UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

Commission File Number: 001-36347

 

 

A-MARK PRECIOUS METALS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware (State of Incorporation)		11-2464169 (IRS Employer I.D. No.)

 

2121 Rosecrans Ave., Suite 6300, El Segundo, CA 90245

(Address of principal executive offices) (Zip code)

(310) 587-1477

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	AMRK	NASDAQ Global Select Market

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes. ☑ No. ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes. ☑ No. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes. ☐ No. ☑

As of May 3, 2024, the registrant had 22,894,814 shares of common stock, par value $0.01 per share outstanding.

 

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A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended March 31, 2024

TABLE OF CONTENTS

 

				Page
PART I		FINANCIAL INFORMATION		3
	Item 1.	Financial Statements		3
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		46
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		81
	Item 4.	Controls and Procedures		82
PART II		OTHER INFORMATION		83
	Item 1.	Legal Proceedings		83
	Item 1A.	Risk Factors		83
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		98
	Item 3.	Defaults Upon Senior Securities		99
	Item 4.	Mine Safety Disclosures		99
	Item 5.	Other Information		99
	Item 6.	Exhibits		100
Signatures				101

 

 

 

 

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Index to the Condensed Consolidated Financial Statements and Notes thereof

	Page
Condensed Consolidated Balance Sheets as of March 31, 2024 and June 30, 2023	4
Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2024 and 2023	6
Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended March 31, 2024 and 2023	7
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2024 and 2023	8
Notes to the Condensed Consolidated Financial Statements	9
Note 1. Description of Business	9
Note 2. Summary of Significant Accounting Policies	11
Note 3. Assets and Liabilities, at Fair Value	22
Note 4. Receivables, Net	25
Note 5. Secured Loans Receivable	25
Note 6. Inventories	27
Note 7. Leases	28
Note 8. Property, Plant, and Equipment	29
Note 9. Goodwill and Intangible Assets	29
Note 10. Long-Term Investments	31
Note 11. Accounts Payable and Other Current Liabilities	31
Note 12. Derivative Instruments and Hedging Transactions	31
Note 13. Income Taxes	34
Note 14. Related Party Transactions	35
Note 15. Financing Agreements	37
Note 16. Commitments and Contingencies	38
Note 17. Stockholders' Equity	39
Note 18. Customer and Supplier Concentrations	42
Note 19. Segments and Geographic Information	42
Note 20. Subsequent Events	46

 

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A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share data)

 

		March 31, 2024				June 30, 2023
		(unaudited)
ASSETS
Current assets
Cash(1)		$	35,167			$	39,318
Receivables, net			53,229				35,243
Derivative assets			30,875				77,881
Secured loans receivable(1)			115,645				100,620
Precious metals held under financing arrangements(1)			12,772				25,530
Inventories:
Inventories(1)			579,398				645,812
Restricted inventories			510,237				335,831
			1,089,635				981,643
Income tax receivable			4,332				—
Prepaid expenses and other assets(1)			7,536				6,956
Total current assets			1,349,191				1,267,191
Operating lease right of use assets			5,130				5,119
Property, plant, and equipment, net			16,234				12,513
Goodwill			120,956				100,943
Intangibles, net			74,917				62,630
Long-term investments			93,735				88,535
Other long-term assets			9,324				8,640
Total assets		$	1,669,487			$	1,545,571
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Lines of credit		$	—			$	235,000
Liabilities on borrowed metals			26,167				21,642
Product financing arrangements			510,237				335,831
Accounts payable and other payables			9,598				25,465
Deferred revenue and other advances			150,875				181,363
Derivative liabilities			51,146				8,076
Accrued liabilities(1)			16,786				20,418
Income tax payable			—				958
Notes payable (1)			—				95,308
Total current liabilities			764,809				924,061
Lines of credit			290,000				—
Notes payable			3,994				—
Deferred tax liabilities			16,717				16,677
Other liabilities			6,967				4,440
Total liabilities			1,082,487				945,178
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of March 31, 2024 or June 30, 2023			—				—
Common stock, par value $0.01; 40,000,000 shares authorized; 23,893,516 and 23,672,122 shares issued and 22,881,480 and 23,336,387 shares outstanding as of March 31, 2024 and June 30, 2023, respectively			239				237
Treasury stock, 1,012,036 and 335,735 shares at cost as of March 31, 2024 and June 30, 2023, respectively			(28,277	)			(9,762	)
Additional paid-in capital			171,612				169,034
Accumulated other comprehensive loss			(898	)			(1,025	)
Retained earnings			440,490				440,639
Total A-Mark Precious Metals, Inc. stockholders’ equity			583,166				599,123
Noncontrolling interest			3,834				1,270
Total stockholders’ equity			587,000				600,393
Total liabilities, noncontrolling interest and stockholders’ equity		$	1,669,487			$	1,545,571

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements

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A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands; unaudited)

In September 2018, AM Capital Funding, LLC (“AMCF”), a wholly-owned subsidiary of Collateral Finance Corporation ("CFC”), completed an issuance of Secured Senior Term Notes, Series 2018-1, Class A in the aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million (collectively, the "AMCF Notes"). In December 2023, the AMCF Notes were repaid in full, and AMCF became inactive.

The Company consolidates a variable interest entity ("VIE") if the Company is considered to be the primary beneficiary. AMCF is a VIE because its initial equity investment may be insufficient to maintain its ongoing collateral requirements without additional financial support from the Company. The Company is the primary beneficiary of this VIE because the Company has the right to determine the type of collateral (i.e., cash, secured loans, or precious metals), has the right to receive (and has received) the proceeds from the securitization transaction, earn ongoing interest income from the secured loans (subject to collateral requirements), and has the obligation to absorb losses should AMCF's interest expense and other costs exceed its interest income.

The following table presents the assets and liabilities of this VIE, which are included in the condensed consolidated balance sheets above. Due to the repayment of the AMCF Notes in December 2023, the VIE did not have assets or liabilities as of March 31, 2024. When outstanding, the holders of the AMCF Notes had a first priority security interest in the assets as shown in the table below, which were in excess of the AMCF Notes' aggregate principal amount. Additionally, the liabilities of the VIE included intercompany balances, which were eliminated in consolidation. (See Note 15.)

 

		March 31, 2024				June 30, 2023
ASSETS OF THE CONSOLIDATED VIE
Cash		$	—			$	1,915
Secured loans receivable			—				46,368
Precious metals held under financing arrangements			—				14,950
Inventories			—				56,841
Prepaid expenses and other assets			—				7
Total assets of the consolidated variable interest entity		$	—			$	120,081
LIABILITIES OF THE CONSOLIDATED VIE
Deferred payment obligations(1)		$	—			$	30,083
Accrued liabilities			—				551
Notes payable(2)			—				99,762
Total liabilities of the consolidated variable interest entity		$	—			$	130,396

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements

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A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except for share and per share data; unaudited)

 

		Three Months Ended March 31,								Nine Months Ended March 31,
		2024				2023				2024				2023
Revenues		$	2,610,651			$	2,317,150			$	7,174,084			$	6,167,206
Cost of sales			2,575,813				2,241,652				7,043,800				5,951,147
Gross profit			34,838				75,498				130,284				216,059
Selling, general, and administrative expenses			(22,854	)			(23,841	)			(67,095	)			(62,438	)
Depreciation and amortization expense			(2,949	)			(3,340	)			(8,552	)			(9,784	)
Interest income			6,682				6,087				19,095				16,167
Interest expense			(9,907	)			(9,237	)			(29,898	)			(22,603	)
Earnings (losses) from equity method investments			(206	)			(70	)			3,280				7,276
Other income, net			763				641				1,605				2,001
Unrealized gains on foreign exchange			73				35				84				250
Net income before provision for income taxes			6,440				45,773				48,803				146,928
Income tax expense			(1,286	)			(9,775	)			(10,705	)			(32,096	)
Net income			5,154				35,998				38,098				114,832
Net income attributable to noncontrolling interest			141				78				492				306
Net income attributable to the Company		$	5,013			$	35,920			$	37,606			$	114,526
Basic and diluted net income per share attributable    to A-Mark Precious Metals, Inc.:
Basic		$	0.22			$	1.53			$	1.63			$	4.89
Diluted		$	0.21			$	1.46			$	1.56			$	4.64
Weighted-average shares outstanding:
Basic			22,847,200				23,421,300				23,098,000				23,435,700
Diluted			23,822,800				24,655,400				24,140,500				24,690,900

 

See accompanying Notes to the Condensed Consolidated Financial Statements

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A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except for share data; unaudited)

	Common Stock								Additional Paid-in				Retained				Accumulated other comprehensive				Treasury Stock								Total A-Mark Precious Metals, Inc. Stockholders'				Non-controlling				Total Stockholders’
	Shares				Amount				Capital				Earnings				income (loss)				Shares				Amount				Equity				Interest				Equity
Balance, June 30, 2022		23,379,888			$	234			$	166,526			$	321,849			$	—				—			$	—			$	488,609			$	1,862			$	490,471
Net income		—				—				—				45,125				—				—				—				45,125				112				45,237
Share-based compensation		—				—				535				—				—				—				—				535				—				535
Earnings distribution paid to noncontrolling interest		—				—				—				—				—				—				—				—				(1,001	)			(1,001	)
Cumulative translation adjustment, net of tax		—				—				—				—				52				—				—				52				—				52
Common stock issued as employee compensation		10,500				—				293				—				—				—				—				293				—				293
Exercise of share-based awards		3,333				—				63				—				—				—				—				63				—				63
Net settlement of share-based awards		59,618				1				(1,606	)			—				—				—				—				(1,605	)			—				(1,605	)
Dividends declared		—				—				3				(28,158	)			—				—				—				(28,155	)			—				(28,155	)
Balance, September 30, 2022		23,453,339				235				165,814				338,816				52				—				—				504,917				973				505,890
Net income		—				—				—				33,481				—				—				—				33,481				116				33,597
Share-based compensation		—				—				534				—				—				—				—				534				—				534
Cumulative translation adjustment, net of tax		—				—				—				—				(1,103	)			—				—				(1,103	)			—				(1,103	)
Exercise of share-based awards		73,336				1				661				—				—				—				—				662				—				662
Net settlement of share-based awards		3,296				—				—				—				—				—				—				—				—				—
Balance, December 31, 2022		23,529,971				236				167,009				372,297				(1,051	)			—				—				538,491				1,089				539,580
Net income		—				—				—				35,920				—				—				—				35,920				78				35,998
Share-based compensation		—				—				538				—				—				—				—				538				—				538
Cumulative translation adjustment, net of tax		—				—				—				—				(178	)			—				—				(178	)			—				(178	)
Exercise of share-based awards		66,370				—				700				—				—				—				—				700				—				700
Repurchases of common stock		—				—				—				—				—				(335,735	)			(9,762	)			(9,762	)			—				(9,762	)
Dividends declared		—				—				6				(4,744	)			—				—				—				(4,738	)			—				(4,738	)
Balance, March 31, 2023		23,596,341			$	236			$	168,253			$	403,473			$	(1,229	)			(335,735	)		$	(9,762	)		$	560,971			$	1,167			$	562,138
Balance, June 30, 2023		23,672,122			$	237			$	169,034			$	440,639			$	(1,025	)			(335,735	)		$	(9,762	)		$	599,123			$	1,270			$	600,393
Net income		—				—				—				18,827				—				—				—				18,827				156				18,983
Share-based compensation		—				—				664				—				—				—				—				664				—				664
Cumulative translation adjustment, net of tax		—				—				—				—				187				—				—				187				—				187
Exercise of share-based awards		159,999				2				958				—				—				—				—				960				—				960
Net settlement of share-based awards		10,556				—				(307	)			—				—				—				—				(307	)			—				(307	)
Repurchases of common stock		—				—				—				—				—				(171,268	)			(5,016	)			(5,016	)			—				(5,016	)
Dividends declared		—				—				8				(32,787	)			—				—				—				(32,779	)			—				(32,779	)
Balance, September 30, 2023		23,842,677				239				170,357				426,679				(838	)			(507,003	)			(14,778	)			581,659				1,426				583,085
Net income		—				—				—				13,766				—				—				—				13,766				195				13,961
Share-based compensation		—				—				482				—				—				—				—				482				—				482
Cumulative translation adjustment, net of tax		—				—				—				—				(123	)			—				—				(123	)			—				(123	)
Net settlement of share-based awards		5,571				—				(23	)			—				—				—				—				(23	)			—				(23	)
Repurchases of common stock		—				—				—				—				—				(440,092	)			(12,002	)			(12,002	)			—				(12,002	)
Balance, December 31, 2023		23,848,248				239				170,816				440,445				(961	)			(947,095	)			(26,780	)			583,759				1,621				585,380
Net income		—				—				—				5,013				—				—				—				5,013				141				5,154
Share-based compensation		—				—				456				—				—				—				—				456				—				456
Common stock issued for acquisition		—				—				—				(367	)			—				139,455				3,881				3,514				—				3,514
Noncontrolling ownership interest contribution		—				—				—				—				—				—				—				—				2,072				2,072
Cumulative translation adjustment, net of tax		—				—				—				—				63				—				—				63				—				63
Net settlement of share-based awards		45,268				—				338				—				—				—				—				338				—				338
Repurchases of common stock		—				—				—				—				—				(204,396	)			(5,378	)			(5,378	)			—				(5,378	)
Dividends declared		—				—				2				(4,601	)			—				—				—				(4,599	)			—				(4,599	)
Balance, March 31, 2024		23,893,516			$	239			$	171,612			$	440,490			$	(898	)			(1,012,036	)		$	(28,277	)		$	583,166			$	3,834			$	587,000

See accompanying Notes to the Condensed Consolidated Financial Statements

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A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands; unaudited)

 

		Nine Months Ended March 31,
		2024				2023
Cash flows from operating activities:
Net income		$	38,098			$	114,832
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization			8,552				9,784
Amortization of loan cost			1,828				1,628
Share-based compensation			1,602				1,607
Earnings from equity method investments			(3,280	)			(7,276	)
Dividends and distributions received from equity method investees			361				551
Other			(74	)			(249	)
Changes in assets and liabilities:
Receivables, net			(8,503	)			6,964
Secured loans receivable			—				1,012
Secured loans made to affiliates			(5,024	)			—
Derivative assets			47,048				33,287
Income tax receivable			(4,332	)			(861	)
Precious metals held under financing arrangements			12,758				55,752
Inventories			(91,185	)			(226,500	)
Prepaid expenses and other assets			(1,443	)			(1,488	)
Accounts payable and other payables			(16,325	)			4,037
Deferred revenue and other advances			(42,049	)			78,143
Derivative liabilities			42,951				7,550
Liabilities on borrowed metals			4,525				(33,687	)
Accrued liabilities			(6,066	)			(1,455	)
Income tax payable			(1,358	)			(382	)
Net cash (used in) provided by operating activities			(21,916	)			43,249
Cash flows from investing activities:
Capital expenditures for property, plant, and equipment			(4,518	)			(3,227	)
Acquisition of a business, net of cash acquired			(32,888	)			—
Purchase of long-term investments			(2,113	)			(5,540	)
Purchase of intangible assets			(8,515	)			(4,500	)
Secured loans receivable, net			(9,987	)			28,359
Other			(487	)			—
Net cash (used in) provided by investing activities			(58,508	)			15,092
Cash flows from financing activities:
Product financing arrangements, net			174,406				9,433
Dividends paid			(37,265	)			(32,794	)
Distributions paid to noncontrolling interest			—				(1,001	)
Net borrowings and repayments under lines of credit			55,000				15,000
Repayment of notes			(95,000	)			—
Proceeds from notes payable to related party			3,448				3,887
Repayments on notes payable to related party			—				(2,135	)
Repurchases of common stock			(22,307	)			(9,762	)
Debt funding issuance costs			(2,975	)			(471	)
Proceeds from the exercise of share-based awards			1,298				1,425
Payments for tax withholding related to net settlement of share-based awards			(332	)			(1,605	)
Net cash provided by (used in) financing activities			76,273				(18,023	)
Net (decrease) increase in cash			(4,151	)			40,318
Cash, beginning of period			39,318				37,783
Cash, end of period		$	35,167			$	78,101
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest paid		$	25,233			$	20,829
Income taxes paid		$	16,388			$	33,725
Income taxes refunded		$	413			$	117
Non-cash investing and financing activities:
Declared distributions and unpaid dividends		$	111			$	98
Common stock issued for acquisitions		$	3,514			$	—
Loss on reissuance of treasury stock		$	367			$	—
Addition of right of use assets under lease obligations		$	957			$	—
Consideration payable for acquisition of business		$	2,800			$	—

See accompanying Notes to the Condensed Consolidated Financial Statements

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A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements that are considered forward-looking statements. Forward-looking statements give the Company's current expectations and forecasts of future events. All statements other than statements of current or historical fact contained in this Quarterly Report, including statements regarding the Company's future financial position, business strategy, budgets, projected costs and plans, and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. These statements are based on the Company's current plans, estimates and beliefs, and the Company's actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this Quarterly Report may turn out to be inaccurate. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Form 10-Q.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and notes contained elsewhere in this Form 10-Q, and in the consolidated financial statements and notes contained in the Form 10-K for the fiscal year ended June 30, 2023. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Quarterly Report, particularly in “Risk Factors.”

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INTRODUCTION

Management's discussion and analysis of financial condition and results of operations is provided as a supplement to the accompanying condensed consolidated financial statements and related notes to aid in the understanding of our results of operations and financial condition. Our discussion is organized as follows:

for the comparable periods.

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EXECUTIVE OVERVIEW

Our Business

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

Wholesale Sales & Ancillary Services Segment

The Company operates its Wholesale Sales & Ancillary Services segment directly and through its wholly-owned subsidiaries, A-Mark Trading AG (“AMTAG”), Transcontinental Depository Services, LLC ("TDS" or “Storage”), A-M Global Logistics, LLC (“AMGL” or "Logistics"), AM&ST Associates, LLC ("AMST" or the “Silver Towne Mint"), and AM/LPM Ventures, LLC, which we formed in February 2024 to acquire LPM Group Limited ("LPM").

The Wholesale Sales & Ancillary Services segment operates as a full-service precious metals company. We offer gold, silver, platinum, and palladium in the form of bars, plates, powder, wafers, grain, ingots, and coins. Our Industrial unit services manufacturers and fabricators of products utilizing or incorporating precious metals. Our Coin and Bar unit deals in over 1,800 coin and bar products in a variety of weights, shapes, and sizes for distribution to dealers and other qualified purchasers. We have a marketing support office in Vienna, Austria, a numismatics showroom in Hong Kong, and a trading center in El Segundo, California. The trading center, for buying and selling precious metals, is available to receive orders 24 hours every day, even when many major world commodity markets are closed. In addition to Wholesale Sales activity, A-Mark offers its customers a variety of ancillary services, including financing, storage, consignment, logistics, and various customized financial programs. As a U.S. Mint-authorized purchaser of gold, silver, platinum, and palladium coins, A-Mark purchases product directly from the U.S. Mint, and it also purchases product from other sovereign mints, for sale to its customers.

Through its wholly-owned subsidiary AMTAG, the Company promotes its products and services to the international market. Through our wholly-owned subsidiary TDS, we offer a variety of managed storage options for precious metals products to financial institutions, dealers, investors, and collectors around the world.

The Company's wholly-owned subsidiary AMGL is based in Las Vegas, Nevada, and provides our customers an array of complementary services, including receiving, handling, inventorying, processing, packing, and shipping of precious metals and custom coins on a secure basis.

Through its wholly-owned subsidiary AMST, the Company designs and produces minted silver products. Our Silver Towne Mint operations allow us to provide greater product selection to our customers and greater pricing stability within the supply chain, as well as to gain increased access to fabricated silver products during volatile market environments, which have historically created higher demand for precious metals products.

In February 2024, the Company acquired LPM, one of Asia's largest precious metals dealers. Headquartered in Hong Kong, LPM extends A-Mark's global reach by offering its full-service precious metals products and services in Asia and internationally.

Direct-to-Consumer

The Company operates its Direct-to-Consumer segment through its wholly-owned subsidiaries JM Bullion, Inc. (“JMB”) and Goldline, Inc. (“Goldline”). JMB currently has six wholly-owned subsidiaries: Buy Gold and Silver Corp. ("BGASC"), BX Corporation ("BullionMax"), Gold Price Group, Inc. (“GPG”), Silver.com, Inc. (“Silver.com”), Provident Metals Corp. (“PMC”), and CyberMetals Corp. ("CyberMetals"). Goldline, Inc. owns 100% of AMIP, LLC ("AMIP"), and has a 50% ownership interest in Precious Metals Purchasing Partners, LLC ("PMPP"). As the context requires, references to JMB may include BGASC, BullionMax, GPG, Silver.com, PMC, and CyberMetals, and references to Goldline may include AMIP and PMPP.

JMB is a leading e-commerce retailer providing access to a broad array of gold, silver, copper, platinum, and palladium products through its websites. JMB currently operates nine separately branded, company-owned websites targeting specific niches within the precious metals retail market, including JMBullion.com, ProvidentMetals.com, Silver.com, BGASC.com, CyberMetals.com, BullionMax.com, Gold.com, GoldPrice.org, and SilverPrice.org.

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In April 2022, JMB commercially launched the CyberMetals online platform, where customers can purchase and sell fractional shares of digital gold, silver, platinum, and palladium bars in a range of denominations. CyberMetals’ customers have the option to convert their digital holdings to fabricated precious metals products via an integrated redemption flow with JMB. These products may be designated for storage by the Company or shipped directly to the customer.

The Company acquired Goldline in August 2017 through an asset purchase transaction with Goldline, LLC, which had been in operation since 1960. Goldline is a direct retailer of precious metals to the investor community, and markets its precious metal products on television, radio, and the internet, as well as through customer service outreach. AMIP manages Goldline’s intellectual property.

PMPP was formed in fiscal 2019 pursuant to terms of a joint venture agreement, for the purpose of purchasing precious metals from the partners' retail customers, and then reselling the acquired products back to affiliates of the partners. PMPP commenced operations in fiscal 2020.

Secured Lending

The Company operates its Secured Lending segment through its wholly-owned subsidiary, Collateral Finance Corporation, LLC, including its wholly-owned subsidiary, CFC Alternative Investments (“CAI”) (collectively “CFC”).

CFC is a California licensed finance lender that originates and acquires commercial loans secured primarily by bullion and numismatic coins. CFC's customers include coin and precious metal dealers, investors, and collectors. As of March 31, 2024, CFC had approximately $115.6 million in secured loans outstanding, of which approximately 16.1% were acquired from third parties (some of which may be customers of A-Mark) and approximately 83.9% were originated by CFC.

CAI is a holding company that has an equity method interest in Collectible Card Partners, LLC (“CCP”). CCP provides capital to fund commercial loans secured by graded sports cards and sports memorabilia. CCP commenced operations in fiscal 2022.

AM Capital Funding, LLC (“AMCF”), a wholly-owned subsidiary of CFC, was formed for the purpose of securitizing eligible secured loans of CFC. AMCF issued and administered Secured Senior Term Notes: Series 2018-1, Class A, with an aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million (collectively referred to as the "AMCF Notes"). The AMCF Notes were repaid in full in December 2023. AMCF is currently inactive. See Note 15 to the Company’s condensed consolidated financial statements for additional information.

Our Strategy

The Company was formed in 1965 and has grown into a significant participant in the bullion and coin markets, with $9.3 billion in revenues for fiscal year 2023. We have remained active in seeking investment opportunities to strategically enhance our business, and also continue to focus on growth in the volume of our business, our geographic presence, the scope of complementary products, services, and technological tools that we offer to our customers. In doing so, we seek to leverage off the strengths of our existing integrated operations, which span trading, distribution, logistics, minting, storage, hedging, financing, and consignment products and services, including:

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Our Customers

Our customers include financial institutions, bullion retailers, industrial manufacturers and fabricators, sovereign mints, refiners, coin and metal dealers, investors, collectors, and e-commerce and other retail customers. The Company makes a two-way market in its wholesale operations, which results in many customers also operating as our suppliers in that segment. This diverse base of wholesale customers purchases a variety of products from the Company in a multitude of grades, primarily in the form of coins and bars. Our Direct-to-Consumer segment sells to (and, through JMB and PMPP, buys from) retail customers, with JMB focusing on e-commerce operations and Goldline marketing through various traditional and e-commerce channels to the investor community. The Direct-to-Consumer segment offers these customers a variety of gold, silver, copper, platinum, and palladium products.

Factors Affecting Revenues, Gross Profit, Interest Income, and Interest Expense

Set forth below are the key factors affecting the Company’s revenues, gross profit, interest income, and interest expense. These factors can result from both the Company’s ongoing business activities as well as from Company acquisitions.

Revenues. The Company enters into transactions to sell and deliver gold, silver, platinum, and palladium to industrial and commercial users, coin and bullion dealers, mints, and financial institutions. The metals are investment or industrial grade and are sold in a variety of shapes and sizes.

The Company also sells and delivers gold, silver, platinum, palladium, and copper products directly to customers and the investor community through its Direct-to Consumer segment. Customers may place orders online at one of the Company's websites or over the phone.

The Company sells precious metals on forward contracts at a fixed price based on current prevailing precious metal spot prices with a certain delivery date in the future (up to six months from inception date of the forward contract). The Company also uses other derivative products (primarily futures contracts) or combinations thereof to hedge commodity risks. We enter into these forward and futures contracts as part of our hedging strategy to mitigate our price risk of holding inventory; they are not entered into for speculative purposes.

Forward sales contracts by their nature are required to be included in revenues, unlike futures contracts which do not impact the Company’s revenue. The decision to use a forward contract versus another derivative type of product (e.g., a futures contract) for hedging purposes is based on the economics of the transaction. Since the volume of hedging can be significant, the movement in and out of forwards can substantially impact revenues, either positively or negatively, from period to period. For this reason, the Company believes ounces sold (excluding ounces sold on forward sales contracts) is a meaningful metric to assess our top line performance.

In addition, the Company earns revenue by providing storage solutions for precious metals and numismatic coins for financial institutions, dealers, investors, and collectors worldwide and by providing storage and order-fulfillment services to our retail customers. The Company also earns revenue from advertisements placed on our Direct-to-Consumer websites. These revenue streams represent less than 1% of the Company’s consolidated revenues.

The Company operates in a high volume/low margin industry. Revenues are impacted by three primary factors: product volume, market prices, and market volatility. A material change in any one or more of these factors may result in a significant change in the Company’s revenues. A significant increase or decrease in revenues can occur simply based on changes in the underlying commodity prices and may not be reflective of an increase or decrease in the volume of products sold.

Gross Profit. Gross profit is the difference between our revenues and the cost of our products sold. Since we quote prices based on the current commodity market prices for precious metals, we enter into a combination of forward and futures contracts to effect a hedge position equal to the underlying precious metal commodity value, which substantially represents inventory subject to price risk. We enter into these derivative transactions solely for the purpose of hedging our inventory, and not for speculative purposes. Our gross profit includes the gains and losses resulting from these derivative instruments. However, the gains and losses on the derivative instruments are substantially offset by the gains and losses on the corresponding changes in the market value of our precious metals inventory. As a result, our results of operations generally are not materially impacted by changes in commodity prices.

Volatility also affects our gross profit. Although conditions may fluctuate from period to period, greater volatility typically causes the premium spreads to widen resulting in an increase in the gross profit. Product supply constraints during extended periods of higher volatility have historically resulted in a heightening of wider premium spreads and increases in gross profit.

Interest Income. The Company enters into secured loans and secured financing structures with its customers under which it charges interest. CFC originates loans and acquires loan portfolios that are secured by precious metal bullion and numismatic material owned by the borrowers and held by the Company for the term of the loan. Additionally, AMCF acquired certain loans from CFC that were secured by precious metal bullion to meet the collateral requirements of the AMCF Notes. Also, the Company offers a number of secured financing options to its customers to finance their precious metals purchases including consignments and other structured inventory finance products whereby the Company earns a fee based on the underlying value of the precious metal ("repurchase arrangements with customers").

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Interest Expense. The Company incurs interest expense associated with its lines of credit, notes payable, product financing agreements for the transfer and subsequent re-acquisition of gold, silver, and platinum at a fixed price with a third-party finance company ("product financing arrangements"), and short-term precious metal borrowing arrangements with our suppliers ("liabilities on borrowed metals").

Performance Metrics

In addition to financial statement indicators, management also utilizes key operational metrics to assess the performance of our business.

Gold and Silver Ounces Sold and Delivered to Customers. A key performance metric we utilize is the number of ounces of gold and silver sold and delivered to our customers (excluding ounces recorded on forward contracts). These metrics reflect our business volume without regard to changes in commodity pricing, which also impacts revenue, but can mask actual business trends.

The primary purpose of entering into forward sales transactions is to hedge commodity price risk. Although the revenues realized from these forward sales transactions are often significant, they generally have negligible impact on gross margins. As a result, the Company excludes the ounces recorded on forward contracts from its performance metrics as the Company does not enter into forward sales transactions for speculative purposes.

Wholesale Sales Ticket Volume. Another measure of our business that is unaffected by changes in commodity pricing is ticket volume (or number of orders processed). Ticket volume for the Wholesale Sales & Ancillary Services segment measures the total number of wholesale orders processed during the period. In periods of higher volatility, there is generally increased trading in the commodity markets, causing increased demand for our products, resulting in higher business volume. During periods of heightened demand, order size per ticket may increase.

Direct-to-Consumer Customers. We are focused on attracting new customers and retaining existing customers to drive revenue growth. We use the following three metrics as revenue growth indicators when assessing our customer base:

Direct-to-Consumer Ticket Volume. Ticket volume for the Direct-to-Consumer segment measures the number of product orders processed during the period. In periods of higher volatility, there is generally increased consumer demand for our products, resulting in higher business volume. We use the following three metrics indicators when assessing our ticket volume:

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Average Order Value. Average order value for the Direct-to-Consumer segment and JMB measures the average dollar value of product orders (excluding accumulation program orders) delivered to the customer during the period.

Inventory Turnover. Inventory turnover is another performance measure on which we are focused and is calculated as the cost of sales divided by the average inventory during the relevant period. Inventory turnover is a measure of how quickly inventory has moved during the period. A higher inventory turnover ratio, which we typically experience during periods of higher volatility when trading is more robust, typically reflects a more efficient use of our capital.

The period of time that inventory is held by the Company varies depending upon the nature of our inventory commitments with customers and suppliers. See Note 6 to the Company’s condensed consolidated financial statements for a description of our classifications of inventory by type. When management analyzes inventory turnover on a period over period basis, consideration is given to each inventory type and its corresponding impact on the inventory turnover calculation. For example:

Additionally, our inventory turnover ratio can be affected by hedging activity, as the period over period change of the inventory turnover ratio may be significantly impacted by a period over period change in hedging volume. For example, if trading activity were to remain constant over two periods, but there were significantly higher forward sales in the current period compared to a prior period, the calculated inventory turnover ratio would increase notwithstanding the constancy of the trading volume.

Number of Secured Loans. Finally, as a measure of the size of our Secured Lending segment, we utilize the number of outstanding secured loans to customers that are primarily collateralized by precious metals at the end of each quarter.

The Company calculates a loan-to-value ("LTV") ratio for each loan as the principal amount of the loan divided by the liquidation value of the collateral, which is based on daily spot market prices of precious metal bullion. When the market price of the pledged collateral decreases and thereby increases the LTV ratio of a loan above a prescribed maximum ratio, usually 85%, the Company has the option to make a margin call on the loan. As a result, a decline of precious metal market prices may cause a decrease in the number of loans outstanding in a period.

Non-GAAP Measures

In addition to key operational metrics that are used to assess the performance of our business, management also uses non-GAAP financial performance and liquidity measures. We believe "adjusted net income before provision for income taxes” and "EBITDA" can provide useful information to evaluate our financial performance and liquidity position. Non-GAAP measures do not have standardized definitions and should not be a substitute for measures that are prepared in accordance with U.S. GAAP. For a reconciliation of these non-GAAP measures to the most directly comparable U.S. GAAP measure reported in our condensed consolidated statements of income and condensed consolidated statements of cash flows and a discussion of certain limitations inherent in such measures, refer to the “Non-GAAP Measures” section below.

Fiscal Year

Our fiscal year end is June 30 each year.

Macroeconomic Volatility

Continued macroeconomic uncertainty and the volatility in the financial markets in recent years have positively affected the Company’s trading revenues and gross profit as the volatility of the price of precious metals and numismatics typically results in an increase in the spread between bid and ask prices on these products. Although conditions may fluctuate from period to period, when volatility is high, we historically experience increased demand for products in each of our coin and bar, industrial, and retail businesses. While macroeconomic uncertainty continues to impact our business, its effects have been less pronounced in the current fiscal year. The Company cannot predict the periods during which such increased volatility will occur or the level of such increased volatility, the effect of such volatility and macroeconomic uncertainty on the Company, or whether other effects on the Company and its businesses will materialize in the short or long term.

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Recent Development

On May 6, 2024, the Company amended A-Mark's Code of Ethics and Business Conduct applicable to directors, officers and other employees, making the following changes:

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RESULTS OF OPERATIONS

Overview of Results of Operations

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

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

Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	2,610,651					100.000	%			$	2,317,150					100.000	%			$	293,501					12.7	%
Gross profit			34,838					1.334	%				75,498					3.258	%			$	(40,660	)				(53.9	%)
Selling, general, and administrative expenses			(22,854	)				(0.875	%)				(23,841	)				(1.029	%)			$	(987	)				(4.1	%)
Depreciation and amortization expense			(2,949	)				(0.113	%)				(3,340	)				(0.144	%)			$	(391	)				(11.7	%)
Interest income			6,682					0.256	%				6,087					0.263	%			$	595					9.8	%
Interest expense			(9,907	)				(0.379	%)				(9,237	)				(0.399	%)			$	670					7.3	%
Losses from equity method investments			(206	)				(0.008	%)				(70	)				(0.003	%)			$	136					194.3	%
Other income, net			763					0.029	%				641					0.028	%			$	122					19.0	%
Unrealized gains on foreign exchange			73					0.003	%				35					0.002	%			$	38					108.6	%
Net income before provision for income taxes			6,440					0.247	%				45,773					1.975	%			$	(39,333	)				(85.9	%)
Income tax expense			(1,286	)				(0.049	%)				(9,775	)				(0.422	%)			$	(8,489	)				(86.8	%)
Net income			5,154					0.197	%				35,998					1.554	%			$	(30,844	)				(85.7	%)
Net income attributable to noncontrolling interest			141					0.005	%				78					0.003	%			$	63					80.8	%
Net income attributable to the Company		$	5,013					0.192	%			$	35,920					1.550	%			$	(30,907	)				(86.0	%)
Basic and diluted net income per share attributable to  A-Mark Precious Metals, Inc.:
Per Share Data:
Basic		$	0.22									$	1.53									$	(1.31	)				(85.6	%)
Diluted		$	0.21									$	1.46									$	(1.25	)				(85.6	%)
Performance Metrics:(1)
Gold ounces sold(2)			446,000										659,000										(213,000	)				(32.3	%)
Silver ounces sold(3)			25,722,000										36,906,000										(11,184,000	)				(30.3	%)
Inventory turnover ratio(4)			2.3										2.4										(0.1	)				(4.2	%)
Number of secured loans at period end(5)			675										963										(288	)				(29.9	%)

 

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Consolidated Results of Operations for the Nine Months Ended March 31, 2024 and 2023

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

Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	7,174,084					100.000	%			$	6,167,206					100.000	%			$	1,006,878					16.3	%
Gross profit			130,284					1.816	%				216,059					3.503	%			$	(85,775	)				(39.7	%)
Selling, general, and administrative expenses			(67,095	)				(0.935	%)				(62,438	)				(1.012	%)			$	4,657					7.5	%
Depreciation and amortization expense			(8,552	)				(0.119	%)				(9,784	)				(0.159	%)			$	(1,232	)				(12.6	%)
Interest income			19,095					0.266	%				16,167					0.262	%			$	2,928					18.1	%
Interest expense			(29,898	)				(0.417	%)				(22,603	)				(0.367	%)			$	7,295					32.3	%
Earnings from equity method investments			3,280					0.046	%				7,276					0.118	%			$	(3,996	)				(54.9	%)
Other income, net			1,605					0.022	%				2,001					0.032	%			$	(396	)				(19.8	%)
Unrealized gains on foreign exchange			84					0.001	%				250					0.004	%			$	(166	)				(66.4	%)
Net income before provision for income taxes			48,803					0.680	%				146,928					2.382	%			$	(98,125	)				(66.8	%)
Income tax expense			(10,705	)				(0.149	%)				(32,096	)				(0.520	%)			$	(21,391	)				(66.6	%)
Net income			38,098					0.531	%				114,832					1.862	%			$	(76,734	)				(66.8	%)
Net income attributable to noncontrolling interest			492					0.007	%				306					0.005	%			$	186					60.8	%
Net income attributable to the Company		$	37,606					0.524	%			$	114,526					1.857	%			$	(76,920	)				(67.2	%)
Basic and diluted net income per share attributable to  A-Mark Precious Metals, Inc.:
Per Share Data:
Basic		$	1.63									$	4.89									$	(3.26	)				(66.7	%)
Diluted		$	1.56									$	4.64									$	(3.08	)				(66.4	%)
Performance Metrics:(1)
Gold ounces sold(2)			1,391,000										1,853,000										(462,000	)				(24.9	%)
Silver ounces sold(3)			82,675,000										110,960,000										(28,285,000	)				(25.5	%)
Inventory turnover ratio(4)			6.8										7.0										(0.2	)				(2.9	%)
Number of secured loans at period end(5)			675										963										(288	)				(29.9	%)

 

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Revenues

in thousands, except performance metrics
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	2,610,651					100.000	%			$	2,317,150					100.000	%			$	293,501					12.7	%
Performance Metrics
Gold ounces sold			446,000										659,000										(213,000	)				(32.3	%)
Silver ounces sold			25,722,000										36,906,000										(11,184,000	)				(30.3	%)

Revenues for the three months ended March 31, 2024 increased $293.5 million, or 12.7%, to $2.611 billion from $2.317 billion in 2023. Excluding an increase of $622.1 million of forward sales, our revenues decreased $328.6 million, or 19.6%, 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 March 31, 2024 decreased 213,000 ounces, or 32.3%, to 446,000 ounces from 659,000 ounces in 2023. Silver ounces sold for the three months ended March 31, 2024 decreased 11,184,000 ounces, or 30.3%, to 25,722,000 ounces from 36,906,000 ounces in 2023. On average, the selling prices for gold increased by 8.3% and selling prices for silver increased by 3.8% during the three months ended March 31, 2024 as compared to the prior year.

JMB's revenue represented 11.9% and 20.4% of the Company's consolidated revenue for the three months ended March 31, 2024 and 2023, respectively.

in thousands, except performance metrics
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	7,174,084					100.000	%			$	6,167,206					100.000	%			$	1,006,878					16.3	%
Performance Metrics
Gold ounces sold			1,391,000										1,853,000										(462,000	)				(24.9	%)
Silver ounces sold			82,675,000										110,960,000										(28,285,000	)				(25.5	%)

Revenues for the nine months ended March 31, 2024 increased $1.007 billion, or 16.3%, to $7.174 billion from $6.167 billion in 2023. Excluding an increase of $1.514 billion of forward sales, our revenues decreased $506.9 million, or 11.0%, 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 nine months ended March 31, 2024 decreased 462,000 ounces, or 24.9%, to 1,391,000 ounces from 1,853,000 ounces in 2023. Silver ounces sold for the nine months ended March 31, 2024 decreased 28,285,000 ounces, or 25.5%, to 82,675,000 ounces from 110,960,000 ounces in 2023. On average, the selling prices for gold increased by 10.4% and selling prices for silver increased by 10.3% during the nine months ended March 31, 2024 as compared to the prior year.

JMB's revenue represented 13.2% and 20.7% of the Company's consolidated revenue for the nine months ended March 31, 2024 and 2023, respectively.

Gross Profit

in thousands, except performance metric
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Gross profit		$	34,838					1.334	%			$	75,498					3.258	%			$	(40,660	)				(53.9	%)
Performance Metric
Inventory turnover ratio			2.3										2.4										(0.1	)				(4.2	%)

Gross profit for the three months ended March 31, 2024 decreased $40.7 million, or 53.9%, to $34.8 million from $75.5 million in 2023. 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 March 31, 2024 decreased by 192.4 basis points to 1.334% from 3.258% in 2023. Excluding an increase of $622.1 million of forward sales that had a negligible impact to the amount of gross profit, our gross margin percentage for the three months ended March 31, 2024 decreased by 191.7 basis points to 2.580% from 4.497%, which was primarily due to lower premium spreads, partially offset by higher trading profits. JMB’s retail market activity represented 45.0% and 47.1%, respectively, of the Company’s consolidated gross profit for the three months ended March 31, 2024 and 2023.

Our inventory turnover rate for the three months ended March 31, 2024 decreased by 4.2% to 2.3 from 2.4 in 2023. 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.

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in thousands, except performance metric
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Gross profit		$	130,284					1.816	%			$	216,059					3.503	%			$	(85,775	)				(39.7	%)
Performance Metric
Inventory turnover ratio			6.8										7.0										(0.2	)				(2.9	%)

Gross profit for the nine months ended March 31, 2024 decreased $85.8 million, or 39.7%, to $130.3 million from $216.1 million in 2023. 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 nine months ended March 31, 2024 decreased by 168.7 basis points to 1.816% from 3.503% in 2023. Excluding an increase of $1.514 billion of forward sales that had a negligible impact to the amount of gross profit, our gross margin percentage for the nine months ended March 31, 2024 decreased by 151.1 basis points to 3.172% from 4.683%, which was primarily due to lower premium spreads, partially offset by higher trading profits. JMB’s retail market activity represented 40.1% and 48.5%, respectively, of the Company’s consolidated gross profit for the nine months ended March 31, 2024 and 2023.

Our inventory turnover ratio for the nine months ended March 31, 2024 decreased by 2.9% to 6.8 from 7.0 in 2023. 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 March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Selling, general, and administrative expenses		$	(22,854	)				(0.875	%)			$	(23,841	)				(1.029	%)			$	(987	)				(4.1	%)

Selling, general, and administrative expenses for the three months ended March 31, 2024 decreased $1.0 million, or 4.1%, to $22.9 million from $23.8 million in 2023. The change was primarily due to: (i) a decrease in compensation expense (including performance-based accruals) of $2.2 million, (ii) a decrease in insurance costs of $0.9 million and (iii) lower advertising costs of $0.4 million, partially offset by (iv) higher consulting and professional fees of $2.2 million and (v) an increase in information technology costs of $0.2 million.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Selling, general, and administrative expenses		$	(67,095	)				(0.935	%)			$	(62,438	)				(1.012	%)			$	4,657					7.5	%

Selling, general, and administrative expenses for the nine months ended March 31, 2024 increased $4.7 million, or 7.5%, to $67.1 million from $62.4 million in 2023. The change was primarily due to: (i) an increase in consulting and professional fees of $4.8 million, (ii) an increase in information technology costs of $0.8 million, and (iii) an increase in compensation expense (including performance-based accruals) of $0.4 million, partially offset by (iv) a decrease in insurance costs of $1.4 million.

Depreciation and Amortization Expense

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Depreciation and amortization expense		$	(2,949	)				(0.113	%)			$	(3,340	)				(0.144	%)			$	(391	)				(11.7	%)

Depreciation and amortization expense for the three months ended March 31, 2024 decreased $0.4 million, or 11.7%, to $2.9 million from $3.3 million in 2023 primarily due to a $0.6 million decrease in JMB’s intangible asset amortization expense.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Depreciation and amortization expense		$	(8,552	)				(0.119	%)			$	(9,784	)				(0.159	%)			$	(1,232	)				(12.6	%)

Depreciation and amortization expense for the nine months ended March 31, 2024 decreased $1.2 million, or 12.6%, to $8.6 million from $9.8 million in 2023 primarily due to a $1.7 million decrease in JMB’s intangible asset amortization expense.

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Interest Income

in thousands, except performance metric
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Interest income		$	6,682					0.256	%			$	6,087					0.263	%			$	595					9.8	%
Performance Metric
Number of secured loans at period-end			675										963										(288	)				(29.9	%)

Interest income for the three months ended March 31, 2024 increased $0.6 million, or 9.8%, to $6.7 million from $6.1 million in 2023. The aggregate increase in interest income was primarily due to a increase in other finance product income of $0.1 million and a increase in interest income earned by our Secured Lending segment of $0.5 million.

The interest income from our Secured Lending segment increased by $0.5 million, or 20.9%, 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 29.9% to 675 as of March 31, 2024, from 963 as of March 31, 2023.

in thousands, except performance metric
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Interest income		$	19,095					0.266	%			$	16,167					0.262	%			$	2,928					18.1	%
Performance Metric
Number of secured loans at period-end			675										963										(288	)				(29.9	%)

Interest income for the nine months ended March 31, 2024 increased $2.9 million, or 18.1%, to $19.1 million from $16.2 million in 2023. The aggregate increase in interest income was primarily due to an increase in other finance product income of $1.6 million and an increase in interest income earned by our Secured Lending segment of $1.4 million.

The interest income from our Secured Lending segment increased by $1.4 million, or 19.1%, 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 29.9% to 675 as of March 31, 2024, from 963 as of March 31, 2023.

Interest Expense

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Interest expense		$	(9,907	)				(0.379	%)			$	(9,237	)				(0.399	%)			$	670					7.3	%

Interest expense for the three months ended March 31, 2024 increased $0.7 million, or 7.3%, to $9.9 million from $9.2 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 an increase in interest rates as well as increased borrowings and (ii) an increase of $0.9 million related to product financing arrangements, partially offset by (iii) a decrease of $1.4 million related to the AMCF Notes (including amortization of debt issuance costs) due to the repayment in December 2023.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Interest expense		$	(29,898	)				(0.417	%)			$	(22,603	)				(0.367	%)			$	7,295					32.3	%

Interest expense for the nine months ended March 31, 2024 increased $7.3 million, or 32.3%, to $29.9 million from $22.6 million in 2023. The increase in interest expense was primarily driven by each of the following components: (i) an increase of $6.9 million associated with our Trading Credit Facility due to an increase in interest rates as well as increased borrowings and (ii) an increase of $2.5 million related to product financing arrangements, partially offset by (iii) a decrease of $1.8 million related to the AMCF Notes (including amortization of debt issuance costs) due to the repayment in December 2023 and (iv) a $0.3 million decrease in loan servicing fees.

Earnings (Losses) from Equity Method Investments

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Losses from equity method investments		$	(206	)				(0.008	%)			$	(70	)				(0.003	%)			$	136					194.3	%

 

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Losses from equity method investments for the three months ended March 31, 2024 increased $0.1 million, or 194.3%, to $0.2 million from $0.1 million in 2023 due to decreased earnings of our equity method investees.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Earnings from equity method investments		$	3,280					0.046	%			$	7,276					0.118	%			$	(3,996	)				(54.9	%)

Earnings from equity method investments for the nine months ended March 31, 2024 decreased $4.0 million, or 54.9%, to $3.3 million from $7.3 million in 2023 due to decreased earnings of our equity method investees.

Other Income, Net

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Other income, net		$	763					0.029	%			$	641					0.028	%			$	122					19.0	%

Other income, net for the three months ended March 31, 2024 increased $0.1 million, or 19.0%, to $0.8 million from $0.6 million in 2023. The change in other income, net was not significant.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Other income, net		$	1,605					0.022	%			$	2,001					0.032	%			$	(396	)				(19.8	%)

Other income, net for the nine months ended March 31, 2024 decreased $0.4 million, or 19.8%, to $1.6 million from $2.0 million in 2023. The decrease in other income, net was primarily due to a decrease in royalties earned of $1.0 million, partially offset by a $0.6 million increase in gains on other investments.

Income Tax Expense

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Income tax expense		$	(1,286	)				(0.049	%)			$	(9,775	)				(0.422	%)			$	(8,489	)				(86.8	%)

Our income tax expense was $1.3 million and $9.8 million for the three months ended March 31, 2024 and 2023, respectively. Our effective tax rate was approximately 20.0% and 21.4% for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024 and 2023, 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
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Income tax expense		$	(10,705	)				(0.149	%)			$	(32,096	)				(0.520	%)			$	(21,391	)				(66.6	%)

Our income tax expense was $10.7 million and $32.1 million for the nine months ended March 31, 2024 and 2023, respectively. Our effective tax rate was approximately 21.9% and 21.8% for the nine months ended March 31, 2024 and 2023, respectively. For the nine months ended March 31, 2024 and 2023, 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.

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SEGMENT RESULTS OF OPERATIONS

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 wholly-owned 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 in February 2024 to acquire LPM Group Limited ("LPM"). The Wholesale Sales & Ancillary Services segment includes the consolidating eliminations of inter-segment transactions and unallocated segment adjustments.

Overview of Results of Operations for the Three Months Ended March 31, 2024 and 2023

— Wholesale Sales & Ancillary Services Segment

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

Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	2,274,977		(a)			100.000	%			$	1,795,140		(b)			100.000	%			$	479,837					26.7	%
Gross profit			16,834					0.740	%	(c)			32,286					1.799	%	(d)		$	(15,452	)				(47.9	%)
Selling, general, and administrative expenses			(12,202	)				(0.536	%)				(12,428	)				(0.692	%)			$	(226	)				(1.8	%)
Depreciation and amortization expense			(474	)				(0.021	%)				(247	)				(0.014	%)			$	227					91.9	%
Interest income			3,676					0.162	%				3,601					0.201	%			$	75					2.1	%
Interest expense			(7,266	)				(0.319	%)				(5,979	)				(0.333	%)			$	1,287					21.5	%
Losses from equity method investments			(223	)				(0.010	%)				(72	)				(0.004	%)			$	151					209.7	%
Other income, net			440					0.019	%				36					0.002	%			$	404					1,122.2	%
Unrealized gains on foreign exchange			73					0.003	%				35					0.002	%			$	38					108.6	%
Net income before provision for income taxes		$	858					0.038	%			$	17,232					0.960	%			$	(16,374	)				(95.0	%)
Performance Metrics:
Gold ounces sold(1)			339,000										484,000										(145,000	)				(30.0	%)
Silver ounces sold(2)			22,545,000										30,843,000										(8,298,000	)				(26.9	%)
Wholesale Sales ticket volume(3)			26,150										28,914										(2,764	)				(9.6	%)

 

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Overview of Results of Operations for the Nine Months Ended March 31, 2024 and 2023

— Wholesale Sales & Ancillary Services Segment

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

 

Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	6,142,233		(a)			100.000	%			$	4,766,981		(b)			100.000	%			$	1,375,252					28.8	%
Gross profit			69,065					1.124	%	(c)			94,208					1.976	%	(d)		$	(25,143	)				(26.7	%)
Selling, general, and administrative expenses			(33,366	)				(0.543	%)				(29,377	)				(0.616	%)			$	3,989					13.6	%
Depreciation and amortization expense			(1,084	)				(0.018	%)				(703	)				(0.015	%)			$	381					54.2	%
Interest income			10,657					0.174	%				9,081					0.190	%			$	1,576					17.4	%
Interest expense			(20,989	)				(0.342	%)				(13,696	)				(0.287	%)			$	7,293					53.2	%
Earnings from equity method investments			3,269					0.053	%				7,272					0.153	%			$	(4,003	)				(55.0	%)
Other income, net			736					0.012	%				106					0.002	%			$	630					594.3	%
Unrealized gains on foreign exchange			84					0.001	%				250					0.005	%			$	(166	)				(66.4	%)
Net income before provision for income taxes		$	28,372					0.462	%			$	67,141					1.408	%			$	(38,769	)				(57.7	%)
Performance Metrics:
Gold ounces sold(1)			1,051,000										1,395,000										(344,000	)				(24.7	%)
Silver ounces sold(2)			72,711,000										92,804,000										(20,093,000	)				(21.7	%)
Wholesale Sales ticket volume(3)			73,456										76,133										(2,677	)				(3.5	%)

 

Revenues — Wholesale Sales & Ancillary Services

in thousands, except performance metrics
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	2,274,977		(a)			100.000	%			$	1,795,140		(b)			100.000	%			$	479,837					26.7	%
Performance Metrics
Gold ounces sold			339,000										484,000										(145,000	)				(30.0	%)
Silver ounces sold			22,545,000										30,843,000										(8,298,000	)				(26.9	%)
Wholesale Sales ticket volume			26,150										28,914										(2,764	)				(9.6	%)

 

Revenues for the three months ended March 31, 2024 increased $479.8 million, or 26.7%, to $2.275 billion from $1.795 billion in 2023. Excluding an increase in forward sales of $622.1 million, our revenues decreased $142.3 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 March 31, 2024 decreased 145,000 ounces, or 30.0%, to 339,000 ounces from 484,000 ounces in 2023. Silver ounces sold for the three months ended March 31, 2024 decreased 8,298,000 ounces, or 26.9%, to 22,545,000 ounces from 30,843,000 ounces in 2023. On average, the selling prices for gold and silver increased by 8.8% and 4.4%, respectively, during the three months ended March 31, 2024 as compared to the prior year.

The Wholesale Sales ticket volume for the three months ended March 31, 2024 decreased by 2,764 tickets, or 9.6% to 26,150 tickets from 28,914 tickets in 2023.

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in thousands, except performance metrics
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	6,142,233		(a)			100.000	%			$	4,766,981		(b)			100.000	%			$	1,375,252					28.8	%
Performance Metrics
Gold ounces sold			1,051,000										1,395,000										(344,000	)				(24.7	%)
Silver ounces sold			72,711,000										92,804,000										(20,093,000	)				(21.7	%)
Wholesale Sales ticket volume			73,456										76,133										(2,677	)				(3.5	%)

 

Revenues for the nine months ended March 31, 2024 increased $1.375 billion, or 28.8%, to $6.142 billion from $4.767 billion in 2023. Excluding an increase in forward sales of $1.514 billion, our revenues decreased $138.5 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 nine months ended March 31, 2024 decreased 344,000 ounces, or 24.7%, to 1,051,000 ounces from 1,395,000 ounces in 2023. Silver ounces sold for the nine months ended March 31, 2024 decreased 20,093,000 ounces, or 21.7%, to 72,711,000 ounces from 92,804,000 ounces in 2023. On average, the selling prices for gold increased by 11.1% and selling prices for silver increased by 11.3% during the nine months ended March 31, 2024 as compared to the prior year.

The Wholesale Sales ticket volume for the nine months ended March 31, 2024 decreased by 2,677 tickets, or 3.5% to 73,456 tickets from 76,133 tickets in 2023.

Gross Profit — Wholesale Sales & Ancillary Services

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Gross profit		$	16,834					0.740	%	(c)		$	32,286					1.799	%	(d)		$	(15,452	)				(47.9	%)

 

Gross profit for the three months ended March 31, 2024 decreased $15.5 million, or 47.9%, to $16.8 million from $32.3 million in 2023. The overall gross profit decrease was primarily due to lower premium spreads, partially offset by higher trading profit.

This segment’s profit margin percentage decreased by 105.9 basis points to 0.740% from 1.799% in 2023. The decrease in gross margin percentage was mainly attributable to lower premium spreads and the impact of increased forward sales, partially offset by higher trading profits.

Excluding an increase of $622.1 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 March 31, 2024 decreased by 113.1 basis points to 1.660% from 2.791%. 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.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Gross profit		$	69,065					1.124	%	(c)		$	94,208					1.976	%	(d)		$	(25,143	)				(26.7	%)

 

 

Gross profit for the nine months ended March 31, 2024 decreased $25.1 million, or 26.7%, to $69.1 million from $94.2 million in 2023. The gross profit decrease was primarily due to lower premium spreads, partially offset by higher trading profits.

This segment’s profit margin percentage decreased by 85.2 basis points to 1.124% from 1.976% in 2023. The decrease in gross margin percentage was mainly attributable to the impact of increased forward sales and lower premium spreads, partially offset by higher trading profits.

Excluding an increase of $1.514 billion of forward sales that had a negligible impact to the amount of gross profit, this segment's gross margin percentage for the nine months ended March 31, 2024 decreased by 68.5 basis points to 2.246% from 2.931% 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.

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

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Selling, general, and administrative expenses		$	(12,202	)				(0.536	%)			$	(12,428	)				(0.692	%)			$	(226	)				(1.8	%)

Selling, general, and administrative expenses for the three months ended March 31, 2024 decreased $0.2 million, or 1.8%, to $12.2 million from $12.4 million in 2023. The change was primarily due to: (i) a decrease in compensation expense (including performance-based accruals) of $2.0 million and (ii) a decrease in insurance costs of $0.9 million, partially offset by (iii) higher consulting and professional fees of $2.3 million and (iv) an increase in advertising costs of $0.2 million.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Selling, general, and administrative expenses		$	(33,366	)				(0.543	%)			$	(29,377	)				(0.616	%)			$	3,989					13.6	%

Selling, general, and administrative expenses for the nine months ended March 31, 2024 increased $4.0 million, or 13.6%, to $33.4 million from $29.4 million in 2023. The change was primarily due to: (i) an increase in consulting and professional fees of $4.8 million, (ii) an increase in advertising costs of $0.9 million, and (iii) an increase in information technology costs of $0.3 million, partially offset by (iv) a decrease in insurance costs of $1.5 million and (v) a decrease in compensation expense (including performance-based accruals) of $0.6 million.

Interest Income — Wholesale Sales & Ancillary Services

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Interest income		$	3,676					0.162	%			$	3,601					0.201	%			$	75					2.1	%

Interest income for the three months ended March 31, 2024 increased $0.1 million, or 2.1%, to $3.7 million from $3.6 million in 2023. The overall increase in interest income was not significant.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Interest income		$	10,657					0.174	%			$	9,081					0.190	%			$	1,576					17.4	%

Interest income for the nine months ended March 31, 2024 increased $1.6 million, or 17.4%, to $10.7 million from $9.1 million in 2023. The overall increase was primarily due to an increase in interest earned from repurchase arrangements with customers of $1.7 million.

Interest Expense — Wholesale Sales & Ancillary Services

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Interest expense		$	(7,266	)				(0.319	%)			$	(5,979	)				(0.333	%)			$	1,287					21.5	%

Interest expense for the three months ended March 31, 2024 increased $1.3 million, or 21.5%, to $7.3 million from $6.0 million in 2023. The overall increase was primarily due to (i) higher interest and fees from product financing arrangements of $0.8 million, (ii) higher inter-segment eliminations related to JMB’s product financing activity with A-Mark of $0.7 million, and (iii) an increase of $0.3 million in connection with our Trading Credit Facility (due to an increase in interest rates as well as increased borrowings), partially offset by (iv) a decrease of $0.6 million related to our AMCF Notes (including amortization of debt issuance costs) due to the repayment in December 2023.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Interest expense		$	(20,989	)				(0.342	%)			$	(13,696	)				(0.287	%)			$	7,293					53.2	%

Interest expense for the nine months ended March 31, 2024 increased $7.3 million, or 53.2%, to $21.0 million from $13.7 million in 2023. The overall increase was primarily due to (i) an increase of $4.3 million in connection with our Trading Credit Facility (due to an increase in interest rates as well as increased borrowings), (ii) higher interest and fees from product financing arrangements of $2.5 million, and (iii) an increase in inter-segment eliminations related to JMB’s product financing activity with A-Mark of $0.6 million.

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Earnings (Losses) from Equity Method Investments — Wholesale Sales & Ancillary Services

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Losses from equity method investments		$	(223	)				(0.010	%)			$	(72	)				(0.004	%)			$	151					209.7	%

Losses from equity method investments for the three months ended March 31, 2024 increased $0.2 million, or 209.7%, to $0.2 million from $0.1 million in 2023 due to decreased earnings of our equity method investees.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Earnings from equity method investments		$	3,269					0.053	%			$	7,272					0.153	%			$	(4,003	)				(55.0	%)

Earnings from equity method investments for the nine months ended March 31, 2024 decreased $4.0 million, or 55.0%, to $3.3 million from $7.3 million in 2023 due to decreased earnings of our equity method investees.

Other Income, Net — Wholesale Sales & Ancillary Services

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Other income, net		$	440					0.019	%			$	36					0.002	%			$	404					1,122.2	%

Other income, net for the three months ended March 31, 2024 increased by $0.4 million primarily due to an increase in gains on other investments of $0.4 million.

 

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Other income, net		$	736					0.012	%			$	106					0.002	%			$	630					594.3	%

Other income, net for the nine months ended March 31, 2024 increased by $0.6 million primarily due to an increase in gains on other investments of $0.6 million.

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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”), and through our 50%-owned subsidiary Precious Metals Purchasing Partners, LLC ("PMPP").

Overview of Results of Operations for the Three Months Ended March 31, 2024 and 2023

— Direct-to-Consumer Segment

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

Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	335,674		(a)			100.000	%			$	522,010		(b)			100.000	%			$	(186,336	)				(35.7	%)
Gross profit			18,004					5.364	%	(c)			43,212					8.278	%	(d)		$	(25,208	)				(58.3	%)
Selling, general, and administrative expenses			(10,259	)				(3.056	%)				(10,900	)				(2.088	%)			$	(641	)				(5.9	%)
Depreciation and amortization expense			(2,392	)				(0.713	%)				(3,005	)				(0.576	%)			$	(613	)				(20.4	%)
Interest expense			(580	)				(0.173	%)				(1,287	)				(0.247	%)			$	(707	)				(54.9	%)
Other income, net			5					0.001	%				—					—	%			$	5					—	%
Net income before provision for income taxes		$	4,778					1.423	%			$	28,020					5.368	%			$	(23,242	)				(82.9	%)
Performance Metrics:
Gold ounces sold(1)			107,000										175,000										(68,000	)				(38.9	%)
Silver ounces sold(2)			3,177,000										6,063,000										(2,886,000	)				(47.6	%)
Number of new customers(3)			56,600										64,700										(8,100	)				(12.5	%)
Number of active customers(4)			126,000										147,400										(21,400	)				(14.5	%)
Number of total customers(5)			2,496,500										2,257,900										238,600					10.6	%
DTC ticket volume from new customers(6)			39,150										42,781										(3,631	)				(8.5	%)
DTC ticket volume from pre-existing customers(7)			120,836										172,906										(52,070	)				(30.1	%)
DTC total ticket volume(8)			159,986										215,687										(55,701	)				(25.8	%)
DTC average order value(9)		$	2,133									$	2,452									$	(319	)				(13.0	%)
JMB average order value(9)		$	2,003									$	2,252									$	(249	)				(11.1	%)

 

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Overview of Results of Operations for the Nine Months Ended March 31, 2024 and 2023

— Direct-to-Consumer Segment

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

 

Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	1,031,851		(a)			100.000	%			$	1,400,225		(b)			100.000	%			$	(368,374	)				(26.3	%)
Gross profit			61,219					5.933	%	(c)			121,851					8.702	%	(d)		$	(60,632	)				(49.8	%)
Selling, general, and administrative expenses			(32,569	)				(3.156	%)				(31,625	)				(2.259	%)			$	944					3.0	%
Depreciation and amortization expense			(7,209	)				(0.699	%)				(8,817	)				(0.630	%)			$	(1,608	)				(18.2	%)
Interest expense			(2,475	)				(0.240	%)				(3,020	)				(0.216	%)			$	(545	)				(18.0	%)
Other income (expense), net			5					0.000	%				(12	)				(0.001	%)			$	17					141.7	%
Net income before provision for income taxes		$	18,971					1.839	%			$	78,377					5.597	%			$	(59,406	)				(75.8	%)
Performance Metrics:
Gold ounces sold(1)			340,000										458,000										(118,000	)				(25.8	%)
Silver ounces sold(2)			9,964,000										18,156,000										(8,192,000	)				(45.1	%)
Number of new customers(3)			148,200										244,900										(96,700	)				(39.5	%)
Number of active customers(4)			368,800										342,500										26,300					7.7	%
Number of total customers(5)			2,496,500										2,257,900										238,600					10.6	%
DTC ticket volume from new customers(6)			100,403										106,933										(6,530	)				(6.1	%)
DTC ticket volume from pre-existing customers(7)			365,687										486,887										(121,200	)				(24.9	%)
DTC total ticket volume(8)			466,090										593,820										(127,730	)				(21.5	%)
DTC average order value(9)		$	2,253									$	2,394									$	(141	)				(5.9	%)
JMB average order value(9)		$	2,093									$	2,216									$	(123	)				(5.6	%)

 

Revenues — Direct-to-Consumer

in thousands, except performance metrics
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	335,674					100.000	%			$	522,010					100.000	%			$	(186,336	)				(35.7	%)
Performance Metrics:
Gold ounces sold			107,000										175,000										(68,000	)				(38.9	%)
Silver ounces sold			3,177,000										6,063,000										(2,886,000	)				(47.6	%)
Number of new customers			56,600										64,700										(8,100	)				(12.5	%)
Number of active customers			126,000										147,400										(21,400	)				(14.5	%)
Number of total customers			2,496,500										2,257,900										238,600					10.6	%
DTC ticket volume from new customers			39,150										42,781										(3,631	)				(8.5	%)
DTC ticket volume from pre-existing customers			120,836										172,906										(52,070	)				(30.1	%)
DTC total ticket volume			159,986										215,687										(55,701	)				(25.8	%)
DTC average order value		$	2,133									$	2,452									$	(319	)				(13.0	%)
JMB average order value		$	2,003									$	2,252									$	(249	)				(11.1	%)

Revenues for the three months ended March 31, 2024 decreased $186.3 million, or 35.7%, to $335.7 million from $522.0 million in 2023. The decrease in revenue was due to a decrease in gold and silver ounces sold, partially offset by an increase in average selling prices of gold and silver. For the three months ended March 31, 2024, JMB's revenue decreased $161.6 million, while revenue of Goldline and PMPP, in the aggregate, decreased by $24.7 million as compared to the prior year.

---

Gold ounces sold for the three months ended March 31, 2024 decreased 68,000 ounces, or 38.9%, to 107,000 ounces from 175,000 ounces in 2023. Silver ounces sold for the three months ended March 31, 2024 decreased 2,886,000 ounces, or 47.6%, to 3,177,000 ounces from 6,063,000 ounces in 2023.

Gold ounces sold by JMB decreased 61,000 ounces for the three months ended March 31, 2024 compared to 2023. Gold ounces sold by Goldline and PMPP, in the aggregate, decreased 7,000 ounces compared to 2023. Silver ounces sold by JMB decreased 2,685,000 ounces for the three months ended March 31, 2024 compared to 2023. Silver ounces sold by Goldline and PMPP, in the aggregate, decreased 201,000 ounces compared to 2023.

On average, selling prices for gold increased by 8.8% and selling prices for silver increased by 3.8% during the three months ended March 31, 2024 as compared to the prior year.

The number of new customers for the three months ended March 31, 2024 decreased 8,100, or 12.5% to 56,600 from 64,700 in 2023. The number of active customers for the three months ended March 31, 2024 decreased 21,400, or 14.5% to 126,000 from 147,400 in 2023. The number of total customers as of March 31, 2024 increased 238,600, or 10.6% to 2,496,500 from 2,257,900 as of March 31, 2023. These changes in customer-based metrics were primarily due to JMB's activity.

As of March 31, 2024, the number of total CyberMetals customers was 28,100, and CyberMetals customer assets under management were $6.8 million.

For the three months ended March 31, 2024, the Direct-to-Consumer ticket volume related to new customers decreased by 3,631 tickets, or 8.5%, to 39,150 tickets from 42,781 tickets in 2023. For the three months ended March 31, 2024, Direct-to-Consumer ticket volume related to pre-existing customers decreased by 52,070 tickets, or 30.1%, to 120,836 tickets from 172,906 tickets in 2023. For the three months ended March 31, 2024, the Direct-to-Consumer total ticket volume decreased by 55,701 tickets, or 25.8%, to 159,986 tickets from 215,687 tickets in 2023.

For the three months ended March 31, 2024, the Direct-to-Consumer average order value decreased by $319, or 13.0%, to $2,133 from $2,452 in 2023.

in thousands, except performance metrics
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Revenues		$	1,031,851					100.000	%			$	1,400,225					100.000	%			$	(368,374	)				(26.3	%)
Performance Metrics:
Gold ounces sold			340,000										458,000										(118,000	)				(25.8	%)
Silver ounces sold			9,964,000										18,156,000										(8,192,000	)				(45.1	%)
Number of new customers			148,200										244,900										(96,700	)				(39.5	%)
Number of active customers			368,800										342,500										26,300					7.7	%
Number of total customers			2,496,500										2,257,900										238,600					10.6	%
DTC ticket volume from new customers			100,403										106,933										(6,530	)				(6.1	%)
DTC ticket volume from pre-existing customers			365,687										486,887										(121,200	)				(24.9	%)
DTC total ticket volume			466,090										593,820										(127,730	)				(21.5	%)
DTC average order value		$	2,253									$	2,394									$	(141	)				(5.9	%)
JMB average order value		$	2,093									$	2,216									$	(123	)				(5.6	%)

Revenues for the nine months ended March 31, 2024 decreased $368.4 million, or 26.3%, to $1.032 billion from $1.400 billion in 2023. The decrease in revenue was due to a decrease in gold and silver ounces sold, partially offset by higher average selling prices of gold and silver. For the nine months ended March 31, 2024, JMB's revenue decreased $334.1 million and revenue of Goldline and PMPP, in the aggregate, decreased by $34.3 million as compared to the prior year.

Gold ounces sold for the nine months ended March 31, 2024 decreased 118,000 ounces, or 25.8%, to 340,000 ounces from 458,000 ounces in 2023. Silver ounces sold for the nine months ended March 31, 2024 decreased 8,192,000 ounces, or 45.1%, to 9,964,000 ounces from 18,156,000 ounces in 2023.

Gold ounces sold by JMB decreased 109,000 ounces for the nine months ended March 31, 2024 compared to 2023. Gold ounces sold by Goldline and PMPP, in the aggregate, decreased 9,000 ounces compared to 2023. Silver ounces sold by JMB decreased 7,624,000 ounces for the nine months ended March 31, 2024 compared to 2023. Silver ounces sold by Goldline and PMPP, in the aggregate, decreased 568,000 ounces compared to 2023.

On average, selling prices for gold increased by 8.7% and selling prices for silver increased by 9.4% during the nine months ended March 31, 2024 as compared to the prior year.

The number of new customers for the nine months ended March 31, 2024 decreased 96,700, or 39.5%, to 148,200 from 244,900 in 2023. The number of active customers for the nine months ended March 31, 2024 increased 26,300, or 7.7% to 368,800 from 342,500 in 2023. The number of total customers as of March 31, 2024 increased 238,600, or 10.6% to 2,496,500 from 2,257,900 as of March 31, 2023. These changes in customer-based metrics were primarily due to JMB's activity.

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As of March 31, 2024, the number of total CyberMetals customers was 28,100, and CyberMetals customer assets under management were $6.8 million.

For the nine months ended March 31, 2024, the Direct-to-Consumer ticket volume related to new customers decreased by 6,530 tickets, or 6.1%, to 100,403 tickets from 106,933 tickets in 2023. For the nine months ended March 31, 2024, Direct-to-Consumer ticket volume related to pre-existing customers decreased by 121,200 tickets, or 24.9%, to 365,687 tickets from 486,887 tickets in 2023. For the nine months ended March 31, 2024, the Direct-to-Consumer total ticket volume decreased by 127,730 tickets, or 21.5%, to 466,090 tickets from 593,820 tickets in 2023.

For the nine months ended March 31, 2024, the Direct-to-Consumer average order value decreased by $141, or 5.9%, to $2,253 from $2,394 in 2023.

Gross Profit — Direct-to-Consumer

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Gross profit		$	18,004					5.364	%			$	43,212					8.278	%			$	(25,208	)				(58.3	%)

Gross profit for the three months ended March 31, 2024 decreased by $25.2 million, or 58.3%, to $18.0 million from $43.2 million in 2023. The decrease in gross profit was mainly due to a decreased gross profit margin percentage as well as a lower ticket volume during the period.

For the three months ended March 31, 2024, the Direct-to-Consumer segment's profit margin percentage decreased by 291.4 basis points to 5.364% from 8.278% in 2023. The decrease in the gross profit margin percentage was primarily due to the lower gross profit percentages of JMB, but also to lower gross profit percentages of Goldline and PMPP.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Gross profit		$	61,219					5.933	%			$	121,851					8.702	%			$	(60,632	)				(49.8	%)

Gross profit for the nine months ended March 31, 2024 decreased by $60.6 million, or 49.8%, to $61.2 million from $121.9 million in 2023. The decrease in gross profit was mainly due to a decreased gross profit margin percentage as well as a lower ticket volume during the period.

For the nine months ended March 31, 2024, the Direct-to-Consumer segment's profit margin percentage decreased by 276.9 basis points to 5.933% from 8.702% in 2023. The decrease in the gross profit margin percentage was primarily due to the lower gross profit percentages of JMB, but also to lower gross profit percentages of Goldline and PMPP.

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

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Selling, general, and administrative expenses		$	(10,259	)				(3.056	%)			$	(10,900	)				(2.088	%)			$	(641	)				(5.9	%)

Selling, general, and administrative expenses for the three months ended March 31, 2024 decreased $0.6 million, or 5.9%, to $10.3 million from $10.9 million in 2023. The change was primarily due to a decrease in advertising costs of $0.6 million.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Selling, general, and administrative expenses		$	(32,569	)				(3.156	%)			$	(31,625	)				(2.259	%)			$	944					3.0	%

Selling, general, and administrative expenses for the nine months ended March 31, 2024 increased $0.9 million, or 3.0%, to $32.6 million from $31.6 million in 2023. The change was primarily due to (i) an increase in compensation expense (including performance-based accruals) of $1.1 million and (ii) an increase in information technology costs of $0.5 million, partially offset by (iii) a decrease in advertising costs of $1.3 million.

Depreciation and Amortization Expense — Direct-to-Consumer

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Depreciation and amortization expense		$	(2,392	)				(0.713	%)			$	(3,005	)				(0.576	%)			$	(613	)				(20.4	%)

Depreciation and amortization expense for the three months ended March 31, 2024, decreased $0.6 million, or 20.4%, to $2.4 million from $3.0 million in 2023 primarily due to a $0.6 million decrease in JMB’s intangible asset amortization expense.

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in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Depreciation and amortization expense		$	(7,209	)				(0.699	%)			$	(8,817	)				(0.630	%)			$	(1,608	)				(18.2	%)

Depreciation and amortization expense for the nine months ended March 31, 2024, decreased $1.6 million, or 18.2%, to $7.2 million from $8.8 million in 2023 primarily due to a $1.7 million decrease in JMB’s intangible asset amortization expense.

Interest expense — Direct-to-Consumer

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Interest expense		$	(580	)				(0.173	%)			$	(1,287	)				(0.247	%)			$	(707	)				(54.9	%)

Interest expense for the three months ended March 31, 2024 decreased $0.7 million to $0.6 million from $1.3 million in 2023. The decrease is related to JMB’s reduced product financing activity with A-Mark.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of revenue					$					% of revenue					$					%
Interest expense		$	(2,475	)				(0.240	%)			$	(3,020	)				(0.216	%)			$	(545	)				(18.0	%)

Interest expense for the nine months ended March 31, 2024 decreased $0.5 million to $2.5 million from $3.0 million in 2023. The decrease is related to JMB’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”), a wholly-owned subsidiary of CFC, was formed for the issuance of certain notes, which were repaid in December 2023. AMCF is currently inactive.

Overview of Results of Operations for the Three Months Ended March 31, 2024 and 2023

— Secured Lending Segment

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

Three Months Ended March 31,		2024										2023										Change
		$					% of interest income					$					% of interest income					$					%
Interest income		$	3,006					100.000	%			$	2,486					100.000	%			$	520					20.9	%
Interest expense			(2,061	)				(68.563	%)				(1,971	)				(79.284	%)			$	90					4.6	%
Selling, general, and administrative expenses			(393	)				(13.074	%)				(513	)				(20.636	%)			$	(120	)				(23.4	%)
Depreciation and amortization expense			(83	)				(2.761	%)				(88	)				(3.540	%)			$	(5	)				(5.7	%)
Earnings from equity method investments			17					0.566	%				2					0.080	%			$	15					750.0	%
Other income, net			318					10.579	%				605					24.336	%			$	(287	)				(47.4	%)
Net income before provision for income taxes		$	804					26.747	%			$	521					20.957	%			$	283					54.3	%
Performance Metric:
Number of secured loans at period end(1)			675										963										(288	)				(29.9	%)

 

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Overview of Results of Operations for the Nine Months Ended March 31, 2024 and 2023

— Secured Lending Segment

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

Nine Months Ended March 31,		2024										2023										Change
		$					% of interest income					$					% of interest income					$					%
Interest income		$	8,438					100.000	%			$	7,086					100.000	%			$	1,352					19.1	%
Interest expense			(6,434	)				(76.250	%)				(5,887	)				(83.079	%)			$	547					9.3	%
Selling, general, and administrative expenses			(1,160	)				(13.747	%)				(1,436	)				(20.265	%)			$	(276	)				(19.2	%)
Depreciation and amortization expense			(259	)				(3.069	%)				(264	)				(3.726	%)			$	(5	)				(1.9	%)
Earnings from equity method investments			11					0.130	%				4					0.056	%			$	7					175.0	%
Other income, net			864					10.239	%				1,907					26.912	%			$	(1,043	)				(54.7	%)
Net income before provision for income taxes		$	1,460					17.303	%			$	1,410					19.898	%			$	50					3.5	%
Performance Metric:
Number of secured loans at period end(1)			675										963										(288	)				(29.9	%)

 

Interest Income — Secured Lending

in thousands, except performance metric
Three Months Ended March 31,		2024										2023										Change
		$					% of interest income					$					% of interest income					$					%
Interest income		$	3,006					100.000	%			$	2,486					100.000	%			$	520					20.9	%
Performance Metric
Number of secured loans at period-end			675										963										(288	)				(29.9	%)

Interest income for the three months ended March 31, 2024 increased $0.5 million, or 20.9%, to $3.0 million from $2.5 million in 2023. 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 288, or 29.9%, to 675 from 963 as of March 31, 2023.

in thousands, except performance metric
Nine Months Ended March 31,		2024										2023										Change
		$					% of interest income					$					% of interest income					$					%
Interest income		$	8,438					100.000	%			$	7,086					100.000	%			$	1,352					19.1	%
Performance Metric
Number of secured loans at period-end			675										963										(288	)				(29.9	%)

Interest income for the nine months ended March 31, 2024 increased $1.4 million, or 19.1%, to $8.4 million from $7.1 million in 2023. 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 288, or 29.9% to 675 from 963 as of March 31, 2023.

Interest Expense — Secured Lending

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of interest income					$					% of interest income					$					%
Interest expense		$	(2,061	)				(68.563	%)			$	(1,971	)				(79.284	%)			$	90					4.6	%

Interest expense for the three months ended March 31, 2024 increased $0.1 million, or 4.6%, to $2.1 million from $2.0 million in 2023. The change in interest expense was not significant.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of interest income					$					% of interest income					$					%
Interest expense		$	(6,434	)				(76.250	%)			$	(5,887	)				(83.079	%)			$	547					9.3	%

Interest expense for the nine months ended March 31, 2024 increased $0.5 million, or 9.3%, to $6.4 million from $5.9 million in 2023. The increase in interest expense was primarily due to (i) an increase of $2.6 million associated with our Trading Credit Facility due to an increase in interest rates as well as increased borrowings, partially offset by (ii) a decrease of $1.7 million related to the AMCF Notes (including amortization of debt issuance costs) due to the repayment in December 2023 and (iii) a $0.3 million decrease in loan servicing fees.

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Selling, General, and Administrative Expenses — Secured Lending

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of interest income					$					% of interest income					$					%
Selling, general, and administrative expenses		$	(393	)				(13.074	%)			$	(513	)				(20.636	%)			$	(120	)				(23.4	%)

Selling, general, and administrative expenses for the three months ended March 31, 2024 decreased $0.1 million, or 23.4%, to $0.4 million from $0.5 million in 2023. The change in selling, general, and administrative expenses was not significant.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of interest income					$					% of interest income					$					%
Selling, general, and administrative expenses		$	(1,160	)				(13.747	%)			$	(1,436	)				(20.265	%)			$	(276	)				(19.2	%)

Selling, general, and administrative expenses for the nine months ended March 31, 2024 decreased $0.3 million, or 19.2%, to $1.2 million from $1.4 million in 2023. The change in selling, general, and administrative expenses was not significant.

Other Income, Net — Secured Lending

in thousands
Three Months Ended March 31,		2024										2023										Change
		$					% of interest income					$					% of interest income					$					%
Other income, net		$	318					10.579	%			$	605					24.336	%			$	(287	)				(47.4	%)

Other income, net for the three months ended March 31, 2024 decreased $0.3 million, or 47.4%, to $0.3 million from $0.6 million in 2023 primarily due to lower royalties earned.

in thousands
Nine Months Ended March 31,		2024										2023										Change
		$					% of interest income					$					% of interest income					$					%
Other income, net		$	864					10.239	%			$	1,907					26.912	%			$	(1,043	)				(54.7	%)

Other income, net for the nine months ended March 31, 2024 decreased $1.0 million, or 54.7%, to $0.9 million from $1.9 million in 2023 primarily due to lower royalties earned.

NON-GAAP MEASURES

Adjusted net income before provision for income taxes

Overview

In addition to our results determined in accordance with U.S. GAAP, we believe the below non-GAAP measure is useful in evaluating our operating performance. We use the financial measure “adjusted net income before provision for income taxes” to present our pre-tax earnings from core business operations. This measure does not have standardized definitions and is not prepared in accordance with U.S. GAAP. The items excluded from this financial measure may have a material impact on our financial results. Certain of those items are non-recurring, while others are non-cash in nature. Accordingly, this non-GAAP financial performance measure should be considered in addition to, and not as a substitute for or superior to, the comparable measures prepared in accordance with U.S. GAAP.

Reconciliation

We calculate this non-GAAP financial performance measure by eliminating from net income before provision for income taxes the impact of items we do not consider indicative of our core operating performance. We eliminate the impact of the following three items: (i) acquisition expenses; (ii) amortization expenses related to intangible assets acquired; and (iii) depreciation expense.

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The following tables reconcile this non-GAAP financial performance measure to its most closely comparable U.S. GAAP measure on our financial statements (in thousands):

Three Months Ended March 31,		2024				2023				Change
		$				$				$					%
Net income before provision for income taxes		$	6,440			$	45,773			$	(39,333	)				(85.9	%)
Adjustments:
Acquisition costs			2,222				38			$	2,184					5,747.4	%
Amortization of acquired intangibles			2,198				2,719			$	(521	)				(19.2	%)
Depreciation expense			751				621			$	130					20.9	%
Adjusted net income before provision for income taxes (non-GAAP)		$	11,611			$	49,151			$	(37,540	)				(76.4	%)

 

Nine Months Ended March 31,		2024				2023				Change
		$				$				$					%
Net income before provision for income taxes		$	48,803			$	146,928			$	(98,125	)				(66.8	%)
Adjustments:
Acquisition costs			2,763				184			$	2,579					1,401.6	%
Amortization of acquired intangibles			6,528				8,193			$	(1,665	)				(20.3	%)
Depreciation expense			2,024				1,591			$	433					27.2	%
Adjusted net income before provision for income taxes (non-GAAP)		$	60,118			$	156,896			$	(96,778	)				(61.7	%)

Adjustments

Acquisition costs. We incur expenses for professional services rendered in connection with business combinations, which are included as a component of selling, general, and administrative expenses in the Company’s condensed consolidated statements of income. Acquisition expenses are recorded in the periods in which the costs are incurred, and the services are received. We exclude acquisition expenses when we evaluate our core operating performance and to facilitate comparison of period-to-period operating performance.

Amortization of purchased intangibles. Amortization expense of purchased intangibles varies in amount and frequency and is significantly impacted by the timing and size of our acquisitions. Due to amortization expense being non-cash in nature, management finds it useful to exclude these charges from our operating expenses to assist in the review of a measure that more closely corresponds to cash operating income generated from our business. Amortization of purchased intangible assets will recur in future periods. For additional information about the amortization of our purchased intangibles. See Note 9 to the Company’s condensed consolidated financial statements.

Depreciation expense. Depreciation expense is calculated using a straight-line method based on the estimated useful lives of the related assets, ranging from three years to twenty-five years. Due to depreciation expense being non-cash in nature, management finds it useful to exclude these charges from our operating expenses to assist in the review of a measure that more closely corresponds to cash operating income generated from our business. See Note 8 to the Company’s condensed consolidated financial statements.

Earnings Before Interest, Taxes, Depreciation, and Amortization

Overview

In addition to the non-GAAP financial performance measure discussed in the section above, we use the non-GAAP liquidity measure “earnings before interest, taxes, depreciation, and amortization” or "EBITDA" to evaluate our business operations before investing activities, interest, and income taxes. Management and external users of our condensed consolidated financial statements, such as industry analysts and investors, may use EBITDA to compare business operations with other publicly traded companies.

Reconciliation

We calculate EBITDA by eliminating from net income the following five items: (i) interest income; (ii) interest expense; (iii) amortization expenses related to intangible assets acquired; (iv) depreciation expense; and (v) income tax expense.

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Management believes the most directly comparable GAAP financial measure is “net cash provided by or used in operating activities” presented in the condensed consolidated statement of cash flows. Below is the reconciliation of net cash provided by or used in operating activities to EBITDA (in thousands):

Three Months Ended March 31,		2024				2023				Change
		$				$				$				%
Net income		$	5,154			$	35,998			$	(30,844	)			(85.7	%)
Adjustments:
Interest income			(6,682	)			(6,087	)		$	595				9.8	%
Interest expense			9,907				9,237			$	670				7.3	%
Amortization of acquired intangibles			2,198				2,719			$	(521	)			(19.2	%)
Depreciation expense			751				621			$	130				20.9	%
Income tax expense			1,286				9,775			$	(8,489	)			(86.8	%)
			7,460				16,265			$	(8,805	)			(54.1	%)
Earnings before interest, taxes, depreciation, and amortization (non-GAAP)		$	12,614			$	52,263			$	(39,649	)			(75.9	%)
Reconciliation of Operating Cash Flows to EBITDA:
Net cash provided by operating activities		$	79,751			$	91,767			$	(12,016	)			(13.1	%)
Changes in operating working capital			(70,511	)			(52,003	)		$	18,508				35.6	%
Interest expense			9,907				9,237			$	670				7.3	%
Interest income			(6,682	)			(6,087	)		$	595				9.8	%
Income tax expense			1,286				9,775			$	(8,489	)			(86.8	%)
Dividends and distributions received from equity method investees			(92	)			—			$	92				—	%
Losses from equity method investments			(206	)			(70	)		$	136				194.3	%
Share-based compensation			(456	)			(538	)		$	(82	)			(15.2	%)
Amortization of loan cost			(614	)			(488	)		$	126				25.8	%
Other			231				670			$	(439	)			(65.5	%)
Earnings before interest, taxes, depreciation, and amortization (non-GAAP)		$	12,614			$	52,263			$	(39,649	)			(75.9	%)
Cash Flow Data:
Net cash provided by operating activities		$	79,751			$	91,767			$	(12,016	)			(13.1	%)
Net cash (used in) provided by investing activities		$	(47,849	)		$	12			$	(47,861	)			(398,841.7	%)
Net cash used in financing activities		$	(25,230	)		$	(86,177	)		$	(60,947	)			(70.7	%)

 

Nine Months Ended March 31,		2024				2023				Change
		$				$				$					%
Net income		$	38,098			$	114,832			$	(76,734	)				(66.8	%)
Adjustments:
Interest income			(19,095	)			(16,167	)		$	2,928					18.1	%
Interest expense			29,898				22,603			$	7,295					32.3	%
Amortization of acquired intangibles			6,528				8,193			$	(1,665	)				(20.3	%)
Depreciation expense			2,024				1,591			$	433					27.2	%
Income tax expense			10,705				32,096			$	(21,391	)				(66.6	%)
			30,060				48,316			$	(18,256	)				(37.8	%)
Earnings before interest, taxes, depreciation, and amortization (non-GAAP)		$	68,158			$	163,148			$	(94,990	)				(58.2	%)
Reconciliation of Operating Cash Flows to EBITDA:
Net cash (used in) provided by operating activities		$	(21,916	)		$	43,249			$	(65,165	)				(150.7	%)
Changes in operating working capital			69,003				77,628			$	(8,625	)				(11.1	%)
Interest expense			29,898				22,603			$	7,295					32.3	%
Interest income			(19,095	)			(16,167	)		$	2,928					18.1	%
Income tax expense			10,705				32,096			$	(21,391	)				(66.6	%)
Dividends and distributions received from equity method investees			(361	)			(551	)		$	(190	)				(34.5	%)
Earnings from equity method investments			3,280				7,276			$	(3,996	)				(54.9	%)
Share-based compensation			(1,602	)			(1,607	)		$	(5	)				(0.3	%)
Amortization of loan cost			(1,828	)			(1,628	)		$	200					12.3	%
Other			74				249			$	(175	)				(70.3	%)
Earnings before interest, taxes, depreciation, and amortization (non-GAAP)		$	68,158			$	163,148			$	(94,990	)				(58.2	%)
Cash Flow Data:
Net cash (used in) provided by operating activities		$	(21,916	)		$	43,249			$	(65,165	)				(150.7	%)
Net cash (used in) provided by investing activities		$	(58,508	)		$	15,092			$	(73,600	)				(487.7	%)
Net cash provided by (used in) financing activities		$	76,273			$	(18,023	)		$	94,296					523.2	%

 

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LIQUIDITY AND FINANCIAL CONDITION

Primary Sources and Uses of Cash

Overview

Liquidity refers to the availability to the Company of amounts of cash to meet all of our cash needs. Our sources of liquidity principally include cash from operations, Trading Credit Facility (see “Lines of Credit” below), and product financing arrangements.

A substantial portion of our assets are liquid. As of March 31, 2024, approximately 80.1% of our assets consisted of cash, receivables, derivative assets, secured loans receivables, precious metals held under financing arrangements, and inventories, measured at fair value. Cash generated from the sales or financing of our precious metals products is our primary source of operating liquidity. Among other things, these include our product financing arrangements and liabilities on borrowed metals. Typically, the Company acquires its inventory by: (i) purchasing inventory from its suppliers by utilizing our own capital and lines of credit; (ii) borrowing precious metals from its suppliers under short-term arrangements which may bear interest at a designated rate, and (iii) repurchasing inventory at an agreed-upon price based on the spot price on the specified repurchase date.

In addition to selling inventory, the Company generates cash from earning interest income. The Company enters into secured loans and secured financing structures with its customers under which it charges interest. The loans are secured by precious metals and numismatic material, and graded sports cards and sports memorabilia owned by the borrowers and held by the Company as security for the term of the loan. The Company also offers a number of secured financing options to its customers to finance their precious metals purchases including consignments and other structured inventory finance products. Furthermore, our customers may enter into agreements whereby the customer agrees to repurchase our precious metals at the prevailing spot price for delivery of the product at a specific point in time in the future; interest income is earned from the contract date until the material is delivered and paid for in full.

We may also raise funds through the public or private offering of equity or debt securities, although there is no assurance that we will be able to do so at the times and in the amounts required.

We continually review our overall credit and capital needs to ensure that our capital base, both stockholders’ equity and available credit facilities, can appropriately support our anticipated financing needs. The Company also continually monitors its current and forecasted cash requirements and draws upon and pays down its lines of credit so as to minimize interest expense. See Note 15 to the Company’s condensed consolidated financial statements.

Lines of Credit

 

in thousands
		March 31, 2024				June 30, 2023				Change
Lines of credit - short term		$	—			$	235,000			$	(235,000	)
Lines of credit - long-term			290,000				—				290,000
		$	290,000			$	235,000			$	55,000

Effective December 21, 2021, A-Mark entered into a committed borrowing facility (the "Trading Credit Facility") with CIBC Bank USA, as agent and joint lead arranger, and a syndicate of banks. As of March 31, 2024, the Trading Credit Facility provided the Company with access up to $350.0 million and has a maturity date of September 20, 2025. The Trading Credit Facility was reclassified to long-term during the three months ended September 30, 2023 due to the elimination of provisions whereby lenders under certain conditions could require repayment of all obligations outstanding under the Trading Credit Facility within 10 days on demand. (See Note 15.)

A-Mark routinely uses funds drawn under the Trading Credit Facility to purchase metals from its suppliers and for other operating cash flow purposes. Our CFC subsidiary also uses the funds drawn under the Trading Credit Facility to finance certain of its lending activities.

Notes Payable

 

in thousands
		March 31, 2024				June 30, 2023				Change
Notes payable — short-term		$	—			$	95,308			$	(95,308	)
Notes payable — long-term			3,994				—				3,994
		$	3,994			$	95,308			$	(91,314	)

 

In September 2018, AMCF, a wholly-owned subsidiary of CFC, completed an issuance of Secured Senior Term Notes, Series 2018-1, Class A in the aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million (collectively, the "AMCF Notes".) The AMCF Notes were repaid in full in December 2023.

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In April 2021, CCP entered into a loan agreement ("CCP Note") with CFC, which provides CFC with up to $4.0 million to fund commercial loans secured by graded sports cards and sports memorabilia to its borrowers. All loans to be funded using the proceeds from the CCP Note are subject to CCP’s prior written approval. The term of the CCP Note expires on April 1, 2026 and may be extended by mutual agreement. As of March 31, 2024 and June 30, 2023 the outstanding principal balance of the CCP Note was $4.0 million and $0.5 million. See Note 14 to the Company’s condensed consolidated financial statements.

Liabilities on Borrowed Metals

 

in thousands
		March 31, 2024				June 30, 2023				Change
Liabilities on borrowed metals		$	26,167			$	21,642			$	4,525

 

We borrow precious metals from our suppliers and customers under short-term arrangements using other precious metal from our inventory or precious metals held under financing arrangements as collateral. Amounts under these arrangements require repayment either in the form of precious metals or cash. Liabilities also arise from unallocated metal positions held by customers in our inventory. Typically, these positions are due on demand, in a specified physical form, based on the total ounces of metal held in the position.

Product Financing Arrangements

 

in thousands
		March 31, 2024				June 30, 2023				Change
Product financing arrangements		$	510,237			$	335,831			$	174,406

 

The Company has agreements with financial institutions and other third parties that allow the Company to transfer its gold and silver inventory to the third-party at an agreed-upon price based on the spot price, which provides alternative sources of liquidity. During the term of the agreement both parties intend for inventory to be returned at an agreed-upon price based on the spot price on the repurchase date. The third parties charge monthly interest as a percentage of the market value of the outstanding obligation; such monthly charges are classified as interest expense. These transactions do not qualify as sales and therefore are accounted for as financing arrangements and reflected in the Company’s condensed consolidated balance sheets as product financing arrangements. The obligation is stated at the amount required to repurchase the outstanding inventory. Both the product financing arrangements and the underlying inventory (which is entirely restricted) are carried at fair value, with changes in fair value included as a component of cost of sales.

Secured Loans Receivable

 

in thousands
		March 31, 2024				June 30, 2023				Change
Secured loans receivable		$	115,645			$	100,620			$	15,025

 

CFC is a California licensed finance lender that makes and acquires commercial loans secured by bullion and numismatic coins, and graded sports cards and sports memorabilia that affords our customers a convenient means of financing their inventory or collections. See Note 5 to the Company’s condensed consolidated financial statements. AMCF also purchased and held secured loans from CFC to meet its collateral requirements related to the AMCF Notes. See Note 15 to Company’s condensed consolidated financial statements. Most of the Company's secured loans are short-term in nature. The renewal of these secured loans is at the discretion of the Company and, as such, provides us with some flexibility in regard to our capital deployment strategies.

Dividends

The Company’s board of directors has adopted a regular quarterly cash dividend policy of $0.20 per common share ($0.80 per share on an annual basis). The declaration of regular cash dividends in the future is subject to the determination each quarter by the board of directors. Below is a summary of dividends paid to stockholders in the nine months ended March 31, 2024.

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See Note 20 to the Company's condensed consolidated financial statements for more information regarding our dividends.

Cash Flows

The majority of the Company’s trading activities involve two-day value trades under which payment is received in advance of delivery or product is received in advance of payment. The combination of sales volume, inventory turnover, and precious metals price volatility can cause material changes in the sources of cash used in or provided by operating activities on a daily basis. The Company manages these variances through its liquidity forecasts and counterparty limits by maintaining a liquidity reserve to meet the Company’s cash needs. The Company uses various short-term financial instruments to manage the cycle of our trading activities from customer purchase order to cash collections and product delivery, which can cause material changes in the amount of cash used in or provided by financing activities on a daily basis.

The following summarizes components of our consolidated statements of cash flows (in thousands):

 

Nine Months Ended		March 31, 2024				March 31, 2023				Change
Net cash (used in) provided by operating activities		$	(21,916	)		$	43,249			$	(65,165	)
Net cash (used in) provided by investing activities		$	(58,508	)		$	15,092			$	(73,600	)
Net cash provided by (used in) financing activities		$	76,273			$	(18,023	)		$	94,296

 

For the periods presented, our principal capital requirements have been to fund (i) working capital and (ii) financing activity. Our working capital requirements fluctuated with market conditions, the availability of precious metals, and the volatility of precious metals commodity pricing.

Net Cash Flows From Operating Activities

Operating activities used $21.9 million and provided $43.2 million in cash for the nine months ended March 31, 2024 and 2023, respectively, representing a $65.2 million change compared to the nine months ended March 31, 2023. The period over period change was primarily due to net changes in working capital, which includes deferred revenue and other advances, accounts payable and other payables, precious metals held under financing arrangements, receivables, net, liabilities on borrowed metals, and inventories, as well as a decrease in net income adjusted for noncash items.

Net Cash Flows From Investing Activities

Investing activities used $58.5 million and provided $15.1 million in cash for the nine months ended March 31, 2024 and 2023, respectively, representing a $73.6 million change compared to the nine months ended March 31, 2023. This period over period change was primarily due to (i) higher outflows of $38.3 million associated with the net originations of secured loans in the current period and (ii) $32.9 million of net cash paid to acquire LPM in February 2024, (iii) an increase in purchases of intangible assets of $4.0 million, and (iv) a $1.3 million increase in capital expenditures for property, plant and equipment, partially offset by (v) a decrease in purchases of long-term investments of $3.4 million.

Net Cash Flows From Financing Activities

Financing activities provided $76.3 million and used $18.0 million in cash for the nine months ended March 31, 2024 and 2023, respectively, representing a $94.3 million change compared to the nine months ended March 31, 2023. This period over period change was primarily due to (i) an increase in cash provided of $165.0 million related to our product financing arrangements, (ii) an increase in cash provided from our net borrowings and repayments of $40.0 million under our Trading Credit Facility, (iii) an increase of $1.7 million on net borrowings on related party notes, (iv) an increase in cash provided of $1.1 million related to the exercise and taxes related to share-based awards, and (v) a $1.0 million decrease in distributions paid to PMPP's noncontrolling interest holder. These increases in cash provided were partially offset by (i) the $95.0 million repayment of our AMCF Notes in December 2023, (ii) an increase of $12.5 million cash used to repurchase of our common stock under our share repurchase program, (iii) an increase in cash paid for dividends of $4.5 million, and (iv) an increase in debt issuance costs paid in the current year of $2.5 million primarily related to our Trading Credit Facility.

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Capital Resources

We believe that our current cash availability under the Trading Credit Facility, product financing arrangements, financing derived from borrowed metals and the cash we anticipate generating from operating activities will provide us with sufficient liquidity to satisfy our working capital needs, capital expenditures, investment requirements, and commitments through at least the next twelve months.

CONTRACTUAL OBLIGATIONS, CONTINGENT LIABILITIES AND COMMITMENTS

Counterparty Risk

We face counterparty risks in our Wholesale Sales and Ancillary Services segment. We manage these risks by setting credit and position risk limits with our trading counterparties, including gross position limits for counterparties engaged in sales and purchase transactions and inventory consignment transactions with us, as well as collateral limits for different types of sale and purchase transactions that counterparties may engage in from time to time.

Commodities Risk and Derivatives

We use a variety of strategies to manage our risk including fluctuations in commodity prices for precious metals. Our inventory consists of, and our trading activities involve, precious metals and precious metal products, for which prices are linked to the corresponding precious metal commodity prices. The Company's precious metals inventory is subject to fluctuations in market value, resulting from changes in the underlying commodity prices. Inventory purchased or borrowed by us is subject to price changes. Inventory borrowed is a natural hedge, since changes in value of the metal held are offset by the obligation to return the metal to the supplier or deliver metals to the customer.

Open sale and purchase commitments in our trading activities are subject to changes in value between the date the purchase or sale price is fixed (the trade date) and the date the metal is received or delivered (the settlement date). We seek to minimize the effect of price changes of the underlying commodity through the use of forward and futures contracts. Our open sale and purchase commitments generally settle within 2 business days, and for those commitments that do not have stated settlement dates, we have the right to settle the positions upon demand.

Our policy is to substantially hedge our inventory position, net of open sale and purchase commitments that are subject to price risk. We regularly enter into precious metals commodity forward and futures contracts with financial institutions to hedge against this risk. We use futures contracts, which typically settle within 30 days, for our shorter-term hedge positions, and forward contracts, which may remain open for up to six months, for our longer-term hedge positions. We have access to all of the precious metals markets, allowing us to place hedges. We also maintain relationships with major market makers in every major precious metals dealing center.

The Company enters into these derivative transactions solely for the purpose of hedging our inventory holding risk, and not for speculative market purposes. Due to the nature of our hedging strategy, we are not using hedge accounting as defined under Derivatives and Hedging Topic 815 of the ASC ("ASC 815"). Unrealized gains or losses resulting from our forward and futures contracts are reported as cost of sales with the related amounts due from or to counterparties reflected as derivative assets or liabilities. The Company adjusts the derivatives to fair value on a daily basis until the transactions are settled. When these contracts are net settled, the unrealized gains and losses are reversed and the realized gains and losses for forward contracts are recorded in revenue and cost of sales and the net realized gains and losses for futures are recorded in cost of sales.

The Company’s net gains and losses on derivative instruments totaled losses of $18.7 million and gains of $49.5 million for the three months ended March 31, 2024 and 2023, respectively, and losses of $86.5 million and gains of $4.1 million, for the nine months ended March 31, 2024 and 2023, respectively. These were substantially offset by the changes in fair market value of the underlying precious metals inventory and open sale and purchase commitments, which is also recorded in cost of sales in the condensed consolidated statements of income.

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The purpose of the Company's hedging policy is to substantially match the change in the value of the derivative financial instrument to the change in the value of the underlying hedged item. The following table summarizes the results of our hedging activities, showing the precious metal commodity inventory position, net of open sale and purchase commitments, which is subject to price risk, compared to change in the value of the derivative instruments (in thousands):

		March 31, 2024				June 30, 2023
Inventories		$	1,089,635			$	981,643
Precious metals held under financing arrangements			12,772				25,530
			1,102,407				1,007,173
Less unhedgeable inventories:
Commemorative coin inventory, held at lower of cost or net realizable value			(3,727	)			(948	)
Premium on metals position			(36,128	)			(29,358	)
Precious metal value not hedged			(39,855	)			(30,306	)
Commitments at market:
Open inventory purchase commitments			750,149				921,108
Open inventory sales commitments			(356,489	)			(587,392	)
Margin sale commitments			(19,838	)			(17,682	)
In-transit inventory no longer subject to market risk			(10,401	)			(5,505	)
Unhedgeable premiums on open commitment positions			11,863				11,224
Borrowed precious metals			(26,167	)			(21,642	)
Product financing arrangements			(510,237	)			(335,831	)
Advances on industrial metals			596				698
			(160,524	)			(35,022	)
Precious metal subject to price risk			902,028				941,845
Precious metal subject to derivative financial instruments:
Precious metals forward contracts at market values			754,420				767,767
Precious metals futures contracts at market values			149,799				170,466
Total market value of derivative financial instruments			904,219				938,233
Net precious metals subject to commodity price risk		$	(2,191	)		$	3,612

We are exposed to the risk of default of the counterparties to our derivative contracts. Significant judgment is applied by us when evaluating the fair value implications. We regularly review the creditworthiness of our major counterparties and monitor our exposure to concentrations. As of March 31, 2024, we believe our risk of counterparty default is mitigated based on our evaluation of the creditworthiness of our major counterparties, the strong financial condition of our counterparties, and the short-term duration of these arrangements.

We had the following outstanding sale and purchase commitments and open forward and futures contracts, which are normal and recurring, in nature (in thousands):

 

		March 31, 2024				June 30, 2023
Purchase commitments		$	750,149			$	921,108
Sales commitments		$	(356,489	)		$	(587,392	)
Margin sales commitments		$	(19,838	)		$	(17,682	)
Open forward contracts		$	754,420			$	767,767
Open futures contracts		$	149,799			$	170,466
Foreign exchange forward contracts		$	7,327			$	7,101

The notional amounts of the commodity forward and futures contracts and the open sales and purchase orders, as shown in the table above, are not reflected at the notional amounts in the condensed consolidated balance sheets. The Company records commodity forward and futures contracts at the fair value, which is the difference between the market price of the underlying metal or contract measured on the reporting date and the trade amount measured on the date the contract was transacted. The fair value of the open derivative contracts is shown as a component of derivative assets or derivative liabilities in the accompanying condensed consolidated balance sheets.

The Company enters into the derivative forward and future transactions solely for the purpose of hedging its inventory holding risk, and not for speculative market purposes. The Company’s gains and losses on derivative instruments are substantially offset by the changes in fair market value of the underlying precious metals inventory position, including our open sale and purchase commitments. The Company records the derivatives at the trade date, and any corresponding unrealized gains or losses are shown as a component of cost of sales in the condensed consolidated statements of income. We adjust the carrying value of the derivatives to fair value on a daily basis until the transactions are physically settled. See Note 12 to the Company’s condensed consolidated financial statements.

Commitments and Contingencies

Refer to Note 16 to the Company’s condensed consolidated financial statements for information relating Company's commitments and contingencies.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). In connection with the preparation of our financial statements, we are required to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that we believe to be relevant at the time the Company’s condensed consolidated financial statements are prepared. On a regular basis, we review our accounting policies, assumptions, estimates and judgments to ensure that the Company’s condensed consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could materially differ from our estimates.

Our significant accounting policies are discussed in Note 2 to the Company’s condensed consolidated financial statements. We believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. We have reviewed these critical accounting estimates and related disclosures with the Audit Committee of our board of directors.

Revenue Recognition

The Company accounts for its metals and sales contracts using settlement date accounting. Pursuant to such accounting, the Company recognizes the sale or purchase of the metals at settlement date. During the period between the trade and settlement dates, the Company enters into forward contracts that meet the definition of a derivative in accordance with the Derivatives and Hedging Topic 815 of the ASC (“ASC 815”). The Company records the derivative at the trade date with any corresponding unrealized gain (loss), shown as component of cost of sales in the condensed consolidated statements of income. The Company adjusts the derivatives to fair value on a daily basis until the transactions are settled. When these contracts are settled, the unrealized gains and losses are reversed, and revenue is recognized for contracts that are physically settled. For contracts that are net settled, the realized gains and losses are recorded in cost of sales, with the exception of forward contracts, where their associated realized gains and losses are recorded in revenue and cost of sales, respectively.

Also, the Company recognizes its storage, logistics, licensing, advertising revenue, and other services revenues in accordance with ASC 606, Revenue from Contracts with Customers, which follows five basic steps to determine whether revenue can be recognized: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Inventories

The Company's inventory, which primarily consists of bullion and bullion coins, is acquired and initially recorded at cost and then marked to fair market value. The fair market value of the bullion and bullion coins comprises two components: (i) published market values attributable to the cost of the raw precious metal, and (ii) the premium paid at acquisition of the metal, which is attributable to the incremental value of the product in its finished goods form. The market value attributable solely to such premium is readily determinable by reference to multiple sources. The precious metal component of the inventory may be hedged through the use of precious metal commodity positions, while the premium component of our inventory is not a commodity that may be hedged.

The Company’s inventory, except for certain lower of cost or net realizable value basis products (as described below), is subsequently recorded at their fair market values. The daily changes in the fair market value of our inventory are offset by daily changes in the fair market value of hedging derivatives that are taken with respect to our inventory positions; both the change in the fair market value of the inventory and the change in the fair market value of these derivative instruments are recorded in cost of sales in the condensed consolidated statements of income.

While the premium component included in inventory is marked-to-market, our commemorative coin inventory, including its premium component, is held at the lower of cost or net realizable value, because the value of commemorative coins is influenced more by supply and demand determinants than on the underlying spot price of the precious metal content of the commemorative coins. Unlike our bullion coins, the value of commemorative coins is not subject to the same level of volatility as bullion coins because our commemorative coins typically carry a substantially higher premium over the spot metal price than bullion coins. Additionally, neither the commemorative coin inventory nor the premium component of our inventory is hedged.

Inventory includes amounts borrowed from suppliers and customers arising from various arrangements including unallocated metal positions held by customers in the Company’s inventory, amounts due to suppliers for the use of consigned inventory, metals held by suppliers as collateral on advanced pool metals, as well as shortages in unallocated metal positions held by the Company in the supplier’s inventory. Unallocated or pool metal represents an unsegregated inventory position that is due on demand, in a specified physical form, based on the total ounces of metal held in the position. Amounts under these arrangements require delivery either in the form of precious metals or cash. The Company mitigates market risk of its physical inventory and open commitments through commodity hedge transactions. See Note 12 to the Company’s condensed consolidated financial statements.

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The Company enters into product financing agreements for the transfer and subsequent option or obligation to reacquire its gold and silver inventory at an agreed-upon price based on the spot price with a third-party finance company. This inventory is restricted and is held at a custodial storage facility in exchange for a financing fee, charged by the third-party finance company. During the term of the financing agreement, the third-party company holds the inventory as collateral, and both parties intend for the inventory to be returned to the Company at an agreed-upon price based on the spot price on the repurchase date. The third-party charges a monthly fee as percentage of the market value of the outstanding obligation; such monthly charge is classified as interest expense. These transactions do not qualify as sales and have been accounted for as financing arrangements in accordance with ASC 470-40 Product Financing Arrangements, and are reflected in the Company’s condensed consolidated balance sheets as product financing arrangements. The obligation is stated at the amount required to repurchase the outstanding inventory. Both the product financing and the underlying inventory (which is restricted) are carried at fair value, with changes in fair value included in cost of sales in the Company’s condensed consolidated statements of income.

The Company periodically loans metals to customers on a short-term consignment basis. Such inventory is removed at the time the customer elects to price and purchase the metals, and the Company records a corresponding sale and receivable.

The Company enters into financing arrangements with certain customers under which A-Mark purchases precious metals products that are subject to repurchase by the customer at the fair value of the product on the repurchase date. The Company or the counterparty may typically terminate any such arrangement with 14 days' notice. Upon termination the customer’s rights to repurchase any remaining inventory is forfeited.

Business Combinations

The accounting for a business combination requires tangible and intangible assets acquired and liabilities assumed to be recorded at estimated fair value. We value intangible assets at their estimated fair values at the acquisition date based upon assumptions related to the future cash flows and discount rates utilizing the then currently available information, and in some cases, valuation results from independent valuation specialists. The use of a discounted cash flow analysis requires significant judgment to estimate the future cash flows derived from the asset and the expected period of time over which those cash flows will occur and to determine an appropriate discount rate.

We make certain judgments and estimates when determining the fair value of assets acquired and liabilities assumed in a business combination. Those judgments and estimates also include determining the lives assigned to acquired intangibles, the resulting amortization period, what indicators will trigger an impairment, whether those indicators are other than temporary, what economic or competitive factors affect valuation, valuation methodology, and key assumptions including discount rates and cash flow estimates. In circumstances where an acquisition involves a contingent consideration arrangement, we recognize a liability equal to the fair value of the expected contingent payments as of the acquisition date. We remeasure this liability each reporting period, with the resulting changes recorded in earnings. The assumptions used in estimating fair value of contingent consideration liabilities require significant judgment; the use of different assumptions and judgments could result in a materially different estimate of fair value which may have a material impact on our results from operations and financial position.

Goodwill and Other Purchased Intangible Assets

We evaluate goodwill and other indefinite-lived intangibles for impairment annually in the fourth quarter of the fiscal year (or more frequently if indicators of potential impairment exist) in accordance with the Intangibles - Goodwill and Other Topic 350 of the ASC (“ASC 350”). Other finite-lived intangible assets are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be recoverable. We may first qualitatively assess whether relevant events and circumstances make it more likely than not that the fair value of the reporting unit's goodwill is less than its carrying value. If, based on this qualitative assessment, we determine that goodwill is more likely than not to be impaired, a quantitative impairment test is performed. This step requires us to determine the fair value of the business and compare the calculated fair value of a reporting unit with its carrying amount, including goodwill. If through this quantitative analysis the Company determines the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is considered not to be impaired. If the Company concludes that the fair value of the reporting unit is less than its carrying value, a goodwill impairment will be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

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The Company also performs impairment reviews on its indefinite-lived intangible assets (i.e., trade names, trademarks and domain names). In assessing its indefinite-lived intangible assets for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If the Company determines that it is not more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the Company is not required to perform any additional tests in assessing the asset for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine if the fair value of an indefinite-lived intangible asset is less than its carrying value. If through a quantitative analysis the Company determines the fair value of an indefinite-lived intangible asset exceeds its carrying amount, the indefinite-lived intangible asset is considered not to be impaired. If the Company concludes that the fair value of an indefinite-lived intangible asset is less than its carrying value, an impairment will be recognized for the amount by which the carrying amount exceeds the indefinite-lived intangible asset’s fair value.

Income Taxes

As part of the process of preparing the Company’s condensed consolidated financial statements, the Company is required to estimate its provision for income taxes in each of the tax jurisdictions in which it conducts business, in accordance with Income Taxes Topic 740 of the ASC ("ASC 740"). The Company computes its annual tax rate based on the statutory tax rates and tax planning opportunities available to it in the various jurisdictions in which it earns income. Significant judgment is required in determining the Company's annual tax rate and in evaluating uncertainty in its tax positions. The Company has adopted the provisions of ASC 740-10, which clarifies the accounting for uncertain tax positions. ASC 740-10 requires that the Company recognizes the impact of a tax position in the financial statements if the position is not more likely than not to be sustained upon examination based on the technical merits of the position. The Company recognizes interest and penalties related to certain uncertain tax positions as a component of income tax expense and the accrued interest and penalties are included in deferred and income taxes payable in the Company’s condensed consolidated balance sheets. See Note 13 to the Company’s condensed consolidated financial statements for more information on the Company’s accounting for income taxes.

Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The factors used to assess the likelihood of realization include the Company's forecast of the reversal of temporary differences, future taxable income, and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company's effective tax rate on future earnings. Based on our assessment, it appears more likely than not that all of the net deferred tax assets will be realized through future taxable income.

RECENT ACCOUNTING PRONOUNCEMENTS

For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial position or results of operations, see Note 2 to the Company’s condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Market risk is the risk that changes in market conditions may adversely impact the value of assets or liabilities, or otherwise negatively impact earnings. The Company is exposed to market risk related to changes in commodity prices.

The Company's precious metals inventory is subject to fluctuations in market value, resulting from changes in the underlying commodity prices. Inventory purchased or borrowed by the Company is subject to price changes. Open sale and purchase commitments are subject to changes in value between the date the purchase or sale price is fixed (the trade date) and the date the metal is received or delivered (the settlement date).

To manage the volatility related to this exposure, the Company enters into precious metals commodity forward and futures contracts. Our policy is to substantially hedge our inventory position, net of open sale and purchase commitments that are subject to price risk. We similarly seek to minimize the effect of price changes on our open sale and purchase commitments through hedging activity. Inventory borrowed is considered a natural hedge, since changes in value of the metal held are offset by the obligation to return the metal to the supplier.

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We generally use futures contracts for our shorter-term hedge positions, and forward contracts, which may remain open for up to six months, for our longer-term hedge positions. We have access to all of the precious metals markets, allowing us to place hedges. We also maintain relationships with major market makers in every major precious metals dealing center. We enter into these derivative contracts for the purpose of hedging substantially all of our market exposure to precious metals prices, and not for speculative purposes. As a result of these hedging strategies, we do not believe we have a material exposure to market risk.

The Company is exposed to the risk of failure of the counterparties to its derivative contracts. The Company regularly reviews the creditworthiness of its major counterparties and monitors its exposure to concentrations. The Company believes its risk of counterparty default is mitigated as a result of such evaluation and the short-term duration of these arrangements.

See Note 12 to the Company's condensed consolidated financial statements, “Derivative Instruments and Hedging Transactions”.

Foreign Exchange Risk

Foreign exchange risk represents exposures to changes in the values of current holdings and future cash flows denominated in currencies other than the U.S. dollar. The types of instruments exposed to this risk include foreign currency denominated receivables and payables and future cash flows in foreign currencies arising from foreign exchange transactions.

To manage the effect of foreign currency exchange fluctuations on its sale and purchase transactions, the Company utilizes foreign currency forward contracts with maturities of generally less than one week. Because of these hedging policies, we do not believe our exposure to foreign exchange risk is material.

See Note 12 to the Company’s condensed consolidated financial statements, “Derivative Instruments and Hedging Transactions—Foreign Currency Exchange Rate Management.”

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our product financing arrangements and Trading Credit Facility. We are subject to fluctuations in interest rates based on the variable interest terms of these arrangements, and we do not utilize derivative contracts to hedge the interest rate fluctuation. See Note 15 to the Company's condensed consolidated financial statements, "Financing Agreements".

We manage the interest rate risks related to our interest income generating activities by increasing our secured loan interest rates and finance product pricing in response to rising interest rates. While our weighted-average effective interest rates on these products increased during the year, the rate increases only partially mitigated the effect of higher interest rates related to our product financing arrangements and Trading Credit Facility. We do not believe our exposure to interest rate risk is material.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (our "Certifying Officers"), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During our most recent fiscal quarter, there has not been any change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are from time to time involved in legal proceedings, claims, or investigations that are incidental to the conduct of our business.

Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including our assessment of the merits of the particular claim, we do not expect that these legal proceedings or claims will have any material adverse impact on our future consolidated financial position, results of operations, or cash flows.

ITEM 1A. RISK FACTORS

Risks Relating to Market Trends and Global Events

The demand for our products and our profitability ultimately depends on preferences and perceptions regarding the desirability of owning precious metals, but those preferences and perceptions are subject to change.

While the Company operates at both the wholesale and direct-to-consumer levels, the demand for our products is dependent upon the perceptions and preferences in the global market regarding the ownership of precious metals and numismatics. These perceptions and preferences depend on a variety of factors, including world events (as discussed more fully below), business and economic conditions, inflationary and other currency related trends and alternative investment opportunities. All such factors may change over time and as a consequence the results of our operations, profitability and stock price may vary over both the short and the long term.

In recent times, our profitability rose to historically unprecedented levels, but may in the future revert to more normalized levels.

Global and macroeconomic events have had an overall positive effect on the demand for our products and ancillary services, the margins that we are able to realize on our products and services and our overall profitability. Our stock price has responded favorably to these unprecedented circumstances as well. Although our profits and the price of our stock have retreated from their all time highs, our profitability and stock price remain well above their pre-pandemic levels. While it is not possible to predict with any accuracy future market trends, our business may revert at some point to levels more closely in line with industry activity prior to such events, particularly in the direct-to-consumer business of the Company. If that were to occur our profitability and the price of our stock could return to prior levels as well.

We regularly seek to innovate and to anticipate market changes, but there is no assurance that we will be successful in doing so.

We are alert to the special sensitivity of our business to economic, social and political trends and events, and we attempt to project their effects on our business over the long term. For example, we have placed increasing emphasis on our direct-to-consumer business, in anticipation that the economic uncertainties, market volatilities and global challenges that we face will continue to make investment in precious metals and numismatics more attractive to individual consumers. There can be no assurance, however, that we will be correct in our assessments of market trends or evolving business and consumer preferences, or that, even if our judgments are correct, our response to projected trends and preferences will be timely or effective. Moreover, because of the sensitivity of our business to macro-economic, social and political circumstances, there may be no effective strategy to insulate us from the adverse effects that these circumstances could have on our business.

Risks Relating to our Operations

Our business is heavily dependent on our credit facility.

Our business depends substantially on our ability to obtain financing for our operations. On December 21, 2021, we entered into a committed facility provided by a syndicate of financial institutions (the “Trading Credit Facility”), with a total current revolving commitment of up to $350.0 million and with a termination date of September 20, 2025. The Trading Credit Facility provides the Company with the liquidity to buy and sell billions of dollars of precious metals annually. A-Mark routinely uses funds drawn under the Trading Credit Facility to purchase metals from its suppliers and for operating cash flow purposes. Our CFC subsidiary also uses the funds drawn under the Trading Credit Facility to finance certain of its lending activities.

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The Trading Credit Facility requires us to comply with customary affirmative and negative covenants, and with a variety of financial covenants, including a minimum working capital requirement; a fixed charge coverage ratio; a ratio of total recourse debt to consolidated tangible net worth; and limitations on the amount of ownership-based financings (as defined). Owing to the cyclicality of our business, we sometimes are required to request limited waivers of compliance with certain financial covenants under the Trading Credit Facility. Our lenders, many of whom have been lenders to the Company for an extended period of time, understand our business and have provided such waivers in the past, but there can be no assurance that they will do so in the future. Upon the occurrence of an event of default under the Trading Credit Facility that was not cured or waived pursuant to the terms of the Trading Credit Facility, the lenders under the Trading Credit Facility could elect to declare all amounts outstanding under the Trading Credit Facility to be due and payable immediately.

If we are unable to access funds under the Trading Credit Facility, we may be limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.

We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments, including the Trading Credit Facility, upon acceleration or at maturity, or that we would be able to refinance or restructure the payments under the Trading Credit Facility. Our failure to renew or replace the Trading Credit Facility under such circumstances would reduce the financing available to us and could limit our ability to conduct our business, including certain lending activity of our CFC subsidiary. There can be no assurance that we could procure replacement financing on commercially acceptable terms on a timely basis, or at all. We have pledged a significant portion of our assets as collateral under the Trading Credit Facility, and if we were unable to repay the amounts outstanding thereunder, the administrative agent under the Trading Credit Facility could proceed against the collateral securing such indebtedness.

We are subject to fluctuations in interest rates based on the variable interest terms of the Trading Credit Facility, and we may not be able to pass along to our customers and borrowers some or any part of an increase in the interest that we are required to pay under the Trading Credit Facility.

Loans under our credit facility may bear interest based on SOFR, but experience with SOFR based loans is limited.

Revolving loans under the Trading Credit Facility are at our option either Based Rate Loans that bear interest at a base rate plus a prescribed margin, or SOFR Loans that bear interest at rates selected by us based on the Secured Overnight Financing Rate published by the Federal Reserve Bank of New York (SOFR) plus prescribed margins. The use of SOFR based rates replaced rates based on the London interbank offered rate (LIBOR), and reflects the cessation of the publication of LIBOR rates by regulators in the United Kingdom and the discontinuation of the use of LIBOR in the financial markets. The use of SOFR based rates may result in interest rates and/or payments that are higher or lower than the rates and payments that we experienced under our prior Trading Credit Facility, where interest rates were based on LIBOR. Also, the use of SOFR based rates is relatively new, and there could be unanticipated difficulties or disruptions with the calculation and publication of SOFR based rates. In particular, if the agent under the Trading Credit Facility determines that SOFR Rates cannot be determined or the agent or the lenders determine that SOFR based rates do not adequately reflect the cost of funding the SOFR Loans, outstanding SOFR Loans will be converted into Base Rate Loans. This could result in increased borrowing costs for the Company.

We could suffer losses with our financing operations.

We engage in a variety of financing activities with our customers:

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Our ability to minimize losses on the credit that we extend to our customers depends on a variety of factors, including:

Liquidity constraints may limit our ability to grow our business.

We will require adequate sources of liquidity to fund both our existing business and our strategy for expansion, evidenced by our acquisition of JMB and other acquisition activity. Currently, our main sources of liquidity are the cash that we generate from operations, and our borrowing availability under the Trading Credit Facility. There can be no assurance that our sources of liquidity will be adequate to support the growth that we are hoping to achieve or that additional sources of financing for this purpose, in the form of additional debt or equity financing, will be available to us, on satisfactory terms or at all. Also, the Trading Credit Facility contains, and any future debt financing is likely to contain, various financial and other restrictive covenants. The need to comply with these covenants may limit our ability to implement our growth initiatives.

We may experience supply chain disruptions in our operations.

As a result of various macro-economic factors, including in recent times the COVID-19 pandemic, businesses in a variety of industries have experienced difficulty in obtaining the source materials required for their operations. We require coin and other bullion products, particularly products manufactured by government mints, for resale to our customers, and silver for the productions of bullion bars and rounds by our Silver Towne Mint. We have multiple sources for obtaining the bullion products which we resell to our customers, and our relationships with major refiners have to date provided us with an adequate source of material for our minting operations. We also maintain a supply of metal in case we experience a shortage of raw materials for our Silver Towne Mint. However, while we do not currently anticipate that our business will suffer as a consequence of problems in the national and global supply chains, we cannot assure you that this will continue to be the case. Our operations could be adversely impacted if we did not have an adequate source of supply for our Silver Towne Mint, particularly if we expand our minting operations to meet increased demand, or if supply chain disruptions significantly interfered with our sources of coin and bullion for resale. If significant supply chain constraints were to occur, we might be required to cut back on our minting operations or we might be unable to timely satisfy customer requirements for coin and bullion products. This could lead to a loss of sales and could adversely impact our reputation.

We are dependent on our key management personnel and our trading experts.

Our strategic vision and performance are dependent on Gregory Roberts, our Chief Executive Officer, other members of our senior management and certain other key employees. We have an employment agreement with Mr. Roberts which expires in June 2027. We also have employment agreements with Thor Gjerdrum, our President, and Brian Aquilino, our Chief Operating Officer, which expire in June 2025, and Robert Pacelli, Chief Executive Officer and President of JMB, which expires in June 2026.

These and other employees have expertise in the trading markets, e-commerce operations and digital marketing; have industry-wide reputations; and perform critical functions for our business. We cannot offer assurance that we will be able to negotiate acceptable terms for the renewal of the employment agreements or otherwise retain our key employees. Also, there is significant competition for skilled precious metals traders and other industry professionals. The loss of our current key officers and employees, without the ability to replace them, would have a materially adverse effect on our business.

We rely extensively on computer systems to execute trades and process transactions, and we could suffer substantial damages if the operation of these systems were interrupted.

We rely on our computer and communications hardware and software systems to execute a large volume of trading transactions each year. Our dependence on computer and communications technology increased with the acquisition of JMB, whose sales are conducted exclusively through the internet. It is therefore critical that we maintain uninterrupted operation of these systems, and we have invested considerable resources to protect our systems from physical compromise and security breaches and to maintain backup and redundancy. Nevertheless, our systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, including breaches of our transaction processing or other systems, catastrophic events such as fires, tornadoes and hurricanes, and usage errors by our employees. Breaches, damage or malfunctions affecting our systems may require significant investment for repair or replacement, and could interrupt our ability to provide quotations or trading services, or to conduct our e-commerce business.

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We are also subject to ransomware attacks, in which malicious actors seek to deprive us of access to our computer systems unless we pay them a fee, which could be substantial. If personal data were compromised, we could be subject to costly litigation or government fines. See also “Risk Factors of General Applicability—If our customer data were breached, we could suffer damages and loss of reputation;” and “—New rules have recently become effective that will require the Company to provide disclosures regarding cybersecurity management and events.”

Risks Related to World Events

Our business is influenced by political conditions and world events.

The precious metals business is especially subject to global political conditions and world events. Precious metals are viewed by some as a secure financial investment in times of political upheaval or unrest, particularly in developing economies, which may drive up pricing. The volatility of the commodity prices for precious metals is also likely to increase in politically uncertain times. Conversely, during periods of relative international calm precious metal volatility is likely to decrease, along with demand, and the prices of precious metals may retreat. Because our business is dependent on the volatility and pricing of precious metals, we are likely to be influenced by world events more than businesses in other economic sectors.

Russia is continuing to engage in its military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export controls, and could impose further sanctions and controls, against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations. The conflict has also created uncertainty regarding, and potential shortages of, grain and fossil fuel supplies in Europe and elsewhere. It is not possible to predict the broader consequences of this conflict, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy, and its impact on us. We could benefit from the resulting uncertainty and instability, as it may encourage investors to seek perceived safety in the ownership of precious metals. On the other hand, we have a marketing support operation in Austria and have significant business in Germany and other parts of Europe that could be materially and adversely affected by the continuing or expanded military activity in that region. Hamas' attack on Israel and Israel's response have the potential for further disruption of economic markets, particularly as hostilities expand to include other state and non-state actors. The Company has no operations in the Middle East at the current time. However, events there could result in political turmoil in Europe, which could directly affect our operations there, and could adversely affect the business that we conduct with customers in the Middle East and other parts of the world. Also, the turmoil in the Middle East could have global economic effects that are the same as or more severe than those of the war in the Ukraine, with similar consequences for our business. In particular, a depressing effect on the global economy as a consequence of the military action in Ukraine and the Middle East could dampen our business activity and reduce the demand for our products and services.

The Company experienced outsized growth in its revenues and operating profits following the onset of the COVID-19 pandemic, but there can be no assurance that this level of performance is sustainable.

The recent growth of the business of the Company generally, and the business of its JMB subsidiary in particular, may be attributed to the unprecedented uncertainties and volatility in the financial markets resulting from the COVID-19 pandemic, its effects on the economy and the related government responses. Other contemporary events and circumstances, including political polarization, macroeconomic uncertainty, volatility in the financial markets, military activity, and global instability, have also been contributing factors to the recent growth of the business of the Company. In this environment, consumers may have sought perceived financial safety in precious coins and metals.

There can be no assurance that the recent growth in the precious metals business will continue in future periods. Consumer perceptions with respect to precious coins and metals could shift, these commodities may no longer be viewed as secure investments and the demand for the Company’s products could substantially decline. Our business in the past has been subject to cyclical fluctuations, and we are beginning to experience to a degree a return to cyclicality in our more recent operating results. Slower precious metals markets with lower volatility and greater supply, as we have experienced recently, have had and could continue to have the effect of decreasing the volume of products sold and also adversely impact our product premiums, which are a key driver of our overall performance. A sustained decline in our revenues and earnings would have adverse effects on our operations and would likely cause our stock price to decline. Moreover, because of the nature of the current business and financial environment, particularly in regards to the precious metal industry, it is difficult to create with any acceptable measure of precision customary financial projections and forecasts for our business over the next several years. This could adversely affect our ability to engage in financial and operational planning for the future.

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We derive significant revenues from business outside the United States.

We derive a significant portion of our revenues from business outside the United States, including from customers in developing countries. Business operations outside the U.S. are subject to political, economic and other risks inherent in operating in foreign countries. These include risks of general applicability, such as the need to comply with multiple regulatory regimes; trade protection measures and import or export licensing requirements; and fluctuations in equity, revenues and profits due to changes in foreign currency exchange rates. Currently, we do not conduct substantial business with customers in developing countries. However, if our business in these areas of the world were to increase, we would also face risks that are particular to developing countries, including the difficulty of enforcing agreements, collecting receivables, protecting inventory and other assets through foreign legal systems, limitations on the repatriation of earnings, currency devaluation and manipulation of exchange rates, and high levels of inflation.

We try to manage these risks by monitoring current and anticipated political, economic, legal and regulatory developments in the countries outside the United States in which we operate or have customers and adjusting operations as appropriate, but there can be no assurance that the measures we adopt will be successful in protecting the Company’s business interests.

The Company’s recent acquisition of LPM, a precious metals business located in Hong Kong, reflects the Company’s efforts to increase its presence in Asia, particularly the Far East. There can be no assurance that the Company’s expansion efforts in the Far East will be successful. Moreover, there are particular regulatory and other challenges to the conduct of business in the Peoples Republic of China, and as a result certain foreign businesses have recently been decreasing their presence there. The Company may encounter similar challenges, which may impede the Company’s expansion efforts in the region.

The current inflationary and high interest rate environment may adversely affect our costs and expenses and the demand for our products.

The United States and other world economies are currently experiencing high interest rates and have recently experienced high levels of inflation, although this has eased in recent months. Certain investors, including customers of our Direct-to-Consumer segment, may regard precious metal products as a hedge against inflation and high interest rates, which could positively affect demand for our goods and services. However, inflation may also increase our expenses of operations, which because of the nature of our business we cannot generally pass along to our customers. Our Trading Credit Facility bears interest at a variable rate of interest, so that higher interest rates will also increase our cost of borrowing under that facility, and rising interest rates may also increase the costs under our product financing arrangements. We may be unable to compensate for these increases through higher interest income and other fees and charges received from our counterparties. Also, inflation, together with high interest rates, may reduce discretionary spending among consumers, thereby reducing product demand in the retail sector.

Risks Related to our Wholesale Sales & Ancillary Services Segment

Our business is dependent on a concentrated customer base.

One of A-Mark's key assets is the customer base of its Wholesale Sales & Ancillary Services segment. This customer base provides deep distribution of product and makes A-Mark a desirable trading partner for precious metals product manufacturers, including sovereign mints seeking to distribute precious metals coinage or large refiners seeking to sell large volumes of physical precious metals. In any given quarter, our sales in this segment may be derived from a small number of significant customers. If our relationships with these customers deteriorated, or if we were to lose these customers, our business could be materially adversely affected.

The loss of a government purchaser/distributorship arrangement could materially adversely affect our business.

A-Mark’s business is heavily dependent on its purchaser/distributorship arrangements with various governmental mints. Our ability to offer numismatic coins and bars to our customers on a competitive basis is based on the ability to purchase products directly from a government source. The arrangements with the governmental mints may be discontinued by them at any time. The loss of an authorized purchaser/distributor relationship, including with the U.S. Mint, could have a material adverse effect on our business.

We operate in a highly competitive industry.

The business of buying and selling precious metals is global and highly competitive. The Company competes with precious metals firms and banks throughout North America, Europe and elsewhere in the world, some of whom have greater financial and other resources, and greater name recognition, than the Company. We believe that, as a full-service firm devoted exclusively to precious metals trading, we offer pricing, product availability, execution, financing alternatives and storage options that are attractive to our customers and allow us to compete effectively. We also believe that our purchaser/distributorship arrangements with various governmental mints give us a competitive advantage in our coin distribution business. However, given the global reach of the precious metals business, the absence of intellectual property protections and the availability of numerous, evolving platforms for trading in precious metals, we cannot assure you that A-Mark will be able to continue to compete successfully or that future developments in the industry will not create additional competitive challenges.

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The Company is subject to risks relating to its AMST operations.

Our AMST subsidiary, which operates our Silver Towne Mint, depends on critical pieces of equipment which may be out of service occasionally for scheduled upgrades or maintenance or as a result of unanticipated failures or business interruptions. AMST’s facilities are subject to equipment failures and the risk of catastrophic loss due to unanticipated events such as fires, earthquakes, accidents or violent weather conditions. AMST has insurance to cover certain of the risks associated with equipment damage and resulting business interruption, but there are certain events that would not be covered by insurance, and there can be no assurance that insurance will continue to be available on acceptable terms. One such casualty event recently occurred as a result of a tornado, which although covered by insurance, temporarily interrupted operations at the mint.

AMST's ability to continue to expand the scope of its services and customer base depends in part on its ability to increase the size of its skilled labor force. In the past, the demand for skilled personnel has been high and the supply limited. The inability to employ or retain skilled technical personnel could adversely affect AMST’s operating results.

We have in the past engaged, and continue to engage, in transactions with Stack’s Bowers, an affiliate of the Company, which could be perceived as not being made at arms-length.

Stack’s-Bowers Numismatics, LLC ("Stack's Bowers"), which is primarily engaged in the business of auctions of high-value and rare coins and in coin retailing, is a wholly-owned subsidiary of Spectrum Group International, Inc. ("SGI"), our former parent and a related party. We have engaged in the past, and continue to engage, in transactions with Stack’s Bowers. These transactions include secured lending transactions in which Stack’s Bowers is the borrower, and other transactions involving the purchase and sale of rare coins, including with JMB. SGI and the Company have a common chief executive officer, and the chief executive officer and the general counsel of the Company are board members of SGI. In addition, a majority of the board of directors of the Company have an ownership interest in SGI that in the aggregate represents a controlling interest in SGI. All transactions between the Company and Stack’s Bowers are approved by our Audit Committee, and we believe that all such transactions are on terms no less favorable to the Company than would be obtained from an unaffiliated third-party. Nonetheless, these transactions could be perceived as being conflicted.

The materials held by A-Mark are subject to loss, damage, theft or restriction on access.

A-Mark has significant quantities of high-value precious metals at its Logistics facilities, at third-party depositories and in transit. There is a risk that gold and other precious metals held by A-Mark, whether on its own behalf or on behalf of its customers, could be lost, damaged or stolen. In addition, access to A-Mark’s precious metals could be restricted by natural events (such as an earthquake) or human actions (such as a terrorist attack). Although we maintain insurance on terms and conditions that we consider appropriate, we may not have adequate sources of recovery if our precious metals inventory is lost, damaged, stolen or destroyed, and recovery may be limited. Among other things, our insurance policies exclude coverage in the event of loss as a result of terrorist attacks or civil unrest.

Our Logistics depository is subject to authorization by our lenders.

Our lenders under our Trading Credit Facility have approved our Logistics facilities as an authorized depository. If that approval were to be withdrawn for any reason, we would no longer be able to keep inventory at that location, which would substantially limit our ability to conduct business from that facility.

Risks Related to our Direct-to Consumer Segment

Our Direct-to-Consumer businesses could be subject to accusations of improper sales practices.

Through our JMB and Goldline subsidiaries, the Company sells precious metals and numismatics directly to the retail investor community. JMB markets its products over the internet. Goldline markets its precious metal products on television, radio, and over the internet, and through customer service outreach. Prior to its acquisition by the Company, Goldline had been accused of improper sales practices, and was the subject of a state enforcement action that was subsequently settled. Other retailers of precious metal products have similarly been the subject of accusations regarding their sales practices, including claims of misrepresentation, excessive product markups, pressured sales tactics and product switching. The Company believes that the sales practices of its Goldline subsidiary conform to applicable legal and ethical standards, and that there is no material basis for claims against Goldline in this regard. Nevertheless, given the nature of the retail precious metals business, the possibility that investors in precious metals may lose a substantial portion of their investment as a result of adverse market trends and the vulnerability of certain retail precious metal investors to economic loss, there can be no assurance that claims will not be made regarding business practices of Goldline or JMB or that, if made, such claims will not attract the attention of governmental and private sector consumer advocates. Were this to occur, the Company could suffer adverse publicity, be subject to governmental enforcement actions or be forced to modify the sales and marketing practices of its direct-to-consumer business.

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Our Direct-to-Consumer businesses operate in a highly competitive environment.

JMB and Goldline face competition from other specialty online precious metal and coin sites, as well as from traditional precious metal retail brokers and coin stores. In addition, certain general online merchandisers such as eBay also offer collectible coins and bullion for sale, and other major online retailers, with financial and marketing resources, name recognition and a customer base that are far greater than those that are available to JMB and Goldline, may in the future enter this market. Competition is based upon the availability of coin and bullion product, price, delivery times, convenience and customer service. There can be no assurance that JMB and Goldline will be able to compete effectively with other retail sources and channels for precious coin and bullion, especially if the demand for these products were to contract from its current record high levels.

We intend to continue to pursue selective acquisitions and investments to complement our organic growth, which may not be successful.

As part of our Direct-to-Consumer operating strategy, we have sought, and in the future may seek, to supplement our organic growth through strategic acquisitions of and investments in other e-commerce retailers of coins and precious metals. We may not be able to identify suitable acquisition or investment candidates in the future. If we are unable to successfully execute on organic growth opportunities or complete acquisitions or investments in the future, or if we incur greater than anticipated costs to execute this strategy, our growth may be limited. To the extent that we grow through acquisitions or investments, we cannot ensure that we will be able to adequately or profitably manage this growth.

JMB’s search engine optimization strategies have provided it with an important competitive advantage, but this may not continue.

We believe that the internally developed search engine optimization (SEO) strategies of JMB provide its business with a competitive advantage in driving traffic to its sites over other e-commerce precious metal retailers and have been a significant factor in the growth of JMB. The challenges of efficient SEO programming are continually evolving, and other e-commerce retailers in the precious metal space are constantly working to improve their own SEO capabilities. If JMB does not continue to maintain its competitive edge in SEO technology, it could lose customers and market share to its competitors.

JMB relies upon paid and unpaid internet search engines to rank its product offerings and drive traffic to its website, and its website traffic may suffer if its rankings decline or its relationship with these services deteriorates.

JMB relies on paid and unpaid internet search engines to attract consumer interest in its product offerings. Search engine companies change their natural search engine algorithms periodically, and these changes may adversely affect JMB’s product offerings in paid and/or unpaid searches. JMB may also at times be subject to ranking penalties if the operators of search engines believe it is not in compliance with their guidelines. If JMB’s search engine rankings decline, and JMB is unable to timely regain its prior rankings, it may have to use more expensive marketing channels to sustain and grow its revenues, resulting in reduced profitability.

If JMB and Goldline do not respond effectively to technological and market changes, they will cease to be competitive with other channels that consumers may have for the purchase of precious coins and bullion.

To remain competitive, JMB and Goldline must continue to enhance and improve the responsiveness, functionality and features of their online operations. The internet and the electronic commerce industry are characterized by rapid technological change, changes in user and customer requirements and preferences, frequent new product and service introductions embodying new technologies, and the emergence of new industry standards and practices.

The evolving nature of the internet could render JMB’s existing technology and systems obsolete. Its continuing success will depend, in part, on its ability to:

With the growth of e-commerce, the pace of change in product offerings and consumer tastes is faster now than in years past. This accelerated pace of change increases uncertainty and places a greater burden on management to anticipate and respond to such changes. The increased pace of change also means that the window in which a technologically advanced or sophisticated product or service can achieve and maintain partner and consumer interest is shrinking and, to the extent JMB and Goldline fail to timely anticipate or respond to changes in their industry, the effects of such missteps may be amplified.

Future advances in technology may not be beneficial to, or compatible with, JMB’s or Goldline’s businesses. Furthermore, JMB and Goldline may be unsuccessful in using new technologies effectively or adapting their technology and systems to user requirements or emerging industry standards on a timely basis. Their ability to remain technologically competitive may require substantial expenditures and lead time. If JMB or Goldline is unable to adapt in a timely manner and at reasonable cost to changing market conditions or user requirements, it will cease to be competitive with other channels for the purchase of precious coins and bullion.

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If JMB fails to continuously improve its websites (on all relevant platforms, including mobile), it may not attract or retain customers.

JMB owns and operates seven separately branded websites targeting specific segments within the precious metals market: JMBullion.com, ProvidentMetals.com, Silver.com, BGASC.com, CyberMetals.com, BullionMax.com, and Gold.com. JMB also owns two websites, GoldPrice.org and SilverPrice.org, which publish data on precious metal and cryptocurrency pricing and generate leads for its other websites. JMB must continually update its websites (on all relevant platforms, including mobile) to improve and enhance its content, accessibility, convenience and ease of use. Failure to do so may create a perception that the websites of JMB’s competitors are easier to use and navigate or that they are better able to service customer needs for precious metal coins and bullion. If such a perception were to gain currency, traffic to JMB’s websites and its revenues would suffer.

Certain of JMB’s websites publish data concerning the precious metal and cryptocurrency markets obtained from third parties, which could be inaccurate.

JMB’s GoldPrice.org and SilverPrice.org publish data on precious metal and cryptocurrency pricing which is obtained from third parties. While we believe that the sources of the published data are reliable, the data is not independently verified by JMB or us. If the data that JMB receives and publishes were inaccurate, and were relied upon by consumers visiting these websites, JMB could be exposed to liability and may suffer damage to its reputation.

JMB and Goldline expect to profit on precious metals acquired from their customers, but that might not be the case.

Through the Direct-to-Consumer Purchase Program, JMB and Goldline (through its affiliate, PMPP) offer to purchase precious coins and bullion owned by their customers. We believe that this program encourages the purchase of coins and bullion as an investment because it assures customers that their investment in the products offered by JMB and Goldline will be liquid and can be monetized if the customers have a need for cash. JMB and Goldline offer to purchase coins and bullion from their customers at prices designed to reflect current market valuations, but also allows JMB and Goldline to profit on the resale of the products. There can be no assurance, however, that JMB or Goldline will in fact be able to resell product that they purchase at a price that will justify the cost of purchase. In a declining market for precious metal products, JMB and Goldline could be burdened with substantial amounts of purchased inventory that they are unable to resell at an economic price, or at all. The suspension or discontinuance of the Direct-to-Consumer Purchase Program because of adverse market conditions could impair the perception among JMB's and Goldline's customers that precious coin and bullion is a safe and attractive investment.

The Company’s joint venture, Precious Metals Purchasing Partners, LLC, is subject to risks which may affect our ability to successfully profit from the joint venture.

The Company owns a 50% joint venture interest in PMPP. PMPP purchases products primarily from end-user retail customers, which are then sold to the Company or affiliated companies.

The Company’s interest in PMPP is subject to the risks customarily associated with the conduct of joint ventures, including the risk of (i) failure to agree on strategic decisions requiring the approval of both parties, (ii) failure of the joint venture partner to meet its obligations, and (iii) disputes between the joint venturers or litigation regarding joint venture matters. Each of these risks could have a material adverse impact on the viability of PMPP, and its potential contributions to the Company’s future cash flows and earnings.

In addition, PMPP is subject to the risks that it will be unable to sell the product that it acquires at economic prices or at all, as described above with respect to the Company's overall Direct-to-Consumer Purchase Program.

Risks Related to our Secured Lending Segment

Our lending business depends on the ability of CFC to originate or acquire loans secured principally by bullion and numismatic coins.

The performance of our Secured Lending segment depends on having a portfolio of loans of sufficient size and quality to justify the expenses and allocation of financial resources committed to the Company’s loan business. CFC both originates loans to customers of our wholesale and trading business and also acquires portfolios of loans originated by other parties. The Company typically stores the bullion and numismatics that serve as collateral for the loans. As CFC does not independently market its lending business, it is dependent on the interest of the customers of the Company’s wholesale and trading business in financing their acquisition of bullion and numismatics with loans made by CFC. The interest of the Company’s customers in obtaining loans from CFC is dependent on numerous factors, including the availability of other sources of financing, the interest rate environment, other alternatives for the storage of their bullion and numismatics, their business relationship with the Company and the level and types of businesses conducted by the Company’s Wholesale Sales & and Ancillary Services segment. The Secured Lending segment is also dependent on CFC’s ability to identify and acquire portfolios of loans secured by bullion and numismatics originated by third parties satisfying the Company’s standard for quality and risk. There can be no assurance the CFC will be successful in continuing to originate and acquire secured loans in amounts sufficient to justify the conduct of this business.

The number of loans and the size of CFC’s loan portfolio can vary significantly from period to period.

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CFC’s loan portfolio can vary considerably from period to period, both as to the number of loans in the portfolio and the total size of the portfolio in terms of dollar amount. The variation of CFCs loan portfolio is attributable to a variety of factors, including the success of the Company in originating and acquiring loans discussed above, as well as the maturities of the loans in the portfolio and the decisions of borrowers to prepay or extend the terms of their loans. As a consequence, the performance of the Secured Lending segment in a particular financial reporting period may not be indicative of the how the segment will perform in any future period, either in the short or the long term.

The growth of the Secured Lending segment is likely to require significant resources.

Historically, the Company has originated loans almost exclusively to customers of its wholesale and trading business. The opportunity to finance purchases of bullion and numismatics with secured loans obtained from CFC is part of a suite of ancillary services that the Company provides to its customers. The business of the Secured Lending segment, with respect to both the origination and acquisition of loan portfolios, is constrained by the Company’s borrowing capacity under its Trading Credit Facility, on which it relies to finance the much larger business of the Wholesale Sales & Ancillary Services segment. Any significant future growth of the Secured Lending segment will require the application of significant additional resources to this business, and there can be no assurance that such resources will be available or that the Company will not determine that such resources, even if available, should be applied to other areas of the Company’s business.

Risks Relating to Commodities

A-Mark’s business is heavily influenced by volatility in commodities prices.

A primary driver of A-Mark’s profitability is volatility in commodities prices, which leads to wider bid and ask spreads. Among the factors that can impact the price of precious metals are supply and demand of precious metals; political, economic, and global financial events; movement of the U.S. dollar versus other currencies; and the activity of large speculators such as hedge funds. If commodity prices were to stagnate, there would likely be a reduction in trading activity, resulting in less demand for the services A-Mark provides, and spreads would likely decrease, which could materially adversely affect our profitability.

The period to period changes in volatility may cause our revenues to fluctuate, as a consequence of which our results for any one period may not be indicative of the results to be expected for any future period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our business is exposed to the risk of changes in commodity prices, and our hedging activity to protect our inventory is subject to risks of default by our counterparties.

A-Mark’s precious metals inventory is subject to market value changes created by changes in the underlying commodity price, as well as supply and demand of the individual products the Company trades. In addition, open sale and purchase commitments are subject to changes in value between the date the purchase or sale is fixed (the trade date) and the date metal is delivered or received (the settlement date). A-Mark seeks to minimize the effect of price changes of the underlying commodity through the use of financial derivative instruments, such as forward and futures contracts. A-Mark’s policy is to remain substantially hedged as to its inventory position and its individual sale and purchase commitments. A-Mark’s management monitors its hedged exposure daily. However, there can be no assurance that these hedging activities will be adequate to protect the Company against commodity price risks associated with A-Mark’s business activities.

Furthermore, even if we are fully hedged as to any given position, there is the risk of default by our counterparties to the financial instruments that we use to hedge our inventory. A default by a counterparty on a substantial hedge could have a material adverse effect on our business.

Increased commodity pricing could limit the inventory that we are able to carry.

We maintain a large and varied inventory of precious metal products, including bullion and coins, in order to support our trading and Direct-to-Consumer activities and provide our customers with superior service. The amount of inventory that we are able to carry is constrained by the borrowing limitations and working capital covenants under the Trading Credit Facility. If commodity prices were to rise substantially, and we were unable to modify the terms of the Trading Credit Facility to compensate for the increase, the quantity of product that we could finance, and hence maintain in our inventory, would fall. This would likely have a material adverse effect on our operations.

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We rely on the efficient functioning of commodity exchanges around the world, and disruptions on these exchanges could adversely affect our business.

The Company buys and sells precious metals contracts on commodity exchanges around the world, both in support of its customer operations and to hedge its inventory and transactional exposure against fluctuations in commodity prices. The Company’s ability to engage in these activities would be compromised if the exchanges on which the Company trades or any of their clearinghouses were to discontinue operations or to experience disruptions in trading, due to computer problems, unsettled markets, sanctions against commodity exporting countries or other factors. For example, if there were to be disruptions in the supply chain for gold, silver, platinum or palladium, our ability to buy and sell these metals on the commodity exchanges would be materially and adversely affected.

The Company may also experience disruption and risk of loss if futures commission merchants or commodity brokers with whom the Company deals were to become insolvent or bankrupt.

Our business is subject to the risk of fraud and counterfeiting.

The precious metals (particularly bullion) business is exposed to the risk of loss as a result of “materials fraud” in its various forms. We seek to minimize our exposure to this type of fraud through a number of means, including third-party authentication and verification, reliance on our internal experts and the establishment of procedures designed to detect fraud. However, there can be no assurance that we will be successful in preventing or identifying this type of fraud, or in obtaining redress in the event such fraud is detected.

Risk Related to our Regulatory Environment

The CFTC may seek to assert jurisdiction over the Company’s activities.

The Company believes that its Direct-to-Consumer operations are generally conducted in a manner that does not implicate the jurisdiction of the Commodity Futures Trading Commission ("CFTC"), as it does not sell products to retail customers for future delivery. The Commodity Exchange Act (the “CEA”) and the rules and regulations of the CFTC are drafted broadly, however, and practices that the Company does not regard as futures transactions may be regarded as such by the CFTC.

During the first quarter of fiscal 2023, the Company and Goldline settled an action in which the CFTC alleged, among other things, that certain financing arrangements that were made available to customers constituted off-exchange retail commodity transactions. Although this matter was settled on terms satisfactory to the Company with no material financial impact, and Goldline has discontinued these particular arrangements and practices, there can be no assurance that the CFTC will not in the future accuse us of violating the CEA or the rules and regulations of the CFTC, or otherwise (along with other federal or state agencies) seek to assert oversight over aspects of our operations which could adversely affect us.

Recent legislative and regulatory initiatives will require us to expend time and resources on environmental reporting.

Although our manufacturing activity is limited to the production of silver bullion products at our Silver Towne Mint, recent California legislation and new rules of the SEC will require us to make disclosures regarding environmental matters that could entail significant time and expense.

On October 7, 2023, California Governor Gavin Newsom signed into law Senate Bill ("SB") 261, Greenhouse Gases: Climate-Related Financial Risk, and SB 253, the Climate Corporate Data Accountability Act, which significantly expand climate-related disclosure requirements for companies doing business in California. As a company with operations in California, we may fall under the jurisdiction of these new laws, which impose rigorous reporting obligations regarding our climate-related financial risks and extensive requirements for the disclosure of greenhouse gas emissions.

SB 253 imposes its greenhouse gas reporting obligations on companies with annual revenues exceeding $1.0 billion. Given our current revenue levels, we are subject to the requirements of SB 253. SB 253 requires the reporting of Scope 1 greenhouse gas emissions (direct emissions from our operations) and Scope 2 greenhouse gas emissions (indirect emissions from our operations) for the prior fiscal year beginning in 2026. SB 253 requires reporting of Scope 3 greenhouse gas emissions (emission from third parties in our value chain) for the prior fiscal year beginning in 2027. Although we will not know the full requirements of this law until the California Air Resources Board issues implementing rules, the law will likely require us to report emissions from our operations in and outside of California, including our mint operations in Winchester, Indiana, and emissions from our suppliers and customers.

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Commencing on January 1, 2026, and biennially thereafter, SB 261 mandates that we publicly disclose our climate-related financial risks, which may include risks to our own operations, the operations of our suppliers and customers and the precious metals markets generally. This includes detailing the strategies we have adopted to mitigate and adapt to these risks. Our compliance reports must be made publicly available on our company's website. Non-compliance with the requirements of SB 261 could expose us to a fine of up to $50,000 per reporting year and we may also be required to pay an annual filing fee. The California climate disclosure is the subject of ongoing litigation that could impact whether and when the Company is required to make the disclosures required by the regime. The Company will monitor that litigation as it prepares to comply with the rule.

On March 6, 2024 the Securities and Exchange Commission (“SEC”) issued final rules requiring public companies, such as A-Mark, to disclose both greenhouse gas emissions and climate risk. The SEC final rules overlap significantly with both the California reporting regime discussed above and the European Corporate Sustainability Directive (“CSRD”) discussed below but there are also material differences.

Like the California reporting regime, the SEC final rule would require the Company to measure and disclose both Scope 1 and Scope 2 greenhouse gas emissions from its facilities including its mint operations in Winchester, Indiana. Unlike the California reporting scheme, the final SEC rules would not require the Company to report Scope 3 greenhouse gas emissions. The SEC final rule would also require the Company to obtain attestation reports of its Scope 1 and Scope 2 greenhouse gas emissions from an independent expert in greenhouse gas emissions measurement.

Like the California reporting regime, the SEC final rule will also require the Company to track and disclose material climate related financial risks and how we manage those risks. Unlike the California rule, the SEC final rule will require the Company to track and report material capitalized costs, expenditures expensed and charged and losses incurred as a result of severe weather events and other natural conditions and any carbon reduction goal we may have along with our use of offsets or Renewable Energy Credits to achieve that goal.

Like the California reporting regime, the SEC final rule is the subject to ongoing litigation that could impact whether and when the Company is required to make the disclosures required by the rule. The Company will monitor that litigation as it prepares to comply with the rule.

The European Union adopted new disclosure standards and rules related to environmental, social, and corporate governance ("ESG") matters in the Corporate Sustainability Reporting Directive (CSRD) which became effective in 2023 and applies to both EU and non-EU entities. Because our operations in Europe surpass the net turnover threshold in the rule and we may be deemed to have an EU branch or subsidiary, we may be subject to CSRD reporting requirements. We will know more about the specific disclosure requirements when the EU adopts implementing regulations for the non-EU groups that are covered by the rule.

These changing rules and regulations, and the stakeholder expectations related to ESG described in "Risk Factors of General Applicability – Third-party expectations relating to ESG factors may impose additional costs and expose us to new risks," have resulted in and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations.

Compliance with new and existing data protection/privacy statutes could increase our costs and expose the Company to possible sanctions for violation.

By reason of our Direct-to-Consumer business in particular, we collect personal data or personal information, which is broadly defined to include all information that can be related to a consumer or household, including identification information, demographics, usage, transactions and inquiries, preferences, and inferences drawn to create a profile about a consumer (“Personal Information”). We are subject to numerous data privacy and protection obligations that govern our handling of Personal Information, including: various federal, state, local and foreign laws, regulations, and guidance; industry standards; external and internal privacy notices and policies; contracts; and other obligations that apply to the handling of Personal Information by us and on our behalf. These obligations may change, are subject to differing interpretations, and may be inconsistent among relevant jurisdictions in which we operate or from which we collect Personal Information. The data privacy and protection landscape continues to evolve in jurisdictions worldwide. This evolution may create uncertainty in our business; affect us or our collaborators’, service providers’, and others’ ability to operate in certain jurisdictions or to collect, store, transfer, use, share, and otherwise process Personal Information; necessitate the acceptance of more onerous obligations in our contracts; cause us to modify our business operations; result in liabilities; or otherwise impose additional compliance costs on us. Moreover, despite our efforts, we may not be successful in achieving compliance if our personnel or third parties upon whom we rely fail to comply with such obligations. For example, any failure by a service provider to comply with applicable data privacy or protection law, regulations, contractual, or other obligations could result in significant consequences against us. These consequences may include: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections and similar activities); litigation (including class-related claims); additional reporting requirements and/or oversight; orders to destroy or not use Personal Information; damage to our reputation; loss of revenue and profits; loss of goodwill; and other adverse business impacts..

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In 2016, the European Union ("EU") adopted a comprehensive overhaul of its data protection regime from a national legislative approach to a single European Economic Area Privacy Regulation, the General Data Protection Regulation (“GDPR”), which went into effect in May 2018. The EU data protection regime expands the scope of the EU data protection law to all foreign companies processing Personal Information of EU residents, imposes a strict data protection compliance regime with severe penalties of up to the greater of 4% of worldwide turnover or €20 million, and includes new rights such as the “portability” of Personal Information. Although the GDPR applies across the EU without a need for local implementing legislation, EU member states have the ability to interpret the GDPR opening clauses, which permit region-specific data protection legislation and have the potential to create inconsistencies on a country-by-country basis. The United Kingdom passed similar legislation (the “UK GDPR”) which took effect in 2021 and provides severe penalties of up to the greater of 4% of worldwide turnover or €17.5 million. We may also be subject to many other foreign privacy laws that are modeled at least in part after the GDPR, including China’s Personal Information Protection Law (PIPL), Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA) and territorial Canadian privacy laws, and the Privacy Acts of Australia and New Zealand.

Our Direct-to-Consumer business currently has limited international operations which would subject it to these foreign privacy laws. Our Wholesale Sales and Ancillary Services segment maintains an office in Vienna, Austria that provides marketing support services for its international customers. We have evaluated these foreign privacy laws and their requirements, and believe we are currently in compliance in all material respects. Going forward, however, the expansion of our international operations could require us to change our business practices and may increase the costs and complexity of compliance. Also, a violation by the Company of these regulations could expose us to penalties and sanctions under the regulations.

California passed amendments to the California Consumer Privacy Act (“CCPA”) that took effect on January 1, 2023. This law provides California consumers with a high level of transparency and broad rights and choices with respect to their Personal Information. For example, CCPA grants consumers privacy rights including the rights of data correction and data portability, the right to limit the Company’s use of a subset of Personal Information called “sensitive Personal Information” that requires heightened protections, and the right to appeal the Company’s response to an individual’s exercise of these new or existing privacy rights. Compliance with CCPA requires the implementation of a series of operational measures such as: preparing data maps, inventory, or other records of all Personal Information pertaining to California residents, households and devices, as well as information sources, usage, storage, and sharing; maintaining and updating detailed disclosures in privacy policies; conducting risk assessments for the use of sensitive Personal Information; establishing mechanisms (including, at a minimum, a toll-free telephone number and an online channel) to respond to consumers’ data access, deletion, portability, and opt-out requests; and providing clear and conspicuous links on the home page of the business’ website, where applicable, allowing residents to limit or opt-out of certain data processing activities. CCPA prohibits businesses from discriminating against consumers who have opted out of the sale of their Personal Information, subject to narrow exceptions. Failure to comply with CCPA can result in civil penalties up to $7,500 per violation or actual damages suffered by a consumer.

Colorado, Virginia, Utah, and Connecticut also passed comprehensive privacy laws, modeled in part after the CCPA, that took effect in 2023. Nine other states have passed similar privacy laws that have taken or will take effect between 2024 and 2026, including Florida, Texas, Delaware, Oregon, Tennessee, Iowa, Indiana, New Hampshire, New Jersey, and Montana. These U.S. privacy laws have some provisions and requirements similar to the CCPA. However, preparing to comply with the varying requirements of these laws has already subjected the Company to costs and legal fees and will subject the Company to additional costs and risks as they take effect. For example, these laws may limit the Company’s ability to use Personal Information for advertising purposes, may limit the ways in which the Company may use certain categories of personal information, may require the Company to obtain additional permissions from the consumer, and may require revision of the Company's contracts with service providers with whom the Company shares Personal Information in the course of providing its products and services. These laws may also limit the Company’s ability to process sensitive Personal Information, which includes financial data, account information, identification card numbers, social security numbers, and precise geolocation. The Company will have to update is policies, notices, procedures, and permissions in response to these new privacy laws. The Company may also have to update its advertising practices. Failure to comply with these privacy laws can result in civil penalties ranging from $2,500 to $20,000 per violation.

All fifty U.S. states and the District of Columbia have enacted data breach notification laws that may require us to notify investors, employees, regulators and others in the event of a security breach (for example, unauthorized access to or disclosure of Personal Information experienced by us or our service providers). These laws may not be consistent, and compliance in the event of a widespread data breach may be difficult and costly. We may also be contractually required or otherwise obligated to notify investors and others of a security breach. Although we may have contractual protections against our service providers should they experience a security breach, any actual or perceived security breach could harm our reputation and brand, expose us to potential liability and require us to expend significant resources on data security as well as in responding to any such actual or perceived breach. Any contractual protections we may have against relevant counterparties may not be sufficient to protect adequately us from any such liabilities and losses, and we may be unable to enforce any such contractual protections.

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Nevada law requires operators of websites and online services to post a notice on their websites regarding their privacy practices. The law also requires operators of internet websites or online services to establish a designated request address through which a consumer may submit a verified request directing such operators not to make any sale of covered information collected about the consumer. The “covered information” regulated by the Nevada law is defined to include an enumerated list of items of personally identifiable information (including names, addresses, email addresses, phone numbers, social security numbers and identifiers that allow a specific person to be contacted).

We have evaluated these state privacy laws and their requirements, and believe we are currently in compliance in all material respects with those that are in effect. Going forward, however, the changes introduced by state privacy laws that will soon take effect, and other similar regulations enacted by other jurisdictions, will subject the Company to additional costs and complexity of compliance, by requiring, among other things, changes to the Company’s security systems, policies, procedures and practices. In addition, a violation by the Company of the new regulations could expose us to penalties and sanctions.

We are subject to other laws and regulations.

There are various federal, state, local and foreign laws, ordinances and regulations that affect our trading business. For example, because of the nature and value of the products in which deal, we are required to comply with the Foreign Corrupt Practices Act and a variety of anti-money laundering and know-your-customer rules in response to the USA Patriot Act.

The SEC has promulgated rules mandated by the Dodd-Frank Act regarding disclosure, on an annual basis, of the use of tin, tantalum, tungsten and gold, known as conflict minerals, in products manufactured by public companies. These rules require due diligence to determine whether such minerals originated from the Democratic Republic of Congo ("DRC") or an adjoining country and whether such minerals helped finance the armed conflict in the DRC.

The Company has concluded that it is not currently subject to the conflict minerals rules because it is not a manufacturer of conflict minerals under the definitions set forth in the rules. Depending on developments in the Company’s business, it could become subject to the rules at some point in the future. In that event, there will be costs associated with complying with these disclosure requirements, including costs to determine the origin of gold used in our products. In addition, the implementation of these rules could adversely affect the sourcing, supply and pricing of gold used in our products. Also, we may face disqualification as a supplier for customers and reputational challenges if the due diligence procedures we implement do not enable us to verify the origins for the gold used in our products or to determine that the gold is conflict free.

CFC operates under a California Finance Lenders License issued by the California Department of Financial Protection and Innovation. CFC is required to submit a finance lender law annual report to the state which summarizes certain loan portfolio and financial information regarding CFC. The Department of Financial Protection and Innovation may audit the books and records of CFC to determine whether CFC is in compliance with the terms of its lending license.

There can be no assurance that the regulation of our trading, Direct-to-Consumer, and lending businesses will not increase or that compliance with the applicable regulations will not become more costly or require us to modify our business practices.

For other risks related to government regulation, see below this section and see “Risk Factors of General Applicability — We are subject to other laws and regulations,” below.

One or more states or municipalities could assert that the Company is liable for sales and use, commerce, or similar type of taxes, which could adversely affect our business.

We ship product to retail customers throughout the United States. In South Dakota v. Wayfair, Inc. et al ("Wayfair"), the U.S. Supreme Court ruled that states may charge tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state. The effect of Wayfair was to uphold economic nexus principles in determining sales and use tax nexus. As a result of the decision, most states have adopted laws that require an out-of-state retailer to register and collect sales and use or other non-income type taxes upon meeting certain economic nexus standards regardless of whether the company has physical presence in the state. Although the Company believes it is complying with these requirements, our interpretation and application of the newly enacted legislation may differ from the states, which could result in the states' attempt to impose additional tax liabilities, including potential penalties and interest. Furthermore, the requirements by state or local governments on out-of-state sellers to collect sales and use taxes could deter futures sales, which could have an adverse impact on our business.

For other risks related to taxation, see “Risk Factors of General Applicability — Changes in tax law could adversely affect our business,” below.

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We use lead providers and marketing affiliates to assist us in obtaining new customers, and if lead providers or marketing affiliates do not comply with an increasing number of applicable laws and regulations, or if our ability to use such lead providers or marketing affiliates is otherwise impaired, it could adversely affect our business.

We are dependent on third parties, referred to as lead providers (or lead generators) and marketing affiliates, as a source of new customers for our Direct-to-Consumer segment and new borrowers for our Secured Lending segment. Our marketing affiliates place our advertisements on their websites that direct potential customers to our websites. Generally, lead providers operate, and also work with their own marketing affiliates who operate, separate websites to attract prospective customers and then sell those “leads” to online traders and lenders. As a result, the success of our Direct-to-Consumer and Secured Lending businesses depends materially on the willingness and ability of lead providers or marketing affiliates to provide us customer leads at acceptable prices.

If regulatory oversight of lead providers or marketing affiliates is increased, through the implementation of new laws or regulations or the interpretation of existing laws or regulations, our ability to use lead providers or marketing affiliates could be restricted or eliminated. For example, the Consumer Financial Protection Bureau ("CFPB") has indicated its intention to examine compliance with federal laws and regulations by lead providers and to scrutinize the flow of non-public, private borrower information between lead providers and lead buyers, such as us. Over the past few years, several states have taken actions that have caused us to discontinue the use of lead providers in those states. While these discontinuations did not have a material adverse effect on us, other states may propose or enact similar restrictions on lead providers and potentially on marketing affiliates in the future, and if other states adopt similar restrictions, our ability to use lead providers or marketing affiliates in those states would also be interrupted.

The failure by lead providers or marketing affiliates to comply with applicable laws or regulations, or any changes in laws or regulations applicable to lead providers or marketing affiliates or changes in the interpretation or implementation of such laws or regulations, could have an adverse effect on our business and could increase negative perceptions of our business and industry. Additionally, the use of lead providers and marketing affiliates could subject us to additional regulatory cost and expense. If our ability to use lead providers or marketing affiliates were to be impaired, our business could be materially adversely affected.

Judicial decisions, CFPB rulemaking or amendments to the Federal Arbitration Act could render the arbitration agreements we use illegal or unenforceable.

We include arbitration provisions in our loan and financing agreements. These provisions are designed to allow us to resolve any customer disputes through individual arbitration rather than in court and explicitly provide that all arbitrations will be conducted on an individual and not on a class basis. Thus, our arbitration agreements, if enforced, have the effect of shielding us from class action liability. Our arbitration agreements do not generally have any impact on regulatory enforcement proceedings. We take the position that the arbitration provisions in loan and financing agreements, including class action waivers, are valid and enforceable; however, the enforceability of arbitration provisions is often challenged in court. If those challenges are successful, our arbitration and class action waiver provisions could be unenforceable, which could subject us to additional litigation, including class action litigation.

In addition, the U.S. Congress has considered legislation that would generally limit or prohibit mandatory arbitration agreements in consumer contracts and has enacted legislation with such a prohibition with respect to certain mortgage loan agreements and also certain consumer loan agreements to members of the military on active duty and their dependents. Further, the Dodd-Frank Act directed the CFPB to study consumer arbitration and authorized the CFPB to adopt rules limiting or prohibiting consumer arbitration, consistent with the results of its study. In July 2017, the CFPB issued a new rule on arbitration, which would have prohibited class action waivers in certain consumer financial services contracts. However, in November 2017, a joint resolution passed by Congress was signed disapproving the rule under the Congressional Review Act. Because the rule was disapproved, it cannot be reissued in substantially the same form, and the CFPB cannot issue a substantially similar rule, unless the new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.

Any judicial decisions, legislation or other rules or regulations that impair our ability to enter into and enforce consumer arbitration agreements and class action waivers could increase our exposure to class action litigation as well as litigation in plaintiff-friendly jurisdictions, which would be costly and could have a material adverse effect on our business.

Our advertising and marketing materials and disclosures related to our Direct-to-Consumer and Secured Lending segments have been and continue to be subject to regulatory scrutiny.

In the jurisdictions where our Direct-to-Consumer business operates, our advertising and marketing activities and disclosures are subject to regulation under various industry standards, borrower protection laws, and other applicable laws and regulations. Consistent with the lending industry as a whole, our advertising and marketing materials have come under increased scrutiny.

There can be no guarantee that we will be able to continue advertising and marketing our business units in a manner we consider effective. Any inability to do so could have a material adverse effect on our business.

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Risks Relating to Our Common Stock

We may not continue to pay any dividends in the future.

A-Mark’s board of directors has adopted a regular quarterly cash dividend policy of $0.20 per common share ($0.80 per share on an annual basis). The initial quarterly cash dividend under the policy was paid on October 24, 2022 to stockholders of record as of October 10, 2022. The most recent cash dividend under the policy was paid on April 29, 2024 to stockholders of record as of April 16, 2024. The declaration of regular cash dividends in the future is subject to the determination each quarter by the board of directors, based on a number of factors, including the Company’s financial performance, available cash resources, cash requirements and alternative uses of cash and applicable bank covenants.

There can be no assurance that the Company will pay dividends in the future on a regular basis or otherwise. If the board of directors were to determine not to pay dividends in the future, stockholders would not receive any further return on an investment in our capital stock in the form of dividends and may obtain an economic benefit from the common stock only after an increase in its trading price and only by selling the common stock.

The Company has paid non-recurring special cash dividends to our stockholders as a consequence in part of the Company's favorable performance during the preceding periods. There is no assurance that any such non-recurring special dividend will be paid in the future, and if made, the timing or amount of any such dividend.

See Note 20 to the Company’s condensed consolidated financial statements for more information regarding our dividends.

Your percentage ownership in the Company could be diluted in the future.

Your percentage ownership in A-Mark potentially could be diluted in the future because of additional common stock-based equity awards that we expect will be granted to our directors, officers and employees, including through our current equity incentive plan. In addition, we may issue equity in order to raise capital or in connection with future acquisitions and strategic investments, which could dilute your percentage ownership. For example, in the acquisition of JMB, our increased investments in Pinehurst Coin Exchange, Inc. and Silver Gold Bull, Inc., and our recent acquisition of LPM, we issued stock to the sellers in partial consideration for the acquired interests. We also issued stock to the public to finance, in part, the acquisition of JMB.

Provisions in our Certificate of Incorporation and Bylaws and of Delaware law may prevent or delay an acquisition of the Company, which could decrease the trading price of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law contain certain anti-takeover provisions that could have the effect of making it more difficult for a third-party to acquire, or of discouraging a third-party from attempting to acquire, control of the Company without negotiating with our board of directors. Such provisions could limit the price that certain investors might be willing to pay in the future for the Company’s securities. Certain of such provisions allow the Company to issue preferred stock with rights senior to those of the common stock, impose various procedural and other requirements which could make it more difficult for stockholders to effect certain corporate actions and set forth rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings.

We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal. However, these provisions apply even if an acquisition offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of our Company and our stockholders. Accordingly, in the event that our board determines that a potential business combination transaction is not in the best interests of our Company and our stockholders, but certain stockholders believe that such a transaction would be beneficial to the Company and its stockholders, such stockholders may elect to sell their shares in the Company and the trading price of our common stock could decrease.

Our board and management beneficially own a sizable percentage of our common stock and therefore have the ability to exert substantial influence as stockholders.

Members of our board and management beneficially own approximately 24% of our outstanding common stock. Acting together in their capacity as stockholders, the board members and management could exert substantial influence over matters on which a stockholder vote is required, such as the approval of business combination transactions. Also because of the size of their beneficial ownership, the board members and management may be in a position effectively to determine the outcome of the election of directors and the vote on stockholder proposals. The concentration of beneficial ownership in the hands of our board and management may therefore limit the ability of our public stockholders to influence the affairs of the Company.

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Risk Factors of General Applicability

New rules have recently become effective that will require the Company to provide disclosures regarding cybersecurity management and events.

While the Company believes it has robust cybersecurity risk management procedures for addressing cybersecurity events, the new rules may increase the costs of cybersecurity protection and require disclosure of cybersecurity events that the Company might not otherwise deem to be material. The SEC recently changed its disclosure requirements regarding cybersecurity risk management, strategy, governance and incident reporting. These changes require companies to investigate all cybersecurity incidents without unreasonable delay, determine their level of materiality, and report specific details about any material cybersecurity incidents in a separate filing within four business days. These changes also require additional information in annual disclosures regarding the Company’s cybersecurity risk management and reporting processes, as well as the cybersecurity expertise of relevant Company personnel and third-party service providers or auditors.

The Company’s failure or inability to protect its intellectual property could harm its competitive position.

The Company relies on a combination of patent, trade secret, copyright and trademark laws and contractual restrictions, such as confidentiality agreements and licenses, to protect its business, services, know-how and information. The Company’s patent, trademarks or service marks may be challenged or found to be unenforceable, and contractual arrangements to protect our intellectual property may be insufficient to prevent its misappropriation. If that were the case, the Company’s competitive position would suffer.

Third parties may assert violations of their intellectual property rights against the Company.

Third parties may currently have, or may be issued, patents upon which the technologies used by the Company infringe. The Company could incur significant costs to defend infringements claims, regardless of their validity, or could be required to develop non-infringing technology at considerable expense or be compelled to enter into expensive royalty or license agreements. For example, JMB was compelled to expend significant resources as a consequence of litigation in which it was accused of infringement prior to its acquisition by the Company.

We are subject to other laws and regulations.

In addition to matters discussed above, we are subject to various laws, and regulations, both domestic and foreign, as well as responsible business, social and environmental practices, which may change from time to time. Failure to comply with applicable laws and regulations or implement responsible business practices could subject us to damage to our reputation, lawsuits, criminal exposure, or increased cost of regulatory compliance.

Changes in tax law could adversely affect our business.

Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. It cannot be predicted whether, when, in what form, or with what effective dates, new tax laws or regulations may be enacted under existing or new tax laws. This could result in an increase in our tax liability or require changes in our business in order to mitigate any adverse effects of changes in tax laws.

Third-party expectations relating to ESG factors may impose additional costs and expose us to new risks.

In recent years, there has been an increasing focus by stakeholders of public companies—including investors, employees, customers, suppliers, and governmental and non-governmental organizations—on ESG matters. A failure, whether real or perceived, to address ESG could adversely affect our business, including by heightening other risks that we face, such as those related to consumer behavior and consumer perceptions of us. We may also face pressure from stakeholders to provide disclosure and establish commitments, targets or goals, and take actions to meet them, regarding ESG. If we fail to satisfy the expectations of investors and other stakeholders or our initiatives are not executed as planned, our reputation, results of our operations and ability to grow our business may be negatively impacted. Additionally, new legislative or regulatory initiatives related to ESG could adversely affect our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchase Program

In April 2018, the Company's board of directors approved a share repurchase program which authorized the Company to purchase up to 1.0 million shares (as adjusted for the two-for-one split of A-Mark’s common stock in the form of a stock dividend in fiscal 2022) of its common stock. Prior to fiscal 2023, no shares were repurchased under our share repurchase program. In fiscal 2023, we repurchased a total of 335,735 shares under the program for $9.8 million. In the fourth quarter of fiscal 2023, the board revised the repurchase program to authorize the purchase of up to 1.0 million shares of our common stock, in addition to the shares previously repurchased, and extended the expiration date from June 30, 2023 to June 30, 2028. In November 2023, the Company's board of directors further amended the share repurchase program to authorize an additional 1.2 million shares to be repurchased under the program, resulting in a total of 2.0 million shares authorized for repurchase, after taking into account the shares previously purchased at that date. As of March 31, 2024, 848,509 shares remain authorized for repurchase under the program.

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Under the share repurchase program, we may repurchase shares of our common stock from time to time at prevailing market prices, depending on market conditions, through open market or privately negotiated transactions. Subject to applicable corporate securities laws, repurchases may be made at such times and in amounts as management deems appropriate. We are not obligated to repurchase any shares under the program, and repurchases under the program may be discontinued if management determines that additional repurchases are not warranted.

The following table reflects activity related to equity securities we repurchased during the quarter ended March 31, 2024:

 

Period		Total Number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
1/1/2024 - 1/31/2024			43,209			$	27.46				990,304				1,009,696
2/1/2024 - 2/29/2024			156,692			$	25.90				1,146,996				853,004
3/1/2024 - 3/31/2024			4,495			$	27.00				1,151,491				848,509
Total			204,396

Recent Sales of Unregistered Equity Securities

We did not sell any unregistered equity securities during the period covered by this report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

 

 

Exhibit No.		Description of Exhibit
14.1*		Code of Business Conduct and Ethics
31.1*		Certification Under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification Under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification Under Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification Under Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document.
101.SCH*		Inline XBRL Taxonomy Extension Schema with Embedded Linkbases document.
104*		Cover Page interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

* Filed herewith

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		A-MARK PRECIOUS METALS, INC.
Date:	May 9, 2024	By:	/s/ Gregory N. Roberts
			Gregory N. Roberts
			Chief Executive Officer
			(Principal Executive Officer)
Date:	May 9, 2024	By:	/s/ Kathleen Simpson-Taylor
			Kathleen Simpson-Taylor
			Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)

 

 

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