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spk02: Good afternoon and welcome to AMARC's Precious Metals conference call for the fiscal second quarter ended December 31st, 2020. My name is Laura and I will be the operator this afternoon. Before this call, AMARC issued its results for the fiscal second quarter 2021 in a press release, which is available in the investor relations section of the company's website at www.amarc.com. You can find the link in the investor relations section at the top of the homepage. Joining us for today's call are AMARC CEO Greg Roberts, President Thor Geerdrum, CFO Kathleen Simpson-Taylor, as well as JM Bullion's co-founder and CEO Michael Whitmire. Following the remarks, we will open the call for your questions. Then, before we conclude the call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call. I would like to remind everyone that this call is being recorded and will be made available for replay via a link available in the investor relations section of AMARC's website. Now, I would like to turn this call over to AMARC's CEO, Mr. Greg Roberts. Sir, please proceed.
spk06: Thank you, Laura. Good afternoon, and thank you for joining AMARC's conference call. Today is a truly exciting and transformative day for AMARC, and I'm looking forward to sharing a number of updates with you. As you may have seen, after the market closed today, we issued a press release announcing AMARC's agreement to acquire JM Bullion. We also issued a press release with our financial results for the second quarter and first six months of fiscal 2021, which I'll touch base on before getting into the acquisition. Q2 was another solid quarter for AMARC and reflects the profitability we continue to see during these market conditions. Following the unprecedented volatility in the precious metals markets during Q1, which produced record profitability for AMARC, the second quarter was characterized by slightly lower but still strong product demand, volumes, and premium spreads. Taken together, these market dynamics allowed us to realize another strong financial performance this quarter, including generating $8.9 million in net income attributable to the company, which contributed to the most profitable first half of any fiscal year in AMARC's history. Our financial results continue to demonstrate the benefits of our unique business model, which is designed to generate steady and diverse revenue streams in normal market conditions and outsized profitability during more volatile market periods, which we have been experiencing the last few quarters. We've intentionally built AMARC with three complementary business segments, which support one another and drive incremental and organic business across the platform. A good example of this is our minting operations, which is anchored by our investment in Silvertown Mint. Silvertown provides AMARC, Goldline, and JM Bullion with improved supply during supply-constrained periods, which we've seen over the last few quarters. This tightly integrated and synergistic model also provides us with multiple growth avenues, including cross-selling opportunities for continued expansion. The resulting effect is our continued ability to capture increasing value across the precious metals market. As I mentioned earlier, in addition to strong financial results for the second quarter, we also issued a press release today announcing the definitive agreement we have signed with JM Bullion, a leading e-commerce retailer of precious metals, to acquire the remaining 79.5% of the issued and outstanding shares of JM Bullion not currently owned by AMARC. Before discussing JMB and the strategic rationale, I think it's important to provide some context. A key driver of our exceptional financial results over the last several quarters are the strategic investments we have made to expand AMARC's direct sales segment. This area of our business has grown considerably over the last several quarters and has contributed to increasing profitability. AMARC has been a leader in precious metals since 1965. Over that time, we've established a robust wholesale business with a marquee institutional customer list. We've been able to grow our position in the market thanks to the high caliber team we've assembled that has more than 100 years of industry experience in various commodity cycles and market conditions. Several years ago, we recognized the evolving customer buying patterns and how the internet and e-commerce was dramatically changing the retail precious metals market. In response, we expanded AMARC's presence and position in the retail market, initially through our minority investment in JM Bullion back in 2014, and more recently through minority investments in two other precious metals e-commerce businesses, each of which serve differentiated customer bases. Over the past six years, we have been able to make further investments in JM Bullion and have enjoyed a highly synergistic relationship together. We are now very excited to add JM Bullion and its management team to our business, as the combination of AMART and JM Bullion will create the industry's preeminent fully integrated Precious Metals platform. Since its founding in 2011, JM Bullion has experienced tremendous success. JM's co-founder and CEO Michael Whitmire, who is on the call with us today, leveraged his team's expertise in e-commerce and search engine optimization to establish JM Bullion as a lead player in the Precious Metals industry. Based on this success, AMARC became increasingly comfortable with our minority investment as Michael and his team proved our thesis that e-commerce was transforming how retail investors bought and sold precious metals. Over the past several quarters, we've watched JM Bullion execute exceptionally well to take advantage of favorable market conditions as well as manage unprecedented volume, packages, and ounces sold. And we reached the conclusion that our respective businesses would be even stronger as a combined platform. And as the saying goes, we truly believe one plus one is equal to three. With that, I will turn it over to Michael to introduce himself, his company, and the value he sees in joining AMARC. Michael, welcome to the team. Take it away.
spk05: Thank you, Greg, and good afternoon, everyone. Thanks for having me join the call. Today is a very exciting day in JM's history and evolution. It wasn't that long ago that JM was just two co-founders operating out of a basement in Lancaster, Pennsylvania, which really puts into perspective how far the company has been able to come over the last nine years. Since our founding, we have established our company as an industry price leader, exceeding customer expectations with fast, secure shipping and award-winning customer service. We've been able to do that through the dedicated efforts of our team, along with the support of high quality partners like Greg and Amark, who have helped JM pursue our mission to create one of the largest and fastest growing online retailers of precious metals in the world. For those of you who aren't familiar with JM, our company enables individual investors to easily and efficiently purchase physical precious metals over the internet. We offer a broad selection of gold, silver, platinum, palladium, and copper products through our various company-owned websites and marketplaces. Today, we operate five uniquely branded websites targeting specific niches within the precious metals market. These include jmbullion.com, providentmetals.com, silver.com, goldprice.org, silverprice.org, along with our JM eBay marketplace. We've experienced tremendous demand lately on our sites and for our products. particularly silver products as retail investors look to gain exposure to silver. Direct-to-consumer suppliers like JM have had a difficult time keeping up with the level of demand, which is at multiples from what we typically see. Now, by partnering even more closely with Greg and the AMARC team, JM will be able to leverage AMARC's unmatched capabilities in product sourcing and minting to be even better positioned to serve our growing customer base's demand for precious metals products. Thank you again, everyone, and I will now turn it back over to Greg.
spk06: Thanks, Michael. With this acquisition, JM Bullion becomes the anchor in our direct-to-retail strategy, significantly bolstering AMART's capabilities and dramatically broadening our consumer-facing footprint and brand portfolio. More specifically, our strategic rationale for the acquisition is based on five pillars. First, JM Bullion provides channel diversification and significantly increases AMARC's direct sales segment, which will represent approximately 50% of the combined company's pre-tax net income on a pro forma basis. Second, JM Bullion will provide AMARC with the ability to tailor its merchandising and pricing strategies to multiple customer demographics across the combined businesses six unique consumer-facing brands, the five currently owned by JM Bullion plus Goldline. With the acquisition of JM Bullion, AMARK has significantly bolstered its direct-to-consumer capabilities and broadened its consumer-facing brand portfolio. Third, JM Bullion will add a centrally located distribution hub in Dallas, Texas, which will further improve AMARK's ability to service its customers across the country, as well as expanding our overall capacity of packages shipped. Fourth, JM Bullion's proven and proprietary online marketing strategies enable it to acquire customers at attractive rates and realize average order values at over 50 times its customer acquisition cost. On top of this, JM Bullion's rapidly growing total number of users which grew at a 31% annual rate in 2020, adds 1.3 million new users to AMARC's direct sales segment. This newly acquired customer base had an average order value of $2,020 in 2020, which will help drive additional profitability for AMARC. And finally, the AMARC and JM Bullion leadership teams have significant precious metals market expertise and deep online and e-commerce experience. Given our familiarity with JM Bullion, including our close working relationship with its leaders and integrated workstream since 2014, we are confident that as a truly unified organization, we will be able to more effectively capitalize on the burgeoning demand for precious metals throughout online and e-commerce channels. From a financial perspective, JM Bullion adds significant scale to AMARC's already robust profile. Where JM Bullion's fiscal year ended December 31, 2020, it generated net sales nearly $1.5 billion and gross profit of nearly $79 million, with pre-tax income in excess of $62 million. These strong financial results are being driven by improving customer metrics and KPIs, including a 30% year-over-year increase in total user base of 1.3 million. Of this amount, more than 300,000 users are classified as active, meaning they completed at least one transaction with JM Bullion during calendar 2020. In terms of consideration and transaction structure, AMARC will pay $138.3 million for the 79.5% of JM Bullion it does not currently own, implying a total valuation of JM Bullion of $174 million. Of the $138 million purchase price, $103 million will be in cash and $34.5 million will be paid in AMARC common stock. AMARC intends to finance the cash consideration with available cash on hand along with net proceeds from any equity or debt financing, which we may determine to consummate prior to closing. The acquisition is expected to close in the first quarter of calendar 2021, subject to customary closing conditions and regulatory approval. Following the close, Michael Whitmire and JM Bullion's Chairman Kendall Saville will join AMARC's Board of Directors. will remain CEO of JM Bullion and will also assume the title of Executive VP of AMARC's direct sales segment. I will now turn the call over to Kathleen Simpson-Taylor, our CFO, to discuss our financial results for the second quarter and first six months of fiscal 2021 in more detail. Kathleen?
spk10: Thank you, Greg, and good afternoon, everyone. Turning to our financial results, our revenues for fiscal Q2 2021 increased 44% to $1.52 billion from $1.06 billion in Q2 of last year. The increase in revenues was primarily due to an increase in the total amount of gold and silver ounces sold and higher selling prices of gold and silver. For the six-month period, our revenues increased 33%, to $3.38 billion from $2.54 billion in the same period last year. The increase in revenue was primarily attributable to an increase in the total amount of gold and silver ounces sold and higher average selling prices of gold and silver. Gross profit for fiscal Q2 2021 increased 131% to $18.8 million, or 1.24 percent of revenue from 8.1 million or 0.77 percent of revenue in Q2 of last year. For the six-month period, gross profit increased 233 percent to 54.9 million or 1.6 percent of revenue from 16.5 million or 0.6 percent of revenue in the same year-ago period. The increase in gross profit for both the quarter and the six-month period was due to higher gross profits earned by our wholesale sales and ancillary services and direct sales segments. SG&A expenses for fiscal Q2 2021 increased 15% to $9 million from $7.9 million in Q2 of last year. The increase was primarily due to increases in insurance costs of $0.5 million, financial and tax consulting costs associated with the acquisition of $0.4 million, compensation expense including performance-based accruals of $0.3 million, and $0.1 million of advertising expense. The increase in SG&A was partially offset by decreases in operating expenses of $0.1 million associated with our direct sales segment. and depreciation and amortization expense reduction of 0.1 million. For the first six months of the fiscal year, SG&A expenses increased 18% to 19 million from 16.1 million in the same year-ago period. The increase in SG&A expenses was primarily due to increases in compensation expense, including performance-based accruals of 2.2 million insurance costs of $0.4 million, financial and tax consulting costs associated with the acquisition of $0.4 million, computer software costs of $0.2 million, and advertising costs of $0.2 million. The increase in SG&A was partially offset by decreases in operating expenses of $0.3 million associated with our direct sales segment and $0.2 million for depreciation and amortization expense. Interest income for fiscal Q2 2021 increased 14% quarter over quarter to $4.5 million from $4 million in Q1 of fiscal 2021, but decreased 27% from $6.2 million in Q2 of fiscal 2020. This is as a result of fewer secured loans outstanding due to the drop in silver prices in Q3 of fiscal 2020. For the six-month period, interest income decreased 29% to 8.5 million from 12 million in the same year-ago period. The decrease for both the quarter and the six-month period was primarily due to lower interest income earned by our secured lending segment partially offset by higher other finance product income. Interest expense for fiscal Q2 2021 decreased 1% to $5 million from $5.1 million in Q2 of last year. The decrease was primarily due to a reduction in loan servicing fees, partially offset by an increase in interest expense related to product financing arrangements. For the six-month period, interest expense decreased 9% to $9.3 million from $10.2 million in the same year-ago period. The decrease was primarily due to reductions in interest expense related to our trading credit facility and loan servicing fees, partially offset by increases in interest expense related to product financing arrangements and liability on borrowed metals. For the second quarter of fiscal 2021, net income attributable to the company totaled $8.9 million or $1.16 per diluted share. This was a significant improvement from net income attributable to the company of $1.2 million or $0.17 per diluted share in Q2 of last year. For the six-month period, net income attributable to the company totaled $32 million or $4.21 per diluted share, which compares favorably to $1.4 million or $0.19 per diluted share in the same period last year. Turning to our balance sheet, at quarter end, we had $14.9 million of cash compared with $52.3 million of cash at the end of fiscal year 2020. Our tangible net worth at the end of the quarter was $104.9 million, up from $91 million at the end of fiscal year 2020. That completes my financial summary. Now I will turn the call over to Thor, who will provide an update on our key performance metrics. Thor?
spk09: Thank you, Kathleen. Looking at our key operational metrics for the second quarter and first six months of fiscal 2021, we sold 479,000 ounces of gold in Q2, which was an increase of 12% from Q2 of last year, but down 34% from the prior quarter. For the six-month period, we sold 1.2 million ounces of gold, which was up 20% from the same period last year. We sold 21.2 million ounces of silver in Q2, which was up 51% from Q2 of last year and down 12% from last quarter. For this six-month period, we sold 45.5 million ounces of silver, which was up 30% for the same period last year. Wholesale ticket volume, our second key metric, decreased 16% to 29,797 tickets from the prior quarter and decreased 3% from Q2 of last year. For the six month period, wholesale ticket volume decreased 3%, 55,138 tickets from the same period, a year ago period. While our ticket volume decreased, our average order size per ticket increased versus the comparable prior year periods, driving an increase in overall revenue. The third key metric we evaluate is inventory turnover. which is a measure of how quickly inventory has moved during the period. For the second quarter, our inventory turnover ratio was 3.6, which was down 28% from 5.0 in the prior quarter and up 9% with 3.3 in Q2 of last year. For the six-month period, our inventory turnover ratio was 7.9, which was down 13% from 9.1 In the same year-ago period, the decrease in our inventory turnover ratio was primarily due to higher product financing arrangements. Finally, the number of secured loans at the end of the quarter totaled 1,324, an increase of 18% for the prior quarter and a decrease of 65% from Q2 of last year. The dollar value of our loan portfolio at the end of the quarter totaled $95.8 million, which is up 14% for the prior quarter and down 37% from Q2 of last year. It is important to keep in mind that typically the number of loans increases during periods of rising precious metals prices and decreases during periods of declining precious metals prices. In the past three quarters, as silver prices have rebounded, we have experienced growth in our CFC loan portfolio. That concludes my prepared remarks. I will now turn it back over to Greg.
spk06: Thank you, Thor. Our business continues to benefit from the sustained rally in precious metals. The acquisition of JM Bullion is truly transformative and will allow us to take even greater advantage of the burgeoning demand for precious metals through AMARC's expanded online and e-commerce channels. This confidence is supported by AMARC's favorable competitive position, industry-leading platform, and proven business model. We believe this will translate to continued growth and profitability in the years ahead. Before we open the call to questions, I would like to thank our valued shareholders for your continued support and confidence in myself and AMARC. Without your continued support, this transaction would not be possible. I would also like to extend a warm welcome to the entire 100-person plus JM Bullion team along with their valued customers, partners, and suppliers. We look forward to having you join the growing AMARC family. Operator, please provide the appropriate instructions for the Q&A.
spk02: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes to the line of Craig Irwin with Roth Capital Partners. You may proceed with your question.
spk03: Thank you. Good evening and congratulations on this really interesting acquisition. Looks like an exciting opportunity that you're bringing together. Thank you, Craig. My first question I wanted to ask is about synergies for JM back with the core AMARC platform. Can you maybe share a little bit more detail on how JM and GoldLine fit together? And maybe are there some external suppliers that can be moved over to AMARC? And then how does this fit or how does this impact core operations at AMARC?
spk06: Well, I mean, I think the synergies we have seen, particularly over the last 12 months, are very enlightening to us. I believe that what we have witnessed with some of the weeks and months that we have had where JM Bullion has had unprecedented demand and increase in transactions, as well as GoldLine's improved performance and the amount of transactions that they're conducting is that there's really no substitute for having an integrated inventory and logistics system with JM or with GoldLine. And I think what we've seen now two or three times in calendar year 2020 and what we've really seen with the events that took place the first week of February where we had an unprecedented amount of volume and customers coming into the marketplace is that having the material, AMARC, having the material in one location and having it available to JM Bullion or Goldline to sell immediately is just, it's a real game changer and it really helps The retail-facing units provide product and get the product in the customer's hands faster than anybody in the marketplace. And I truly believe that this combination will allow us to just really take advantage of these opportunities when we have the ability to move inventory from AMARC to a JM customer in 24 or 48 hours, same with a GoldLine customer. And that ability to have product available really allows us to add new customers and to sell a customer as much as we possibly can or as much as the customer wants. And whether it's the Silvertown Mint or whether it's the Sunshine Mint or any of the other suppliers that AMARC has, AMARC's size and ability to inventory product finance product very cheaply and then make it available on a real-time basis to retail customers through JM or through Goldline is really to us a game changer and we feel it's just a natural progression. But really seeing the machine work and seeing 100 or 120,000 packages go out in a month to retail customers through our logistics sites and delivering those quickly is really what propelled us and caused us to really take a look at this transaction and be very enthusiastic about it.
spk03: Excellent. Thank you. My second question is really about macro. So You know, I really love the metrics you shared, active users up 70% year-over-year, total users up 30%, more than a million users added to the platform. You know, there's a lot of things being tossed around these days, stagflation, inflation, stimulus spending, all scary things for investors, and everybody's looking for inflation protection. Can you talk a little bit about how this is impacting the psychology of customers out there? And are you seeing indicators, or what would you say are the best indicators that we're seeing a more committed, more active pool of buyers? And, you know, just as an aside, how does Bitcoin fit into the picture? It's something that also comes into the general conversation when we talk to investors about, you know, the increased interest and increased – commitment of buyers to have a portion of their portfolio in precious metals?
spk06: Thank you, Craig, for a very broad question. I'll leave it to you to keep track of if I answer each one of those in order or not. But let's start with macro events in the last 12 months. I think that you can pinpoint very easily the the events in March of 2020 and the COVID and the pandemic. And we can definitely point towards that from a logistics standpoint and from just the overall world kind of shutting down and slowing down and a little bit of panic buying through March, April, May, and June. And that customer, I think, was was probably more closely tied to our existing customers and our customers that are familiar with the marketplace. I view that customer base completely different than what we saw in August and September and then what we are seeing today in January and February. I think there is quite a bit of difference in the mentality of the buyer and I think it's very positive. I think that For us, when we got to June, July, and we did see a little bit of a slowdown in new customer acquisition, and we did see a little bit of a slowdown in ounces sold, not for a long period, but for 30 days or so, you kind of believe there that maybe this was just COVID-related. But what we're seeing now and what we've seen since August and September. We've just seen much more macro interest in the stimulus, in political issues, in the devaluation of the dollar. We're seeing all the big buzzwords that are out there right now, and we're seeing that translate into the type of buyers that we're seeing. And I will say that although I don't believe there's a correlation necessarily to a Bitcoin buyer versus a physical precious metals buyer. I will say that what's motivating people to buy Bitcoin is probably motivating our precious metals customers and the new customers that are entering the marketplace, which is a macro fear of economic deterioration of a devalued dollar, of inflation, and what is going to happen to the purchase price and the ability to use Existing dollars and what will that cost? What will products cost in the future? These are all things we're hearing I think that Michael and I are extremely Confident and optimistic that the quality of the customer and we see this at gold line. We always Kind of look at the different type of demographic in buyers the quality of the buyers that we have added to the platform in the last just five to six months and the average order size, the preponderance to buy a little bit more gold than silver. We just see a bigger wallet and a much bigger order size as well as first-time buyers coming in and buying significantly more in some cases than we've seen before. I think it's very telling. Historically, the gold line buyer we've seen is a bit more a bit more conservative, a little bit older, a little bit more interested in macroeconomics and issues that are going on. And what we saw early on in J.M. Bullion's evolution was a buyer that bought a little bit smaller average order size, generally bought silver, and in a lot of cases bought the dips and bought when we saw price drops. as somewhat of a bargain shopper. In the last six months, that has changed completely and Goldline and JM buyers and new customers are much more aligned, much more similar. Particularly on the JM side, we're seeing much higher average order size and much higher preponderance to gold and a higher initial order. I've seen some customers at JM that start off with an initial order of $5,000 to $10,000 and they end up over a very short period of time buying six, seven figures of precious metals. And that's very, very positive and certainly one of the reasons why we are very excited about this customer base that we are acquiring. The other thing which I just want to make a very strong point of is that In spite of a lot of people who believe that Bitcoin is somehow going to be the next currency or the next hard asset, we've seen in conjunction and very closely tied in parallel as Bitcoin has gone from $10,000 to $40,000, it's very interesting to us that we've also experienced a record increase in new customers with a very high order size, which I just talked about, which would indicate to me that although their circles might cross a little bit as it relates to what they're looking at, they actually can and do perform in parallel and in conjunction through the exact same economic uncertainties. And then, you know, I don't want to get too much into what's happening we're seeing in the first quarter, but certainly the events that JM Bullion and Goldline and other precious metal dealers experienced January 30th, 31st, and February 1st as it relates to the Reddit buyers or the Wall Street bet buyers. I mean, we saw over that weekend an unprecedented amount of new customers added to the platform and just new customers that we'd never seen before that were just a different a different type of buyer and a different demographic. And to be quite honest, it put tremendous pressure on the physical metal product side. But I'm very happy to say that JM Bullion and AMARC and Goldline, the three of us together, delivered a tremendous amount of packages and product and did it seamlessly to a whole new group of customers, which gave them a very good first-time experience in precious metals.
spk03: Excellent. Greg, I also wanted to ask about the capacity expansion over at Silvertown. How is the new pizza oven? How's the de-bottlenecking that you've been doing there working? Are we operating close to maximum capacity now?
spk06: Today we're operating at about 550,000 ounces a week in production. We did have, just due to logistics and the pandemic, we had a little delay in receiving the new furnace or pizza oven. I'm happy to say that as we speak, it is being put together and unpacked at Silver Town Mint. And I think that's, you know, we're looking forward to bringing that capacity online within the next couple weeks. you know, we will be comfortable within the next seven days, we will be able to start forward selling that production, probably for delivery around March 1st. So we will have that capacity online for the AMARC traders to start selling and for JM to start selling, you know, within the next couple of weeks. But so far, we're very, you know, The machine arrived in great shape. The reconstruction, putting it together, is going well, and we're very happy. I'd also like to add that Michael had the foresight three or four months ago to buy his own pizza oven, and that will be delivered in a few weeks. And through this process with Michael and JM, we're happy to report we have room and we will be adding the second furnace and pizza oven to the Silvertown facility in Indiana probably sometime in April or May.
spk03: Thank you. And then last question, if I may. In the results for the quarter, your numbers are pretty good for the loan book, right? Your secured loan book, you know, 18% growth sequentially. You're doing a good job rebuilding that book after the volatility kind of shook it out earlier this year. Yep. is there maybe an opportunity to market secured loans to JM customers? Is there something that might be able to accelerate growth and expand the opportunity over the next number of quarters?
spk06: The simple answer is a strong yes. I would say that all of the products that AMARC has will only make the customer experience better for the JM customers. And then, obviously, a million three customers Retail internet buyers who love precious metals that a mark can now offer whether it be storage Whether it be finance You know all kinds of things that we will be able to now offer To the jam customer base plus all the things that Michael and I have talked about over the last six years That we really believe, you know now will be the time to introduce products I think with the combined staffs and the the combined brain power, we will quickly be integrating things that Michael, as he's operated Jambillion and just focused on growth and delivering products, I think having the AMARC team behind him and being able to delegate some of the ideas that we've had together, we're very enthusiastic about, again, the one plus one equals three or four as it relates to being able to really create an unparalleled experience for the JM customers, not to mention, I mean, I, as I said in my comments, Michael and his team at jambling are one of the best that I've ever seen as it relates to, um, online marketing generation of new customers, bringing new customers, um, efficiently price wise and, and taking care of them in onto the platform. Um, you know, we we've, experimented the last six months and actually had JM Bullion provide some online marketing for Goldline in a limited capacity. And the success we've seen from Michael's team to be able to attract and generate the demographic that likes the Goldline platform has been just fantastic. And now that we're together, I can't wait to see what Michael and his team can do to bring more customers to the GoldLine platform, as well as, you know, look for ways that GoldLine and its customer-facing products can meld and be connected to what Michael's done with J.M. Bullion customers.
spk03: Thank you for taking my questions, and congratulations again for a really exciting acquisition here. It's going to be fun to watch.
spk06: Yeah, thank you. Thank you, Craig.
spk02: Our next question comes from the line of Sarkis Sherbakian with D. Riley FBR. You may proceed with your question.
spk07: Hey, thanks for taking my question.
spk06: Hello. Good to hear from you again.
spk07: Yeah. Hey, congrats on the acquisition. And Michael, welcome to AMARC. Greg, if I heard this correctly, was pre-tax income for JM Bullion $62 million for 2020?
spk06: Yes, you heard that correctly.
spk07: And that's on $79 million of gross profit dollars? Correct. So 78% of gross profit dollars are going to pre-tax income, it seems. Is there an opportunity for, you know, kind of further expansion on that margin take, or do you think there's some investment there? Just help me understand what you're seeing from also a P&L opportunity perspective.
spk06: I'm going to let Michael answer that because he has some really exciting plans for new products, products that are in high demand with a little bit better profit margins. But I'll let Michael talk to that and maybe Michael can go through some skew numbers of where we are today and where we hope to be with the help of AMARC and all of our different vendors and suppliers.
spk05: Yeah, thanks for the question. I think there's certainly the opportunity to expand our baseline margins going forward, primarily through new and exclusive product development that we'll be able to do with AMARC. Historically, we've been pretty much predominantly focused on customer acquisition and shipping packages. And frankly, we've had all the demand that we could even deal with. So this is an area of opportunity that now that we have additional resources and The AMARC team is there to help us with the supply chain and new product design. I think we'll be able to bring a lot of these items to market. So right now, historically, we've been somewhere between 1,000 and 2,000 unique SKUs on the website. We're a little lower right now because we've sold out of so many items. But going forward, I would say that our target will be to build to 3,000 to 5,000 SKUs in the next year or two. And the bulk of those which we add will be higher margin products than we've historically offered more collectible, you know unique custom type coins So looking forward to working on that together and think we have a lot of opportunities there Hey, thanks for that Michael I think the other point I want to touch on and this could be both more of kind of the current environment of what we saw here in January and February and
spk07: as well as just kind of the opportunity at JM Bullion and AMARC with the supply chain, right? So there's a lot of places that don't have physical product in stock. I guess, can you maybe help the folks listening to the call understand what AMARC's supply chain and JM's access and reach to customers, you know, how did that work together kind of now and also going forward to
spk05: know service demand where maybe at other locations there just is no physical and and how does that relate to your spreads yeah you hit the nail on the head with that obviously when you know there's not enough product out there and our competitors don't have you know certain core SKUs our ability to have those in stock is extremely meaningful we have so much traffic and customer activity that we're essentially only constrained by how much product we can get. So obviously this partnership completely changes that dynamic to where we can be front of line to access the Silvertown production, AMARC's authorized purchaser at every relevant government in the world. So this is really a game changer for us in terms of being front of the line to keep our products in stock. And as you mentioned, obviously if we have stuff that Other companies don't. The premiums, you know, move in our favor accordingly. So very excited about that as well.
spk07: Thanks for that. And Greg, maybe if you can comment on, you know, route to potentially financing the transaction. You know, it seems like there's a portion that's going to be AMARC shares and the other portion seems to be cash. So just trying to you know, get a sense for how you would imagine being able to complete the transaction, if you can speak to that, please.
spk06: Sure, yeah. You know, we want to, we obviously want to take advantage of any opportunities we have to finance it that's in the best interest of all the shareholders that we, you know, we have. I think, as we said in the release, we're looking at, you know, a combination of company cash, a potential equity offering, and potential a debt offering. We're exploring everything right now. Our friends at Davidson and Roth are helping us with that and explore different opportunities. We believe that there's plenty of supply out there for us to put this together. We look forward to getting started on that. The board and myself and We'll be looking at what's the best deal for the shareholders, and that's what we're focused on. But we want to keep all of our options open and see what looks like the best opportunity for AMARC.
spk07: Great. Thanks for that. And, Thor, if I can throw one your way, as far as kind of the current environment in volatility and spreads, can you maybe talk about what you guys are seeing just given the supply constraints and given the elevated level of interest in precious metals?
spk09: Yeah, I mean, we're continuing to see elevated spreads, as we've talked about on some of these previous calls. Really, starting with the pandemic in the springtime and continuing now into almost a full year, as Greg's alluded to, there's really a number of tailwinds we're continuing to see that really are not COVID-related, whether it be events in Washington, other geopolitical activities. You've heard everyone on this call talk about where physical demand has been. So you're continuing to see strong demand. You've had issues like the Reddit folks running silver prices up and down very rapidly quite recently. Really, all of those conditions are continuing to sustain a marketplace where you're seeing unusually high premium spreads. You know, at times, as Greg said, we've seen the market slow and come back, but in general, we're continuing to see pretty strong spreads, in particular in silver products.
spk07: Fantastic. Thanks for the color, guys, and continued success. Great.
spk02: Our next question comes from the line of Mitch Almey with Wedbush Securities. You may proceed with your question.
spk08: Hi, Greg.
spk06: Hello, Mitch.
spk08: Nice job adding to the business. A couple of questions. After you built Vegas and we first met, one of the things you were going to do was build your facility in Vegas and then you bought Silvertown and then Goldline and then this continues and then Sunshine. For most of that period of time, the market was sort of in a funk and you took some market share from a lot of folks. And I'm wondering if you can just speak to what that gives you in terms of pricing power now, what it gives you in terms of flexibility, and then whether it makes sense to at some point bring all those things together or if it's better that they all keep their various little platforms out there and and contribute that way as opposed to being part of either the JM or the AMARC brand, I guess.
spk06: Right. I mean, I think as it relates to the first question, as it relates to having the supply and being able to make sure that AMARC customers have supply and have product, I think certainly the Sunshine and Silvertown deals are important to that. I believe that As we've talked about before, our guys at Silvertown and what they've been able to accomplish ramping up and working 24-7 and producing the quality of products that they've been able to do and just make products that Silvertown Mint really had never made before from different sizes, different qualities, different designs. It's really helped create new SKUs. for all of AMARC's customers as well as help JM create new products that their customers are asking for. And I think that Sunshine, as you know, we're very excited about our investment in Sunshine. Tom Power at Sunshine is just a great operator, has been doing this forever. He really sets the gold standard as it relates to quantity of ounces and quality And that's, you know, that's proven by the fact that all the sovereign mints come to him for, you know, for the work he can do. And I think that Silvertown has, you know, a great relationship with Tom and Sunshine. Jamie at Silvertown has a great relationship with the guys at Sunshine. And, you know, I think they're both learning from each other. And I think it's been what we've really found is that, you know, Each site, each mid does a little bit different product and very complementary, definitely all rowing in the same direction. And so I don't at the moment believe that there's really any reason not to run all of our units as independent brands. I think that Michael and JM accomplished the acquisition of Provident Metals about a year and a half ago and integrated that very quickly into the JM Bullion platform, but continued to operate Provident as a standalone brand and website. And to be honest, what we found is that that customer base at Provident is a unique subset of the precious metals marketplace and that that customer base likes the Provident brand. Michael's been able to bring back a number of products that Provident sold years ago that had discontinued. And Michael was able to manufacture those products with David Madge and Jamie's help at the Silvertown Mint. And he's been able to bring back a number of new products that the Provident customers really wanted to see. So, I mean, I think we run as one platform, as one brand. But my style is I like to let the different brands have their own anonymity, and I feel like that's what works in our business at AMARC.
spk08: Great. Then I've got a couple of kind of quick ones. As we did with JM Bullion, you established a stake back in 2014, and I guess at some point you established a stake or a convertible loan in Sunshine. And then here, when business gets good, we learn you had these. And so it sort of begs the question, without giving any names, are there any more of these companies out there that are sort of strategic in the industry that you own pieces of that we'll look forward to possibly adding down the road?
spk06: For sure. I think that, again, as Michael demonstrated in the Provident deal, they had a unique following and they had a diverse customer base that liked the Provident products. And I think that certainly as we look at opportunities out there, I think geographic location is important. I think certainly a customer in Canada or a customer in Europe might you know, that customer may like dealing with a local company. And I believe that, you know, AMARC is very well positioned that if the opportunity presents itself and, you know, I think this, you know, Michael and I will certainly look at every opportunity, but I do believe that there is the potential for more consolidation. And, you know, as we've said in our filings before, you know, you know, we have an opportunity and an option to take a greater stake in Sunshine, and that's something as Tom believes it's a good thing to do, and as Tom grows his business, I don't see any reason why AMARC wouldn't take advantage of, you know, we have an option to convert our debt into equity, and as Tom performs and Sunshine performs, I think we we'll definitely take a strong look at that.
spk08: Super. Who is going to buy the bars that come out of the pizza? And are these something that are currently available on the market here in the U.S.?
spk06: I believe that the guys at Silvertown Mint are going to be able to produce product there that comes out of this machine that is very similar to other products in the marketplace that are actually hand poured or struck. These will be cast products and I would think of it a little bit more like let's call it in silver you would call hundred ounce bars are the most likely product that we can make very efficiently and cheaply in this machine. It's not going to take the place of a a real high quality struck one ounce silver coin. But I believe we can mimic the quality of a poured bar with this machine and do it very efficiently. The beauty of these machines, these two machines, are they run pretty much automated 24-7 with very little human interaction. And we just believe it's a game changer and we could really use right now you know, the extra million and a half to two million ounces a month of silver product that these machines will be able to make, hopefully within the next three to four months. And, you know, again, you know, give JM and give all the AMAR customers access to product that they really need right now.
spk08: Sure. And one final question. At the U.S. Mint, where is your allocation right now, roughly?
spk06: With the U.S. mint? Yes. We generally get anywhere between 25% and 35% of the silver one-ounce eagles. The gold product is a little bit lower than that, but it can be around the same numbers. The other event that's happened in the last few weeks in conjunction with some significant increase in demand is that the U.S. Mint has been on allocation and they've had some limitations on what they can produce. And certainly from what Michael and I can see right now, there's more demand for the U.S. Mint products than what they can produce. So we're seeing some shortages there.
spk08: Great. Well, you've answered my questions again. Congratulations and thanks for taking the time. See you.
spk06: Thank you.
spk02: Our next question comes from the line of Chris Sakai with Singular Research. You may proceed with your question.
spk04: Hi, Greg. I just had a question on your sequential, the sequential ounces of gold and silver sold, ticket volume and inventory turnover all sequentially seem to be decreasing. I wanted to see if without any of the Robin Hood frenzy, are we seeing some sort of industry trend here? And I wanted to see as well what Michael had to say about this at JMB.
spk06: Are you talking about our ounces and ticket counts in in Q2 that we just reported? Are you looking at those that they are down from the previous quarter? Was that the first question?
spk04: Yeah.
spk06: Yeah. I would attribute that a little bit to timing. And I think, you know, I can speak for Michael on this because we talk about it all the time. There was a, you know, in our Q2 up to the election, I would say that demand was good. For whatever reason, after the election, we saw a little slowdown in November. I think it was just everybody catching their breath. I mean, it was a big buildup to the election. And I think that for the final three weeks of November and probably the first two weeks of December, we did see a little bit of just a take a breather and catch your breath kind of thing. But I will say that in the last week of December and certainly the first, you know, the first five weeks of 2021, you know, we're seeing, you know, back to very significant demand, good ounces, good ticket count, good premiums. And it's just, you know, we go through these periods, but I think both Michael and I are, you know, very excited and interested in how the demand has come roaring back. And maybe Michael can talk a little bit more towards what he's seen in the last five or six weeks.
spk05: Yeah, I would echo what Greg said. The latter half of December, I think particularly after the Senate runoff elections into January, we started to see things really pick up across all the products we offer, but particularly on the gold side. And then The end of January, Greg touched on this earlier, but the whole silver squeeze movement on Reddit and it got all this media attention, that really spurred silver demand that we just haven't seen before. So we're just trying to keep up with it at this point.
spk04: Okay, great. Well, thanks for that, and I look forward to seeing you next quarter. Great, thank you.
spk02: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Richard Grulich with REG Capital Advisors. You may proceed with your question.
spk01: Thank you. I have two questions. The first is, what does the balance sheet of JM Bullion look like in terms of the – is there any debt attached to it?
spk06: There's no debt. Our transaction contemplates buying JM Bullion with no debt and a significant amount of tangible net worth that we will acquire as part of the deal. JM also anticipates doing a dividend prior to closing above the amount of tangible net worth that we will acquire. But the transaction contemplates no JM Bullion debt at closing.
spk01: Okay. Thank you. And in terms of your financing the cash portion of it, while it was mentioned a possible convertible debt offering, are you considering at all just a straight debt offering?
spk06: I think that we are considering everything and any product or anything that we can look at. And I don't think we've settled on any one thing yet, but certainly – A debt offering or an equity offering is definitely possible. I think also, you know, our balance sheet and, you know, our cash gives us, you know, flexibility to do whatever is in the best interest of the shareholders. And we're taking a very careful and close look at that.
spk01: And do you believe that there's an opportunity for a private equity offering at a premium to what the public equity offering might be?
spk06: That is not something I've contemplated yet, but I appreciate you offering the suggestion. Thank you. Good luck.
spk04: Thank you.
spk02: Our next question comes from the line of Craig Irwin with Roth Capital Partners. You may proceed with your question.
spk03: Thanks for taking the follow-up. I know this is a hard question to answer because of the availability of product right now. But if you were to compare peak fear, right, when COVID was becoming a real issue, and activity recently with Wall Street Bets, Reddit, how would you compare the differential activity sort of on a weekly basis between the different peaks in demand? And would you say that... You know, this surge in activity we've seen recently is similarly as broad-based, and would you maybe call it broader based on the number of incremental buyers, you know, up more than 100% year-over-year in the market at this point? Sure.
spk06: I mean, I'll try to answer that. I mean, I don't know. I can't really get into the mind of every buyer of silver or gold right now. But I will say that the quickness and the ability to just rally a group of people to buy the same product all at the same time is probably not something we've ever seen before. I would say that that is unprecedented. And I think if you look at the weekend of the last two days of January and February 1st, and you went to the SLV envelope, and just the amount of silver that traded on the London exchange, I don't know that there's ever been a combination of physical buyers, ETF buyers, and futures buyers that have ever come together so quickly in a 72-hour period. And I think that's, you know, it's definitely unusual for us. I think it says a lot about how little silver is out there and how little gold is available and that when a brand-new group of people decide they want to buy a product or buy a stock or buy an equity, it definitely is a game changer and I think that we're very curious and we want to see how this plays out and we'll do everything we can. Michael was on CNBC a few times through that. We were mentioned, Jambillion was mentioned in a number of pieces that promoted the best place to buy silver and You know, that kind of promotion and that kind of exposure of Michael and J.M. Bullion to the retail silver buyers was really just astonishing for us.
spk03: Excellent. And then another follow-up question. So acquisitions like this are never completed in a fortnight, right? You've obviously been working on this for several weeks. Can you – okay, that's a confirmation question. So this predates the activity that we've seen in the last couple weeks. Can you maybe clarify for us the metrics, the customer counts? Are these updated for the activity in the last couple weeks, or are these maybe December 31st numbers that might need updating after all the metrics are in at the end of your March quarter?
spk06: We just – Michael and JM just finished their audit, so the numbers you are seeing, I believe, are as of December 31st, so they do not yet incorporate the activity that we've seen in 2021. So we've identified some metrics that we really want to use going forward, and we're looking forward to comparing what will be AMARC's Q3 numbers once we have that information from JM you know, at the end of this current quarter, but they're not in those numbers at the moment.
spk03: Okay. And then can you maybe quantify for us or estimate for us what the Q1 activity looks like as far as increased customers, increased repeat customers, you know, with the very strong activity we've seen in the last couple weeks?
spk06: You know, it's probably not you know, not good to talk about exact numbers. I will just say that, you know, when we have numbers that we can put out, we will. And right now, I think that I can't imagine, you know, really that we haven't had just a tremendous amount of new customers. I think it's been a very active period for new customer acquisition. And certainly from the numbers that we're seeing, related to JM's performance and AMARC's performance. The first five weeks are particularly robust and active.
spk03: That's great. Thanks again for taking my questions. Thank you.
spk02: At this time, this concludes our question and answer session. I'd like to turn this call back over to Mr. Roberts for closing remarks.
spk04: Thank you, Laura.
spk06: Thank you all for joining our call today. As always, we appreciate your interest and continued support. We look forward to keeping you apprised of AMARC's progress going forward.
spk02: Before we conclude today's call, I would like to provide AMARC's safe harbor statement that includes important cautions regarding forward-looking statements made during this call. During today's call, there were forward-looking statements made regarding future events Statements that relate AMARC's future plans, objectives, expectations, performance, events, and the like are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Future events, risks, and uncertainties individually or in the aggregate could cause actual results to differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ, including the following, the failure to execute the company's growth strategy as planned, greater than anticipated costs incurred to execute the strategy, changes in the current domestic and international political climate, increased competition for AMARC's higher margin services, which could suppress pricing, the failure of the company's business model to respond to changes in the market's environment as anticipated, general risks of doing business in the commodity markets and other business, economic, financial, and governmental risks as described in the company's public filings with the Securities and Exchange Commission. The words should, believe, estimate, expect, intend, anticipate, foresee, plan, and similar expressions and variations, therefore, identify certain of such forward-looking statements which speak only as of the dates on which they were made. Additionally, any statements related to future improved performance and estimates of revenues and earnings per share are forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Finally, I would like to remind everyone that a recording of today's call will be available for replay via a link in the investor section of the company's website. Thank you for joining us today for AMARC's earnings call. You may disconnect your lines at this time.
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