwill		100,943			100,943
Intangibles, net		60,465			62,630
Long-term investments		91,220			88,535
Other long-term assets		13,170			8,640
Total assets	$	1,579,237		$	1,545,571
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Lines of credit	$	—		$	235,000
Liabilities on borrowed metals		21,727			21,642
Product financing arrangements		389,615			335,831
Accounts payable and other payables		8,800			25,465
Deferred revenue and other advances		151,169			181,363
Derivative liabilities		20,417			8,076
Accrued liabilities(1)		14,564			20,418
Income tax payable		3,507			958
Notes payable (1)		95,179			95,308
Total current liabilities		704,978			924,061
Lines of credit		270,000			—
Deferred tax liabilities		16,735			16,677
Other liabilities		4,439			4,440
Total liabilities		996,152			945,178
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of September 30, 2023 or June 30, 2023		—			—
Common stock, par value $0.01; 40,000,000 shares authorized; 23,842,677 and 23,672,122 shares issued and 23,335,674 and 23,336,387 shares outstanding as of September 30, 2023 and June 30, 2023, respectively		239			237
Treasury stock, 507,003 and 335,735 shares at cost as of September 30, 2023 and June 30, 2023, respectively		(14,778	)		(9,762	)
Additional paid-in capital		170,357			169,034
Accumulated other comprehensive loss		(838	)		(1,025	)
Retained earnings		426,679			440,639
Total A-Mark Precious Metals, Inc. stockholders’ equity		581,659			599,123
Noncontrolling interest		1,426			1,270
Total stockholders’ equity		583,085			600,393
Total liabilities, noncontrolling interest and stockholders’ equity	$	1,579,237		$	1,545,571

(1)

Includes amounts of the consolidated variable interest entity, which are 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

(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 ongoing 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 ongoing 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.)


	September 30, 2023		June 30, 2023
ASSETS OF THE CONSOLIDATED VIE
Cash	$	1,536	$	1,915
Secured loans receivable		42,417		46,368
Precious metals held under financing arrangements		12,737		14,950
Inventories		62,562		56,841
Prepaid expenses and other assets		—		7
Total assets of the consolidated variable interest entity	$	119,252	$	120,081
LIABILITIES OF THE CONSOLIDATED VIE
Deferred payment obligations(1)	$	29,938	$	30,083
Accrued liabilities		531		551
Notes payable(2)		99,890		99,762
Total liabilities of the consolidated variable interest entity	$	130,359	$	130,396

(1)

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

(2)

$5.0 million of the AMCF Notes are held by the Company which are eliminated in consolidation and 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 September 30,
	2023			2022
Revenues	$	2,484,618		$	1,900,351
Cost of sales		2,435,213			1,823,759
Gross profit		49,405			76,592
Selling, general, and administrative expenses		(21,845	)		(17,784	)
Depreciation and amortization expense		(2,792	)		(3,184	)
Interest income		6,102			5,096
Interest expense		(9,823	)		(6,130	)
Earnings from equity method investments		2,709			2,677
Other income, net		273			527
Unrealized (losses) gains on foreign exchange		(94	)		214
Net income before provision for income taxes		23,935			58,008
Income tax expense		(4,952	)		(12,771	)
Net income		18,983			45,237
Net income attributable to noncontrolling interest		156			112
Net income attributable to the Company	$	18,827		$	45,125
Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.:
Basic	$	0.81		$	1.93
Diluted	$	0.77		$	1.83

Weighted average shares outstanding:
Basic		23,364,700			23,396,400
Diluted		24,532,600			24,685,200

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, 2022		23,379,888	$	234	$	166,526		$	321,849		$	—			—		$	—		$	488,609		$	1,862		$	490,471
Net income		—		—		—			45,125			—			—			—			45,125			112			45,237
Share-based compensation		—		—		535			—			—			—			—			535			—			535
Earnings distribution paid to noncontrolling interest		—		—					—			—			—			—			—			(1,001	)		(1,001	)
Cumulative translation adjustment, net of tax		—		—		—			—			52			—			—			52			—			52
Common stock issued as employee compensation		10,500		—		293			—			—			—			—			293			—			293
Exercise of share-based awards		3,333		—		63			—			—			—			—			63			—			63
Net settlement of share-based awards		59,618		1		(1,606	)		—			—			—			—			(1,605	)		—			(1,605	)
Dividends declared ($1.00 per common share)		—		—		3			(23,468	)		—			—			—			(23,465	)		—			(23,465	)
Dividends declared ($0.20 per common share)		—		—		—			(4,690	)		—			—			—			(4,690	)		—			(4,690	)
Balance, September 30, 2022		23,453,339	$	235	$	165,814		$	338,816		$	52			—		$	—		$	504,917		$	973		$	505,890

Balance, June 30, 2023		23,672,122	$	237	$	169,034		$	440,639		$	(1,025	)		(335,735	)	$	(9,762	)	$	599,123		$	1,270		$	600,393
Net income		—		—		—			18,827			—			—			—			18,827			156			18,983
Share-based compensation		—		—		664			—			—			—			—			664			—			664
Cumulative translation adjustment, net of tax		—		—		—			—			187			—			—			187			—			187
Exercise of share-based awards		159,999		2		958			—			—			—			—			960			—			960
Net settlement of share-based awards		10,556		—		(307	)		—			—			—			—			(307	)		—			(307	)
Repurchases of common stock		—		—		—			—			—			(171,268	)		(5,016	)		(5,016	)		—			(5,016	)
Dividends declared ($1.00 per common share)		—		—		7			(23,441	)		—			—			—			(23,434	)		—			(23,434	)
Dividends declared ($0.20 per common share)		—		—		1			(9,346	)		—			—			—			(9,345	)		—			(9,345	)
Balance, September 30, 2023		23,842,677	$	239	$	170,357		$	426,679		$	(838	)		(507,003	)	$	(14,778	)	$	581,659		$	1,426		$	583,085

See accompanying Notes to the Condensed Consolidated Financial Statements

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands; unaudited)


	Three Months Ended September 30,
	2023	2022
Cash flows from operating activities: