A-Mark Precious Metals Reports Fiscal Fourth Quarter and Full Year 2016 Results

SANTA MONICA, Calif., Sept. 21, 2016 (GLOBE NEWSWIRE) — A-Mark Precious Metals, Inc. (NASDAQ:AMRK), a full-service precious metals trading company and an official distributor for all the major sovereign mints, reported results for the fiscal fourth quarter and full year ended June 30, 2016.

Fiscal Q4 2016 Highlights (compared to the same year-ago quarter)

  • Revenues increased 19% to $1.74 billion
  • Gross profit increased 27% to $7.6 million
  • Net income decreased 58% to $1.1 million or $0.15 per diluted share
  • Gold ounces sold increased 48% to 711,000 ounces
  • Silver ounces sold increased 17% to 25.8 million ounces
  • Trading ticket volume decreased 8% to 20,964 tickets

Fiscal Q4 2016 Financial Results
Revenues increased 19% to $1.74 billion from $1.45 billion in the same year-ago quarter. The increase in revenue was primarily due to a 48% increase in gold ounces sold and a 17% increase in silver ounces sold, driven by demand for the company’s primary products, as well as a 5% increase in the price of gold.

Gross profit increased 27% to $7.6 million (0.44% of revenue) from $6.0 million (0.41% of revenue) in the same year-ago quarter. The improvement in gross profit margin was primarily due to better performance of the company’s higher-margin custom coin products.

Selling, general and administrative expenses increased 46% to $5.9 million from $4.1 million in the same year-ago quarter. The increase was primarily due to higher performance-based compensation accruals, IT system consulting costs, as well as operational costs related to the Las Vegas logistics facility established to provide fulfillment services to customers.

Interest income increased 53% to $2.4 million from $1.6 million in same year-ago quarter, driven primarily by an increase in the size of the company’s loan portfolio, as well as an improvement in certain finance products.

Interest expense increased 88% to $2.1 million from $1.1 million in same year-ago quarter, which was primarily due to greater usage of the company’s lines of credit and other product financing arrangements.

Net income decreased 58% to $1.1 million or $0.15 per diluted share from $2.6 million or $0.36 per diluted share in the same year-ago quarter. The decrease was primarily due to a higher provision for income taxes, as well as higher interest expense and selling, general and administrative expenses. The decrease in net income was partially offset by higher gross profit and interest income compared to the same year-ago quarter.

Fiscal 2016 Highlights (compared to the same year-ago period)

  • Revenues increased 12% to $6.78 billion
  • Gross profit increased 41% to $34.5 million
  • Net income increased 31% to $9.3 million or $1.30 per diluted share
  • Gold ounces sold increased 45% to 3.0 million ounces
  • Silver ounces sold increased 43% to 126.3 million ounces
  • Trading ticket volume increased 4% to 88,486 tickets

Fiscal 2016 Financial Results
Revenues increased 12% to $6.78 billion from $6.07 billion in the same year-ago period, driven primarily by a 45% increase in gold ounces sold and a 43% increase in silver ounces sold. Key factors contributing to the increase in demand were the volatility and decrease in commodity prices during fiscal Q1 2016, which resulted in renewed investment interest in precious metals.

Gross profit increased 41% to $34.5 million (0.51% of revenue) from $24.5 million (0.40% of revenue) in the same year-ago period. The increase in gross margin was due, in part, to higher premium spreads on the company’s primary products, particularly during fiscal Q1 2016.

Selling, general and administrative expenses increased 30% to $22.2 million from $17.1 million in the same year-ago period. The increase was primarily due to higher performance-based compensation accruals, salary expenses, IT system consulting costs, and the operational cost of the company’s new logistics facility.

Interest income increased 45% to $8.8 million from $6.1 million in the same year-ago period. The increase was primarily due to an increase in the size of the company’s loan portfolio, as well as an improvement in certain finance products.

Interest expense increased 47% to $6.3 million from $4.3 million in the same year-ago period, which was primarily due to greater usage of the company’s lines of credit and product financing arrangements, increased interest rates and amortization of loan fees.

Net income increased 31% to $9.3 million or $1.30 per diluted share from $7.1 million or $1.00 per diluted share in the same period last year. The increase was primarily due to higher revenue, gross profits and interest income, partially offset by higher selling, general and administrative expenses, interest expense, and income taxes.

Management Commentary
“The fourth quarter was our eleventh consecutive quarter of profitability as a public company and marked a strong finish to a pivotal year in A-Mark’s development,” said company CEO, Greg Roberts. “Our performance in Q4 was reflected by double-digit growth in several key metrics, including revenue and gross profit. Our financial performance also demonstrated strong growth in our finance products, as reflected by the 53% increase in interest income during the quarter.

“Our results for the fourth quarter and full year illustrate the advantages of our unique business model, which is structured to provide consistent profitability in all market environments, while offering opportunities for significantly higher gross profit when we experience increased volatility and demand for our products and services. To this end, in fiscal 2016 we believe A-Mark has invested in its future successfully growing its capacity and future earnings potential. In step with this, we continue to pursue business development initiatives that can provide us with greater capacity and direct influence over our profitability. This includes growing our finance product portfolio and expanding our value-added service offerings, like minting, storage and logistics. To support these services, we will leverage the full capacity and advantages of our Las Vegas logistics facility, which began operations more than a year ago. This facility enables us to provide a full suite of ancillary services, allowing us to deepen our customer relationships and drive more predictable revenue growth and improved gross margins.

“An integral part of our long-term strategy is vertical integration. Our execution on this initiative was demonstrated by our recent strategic investment in SilverTowne Mint, a leading producer of fabricated silver products. SilverTowne Mint will be one of the most efficient vertically integrated mints in North America, benefiting from A-Mark’s industry-leading distribution network and Asahi’s unparalleled refining capabilities as part of the strategic supplier agreement. The numerous operating synergies between A-Mark and SilverTowne will significantly expand our capacity to meet unforeseen surges in demand during volatile market environments, such as the one we experienced last August and September.

“Along that line, during our fiscal first quarter of 2017 ending September 30, we have seen normal market conditions in precious metals compared to the high demand and volatility we experienced in the same year-ago period. That being said, we continue to be optimistic about our business and opportunities, but given current market conditions, do not anticipate our financial performance to be commensurate with the same year-ago period.

“Looking ahead, we expect that fiscal 2017 will be a year of continued execution on our plan that’s focused on growing our platform of turnkey solutions. We plan to build on this platform throughout the year in order to meet the current and changing demands of our customers. We also continue to look for strategic investments, like SilverTowne Mint, that are highly synergistic and complementary to our expanding platform.”

Conference Call
A-Mark will hold a conference call today (September 21, 2016) to discuss these financial results. The company’s CEO Greg Roberts, President Thor Gjerdrum and CFO Cary Dickson will host the call at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). A question and answer session will follow management’s presentation.

To participate, please dial the appropriate number at least five minutes prior to the start time, and ask for the A-Mark Precious Metals conference call.

U.S. dial-in number: 1-877-407-0789
International number: 1-201-689-8562

The conference call will be broadcast simultaneously and available for replay via the Investor Information section of A-Mark’s website at www.amark.com. If you have any difficulty connecting with the conference call or webcast, please contact Liolios Group at 949-574-3860.

A replay of the call will be available after 7:30 p.m. Eastern time through October 5, 2016.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Conference ID: 13645683

About A-Mark Precious Metals
A-Mark Precious Metals, Inc. is a full-service precious metals trading company and an official distributor for many government mints throughout the world. The company offers gold, silver, platinum and palladium in the form of bars, plates, powder, wafers, grain, ingots and coins. Its Industrial unit services manufacturers and fabricators of products utilizing or incorporating precious metals, while its Coin & Bar unit deals in over 200 coin and bar products in a variety of weights, shapes and sizes for distribution to dealers and other qualified purchasers. The company operates trading centers in Santa Monica, California, and Vienna, Austria, for buying and selling precious metals.

In addition to wholesale and trading activity, A-Mark offers customers a variety of services, including financing, consignment and various customized financial programs. As a U.S. Mint-authorized purchaser of gold, silver and platinum coins, A-Mark purchases bullion products directly from the U.S. Mint for sale to customers. A-Mark also has distributorships with other sovereign mints, including in Australia, Austria, Canada, China, Mexico and South Africa. Customers of A Mark include mints, manufacturers and fabricators, refiners, coin and metal dealers, banks and other financial institutions, jewelers, investors and collectors. For more information about A-Mark Precious Metals, visit www.amark.com

Through its subsidiary Collateral Finance Corporation, a licensed California Finance Lender, the company offers loans collateralized by numismatic and semi-numismatic coins and bullion to coin and metal dealers, investors and collectors. Through its Transcontinental Depository Services subsidiary, it offers a variety of managed storage options for precious metals products to financial institutions, dealers, investors and collectors around the world. Through its A-M Global Logistics subsidiary, the company provides its customers an array of complementary services, including storage, shipping, handling, receiving, processing, and inventorying of precious metals and custom coins on a secure basis.

Important Cautions Regarding Forward-Looking Statements
Statements in this press release that relate to future plans, objectives, expectations, performance, events and the like are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Future events, risks and uncertainties, individually or in the aggregate, could cause actual results to differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ include the following: the failure to execute our growth strategy as planned; greater than anticipated costs incurred to execute this strategy; changes in the current international political climate which has favorably contributed to demand and volatility in the precious metals markets; increased competition for our higher margin services, which could depress pricing; the failure of our business model to respond to changes in the market environment as anticipated; general risks of doing business in the commodity markets; and other business, economic, financial and governmental risks as described in in the Company’s public filings with the Securities and Exchange Commission.

The words “should,” “believe,” “estimate,” “expect,” “intend,” “anticipate,” “foresee,” “plan” and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made. Additionally, any statements related to future improved performance and estimates of revenues and earnings per share are forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.

A-MARK PRECIOUS METALS, INC.

CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for share data)

 
   June 30,
 2016
   June 30,
 2015
ASSETS      
Current assets:      
Cash $ 17,142     $ 20,927  
Receivables, net 43,302     30,025  
Derivative assets 33,732     11,364  
Secured loans receivable 70,004     48,666  
       
Inventories:      
Inventories 185,699     152,076  
Restricted inventories 59,358     39,425  
  245,057     191,501  
       
Income taxes receivable 7,318     7,846  
Income taxes receivable from Former Parent 203     1,095  
Prepaid expenses and other assets 1,503     1,202  
Total current assets 418,261     312,626  
       
Property and equipment, net 3,482     2,850  
Goodwill 4,620     4,884  
Intangibles, net 1,987     2,369  
Long-term secured loans receivable 500     650  
Long-term investments 7,873     2,500  
Deferred tax assets – non-current 424     783  
Total assets $ 437,147     $ 326,662  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Lines of credit $ 212,000     $ 147,000  
Liability on borrowed metals 4,352     9,500  
Product financing arrangement 59,358     39,425  
Accounts payable 46,769     50,639  
Derivative liabilities 36,454     17,897  
Accrued liabilities 7,660     5,330  
Total current liabilities 366,593     269,791  
Deferred tax liabilities – non-current 7,245     909  
Total liabilities 373,838     270,700  
       
Commitments and contingencies      
       
Stockholders’ equity:      
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of June 30, 2016 and 2015      
Common Stock, par value $0.01; 40,000,000 shares authorized; 7,021,450 and 6,973,549 shares issued and outstanding as of June 30, 2016 and 2015, respectively 71     70  
Additional paid-in capital 22,220     22,470  
Retained earnings 41,018     33,422  
Total stockholders’ equity 63,309     55,962  
Total liabilities and stockholders’ equity $ 437,147     $ 326,662  

A-MARK PRECIOUS METALS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except for share and per share data)
 
Years Ended June 30,   2016   2015  
Revenues   $ 6,784,039     $ 6,070,234    
Cost of sales   6,749,518     6,045,736    
Gross profit   34,521     24,498    
           
Selling, general and administrative expenses   (22,233 )   (17,131 )  
Interest income   8,795     6,073    
Interest expense   (6,319 )   (4,311 )  
Other income   701        
Unrealized gains on foreign exchange   99     19    
Net income before provision for income taxes   15,564     9,148    
Provision for income taxes   (6,293 )   (2,097 )  
Net income   $ 9,271     $ 7,051    
           
Basic and diluted income per share:          
Basic – net income   $ 1.33     $ 1.01    
Diluted – net income   $ 1.30     $ 1.00    
Weighted average shares outstanding:          
Basic   6,981,900     6,962,800    
Diluted   7,120,300     7,062,600    

A-MARK PRECIOUS METALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
 
Years Ended June 30,   2016   2015  
Cash flows from operating activities:          
Net income   $ 9,271     $ 7,051    
Adjustments to reconcile net income to net cash used in operating activities:          
Depreciation and amortization   1,216     895    
Amortization of loan cost   204        
Deferred income taxes   6,695     (1,363 )  
Interest added to principal of secured loans   (83 )   (212 )  
Share-based compensation   419     253    
Earnings from equity method investment   (701 )      
Loss on sale of property and equipment       41    
Changes in assets and liabilities:          
Receivables   (13,277 )   9,354    
Secured loans   4,345     (737 )  
Secured loans to Former Parent   (1,369 )   2,562    
Derivative assets   (22,368 )   10,820    
Income tax receivable   528     (7,846 )  
Inventories   (53,556 )   (15,947 )  
Prepaid expenses and other current assets   (505 )   (589 )  
Accounts payable   (3,870 )   5,995    
Derivative liabilities   18,557     (14,885 )  
Liabilities on borrowed metals   (5,148 )   791    
Accrued liabilities   2,594     (740 )  
Receivable from/payables to Former Parent   892     2,044    
Income taxes payable       (2,178 )  
Net cash used in operating activities   (56,156 )   (4,691 )  
Cash flows from investing activities:          
Capital expenditures for property and equipment   (1,466 )   (1,784 )  
Proceeds from the sale of property and equipment       60    
Purchase of long-term investments   (4,672 )   (2,000 )  
Secured loans, net   (24,081 )   (9,668 )  
Net cash used in investing activities   (30,219 )   (13,392 )  
Cash flows from financing activities:          
Product financing arrangement, net   19,933     14,815    
Dividends paid   (1,675 )   (698 )  
Borrowings (repayments) under lines of credit, net   65,000     11,800    
Release of common stock   1        
Repurchase and retirement of restricted stock for payroll taxes   (669 )   (100 )  
Net cash provided by financing activities   82,590     25,817    
Net (decrease) increase in cash and cash equivalents   (3,785 )   7,734    
Cash and cash equivalents, beginning of period   20,927     13,193    
Cash and cash equivalents, end of period   $ 17,142     $ 20,927    
Supplemental disclosures of cash flow information:          
Cash paid during the period for:          
Interest expense   $ 6,143     $ 4,141    
Income taxes   $ 149     $ 12,883    
Non-cash investing and financing activities:          
Interest added to principal of secured loans   $ 83     $ 212    

A-MARK PRECIOUS METALS, INC.
RESULTS OF OPERATIONS
(in thousands, except for per share data)
     
 Consolidated Results of Operations
 
The operating results of our business for the year ended June 30, 2016 and 2015 are as follows:
     
Years Ended June 30, 2016   2015   $   %
  $   % of
revenue
  $   % of
revenue
  Increase/
(decrease)
  Increase/
(decrease)
Revenues $ 6,784,039     100.000 %   $ 6,070,234     100.000 %   $ 713,805     11.8 %
Gross profit 34,521     0.509 %   24,498     0.404 %   $ 10,023     40.9 %
Selling, general and administrative expenses (22,233 )   (0.328 )%   (17,131 )   (0.282 )%   $ 5,102     29.8 %
Interest income 8,795     0.130 %   6,073     0.100 %   $ 2,722     44.8 %
Interest expense (6,319 )   (0.093 )%   (4,311 )   (0.071 )%   $ 2,008     46.6 %
Other income 701     0.010 %       %   $ 701     %
Unrealized gains on foreign exchange 99     0.001 %   19     %   $ 80     NM  
Net income before provision for income taxes 15,564     0.229 %   9,148     0.151 %   $ 6,416     70.1 %
Provision for income taxes (6,293 )   (0.093 )%   (2,097 )   (0.035 )%   $ 4,196     200.1 %
Net income $ 9,271     0.137 %   $ 7,051     0.116 %   $ 2,220     31.5 %
                       
Per Share Data:                      
Basic $ 1.33         $ 1.01         $ 0.32     31.7 %
Diluted $ 1.30         $ 1.00         $ 0.30     30.0 %

The operating results of our business for the three months ended June 30, 2016 and 2015 are as follows:
     
Three Months Ended June 30, 2016   2015   $   %
  $   % of
revenue
  $   % of
revenue
  Increase/
(decrease)
  Increase/
(decrease)
Revenues $ 1,735,210     100.000 %   $ 1,453,402     100.000 %   $ 281,808     19.4 %
Gross profit 7,563     0.436 %   5,951     0.409 %   $ 1,612     27.1 %
Selling, general and administrative expenses (5,931 )   (0.342 )%   (4,069 )   (0.280 )%   $ 1,862     45.8 %
Interest income 2,430     0.140 %   1,591     0.109 %   $ 839     52.7 %
Interest expense (2,105 )   (0.121 )%   (1,122 )   (0.077 )%   $ 983     87.6 %
Other income 88     0.005 %       %   $ 88     %
Unrealized gains on foreign exchange 90     0.005 %   226     0.016 %   $ (136 )   NM  
Net income before provision for income taxes 2,135     0.123 %   2,577     0.177 %   $ (442 )   (17.2 )%
Provision for income taxes (1,067 )   (0.061 )%   (11 )   (0.001 )%   $ 1,056     NM  
Net income $ 1,068     0.062 %   $ 2,566     0.177 %   $ (1,498 )   (58.4 )%
                       
Per Share Data:                      
Basic $ 0.15         $ 0.37         $ (0.22 )   (59.5 )%
Diluted $ 0.15         $ 0.36         $ (0.21 )   (58.3 )%

CONTACT: Company Contact:
Thor Gjerdrum, President
A-Mark Precious Metals, Inc.
310-587-1414
thor@amark.com

Investor Relations Contact:
Matt Glover or Najim Mostamand
Liolios Group, Inc.
949-574-3860
AMRK@liolios.com