Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- A-Mark Precious Metals Inc (AMRK, Financial) reported a revenue increase of 13% to $2.611 billion in fiscal Q3 2024 compared to the previous year.
- The company successfully completed the acquisition of LPM Group Limited, enhancing its product offerings and market reach, particularly in Asia.
- A-Mark Precious Metals Inc (AMRK) has made significant technology upgrades to improve logistics and operational efficiency.
- The company repurchased 204,396 shares for $5 million, demonstrating confidence in its stock value.
- Interest income for fiscal Q3 2024 increased by 10% due to higher earnings in the Secured Lending segment.
Negative Points
- Net income and EBITDA significantly decreased in Q3 2024 compared to the previous year, with net income at $5 million versus $35.9 million in Q3 of the prior year.
- Gross profit for fiscal Q3 2024 decreased by 54% due to lower profits from wholesale sales and the direct-to-consumer (DTC) segment.
- The company experienced a decrease in the number of gold and silver ounces sold, with a 32% decrease in gold ounces and a 30% decrease in silver ounces sold compared to last year.
- Interest expenses increased by 7% in Q3 2024 due to higher rates and increased borrowings.
- The number of new customers in the DTC segment decreased by 13% compared to the same quarter last year.
Q & A Highlights
Q: What caused the compression in the spreads during the first quarter?
A: Gregory Roberts, CEO of A-Mark Precious Metals, explained that the primary challenge was the record high gold prices during the quarter, which led many customers to sell their products back to A-Mark. The company managed its inventory effectively, balancing purchases and sales, and rotated out of less profitable inventory. Roberts noted a shift in buying back from customers versus selling, which started to improve in January, February, and March.
Q: How long does it usually take for the product bought in the March quarter to benefit the company?
A: Gregory Roberts mentioned that the monetization of inventory purchases typically spans three to six months. He described these purchases as similar to call options in the financial sector, where some trades may not work out as expected, but most do turn profitable based on the company's strategic inventory management.
Q: Can you explain the lower gross margin during the quarter?
A: The CEO attributed the lower gross margin to the fixed carry cost on inventory and the compression of premiums. He explained that when products are sold at lower premiums than usual, it significantly impacts both the gross profit in dollars and the gross profit percentage. The mix of products sold through wholesale versus direct-to-consumer (DTC) channels also affects the gross margins.
Q: What changed in the last four to five weeks that might affect future performance?
A: Roberts highlighted a slight uptick in demand and a decrease in the amount of product being bought back from wholesale customers. He noted that supply constraints, due to less profitability in production at lower premiums, have begun to rebalance the supply-demand dynamics, leading to an increase in premiums, especially for products like U.S. Silver Eagles.
Q: With the market slowdown, does this present unique M&A opportunities?
A: The CEO confirmed that the slower market has indeed opened up more M&A opportunities. He emphasized A-Mark's strong liquidity position and its strategic approach to acquisitions, particularly in potentially expanding into regions like Singapore and leveraging opportunities in both wholesale and DTC segments.
Q: How are new products attracting customers in the DTC segment?
A: Roberts discussed the introduction of new products like a one-ounce silver round developed in collaboration with Silvercrest mines, which has been successful in attracting new customers. He mentioned that A-Mark continuously adapts its product offerings to meet customer demand and capture new market segments through its DTC platforms.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
