Q3 2022 A-Mark Precious Metals Inc Earnings Call
Good afternoon.
And two the amax precious metals conference call for the fiscal quarter ended March 31 2022.
My name is Holly and I will be your operator, that's often.
Before this call back issues its results for the fiscal third quarter 2022 in the press release, which is available in the Investor Relations section of the company's website at Www Dot <unk> dot.
Dot com.
You can find the link to the Investor Relations section at the top of the homepage.
Joining us for today's call are a Mark's CEO Greg Roberts.
Residents or gear Jim.
And CFO Kathleen Simpson Taylor.
Following their remarks, we will open your call to questions.
Then 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 in the Investor Relations section of the <unk> website.
Now I would like to turn the call over to a marks CEO Mr. Greg Roberts Sir Please proceed.
Thank you Ali and good afternoon to everyone.
Alright.
Yes.
Hello, Thank you Ali and good afternoon, everyone. Thank you for joining our call today.
Our third quarter was another strong period for a mark as we generated $54 million of adjusted pre tax income or $4 45 per diluted share with an eight 5% return on equity.
On a per share basis, we grew adjusted net income before provision for income taxes of 11% sequentially.
Macroeconomic factors continue to provide elevated demand and strong tailwind for <unk> business and we remain optimistic.
As we finish out our final quarter of our fiscal year.
As many of you saw from our press release last week <unk>.
<unk> signed a definitive agreement to increase our strategic investment in silver Gold Bull.
Or S GB <unk>.
Providing us with increased exposure to the international direct to consumer or DTC market.
Hey, Mark will acquire an additional 40% of the outstanding equity interest in STB for approximately $44 million consisting.
Consisting of $34 million in cash and 126000 shares of <unk> common stock implying.
Implying an enterprise value of $110 million.
We have participated in <unk> success and growth over the past several years and see continued growth opportunities for a mark while leveraging our mid teen in wholesale sources of supply.
Through an extended supplier agreement with STB.
We also acquired the option.
Exercisable between 18% and 27 months after we close to purchase an additional 27, 7% interest in S. GB.
That if exercised would bring our total ownership interest to 75%.
The current acquisition is expected to close in the fourth quarter of fiscal 2021 and is subject to customary closing conditions and regulatory approval.
<unk> is one of the leading e-commerce precious metals retailers in Canada with revenue of 633 million gross profit of $41 2 million and pretax income of 26 plus million. During the 12 month period ended March 31.
<unk> 2022.
During this same period silver gold both customer base grew by 48%.
We are pleased to report that in just over a year since we closed the <unk> acquisition, we have hit an important milestone.
<unk> cumulative pre tax income before depreciation and amortization expense has surpassed the cash consideration paid for the <unk> acquisition.
We continue to remain optimistic about the prospects ahead for JMP in our DTC business.
Now I'd like to turn over the call to our CFO Kathleen Simpson Taylor.
To walk you through our financials in more detail.
And then our president Thor <unk> will discuss our kpis and operational metrics.
Afterwards, I will provide a further update of our business and growth strategy.
<unk> take it away.
Thank you, Greg and good afternoon, everyone.
Revenues for fiscal Q3, 2022 increased 3% to $2, one 1 billion from 2.5.
And then in Q3 of last year.
Increase was due to an increase in silver ounces sold and higher average selling prices of gold.
Offset by a decrease in gold ounces sold and lower average.
That's still there.
The DTC segment contributed 28% of consolidated revenue in fiscal Q3, 2022 compared to 6% in Q3 of last year.
The increase in revenue from the DTC segment is due primarily to the acquisition of JMP in March 2021.
Revenue contributed by JMP represented 26% at the consolidated revenues for fiscal Q3 of 2022 compared to 3% in Q3 of last year.
For the nine month period, our revenues increased 12% to six points.
<unk> 7 billion from $5 43 billion in the same year ago period.
The increase was due to an increase in gold and silver ounces sold and higher average selling prices of coal, partially offset by lower average selling prices.
The DTC segment contributed 27% of the consolidated revenue for the nine months ended March 31, 2022, compared to 4% for the prior year nine months period.
The increase in revenue from the DTC segment is due primarily to the acquisition of <unk> in March of last year.
Revenue contributed by JMP represented 25% of the consolidated revenue for the nine months ended March 31, 2022 compared to 1% in the same year ago period.
Gross profit for fiscal Q3, 2022 increased 6% to $72 1 million or 342% of revenue from $68 2 million or $3, 33% of revenue in Q3 of last year.
The increase in gross profit was due to higher gross profit earned from the DTC segment, partially offset by lower gross profit earned from the wholesale sales and ancillary services segment.
Gross profit contributed by JMP represented 48% of the total consolidated gross profit in fiscal Q3 2022.
For the nine month period gross profit increased 58% to $194 million or three 2% of revenue from $123 1 million or a key 6% of revenue in the same year ago period.
The gross profit increase was due to higher gross profit earned from the DTC segment, partially offset by lower gross profit earned from the wholesale sales in the ancillary services segment.
Gross profit contributed by JMP represented 46% of the total gross profit for the nine months period ended March 31 2022.
SG&A expenses for fiscal Q3, 2022 increased 54% to $25 million from $13 3 million in Q3 of last year.
The increase was primarily due to $6 5 million of expenses incurred by JMP, Inc.
Increased compensation expense, including performance based accruals of $1 4 million offset by lower consulting and professional fees of <unk> 9 million.
For the nine months period, selling general and administrative expenses increased 78% to $55 9 million from $31 3 million in the same year ago period.
The increase was primarily due to $19 4 million of expenses incurred by AMD.
Increased compensation expense, including performance based accruals of $2 7 million.
Increased consulting and professional fees of one 6 million and higher insurance costs of $0 9 million.
Depreciation and amortization expense for fiscal Q3, 2022 increased 407% to $7 5 million from $1 5 million in Q3 of last year.
For the nine months period, depreciation and amortization expense increased 865% to $24 1 million from $2 5 million in the same year ago period.
The increase was primarily due to amortization of acquired intangibles related to JMP.
Interest income for fiscal Q3, 2022 increased 13% to $5 3 million from $4 7 million in Q3 of last year.
The increase was due to higher interest income earned by our secured lending segment, partly offset by lower other finance product income.
For the nine month period interest income increased 22% to $16 1 million from $13 2 million in the same year ago period.
The aggregate increase was primarily due to higher interest income earned by our secured lending segment and higher other finance product overtime.
Interest expense for fiscal Q3, 2022 increased 2% to $5 4 million from $5 3 million in Q3 of last year.
The increase in interest expense was primarily driven by <unk> 2 million of loan servicing fees offset by a decrease of 0.1 million associated with our trading credit facility and notes payable.
Occluding amortization of debt issuance costs.
For the nine month period interest expense increased 11% to $16 3 million from $14 7 million in the same year ago period.
The increase was primarily driven by <unk> 6 million associated with our trading credit facility and notes payable, including amortization of debt issuance costs.
<unk> 7 million related to product financing arrangements.
$6 million of loan servicing fees.
Offset by a decrease of <unk> 3 million and interest associated with liabilities on borrowed metals.
Earnings from equity method investments in Q3, 2022 decreased 78% to $1 6 million from $7 4 million in the same year ago quarter.
The net decrease of $5 8 million includes a $6 1 million decrease related to J M. B, a former equity method investment, which is now reported by the company as a wholly owned subsidiary offset by increased earnings of <unk> 3 million from our other equity method investments.
For the nine months period earnings from equity method investments decreased 69% to $4 3 million from $13 9 million in the same year ago period.
The net decrease of $9 6 million increased.
$11 7 million decrease related to JMP.
Former equity method investment, which is now reported by the company as a fully owned subsidiary and this is offset by increased earnings of $2 1 million from our other equity method investments.
Net income attributable to the company for the third fiscal quarter of 2022 totaled $37 4 million or $3 six per diluted share.
This compares to net income attributable to the company of $76 6 million or $8 84 per diluted share in Q3 of last year.
As you May recall Q3 of last year included a $26 3 million re measurement gain on a preexisting equity interest in JMP and connection with this acquisition.
Excluding the Remeasurement gain net income attributable to the company for Q3 fiscal 2021 was $53 million.
Net income attributable to the company also included $2 2 million of nonrecurring costs associated with the JMP acquisition.
Our diluted EPS for the fiscal third quarter of 2022 is based on the weighted average shares outstanding of $12 2 million compared with $8 7 million weighted average shares outstanding during the third quarter of last year.
Adjusted net income before provision for income taxes.
non-GAAP financial measure, which excludes depreciation amortization and acquisition cost and re measurement gains for Q3 fiscal 'twenty two totaled $54 3 million or $4 45 per diluted share compared to $64 2 million or seven.
<unk> 40 per diluted share for Q3 fiscal 2021.
The weighted average shares outstanding for the current fiscal quarter were $3 5 million higher than those outstanding in the prior year fiscal quarter.
For the nine months period net income attributable to the company totaled $95 2 million or $7 84 per diluted share is.
This compares to net income attributable to the company of 108 6 million or 30.
<unk>.
61 per diluted share in the prior year period.
The prior year nine month period included the previously mentioned $26 3 million Remeasurement gains on our preexisting equity interest in JMP and connection with this acquisition.
Excluding this remeasurement gain net income attributable to the company for the prior year nine month period was 82 3 million.
Net income attributable to the company also included $2 6 million of nonrecurring costs associated with the acquisition of ANV.
Our diluted EPS for the nine months period is based on the weighted average shares outstanding of $12 1 million compared with 8 million weighted average shares outstanding during the prior year period.
Adjusted net income before provision for income taxes, and non-GAAP financial measure for the nine month period totaled $144 4 million or 11.
And 80, $911 89 per diluted share, which compares to $107 6 million or <unk> 48 per diluted share in the prior year period.
Turning to our balance sheet at quarter end, we had $28 $5 million of cash compared to $101 4 million at the end of fiscal year 2021.
Our prior year fiscal year, and being cash balances were higher due to our significant planned precious metals purchases in the first few days of July 2021.
Typically due in part to the U S mint release of an equally incurred.
That was defined on July <unk>.
Our tangible net worth at the ended the quarter with $271 8 million up from 226 points here $1 million at the end of the prior quarter.
Finally, as we announced in our earnings release today, Our board of Directors has declared a two for one split of <unk> common stock in the form of a stock dividend to make stock ownership more accessible to our employees and investors.
The stockholders of record at the close of business on May 23, 2022 will receive a dividend of one additional share common stock for every share held on the record date.
Distributed after the close of trading on June six 2020 to trade.
Trading is expected to begin on a stock split adjusted basis on June seven 2022.
As a reminder, this stock dividend has no impact on any individual stockholders ownership interest in a market as there is no inherent dilution and this stock dividend.
That completes my financial summary, now I'd like to turn the call over to Thorpe, who will provide an update on our key performance metrics for.
Thank you Kathleen looking at our key operational metrics for the fiscal third quarter and first nine months of 2022.
727000 ounces of gold in Q3, which was down 6% from Q3 of last year and up 15% from the prior quarter.
Nine month period, we sold two 3 million ounces of gold, which was up 3% from the same period last year.
We sold $34 5 million ounces of silver in Q3 fiscal 2022, which was up 4% from Q3 of last year.
8% from last quarter.
For the nine month period, we sold $94 6 million ounces of silver, which was up 20% from the same period last year.
The number of new customers in the DTC segment was 108400 Q3 of fiscal 2022, which was up 721% from Q3 of last year for the nine months period, the number of new customers in the DTC segment was 182000, which was up $1, 121% from the same.
Period last year, the number of total customers in the DTC segment as of Q3 fiscal 2022 was 1 million 968200, which is a 20% increase from Q3 of last year. The increase in these metrics is mainly attributable to the addition of the J&J customer base, although it's important to note.
With the 20% growth in total customers for Q3 of fiscal 2021 in Q3 of fiscal 2022 is due to organic growth. It is not attributable to customers acquired from JMP.
Total DTC ticket volume, which represents the total number of product orders processed by <unk> <unk> and <unk> increased 292% to 219924 for Q3 of last year, but decreased 5% from the second quarter of fiscal 2022.
Period, DTC ticket volume increased 902% to 677330 in the same period last year.
Also ticket volume, which represents the total number of product orders processed by our charity dust decreased 37% to $28 122 from Q3 of last year, but increased 5% from the second quarter of fiscal 2022 to deny but period wholesale ticket volume decreased 26% to 81009.
From the same period last year.
For the third fiscal quarter, our inventory turn ratio was three one which is a 16% decrease from $3 seven in Q3 of last year and a 6% decrease from three three in the prior quarter with the nine month period, our inventory turnover ratio was nine 6%, which was down 20% from the same year ago period.
Finally, the number of secured loans at the end of March 2697, an increase of 13% from the end of December and an increase of 72% from March 31, 2021, the dollar value of our loan portfolio at the end of March 2022 totaled $145 8 million, which is up 15.
Percent from the end of December and up 45% from March 31, 2021, typically the number of loans increased during periods of rising precious metal prices and decreased during periods of declining versus miles prices.
That concludes my prepared remarks, I'll now turn it back over to Greg for closing remarks, great.
Thank you Thor.
Thus far in Q4 <unk> performance has remained strong as favorable market conditions have continued keeping us optimistic about the outlook for Q4.
I am pleased to report that <unk> has successfully launched the cyber metals online platform, where customers may purchase fractional or four ounces of digital gold silver platinum and palladium cyber.
Cyber metals customers have the option to convert their digital holdings to fabricated precious metal products via an integrated redemption flow with JMP.
These products may be designated for storage by the company are shipped directly to the customer.
During our beta testing of the platform during the quarter, we accumulated 745, new customers processed nearly 1000 trades and ended the quarter with $300000 of assets under management.
The cyber metals platform was commercially launched.
Early April 2022, and we are very pleased with the level of new account registrants and the traction we have experienced from repeat customers.
We plan to expand the marketing efforts to the broader precious metals community and look forward to providing further updates on our progress during the next earnings call.
The performance of our mid tier business was truly outstanding an extraordinary in the quarter, which is critically important during periods when sovereign mints struggled to meet demand due to supply chain constraints.
During the fiscal third quarter, our silver <unk> produced an average of 750000 ounces of silver per week.
Up 81% year over year.
And achieved a new record level of production with over 1 million ounces of silver produced in a single week.
In order to capitalize on this high level of demand.
Evaluating further options and expanding our production capabilities.
And this may include an expansion of the minting facility.
We also recently completed the conversion to double blanking for one ounce rounds, which added an additional 100000 ounces per week of capacity at the <unk>.
With an additional 75000 ounces per week expected by the end of our current fiscal year.
In terms of additional strategic investments and acquisitions, we continue to evaluate opportunities within all of our segments that fit our model and can further diversify our revenue stream, both domestically and geographically.
Our fully integrated business model continues to provide us with a steady steady access to product.
Wide range of wholesale and retail buyers and sellers of precious metals, allowing us to further augment our capabilities and drive strong results for our stockholders over the long term.
Operator.
Thank you ladies and gentlemen, the floor is now open for questions.
You have any questions or comments. Please press star one on your phone at this time.
We ask that was causing your question. Please pickup your handset assisting on speaker phone to provide optimum quality.
Please hold while we poll for questions.
Our first question will come from Scott.
Ross capital partners.
Please proceed.
Good afternoon. Thank you for taking my questions and congrats on another strong quarter.
First question has to do with the number of customers you guys sell through the DTC segment. So I believe active customers tripled quarter over quarter and I am sure Thats.
It can be a lumpy number due to market dynamics, but can you guys kind of talk to what you saw with the increased activity across your various platforms.
Yes.
Happy to happy to try to answer that question.
<unk>.
The important thing to note is the new customers were up 20% quarter over quarter and that the.
Quality of the customers is as high as we have seen.
<unk>.
In total.
At the current moment in our Q4 were over 2 million customers total.
And I, just I want to stress that.
The quality of the customers.
We believe as the lifetime value of the customers and the initial order size being significantly higher than it has been in the past really indicates to us that we're in a time, where we're we're accumulating.
And attracting very high quality customers that are spending a significantly higher amount both with their initial purchase and their subsequent purchases.
<unk> hit on a point that that I was going to discuss any ways that we really are.
<unk>.
Enthusiastic and very optimistic.
If the value of the customers were acquiring right now is going to pay dividends.
Far into the future. So the environment is very good our marketing efforts.
At <unk> Gold line, our investment in Pinehurst.
As well as what we're seeing at silver global.
Just a very healthy strong quality of customers.
Great. Thank you for the color and then just one follow up for me.
As you touched on.
The large increase year over year on your production out of silver town and.
So like in the quarter, you almost had a 25% increase on weekly output.
Getting up to a million ounces a week. So can you kind of talk about how you see.
Increased <unk>.
<unk> flowing through the various business units and kind of your plans there.
With that 250000 more ounces.
Coming out of it overtime.
Sure.
This is just part of our overall strategy and our vertical integration and I think that when you see an announcement.
Related to silver gold Bull that we're increasing our ownership there as well as we negotiated an option to get to 75%.
The distribution of our product is very important and our international growth is very important to try to attract new customers around the world that we haven't you haven't touched previously, but I believe that when we talk about increased production that silver town, where we talk about increased <unk>.
Duction at Sunshine meant all of this is tied to.
Our strategy of making sure in the DTC business that we sell.
As much product as we can physically make it.
And it's all connected and we look at this on a daily weekly basis as to where that production is going to go and certainly.
What we see the guys at silver global doing what we see them doing growing right now as well as our.
Our cyber metals platform of JM bouillon as well as some other marketing initiatives within.
Within our DTC brands.
We see demand growing and it's important that.
We continue to.
As much of the sovereign mint products as we can.
And the one thing that we can control is to increase the production at our.
Hey, Mark owned properties that are that are producing metals. So I think it's all connected but I would say that.
What we see on the horizon for.
For silver global as well as some other customers that we're working on acquiring right now.
We need that we need the production to keep up with that demand and I think we're doing a very good job of it right now at 1 million ounces at the silver town than it was.
A very important milestone.
Great effort from that team there.
Jamie and Brent really put together a great quarter there.
And have not let us down.
When we're when we're able to sell and we're able to attract new customers. One of the reasons are these new customers are so plentiful and the quality is so high is that our DTC brands right now have have had product throughout the quarter, where a number of their competitors have not and that's just allowed us to really.
<unk>.
Really bring these customers in.
Sure.
The 24 to 27 production of silver town and the heightened production at Sunshine has really allowed us to do that.
Great. Thanks for the detail and I'll hop back into queue.
Thank you. Our next question is coming from Gregg <unk> at Northland Securities. Please proceed.
Hey, good afternoon, congrats on the strong results and thanks for taking the questions sure.
I guess nice to hear that.
A solid launch for the cyber cyber metals platform in early April it sounds like relative to your expectations is going pretty well I was wondering if you could maybe talk a little bit more about.
Your marketing efforts there to attract users.
Are you, providing kind of incentives for existing <unk> customers to move over.
J M. B for instance, and could you maybe talk about.
Maybe the split between new customers to that versus existing ones that are maybe coming from JMP.
Sure.
To this point.
We're pretty much focused exclusively on existing <unk> customers, we havent done any offerings really outside of those existing customers.
As it relates to marketing.
The current fourth quarter.
We're doing a number of special offerings, we have a cyber metals silver one ounce round.
That we are.
<unk> that kind of commemorates the launch of Ciber metals.
And we are also offering some discounted trading.
Options.
Two to get <unk>.
<unk> customers crossover and registered on the cyber metals platform.
So far I think that the.
The launch in April and what we're seeing early in this quarter is is very excited I would say that it's exceeded my expectations a little bit.
The demographics of what we're seeing is definitely trending younger and we're seeing we're seeing we're getting some very good data from the test and what we're doing with the <unk> customers.
And we're currently at.
As we budget for next fiscal year starting July one.
We will we will around that time most likely.
Continue to market to <unk> and other DTC customers, but we will start to market outside.
To try to attract brand new customers that have not registered or done physical business with us yet.
And we are working this quarter on our marketing plan, which we plan on being very aggressive on this and we.
Look forward to updating.
Investors on these metrics, we're going to keep the real close eye and we're going to we're going to be.
Given some updates on this as we move forward and we think it's as we've said before this is a great opportunity for us and I feel.
Super.
Optimistic and very.
Enthusiastic at what we've seen so far the platform is working great feedback from customers using the platform has been great.
And having it actually out there functioning and attracting new customers I would say we have.
A number of new ideas that maybe we hadn't thought of three six months ago of ways that we can continue to improve this experience for our customers.
Great I appreciate the additional color there and then obviously looking forward to two updates going forward, but good to hear.
If I could follow up on your recent investment in silver Gold Bull our expanded investment.
Could you maybe talk a little bit more about the breakdown in terms of what new markets. You are kind of having exposure to or maybe not new but maybe greater exposure I imagine the Canadian market is a big one.
And then kind of a.
Follow up to that.
Strategically going forward.
Do you expect maybe you are.
Focus on the investment strategy to be on other DTC brands or are you looking elsewhere.
Maybe what types of multiple ranges do you target for those types of M&A opportunities.
Sure.
I mean, we're very familiar with silver global so this was a bit of a natural for us.
We have been involved with them since 2012, so I think 10 years.
On the board of Silver Global I think since 2014 and $1 one way or another.
The four gentlemen that are the founders of the business are fantastic have been fantastic trading partners and.
Fantastic.
Partners as it relates to our minority interest in the business I.
I think they've done a great job there growth has has been significant and it has been very impressive.
In light of so many less people in Canada are so many less potential customers in Canada as to what we have in North America.
Silver Global has has shown a good.
Ability to be probably the largest online broker in Canada.
And really.
The dominant the dominant player in that business.
Theres a couple of other.
Precious metals dealers that are potentially bigger, but not that are in the same niches silver global so.
We believe that.
With the increased.
Capacity of product that we're producing as well as our our long and strong relationship with the Royal Canadian Mint I think we can work a little bit harder to get more product to silver gold bull to satisfy even more customers in Canada.
I have worked.
With the silver global team.
<unk>.
Platform in Germany.
Have.
Started to develop they've actually done quite a few transactions in Germany, I think it's a good opportunity for silver global to grow there.
I believe that.
We have an opportunity to also grow logistics in Calgary, where silver global is located we're looking at expanding.
Logistics facility, there, which will service the customers in Canada.
I also believe that some of our other DTC brands, Jim Boyd in particular.
Have struggled to satisfy the Canadian customer traffic that they get on their site.
So we're looking to possibly do some some.
Efforts to to help satisfy Canadian.
Customers that <unk> has not been able to satisfy through silver global and then finally soon.
Silver global does have.
What I consider a significant presence in southeast Asia, they have a number of customers in Singapore.
Zealand and a few other places where we we have not had any exposure historically, so I think we will we look forward to combining the mark logistics.
Product expertise with what silver gold Bull is trying to grow down there and I think it'll be it'll be a great opportunity for us.
Great I appreciate the color I'll pass it on.
Once again, if there are any remaining questions or comments. Please press star one on your phone at this time.
The next question is from Saudi Jackups as J M.
Hey, Greg how are you great sorry, how are you today.
Well I have a couple few distinct questions. So let me just go through them one at a time.
On the STB acquisition, and I guess it would also relate to our investment I should say I guess you can also relate to the Sunshine.
Minority stake you took am I understanding it correctly that the revenue and earnings.
It will not flow through to your income statement going forward.
Correct at the current 40 plus percent interest we're going to continue to.
Silver gold both similar to what we do at Sunshine.
We will account for them in our equity method, so you'll see them in our Q and our K as has now there'll be identified as one of our investments and we will we will account for them that way but.
But the overall business and the accounting on a month to month and quarter to quarter basis, we will not be consolidated into <unk>.
Financials at the moment and.
And this is.
Something that Kathleen talked about before that just under accounting rules. This is how.
How we will account for it.
And we.
We do not have any.
Real change in control of the business the founders and the majority owners are still running the business and we are here to support them, obviously, if if and when we exercise the option to take control of the business and <unk>.
Over 50%.
That would change and we would look to them.
Bring them in and consolidate them.
Within accounting for them, what would be a minority interest partner.
And it's very similar.
We do it.
Okay.
One way.
I look at it which I like to get your thoughts on as you are.
We're committing capital you have cost of capital for the 30 some.
<unk> million dollars of cash and Youre issuing stock so it is going to be greater.
Shares outstanding at a cost of capital.
As reflected in your income statement.
Most of that.
Actual cost.
And foregone income or whatever.
As a greater bigger number in the denominator of the shares outstanding but no.
Changes in net income from a GAAP accounting basis.
It's actually dilutive to earnings but it.
Widens the gap.
Yes.
Sure.
The shareholder value being created through the acquisition, it's just not run through the income statement impact the income statement suffers a little bit.
Yes, let Kathleen talk to this because she is kathleen.
We've been working on this Kathleen why don't you.
Just give a little more color because I, probably haven't explained it exactly right to side sure.
Hi.
Currently we own.
175% approximately a cyclical bull and we recorded 75% of their net income in our books and records in the earnings from equity method investment.
Hotline.
No.
If we conclude and close the acquisition.
At 47, 5%.
Such time, we would then record 47, 5% of their net income into our books and records. So we will definitely be financed funding the financing.
As we move forward subject to their continued strong performance.
Are you talking about the income statement or the balance sheet.
So.
Okay, Yes. It does so the income statement, we do but our percentage share of their earnings.
Our financials in that line item that we have entitled earnings from equity method investments and Thats kind of with all of our equity method investments including franchise.
Sunshine increased earnings since you bought them has benefited your income statement as well as <unk> going forward.
STB has been benefiting our income statement.
At that ownership interest.
Okay. If you go to our if you go to our filings.
The area, where you see investments in company ABCD.
And those those are where we account for the equity investments and they do they do get reflected in our income statements now we do report them I believe a month in arrears. So the timing of it is not always exactly.
Quarter to quarter or month to month.
But I think obviously the important.
I think to note, which we've had a little bit of discussion here on the <unk> transaction.
And I wanted to ask about.
The current really tight market conditions would seem to be benefiting you from a.
You know the prices you are getting versus what spot silver and gold bars seem to us to be as wide as they've ever been and wider than they were three months ago say.
Is there any.
Sort of short term downside to that in the sense that.
You're unable to fill orders and I say that out of sort of.
I know some French friends and acquaintances, who our customers are very up areas brands of yours, and you know it upsets me in recent months, especially the last month or two like the amount they are able to buy when they inquired.
Is less than.
They want let's say one yeah.
Yeah, and they were told that it could you know they could ship more than 30 days or something like that and I'm I'm wondering if it has put a ship and revenue recognition.
Extended at all in the J M B and other brand basis and in a way that might be affecting revenue.
No I I mean, Kathleen does a great job of accounting for this and I will say that when we sell forward.
Future production. It makes her job more complicated because she does have to reverse transactions that have not been delivered so there is extra work for her.
We are as you have noted we are dealing with fewer customers. These days than we did two years ago, because our equity ownership and a number of the biggest companies are.
Able to account for.
A larger percentage of our supply so what we do is we balance.
What we have physically and what we're making physically and what we're getting from sovereign men and what we can make it at our private mints and we're sliding customers in for delivery on a on a on a future date and.
So they are.
As it relates to J M bullion.
Goldline and silver gold ball in Pinehurst.
And a couple of our other larger customers the reality of the marketplace right now is that they're getting taken care of first.
And that <unk>.
Retail profit or that percentage of profit that they're making a higher number of ounces are being distributed and and we are the beneficiary of that because we're we're collecting more of the of the profit that's generated.
Up to the to the end user so we are balancing right now.
Smaller customers.
At.
Aren't happy about having to get in line and maybe book.
Let's call. It 20000 ounces of silver towns production four five ounce Buffalo bars that they want.
We may not be able to slot them in until Colette July 15th.
And we require them to commit.
We don't price, but the price of the metal, but we do ask them to commit in times, we asked for deposits and.
As as we look future delivery.
We have a commitment to the customer and the customer has a commitment to perform to us but it is a it is a <unk>.
Australia had very synchronized dance, we do every day, where we are looking at our calendar out 90, or a 120 days and we're quoting delivery.
Wherever we call it that delivery date is what the customer is expecting though I will say that.
Hey, Mark continues to have more product and more availability to product.
At shorter time periods, then marks wholesale competitors theirs.
Our number one competitor has been quoting August September or October delivery.
So it isn't just a market is industrywide and as you know.
That is causing the premiums to continue to be up and we mark as a major beneficiary of those increased premiums so.
It is just a function we've seen it before we've we've dealt with it before I would say, we probably haven't managed a forward book quite like this.
To this size before.
And the sustain the sustained demand has been longer but it's not anything new to us we've managed through this many times in the past.
Alright, so what are the reasons I asked that question I will check that kind of leads to additional.
<unk> is it seems to me the the growth really great numbers reporting about new account openings and in your comments.
About the numbers of transactions and tickets sizes and.
It all sounds really strong we know that the margin it is <unk>.
Really strong as high as it's ever been the price you're getting versus spot.
It seemed in my mind to add up to a greater percentage increase than what JM volume just reported in revenues.
Sequentially forget about the year over year comparison, so I I was thinking that there may be some sort of delayed revenue recognition because the account opening that transaction numbers all the commentary the margins all seem so strong team.
Stronger than the revenue comp.
Right.
Yeah, I mean, there there could be some timing issues there I I don't really spend too much time on.
This part of my analysis, I think what's really happening today, which is what I focus on us.
There is no doubt that are proprietary brands and our DTC segment are taking market share away from their competitors right now for the simple reason that regardless of where the premium's are at we have more product available for sale on the JM side or at Goldline or at silver.
Global whereas if you look at a number of the their competitors a high percentage of there.
Offerings are sold out and not available. So I think you have a combination of new customers that are.
Finding us both through our efforts to market as well as that are are DTC competitors do do not have as much product or have an even longer delay delivery.
And I think that's benefiting us.
Think that.
We are seeing.
Ah nice uptick like I said.
What we think is the the average order value an initial order value of a lot of these new customers I don't believe that's necessarily attributed to us just taking.
Customers from our competitors I think there is a.
Underlying shift in.
And just who is buying and how how big their wallet as in the quality of those customers is very good.
And I think it's important to note that.
Not all of our.
Sales at the DTC level right now are necessarily Prada.
Products were making or even products, we're buying <unk>.
Directly from the sovereign men's <unk>.
One of the one of the phenomenon that we've seen in the last quarter was a higher percentage of of secondary product that we're buying from other distributors or other wholesalers and obviously, we're paying a little bit higher price on that material. If we're buying it on the secondary market.
And that.
That may be.
At least now slightly <unk>.
Negative ley affecting our overall gross profit, but it but at the end of the day I value the.
I have a number in my head that I value new customers at with a lifetime value and we're making a little bit less percentage wise on some of these new customers because of the product mix.
To me that that is going to be.
Outweighed with the value of the new customers that doesn't necessarily reflect in the first transaction, but it certainly will reflect in the lifetime value of those customers.
Thanks and left much more straightforward question.
Is the <unk>.
Press releases tend to give.
Gap.
After tax EPS per share numbers, but for some reason pretax.
Adjusted or cash earnings, which this quarter was 445, a share is it as simple as multiplying that by the tax rate or one minus the tax rate and say that that cash earnings worth about 360, a share this quarter or am I missing something there.
Yeah, I mean, the after tax net net was three O. Six 445 reflects pretax as well as what we are now using as as an adjustment that takes into account the intangible.
And goodwill.
Amortization that we're going through as well as some of the acquisition costs from the giant bullion deal. We felt that it was good to give all the numbers.
But but but the three O. Six is is pure after tax the 445 ads.
<unk> back in the what we have is what we consider a very high.
Depreciation rate going on in this quarter as it reflects really the better success of JM voted in what we initially had planned for and that is causing us to have to accelerate some of the amortization and depreciation as it relates to the giant bully and transaction.
Right. So so you know Bloomberg when it quotes estimates on stocks quotes the adjusted per share the number that analysts are using so I think there.
Since that's the estimate that's floating out there per share.
I think it should be provided because it's it's basically that 445.
Taxed.
Yeah I mean, we're we're explained it in the press release and I think if you look at the analysts.
The analysts were.
Predicting.
A two dollar EPS and that $2 was reflected of an after tax number which which is comparable.
Apples to apples, two or three O six so I'm not familiar with what Bloomberg is doing but.
I will certainly take a look at.
And Bloomberg attempts to quote via.
Just the number not the gap number.
To tan or two nine or whatever it would actually be adjusted number from animals expectations. So it would be the fourth 45 packs.
Yeah, I mean to me I look at it as.
How much cash were we made in the quarter and how much we have in the bank versus what we started with.
And.
Obviously.
The three O six is it.
At some point the tax payment is going to go away and at three O. Six is is counting the non-cash charges.
Which.
At the end of the day I think the 445 is a little bit more reflective of what we're.
What we're actually keeping and what our caches that we're generating.
But.
We are working on this presentation and certainly if there's ways that we can refine it or ways that we can make it better we will continue to do that but I do point to the the queue tomorrow and and as well as the press release and I think we we try our best to give as much information out there as we can and and people that are used.
Thing it to forecast what we're doing a report on what we're doing I I I hope that they're they're able to digested and we're making it clear enough for them to.
To use the numbers properly as opposed to.
Quoting something that is an accurate.
Okay. Thanks, Greg Thanks for all your answers sorry for all three of US don't worry it's always great to talk to you.
Okay. Thanks, Greg.
If there will be any further questions or comments. Please indicate so by pressing star one.
The next question is coming from Tom 40.
Davidson please.
Yeah.
Alright, Thanks for taking my question for efficiency sake, all that both my questions at once.
Greg can you talked about at a high level, the pros and cons of operating a business when prices of goals are elevated for extended period of time and then second Greg appreciate your current thoughts and inflation and how that's impacting your business.
Sure.
I mean, the price of gold as we've talked about many times.
This does not.
On a day to day basis is not something we spend a lot of time on because we're fully hedged I can say that the level of volatility in both Golden Silver again in the last 60 to 90 days has been incredibly good for us both and our results and how I believe the fourth quarter has started off.
Our quarter were reporting here actually started out a little bit slow in January and we had a little hangover I think from December which again, we talked about last time was very strong.
February was better than January and March was better than February . So we have seen a significant uptick and it is in my opinion very much reflected on the volatility of gold I think you have.
Goldman in the last 30 days has had about $150 range from low to high silver has had about a three dollar range. So that is very good for us.
As usual, we had a significant drop on Monday of this week.
Where gold was down quite a bit in silver was down and and as as we usually report one of our busiest days of the month and over the last 30 days so when prices drop.
We generally tend to have much higher volumes and much.
Much busier as.
As people try to buy the bids.
The inflation question again, I've talked about it before inflation is very good for us.
Higher interest rates.
Are generally good for us.
I think it's.
Very interesting to note that gold and silver have continued to perform fairly well.
This year year to date.
Whereas the equities and particularly bitcoin.
And some of the kryptos have really been lock step in a very poor performance.
The volatility in the in the.
The questions as it relates to what the <unk>.
That is going to do about inflation I found yesterday's comments to be.
Continued denial of a problem that is really there.
There is a clear political balance right now too.
If we're really sorry for everybody that's paying twice what they paid a year ago for stuff, but we are on it and everything is going to be great I haven't heard a solution.
They really wanted to stop inflation they would have raised.
Interest rates are under basis points yesterday.
But they did and they seem to think that a series of 50 basis point.
Rises and interest rates is going to just solve this problem.
And personally I don't see it maybe that obviously, they're very smart at the fed they know what they're doing but I don't I don't see this this slowing down this inflation issue what I do see is that of a fed trying to balance in November election, and trying to.
B dovish as well as as say, they're tough on inflation, but I don't see it so.
This is all very good for our business.
And continues to.
Drive buyers and drive people that that don't trust.
The fed and us are not trustworthy as it relates to to what they are going to be able to buy 612 months from now so.
To me it's.
It's just business as usual.
Great. Thank you.
At this time that concludes our question and answer session I'd I'd like to turn the call back over to Mister Roberts for his closing remarks.
Thank you very much I.
I appreciate everybody.
Joining us today.
Many thanks to our employees for their dedication and commitment to earmark success and look forward to keeping you apprised of marks progress in the future and thank.
Thank you very much again for joining today.
Before we can see today's call I would like to provide amex safe Harbor statements that includes important cautions regarding forward looking statements.
Join it gets cold.
During today's call their look forward looking statements made regarding feature events.
<unk>, Hey, Max future plans objectives expectations performances.
<unk> on the like a forward looking statements within the meaning of the private securities litigation the format of.
1995, and the Securities Exchange Act of 1934.
Future events risks and uncertainties individually.
Aggregates.
Could cause actual results to differ materially from those.
Express or implied in the statement.
Doctors that could cause actual results to differ exceeded the following.
Failure to execute the company's growth strategy as filings.
Greater than five anticipated costs incurred to execute this strategy change.
Changes in the current domestic and international political climate incur.
Increased competition for a much higher marriage and services.
Which could depress pricing is.
The failure of the company's business model to respond to changes in the market environment.
Anticipated.
General risks of doing business in this commodity markets and other business economic financial and governmental risks as described in the company's public filings with the Securities and Exchange Commission.
The words shared belief.
Goodness expect intend anticipates foresee plan.
Similar expressions.
<unk> thereof.
To fight.
Up such forward looking statements speak only as of the date on which date or a mate.
Additionally, any statements related to future improves performance and estimates of revenues and earnings per share a forward looking statements.
The company undertakes no obligation to publicly updates or advise any forward looking statements.
Leaders are cautions lots of 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 me. Please.
Oh, Yeah, I think and the investors section of the company's web site.
Thank you for joining us today for anthrax, earning call.
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