Q2 2021 A-Mark Precious Metals Inc Earnings Call

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Okay.

Good afternoon, and welcome to <unk> remarks, precious metals conference call for the fiscal second quarter ended December 31st 'twenty and 'twenty. My name is Laura and I will be the operator. This afternoon before this call and Mark issued notes for the fiscal second quarter, 'twenty 'twenty, one and a press release.

Which is available and the Investor Relations section of the company's website at Www Dot and Mark Dot Com you can find the link and the Investor Relations section at the top on the homepage and joining us for today's call or a Mark's CEO, Greg Roberts, President Thor share drums.

So Kathleen Simpson Taylor as.

And as well as Jay and bullion and co founder and CEO, Michael What my following their remarks, we will open the call for your questions and before we conclude the call I'll provide the necessary cautions regarding the forward looking statements made by management. During this call I would like to remind everyone that this call is being.

Recorded and will be made available for replay via a link available on the Investor Relations section of a Mark's website now I would like to turn this call over to a Mark's CEO Mr. Greg Roberts Sir Please proceed.

Thank you Laura.

Good afternoon, and thank you for joining and Mark's conference call.

Today is a truly exciting and transformative day for a mark and I'm looking forward to sharing a number of updates with you.

As you may have seen after the market closed today, we issued a press release announcing <unk> agreement to acquire Jay and boy and we.

We also issued a press release with our financial results for the second quarter and first six months of fiscal 2021.

And I will touch based on before getting into the acquisition.

Q2 was another solid quarter for a mark and reflects the profitability. We continue to see during these market conditions.

Following the unprecedented volatility and the precious metals markets during Q1.

Which produced record profitability for a marks the second quarter was characterized by slightly lower but still strong product demand volumes and premium spreads.

Taken together these market dynamics allowed us allowed us to realize another strong financial performance this quarter, including generating $8 9 million and net income attributable to the company.

Which contributed to the most profitable first half of any fiscal year and a Mark's history.

Our financial results continue to demonstrate the benefits of our unique business model, which is designed to generate steady and diverse revenue streams.

And normal market conditions, and outsized profitability during more volatile market periods, which is which we have been experiencing the last few quarters.

We've intentionally built a mark with three complementary business segments, which support one another and drive incremental and organic business across the platform.

A good example of this is our menu and operations.

Which is anchored.

By our investment and silver and silver.

So overtime and provides a mark gold line and JM boy and with improved supply during supply constrained periods, which we've seen over the last few quarters.

This tightly integrated and synergistic model also provides us with multiple gross growth avenues, including cross selling opportunities for continued expansion the.

And the resulting effect is our continued ability to capture increasing value across the price precious metals market.

And as I mentioned earlier in addition to strong financial results for the second quarter. We also issued a press release today announcing the definitive agreement, we have signed with Jay and bullion.

Leading E commerce retailer of precious metals.

To acquire the remaining 79, 5% of the issued and outstanding shares of JM bullion not currently owned by a day Mark.

Before discussing JMP and the strategic rationale.

I think it's important to provide some context.

A key driver of our exceptional financial results over the last several quarters are there strategic investments we have made to expand <unk> direct sales segment.

This area of our business has grown considerably over the last several quarters and has contributed increasing and increasing profitability.

And Mark has been a leader and precious metal since 1965.

Over that time, we've established a robust wholesale business with a marquee institutional customer list.

We've been able to grow our position and the market. Thanks to the high caliber team. We've assembled that has more than 100 years of industry experience and various commodity cycles and market conditions.

Several years ago, we recognize the evolving customer buying patterns and how the internet and E commerce was dramatically changing the retail precious metals market.

In response, we expanded <unk> presence and position and the retail market initially through our minority investment and JM boy and back in 2014, and more recently through minority investments and two other precious metals E commerce businesses, each of which serve differentiated customer.

Basis.

Over the past six years.

We have been able to make further investments and Jay and boy and and have enjoyed a highly synergistic relationship together.

We are now very excited to add JM bullion and its Matt Jay its management team to our business.

As the combination of a mark and Jay on volume will create the industry's preeminent.

Fully integrated precious metals platform.

Since its founding in 2011 Jam boy and has experienced tremendous success jam.

<unk> co founder and CEO, Michael Whitmire, who is on the call with US today Leverages his team's expertise and E commerce and search engine optimization to establish Dzhambul, you and as a lead player and the precious metals industry.

Based on this success.

Hey, Mark became increasingly comfortable with our minority investment as Michael and his team proved our thesis that E. Commerce was transforming how retail investors bought and sold precious metals.

Over the past several quarters, we've watched jamboree and execute exceptionally well to <unk>.

And take advantage of favorable market conditions, as well as manage unprecedented volume packages and ounces sold.

And we reached the conclusion that our respective businesses would be even stronger as a combined platform.

And as the saying goes we truly believe one plus one is equal to three.

With that I will turn it over to Michael to introduce himself and his company and the value he sees and joining a mark.

Michael welcome to the team take it away.

Thank you Greg and good afternoon, everyone. Thanks for having me joined the call.

Today is a very exciting day, and Jm's history and evolution.

It wasn't that long ago that J M. With just two co founders operating out of the basement, and Lancaster, Pennsylvania, which really puts into perspective, how far the company has been able to come over the last nine years.

Since our founding we and established our company as an industry price leader for it.

Seed and customer expectations with fast and secure shipping and award winning customer service.

We've been able to do that through the dedicated efforts of our team along with the support and high quality partners like Greg and Mark.

Help JM pursue our mission to create one of the largest and fastest growing online retailers and precious metals and the world.

For those of you who aren't familiar with J M.

Our company enables individual investors to easily and efficiently purchase physical precious metals over the internet.

We have for a broad selection of gold silver platinum and palladium and copper products through our various company owned websites and marketplaces today.

Today, we operate five uniquely branded websites targeting specific niches within the precious metals market.

These include J M volume Dotcom, Provident and metals dotcom silver Dot com gold price Dot org silver price Dot org, along with R. J M ebay marketplace.

We've experienced tremendous demand lately on our sites and for our products, particularly silver products as retail investors look to gain exposure to silver.

Direct to consumer suppliers like Jan has had a difficult time, keeping up with the level of demand, which is at multiples from what we typically see.

Now by partner and even more closely with Greg and the day Mark team J M will be able to leverage and marks unmatched capabilities and product sourcing and minting to be even better positioned to serve our growing customer base as demand for precious metals products.

And again, everyone and I will now turn it back over to Greg.

Thanks, Michael.

With this acquisition JM boy and becomes the anchor and our direct to retail strategy significantly bolstering <unk> capabilities and dramatically broadening our consumer facing for footprint and brand portfolio.

More specifically our strategic rationale for the acquisition is based on five pillars.

First.

JM bullion provides channel diversification and significantly increases <unk> direct sales segment, which will represent approximately 50% of the combined company's pre tax net income on a pro forma basis.

Second <unk>.

<unk> and will provide a mark with the ability to tailor its merchant merchandising and pricing strategies to multiple customer demographics across the combined businesses six unique consumer facing brands for.

And five currently owned by JM Boy and plus Goldmine.

With the acquisition of Jam Boy, and Hey, Mark has significantly bolstered its direct to consumer capabilities and broadened its consumer facing brand portfolio.

Third J M Boy, and we'll add a centrally located distribution hub and Dallas, Texas.

And which will further improve <unk> ability to service its customers across the country.

And as well as expanding our overall capacity of packages shipped.

Fourth JM, bouygues, and proven and proprietary online marketing strategies enable us to acquire customers on attractive rates and realized average order values at over 50 times its customer acquisition cost.

On top of this.

Jam volumes rapidly growing total number of users, which grew at a 31% annual rate in 2000 and 'twenty.

Add on.

And one 3 million new users to <unk> direct sales segment.

And this newly acquired customer base and hiring.

Average order value of $2020 and 2020.

Which will help drive additional profitability for a mark.

And finally, the a mark and Jay Amboy, and leadership teams and significant precious metals market expertise and deep online and E commerce experience.

Given our familiarity with gambling, including our close working relationship with its leaders and integrate and work streams. Since 2014, we are confident that as a truly unified organization, we will be able to more effectively capitalize on the burgeoning demand for precious metals throughout on.

<unk> and ecommerce channels.

From a financial perspective, JM boy and adds significant scale to a mark's already robust profile.

For gambling and fiscal year ended December 31, 2020, it generated net sales.

Nearly $1 $5 billion and gross profit of nearly 79 million with pre tax income in excess of $62 million.

These strong financial results are being driven by improving customer metrics and kpis, including a 30% year over year increase and total user base.

One 3 million.

Of this amount more than 300000 users are classified as active meaning they completed at least one transaction with JM bullion during calendar 2020.

In terms of consideration and transaction structure.

Hey, Mark will pay $138 3 million for the 79, 5% of gambling and it does not currently own implying a total valuation of jam boy and of $174 million.

The $138 million purchase price $103 million will be and cash and 34 and $5 million will be paid and a mark common stock.

Hey, Marc intends to finance for cash consideration with available cash on hand, along with net proceeds from any equity or.

Our debt financing, which we may determine to consummate prior to closing.

The acquisition is expected to close and the first quarter of calendar 2021 subject to customary closing conditions and regulatory approval.

Following the close.

Michael Wittmeyer and Dzhambul Williams, Chairman Kendall Seville will join <unk> board of directors.

Michael will remain CEO of J on buoyant and will also assume the title of executive VP of <unk> direct sales segment.

And I will now turn the call over to Kathleen Simpson Taylor, our CFO to discuss our financial results for the second quarter and first six months and fiscal 2021 in more detail.

Lane.

Thank you, Greg and good afternoon, everyone turning to our financial results. Our revenue for fiscal Q2, 2021 increased 44% to 152 billion from 1.06 billion in Q2 of last year the ink.

Kris and revenues was primarily due to an increase and the total amount of gold and silver ounces sold and higher selling prices of gold and silver.

For the six month period, our revenues increased 33% for $3 three 8 billion from 2.54 billion and the same period last year. The increase in revenue was primarily attributable to an increase and the total amount of gold and silver ounces sold and higher average selling price.

And of gold and silver.

Gross profit for fiscal Q2, 2021 increased 131% to $18 8 million or one point and Q4 percent of revenue from $8 1 million or 0.7, and 7% of revenue in Q2 of last year.

For the six months period gross profit increased 233% to $54 9 million or one six percentage of revenue from $16 5 million or 0.6% of revenue and the same year ago period.

The increase in gross profit for both the quarter and the six month period was due to higher gross profit earned by our wholesale sales and ancillary services and direct sales segments.

SG&A expenses for fiscal Q2, 2021 increased 15% to 9 million from $7 9 million in Q2 of last year.

The increase was primarily due to increases in insurance costs, and 0.5 million financial and tax consulting costs associated with the acquisition and zero point for million compensation expense, including performance based accruals and zero point $3 million and 0.1.

$1 million of advertising expense.

The increase in SG&A was partially offset by decreases and operating expenses and 0.1 million associated with our direct sales segment, and depreciation and amortization expense reduction and 0.1 million for.

For the first six months of the fiscal year SG&A expenses increased 18% to 19 million from $16 1 million and the same year ago period. The increase in SG&A expenses was primarily due to increases in compensation expense, including performance based accruals.

$2 2 million insurance costs, and zero point for million financial and tax consulting costs associated with the acquisition of zero point for million computer software costs, and zero point $2 million and advertising costs, and 0.2 million and the increase in SG&A was.

Partially offset by decreases and operating expenses of 0.3 million associated with our direct sales segment and 0.2 million for depreciation and amortization expense.

Interest income for fiscal Q2, 'twenty 'twenty, one increased 14% quarter over quarter Q4 dollars 5 million from 4 million in Q1 on fiscal 'twenty 'twenty, one but decreased 27% from $6 2 million in Q2 of fiscal 2020. This is.

As a result of fewer secured loans outstanding due to the drop in silver prices in Q3 of fiscal 'twenty and 'twenty.

For the six month period interest income decreased 29% to $8 5 million from 12 million in the same year ago period. The decrease for both the quarter and the six month period was primarily due to lower interest income earned by our secured lending segment, partially offset by higher other.

<unk> finance product income.

Interest expense for fiscal Q2, 2021 decreased 1% to 5 million from $5 1 million in Q2 of last year. The decrease was primarily due to a reduction and loan servicing fees, partially offset by an increase in interest expense related to product for.

Financing arrangements for the six months period interest expense decreased 9% to $9 3 million from $10 2 million and the same year ago period. The decrease was primarily due to reductions and interest expense related to our trading credit facility and loan servicing fees partially.

Really offset by increases in interest expense related to product financing arrangements and liability on borrowed and metals.

For the second quarter of fiscal 2021, net income attributable to the company totaled $8 9 million or $1 16 per diluted share. This was a significant improvement from net income attributable to the company of $1 2 million or 17 cents per <unk>.

Diluted share in Q2 of last year.

For the six month period net income attributable to the company totaled 32 million or $4.21 per diluted share, which compares favorably to $1 4 million or 19 cents per diluted share and the same period last year.

Turning to our balance sheet.

At quarter, and we had $14 9 million of cash compared with $52 $3 million of cash at the end of fiscal year 'twenty and 'twenty.

Our tangible net worth at the ended the quarter with $104 9 million up from $91 million at the end of fiscal year 'twenty and 'twenty.

That completes my financial summary, now I will turn the call over to Thor, who will provide an update on our key performance metrics for.

Thank you Kathleen.

Looking at our key operational metrics for the second quarter and first six months of fiscal 2021, we sold 479000 ounces of gold and Q2, which was an increase of 12% for Q2 of last year for down 34% from the prior quarter.

The six month period, we sold one 2 million ounces of gold, which was up 20% for the same period last year.

We sold $21 2 million ounces of silver and Q2.

Which was up 51% for Q2 of last year and down 12% for last quarter.

For the six month period, we sold $45 5 million ounces of silver, which was up 30% for the same period last year.

Sales ticket volume, our second key metric decreased 16% to 29000 29797 and tickets for the prior quarter decreased 3% for.

Q2 of last year.

For the six months period wholesale ticket volume decreased 3%.

55138 tickets for the same period a year ago period.

And our ticket volume decreased our average order size, particularly increased versus the comparable prior year periods, driving an increase and overall revenue.

Okay.

The third key metric, we evaluate is inventory turnover, which is a measure of how quickly inventory has moved during the period.

For the second quarter, our inventory turnover ratio was three six.

Which was down 28% from 5.1 and the prior quarter.

9% for three three and Q2 of last year.

For the six months period, our inventory turnover ratio was 7.9, which was down 13% from 99, one and the same year ago period, the decrease and our inventory turnover ratio was primarily due to higher product financing arrangements.

Finally, the number of secured loans at the end of the quarter totaled 1320 for increased 18% for the prior quarter and a decrease of 65% from Q2 of last year the day.

And our value of our loan portfolio at the end of the quarter total of $95 8 million, which is up 14% for the prior quarter and down 37% from Q2 of last year.

It is important to keep in mind that typically it's the number of loans increases during periods.

Rising precious metals prices decreased during periods of declining precious metals prices and the past three quarters, our silver prices have rebounded we have experienced growth and our CFC loan portfolio.

That concludes my prepared remarks for now.

And I'll turn it back over to Greg.

Okay.

Thank you for.

Our business continues to benefit from a sustained rally and precious metals and the acquisition of Jam volume is truly transformative and will allow us to take even greater advantage the burgeoning demand for precious metals through a mark's expanded online and E commerce channels.

And this confidence is supported by a mark's favorable competitive position and industry, leading platform and proven business model. We believe this will translate to continued growth and profitability and the years ahead.

Before we open the call to questions I would like to thank.

Our valued shareholders for your continued support and confidence and myself and a mark.

Without your continued support this transition this transaction would not be possible.

I would also like to extend a warm welcome to the entire 100 person plus J and boy and team along with their valued customers partners and suppliers.

We look forward to have and you joined the growing <unk> family.

Operator, please provide the appropriate instructions for the Q&A.

Thank you at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is and the question queue. You May press star two share and move your question from the queue for participants using speaker.

Equipment and may be necessary for you to pick up your handset before pressing the star key on Momo.

While we poll for questions.

Our first question comes from the line of Craig Irwin with Roth Capital Partners. You May proceed with your question.

Thank you good evening and congratulations on this really interesting acquisition it looks it looks like and exciting opportunity that you bring them together.

And.

Thank you Craig.

My first question I wanted to ask.

It's about the synergies for jam packed with the.

And the core EMR platform can you maybe share a little bit more detail on how JM and Goldstein fit together and maybe are there. Some some external suppliers that can be moved from.

<unk> moved over to a Mark and then how does this fit or how does this impact.

Core operations a day.

Mark.

Well I mean, I think the synergies we have seen particularly over the last 12 months are very enlightening to us.

Believe that.

What we have witnessed with some of the weeks and months that we've had where dzhambul you and has had unprecedented demand and increase and transactions as well as gold lines.

Improved performance and the amount of transactions that they're conducting is theres really no substitute for having an integrated inventory and logistics system.

And with with JM or with Goldmine, and and I think what what we've seen now two.

Two or three times.

In calendar year 2020, and.

And what we've really seen a with the events that took place the first week of February where we had.

Unprecedented amount of.

Volume and customers coming into the marketplace.

Is that having the material a mark having the material and in one location and having it available to jam bullion or gold line to sell immediately.

It is just it's a real game changer, and and it really helps the retail facing units.

Provide product and and get the product and the customer's hands faster than anybody in the marketplace and I truly believe that this combination will allow us to just really take advantage of these opportunities when we have the ability to move inventory from a march to a J M.

Customer and 'twenty for 48 hours and same with the goal and line customer and.

And that ability to have product available.

And so really really allows us to add new customers and two to sell a customer.

And as much as we possibly can or as much as the customer wants and.

Whether it's.

The silver con men or whether it's the sunshine meant or any of the other suppliers and a mark has a mark size and ability to inventory product finance product very cheaply and then make it available and a real on a real time basis to retail customers through Jr.

And we're through Goldmine is really to us a game changer and and we feel.

It's just a natural progression, but but really really seen seeing the machine work and seeing.

100, or 120000 packages go out and have months to retail customers through through our logistics sites and delivering those quickly.

Is really you know really what propelled us and caused us to really take a look at this transaction and be very enthusiastic about it.

Excellent. Thank you.

My second question is really about macro so you know I really loved the metrics you shared.

Active active users up 70% year over year total years is up 30% more than more than 1 million users added to the platform.

There's a lot of things being tossed around these day stagflation inflation and stimulus spending.

All scary a sales for investors and everybody is looking for for inflation protection.

Can you talk a little bit about how this is impacting the psychology of customers out there and are you seeing indicators of what would you share the best indicators.

And that we're seeing a more committed more active pool of buyers.

And you know just as an aside how does bitcoin fit into the into the picture. It's it's something that also comes into the the.

The general conversation when we are when we talk to investors about the increased.

<unk> interest and increased.

Our commitment of buyers to have a portion of their portfolio and net.

And precious metals.

Thank you Craig for a very broad question and I'll leave it to you to keep track of if I answer each one of those and order or not but.

Let's start with with macro events and the last 12 months I think that.

You can you can pinpoint very very easily <unk>.

And the events in March of 2020, and the Covid and the.

Pandemic and we can we can definitely point towards that.

From a logistics standpoint, and from just the overall world kind of shutting down and slowing down and and a little a little bit of a panic buying.

Through March April May and June.

And and.

That customer I think was probably more closely tied to our existing customers and our.

Customers that are familiar with the marketplace.

I view that customer base completely different than what we saw in August and September and then what we are seeing today and January and February I think there is.

Quite a bit of difference and the mentality of the buyer.

And I think it's a very positive I think that for us.

When we when we got to.

June July and we did see a little bit of a slowdown and in new customer acquisition, and we did see a little bit of a slowdown and ounces sold not for a long period, but for 30 days or so.

And you kind of believe there that maybe this was just COVID-19 related.

But what we're seeing now and what we've seen since since August and September we've just seen.

Much more macro interest in the stimulus and political issues and.

And the devaluation of the dollar we are seeing all the big the Big Buzz words that are out there right now and we're seeing that translate into the type of buyers that we're seeing and and and I will say that although I don't believe there is a.

Correlation necessarily to a bitcoin buyer versus a physical precious metals buyer I will say that what's motivating people to buy bitcoin is probably motivating our precious metals customers and the new customers that are on in the marketplace, which is a <unk>.

Macro fear of economic deterioration.

On the devalued dollar.

Inflation, and what is going to happen to the purchase price and the ability to use existing dollars and what will that cost and what will products cost and the future. These are all things we are hearing.

Think that Michael and I are extremely confident and optimistic that the quality of the customer and we see this at gold line, we always kind of look at the different type of demographic and buyers.

And the quality of the buyers that we have added to the platform and the last just five to six months and.

The average order size the per.

Pondering to buy a little bit more gold and silver.

We just see a bigger wallet and a much bigger order size as well as first time buyers coming in and buying Cigna.

Significantly more in some cases and we've seen before.

I think it's very it's very telling and historically the goldmine buyer, we've seen as a bit more debt.

More conservative a little bit older a little bit more interested and macro economics and issues that are going on and what we what we saw.

Early on and JM volumes.

Evolution was a buyer that bought a little bit.

Smaller average order size and generally bought silver and and a lot of cases bought the dips and bought when we saw price drops.

As somewhat of a bargain shopper.

And the last six months that that.

Has changed completely and gold line and JM buyers and new customers are much more aligned much more similar.

And particularly on the JM side, we're seeing much higher <unk>.

Average order size and much higher.

And much higher preponderance to gold and a higher initial order.

I've seen some customers and.

J M.

Let's start off with an initial order of five to $10000 and they end up.

Over a very short period of time buying.

Six seven figures of precious metals.

And that's that's very very positive and and certainly one of the reasons why we.

We are very excited about this customer base.

That we are acquiring.

The other thing, which I just wanted to make a very strong point out or is that in spite of.

A lot of people, who believe that bitcoin.

And is somehow going to be the next currency or the next and then.

Next hard assets.

Hard assets.

We've seen.

And in conjunction and very closely tied and parallel as bitcoin has gone from $10000 to $40000. It's very interesting to us that we have also experienced a record increase in new customers with a very high order size, which I just talked about which would indicate to me that although.

And there are circles might cross a little bit as it relates to what theyre looking at.

They actually can and do perform in parallel and in conjunction through the exact same economic uncertainties.

And then.

I don't want to get too much into what's what's happening, we're seeing and the first quarter, but certainly the events that JM bullion and gold line and other precious metal dealers.

Experienced January 30, 31 and February one.

As it relates to.

The red it buyers or the or the wall Street debt buyers I mean, we saw over that weekend and unprecedented amount of new customers added to the platform.

And just you know.

New customers that we've never seen before that we're just a different a different type of buyer and a different demographic and and to be quite honest it put tremendous pressure on the physical metal.

Product side.

But I'm very happy to say that Jay on board, and Hey, Mark and gold line for three of US together delivered a tremendous amount of packages and product and and.

And did it seamlessly.

To a whole new group of customers, which gave them a very good first time experience and precious metals.

And excellent Greg.

Also wanted to ask about the expansion.

And the capacity expansion over its silver town and how is the new pizza oven and household housekeeping.

And the Debottlenecking that you've been doing there working.

Are we are we operating close to maximum capacity now.

Today, we're at we're operating at about 550000 ounces, a week and production.

And we did have just due to logistics and the pandemic, we had a little a little delay in receiving the new furnace our pizza oven.

I'm happy to say that and as we speak it is being put together and unpacked at silver town meant and.

And I think thats.

We're looking forward to bringing that capacity online within the next couple of weeks I think that.

We will be comfortable.

Within the next seven days, we will be able to start.

Forward selling that production.

Probably for delivery around March one.

So we will have that capacity on line for the a mark triggers to be to start selling and for.

J M to start selling.

And within the next couple of weeks, but so far we're very.

The machine arrived in great shape there.

On the reconstruction and putting it together is going well and we're very happy I would also like to add debt.

Michael had the foresight three or four months ago to buy his own pizza oven and that will be delivered and a few weeks and.

Through this process with Michael and J M.

And we're happy to report, we have room, and we will be adding the second furnace and pizza oven to the silver town facility and Indiana, probably sometime in April or May.

And thank you and then last question if I may.

And the results for the quarter.

Your numbers are pretty good for the loan book right your secured loan book.

18% growth sequentially Youre doing a good job rebuilding that book after the volatility.

Kind of shook it out earlier. This year is there may be an opportunity to market secured loans to jam customer. So is there something that might be able to accelerate growth and expand the opportunity over the next number of quarters.

The simple answer is a strong yes.

And I would say that all of the products that Mark has and will only make the customer experience better for the J M customers and then obviously.

Three.

Retail Internet buyers, who love precious metals that hey, Marc can now offer whether it be storage whether it be finance.

You know all kinds of things that we will be able to now offer.

The JM customer base, plus all the things that Michael and I have talked about over the last six years that we really believe.

Now will be the time to introduce products I think with a combined staffs and the combined brainpower.

We will we will quickly be integrating things that Michael as you know as he has operated jam boy and and just focused on growth and delivering products I think having the a mark team behind him and being able to delegate some of the ideas that we've had.

Together, we're very enthusiastic about again, the one plus one equals three or four as it relates to being able to to really create and unparalleled experience for the J M customers not to mention <unk>.

As I said and my comments Mike.

Michael and his team and Chamberlain and are one of the best that I've ever seen as it relates to.

Online marketing generation of new customers, bringing new customers.

Efficiently price wise and taking care of them.

Onto the platform.

And we've experimented the last six months and actually had JM boy and provide some online marketing for gold line.

And in a limited capacity and the success, we've seen for Michaels team to be able to attract and generate the demographic that likes the gold line platform has been has been just fantastic and now that we're together I can't wait to see what.

Michael and his team can do to bring more customers to the gold line platform as well as you know.

And look for ways that gold line and it's it's customer facing products.

Can meld and B connected to what Michael has done with Jay and boy and customers.

Thank you for taking my questions and congratulations again for a really exciting acquisition here, it's going to be fun to watch.

Thank you thank you Greg.

Our next question comes from the line of Keith <unk> with B Riley FBR you May proceed with your question.

Hey, Thanks for taking my question.

Hello and.

Good to hear for me again.

Yeah.

Hey, congrats on the acquisition and and Michael welcome to a mark.

Greg if I heard this correctly was pretax income for JM fully and $62 million for 'twenty and 'twenty.

Yes, you heard that correctly.

And that's on $79 million of growth gross profit dollars.

Correct.

So 78% of gross profit dollars are going to pretax income. It seems is is there an opportunity for you know kind of further expansion on that margin take or do you think there's some investment there just help me understand what you're seeing from also a P&L opportunity per.

Got it.

New products and told them.

Yes, I'm going to let Michael answer that because he has some <unk>.

Some really exciting plans for.

New products.

Products that are in high demand.

And with a little bit better prop.

Profit margins, but I'll, let Michael talk to that and maybe Michal and go through some SKU numbers of where we are today and where we hope to be with the help of a mark and all of our different vendors and suppliers.

Yeah. Thanks for the question.

I think theres certainly the opportunity to expand our baseline margins going forward, primarily through new and exclusive product development that we'll be able to do with a mark.

Historically, we've been pretty much predominantly focused on customer acquisition and shipping packages and frankly, we've had all of the demand that we could even deal with so this is an area of opportunity that now that we have additional resources and you.

The team there to help us with the supply chain and new product design and I think we'll be able to bring a lot of these items to market.

So right now historically, we've been somewhere between one and 2000 unique skews on the website.

For a little lower right now because we've sold out of so many items.

But going forward I would say that our target will be to build for three to 5000, Skus and the next year or two.

And the bulk of those which we add will be higher margin products than we've historically offered more collectible unique custom type coins.

And so looking forward to work and on that together and think we have a lot of opportunities there.

Hey, Thanks for that Michael I think the other day.

And I wanted to touch on and this could be both more of kind of on the current environment and what we saw here and in January and February as well as just kind of the opportunity.

And Jim Bullion and a mark with the supply chain right. So there's a lot of places that don't have physical product and stock I guess can you maybe help the the folks listening to the call understand what <unk> supply chain, and and jams axis and reach to customers.

How does how does that work together kind of now and also going forward to service them.

And where maybe at other locations, they're just there's no physical and and how does that relate to your spreads.

Yes.

You hit the nail on the head with that obviously when you know that.

Not enough product out there and our competitors don't have certain core skus, our ability to have those and stock is extremely meaningful.

We have so much traffic and customer activity.

We're essentially only constrained by how much product we can get so obviously this partnership completely changes that dynamic to where we can be front and blind to access the silver production.

On a mark that authorized purchaser at every relevant government and then and the world. So this is really a game changer for us in terms of being front of the line to keep our products and stock and as you mentioned, obviously, if we have stuff that other companies don't have the premiums you know move in our favor accordingly, and that's it.

We're excited about that as well.

Thanks for that and.

Greg maybe if you can comment on.

Route to potentially financing the transaction.

It seems like there's a portion that's going to be a mark shares and the other portion seems to be cash. So I'm just trying to get a sense for how you would imagine being able to complete the transaction and you can speak to that please.

Sure Yeah.

We wanted to we obviously want to take advantage of any opportunities we have to finance it and that's in the best interest of all the shareholders that we.

We have.

I think as we said and the release we're looking at.

A combination of.

Company cash potential equity offering and <unk>.

Potential debt offering.

And we're exploring.

Everything right now our friends at Davidson, and and Roth are helping us with that and explore different opportunities and.

We believe that.

There's plenty of them.

Supply out there for us to put this together and.

And we look forward to getting started on that and the board and myself and we'll be looking at.

What's the best deal for the shareholders and and that's you know that's what we're focused on but we want to keep all of our options open and.

See what it looks like the best opportunity for a mark.

Great. Thanks for that and for if I can throw one your way.

As far as kind of the current environment and volatility and spreads.

Can you maybe talk about what you guys are seeing just given the supply constraints and given the elevated level of interest and precious metals.

Yeah, I mean, we're continuing to see.

Elevated spreads as we've talked about on some of these previous calls.

Really.

Starting with the pandemic.

And the spring time and.

Continuing now into almost a full year.

As Greg alluded to there is really a number of tailwind.

Tailwind for and we're continuing to see that really are not COVID-19 related whether it be events and Washington and other geopolitical activities.

You've heard everyone on this call talk about where physical demand has been so youre continuing to see strong demand.

You've had issues like the.

The red it folks running silver prices up and down very rapidly quite recently really on all of those conditions are continuing to you.

Yes, the state and marketplace, where you're seeing.

And usually high premium spreads at times as Greg said, we've seen we've seen the market slow and come back but in general we're continuing to see pretty strong spreads in particular and some other products.

Fantastic.

Thanks for the color guys and continued success.

Great.

Our next question comes from the line of Mitch <unk> with Wedbush Securities. You May proceed with your question.

Hi, Greg.

Hello, Mitch.

Nice job and.

Adding to the business.

Yes.

A couple of questions.

Yes.

After you build Vegas, and we first met one of the things Youre going to do is build your facility and Vegas menu bought silver and gold mine and this continues.

And then.

Sunshine.

Right.

For most of that period of time and the market was sort of in a funk and you took some market share from a lot of folks.

And.

And I'm wondering if you can just speak to what that gives you in terms of pricing power now what it gives you in terms of flexibility and then whether it makes sense to at some point bring all those things together or if it's better that they did they all keep their various little platforms out there.

And.

And.

And contribute that way for pars.

As opposed to being part of the E. J M. A day for the brand.

Right, Yeah, I mean, I think as it relates to.

The first question as it relates to having the supply and being able to make sure that kmart customers have have supply and have product I think certainly the sunshine and silver on deals are important to that.

I believe that.

As we've talked about before our guys at silver town and.

What they've been able to accomplish and ramping up and working 24, seven and producing the quality of products that they've been able to do and.

And just make products that silver time meant really had never made before from it.

A different sizes different qualities different designs.

And it's really helped create new skus for all for all of <unk> customers as well as help Jan.

Create new products that their customers are asking for.

And I think that.

You know.

Sunshine as you know, we're very excited about our investment and Sunshine, Tom power and Sunshine is just.

Great operator has been doing this forever he really sets the gold standard as it relates to.

Quantity of ounces and quality and that's.

Okay.

Proven by the fact that all of the sovereign mints and come to him for you know for the work he can do and and I think that silver town as you know.

A great relationship with Tom and Sunshine.

Jamie and.

And so overtime.

Great relationship with the guys and Sunshine and I think they are both learning from each other and I think it's been what we've really found as debt.

Each each site each and each mid does a little bit different product and very complementary.

Definitely all rowing in the same direction.

And so.

I don't at the moment believe net.

And Theres really any reason not to run all of our units as independent brands.

I think that.

And that Michael and J M.

And the acquisition of Provident and metals about a year and a half ago.

And and.

Integrated that very quickly into the JM volume platform, but continued to operate profit and as a standalone brand and website and to be honest. What we've found is that debt that customer base at Providence is a unique.

Our new unique subset of of the precious metals marketplace, and the fact that customer base likes the Provident brand Michael has been able to bring back a number of products that provenance sold.

Years ago that day.

On a discontinued and Michael was able to manufacture those products with David Madge and Jamie has helped at the silver town man and he's he's been able to ship.

To bring back a number of new products that the provenance customers really wanted to see so.

I mean, I think we we run as one platform as one brand, but my style is and I'd like to let the different brands have their own anonymity and.

And.

I feel like.

I feel like that's what works and our and our business a day Mark.

Great.

And then I've got a couple of other kind of quick ones.

And as we did with <unk>.

With GM bully on you established and state back in 2014, and I guess at some point established and.

Stake or a convertible loan and Sunshine and then here when business gets good.

And we learned you had these and so.

And so it sort of begs the question without giving any names.

Are there any more of these companies out there that.

Or sort of strategic and the industry on pieces of debt.

Debt that would look forward to possibly adding down the road.

For sure you know I think that.

I think that again as Michael Michael demonstrated in the Provident deal.

They had a unique following and they had a diverse customer base that on.

And that was.

And that like the Provident products.

And I think that.

Certainly.

As we look at opportunities out there I think.

Geographic location is important I think certainly.

Our customer and Canada, our customer and Europe might.

Right.

That customer may like dealing with a local company and.

And I believe that you know.

Mark is very well positioned.

That is if the opportunity presents itself and.

I think this.

Michael and I will certainly look at every opportunity, but but I do believe that there is.

And the potential for more consolidation and.

As we've said and our filings before.

We have a on an.

And opportunity and an option to take on greater stake and Sunshine.

And and that's something as is Tom.

It's Tom believes its a good a good thing to do and as Tom gross whose business.

I don't see any reason why and mark wouldn't take advantage of.

We are we have a.

And option to convert our debt into equity and.

And as Tom performs and Sunshine performs I think we will definitely take a strong look at that.

Super.

Who is going to buy.

The bars that come out of the pizza and.

And this and are these something that debt.

And are currently available on the market here and the U S.

I believe that the guidance thats overtime and are going to be able to produce product there that.

No.

Comes out of this machine that is very similar to other products and the marketplace that are actually and poured or struck.

This product and these will be cash products.

And I would think of it a little bit more like.

Let's call it and silver you would call for 100 ounce bars are the most likely product debt.

We can make very efficiently and cheaply and this machine.

It's not going to take the place of <unk>.

On a real high quality struck one ounce silver coin.

But I believe we can mimic the quality of our poured bar with this machine and do it very efficiently. The beauty of these machines. These two machines or they run.

Pretty much automated 24, seven with very very little human interaction.

And we just believe it's a game changer and.

And we could really use right now.

Xtra.

Million and a half to 2 million ounces a month of silver product that these machines will be able to make hopefully within the next three to four months and.

Again.

Give JM and give all the day mark customers access to product that they really need right now.

Sure.

One final question.

At the U S Mint.

Where is your allocation right now roughly.

With the U S mint.

Yes.

We generally get anywhere between 25 and 35% of the of the silver one ounce of Eagles.

And the gold gold product.

There's a little bit lower than that but it can be around the same numbers.

So.

The other the other event that's happened and the last few weeks in conjunction with.

And then some.

Significant increase in demand is that the U S. Mint has been on allocation and then.

Had some limitations on what they can produce and.

Certainly from what Michael and I can see right now there's there's more demand for the U S mint products and what they can produce so we're seeing we're seeing some shortages there.

We've asked all my questions.

And congratulations and thanks for taking the time.

Thank you.

Our next question comes from the line of Chris Sakai with singular Research you May proceed with your question.

Hi, Greg.

Just had a quick.

I had a question on.

And your sequential the sequential ounces of gold and silver sold.

And ticket volume and inventory turnover on.

All sequentially seemed to be decreasing.

Wanted to see if.

Without.

Any of the the Robinhood frenzy is are we seeing a.

And some sort of industry trends here and I wanted to see as well what Michael had to say about this with <unk> at JMP.

Are you talking about our ounces and ticket counts in in Q2 that we just reported are you looking at those that they are down from the previous quarter was that the first question.

Yeah, Yeah, I would attribute that a little bit of timing.

And I think I can speak for Michael on this because we talk about it all the time.

And there was a.

And in our Q2.

Two the election, I would say that that demand.

Was <unk>.

Good.

And for whatever reason after the election, we saw a little slowdown and November I think it was just everybody catching their breath I mean, it was a it was.

A big buildup to the election, and I think that for.

For the the final three weeks of November and probably the first two weeks of December we did see a little bit of a on just to take a breather and catch your breath kind of thing.

But but but I will say that in the last week of December and certainly the first the first five weeks of 2021.

We are seeing.

Back to very significant.

<unk> good.

Good good ounces good ticket count could good premiums.

And it's just we go through these periods, but I am I think both Michael and I are.

Very excited and interested and how the demand has come roaring back and maybe Michael can talk a little bit more towards what what he's seen and the last five or six weeks.

Yes, I would echo what Greg said.

The latter half of December I think particularly after the Senate runoff elections into January we started to see things really pick up.

Across all of the products, we offer but particularly on the gold side.

And then.

And the end of January Greg touched on this earlier, but the the whole silver squeeze movement on Red and they've got all those media attention that really spurred silver demand that we just haven't seen before.

So we're just trying to keep up with it at this point.

Okay, great well, thanks for that and I look forward to seeing the next quarter.

Great and thank you.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Our next question comes from the line of Richard Grillage. It's R. E. G Capital Advisors. You May proceed with your question.

And I have two questions. The first is.

What is the balance sheet of jam bullion looked like in terms of the is there any debt attached.

Attached to it.

There is no debt.

Our transaction contemplates by and JM volume with no debt and a significant amount of tangible net worth that we will acquire as part of the deal.

Jam also anticipates doing a dividend prior to closing.

The amount of tangible net worth it we will acquire.

But the the transaction contemplates no JM bullion debt at closing.

Thank you and in terms of your financing the cash portion of it.

And while it was mentioned to converted possible convertible debt offering.

Are you considering at all just a straight debt offering.

I think that we are considering everything and any and any app any product or any anything that we can look at.

And I don't think.

We've settled on any one thing yet, but that's certainly a day.

Debt offering or an equity offering is definitely possible I think also.

Our balance sheet and and our cash gives us flexibility to do whatever whatever is and is in the best interest of the shareholders and we're taking a very careful and close look at that.

And do you believe that there's an opportunity for a private equity offering.

On a premium to what the public equity offering might be.

That is that is not something I've contemplated, yes, yes, but I appreciate you offering the suggestion.

Thank you good luck.

Thank you.

Our next question comes from the line of Craig Irwin with Roth Capital Partners. You May proceed with your question.

Thanks for taking the follow up.

I know this is a hard question to answer because of the day availability of product right now, but if you were to compare.

Peak fear right and in the.

And when Covid was becoming a real issue.

And activity recently with Wall Street Birch read it.

How would you compare the differential activity sort of on and on a weekly basis.

Between the different peaks in demand.

And would you say that.

You know this.

Surgeon activity, we've seen recently.

Is similarly as broad based.

And would you maybe call it broader based on the number of incremental.

Incremental buyers up more than 100% year over year in the market at this point.

I mean I'll try to answer that I mean, I don't know I can't really get into the mind of every buyer of silver or gold right now.

But I will say that.

The peak.

And the quickness and the ability to just rally a group of people to buy the same product all at the same time is probably not something we've ever seen before.

I would say that that is unprecedented and I think if you if you look at.

The weekend of.

And the last two days of January and February one and you went to the <unk> envelope.

And then just.

The amount of silver that traded on the London exchange.

I don't know that theres ever been a combination of physical buyers ETF buyers and.

And futures buyers and did have ever come together, so quickly and a 72 hour period and I think thats.

You know.

It's definitely unusual for us.

I think it says a lot about how little silver is out there and how little gold is available and net win.

A brand new group of people decide they want to buy.

Bye, bye and product or buy a stock or buy and equity.

It definitely is a game changer and I think that.

We're very.

We were we're very curious and we want to see how this plays out and.

Hum.

We will do everything we can I mean, Michael was on CNBC, a few times through that.

We were mentioned Jam boy and was mentioned and a number of pieces that promoted and the best place to buy silver.

And that so.

And that kind of promotion and that kind of exposure and Michael and jam bullion to the retail silver buyers.

It was really just astonishing for us.

Excellent and then and then another follow up question. So acquisitions like this for never completed and a fortnight right. You've obviously been working on this for several weeks can.

Can you okay, that's a confirmation and so this predates the the activity.

We've seen and the last couple of weeks can you maybe.

Clarify for us.

The metrics the cut.

Accounts are these updated for the activity and the last couple of weeks or are these maybe.

December 31st numbers.

And that that might need updating after all the all the metrics are in at the end of your March quarter.

And we just we just.

Michael and JM just finished their audits so the numbers youre seeing I believe our as of December 31, So they do not yet incorporate the.

The activity that we've seen in 2021.

So.

We we've.

We've identified some metrics that we really want to use going forward and we're looking forward to comparing.

What will be a Mark's Q3 now.

Once we have that information from J M. At the end of this this current quarter, but but theyre not theyre not in those numbers at the moment.

Okay, and then can you maybe quantify for us or estimate for us.

What the Q1 activity looks like as far as increased customers.

Increased repeat customers.

With the with the debt that's very strong activity, we've seen and the last couple of weeks.

And that's probably not.

Not good to talk about exact numbers.

And we'll just say that when.

When we have numbers and we can put out we will and.

Right now I think that.

I can't imagine you know really.

We havent have had just a tremendous amount of new customers I think it's been a very active period for new customer acquisition and certainly from the numbers that we're seeing for related to <unk> performance and <unk> performance. The first five weeks or.

And that's been particularly particularly robust and active.

That's great and thanks again for taking my questions.

And thank you.

At this time. This concludes our question and answer session I'd like to turn this call back over to Mr. Roberts for closing remarks.

Thank you Laura.

Thank you all for joining our call today as always we appreciate your interest and continued support we look forward to keeping you apprised of <unk> progress going forward.

Before we conclude today's call I would like to provide a Mark's safe Harbor statement that includes important cautions regarding forward looking statements made during this call.

During today's call day were forward looking statements made regarding future events statements that relate a mark's future plans objectives expectations performance events and alike are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, MS Securities Exchange Act.

And of 1930 for future events risks and uncertainties individually or in the aggregate could cause actual results to differ materially from those expressed or implied and these statements factors that could cause actual results to differ including the following for pellets.

Execute the company's growth strategy as planned greater than anticipated costs incurred to execute the strategy changes and the current domestic and international political climate and increased competition for a much higher margin services, which could depress pricing the failure of the company's business model to respond to changes and the market environment.

And as anticipated general risks of doing business and the commodity markets other business economic financial and governmental risks as described and the company's public filings with the Securities and Exchange Commission. The words should believe estimate expect intend anticipate foresee plan and similar.

Question and variation and therefore identify certain of such forward looking statements, which speak only as of the date on which they were made and additionally, any statements related to future improved performance and estimates of revenue and earnings per share on forward looking statements. The company undertakes no obligation to publicly.

Date or revise any forward looking statements readers are cautioned not to place undue reliance on these forward looking statements and finally I would like to remind everyone that a recording of today's call will be available for replay via a link and the investors section of the company's website.

And for joining us today for a much earnings call. You may disconnect your lines at this time.

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