A-Mark Precious Metals Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2023

There are 8 speakers on the call.

Operator

Afternoon, and welcome to the A Mark Precious Metals Conference Call for the Fiscal Third Quarter Ended March 31, 2023. My name is Kelly, and I will be your operator this afternoon. Before this call, A Mark issued its results for the fiscal Q3 2023 in a press release, which is available in the Investor Relations section of the company's website at www. Mark.com. You can find the link in the Investor Relations section at the top of the homepage.

Operator

Joining us today for today's call are A Mark's CEO, Greg Roberts President, Thor Gerdrum and CFO, Kathleen Simpson Eller. Following their remarks, we will open the call to your 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 A Mark's website. Now, I would like to turn the call over to A Mark's CEO, Mr.

Operator

Greg Roberts. Sir, please proceed.

Speaker 1

Thank you, Kelly, and good afternoon, everyone, and thanks for joining us on our call today. As we reported in our earnings release just a few minutes ago, the 3rd quarter marked another period of solid financial performance for A Mark, highlighted by $35,900,000 of net income and diluted EPS of $1.46 yielding a quarterly return on equity of 6%. These results further demonstrate the effectiveness of our fully integrated platform, particularly in times of macroeconomic uncertainty and increased market volatility. Our integrated capabilities allow us to optimize access to inventory, providing us with a consistent source of supply during periods of increased demand, which contributed to quarter over quarter increases of 19% in revenue and 18% in gross profit during the Q3. Our direct to consumer segment continued to contribute significantly and impressively to our overall results, generating 50 7% of our consolidated gross profit for the quarter, driven by 124 basis point increase in the segment's gross margin percentage compared to the Q3 of fiscal 2022.

Speaker 1

We remain active in our pursuit of investment opportunities that align with our strategic vision and to expand our geographic footprint. Our minting business remains a consistent The Mint is consistently producing over 1,000,000 ounces per week. During the Q3, SilverTowne Mint achieved ISO certification in recognition of the facility's high standards for quality management. The certification not only refers reaffirms the Mint's long standing reputation as a leading manufacturer of silver bullion products, but also allows its products to be accepted into individual retirement accounts or IRAs, further expanding A Mark's strong customer base. Jamie Meadows and his team have worked tirelessly to achieve this and we congratulate them.

Speaker 1

Finally, I'm pleased to report that the company purchased 135,735 shares of its common stock during the quarter for an aggregate value of 9,800,000 We view our share repurchase program as an attractive investment opportunity for the company and another way to deliver value to our shareholders. Now, I'll turn it over to our CFO, Kathleen Simpson Taylor, to walk you through our financials in more detail. Then our President, Thor Gjerdrum will discuss our key operating metrics. Afterwards, I will provide a further update on our business and growth strategy and take questions. Kathleen, take it away.

Speaker 2

Thank you, Greg, and good afternoon, everyone. Our revenues for fiscal Q3 2023 increased 10% to $2,300,000,000 from $2,100,000,000 in Q3 of last year. Excluding an increase of $312,500,000 of forward sales, revenues decreased $104,500,000 or 6%, which was due to a decrease in gold ounces sold and lower average selling prices of silver, partially offset by an increase in silver ounces sold and higher average selling prices of gold. The DTC segment contributed 23% of the consolidated revenue in fiscal Q3 2023 and 28% of the consolidated revenue in Q3 of last year. Revenue contributed by JM Bullion's JMD represented 20% of the consolidated revenues for fiscal Q3 of 2023 compared to 26% in Q3 of last year.

Speaker 2

For the 9 month period, our revenues increased 2% to $6,200,000,000 from $6,100,000,000 in the same year ago period. Excluding an increase of $596,100,000 of forward sales, our revenues decreased 498 point $3,000,000 or 10%, which was due to a decrease in gold ounces sold and lower average selling prices of gold and silver, partially offset by an increase in silver ounces sold. The DTC segment contributed 23% and 27% of the consolidated revenue for the 9 months ended March 31, 2023 and 2022 respectively. Revenue contributed by JMB represented 21% of the consolidated revenues for the 9 months ended March 31, 2023 compared to 25% in the same year ago period. Gross profit for fiscal Q3 2023 increased 5% to 75,500,000 or 3.26 percent of revenue from $72,100,000 or 3.42 percent of revenue in Q3 of last year.

Speaker 2

Excluding the $312,500,000 increase in forward sales, gross margin percentage increased to 4.5 percent of revenue from 4.0 percent of revenue last year. In the Q3 of fiscal Q3 ended March 31st. Gross profit contributed by our DTC segment represented 57% of the consolidated gross profit in fiscal Q3 2023 compared to 58% in the same year ago period. Gross profit contributed by JMB represented 47% of the consolidated gross profit in fiscal Q3 2023 compared to 48% in Q3 of last year. For the 9 month period, gross profit increased 11% to $216,100,000 or 3.5 percent of revenue from $194,000,000 or 3.2 percent of revenue in the same year ago period.

Speaker 2

Excluding the $596,100,000 increase in forward sales, gross margin percentage increased to 4.7 percent of revenue from 3.8 percent of revenue. The gross profit increase was due to higher gross profits earned from both the Wholesale Sales and Ancillary Services and DTC segments. Gross profit contributed by the DTC segment represented 56% of the consolidated gross profit in both of the 9 month periods ended March 31st, 2023 2022, respectively. Gross profit contributed by JMB represented 48% and 46% of consolidated gross profit for the 9 months ended March 31, 2023 and 2022 respectively. SG and A expenses for fiscal Q3 2023 increased 16% to $23,800,000 from $20,500,000 in Q3 of last year.

Speaker 2

The increase was primarily due to an increase in compensation expense, including performance based accruals of 2,600,000 Higher advertising costs of $500,000 an increase in computer related expenses of $300,000 and an increase in insurance costs of $200,000 partially offset by lower consulting and professional fees of $500,000 For the 9 month period, SG and A expenses increased 12% to $62,400,000 from $55,900,000 in the same year ago period. The increase was primarily due to an increase in Compensation expense, including performance based accruals of $5,100,000 higher advertising costs of $2,400,000 an increase in computer related expenses of $800,000 and an increase in insurance costs of $400,000 partially offset by lower consulting and professional fees of $2,500,000 Depreciation and amortization Thanks for fiscal Q3 2023 decreased 56 percent to $3,300,000 from $7,500,000 in Q3 of last year. The decrease was primarily due to a $4,300,000 decrease in amortization of acquired intangibles related to JMB. For the 9 month period, depreciation and amortization expense decreased 59% to $9,800,000 from $24,100,000 in the same year ago period. The decrease was primarily due to a $14,400,000 decrease in amortization of acquired intangibles related to JMB.

Speaker 2

Interest income for fiscal Q3 2023 increased 14% to $6,100,000 from $5,300,000 in Q3 of last year. The aggregate increase in interest income was primarily due to higher other finance product income, partially offset by lower interest income earned by our Secured Lending segment. For the 9 month period, interest income increased 0.3 percent to $16,200,000 from $16,100,000 in the same year ago period. The aggregate increase in interest income was primarily due to an increase in other finance product income, partially offset by lower interest income earned by our Secured Lending segment. Interest expense for fiscal Q3 2023 increased 70% to $9,200,000 from $5,400,000 in Q3 of last year.

Speaker 2

The increase in interest expense was primarily driven by $3,100,000 associated with our trading credit facility and the AMCF notes, including amortization of debt issuance costs and $900,000 related to product financing arrangements, partially offset by a decrease of $300,000 of loan servicing fees. For the 9 month period, interest expense increased 30 $6,000,000 from $16,300,000 in the same year ago period. The increase was primarily driven by $4,900,000 associated with our trading credit facility and the AMCS notes, including amortization of debt issuance costs, dollars 1,800,000 related product financing arrangements and $400,000 in interest associated with liabilities on borrowed metals, partially offset by a decrease of $700,000 of loan servicing fees. Earnings Losses from equity method investments in Q3 2023 decreased 104% to a loss of $100,000 compared to earnings of $1,600,000 in the same year ago quarter. The net decrease was primarily due to lower earnings of our equity method investees.

Speaker 2

For the 9 month period, earnings from equity method investments increased 69 percent to $7,300,000 from $4,300,000 in the same year ago period. The net increase of $3,000,000 was primarily due to our additional 40% ownership interest in Silver Gold Bowl, which was acquired in June 2022. Net income attributable to the company for the Q3 2023 totaled $35,900,000 or $1.46 per diluted share. This compares to net income attributable to the company of $37,400,000 or $1.53 per diluted share in Q3 of last year, adjusted for the effect of the 2 for 1 stock split in the form of a stock dividend in June 2022. For the 9 month period, net income attributable to the company totaled 114,500,000 or $4.64 per diluted share, which compares to net income attributable to the company of $95,200,000 or $3.92 per diluted share in the same year ago period.

Speaker 2

Adjusted for the effect of the 2 for 1 stock split in the form of a stock dividend that occurred in June 2022. Adjusted net income before provision for income taxes, a non GAAP financial performance measure, which excludes acquisition expenses, amortization and depreciation, for Q3 fiscal 2023 totaled $49,200,000 a decrease of 10% compared to 54,300,000 in the same year ago quarter. Adjusted net income before provision for income taxes for the 9 month period totaled $156,900,000 a 9% increase from $144,400,000 in the same year ago period. EBITDA, a non GAAP liquidity measure, for Q3 fiscal 2023 totaled $52,300,000 a 2% decrease compared to $53,600,000 in Q3 fiscal 2022. EBITDA for the 9 month period totaled $163,100,000 a 14% increase compared to $143,700,000 in the same year ago period.

Speaker 2

Now turning to our balance sheet. At quarter end, we had $78,100,000 of cash compared to $37,800,000 at the end of fiscal year 2022. Our tangible net worth at the end of the quarter was $396,900,000 up from 321 point $6,000,000 at the end of the prior fiscal year. Finally, as we announced in the prior press release, A Mark's Board of Directors reaffirmed its previously announced regular quarterly cash dividend policy of $0.20 per common share, which the company paid in April. It is expected that the next quarterly dividend will be declared and paid in July 2023.

Speaker 2

The declaration of regular cash dividends in the future, including the next quarter, is subject to the determination each quarter by the Board of Directors based on a number of factors, including the company's financial performance, available cash resources, cash requirements and alternative uses of cash and applicable bank covenants. That completes my financial summary. Now I will turn the call over to Thor, who will provide an update on our key operating metrics.

Speaker 3

Thor? Thank you, Kathleen. Looking at our key operating metrics for the Q3 of fiscal 2023, We sold 659,000 ounces of gold in Q3 fiscal 2023, which was down 9% from Q3 of last year, but was up 17% from the previous quarter. For the 9 month period, we sold 1,900,000 ounces of gold, which was down 9% from the same year ago period. We sold 36,900,000 ounces of silver in Q3 fiscal 2023, which was up 7% from Q3 of last year, but was down 3% from last quarter.

Speaker 3

For the 9 month period, we sold 111,000,000 ounces of silver, which is up 17% from the same year ago period. The number of new customers in our 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 64,700 in Q3 fiscal 2023, which is down 40% from Q3 of last year and was down 51% from last quarter. It is important to note approximately 55% of the new customers and the previous quarter were attributable to the acquired customer list of BGASC in October of 2022. For the 9 month period, the number of new customers in our DTC segment was 244,900, which was up 35% from 182,000 new customers in the same year ago period. Approximately 30% of the new customers in the NYMOC period were attributable to the acquired customer list of BGASC in October of 2022.

Speaker 3

The number of total customers in our DTC segment At the end of the Q3 was approximately $2,300,000 which was a 15% increase from the prior year. The year over year increase in total customers was primarily due to organic growth of our JNB customer base as well as the acquired customer list from BGASC in October of 2022. 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 Q3 fiscal 2023 was $2,452 which was down $2.66 from Q3 fiscal 2022. For the 9 month period, our DTC average order value was $2,394 which compares to 2,458 from the same year ago period. For the fiscal Q3, our inventory turn ratio was 2.4%, which was a 23% decrease from 3.1 In Q3 of last year, for the 9 month period, our inventory turnover ratio was 7.0%, which was 27% which was a 27% decrease

Speaker 2

from the

Speaker 3

9 month period of last year. Finally, the number of secured loans at the end of March totaled 963, a decrease of 8% from December 31, 2022

Speaker 4

and a

Speaker 3

decrease of 64% from March 31, 2022. The dollar value of our loan portfolio at the end of March 2023 totaled $96,900,000 which is down 5% from the end of December and down 34% from March 31, 2022. That concludes my prepared remarks. I'll now turn it over to Greg for closing remarks. Greg?

Speaker 1

Thank you, Thor and Kathleen. The exceptional market conditions that we experienced in the latter half of the third quarter post bank crisis have continued, keeping us optimistic about the outlook for A Mark as we close out our fiscal year. Looking ahead, we continue to evaluate growth opportunities to further expand our customer base and our geographic footprint. We continue to invest in our minting business and are currently in the process of expanding the size of the facility and acquiring additional equipment to further increase minting capacity. We remain optimistic that our proven business model and integrated platform will allow us to realize growth and profitability over the long run.

Speaker 1

This concludes my remarks. Kelly?

Operator

Certainly, the floor is now open for questions. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we pull for questions. Your first question is coming from Thomas Forte with D. A.

Operator

Davidson. Please post your question. Your line is live.

Speaker 5

Great. Thank you. So Greg, Zohr, Kathleen and Steve, congrats on a fantastic quarter. Had 3 questions, but they're pretty quick ones. So I'll go one at a time.

Speaker 5

So Greg, can you give your current thoughts on capital allocation, including dividends, one time dividends And buying back shares, I see you bought back shares in the quarter?

Speaker 1

Sure. I think that Post this quarter, we have added to our added to our capital, added to our tangible net worth. I think that The company had a buyback plan in place, which we've had for a while. We felt In this last quarter that there was an opportunity to deploy capital in a good way. I think the average purchase price for the 335,000 shares was around $29 a share.

Speaker 1

And We saw that as an opportunity. I think that we continue to have a good pipeline of acquisition targets. In fact, it's fairly robust right now. So we're very careful about How we're going to deploy capital in that way, very comfortable with the quarterly dividend. And as we have said before, depending Where we are after the fiscal year, we usually take a close look at a special dividend, really depending on All the factors I just discussed and what we think is the proper amount to return to shareholders at that time.

Speaker 1

So I think all of those things we look at regularly and Pretty comfortable right now that we're in a position to be able to make these decisions and Return capital or do things that we think are good for shareholder value.

Speaker 5

You touched on this twice already, so I don't know what more you can add. But on the strategic M and A front, including international direct to consumer expansion, Is there anything you want to add above and beyond what you've already said so far?

Speaker 1

Not really. I mean, I think it's the same. I think At the moment, we feel very good about the pipeline and we have a lot of opportunities that are that have developed. No guarantee any of them will happen. We're in the early stages on a few things we're looking at.

Speaker 1

But optimistic that We can continue to do acquisitions and do as we have done in the past Accretive for the company and the shareholders and that we feel we have a good formula and we're finding opportunities that we believe will be good for those whether that's in the DTC segment or the minting business or the wholesale trading business. I think We're always open to acquisitions and opportunities that make sense like what we've done historically.

Speaker 5

All right. Excellent. And last one for me. I think that investors may not fully understand this, which is why I wanted to ask. So for those investors who may not be familiar, how does a sustained period of elevated gold prices impact your business?

Speaker 1

I've talked about this almost every quarter for the last 10 years. The price of gold is a little bit less important to our activity level As is the circumstances behind the price of gold. What we saw in the month of March and the month of April was a panic flight to safety. And the price of the metal really didn't matter, particularly in the last 3 weeks of March. People just were taking money out of banks and people were buying safety.

Speaker 1

That is a behavior that our customers Have not really exhibited in the past short term. It was a different feel. It was a different behavior by the client. But there was a tremendous amount of volatility and a tremendous Amount of fear of missing out, I believe, at the end of last of the quarter we're reporting on. So the price was very strong and neared new highs and The sentiment of missing out was evident for us.

Speaker 1

Historically, we've talked about drops in price That really stimulated interest. We still expect to see those in the future. But the macro environment right now is such that there's a belief that There are more crises to come. There's more uncertainty. There's more volatility.

Speaker 1

The world seems to be Somewhat uneasy right now overall. And that particular sentiment and the environment that we're seeing is favorable to us. And it's a good thing for us. Generally, our slowest periods happen when the price of gold and silver is very tightly range bound over a long period of time. And we are just aren't seeing that right now.

Speaker 5

Thank you, Greg. I really appreciate that.

Operator

Your next question is coming from Lucas Pipes with B. Riley Securities. Please pose your question. Your line is live.

Speaker 6

Thank you very much, operator. Good afternoon, everyone. And Greg, you touched on it just there a bit in the prior question, but I wanted to ask a little bit more about the trends Since quarter end, you mentioned the uncertainty around the debt ceiling right now. That's an issue a lot of folks are seemingly concerned about. So what have you seen in terms of volume, customer acquisitions, The margin on the product in the DTC segment would appreciate maybe some additional color on that and then how it may shape your outlook for the end of the year?

Speaker 6

Thank you very much.

Speaker 1

Sure. It seems like I should be asking you that. I saw your last report and it seems like you were did your homework and you were very Attune to the premiums and what has happened pretty much since the middle of March or the 1st week of March. We really this quarter for us was really like night and day. We reported on our last quarter that December January had started off fairly slow for us.

Speaker 1

And there were a number of factors to that. A lot of it was inventory availability. And again, there were some tight range bound periods. February continued to be Fairly slow. The week before the SVB crisis, we saw activity pick up and we saw just a little bit different behavior from our customers.

Speaker 1

And then the last 3 weeks of March were for all the reasons that you mentioned and The panic that seemed to ensue, it was extremely good for us and all aspects of the business Performed just as we would expect them to. And there was a new level of just What seemed like fear and just flight to quality that we hadn't seen compressed into such A short period of time before. I attribute all of the work that everybody here has done to the success And being prepared, so that we could take advantage of it. We had plenty of inventory. Our DTC businesses took Full advantage of the increase in demand.

Speaker 1

And we have seen the level of activity Continue in the 1st part of this quarter. April was very active for us. And I believe the overall crisis and the overall uncertainty in the market right now and just Really kind of a fear of what comes next. It seems like every Sunday afternoon or every early Monday morning there's a new Event that the government is having to deal with. And I think that bodes well for Our part of the economy or our part of the world.

Speaker 1

So we feel like we're well positioned and we're seeing some good activity right now.

Speaker 6

Thank you and also congratulations for being in a position to take advantage of that market opportunity. I wanted to touch on the Mint expansion really quickly. And I wondered what Capital outlays the expansion requires what payback periods you're looking at. And then I saw that You obtained the certification that qualifies, the mint, I believe for IRA investments. How does that work and what's the market opportunity on that front?

Speaker 6

Thank you very much, Greg.

Speaker 1

Sure. As it relates to the expansion, we've had an opportunity to Acquire some new equipment that will expand a certain product line that we are very active in right now. It will require a small construction build and then we expect the machinery to be online probably in September. The overall capital expense for this Small expansion is probably less than $2,000,000 So, I mean, it's not a ton of money. As it relates to Return on investment, it's going to depend a little bit on where the demand goes between now and September, October, November.

Speaker 1

But if we're anywhere near the activity level we have right now, This new machine and this expansion could have a 1 to 2 year payback. If the market is Super active, it could be quicker, but somewhere in the 1 to 2 year range on this is what we would be shooting for. As it relates to the ISO certification, it allows SilverTowne product To be accepted by most of the IRA trustees. It's a very arduous process and it took quite a bit of time. But now as long as any of our products have either the SilverTowne name or the pickaxe, which is our logo On the product, anywhere on the product, it will be accepted by the majority of the trustees for IRA inclusion in their ecosystem.

Speaker 1

So it's something that Jamie and his team and Brent had worked on for a long time. It's a testament to only the highest quality mints are certified. Our other the mint that we have a minority interest In Sunshine, they too are certified and we look at it as a big accomplishment.

Speaker 6

Greg, that's super helpful. Really appreciate all the color and continued best of luck to you and your team.

Operator

Your next question is coming from Andrew Schett with ROTH MKM. Please close your question. Your line

Speaker 7

Good afternoon and congrats on the strong quarter. Just kind of going off of Some of the questions here regarding the inventory build. You guys had some healthy build in the June quarter March quarter and you touched on kind of a Opportunistic June quarter here to liquidate some of the inventory. Can you just kind of touch on your guys' thought process behind inventory management and when you may build or when you may liquidate depending on market conditions?

Speaker 1

Well, the demand really dictates where our inventory will be and how fast the inventory turns. We're currently Pretty booked up through the end of June for both Sunshine and SilverTowne products. The Royal Canadian Mint continues to be on allocation and we're not getting enough Royal Canadian Mint product. The U. S.

Speaker 1

Mint It is continuing their allocation program and we're not getting enough of that product either. So I guess the inventory buildup, it depends a lot on the product. A lot of times you'll see our inventory buildup Dollar wise and it might be 400 ounce gold bars or 1,000 ounce silver bars that are very low margin for us. So it really depends about the composition of the inventory and how much of it is fabricated product that will Sell through our DTC and how much of it is industrial sized bars that will sell to manufacturers Or institutions. So it's not just as easy as saying what how we will build up or what we will build up in.

Speaker 1

Right now, it would be very difficult for us to build up inventory because we're pretty much selling everything we can make. And the demand is driving that. As I mentioned on the last call, towards the end of November and December of 2022 and through January February, we had a significant slowdown in demand And we were able to take that opportunity to build up inventory and have it live on the shelves and That was opportunistic for us and it played out very well as we saw a spike in demand in the 1st and second week of March. And the demand has continued through the 1st part of this quarter. But just going by what our inventory is and what it says on the balance sheet can be a little bit More complex than that.

Speaker 1

It has a lot to do with the makeup and then strategically what the company decides We want to build up for some promotion or some opportunity in the future. So it's just a little more complicated than just what the line item is on the balance sheet.

Speaker 7

Great. Thank you for the detail there. That was very helpful. And last, just a quick one for me. It's Nice to see the healthy I think you said 124 basis point expansion in direct to consumer.

Speaker 7

Can you just unpack that a little bit? Was that driven by Spreads and the increased volumes at the end of the quarter or is there something else to unpack there?

Speaker 1

No, I think it was just our ability to be And to be able to sell a lot of product when our competition in the DTC segment seemed To be a little less prepared or didn't have as much inventory. So I think that When we're taking market share and when we're taking customers and there's less product available, The market is going to naturally price product a little bit higher. And I think We were able to take advantage of that and it was good for us. We not only saw Some increase in margins we saw we had the product to sell and I believe our new customer counts and Our ability to find new customers and service those customers was very good towards the end of the quarter and is reflecting very strongly for the start of the new quarter.

Speaker 7

Great. I appreciate the feedback and congrats again on the strong quarter.

Speaker 1

Thank you. Thank you.

Operator

Your next question is coming from Greg Gibas with Northland Securities. Please post your question. Your line is live.

Speaker 4

Hey, Greg, Kathleen and Thor. Thanks for taking the questions. Congrats on the strong results. Thanks, Craig. Most of my questions have been answered here, but I wanted to follow-up on the expansion of the facility at SilverTowne Mint.

Speaker 4

You kind of covered a little bit regarding timing and everything, but wanted to get a sense of maybe the magnitude of the expansion or I guess the level Production volume that you're kind of seeking to maybe match the demand. I know your comment was we're really selling everything we can make. So just wanted to get a sense of What the degree to the expansion there?

Speaker 1

Right. And there's 2. We've talked a little bit before that we bought some property in Winchester, Indiana that Jamie Meadows was able to acquire for us. And there's a long term plan for a much bigger expansion, but that's going to take some time. And I would say that's much more long term as it relates to expansion.

Speaker 1

As it relates to what I described earlier, this was a specific set of machinery that had been on order with another company and the machinery the company decided not to take delivery of the machinery. And so we were able to jump in and get the slot, which is why we're going to be able to take delivery of This set of machinery hopefully in August or September and get online very quickly. Generally, you need to Plan on 12 to 18 months lead time for some of this equipment. So this was a real opportunity for us To kind of jump to the front of the line and get something that we really think we need. It's my Understanding that when we get this fully online in October, it's likely to add 500,000 plus ounces a week.

Speaker 1

I mean, I'm sorry, 500,000 ounces plus a month of additional capacity for us. So a very fair a very nice jump And we're looking forward to getting it online for products right now that We actually can't make enough of it. It fits this piece of machinery fits a product line that we're having trouble keeping up with. So it worked out Very well for us and it's exactly what we needed and we're going to be able to get it quicker than we normally would. So very, Very happy with the progress we're making on this project.

Speaker 4

Got it. That's great to hear. Appreciate the color there. And I did want to ask you, I was going to ask you in the past, but sometimes I feel like you have some pretty good insights into the supply dynamics from the U. S.

Speaker 4

Mint And how that will trend going forward. I'm curious if you have any comments on where you expect that to trend?

Speaker 1

Yes. I don't really. I mean it's From what I can tell right now, the trends of limited production Is continuing. I think certainly if you look at the premiums on U. S.

Speaker 1

Mint product, particularly in silver not so much in gold, but particularly in silver, The premiums continue to be at an elevated level, and that's just a combination of Supply and demand and right now, the premiums would indicate there's not enough supply coming out of the mint for the demand. And that's a good thing for us. We're not going to complain and we'd always like to have a little bit more product. But I think that continued lack of what filling the demand that's there Really long term plays out well for A Mark in our private Mint products in particularly SilverTowne and Sunshine That the longer this persists, the longer Customers are going to favor and want to buy SilverTowne and Sunshine products and the acceptance level of that those products and The quality of the product at Sunshine and SilverTowne are manufacturing rivals a lot of sovereignments Right now. And we've come so far and the product is so good that the brands are stronger than ever And the ISO certification really illustrates that.

Speaker 1

The Mint is making a great product. We love their product. We could sell more of it if we had it. And We'll see what happens. But I don't anticipate right now that there's any is going to be any Significant or material change in what they're able to produce every month.

Speaker 4

Sure. That's helpful, Greg. I think you already kind of answered my questions regarding M and A opportunities there. So I'll leave it there for now, but appreciate the help.

Speaker 1

Great. Thank you.

Operator

Your next question is coming from David Sebastian with Kingen Capital Advisors. Please post your question. Your line is

Speaker 4

Hi, thanks for taking my question. I was curious if you could talk a little bit about counterparty risk when it Your hedging on your gold and silver with all the bank runs that have been going on lately?

Speaker 1

Yes. I mean, we live through the 2,008 crisis and we've been there and we've lived through the MF global crisis as it relates to large counter We have a what I believe is the one of the best risk management strategies in the marketplace. We have not seen any counterparty disruption throughout the last 8 weeks. Our philosophy really Like most people in the country is, we'd like to be engaged with banks and institutions that we believe fall in the too big to fail category. And we have positioned ourselves Over the last 15 years to continually have our largest counterparty positions with institutions that we believe are too big to fail.

Speaker 1

And we've really tried to avoid Having positions or having counterparty risk that we deem material in this area with any of the mid level Or smaller counterparties that we could deal with. And I think that's just part of our risk management and We feel like we do a really good job on this. And I think how we've particularly Thor and I have managed this in the last 18 years or 19 years is we feel pretty good about that. You can always you always know that a Black Swan event is out there and you always know that you need to prepare for the worst and hope for the best. But I believe that in our case, we've been doing this for quite some time and our philosophy really hasn't changed 1.

Speaker 1

Since 2008, 2009 where we really moved away from what we felt at the time were higher risk counterparties and We've focused on doing most of our business with high level institutions.

Speaker 4

Got it. Thank you. Very helpful. Do you have any commentary on where sales are trending, Especially on the DTC side for Q4 versus what you saw in Q3?

Speaker 1

I feel like the businesses all segments of the businesses were really excelling at the end of Q3. I feel like everything really worked together. Everything was there. We really took advantage of it, Generated a tremendous amount of gross profit in the last month of the quarter. I think that What we're seeing right now through 5 weeks of Q4, we're very optimistic.

Speaker 1

And I can say that the business continues to exceed my expectations as it relates Just the seamless operations that all of our divisions Are working together rowing in the same direction from getting raw metal to delivering 10 ounces of silver to somebody's doorstep. It's a very complex and intense process Throughout the spikes in demand that we saw particularly over a couple of weekends in March towards Our delivery, our ability to get products to DTC customers in a very, very short period Time when people were really panicked and just really wanted anything in their hands as opposed to in a brokerage account or in a bank account. Our team really overachieved. So I don't know what's going to happen next week. I can just comment on what I've seen so far and we feel really firing on what I would say are 12 cylinders right now.

Speaker 4

Got it. Thank you. That's all for me.

Operator

At this time, this concludes a question and answer session. I'd now like to turn the call back over to Mr. Roberts for his closing remarks.

Speaker 1

Thank you, Kelly. I'd like to thank all of our shareholders for joining that joined our call today. Thank you for your interest and continued support. I'd also like to thank all of our employees for their dedication and commitment to A Mark's continued success. We look forward to keeping you apprised of A Mark's progress.

Speaker 1

Thank you.

Operator

Before we conclude today's call, I would like to provide A Mark's Safe Harbor statement that includes important cautions regarding forward looking statements made during this call. During today's call, there were forward looking statements made regarding future events, statements that relate A Mark's 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 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 the company's growth strategy as planned greater than anticipated cost incurred to execute the strategy, changes in the current domestic and international political climate, increased competition for A Mark's higher margin services, which could depress pricing the failure of the company's 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 risk as described 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 there have identified certain of such forward looking statements, which speak only as of the dates on which they were made.

Operator

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. Finally, I would like to remind everyone that a recording of today's call will be available for replay via a link on the Investors section of the company's website. Thank you for joining us today for A Mark's earnings call.

Operator

You may

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Earnings Conference Call
A-Mark Precious Metals Q3 2023
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