Good afternoon, and welcome to A-Mark Precious Metals Conference Call for Fiscal Third Quarter 2019 Ended March 31, 2019. My name is Chantel, and I will be your operator this afternoon. Before this call, A-Mark issued its results for the fiscal third quarter 2019 in a press release, which was available in the Investor Relations section of the Company’s website at www.amark.com. You can find a link to the Investor Relations section at the bottom of the homepage. Joining us for today’s call are A-Mark’s CEO, Greg Roberts; President, Thor Gjerdrum; and CFO, Cary Dickson. 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, 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. Greg. Go ahead, please.

Thanks, Chantel, and good afternoon, everyone. Thank you, thank you for joining our third quarter earnings call. It was a busy and productive quarter for A-Mark. From a macro standpoint as expected, Q3 was another period of modest volatility in the precious metals market. We saw gold spot prices rise to a high of $1,345 per ounce, which is the highest level in about nine months before closing at just under $1,300 per ounce at quarter end. On the other hand, the spot price of silver tops $16 per ounce for the first time in more than six months, but closed down for the quarter at $15.13. As you follow our company and evaluate the broader precious metals market, it’s important to keep in mind that A-Mark hedges all of its positions. Volatility has a positive effect on our business as we benefit from the increased levels of activity and ounces sold, which allow us to widen our premium spreads. As I have talked about on prior calls, we’ve strategically structured our business to capitalize on market volatility and demand for physical metals, while continuing to systematically build and scale our business for the long-term. The third quarter was no different. During Q3, we were able to leverage our diversified platform and long-standing customer relationships. Our success operationally in the third quarter is evidenced by the improvement of certain key financial metrics, most notably, gross profit, net income and silver ounces sold. While it’s encouraging to see the sequential improvement in our numbers, it’s perhaps more challenging to look at the improving trend line on our business over the first nine months of the fiscal year, where we’ve seen solid increases in nearly all of our key financial metrics. This not only reflects the improved market conditions, we experienced in Q2 and Q3, but also the benefits of our business model. This model is characterized by multiple income streams that streamline our financial profile and provide predictability over the long-term. Before I talk more about our platform business segments and growth opportunities, I will turn the podium over to our CFO, Cary Dickson, who will walk you through our financial performance for fiscal Q3 and the first nine months of 2019. Cary, take it away.

Thank you, Greg, and good afternoon, everyone. Turning to our financial results for the fiscal third quarter and the first nine months ended March 31, 2019. Our revenues for fiscal Q3 2019 increased – decreased 36% to $1.27 billion from $1.99 million in the same year-ago quarter. For the first nine months of the year, our revenues decreased 33% to $3.93 billion from $5.84 billion in the same period last year. The decrease for both the fiscal third quarter and the first nine months of 2019 were mainly due to lower forward sales and lower gold and silver prices, which were offset by an increase in the total amount of silver ounces sold in the quarter and gold and silver ounces sold in the first nine months. Gross profit for the fiscal third quarter of 2019 increased 17% to $8.7 million or 0.69% of revenue from $7.4 million or 0.37% of revenue in Q3 of last year. For the 9-month period, our gross profit increased 8% to $25.5 million or 0.65% of revenue from $23.6 million or 0.40% of revenue in the same year-ago period. The increase in gross profit for both third quarter and the first nine months of 2019 compared to the prior period was primarily related to improved gross profit for the Wholesale Trading & Ancillary segment and Direct Sales segment. Turning to our expenses. Selling, general and administrative expenses for the fiscal third quarter of 2019 decreased 12% to $8.3 million from $9.4 million in Q3 of last year. The decrease is primarily due to lower operating expenses incurred by the Direct Sales segment of $1.4 million, which were partially offset by increased overall compensation costs of $0.5 million. For the first nine months of 2019, SG&A decreased 6% to $24.1 million from $25.7 million in…

Thank you, Cary. Turning to the key operational metrics for the fiscal third quarter of 2019. We saw 474,000 ounces of gold during the quarter, which is up 8% from the prior quarter, but down 23% from fiscal Q3 of last year. For the first nine months of the year, we sold 1.4 million ounces, which is up 9% from $1.3 million in the comparable prior year period. Turning to silver. We sold 16.8 million ounces, which is down 16% from the prior quarter, but up 47% from Q3 of last year. For the nine-month period, silver ounces sold increased 45% to 55.1 million ounces from 37.9 million in the comparable prior year period. Looking at our key second – our second key metric, Wholesale Trading tickets volumes decreased 6% to 30,966 tickets from the prior quarter and increased 7% from Q3 of last year. The third key metric evaluate is inventory turn, defined as the cost of sales during the period divided by the average inventory during the period. In the third quarter, our inventory turn ratio was 4.6, which was up 18% from 3.9 in the prior quarter and down 4% from 4.8 in Q3 last year. And finally, the number of secured loans at the end of the quarter totaled 2,568, which was up 33% from the prior quarter and down 18% from the comparable prior year period. This decrease was due to lower metals prices in the first quarter of fiscal 2019, which lowered the customers collateral value and led to lone liquidations. As of March 31, 2019, the dollar value of our CFC loan portfolio totaled $111.2 million, which was up 6.2% from the prior quarter and up 1.6% year-over-year. That concludes my prepared remarks. I will now turn it back over to Greg to talk about the progress we’ve been making on our key operational initiatives. Greg?

Thanks, Thor. We’ve seen some solid improvement in our KPIs for the first nine months of this fiscal year. If we step back and take a look at our business more broadly, it’s clear we’re taking advantage of the operating momentum we’ve established as well as capitalizing on our expansive platform of offerings, which we believe is the most robust in our industry. We are continuing to plan and judiciously invest in our business as well as strategic growth areas to further our competitive position and grow our business. This means further scaling of our business both operationally and financially with expanded new offerings and increasing the predictability and profitability of our model. At the center of A-Mark’s ecosystem is A-Mark Global Logistics. For those newer to our company, AM Global Logistics is our full-service 17,000 square-foot facility in Las Vegas that provides end-to-end logistics services to e-commerce leaders as well as IRA storage and precious metal and numismatic storage solutions to a growing customer base. What’s attractive about this business is the inherent cross-sell opportunities it provides our broader platform. As I’ve communicated on previous calls, AMG is actively pursuing initiatives to increase our gross profit and service offerings. Leading these initiatives is our new VP of Logistics, Chris Harte, who has done a great job of leveraging data to improve our processes and efficiencies at the facility. Building from the successes of world class online retailers, we recently launched a program to streamline our customer deposit and returns process. While it’s still in its early days, the new program has expedited the overall process, improved the customer experience and product quality as well as reduced our shipping and packaging costs. Moving onto our Secured Lending segment, notably Collateral Finance Corp. or CFC serves a great customer generation tool…

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] Thank you. Your first question comes from Sarkis Sherbetchyan. Go ahead please.

Hey, good afternoon, and thanks for taking my question here.

Sure. Thanks for asking.

First off, just wanted to ask on the granularities beyond the gross profit trend. It looks like sequentially silver ounces sold were a little bit lower. Just wanted to see if you can maybe give us some levers on the profitability metrics for the business?

Sure. I think the silver ounces sold, although they were down a little bit in this quarter, the actual premium we were able to charge for silver ounces was up and that was due to some volatility in Q2 as well as some demand that carried over into Q3. But in particular, our silver premiums per ounce on our SilverTowne product as well as our U.S. Mint products, we were able to carry a slightly higher premium in Q3 and that’s why the gross profits up but the actual ounces were down a little bit.

Yes. That’s super helpful. Can you maybe talk about the premium trends you’re seeing both for the products from the U.S. Mint as well as currently kind of the SilverTowne premiums you’re able to earn?

I think in Q3, we were coming off of a very strong demand period in Q2, where most of which happened in December when we had some issues and some volatility in the equities markets. We were fortunate enough that some other producers of silver products that compete with SilverTowne had some production lapses and that allowed us to increase our premiums a little bit. The U.S. Mint also ran into some production issues as well as they ran out of silver products in the quarter for a period of time and that translated into us being able to raise premiums across some of our other products. I would say that in the beginning, the first say, 45 days of Q4, the premiums have come back down a little bit as the demand has subsided a little bit. We seem to be back into a fairly robust equities market the last six weeks, although the last few days are favorable to us, but the premiums have come back down a little bit as demand has decreased slightly over the last say, four weeks to six weeks. But we’re still very happy, I would say. In general, our SilverTowne premiums are up $0.20 to $0.30 an ounce over where they probably were a year ago. So we’re very pleased and we have been able to increase our market share with SilverTowne products in the last two quarters, so I believe we’ve taken some market share and we’ve developed some new customers that are very, very receptive to the SilverTowne product.

Thanks for that color. And I think if we kind of switch gears here to the Direct Sales segment, it seems like you had a $0.5 million pretax loss if I heard the comments correctly, and you’re kind of on the pathway to achieve profitability. Can you maybe give us some color or updated thoughts around when you would think you would maybe breakeven on that segment of the business?

Sure. We look at that business in a number of different ways. On a pure stand-alone segment basis, I would say we’ve made some great improvements in our OpEx. We had a fairly strong quarter top line as it relates to what GoldMine was able to sell both ounces, and we were very happy with the product mix. We look at Goldline a little more broadly, and that when we look at it from a management perspective, we also factor in profits that we generate at Goldline from the trading desk on products that A-Mark supplies Goldline as well as storage and logistics profits as well as CFC loan and interest income, which has – is growing at what we feel is a nice pace. So it depends on how we define breakeven or how we define profitability. We would say that Q3, which we’re reporting on here, we’ve – Goldline was – we consider profitable if we factor in all the different revenue streams the company captures. As it relates to Goldline as a standalone, I would say that we’re still probably three months to six months away from that standalone profitability number. We did make some further reductions in OpEx last week at Goldline, and we were very happy with some further reductions that Thor was able to institute, and there were some associated severance costs with that, which will be captured in Q4. But we really feel like we have our arms around this and that this is a quickly – in the last 30 to 60 days is where we’re seeing some real good numbers that we like. Next question.

Thank you. Your next question comes from Chris Sakai. Go ahead please.

Hi everyone, just a question regarding, I guess, I think results silver ounces sold has grown more than the gold ounces sold, I wanted to hear your guys’ thinking on that why has silver been more demanded than gold?

That’s a difficult – that’s a good question but a difficult answer to pinpoint exactly why. It has a lot to do with the macroeconomic numbers and who is actually buying the product. Generally, when our gold ounces rise and grow quicker than the silver ounces, it has to do with more institutional buying and more bigger buyers that buy gold where when silver ounces increase or decrease, it’s generally more affected by the small retail buyers. So a high quantity of $1000 silver buyers at the retail level will affect our silver ounces sold differently than a small number of multimillion-dollar purchases from a bank or an institution. I think that it also has a little bit to do with our SilverTowne Mint production. We are – when SilverTowne has product available, or when A-Mark has SilverTowne product available, but there is a shortage from other private mints or even sovereign mints, our silver ounces can go up. It can be the same amount of silver being purchased in the marketplace, but our sales will go up because we have product when other people don’t. So that’s about as much as I can say on specifics why you’ll see that. But a lot of times it just depends on, we’re the cheapest in the marketplace and we have product, either it’s silver or it’s gold, and we get that market share. I do believe if we go back up to Q2, we were fortunate enough to buy a very large position of 1 ounce gold coins from a sovereign mint and when we’re looking quarter-over-quarter, that may have had played a part in our gold ounces sold being up last quarter and may be down a little bit this quarter. There’s a number of factors that can affect those two metrics.

Okay, thanks. And then, for the Goldline business, I guess you were just commenting on, it would – it gets profitable in three months to six months. So my question is, I guess, when it becomes profitable, I mean, how much is this going to contribute to the earnings per share?

Well, I wish you could give me the answer to that. It’s – we are very optimistic about this platform and this distribution machine that Goldline is. I think we are very well positioned in a bull market in precious metals or a crisis situation macro that Goldline is going to outperform our other business platforms in the right environment. I hate to try to guess how much we’re going to make in that business because if you can’t tell me exactly the dynamic that caused the environment to change the dynamics, it’s hard for me to say what exactly the bottom line number is going to be. I will say that Goldline has historically had months where it sold $10 million to $20 million a month retail in precious metals. I think we’re at a position – and that – and the breakeven point of that in that time may have been in the $8 million to $10 million range for sales. I will say that Goldline today is positioned to breakeven or make money at the $3 million to $4 million a month top line sales numbers. So I think we’re very efficient right now and it doesn’t take much if we get back to the numbers that Goldline has produced historically. The profits would be very favorable, but unless I kind of had a crystal ball and I could tell exactly what the environment was, it’s hard for me to pinpoint exactly what their potential is. We just believe the customer base is strong. We believe the customer base is one of the best in the business. We’re doing a great job right now at acquiring new customers and new business through our association with Glenn Beck and his leads that he is generating for Goldline are very, very high quality and we feel good about where Goldline is positioned today in what has been for their model a fairly negative environment with some headwinds.

Okay, thanks.

Sure.

Thank you. [Operator Instructions] Your next question comes from Mitch Almy. Go ahead please.

Good afternoon, Greg.

Hello, Mitch.

I’m doing great. How are you do?

Just super, thank you. I just have one question. It has to do with the loan book. Are you at liberty and does it make sense to give us the absolute size of the loan book at quarter end? And if it does, would you be open to disclosing them on a quarterly basis going forward?

The CFC loan book.

Yes, I think it’s disclosed as secured loans on our balance sheet on the CFC portion.

Okay.

So even on the press release, it’s here in the balance sheet.

Okay, so that’s…

[Indiscernible]

So the secured loans on the balance sheet and in the release are specifically CFC. So there is some other lending and some other loans on our balance sheet, but we – the Secured Lending segment is CFC. And at quarter end, we were at $111 million versus about a $110 million at June 30, 2018 in CFC. I will say that what we’ve talked about before and discussed on previous calls is when silver dipped in the, I would say, Q1 of this fiscal year, which was the July, August, September period. We had a big drop in silver. We lost about $20 million in loans or maybe a little more, $27 million I think it was, just due to the margin call. So we – if you look what happened between June 30, 2018 and March 31, 2019, it looks like we’re only up like $1 million, but we had a fairly significant drop right when we were closing our ABS facility, and then we’ve been able to build that back up and I can – I think, I can just say on this call that the book is up closer to $120 million as of today, up from March 31. So we’re – we have over the last few weeks achieved, I think, two consecutive weeks of record number in our overall book.

If I understand it correctly – go ahead.

Thor had one thing to add.

I was going to add, Mitch, here, people always ask us about our controls and the fact that we never had a loan loss in that period where we had over $20 million in margin calls. All calls were met and all liquidations were handled orderly with no loan losses. Our systems continue to perform very well in regard to managing the collateral and managing loan-to-value when we see market volatility.

That’s great. Thanks for adding that.

Does that answer the question or is there something I missed?

Absolutely. Yes. No, no. I’m just trying to calculate the net interest margin on your portfolio going forward. And with the asset backed facility, the incremental amount that you can issue is in $50 million increments, correct?

We had some discussions on that this morning. I wouldn’t lock into the idea of $50 million like number. I think we could do $25 million tomorrow if we needed to, but I think the larger the tranche to do a new one, the better pricing we’re going to get. And so that’s a consideration. I think the one thing that we talked about this morning, which I think Thor is working on with Cary, I think we’re looking at potentially a warehouse facility that we would like to be able to put loans into specifically while we’re building up to get to a little bit larger next the de-tranche or whatever it is. So I think there’s ways we can do this. I think that one of the real negative aspects was from a timing perspective, which we’ve now really worked through is that when we close the ABS, it was so important to us to get the first one done and building this brand and being out in the marketplace with this security that we were probably a little bit short of the $100 million when we closed the first one and we anticipated that we would need to put some inventory in the ABS, which is allowed per the documents. And what that did was any inventory we have in there is – we’re probably paying a slightly higher rate than we would normally. The timing of the ABS closing was also coincided with what I just talked about, which was the period when silver prices dropped and we had some liquidations and some margin calls. So what you saw in Q2 and a little bit in Q1 was that we started the ABS instead of starting it with a $100 million with $10 million in loans…

It does. It also begs one more sort of associated question, which in the previous Q&A, you mentioned you brought the breakeven at Goldline down to $3 million to $4 million, but in the...

Per month.

$10 million to $12 million of revenue. In the same way, that we’ve seen the size of your loan book move with the volatility in a much better market, I will say, one with crisis and volatility, what would the rate at which you control that loan book be ideally?

Well, that’s interesting. That’s another great question that we are very focused on. This Goldline thing, although it’s been – it had certainly its bumps in the road and it’s had some issues, we think we’re really rightsized with it right now. It has opened our eyes up to another, I guess what I would call, loan originator for CFC and for the business we’re talking about, and we’ve seen a great deal of acceptance on Goldline’s ability to add to their ticket count or what their customers willing to spend by adding on some leverage and being able to purchase more than they initially thought they could by using leverage. Up until about three weeks ago, Goldline was specifically selling a silver product and it was only creating leverage for customers that had existing metal that customers needed to send to Las Vegas, get checked in and then they were able to do some add-on purchasing and buy some more metal using the existing original collateral, original metal as collateral and all of – and we got – Goldline is up to about $13 million I believe as of now in loans originated. And so you’re talking about maybe $2 million a month there that they’re able to do on small silver products which, generally, the size of these loans are maybe $25,000 to $30,000. Within the last few weeks, we’ve introduced a new gold product that is now the exclusive gold product for CFC loans at Goldline, and we’re anticipating that just the buyer of gold usually buys more than the buyer of silver and we’re also offering this as a product that if you’re coming as a new client and you’re making your first purchase, you can do that with CFC and this new gold product. So I think we’ve seen some really good results. We’re really curious as to we have – we’ll have the silver going at the same time, but now we’re going to introduce a gold product that can be turned into a CFC loan. So I would say, ask this question again next quarter and we might even have a little bit more information to help.

Thanks for the clarity. That’s great.

Go ahead. Thor has a follow-on.

The other thing that we’ve gone live with and again we don’t have much data on yet, but we officially launched a Goldline brand in e-commerce site just this past Monday, so we’re starting with a handful of products that are exclusively available for Goldline so we’re – in combination with our new technology group and really refocusing on technology transformation, we are offering an e-commerce store to go after really the smaller order sizes online to further supplement Goldline’s revenue trajectory.

So is that part of goldline.com? Or is that a separate?

It’s a goldline.com and there is a shop online button on the top.

Shop online button.

So we – and that site is specifically – we worked on it for seven months now I think and it’s specifically geared towards smaller purchases. So I think that the way we have it set up is that if you want to purchase under $7,500, you can do it online and you can buy the Goldline exclusive products and there’s a very limited amount of products available but if you choose to spend $25,000, you’ll then get connected or you’ll get contacted by a live representative of Goldline salesperson. And – so it’s actually we’re using it as a lead generator and then it’s a way to kind of sit through some of the smaller orders that maybe don’t need the attention of a live broker, and then we’ll – if it’s a bigger order, we’ll give you that extra customer service or that extra tender loving care that a bigger customer might need. So it’s – we’re pretty excited about both of these new additions to Goldline, the website and the CFC financing.

Super. Again, thanks for the clarity. You’ve given me a lot of time, thanks.

Great.

Thank you. This concludes our question-and-answer session. I would now like to turn the call back to Mr. Roberts for closing remarks.

Thank you, everyone, for joining our call today. Just to let everybody know we plan on presenting at the B. Riley Conference on May 23 and the LD Micro Invitational in early June. If you don’t see us at one of those events, we look forward to talking to you on our next fiscal year-end call in September. As always, we appreciate your interest and continued support being our partners here at A-Mark. Thank you, and goodbye for now.

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 relates A-Mark’s future plans, objectives, expectations, performance, events and the likes 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 the 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 costs 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 risks 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 thereof identity – sorry, identify certain of such forward-looking statements, which speak only as of the dates on which they were made. Additionally, any statements related to future improvements, 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 in the Investors section of the company’s website. Thank you for joining us today for A-Mark’s Fiscal Third Quarter of 2019 Earnings Call. You may now disconnect.