A-Mark Precious Metals Inc

RESULTS OFOPERATIONS

Overview of Results of Operations

Consolidated Results of Operations for the Three Months Ended December 31, 2024 and 2023

The operating results of our business were as follows (in thousands, except per share and performance metrics data):

(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, 2024 and 2023

The operating results of our business were as follows (in thousands, except per share and performance metrics data):

(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

Revenues for the three months ended December 31, 2024 increased $663.5 million, or 31.9%, to $2.742 billion from $2.079 billion in 2023. Excluding an increase of $167.3 million of forward sales, our revenues increased $496.2 million, or 38.1%, which was due to an increase in gold ounces sold and higher average selling prices of gold and silver, partially offset by a decrease in silver ounces sold.

Gold ounces sold for the three months ended December 31, 2024 increased 16,000 ounces, or 3.6%, to 466,000 ounces from 450,000 ounces in 2023. Silver ounces sold for the three months ended December 31, 2024 decreased 4,747,000 ounces, or 17.9%, to 21,828,000 ounces from 26,575,000 ounces in 2023. On average, the selling prices for gold increased by 35.1% and selling prices for silver increased by 37.3% during the three months ended December 31, 2024 as compared to the prior year.

JMB's revenue represented 11.3% and 16.3% of the Company's consolidated revenue for the three months ended December 31, 2024 and 2023, respectively.

Revenues for the six months ended December 31, 2024 increased $894.0 million, or 19.6%, to $5.457 billion from $4.563 billion in 2023. Excluding an increase of $384.7 million of forward sales, our revenues increased $509.3 million, or 18.5%, which was due to higher average selling prices of gold and silver, partially offset by a decrease in gold and silver ounces sold.

Gold ounces sold for the six months ended December 31, 2024 decreased 81,000 ounces, or 8.6%, to 864,000 ounces from 945,000 ounces in 2023. Silver ounces sold for the six months ended December 31, 2024 decreased 14,676,000 ounces, or 25.8%, to 42,277,000 ounces from 56,953,000 ounces in 2023. On average, the selling prices for gold increased by 31.4% and selling prices for silver increased by 31.0% during the six months ended December 31, 2024 as compared to the prior year.

JMB's revenue represented 11.3% and 13.9% of the Company's consolidated revenue for the six months ended December 31, 2024 and 2023, respectively.

Gross Profit

Gross profit for the three months ended December 31, 2024 decreased $1.3 million, or 2.8%, to $44.8 million from $46.0 million in 2023. The overall gross profit decrease was due to lower gross profits earned from the Wholesale Sales & Ancillary Services segment, partially offset by an increase in gross profits earned by the Direct-to-Consumer segment.

The Company’s overall gross margin percentage for the three months ended December 31, 2024 decreased by 58.3 basis points to 1.632% from 2.215% in 2023. Excluding an increase of $167.3 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, 2024 decreased by 104.4 basis points to 2.488% from 3.532%, which was primarily due to lower premium spreads and lower trading profits. JMB’s retail market activity represented 37.9% and 41.1%, respectively, of the Company’s consolidated gross profit for the three months ended December 31, 2024 and 2023.

Our inventory turnover ratio for the three months ended December 31, 2024 increased by 15.8% to 2.2 from 1.9 in 2023. The increase in our inventory turnover ratio was primarily due to higher forward sales, partially offset by higher average inventory balances.

Gross profit for the six months ended December 31, 2024 decreased $7.2 million, or 7.6%, to $88.2 million from $95.4 million in 2023. The overall gross profit decrease was due to lower gross profits earned from the Wholesale Sales & Ancillary Services segment, partially offset by an increase in gross profits earned by the Direct-to-Consumer segment.

The Company’s overall gross margin percentage for the six months ended December 31, 2024 decreased by 47.6 basis points to 1.616% from 2.092% in 2023. Excluding an increase of $384.7 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, 2024 decreased by 76.2 basis points to 2.700% from 3.462%, which was primarily due to lower premium spreads and lower trading profits. JMB’s retail market activity represented 37.5% and 38.3%, respectively, of the Company’s consolidated gross profit for the six months ended December 31, 2024 and 2023.

Our inventory turnover ratio for the six months ended December 31, 2024 increased by 9.3% to 4.7 from 4.3 in 2023. The increase in our inventory turnover ratio was primarily due to higher forward sales, partially offset by higher average inventory balances.

Selling, General and Administrative Expense

Selling, general and administrative expenses for the three months ended December 31, 2024 increased $3.4 million, or 15.0%, to $25.8 million from $22.4 million in 2023. The change was primarily due to: (i) an increase in consulting and professional fees of $1.3 million, (ii) higher advertising costs of $0.9 million, (iii) an increase in compensation expense (including performance-based accruals) of $0.6 million, and (iv) an increase in facilities expense of $0.4 million. Selling, general and administrative expenses for the three months ended December 31, 2024, include $5.2 million of expenses incurred by LPM and SGB, which were not included in the same year-ago period, as they were not yet consolidated subsidiaries.

Selling, general, and administrative expenses for the six months ended December 31, 2024 increased $8.1 million, or 18.4%, to $52.4 million from $44.2 million in 2023. The change was primarily due to: (i) an increase in compensation expense (including performance-based accruals) of $3.1 million, (ii) an increase in advertising costs of $1.6 million, (iii) an increase in consulting and professional fees of $1.5 million, (iv) an increase in facilities expense of $0.8 million, (v) an increase in insurance costs of $0.3 million, and (vi) an increase in information technology costs of $0.2 million. Selling, general and administrative expenses for the six months ended December 31, 2024, include $10.5 million of expenses incurred by LPM and SGB, which were not included in the same year-ago period, as they were not yet consolidated subsidiaries.

Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended December 31, 2024 increased $1.8 million, or 65.0%, to $4.6 million from $2.8 million in 2023 primarily due to an increase in amortization expense of $2.2 million relating to intangible assets acquired through our acquisition of LPM and acquisition of a controlling interest in SGB, partially offset by a decrease in JMB intangible asset amortization of $0.5 million.

Depreciation and amortization expense for the six months ended December 31, 2024 increased $3.7 million, or 66.8%, to $9.3 million from $5.6 million in 2023 primarily due to an increase in amortization expense of $4.4 million relating to intangible assets acquired through our acquisition of LPM and acquisition of a controlling interest in SGB, partially offset by a decrease in JMB intangible asset amortization of $1.0 million.

Interest income for the three months ended December 31, 2024 increased $0.5 million, or 7.7%, to $6.8 million from $6.3 million in 2023. The aggregate increase in interest income was due to an increase in other finance product income of $0.6 million and a decrease in interest income earned by our Secured Lending segment of $0.1 million.

The interest income from our Secured Lending segment decreased by $0.1 million, or 4.1%, compared with the prior year period. The decrease in interest income earned from the segment’s secured loan portfolio was primarily due to lower average monthly loan balances and by fewer loans outstanding. The number of secured loans outstanding decreased by 27.6% to 518 as of December 31, 2024, from 715 as of December 31, 2023.

Interest income for the six months ended December 31, 2024 increased $1.5 million, or 11.8%, to $13.9 million from $12.4 million in 2023. The aggregate increase in interest income was due to an increase in other finance product income of $1.2 million and an increase in interest income earned by our Secured Lending segment of $0.2 million.

The interest income from our Secured Lending segment increased by $0.2 million, or 3.9%, compared with the prior year period. 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 27.6% to 518 as of December 31, 2024, from 715 as of December 31, 2023.

Interest expense for the three months ended December 31, 2024 increased $0.2 million, or 1.9%, to $10.4 million from $10.2 million in 2023. The increase in interest expense was primarily due to: (i) an increase of $0.6 million associated with our Trading Credit Facility due to increased borrowings, (ii) an increase of $0.5 million from liabilities on borrowed metals, (iii) an increase of $0.2 million related to product financing arrangements, partially offset by (iv) a decrease of $1.1 million related to the AMCF Notes (including amortization of debt issuance costs) due to their repayment in December 2023.

Interest expense for the six months ended December 31, 2024 increased $0.4 million, or 1.8%, to $20.4 million from $20.0 million in 2023. The increase in interest expense was primarily due to: (i) an increase of $1.3 million associated with our Trading Credit Facility due to increased borrowings as well as an increase in the weighted-average effective interest rate, (ii) an increase of $0.9 million related to product financing arrangements, and (iii) an increase of $0.7 million from liabilities on borrowed metals, partially offset by (iv) a decrease of $2.5 million related to the AMCF Notes (including amortization of debt issuance costs) due to their repayment in December 2023.

Earnings (Losses) from Equity Method Investments

Earnings (losses) from equity method investments for the three months ended December 31, 2024 decreased $3.2 million, or 410.2%, to a loss of $2.4 million from earnings of $0.8 million in 2023 due to decreased earnings of our equity method investees.

Earnings (losses) from equity method investments for the six months ended December 31, 2024 decreased $5.3 million, or 152.6%, to a loss of $1.8 million from earnings of $3.5 million in 2023 due to decreased earnings of our equity method investees.

Other Income, Net

Other income, net for the three months ended December 31, 2024 decreased $0.1 million, or 19.0%, to $0.5 million from $0.6 million in 2023. The change in other income, net was not significant.

Other income, net for the six months ended December 31, 2024 decreased $0.2 million, or 21.5%, to $0.7 million from $0.8 million in 2023. The change in other income, net was not significant.

Income Tax Expense

Our income tax expense was $2.0 million and $4.5 million for the three months ended December 31, 2024 and 2023, respectively. Our effective tax rate was approximately 25.5% and 24.2% for the three months ended December 31, 2024 and 2023, respectively. Our effective tax rate varied from the federal statutory rate for the three months ended December 31, 2024 primarily due to the excess tax benefit from share-based compensation, partially offset by state taxes (net of federal tax benefit), foreign tax rate differential, Section 162(m) executive compensation disallowance, and other normal course non-deductible expenditures. Our effective tax rate for the three months ended December 31, 2023 varied from the tax computed at the federal statutory rate primarily due to the excess tax benefit from share-based compensation and the foreign derived intangible income special deduction, partially offset by state taxes (net of federal tax benefit), Section 162(m) executive compensation disallowance, and other normal course non-deductible expenditures.

Our income tax expense was $3.8 million and $9.4 million for the six months ended December 31, 2024 and 2023, respectively. Our effective tax rate was approximately 20.9% and 22.2% for the six months ended December 31, 2024 and 2023, respectively. Our effective tax rate varied from the federal statutory rate for the six months ended December 31, 2024 primarily due to the excess tax benefit from share-based compensation, partially offset by state taxes (net of federal tax benefit), foreign tax rate differential, Section 162(m) executive compensation disallowance, and other normal course non-deductible expenditures. Our effective tax rate for the six months ended December 31, 2023 varied from the tax computed at the federal statutory rate primarily due to the excess tax benefit from share-based compensation and the foreign derived intangible income special deduction, partially offset by state taxes (net of federal tax benefit), Section 162(m) executive compensation disallowance, and other normal course non-deductible expenditures.