A-Mark Precious Metals Inc
For the period ended Dec 31, 2023. Filed Feb 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2023 · Filed Feb 8, 2024
Extracted filing text, with the paragraph anchors used by the comparison.
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Item 2. Results of operations
RESULTS OFOPERATIONS
Overview of Results of Operations
Consolidated Results of Operations for the Three Months Ended December 31, 2023 and 2022
The operating results of our business were as follows (in thousands, except per share and performance metrics data):
| Three Months Ended December 31, · 2023 · 2022 · Change | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| $ · % of revenue · $ · % of revenue · $ · % | |||||||||
| Revenues | $2,078,815 | 100.000% | $1,949,705 | 100.000% | $129,110 | 6.6% | |||
| Gross profit | 46,041 | 2.215% | 63,969 | 3.281% | $(17,928) | (28.0%) | |||
| Selling, general, and administrative expenses | (22,396) | (1.077%) | (20,813) | (1.067%) | $1,583 | 7.6% | |||
| Depreciation and amortization expense | (2,811) | (0.135%) | (3,260) | (0.167%) | $(449) | (13.8%) | |||
| Interest income | 6,311 | 0.304% | 4,984 | 0.256% | $1,327 | 26.6% | |||
| Interest expense | (10,168) | (0.489%) | (7,236) | (0.371%) | $2,932 | 40.5% | |||
| Earnings from equity method investments | 777 | 0.037% | 4,669 | 0.239% | $(3,892) | (83.4%) | |||
| Other income, net | 569 | 0.027% | 833 | 0.043% | $(264) | (31.7%) | |||
| Unrealized gains on foreign exchange | 105 | 0.005% | 1 | 0.000% | $104 | 10,400.0% | |||
| Net income before provision for income taxes | 18,428 | 0.886% | 43,147 | 2.213% | $(24,719) | (57.3%) | |||
| Income tax expense | (4,467) | (0.215%) | (9,550) | (0.490%) | $(5,083) | (53.2%) | |||
| Net income | 13,961 | 0.672% | 33,597 | 1.723% | $(19,636) | (58.4%) | |||
| Net income attributable to noncontrolling interest | 195 | 0.009% | 116 | 0.006% | $79 | 68.1% | |||
| Net income attributable to the Company | $13,766 | 0.662% | $33,481 | 1.717% | $(19,715) | (58.9%) | |||
| Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.: | |||||||||
| Per Share Data: | |||||||||
| Basic | $0.60 | $1.43 | $(0.83) | (58.0%) | |||||
| Diluted | $0.57 | $1.35 | $(0.78) | (57.8%) | |||||
| Performance Metrics:(1) | |||||||||
| Gold ounces sold(2) | 450,000 | 565,000 | (115,000) | (20.4%) | |||||
| Silver ounces sold(3) | 26,575,000 | 38,137,000 | (11,562,000) | (30.3%) | |||||
| Inventory turnover ratio(4) | 1.9 | 2.4 | (0.5) | (20.8%) | |||||
| Number of secured loans at period end(5) | 715 | 1,049 | (334) | (31.8%) | |||||
(1)
See "Results of Segments" for a description of additional metrics not listed above.
(2)
(3)
(4)
Inventory turnover ratio is the cost of sales divided by average inventory for the period presented above. This calculation excludes precious metals held under financing arrangements, which are not classified as inventory on the condensed consolidated balance sheets.
(5)
Number of outstanding secured loans to customers that are primarily collateralized by precious metals at the end of the period.
Consolidated Results of Operations for the Six Months Ended December 31, 2023 and 2022
The operating results of our business were as follows (in thousands, except per share and performance metrics data):
| Six Months Ended December 31, · 2023 · 2022 · Change | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| $ · % of revenue · $ · % of revenue · $ · % | |||||||||
| Revenues | $4,563,433 | 100.000% | $3,850,056 | 100.000% | $713,377 | 18.5% | |||
| Gross profit | 95,446 | 2.092% | 140,561 | 3.651% | $(45,115) | (32.1%) | |||
| Selling, general, and administrative expenses | (44,241) | (0.969%) | (38,597) | (1.003%) | $5,644 | 14.6% | |||
| Depreciation and amortization expense | (5,603) | (0.123%) | (6,444) | (0.167%) | $(841) | (13.1%) | |||
| Interest income | 12,413 | 0.272% | 10,080 | 0.262% | $2,333 | 23.1% | |||
| Interest expense | (19,991) | (0.438%) | (13,366) | (0.347%) | $6,625 | 49.6% | |||
| Earnings from equity method investments | 3,486 | 0.076% | 7,346 | 0.191% | $(3,860) | (52.5%) | |||
| Other income, net | 842 | 0.018% | 1,360 | 0.035% | $(518) | (38.1%) | |||
| Unrealized gains on foreign exchange | 11 | 0.000% | 215 | 0.006% | $(204) | (94.9%) | |||
| Net income before provision for income taxes | 42,363 | 0.928% | 101,155 | 2.627% | $(58,792) | (58.1%) | |||
| Income tax expense | (9,419) | (0.206%) | (22,321) | (0.580%) | $(12,902) | (57.8%) | |||
| Net income | 32,944 | 0.722% | 78,834 | 2.048% | $(45,890) | (58.2%) | |||
| Net income attributable to noncontrolling interest | 351 | 0.008% | 228 | 0.006% | $123 | 53.9% | |||
| Net income attributable to the Company | $32,593 | 0.714% | $78,606 | 2.042% | $(46,013) | (58.5%) | |||
| Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.: | |||||||||
| Per Share Data: | |||||||||
| Basic | $1.40 | $3.35 | $(1.95) | (58.2%) | |||||
| Diluted | $1.34 | $3.18 | $(1.84) | (57.9%) | |||||
| Performance Metrics:(1) | |||||||||
| Gold ounces sold(2) | 945,000 | 1,194,000 | (249,000) | (20.9%) | |||||
| Silver ounces sold(3) | 56,953,000 | 74,054,000 | (17,101,000) | (23.1%) | |||||
| Inventory turnover ratio(4) | 4.3 | 4.5 | (0.2) | (4.4%) | |||||
| Number of secured loans at period end(5) | 715 | 1,049 | (334) | (31.8%) | |||||
(1)
See "Results of Segments" for a description of additional metrics not listed above.
(2)
(3)
(4)
Inventory turnover ratio is the cost of sales divided by average inventory for the period presented above. This calculation excludes precious metals held under financing arrangements, which are not classified as inventory on the condensed consolidated balance sheets.
(5)
Number of outstanding secured loans to customers that are primarily collateralized by precious metals at the end of the period.
Revenues
| in thousands, except performance metrics | |||||||
|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, · 2023 · 2022 · Change | |||||||
| $ · % of revenue · $ · % of revenue · $ · % | |||||||
| Revenues | $2,078,815 | 100.000% | $1,949,705 | 100.000% | $129,110 | 6.6% | |
| Performance Metrics | |||||||
| Gold ounces sold | 450,000 | 565,000 | (115,000) | (20.4%) | |||
| Silver ounces sold | 26,575,000 | 38,137,000 | (11,562,000) | (30.3%) | |||
Revenues for the three months ended December 31, 2023 increased $129.1 million, or 6.6%, to $2.079 billion from $1.950 billion in 2022. Excluding an increase of $231.6 million of forward sales, our revenues decreased $102.5 million, or 7.3%, which was due to a decrease in gold and silver ounces sold, partially offset by higher average selling prices of gold and silver.
Gold ounces sold for the three months ended December 31, 2023 decreased 115,000 ounces, or 20.4%, to 450,000 ounces from 565,000 ounces in 2022. Silver ounces sold for the three months ended December 31, 2023 decreased 11,562,000 ounces, or 30.3%, to 26,575,000 ounces from 38,137,000 ounces in 2022. On average, the selling prices for gold increased by 13.9% and selling prices for silver increased by 13.1% during the three months ended December 31, 2023 as compared to the prior year.
JMB's revenue represented 16.3% and 21.3% of the Company's consolidated revenue for the three months ended December 31, 2023 and 2022, respectively.
| in thousands, except performance metrics | |||||||
|---|---|---|---|---|---|---|---|
| Six Months Ended December 31, · 2023 · 2022 · Change | |||||||
| $ · % of revenue · $ · % of revenue · $ · % | |||||||
| Revenues | $4,563,433 | 100.000% | $3,850,056 | 100.000% | $713,377 | 18.5% | |
| Performance Metrics | |||||||
| Gold ounces sold | 945,000 | 1,194,000 | (249,000) | (20.9%) | |||
| Silver ounces sold | 56,953,000 | 74,054,000 | (17,101,000) | (23.1%) | |||
Revenues for the six months ended December 31, 2023 increased $713.4 million, or 18.5%, to $4.563 billion from $3.850 billion in 2022. Excluding an increase of $891.6 million of forward sales, our revenues decreased $178.2 million, or 6.1%, which was due to a decrease in gold and silver ounces sold, partially offset by higher average selling prices of gold and silver.
Gold ounces sold for the six months ended December 31, 2023 decreased 249,000 ounces, or 20.9%, to 945,000 ounces from 1,194,000 ounces in 2022. Silver ounces sold for the six months ended December 31, 2023 decreased 17,101,000 ounces, or 23.1%, to 56,953,000 ounces from 74,054,000 ounces in 2022. On average, the selling prices for gold increased by 12.0% and selling prices for silver increased by 13.9% during the six months ended December 31, 2023 as compared to the prior year.
JMB's revenue represented 13.9% and 20.9% of the Company's consolidated revenue for the six months ended December 31, 2023 and 2022, respectively.
Gross Profit
| in thousands, except performance metric | ||||||
|---|---|---|---|---|---|---|
| Three Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Gross profit | $46,041 | 2.215% | $63,969 | 3.281% | $(17,928) | (28.0%) |
| Performance Metric | ||||||
| Inventory turnover ratio | 1.9 | 2.4 | (0.5) | (20.8%) | ||
Gross profit for the three months ended December 31, 2023 decreased $17.9 million, or 28.0%, to $46.0 million from $64.0 million in 2022. The overall gross profit decrease was due to lower gross profits earned from both the Wholesale Sales & Ancillary Services and Direct-to-Consumer segments.
The Company’s overall gross margin percentage for the three months ended December 31, 2023 decreased by 106.6 basis points to 2.215% from 3.281% in 2022. Excluding an increase of $231.6 million of forward sales that had a negligible impact to the amount of gross profit, our gross margin percentage for the three months ended December 31, 2023 decreased by 101.8 basis points to 3.532% from 4.550%, which was primarily due to lower premium spreads, partially offset by higher trading profits. JMB’s retail market activity represented 41.1% and 50.7%, respectively, of the Company’s consolidated gross profit for the three months ended December 31, 2023 and 2022.
Our inventory turnover rate for the three months ended December 31, 2023 decreased by 20.8% to 1.9 from 2.4 in 2022. The decrease in our inventory turnover ratio was primarily due to higher average inventory balances held under product financing arrangements, partially offset by higher forward sales.
| in thousands, except performance metric | ||||||
|---|---|---|---|---|---|---|
| Six Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Gross profit | $95,446 | 2.092% | $140,561 | 3.651% | $(45,115) | (32.1%) |
| Performance Metric | ||||||
| Inventory turnover ratio | 4.3 | 4.5 | (0.2) | (4.4%) | ||
Gross profit for the six months ended December 31, 2023 decreased $45.1 million, or 32.1%, to $95.4 million from $140.6 million in 2022. The overall gross profit decrease was due to lower gross profits earned from both the Wholesale Sales & Ancillary Services and Direct-to-Consumer segments.
The Company’s overall gross margin percentage for the six months ended December 31, 2023 decreased by 155.9 basis points to 2.092% from 3.651% in 2022. Excluding an increase of $891.6 million of forward sales that had a negligible impact to the amount of gross profit, our gross margin percentage for the six months ended December 31, 2023 decreased by 132.6 basis points to 3.462% from 4.788%, which was primarily due to lower premium spreads, partially offset by higher trading profits. JMB’s retail market activity represented 38.3% and 49.2%, respectively, of the Company’s consolidated gross profit for the six months ended December 31, 2023 and 2022.
Our inventory turnover ratio for the six months ended December 31, 2023 decreased by 4.4% to 4.3 from 4.5 in 2022. The decrease in our inventory turnover ratio was primarily due to higher average inventory balances held under product financing arrangements, partially offset by higher forward sales.
Selling, General and Administrative Expense
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Three Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Selling, general, and administrative expenses | $(22,396) | (1.077%) | $(20,813) | (1.067%) | $1,583 | 7.6% |
Selling, general and administrative expenses for the three months ended December 31, 2023 increased $1.6 million, or 7.6%, to $22.4 million from $20.8 million in 2022. The change was primarily due to: (i) an increase in compensation expense (including performance-based accruals) of $1.4 million, (ii) higher consulting and professional fees of $0.6 million, and (iii) an increase in information technology costs of $0.4 million, partially offset by (iv) a decrease in insurance costs of $0.9 million and (v) lower advertising costs of $0.4 million.
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Six Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Selling, general, and administrative expenses | $(44,241) | (0.969%) | $(38,597) | (1.003%) | $5,644 | 14.6% |
Selling, general and administrative expenses for the six months ended December 31, 2023 increased $5.6 million, or 14.6%, to $44.2 million from $38.6 million in 2022. The change was primarily due to: (i) an increase in consulting and professional fees of $2.6 million, (ii) an increase in compensation expense (including performance-based accruals) of $2.6 million, and (iii) an increase in information technology costs of $0.7 million, partially offset by (iv) a decrease in insurance costs of $0.5 million.
Depreciation and Amortization Expense
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Three Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Depreciation and amortization expense | $(2,811) | (0.135%) | $(3,260) | (0.167%) | $(449) | (13.8%) |
Depreciation and amortization expense for the three months ended December 31, 2023 decreased $0.4 million, or 13.8%, to $2.8 million from $3.3 million in 2022 primarily due to a $0.6 million decrease in JMB’s intangible asset amortization expense.
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Six Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Depreciation and amortization expense | $(5,603) | (0.123%) | $(6,444) | (0.167%) | $(841) | (13.1%) |
Depreciation and amortization expense for the six months ended December 31, 2023 decreased $0.8 million, or 13.1%, to $5.6 million from $6.4 million in 2022 primarily due to a $1.1 million decrease in JMB’s intangible asset amortization expense.
| in thousands, except performance metric | |||||||
|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, · 2023 · 2022 · Change | |||||||
| $ · % of revenue · $ · % of revenue · $ · % | |||||||
| Interest income | $6,311 | 0.304% | $4,984 | 0.256% | $1,327 | 26.6% | |
| Performance Metric | |||||||
| Number of secured loans at period-end | 715 | 1,049 | (334) | (31.8%) | |||
Interest income for the three months ended December 31, 2023 increased $1.3 million, or 26.6%, to $6.3 million from $5.0 million in 2022. The aggregate increase in interest income was primarily due to a increase in other finance product income of $0.8 million and a increase in interest income earned by our Secured Lending segment of $0.6 million.
The interest income from our Secured Lending segment increased by $0.6 million, or 26.2%, compared with the prior year period. The increase in interest income earned from the segment’s secured loan portfolio was primarily due to an increase in interest rates and higher average monthly loan balances, partially offset by fewer loans outstanding. The number of secured loans outstanding decreased by 31.8% to 715 as of December 31, 2023, from 1,049 as of December 31, 2022.
| in thousands, except performance metric | |||||||
|---|---|---|---|---|---|---|---|
| Six Months Ended December 31, · 2023 · 2022 · Change | |||||||
| $ · % of revenue · $ · % of revenue · $ · % | |||||||
| Interest income | $12,413 | 0.272% | $10,080 | 0.262% | $2,333 | 23.1% | |
| Performance Metric | |||||||
| Number of secured loans at period-end | 715 | 1,049 | (334) | (31.8%) | |||
Interest income for the six months ended December 31, 2023 increased $2.3 million, or 23.1%, to $12.4 million from $10.1 million in 2022. The aggregate increase in interest income was primarily due to an increase in other finance product income of $1.5 million and an increase in interest income earned by our Secured Lending segment of $0.8 million.
The interest income from our Secured Lending segment increased by $0.8 million, or 18.1%, compared with the prior year period. The increase in interest income earned from the segment’s secured loan portfolio was primarily due to an increase in interest rates and higher average monthly loan balances, partially offset by fewer loans outstanding. The number of secured loans outstanding decreased by 31.8% to 715 as of December 31, 2023, from 1,049 as of December 31, 2022.
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Three Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Interest expense | $(10,168) | (0.489%) | $(7,236) | (0.371%) | $2,932 | 40.5% |
Interest expense for the three months ended December 31, 2023 increased $2.9 million, or 40.5%, to $10.2 million from $7.2 million in 2022. The increase in interest expense was primarily due to (i) an increase of $2.4 million associated with our Trading Credit Facility due to an increase in interest rates as well as increased borrowings and (ii) an increase of $1.1 million related to product financing arrangements, partially offset by (iii) a decrease of $0.3 million related to the AMCF Notes (including amortization of debt issuance costs) due to the repayment in December 2023.
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Six Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Interest expense | $(19,991) | (0.438%) | $(13,366) | (0.347%) | $6,625 | 49.6% |
Interest expense for the six months ended December 31, 2023 increased $6.6 million, or 49.6%, to $20.0 million from $13.4 million in 2022. The increase in interest expense was primarily driven by each of the following components: (i) an increase of $5.6 million associated with our Trading Credit Facility due to an increase in interest rates as well as increased borrowings and (ii) an increase of $1.6 million related to product financing arrangements, partially offset by (iii) a decrease of $0.4 million related to the AMCF Notes (including amortization of debt issuance costs) due to the repayment in December 2023 and (iv) a $0.2 million decrease in loan servicing fees.
Earnings from Equity Method Investments
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Three Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Earnings from equity method investments | $777 | 0.037% | $4,669 | 0.239% | $(3,892) | (83.4%) |
Earnings from equity method investments for the three months ended December 31, 2023 decreased $3.9 million, or 83.4%, to $0.8 million from $4.7 million in 2022 due primarily to decreased earnings of our equity method investees.
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Six Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Earnings from equity method investments | $3,486 | 0.076% | $7,346 | 0.191% | $(3,860) | (52.5%) |
Earnings from equity method investments for the six months ended December 31, 2023 decreased $3.9 million, or 52.5%, to $3.5 million from $7.3 million in 2022 due primarily to decreased earnings of our equity method investees.
Other Income, Net
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Three Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Other income, net | $569 | 0.027% | $833 | 0.043% | $(264) | (31.7%) |
Other income, net for the three months ended December 31, 2023 decreased $0.3 million, or 31.7%, to $0.6 million from $0.8 million in 2022. The change in other income, net was not significant.
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Six Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Other income, net | $842 | 0.018% | $1,360 | 0.035% | $(518) | (38.1%) |
Other income, net for the six months ended December 31, 2023 decreased $0.5 million, or 38.1%, to $0.8 million from $1.4 million in 2022. The change in other income, net was not significant.
Income Tax Expense
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Three Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Income tax expense | $(4,467) | (0.215%) | $(9,550) | (0.490%) | $(5,083) | (53.2%) |
Our income tax expense was $4.5 million and $9.6 million for the three months ended December 31, 2023 and 2022, respectively. Our effective tax rate was approximately 24.2% and 22.1% for the three months ended December 31, 2023 and 2022, respectively. For the three months ended December 31, 2023 and 2022, our effective tax rate differed from the federal statutory rate primarily due to the foreign derived intangible income special deduction and the excess tax benefit from share-based compensation, partially offset by Section 162(m) executive compensation disallowance, state taxes (net of federal tax benefit), and other normal course non-deductible expenditures.
| in thousands | ||||||
|---|---|---|---|---|---|---|
| Six Months Ended December 31, · 2023 · 2022 · Change | ||||||
| $ | % of revenue | $ | % of revenue | $ | % | |
| Income tax expense | $(9,419) | (0.206%) | $(22,321) | (0.580%) | $(12,902) | (57.8%) |
Our income tax expense was $9.4 million and $22.3 million for the six months ended December 31, 2023 and 2022, respectively. Our effective tax rate was approximately 22.2% and 22.1% for the six months ended December 31, 2023 and 2022, respectively. For the six months ended December 31, 2023 and 2022, our effective tax rate differed from the federal statutory rate primarily due to the foreign derived intangible income special deduction and the excess tax benefit from share-based compensation, partially offset by Section 162(m) executive compensation disallowance, state taxes (net of federal tax benefit), and other normal course non-deductible expenditures.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.