EL SEGUNDO, Calif., Feb. 11, 2019 (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 second quarter ended December 31, 2018.

Fiscal Q2 2019 Financial Highlights

  • Revenues for the three months ended December 31, 2018 decreased 35% to $1.10 billion from $1.68 billion for the three months ended December 31, 2017 and decreased 30% from $1.57 billion for the three months ended September 30, 2018
  • Gross profit for the three months ended December 31, 2018 decreased 7% to $8.3 million (0.8% of revenue) from $8.9 million (0.5% of revenue) for the three months ended December 31, 2017 and decreased 2% from $8.5 million (0.5% of revenue) for the three months ended September 30, 2018
  • Net income for the three months ended December 31, 2018 totaled $577,000 or $0.08 per diluted share, compared to net loss of $205,000 or $(0.03) per diluted share for the three months ended December 31, 2017 and net income of $1.5 million or $0.21 per diluted share for the three months ended September 30, 2018  
  • Gold ounces sold in the three months ended December 31, 2018 increased 17% to 440,000 ounces from 376,000 for the three months ended December 31, 2017 and decreased 18% from 535,000 for the three months ended September 30, 2018
  • Silver ounces sold in the three months ended December 31, 2018 increased 68% to 20.0 million ounces from 12.0 million ounces for the three months ended December 31, 2017 and increased 10% from 18.3 million from the three months ended September 30, 2018
  • As of December 31, 2018, the number of secured loans decreased 32% to 1,931 from 2,823 as of December 31, 2017 and increased 13% from 1,705 as of September 30, 2018

Fiscal Q2 2019 Financial Results
Revenues decreased 35% to $1.10 billion from $1.68 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 decreased 7% to $8.3 million (0.8% of revenue) from $8.9 million (0.5% of revenue) in the same year-ago quarter. The decrease in gross profit was primarily due to lower trading profits of the Wholesale Trading & Ancillary Services segment and decreased gross profit from the company’s Direct Sales segment (i.e., Goldline).

Selling, general and administrative expenses decreased 13% to $8.1 million from $9.3 million in the same year-ago quarter. The decrease was primarily due to lower operating expenses incurred by the company’s Direct Sales segment of $1.5 million and a reduction of $0.5 million of legal expenses and investigatory acquisition costs. These reductions were partially offset by higher overall compensation costs of $0.6 million.

Interest income increased 42% to $4.7 million from $3.3 million in the same year-ago quarter. The increase was driven primarily by other finance product income, including finance fees earned related to repurchase arrangements with customers, which increased by $0.8 million compared to the same year-ago period and represented approximately 61% of the aggregate increase.

Interest expense increased 39% to $4.7 million from $3.4 million in the same year-ago quarter. The increase was primarily due to the newly issued notes payable related to the Secured Lending segment and an increase in liability on borrowed metals, partially offset by a reduction of liabilities for the Trading Credit Facility and product financing arrangements. 

Net income totaled $577,000 or $0.08 per diluted share, an improvement from net loss of $205,000 or $(0.03) per diluted share in the same year-ago quarter.

Fiscal Six Months 2019 Highlights

  • Revenues for the six months ended December 31, 2018 decreased ­­31% to $2.67 billion from $3.84 billion for the six months ended December 31, 2017
  • Gross profit for the six months ended December 31, 2018 increased 4% to $16.8 million (0.6% of revenue) from $16.2 million (0.4% of revenue) for the six months ended December 31, 2017
  • Net income for the six months ended December 31, 2018 totaled $2.1 million or $0.29 per diluted share, as compared to net income of $273,000 or $0.04 per diluted share for the six months ended December 31, 2017
  • Gold ounces sold in the six months ended December 31, 2018 increased 38% to 975,000 ounces from 708,000 for the six months ended December 31, 2017
  • Silver ounces sold in the six months ended December 31, 2018 increased 45% to 38.3 million ounces from 26.5 million for the six months ended December 31, 2017

Fiscal Six Months 2019 Financial Results
Revenues decreased 31% to $2.67 billion from $3.84 billion in the same year-ago period. The decrease was primarily 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 4% to $16.8 million (0.6% of revenue) from $16.2 million (0.4% of revenue) in the same year-ago period. The increase in gross profit was primarily due to higher gross profits from the company’s Wholesale Trading & Ancillary Services segment, offset by lower trading profits and gross profit from the Direct Sales segment (i.e., Goldline).

Selling, general and administrative expenses decreased 3% to $15.8 million from $16.3 million in the same year-ago period. The decrease was primarily due to lower operating expenses incurred by the Direct Sales segment of $0.6 million and a reduction of $0.9 million of legal and investigatory acquisition costs. The reductions were partially offset by increased overall compensation costs of $1.2 million.

Interest income increased 43% to $9.2 million from $6.4 million in the same year-ago period. This increase was driven primarily by other finance product income, including finance fees earned related to repurchase arrangements with customers, which increased by $1.7 million compared to the same year-ago period. The increase was also driven by higher interest rates and an increase in the weighted-average value of the company’s secured loan portfolio. Interest income earned from the secured loan portfolio increased by $0.4 million compared to the same year-ago period.

Interest expense increased 35% to $8.2 million from $6.1 million in the same year-ago period. The increase was primarily due to newly issued notes payable related to the Secured Lending segment and an increase in liability on borrowed metals, which was partially offset by a reduction in liabilities for the Trading Credit Facility and product financing arrangements. In comparison to the same year-ago period, interest expense increased $1.7 million related to the newly issued notes payable, $0.7 million related to the liability on borrowed metals and $0.1 million related to the Goldline Credit Facility. This was partially offset by $(0.1) million related to the Trading Credit Facility (including debt amortization costs) and $(0.2) million related to product financing arrangements. The Goldline Credit Facility was paid off in full during the period.

Net income totaled $2.1 million or $0.29 per diluted share, an improvement from $273,000 or $0.04 per diluted share in the same year-ago period.

Management Commentary 
“The second quarter was a continuation of the momentum we experienced in Q1,” said A-Mark CEO, Greg Roberts. “This achievement was driven, in part, by the favorable conditions in the precious metals market, where we saw continued price volatility, which in turn produced sustained higher demand and supply constraints.

“A-Mark’s vertically-integrated structure, and especially our minting capabilities through SilverTowne Mint, gives us a key competitive advantage by enabling us to meet surges in demand during more volatile market environments. Our financial success in the first half of the fiscal year was primarily due to higher sales volumes on both gold and silver products at our Wholesale Trading & Ancillary Services segment and sustained reductions of selling, general and administrative expenses at our Direct Sales segment over the prior year period. Additionally, we further strengthened our balance sheet by paying off the credit facility which we had used to finance our acquisition of Goldline, and which had been our highest interest rate debt instrument.

“Looking forward to the second half of the fiscal year, we have seen a 3% increase in both gold and silver prices since the end of December and have continued to experience increased volatility in the market and robust demand for A-Mark’s physical products. Moreover, the price of gold exceeded $1,300 per ounce in January for the first time in over six months. We remain cautiously optimistic about our prospects, especially given the macro backdrop and geopolitical environment, and will continue to act opportunistically 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 (February 11, 2019) 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
Conference ID: 13687174

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 A-Mark’s investor relations team at 1-949-574-3860.

A replay of the call will be available after 7:30 p.m. Eastern time through February 25, 2019.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Conference ID: 13687174

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)

 December 31,
 2018
 June 30,
 2018
ASSETS   
Current assets:   
Cash$11,830  $6,291 
Receivables, net23,275  35,856 
Derivative assets1,601  7,395 
Secured loans receivable104,757  110,424 
Precious metals held under financing arrangements226,905  262,566 
Inventories:   
Inventories193,872  166,176 
Restricted inventories82,413  113,940 
 276,285  280,116 
    
Income taxes receivable1,527  1,553 
Prepaid expenses and other assets1,754  2,782 
Total current assets647,934  706,983 
    
Plant, property and equipment, net7,261  8,018 
Goodwill8,881  8,881 
Intangibles, net6,357  6,861 
Long-term investments10,447  8,388 
Deferred tax assets - non-current3,211  3,870 
Total assets$684,091  $743,001 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Lines of credit$139,000  $200,000 
Liability on borrowed metals227,317  280,346 
Product financing arrangements82,413  113,940 
Accounts payable46,740  45,997 
Derivative liabilities25,304  20,457 
Accrued liabilities4,951  5,129 
Total current liabilities525,725  665,869 
Debt obligation (related party)  7,226 
Notes payable (1)86,569   
Other long-term liabilities (related party)  798 
Total liabilities612,294  673,893 
    
Commitments and contingencies   
    
Stockholders’ equity:   
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of December 31, 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 December 31, 2018 and June 30, 201871  71 
Additional paid-in capital25,909  24,717 
Retained earnings42,968  40,910 
Total A-Mark Precious Metals, Inc. stockholders’ equity68,948  65,698 
Non-controlling interest2,849  3,410 
Total stockholders’ equity71,797  69,108 
Total liabilities, non-controlling interest and stockholders’ equity$684,091  $743,001 


A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)

   Three Months Ended Six Months Ended 
   December 31, 2018 December 31, 2017 December 31, 2018 December 31, 2017 
Revenues $1,100,912  $1,680,738  $2,666,002  $3,844,528  
Cost of sales 1,092,595  1,671,822  2,649,210  3,828,306  
Gross profit 8,317  8,916  16,792  16,222  
           
Selling, general and administrative expenses (8,103) (9,349) (15,822) (16,325) 
Interest income 4,652  3,268  9,203  6,429  
Interest expense (4,656) (3,359) (8,208) (6,092) 
Other income 682  651  930  712  
Unrealized gain (loss) on foreign exchange 52  139  (18) 38  
Net income before provision for income taxes 944  266  2,877  984  
Income tax expense (242) (324) (741) (598) 
Net income (loss) 702  (58) 2,136  386  
 Net gain attributable to non-controlling interest 125  147  78  113  
Net income (loss) attributable to the Company $577  $(205) $2,058  $273  
           
Basic and diluted net income (loss) per share attributable to A-Mark Precious Metals, Inc.: 
Basic $0.08  $(0.03) $0.29  $0.04  
Diluted $0.08  $(0.03) $0.29  $0.04  
          
Dividends per share $  $0.08  $  $0.16  
          
Weighted average shares outstanding:         
Basic 7,031,400  7,031,400  7,031,400  7,031,400  
Diluted 7,085,600  7,031,400  7,088,700  7,113,000  


A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)

Six Months Ended December 31, 2018 2017 
Cash flows from operating activities:     
Net income $2,136  $386  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:     
Provision for doubtful accounts (30)   
Depreciation and amortization 1,398  1,312  
Amortization of loan cost 542  595  
Deferred income taxes 659  (211) 
Interest added to principal of secured loans (10) (29) 
Change in accrued earn-out (non-cash) (504) (529) 
Loss on debt extinguishment 6    
Share-based compensation 553  738  
Earnings from equity method investment (558) (179) 
Changes in assets and liabilities:     
Receivables 12,611  923  
Secured loans (737) (289) 
Secured loans to Former Parent (4,458) (1,502) 
Derivative assets 5,794  17,013  
Income tax receivable 26  (663) 
Precious metals held under financing arrangements 35,661    
Inventories 3,831  (38,035) 
Prepaid expenses and other assets 708  (714) 
Accounts payable 743  15,511  
Derivative liabilities 4,847  (7,162) 
Liabilities on borrowed metals (53,029) 4,952  
Accrued liabilities (109) (2,376) 
Income taxes payable   (1,418) 
Net cash provided by (used in) operating activities 10,080  (11,677) 
Cash flows from investing activities:     
Capital expenditures for property and equipment (138) (417) 
Purchase of long-term investments (1,500)   
Secured loans, net 10,872  (3,913) 
Acquisition of subsidiary, net of cash   (9,548) 
Net cash provided by (used in) investing activities 9,234  (13,878) 
Cash flows from financing activities:     
Product financing arrangements, net (31,527) (15,182) 
Dividends   (1,124) 
Borrowings and repayments under lines of credit, net (61,000) 34,000  
Repayments on notes payable to related party (7,500) (500) 
Proceeds from issuance of notes payable 90,000  7,500  
Debt funding issuance costs (3,748) (187) 
Net cash (used in) provided by financing activities (13,775) 24,507  
      
Net increase (decrease) in cash, cash equivalents, and restricted cash 5,539  (1,048) 
Cash, cash equivalents, and restricted cash, beginning of period 6,291  13,059  
Cash, cash equivalents, and restricted cash, end of period $11,830  $12,011  


Overview of Results of Operations for the Three Months Ended December 31, 2018 and 2017

Condensed Consolidated Results of Operations

The operating results of our business for the three months ended December 31, 2018 and 2017 are as follows:

in thousands, except per share data  
Three Months Ended December 31,2018 2017 $ %
 $ % of revenue $ % of revenue Increase/
(decrease)
 Increase/
(decrease)
Revenues$1,100,912  100.000% $1,680,738  100.000% $(579,826) (34.5)%
Gross profit8,317  0.755% 8,916  0.530% $(599) (6.7)%
Selling, general and administrative expenses(8,103) (0.736)% (9,349) (0.556)% $(1,246) (13.3)%
Interest income4,652  0.423% 3,268  0.194% $1,384  42.4%
Interest expense(4,656) (0.423)% (3,359) (0.200)% $1,297  38.6%
Other income682  0.062% 651  0.039% $31  4.8%
Unrealized gain on foreign exchange52  0.005% 139  0.008% $(87) (62.6)%
Net income before provision for income taxes944  0.086% 266  0.016% $678  254.9%
Income tax expense(242) (0.022)% (324) (0.019)% $(82) (25.3)%
Net income (loss)702  0.064% (58) (0.004)% $760  1,310.3%
 Net income attributable to non-controlling interest125  0.011% 147  0.009% $(22) (15.0)%
Net income (loss) attributable to the Company$577  0.052% $(205) (0.012)% $782  381.5%
            
Basic and diluted net (loss) income per share attributable to A-Mark Precious Metals, Inc.:
Per Share Data:           
Basic$0.08    $(0.03)   $0.11  366.7%
Diluted$0.08    $(0.03)   $0.11  366.7%
            



Overview of Results of Operations for the Six Months Ended December 31, 2018 and 2017

Condensed Consolidated Results of Operations

The operating results of our business for the six months ended December 31, 2018 and 2017 are as follows:

in thousands, except per share data  
Six Months Ended December 31,2018 2017 $ %
 $ % of revenue $ % of revenue Increase/
(decrease)
 Increase/
(decrease)
Revenues$2,666,002  100.000% $3,844,528  100.000% $(1,178,526) (30.7)%
Gross profit16,792  0.630% 16,222  0.422% $570  3.5%
Selling, general and administrative expenses(15,822) (0.593)% (16,325) (0.425)% $(503) (3.1)%
Interest income9,203  0.345% 6,429  0.167% $2,774  43.1%
Interest expense(8,208) (0.308)% (6,092) (0.159)% $2,116  34.7%
Other income930  0.035% 712  0.019% $218  30.6%
Unrealized loss on foreign exchange(18) (0.001)% 38  0.001% $56  147.4%
Net income before provision for income taxes2,877  0.108% 984  0.026% $1,893  192.4%
Income tax expense(741) (0.028)% (598) (0.016)% $143  23.9%
Net income2,136  0.080% 386  0.010% $1,750  453.4%
 Net income attributable to non-controlling interest78  0.003% 113  0.003% $(35) (31.0)%
Net income attributable to the Company$2,058  0.077% $273  0.007% $1,785  653.8%
            
Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.:
Per Share Data:           
Basic$0.29    $0.04    $0.25  625.0%
Diluted$0.29    $0.04    $0.25  625.0%