A-Mark Precious Metals Inc

The Company conducts its operations in three reportable segments: (i) Wholesale Sales & Ancillary Services, (ii) Direct-to-Consumer, and (iii) Secured Lending.

Results of Operations — Wholesale Sales & Ancillary Services Segment

The Company operates its Wholesale Sales & Ancillary Services segment directly and through its consolidated subsidiaries, A-Mark Trading AG (“AMTAG”), Transcontinental Depository Services ("TDS"), A-M Global Logistics, LLC ("Logistics"), AM&ST Associates, LLC ("AMST" or "Silver Towne" or the "Mint"), and AM/LPM Ventures, LLC, which we formed to acquire LPM Group Limited ("LPM"). The Wholesale Sales & Ancillary Services segment includes the consolidating eliminations of inter-segment transactions and unallocated segment adjustments.

— Wholesale Sales & Ancillary Services Segment

The operating results of our Wholesale Sales & Ancillary Services segment were as follows (in thousands, except performance metrics data):

(a)

Revenues are presented net of inter-segment transactions with the Direct-to-Consumer segment that totaled $321.0 million. This segment’s gross sales before eliminations of inter-segment activity totaled $2.548 billion.

(b)

Revenues are presented net of inter-segment transactions with the Direct-to-Consumer segment that totaled $228.3 million. This segment’s gross sales before eliminations of inter-segment activity totaled $2.387 billion.

(c)

Gross profit percentage before elimination of inter-segment sales to the Direct-to-Consumer segment was 0.777% for the period.

(d)

Gross profit percentage before elimination of inter-segment sales to the Direct-to-Consumer segment was 1.093% for the period.

(1)

Gold ounces sold represents the ounces of gold product sold and delivered to the customer during the period, excluding ounces of gold recorded on forward contracts.

(2)

Silver ounces sold represents the ounces of silver product sold and delivered to the customer during the period, excluding ounces of silver recorded on forward contracts.

(3)

Wholesales Sales ticket volume represents the total number of product orders processed.

Revenues — Wholesale Sales & Ancillary Services

(a)

Revenues are presented net of inter-segment transactions with the Direct-to-Consumer segment that totaled $321.0 million. This segment’s gross sales before eliminations of inter-segment activity totaled $2.548 billion.

(b)

Revenues are presented net of inter-segment transactions with the Direct-to-Consumer segment that totaled $228.3 million. This segment’s gross sales before eliminations of inter-segment activity totaled $2.387 billion.

Revenues for the three months ended September 30, 2024 increased $67.9 million, or 3.1%, to $2.227 billion from $2.159 billion in 2023. Excluding an increase in forward sales of $217.4 million, our revenues decreased $149.5 million, 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 September 30, 2024 decreased 106,000 ounces, or 28.0%, to 272,000 ounces from 378,000 ounces in 2023. Silver ounces sold for the three months ended September 30, 2024 decreased 11,397,000 ounces, or 41.7%, to 15,960,000 ounces from 27,357,000 ounces in 2023. On average, the selling prices for gold increased by 25.5% and selling prices for silver increased by 23.1% during the three months ended September 30, 2024 as compared to the prior year.

The Wholesale Sales ticket volume for the three months ended September 30, 2024 increased by 7,611 tickets, or 34.5% to 29,655 tickets from 22,044 tickets in 2023.

Gross Profit — Wholesale Sales & Ancillary Services

(c)

Gross profit percentage before elimination of inter-segment sales to the Direct-to-Consumer segment was 0.777% for the period.

(d)

Gross profit percentage before elimination of inter-segment sales to the Direct-to-Consumer segment was 1.093% for the period.

Gross profit for the three months ended September 30, 2024 decreased $8.4 million, or 29.5%, to $20.0 million from $28.3 million in 2023. The gross profit decrease was primarily due to lower premium spreads and lower trading profits.

This segment’s profit margin percentage decreased by 41.5 basis points to 0.898% from 1.313% in 2023. The decrease in gross margin percentage was mainly attributable to the impact of increased forward sales, lower premium spreads, and lower trading profits.

Excluding an increase of $217.4 million of forward sales that had a negligible impact to the amount of gross profit, this segment's gross margin percentage for the three months ended September 30, 2024 decreased by 47.0 basis points to 2.042% from 2.512% in the prior year. Forward sales increase revenues but are associated with negligible gross profit. The Company enters into forward contracts to hedge its precious metals price risk exposure and not for speculative purposes.

Selling, General, and Administrative Expenses — Wholesale Sales & Ancillary Services

Selling, general, and administrative expenses for the three months ended September 30, 2024 increased $2.1 million, or 20.3%, to $12.7 million from $10.6 million in 2023. The change was primarily due to an increase in compensation expense (including performance-based accruals) of $1.5 million.

Interest Income — Wholesale Sales & Ancillary Services

Interest income for the three months ended September 30, 2024 increased $0.6 million, or 17.8%, to $4.0 million from $3.4 million in 2023. The overall increase was primarily due to (i) a $0.4 million increase in interest income earned from spot deferred trade orders and (ii) a $0.2 million increase in interest and fees earned related to margin orders.

Interest Expense — Wholesale Sales & Ancillary Services

Interest expense for the three months ended September 30, 2024 increased $0.7 million, or 10.6%, to $7.5 million from $6.8 million in 2023. The overall increase was primarily due to (i) an increase in inter-segment eliminations related to the DTC segment's product financing activity with A-Mark of $0.7 million and (ii) higher interest and fees from product financing arrangements of $0.6 million, partially offset by (iii) a decrease of $0.8 million related to the AMCF Notes (including amortization of debt issuance costs) due to the repayment in December 2023.

Earnings from Equity Method Investments — Wholesale Sales & Ancillary Services

Earnings from equity method investments for the three months ended September 30, 2024 decreased $2.2 million, or 79.7%, to $0.6 million from $2.7 million in 2023 due to decreased earnings of our equity method investees.

Results of Operations — Direct-to-Consumer Segment

The Company operates its Direct-to-Consumer segment through our wholly-owned subsidiaries: JM Bullion, Inc. (“JMB”), Goldline, Inc. (“Goldline”), through our investment in Silver Gold Bull, Inc. ("SGB"), and through our subsidiary Precious Metals Purchasing Partners, LLC ("PMPP").

— Direct-to-Consumer Segment

The operating results of our Direct-to-Consumer ("DTC") segment were as follows (in thousands, except performance metrics data):

(a)

Includes $20.4 million of inter-segment sales from the Direct-to-Consumer segment to the Wholesale Sales & Ancillary Services segment.

(b)

Includes $1.6 million of inter-segment sales from the Direct-to-Consumer segment to the Wholesale Sales & Ancillary Services segment.

(1)

Gold ounces sold represents the ounces of gold product sold and delivered during the period. SGB's metrics are included after the Company acquired a controlling interest on June 21, 2024.

(2)

Silver ounces sold represents the ounces of silver product sold and delivered during the period. SGB's metrics are included after the Company acquired a controlling interest on June 21, 2024.

(3)

Number of new customers represents the number of customers that have registered or set up a new account or made a purchase for the first time during the period. SGB's metrics are included after the Company acquired a controlling interest on June 21, 2024.

(4)

Number of active customers represents the number of customers that have made a purchase during any month during the period. SGB's metrics are included after the Company acquired a controlling interest on June 21, 2024.

(5)

Number of total customers represents the aggregate number of customers that have registered or set up an account or have made a purchase in the past. SGB's metrics are included after the Company acquired a controlling interest on June 21, 2024.

(6)

Ticket volume from new customers represents the number of product orders from new customers processed by JMB, Goldline, SGB, and PMPP during the period. SGB's metrics are included after the Company acquired a controlling interest on June 21, 2024.

(7)

Ticket volume from pre-existing customers represents the total number of product orders from pre-existing customers processed by JMB, Goldline, SGB, and PMPP during the period. SGB's metrics are included after the Company acquired a controlling interest on June 21, 2024.

(8)

Total ticket volume represents the total number of product orders processed by JMB, Goldline, SGB, and PMPP during the period. SGB's metrics are included after the Company acquired a controlling interest on June 21, 2024.

(9)

Average Order Value ("AOV") represents the average dollar value of product orders (excluding accumulation program orders) delivered to the customer during the period. SGB's metrics are included after the Company acquired a controlling interest on June 21, 2024.

Revenues — Direct-to-Consumer

Revenues for the three months ended September 30, 2024 increased $162.6 million, or 49.9%, to $488.1 million from $325.5 million in 2023. The increase in revenue was due to an increase in gold and silver ounces sold as well as by higher average selling prices of gold and silver. For the three months ended September 30, 2024, revenue of Goldline, SGB and PMPP, in the aggregate, was higher by $147.9 million as compared to the prior year, primarily related to acquiring a controlling interest in SGB in June 2024. For the three months ended September 30, 2024, JMB's revenue increased $14.7 million as compared to the prior year

Gold ounces sold for the three months ended September 30, 2024 increased 9,000 ounces, or 7.7%, to 126,000 ounces from 117,000 ounces in 2023. Silver ounces sold for the three months ended September 30, 2024 increased 1,468,000 ounces, or 48.6%, to 4,489,000 ounces from 3,021,000 ounces in 2023.

Gold ounces sold by Goldline, SGB and PMPP, in the aggregate, increased 34,500 ounces compared to 2023, primarily due to the Company acquiring a controlling interest in SGB in June 2024. Gold ounces sold by JMB decreased 25,500 ounces for the three months ended September 30, 2024 compared to 2023. Silver ounces sold by Goldline, SGB and PMPP, in the aggregate, increased 1,514,000 ounces compared to 2023, primarily due to the Company acquiring a controlling interest in SGB in June 2024. Silver ounces sold by JMB decreased 46,000 ounces for the three months ended September 30, 2024 compared to 2023.

On average, selling prices for gold increased by 24.7% and selling prices for silver increased by 22.0% during the three months ended September 30, 2024 as compared to the prior year.

The number of new customers for the three months ended September 30, 2024 increased 16,200, or 41.4%, to 55,300 from 39,100 in 2023. The number of active customers for the three months ended September 30, 2024 increased 23,500, or 22.1% to 129,900 from 106,400 in 2023. The number of total customers as of September 30, 2024 increased 734,700, or 30.8% to 3,122,100 from 2,387,400 as of September 30, 2023. These changes in customer-based metrics were primarily due the acquisition of SGB's customers upon the Company acquiring a controlling interest in June 2024, as well as JMB's activity.

As of September 30, 2024, the number of total CyberMetals customers was 31,100, and CyberMetals customer assets under management were $8.3 million.

For the three months ended September 30, 2024, the Direct-to-Consumer ticket volume related to new customers increased by 13,986 tickets, or 56.9%, to 38,546 tickets from 24,560 tickets in 2023. For the three months ended September 30, 2024, Direct-to-Consumer ticket volume related to pre-existing customers increased by 16,235 tickets, or 14.5%, to 128,032 tickets from 111,797 tickets in 2023. For the three months ended September 30, 2024, the Direct-to-Consumer total ticket volume increased by 30,221 tickets, or 22.2%, to 166,578 tickets from 136,357 tickets in 2023.

For the three months ended September 30, 2024, the Direct-to-Consumer average order value increased by $527, or 21.6%, to $2,967 from $2,440 in 2023.

Gross Profit — Direct-to-Consumer

Gross profit for the three months ended September 30, 2024 increased by $2.4 million, or 11.4%, to $23.5 million from $21.1 million in 2023. The increase in gross profit was mainly due to gross profit recognized as a result of our acquisition of a controlling interest in SGB and higher ticket volume during the period, partially offset by a lower gross profit margin percentage.

For the three months ended September 30, 2024, the Direct-to-Consumer segment's profit margin percentage decreased by 166.4 basis points to 4.805% from 6.469% in 2023. The decrease in the gross profit margin percentage was primarily due to our acquisition of a controlling interest in SGB, as well as lower gross profit percentages of JMB, Goldline and PMPP.

Selling, General, and Administrative Expense — Direct-to-Consumer

Selling, general, and administrative expenses for the three months ended September 30, 2024 increased $2.7 million, or 25.1%, to $13.6 million from $10.9 million in 2023. The change was primarily due to: (i) an increase in compensation expense (including performance-based accruals) of $1.0 million, (ii) an increase in advertising costs of $0.7 million, (iii) an increase in consulting and professional fees of $0.2 million, and (iv) an increase in information technology costs of $0.2 million.

Depreciation and Amortization Expense — Direct-to-Consumer

Depreciation and amortization expense for the three months ended September 30, 2024, increased $1.5 million, or 62.2%, to $3.9 million from $2.4 million in 2023 primarily due to a $2.0 million increase in SGB's intangible asset amortization expense, partially offset by a $0.5 million decrease in JMB’s intangible asset amortization expense.

Interest expense — Direct-to-Consumer

Interest expense for the three months ended September 30, 2024 decreased $0.6 million to $0.5 million from $1.1 million in 2023. The decrease is primarily related to the DTC segment's reduced product financing activity with A-Mark.

Results of Operations — Secured Lending Segment

The Company operates its Secured Lending segment through its wholly-owned subsidiaries, Collateral Finance Corporation, LLC ("CFC") and CFC Alternative Investments (“CAI”). AM Capital Funding, LLC (“AMCF”), previously a wholly-owned subsidiary of CFC, was formed for the issuance of certain notes, which were repaid in December 2023. AMCF was dissolved in June 2024.

— Secured Lending Segment

The operating results of our Secured Lending segment were as follows (in thousands, except performance metrics data):

(1)

Number of outstanding secured loans to customers at the end of the period.

Interest Income — Secured Lending

Interest income for the three months ended September 30, 2024 increased $0.3 million, or 12.1%, to $3.0 million from $2.7 million in 2023. The increase in interest income earned from the segment’s secured loan portfolio was primarily due to higher average monthly loan balances, partially offset by fewer loans outstanding. The number of secured loans outstanding decreased by 241, or 30.0% to 562 from 803 as of September 30, 2023.

Interest Expense — Secured Lending

Interest expense for the three months ended September 30, 2024 increased $0.1 million, or 3.3%, to $2.0 million from $2.0 million in 2023. The increase in interest expense was not significant.

Selling, General, and Administrative Expenses — Secured Lending

Selling, general, and administrative expenses for the three months ended September 30, 2024 decreased $0.1 million, or 25.5%, to $0.3 million from $0.4 million in 2023. The change in selling, general, and administrative expenses was not significant.