Q1 2025 A-Mark Precious Metals Inc Earnings Call
Good afternoon and welcome to the A-Mark Pressure's Middles Conference call for the fiscal 1st quarter and its September 30th, 2024. My name is Matthew and I will be your operator this afternoon.
Before this call, a Mark issued its results for the fiscal 1, 2, 2025 in a press release, which is available in the Vester Relations section of the company's website at www.amark.com You can find the link in the Vester Relations section at the top of the homepage
Joining us for today's call are Amark CEO Greg Roberts, President Thor Gjerdrum, and CFO Kathleen Simpson Taylor.
Following the remarks we'll open the call for your questions.
Speaker Change: Then before we conclude the call, I'll provide the necessary caution regarding the forward-looking statements made by management during this call. I'd like to remind everyone that this call is being recorded and will be made available for replay, be a link available on the Investor Relations section of A Mark's website.
Speaker Change: Now would like to turn the call over to A-Marxie E.O. Mr. Greg Roberts. Sir, please proceed.
Greg Roberts: Thank you Matthew and good afternoon everyone.
Greg Roberts: Our first quarter results reflect the continued strength of our fully integrated platform to deliver profitable results, even during slower market conditions.
Speaker Change: Despite facing a less favorable macroeconomic environment, including elevated precious metal prices and softened levels of demand, we delivered 37 cents per diluted share and generated almost 18 million in non-GAAP EBITDA.
Greg Roberts: During the quarter, we amended our trading credit facility, extending its maturity to September 2026, providing us with the liquidity for our future capital needs.
Greg Roberts: We also advanced our AMARC Global Logistics Facility Expansion and Logistics Automation Initiatives, which are expected to be completed in the next few months.
Speaker Change: We anticipate these measures will increase operational capacity and produce efficiencies and long-term cost savings.
Speaker Change: We have also continued to make substantial progress towards establishing a trading office and DTC presence in Singapore and broadening our reach into the surrounding region.
Finally, as previously announced, Silvertown Mint recently acquired all the assets of Regency Mint Manufacturing, including its minting equipment and its customer list, further enhancing our minting capability and expanding our customer base.
Speaker Change: We believe these initiatives position AMARC for future success as we continue to grow and expand our business.
Speaker Change: Now I will turn the call over to our CFO, Kathleen Simpson-Taylor, who will provide a more detailed overview of our financial performance.
Speaker Change: Then our president, Thor Gjerdrum, will discuss our key operating metrics.
Speaker Change: Finally, I will provide further insights into our business and growth strategy. Kathleen.
Kathleen: Thank you, Greg, and good afternoon, everyone.
Kathleen: Our revenues for fiscal Q1 2025 increased 9% to $2.72 billion from $2.48 billion in Q1 of last year.
Speaker Change: Excluding an increase of $217.4 million of forward sales, our revenues increased $13.1 million, or 0.9%.
Speaker Change: which was due to higher average selling prices of gold and silver partially offset by a decrease in gold and silver ounces sold.
Speaker Change: The DTC segment contributed 18% and 13% of the consolidated revenue in fiscal Q1 2025 and fiscal Q1 2024, respectively.
Speaker Change: Revenue contributed by JMB represented 11% of the consolidated revenues for fiscal Q1 of 2025 compared to 12% in Q1 of last year.
Speaker Change: Gross profit for fiscal Q1 2025 decreased 12% to $43.4 million, or 1.6% of revenue from $49.4 million, or 1.99% of revenue in Q1 of last year.
Speaker Change: The decrease in gross profit was due to lower gross profits earned from the wholesale sales and ancillary services segment, partially offset by an increase in gross profits earned by the direct consumer segment.
Speaker Change: Gross profit contributed by the direct consumer segment represented 54% of the consolidated gross profit in fiscal Q1 2025 compared to 43% in the same year ago period.
Speaker Change: Gross profit contributed by JMB represented 37% of the consolidated gross profit in fiscal Q1 2025 compared to 36% in Q1 of last year.
Speaker Change: SG&A expenses for fiscal Q1 2025 increased 22% to $26.6 million from $21.8 million in Q1 of last year.
Speaker Change: higher advertising costs of $0.7 million, an increase in consulting and professional fees of $0.2 million, an increase in information technology costs of $0.2 million, and an increase in insurance costs of $0.2 million.
Speaker Change: SG&A expenses for the three months ended September 30, 2024 include $5.3 million of expenses incurred by LPM and SGB, our recently consolidated subsidiaries, which were not included in our prior year Q1 results.
Speaker Change: Depreciation and amortization expense for fiscal Q1 2025 increased 69% to $4.7 million from $2.8 million in Q1 of last year.
Speaker Change: This was partially offset by a decrease in JMB, Intangible Asset Amortization, of $0.5 million.
Speaker Change: Interest income for fiscal Q1 2025 increased 16% to $7.1 million from $6.1 million in Q1 of last year.
Speaker Change: The increase in interest income was primarily due to an increase in other finance product income of $0.6 million and an increase in interest income earned by our secured lending segment of $0.3 million.
Speaker Change: Interest expense for fiscal Q1 2025 increased 2% to $10 million from $9.8 million in Q1 of last fiscal year.
Speaker Change: The increase in interest expense was primarily due to an increase of $0.7 million associated with our trading credit facility, due to increased borrowings as well as an increase in interest rates.
Speaker Change: and an increase of $0.7 million related to product financing arrangements. This was partially offset by a decrease of $1.4 million related to the AMCF notes, including amortization of debt issuance costs, due to their repayment in December 2023.
Speaker Change: Earnings from equity method investments in fiscal Q1 2025 decreased 79% to $0.6 million from $2.7 million in the same year ago quarter. The decrease was due to decreased earnings of our equity method investees.
Speaker Change: Net income attributable to the company for the first quarter of fiscal 2025 totaled $9 million, or $0.37 per diluted share. This compares to net income attributable to the company of $18.8 million, or $0.77 per diluted share, in Q1 of last year.
Speaker Change: Adjusted net income before provision for income taxes, a non-GAAP financial measure which excludes depreciation, amortization, acquisition costs, and contingent consideration fair value adjustments for fiscal Q1 2025, totaled $14.8 million, a decrease of 45% compared to $26.8 million in the same year-ago quarter.
Speaker Change: EBITDA, a non-gap liquidity measure for fiscal Q1 2025, totaled $17.8 million, a 41% decrease compared to $30.4 million in Q1 of last year.
Speaker Change: Turning to our balance sheet, at quarter end we had $46.9 million of cash compared to $48.6 million at June 30th, 2024.
Speaker Change: Our tangible net worth excluding non-controlling interest at the end of the quarter was $313.3 million, up from $306 million at June 30, 2024.
Speaker Change: As Greg mentioned, we executed an extension of our primary credit facility, which provides $422.5 million in committed lines now through September 2026, providing the company with stable, long-term access to capital for the business.
Speaker Change: This facility, in conjunction with our repo lines and lease facilities, provides the company with a diversified portfolio of liquidity tools going forward.
Speaker Change: AMARC's Board of Directors has continued to maintain the company's regular quarterly cash dividend program of $0.20 per common share. The most recent quarterly cash dividend was paid in October. It is expected that the next quarterly dividend will be paid in January 2025.
Speaker Change: That completes my financial summary. Now I will turn the call over to Thor, who will provide an update on our key operating metrics.
Thor Gjerdrum: Thank you Kathleen, looking at our key operating metrics for the first quarter of fiscal 2025. We sold 398,000 ounces of gold in Q1 fiscal 2025, which is down 20% from Q1 of last year and down 11% from the prior quarter.
Speaker Change: We sold 20.4 million ounces of silver in Q1 fiscal 2025, which was down 33% from Q1 of last year and down 20% from last year.
Speaker Change: The number of new customers in the DTC segment, which is defined as the number of customers that have registered or set up a new account or made a purchase for the first time during the period, was 55,300 in Q1 fiscal 2025, which was up 41% from Q1 of last year and down 90% from last quarter.
Speaker Change: Approximately 92% of the new customers from the last quarter were attributable to the acquisition of a controlling interest in SGB.
Speaker Change: The number of total customers in the DTC segment at the end of the first quarter was approximately 3.1 million, which was a 31% increase from prior year. The year-over-year increase in total customers was due to the organic growth of our JMB customer base as well as the acquisition of a controlling interest in SGB.
Speaker Change: The DTC Segment Average Order Value, which represents the average dollar value of third-party product orders, excluding accumulation program orders, delivered to DTC Segment customers during Q1 Fiscal 2025.
Speaker Change: with $2,967, which is up 22% from Q1 fiscal 2024 and up 3% from the prior quarter.
Speaker Change: For the fiscal first quarter, our inventory turnover ratio was 2.3, which was an 8% decrease from 2.5 in Q1 of last year and comparable with the prior quarter.
Speaker Change: Finally, the number of secured loans at the end of September totaled 562, a decrease of 30% from September 30, 2023, and a decrease of 4% from the end of June 2024.
Speaker Change: The dollar value of our loan portfolio at the end of September totaled $101.9 million, a decrease of 10% from June 30, 2024. That concludes my prepared remarks. I'll now turn it over to Greg for closing remarks. Greg? Thank you, Thor and Kathleen.
Greg Roberts: AMARC's fully integrated precious metals platform continues to demonstrate its ability to deliver profitable results.
Greg Roberts: even during slower market conditions. Looking ahead, we remain cautiously optimistic that the macro headwinds we face will begin to shift, leading to increased demand across both our wholesale and retail segments.
Greg Roberts: We remain committed to pursuing opportunities that expand our market reach and deliver value to our shareholders over the long term.
Greg Roberts: operator
Speaker Change: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset, if you're listening on speakerphone, to provide optimum sound quality.
Greg Roberts: Once again, if you have any questions or comments, please press star 1 on your phone.
Speaker Change: Your first question is coming from Thomas Forte from Maxim Group. Your line is live.
Speaker Change: Great. So, first off... Hi, Tom.
Thomas Forte: Congrats on your ability to once again generate profits in a challenging quarter.
Speaker Change: I'm going to ask two questions, and then I'm going to get back in the queue to give other people an opportunity. So, Greg, the first question I had is,
Speaker Change: How should we think about the levers you can pull to stimulate demand?
Greg Roberts: when you have an environment, it seems like there's, you know, it's pretty challenging because you have kind of two one-way trades now in gold and essentially in equities.
Greg Roberts: So, but I do think that you do a lot in such an environment, so I'd like to hear some additional details on the levers you can pull when facing that.
Speaker Change: use marketing to try to bring in new customers, which we've done. We can't really control how much they're going to spend or what their average order value is going to be. But we believe that when markets are slower,
Greg Roberts: trying to get new customers is a great investment in the future.
Greg Roberts: Throughout this quarter, we once again had kind of hit and miss weeks. We would have probably had two or three very exceptional weeks, particularly in August.
Greg Roberts: and, you know, we were able to...
Greg Roberts: We saw an increase in demand and we were very well positioned and our our new customer counts our Profitability our sales, you know, we had we were able to pull some levers as you say that What we felt was able to take advantage, you know when the market allowed us to do it
Greg Roberts: What we haven't been able to do is sustain multiple weeks or months where we're seeing this increased demand.
Greg Roberts: I will say that, you know, towards the end of...
Greg Roberts: September and through October.
Greg Roberts: We did start to see a little bit of positive movement in the premiums.
Greg Roberts: So some of the premiums and some of the products, not all of them, but some of them, we did see some premium expansion to the positive. So we did feel we were in good shape there. We feel that in this quarter, our inventory and our buys and our sells, we felt like we had very good results.
Greg Roberts: very good match there. And then obviously, you know, coming into the election yesterday, you know, the last...
Greg Roberts: you know, the last few weeks there was activity that was good and then, you know, today clearly there was a risk on.
Greg Roberts: movement back into equities.
Greg Roberts: a little bit of price drop in the spot price of gold and silver.
Greg Roberts: which traditionally should help with premiums as well as demand with a drop in price. So we'll have to see how that plays out and how the customer base responds.
Greg Roberts: For us, we felt like we continue to get as much as we can out of what the environment gives us.
Greg Roberts: As I've said before, the good news is we clearly see that when we get a little bit of a shift from headwind to tailwind, the businesses all perform very well, albeit in shorter periods of time.
Thomas Forte: And then for my follow-up, and I'll get back in the queue, so the longer-term question is during periods like this
Speaker Change: It seems like, historically, you've done an amazing job on the strategic M&A side to find assets attractively valued that have you then well positioned for that next increase in demand. It sounds like you made an acquisition through the Silvertown, but can you give your current thoughts on strategic M&A?
Speaker Change: I mean, I, you know, I thought the Silvertown acquisition was, you know, just...
Speaker Change: Just great for us, really good.
Speaker Change: Timing for us with premiums low and profitability at the target.
Speaker Change: was down a little, they were looking to, the sellers were looking to move out of the business and move into something else. So I believe that, you know, for us to really pick up
Speaker Change: You know an extra 20 million ounces a year of struck product Which is what we believe we will get out of this acquisition when when we get all the equipment set up and working and you know
Speaker Change: really getting up to that 100 million mark at Silvertown Minute if you include the cast bar products, you know, that was just a, you know, what we felt was just perfect timing and very good from a strategic standpoint.
Speaker Change: I will say in the last 30 days we have really filled the funnel in things we're looking at on the M&A side. We're very...
Speaker Change: you know we believe very favorable for us. So we're very busy in that area right now to answer the question directly and you know again I believe the timing is very good for us and we very much look forward to going through the process and and trying to finish up a couple of these deals we've been looking at.
Speaker Change: Great, thank you. I'm going to get back in the queue.
Speaker Change: Thank you. Your next question is coming from Michael Baker from DA Davidson. Your line is live.
Michael Baker: Thank you very much. Thank you.
Michael Baker: Okay, thanks. One of the last things, Greg, you said on your prepared remarks was something along the lines of looking ahead. Do you think the macro headwinds will begin to shift?
Michael Baker: leading to increased demand. What makes you say that? Does it have anything to do with the election? Is it one of the things you just said to answer Tom's question? You talked about gold and silver pricing coming down a little bit and that's helping premiums. Is that what you're referring to or just, you know, why do the macro headwinds?
Speaker Change: which seem to have been against you for, you know, the last several quarters. Why do you think that begins to shift?
Speaker Change: As we talked about on the last call, we have gone through this quarter of continuing record gold spot prices in particular and silver.
Speaker Change: are trading at a price above $32 that we hadn't seen in a very long time. And as I talked about on the last call, when you go day after day after day and week after week after week of
Speaker Change: of higher spot prices or world record spot prices, which is, you know, what we talk about around here.
Speaker Change: We're just going to buy back more product, and that's going to hurt our margins a little bit. It's going to hurt our premiums a little bit.
Speaker Change: And, you know, we talked about this on the last call, when I, I said earlier that I believe that was shifting a little up until today, you know, we continue to see very high spot prices, but our.
Speaker Change: percentage and our buybacks that we've been buying back or taking back in on the secondary market, it did seem to diminish a bit and it did seem to wane so I feel like you know a lot of that selling has
Speaker Change: is behind us and and and I believe
Speaker Change: We're very well positioned that we work through a lot of inventory, so we feel like we're very well positioned. When you get a drop in the spot price, as we did today, I mean, that has historically...
Speaker Change: you know, change sentiment a little bit on the buy side, so, you know, I believe that that leading up and then the drop in price today is what I was referencing. Clearly, moving forward, we're going to have to see, you know,
Speaker Change: how the how the public responds and how the You know how things have gone. I do believe that
Speaker Change: For the first time in the last few weeks, we did see a little bit different attitude with the retail buyer. For the first time in a while, there appeared to be some fear of missing out.
Speaker Change: you know, customers were.
Speaker Change: you know, buying the higher prices with a little more gusto, so, you know, we'll see if that continues or, you know, if the drop in price triggers, you know, more buying or what happens, but generally in a lower spot price environment, our premiums are going to expand a little bit, so that's what I was referring to.
Speaker Change: Okay yeah that makes sense and by way of follow-up any way you can sort of quantify or a little more detail on the ratio of what you what you were buying in versus what you were selling I think in my notes
Speaker Change: uh... you know it's a stroke around ten percent of uh... you know you you you buy and what you're selling
Speaker Change: out new. It had gone up to, I think, 30% last quarter, if my numbers are right, or the quarter, that's the quarter, the June quarter. What was it in September, the September quarter? How is that trending?
Speaker Change: Right, I think when I was referencing this before we were looking more at weekly, week over week and and weekly numbers so you know it would be possible that we in the past we may have had
Speaker Change: At our DTC segment, there may have been a number close to 30% that we had bought back. And the 10% number, you know, in a week is a little more...
Speaker Change: is a little more normalized. We did have a couple of real good weeks in the quarter where that ratio dropped down to 5%.
Speaker Change: the selling of our retail customers is shifting a little bit more to the buy side and the sales in general have slowed down. The kinds of products we're buying back have shifted a little bit so you know cautiously optimistic as I said.
Speaker Change: Awesome. Thank you. Fair enough. I'll pass it on.
Speaker Change: Thank you.
Speaker Change: Thank you. Once again, everyone, if you have any questions or comments, please press star then 1 on your phone.
Speaker Change: Your next question is coming from Lucas Pipes from B. Reilly. Your line is live.
Speaker Change: Thank you very much, Operator. This is actually Fedor Shabalin asking a question on behalf of Lukas Pipes. And, Greg, I would like to follow up a little bit on the previous question, looking forward. So, you're pretty good described.
Speaker Change: Your expectations for calendar Q4, but for 2025, once Trump gets into the office, based on your experience from his previous presidency, what would you expect from buyers and sellers' sentiment?
Speaker Change: Thank you. Yeah, I mean, it's very hard for me to predict what...
Speaker Change: What the political winds are going to create for our business. I think that, you know, historically we've talked about very close
Speaker Change: You know, contested elections are beneficial for us. This clearly was not contested and it was a real referendum on a change of attitude.
Speaker Change: you know, and...
Speaker Change: clearly what looks to be a shift in the Senate is something we haven't had or experienced in a while, so
Speaker Change: how
Speaker Change: The new administration manages taxes and how they administer the printing of money and where they're going to spend the money and what really does, where really inflation kind of ends up.
Speaker Change: You know, I think that's to be determined, and you may not see it until 26, but...
Speaker Change: you know.
Speaker Change: from from my viewpoint, our job here is just to manage whatever, whatever the markets throw at us. And, and I feel we're really good at that. I feel like we, we can make money. You know, we made money through a Biden administration, we made money, historically in a Trump administration, you know, the, from my viewpoint,
Speaker Change: As it relates to AMARC's business, I wasn't particularly concerned about who won from a pure business standpoint. I felt like a lot of what was going to happen in the future was going to happen either way. And I think that, you know...
Speaker Change: We're in the precious metals business, we're in the hard asset business, and continued and unsustainable deficits and borrowing of money is likely to be good for our business. And we'll have to see how that plays out.
Speaker Change: Thank you very much for this and in my second follow-up maybe on this SGNA growth quarter of a quarter if I remember correctly is 22% up and
Speaker Change: Can you frame it up a little bit? Is it related to the acquisitions and how we should look to this expense going forward? Yeah, I think if you listen to Kathleen and go back and look at her comments
Speaker Change: I believe a little over 5 million of the SG&A increase was related to the new acquisitions, which is just, you know, brand new expenses we're bringing on. So I think if you back that out, you know, I think our SG&A was, you know, fairly consistent.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Your next question is coming from Greg Gibbous from Northland Securities. Your line is live.
Greg Gibbous: Great, thanks for taking the questions. Appreciate the color, Greg, Kathleen, and Floor.
Greg Gibbous: You know wanted to follow up I think you know if you could speak to maybe which markets you're looking at on the M&A side I think you noted you know potentially something within the next 90 days or so and just wanted to get a sense of you know where in terms of geographies you're you know leaning towards on that front.
Speaker Change: It's probably a little premature to focus on specifically where we're looking at. I can just say that, you know, the deals we're looking at right now are broad and and they cover, you know, a number of parts of our business and I haven't been, you know,
Speaker Change: this optimistic in a while. I think, you know, we've got some really good opportunities we're looking at and I think, you know, we feel good about them, we feel good about the timing.
Speaker Change: You know, we're always looking to increase our direct-to-consumer business, as well as our wholesale business, and there's good reason for us here that we're going to be very busy and busy.
Speaker Change: There's there's good reason for us here that we're going to be very busy and we're optimistic we're going to be able to give us good get at least one or two deals over the goal line.
Speaker Change: We're optimistic we're going to be able to get at least one or two deals over the goal line.
Speaker Change: Got it we'll look forward to updates there.
Speaker Change: Thank you.
Speaker Change: I appreciate your commentary on kind of the gold and silver prices and then just kind of expectations into the election and after election.
Speaker Change: Got it. We'll look forward to updates there.
Speaker Change: You know, I appreciate your commentary on kind of the goal of civil prices and then just kind of expectations into the election and after election. You know, I guess I wanted to ask more broadly speaking, if you're seeing any changes on the competitive front, you know, whether it's within kind of traditional retail or anything you're seeing online, but it would be great to kind of get your overall thoughts on any dynamics there.
Speaker Change: I guess I wanted to ask more broadly speaking if youre seeing any changes on the competitive front.
Speaker Change: Whether it's within.
Speaker Change: Kind of traditional retail or anything youre seeing online, but that would be great to kind of get your overall thoughts on any dynamics there.
Speaker Change: Yeah.
Speaker Change: I mean, we track as I've said on previous calls, we track pretty closely our new customer data and in our new customer numbers.
Speaker Change: We have.
Speaker Change: We have picked up a lot of new clients and in a lot of new buyers in the last <unk>.
Speaker Change: 90 to 120 days.
Speaker Change: And we've also.
Speaker Change: We've done a pretty good job of re energizing and getting old clients, who haven't bought for awhile to buy.
Speaker Change: And so I believe that.
Speaker Change: We're growing and I believe our message to our retail customers is resonating and I think there is there's good reason to believe we have the best retail customer base out there right now at least in small fabricated silver and gold products. So.
Speaker Change: Yeah.
Speaker Change: Very pleased with with our DTC customer base wholesale continues to be a bit of a struggle just because of the premiums and theres a lot of product out in the marketplace right now so you'll see you'll see our wholesale numbers lag a little bit here.
Speaker Change: But we have we have manage the inventory and we believe we have have a good mix of inventory right now and when we have seen.
Speaker Change: A real busy week or.
Speaker Change: A home run kind of weak we have seen in the last few months, we really were able to take advantage of it so.
Speaker Change: I think we're doing a good job of continuing to take market share and add new customers.
Speaker Change: Got it that's helpful. Thanks, Greg.
Speaker Change: Yeah.