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spk01: Good afternoon. Welcome to AMARC Precious Metals Conference call for the fiscal second quarter ended December 31st, 2021. My name is Sherry and I will be your operator this afternoon. Before this call, AMARC issued its results for the fiscal second quarter 2022 in a press release, which is available in the investor relations section of the company's website at www.amarc.com. You can find a link to the investor relations section at the top of the home page. Joining us for today's call are AMARC CEO Greg Roberts, President Thora Georgioum, and CFO Kathleen Simpson-Taylor. Following their remarks, we will open up the call for your questions. Then before we conclude the call, I'll provide the necessary questions 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 the link available in the Best Relations section of the AMARC website. Now I would like to turn the call over to AMARC CEO, Mr. Greg Roberts. Please proceed, sir.
spk05: Thank you, Sherry, and good afternoon to everyone. Thank you for joining our call today. As you can see from our earnings release, Q2 marked another solid quarter as AMARC delivered $31.8 million of net income and diluted EPS of $2.61 a share. We also generated $49 million of adjusted net income before provision for income taxes, or $4.02 per diluted share. Our Q2 results reflect the strength of our fully integrated precious metals platform, combined with the continuation of the favorable macro conditions that had benefited our business over the past several quarters. We continue to experience robust demand from both our retail and wholesale customers, along with ongoing supply constraints, which have resulted in continued higher premium spreads. Our fully integrated business model continues to provide us with steady access to product, enabling us to take advantage of favorable market conditions through our wholly owned and equity interests in private mints and our 30-plus year relationship with other supply sources. The unique strength of our model is evident in our Q2 performance, which included an 18% sequential increase in gross profit to $65.9 million, with our gross profit margin expanding by 61 basis points and an 8% return on equity. Now, I want to turn the call over to our CFO, Kathleen Simpson-Taylor, and she will walk you through our financials in more detail. Then our president, Thor Jerdrum, will come on to discuss our KPIs and operational metrics. Afterwards, I will provide a further update on our business and growth strategy. Kathleen, take it away.
spk02: Thank you, Greg, and good afternoon, everyone. Our revenues for fiscal Q2 2022 increased 28% to $1.95 billion from $1.52 billion in Q2 of last year. The increase in revenues was due to an increase in gold and silver ounces sold offset by lower average selling prices of gold and silver. JM Bullion, JMB, contributed $489.3 million of revenue to the quarter. For the six-month period, our revenues increased 17% to $3.96 billion from $3.38 billion in the same year-ago period. The increase in revenues was due to an increase in gold and silver ounces sold, combined with higher average selling prices for silver, offset by lower average selling prices for gold. JMB contributed $961.6 million of revenues to the six-month period. Gross profit for fiscal Q2 2022 increased 252%. to 65.9 million or 3.39% of revenue from 18.8 million or 1.23% of revenue in Q2 of last year. The gross profit increase was due to higher gross profits earned from the wholesale sales and ancillary services and direct to consumer segments, including 29.7 million contributed by JMB. For the six-month period, gross profit increased 122% to $121.9 million or 3.08% of revenue from $54.9 million or 1.62% of revenue in the same year-ago period. The gross profit increase was due to higher gross profits earned from the wholesale sales and ancillary services and direct-to-consumer segments including 54.4 million contributed by JMB. SG&A expenses for fiscal Q2 2022 increased 119% to 18.7 million from 8.5 million in Q2 of last year. The increase was primarily due to 6.9 million of expenses incurred by JMB, 2.3 million of legal consulting and professional fees, increased compensation expense, including performance-based accruals, of $0.9 million, and higher insurance costs of $0.1 million. For the six-month period, selling, general, and administrative expenses increased 96% to $35.4 million from $18 million in the same year-ago period. The increase was primarily due to $12.9 million of expenses incurred by JMD, $2.8 million of legal consulting and professional fees, increased compensation expense, including performance-based accruals, of $1.1 million, and higher insurance costs of $0.6 million. Depreciation and amortization expense for fiscal Q2 2022 increased 1,535% to $8.3 million, from $0.5 million in Q2 of last year. For the six-month period, depreciation and amortization expense increased 1,543% to $16.5 million from $1 million in the same year-ago period. The increase was primarily due to amortization of the acquired intangibles related to JMB. Interest income for fiscal Q2 2022 increased 16% to $5.3 million from $4.5 million in Q2 of last year. For the six-month period, interest income increased 27% to $10.8 million from $8.5 million in the same year-ago period. The aggregate increase was primarily due to higher interest income earned by our secured lending segment and higher other finance product income. Interest expense for fiscal Q2 2022 increased 7% to $5.4 million from $5 million in Q2 of last fiscal year. The increase was primarily driven by $0.3 million associated with our trading credit facility and notes payable, including amortization of debt issuance costs, $0.2 million of loan servicing fees, offset by a decrease of $0.1 million in interest associated with liabilities on borrowed metals. For the six-month period, interest expense increased 16% to $10.9 million from $9.3 million in the same year-ago period. The increase was primarily driven by $0.8 million associated with our trading credit facility and notes payable, including amortization of debt issuance costs, $0.7 million related to product financing arrangements, $0.4 million of loan servicing fees, offset by a decrease of $0.3 million in interest associated with liabilities on borrowed metals. Earnings from equity method investments in fiscal Q2 2022 decreased 48% to $1.2 million from $2.4 million in the same year-ago quarter. The change includes an increase in earnings of $0.7 million from our current equity method investments, offset by a decrease of $1.9 million related to J&B, a former equity method investment which is now reported by the company as a wholly owned subsidiary. For the six-month period, earnings from equity method investments decreased 58% to $2.7 million from $6.5 million in the same year-ago period. The change includes an increase in earnings of $1.8 million from our current equity method investments, offset by a decrease of $5.6 million related to J&B, a former equity method investment which is now reported by the company as a wholly owned subsidiary. Net income attributable to the company for the second fiscal quarter of 2022 totaled $31.8 million or $2.61 per diluted share. This compares to net income attributable to the company of $8.9 million or $1.16 per diluted share in Q2 of last year. Our diluted EPS for the fiscal second quarter of 2022 is based on the weighted average shares outstanding of 12.2 million, compared with 7.7 million weighted average shares outstanding during the second quarter of last year. Adjusted net income before provision for income taxes, a non-GAAP financial measure, which excludes acquisition expenses, amortization, and depreciation, For Q2 fiscal 2022, totaled $49 million, or $4.02 per diluted share, an improvement of $36.3 million compared to $12.7 million, or $1.64 per diluted share for Q2 fiscal 2021. The weighted average shares outstanding for the current fiscal quarter were $4.5 million higher than those outstanding in the prior year fiscal quarter. For the six-month period, net income attributable to the company totaled $57.8 million, or $4.78 per diluted share. This compares to net income attributable to the company of $32 million or $4.21 per diluted share in the same year-ago period. Our diluted EPS for the six-month period is based on weighted average shares outstanding of $12.1 million compared with 7.6 million weighted average shares outstanding during the same year-ago period. Adjusted net income before provision for income taxes, a non-GAAP financial measure, which excludes acquisition expenses, amortization, and depreciation for the six-month period, totaled $90.1 million, or $7.44 per diluted share, an improvement compared to $43.4 million, or $5.70 per diluted share, in the same year-ago period. The weighted average shares outstanding for the six-month period were $4.5 million higher than those outstanding in the prior year six-month period. Now turning to our balance sheet. At quarter end, we had $19.4 million of cash compared to $101.4 million at the end of fiscal year 2021. Our fiscal year 2021 cash balances were high, due to our significant planned precious metals purchases in the first few days of July 2021, specifically due in part to the US Mint's release of a new bullion coin design on July 1st. Our tangible net worth at the end of the quarter was $226 million, up from $184.9 million at the end of the prior quarter. Finally, as we announced in December, We closed our new three-year committed $350 million trading credit facility during the quarter, replacing our previous $280 million trading credit facility. The new credit facility is the largest in the company's history as we added a number of new lenders to expand our lender base, which provides additional lending capacity should we need it in the future. We believe this reflects the strong performance of our business and our capital partners' confidence in our vertically integrated model. 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?
spk04: Thank you, Kathleen. Looking at our operational metrics for the fiscal second quarter and first six months of 2022, We sold 631,000 ounces of gold in fiscal Q2, which was up 32% from Q2 of last year, but down 6% from last quarter. For the six-month period, we sold 1.3 million ounces of gold, which was up 8% from the same year ago period. We sold 32 million ounces of silver in fiscal Q2 2022, which was up 51% from Q2 of last year and up 14% from last quarter. For the six-month period, We sold 60.1 million ounces of silver, which is up 32% from the same year ago period. Wholesale trading ticket volume, which represents the total number of product orders processed by our trading desk, decreased 10% to 26,809 from Q2 of last year, but increased 3% from the first quarter of fiscal 2022. For the six-month period, wholesale ticket volume decreased 19% to 52,887 from the same year ago period. For the second fiscal quarter, our inventory turnover ratio was 3.3, which was a 3% increase from 3.2 in Q2 of last year, and a 13% decrease from 3.8 in the prior quarter. For the six-month period, our inventory turnover ratio was 7.6, which is down 4% from the year-ago period. I'd like to also share some of the key metrics from our direct-to-consumer segment this quarter. The total number of active customers in the quarter increased by 87,100 compared with the prior year second quarter and increased by 201,700 for the six month period. The number of customers sold 1.9 million at the end of December 2021 compared with 160,300 at the end of December 20. The increase in these metrics is mainly attributable to the addition of the J&B customer base. Finally, the number of secured loans at the end of December totaled 2,393 an increase of 15% from the prior quarter, and an increase of 81% from December 2020. The dollar value of the total loan portfolio at the end of December totaled $126.3 million, which is up 14% from prior quarter and up 32% from Q2 of last year. Typically, the number of loans increased during periods of rising precious metals prices and decreased during periods of declining precious metals prices. That concludes my prepared remarks. I'm going to turn it over to Greg for closing remarks.
spk05: Thank you, Thor. As we approach the one-year anniversary of our acquisition of JM Bullion, I am thrilled and encouraged by the continued strength and momentum of our combined companies. JMB continues to execute well and grow its customer base, contributing approximately 25% of our revenue and 45% of our gross profit during the quarter. We are optimistic about our DTC prospects, including the forthcoming rollout of JMB's cyber metals. Our innovative, platform that digitalizes large gold silver and platinum bars and allows consumers to buy and sell fractional shares in a range of denominations with the option to convert these holdings into physical coin and bar in the future the cyber metals product remains on track for commercial release later this month and we're eager to begin marketing this innovative offering to our many JM Bullion customers, and to the broader precious metals community. Our DTC performance remains strong with 21% growth in gross profit and almost a full percentage point increase in our gross profit margin compared to the prior quarter. Favorable business trends have continued into the third quarter, keeping us optimistic about our outlook. Our DTC and wholesale segments continue to benefit from their access to AMARC's supply chain, including our wholly-owned subsidiary, Silvertown Mint. The performance of the mint remains strong, which is critically important in periods such as these where we see sovereign mint struggle to meet demand due to supply chain constraints. During the second quarter, the mint produced, on average, 625,000 ounces of silver per week. which is up an amazing 58% from the same year ago period. We continue to evaluate and invest in capital to expand our mint capacity and expect our February production to be in excess of 750,000 ounces of silver per week. Finally, we continue to evaluate strategic opportunities that can further augment our capabilities and drive strong results for our shareholders over the long run. Operator?
spk01: Thank you. 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 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Tom Forte with DA Davidson. Please proceed.
spk07: Great. So, Greg and team, congrats on a great quarter. I have a couple of questions. I'll go one at a time. So, Greg, we talk a lot about things that impact interest in precious metals. I want to talk about market volatility. You had two days in a row there where I think the Dow was up or down more than 1,000 points. How should we think about market volatility and how that may or may not be impacting interest in precious models? That's my first question.
spk05: Okay. Thank you, Tom. We've clearly started to see some more volatility in the equity markets the last few weeks, and I will say that any uncertainty or fear or changing of the way assets are deployed for people certainly affect the precious metals market, and we're a direct recipient of that, obviously. Different conditions create different circumstances. Some conditions create institutional buying at an ETF level or at a big bar level. Certain things affect individuals in our DTC segment and how they're going to view that information and whether that's going to cause them to buy or sell or hold. And You know we did as we expected Over the couple of weeks that you've described you know recently we did see an increased level of activity and we and we saw a burst of interest from our customer base particularly You know in the last two weeks when you had a significant drop in gold and silver on in a two to three day period and That was positive for our demand from our customer base, and it was good to see the expanding customer base react as we would expect. Slow rising prices of gold and silver don't create the exact same result or the exact same change in behavior from the customers, but it's still good for us because it It is a more affirmation that precious metals are in demand at all levels. So I think we see that our business model is performing as expected and the volatility is good for us. And as we've always said before, a drop in price really motivates our customers to buy the dip. and then we get great action for a couple of days, and then we get what I call kind of aftershocks after the earthquake. We get some continued interest, and we did see that in the last couple of weeks, which is what we would have expected on the volatility that we saw. I think from a macro perspective, personally, I see what seems to be a lot of repositioning and a lot of change in attitude. towards all different asset classes and any shift or any behavioral change at a macro level is generally going to create interest at our level.
spk07: Great. And then the second question, and then I'll try to limit myself to three, is a lot of investors I talk to, we debate inflation and in 2022, if precious metals have a different role as far as hedging cryptocurrency, if that's taken some of the shine off gold from a hedging standpoint. So I guess my question for you is, do you feel like today the use of or perception of precious metals as a hedge for inflation feels materially different to you versus times in the past And I'd love to get your perspective if you feel like crypto has in any way, shape, or form replaced gold as a hedge.
spk05: I mean, based on crypto's performance when the Dow and the Nasdaq dropped last two weeks ago, I would say that they're uncorrelated to precious metals, which was the first time I really, I ever remember seeing crypto follow what the equities were doing. So, you know, I think every situation is different, but certainly for us, you know, we saw Bitcoin get down to $36,000. It almost tracked, you know, tracked the NASDAQ very closely, which would indicate to me that you had a risk-off situation going on. And I thought that after the initial drop of $50 in gold from 1850 to 1800, I really felt that gold... and silver held up really well in the last week or so since then. They seem to be very, very strong related to maybe a situation where in the past we might see them drop a little further. So I do believe the underlying inflation fear and the underlying risk-off strategy is good for gold, and I think gold's holding up very well. We're seeing that. you know, pretty predominantly.
spk07: Great. Last question. The next quarter, I look forward to asking you about CyberMetals. The JM Bullion acquisition has been amazing. What are your current thoughts today on potential additional strategic M&A, both U.S. e-commerce, international, and any other, you know, vertically integrated type assets that may be of interest? High level, of course.
spk05: I think that the amazing thing that I see over the last three to four months and back into the quarter we're reporting right now is the continued pace of our new client onboarding at the DTC level and the first purchase by some of those clients, the size of those first purchases, If you're looking for things that are different and that I see different from where we were a year ago or two years ago, the new client onboarding, specifically at the DTC level and more specifically at the JMB level, continues to really outperform my expectations from a year ago when we did the JM Bullion acquisition. I think we're way ahead of kind of what our projections were on new clients, and I think Thor talked a little bit about this, just the pace of new clients. Now, obviously, in the year-ago quarter, we didn't have a DTC JM Bullion that was bringing in new clients, but we continue to average 3,000 to 4,000 new clients at JM Bullion every week, and the There's always a few new buyers that are making six-figure and up purchases as a first-time purchase that we're getting that first purchase from them at a much higher level. So I think as it relates to M&A and where we're looking right now, I think that what we're seeing from the Jambillion metrics is giving us confidence that there are other potential acquisitions out there that we'll have a slightly different demographic and that we'll bring new customers to the platform. And we're looking at that very closely. And I think we're encouraged by some of the opportunities that we're looking at. But I think that more than anything, we really feel that we have a really good handle right now on new client acquisition. and that the pace of new clients is continuing, which gives us confidence and encourages us to continue to seek opportunities for us on the M&A side.
spk07: Great. So thank you, Greg. Thank you, Thor, Kathleen, and Michael. Great quarter. Thank you.
spk01: As a reminder, there's Star 1 on your telephone keypad if you would like to ask a question. Our next question is from Andrew Scott. with Roth Capital Partners. Please proceed.
spk03: Hey, guys. Congrats on another strong quarter, and thanks for taking my questions. The first question here is, so with the sovereign mints kind of ramping up production compared to last year, can you speak to how that will impact your inventory management and pricing strategies at all as supply continues to come back online?
spk05: Yeah. I mean, we still are dealing with supply constraints from the sovereign mints. I don't know of any mint that's operating at anywhere close to what they were pre-COVID. So I think that we're, as you can see from some of my commentary, we're continuing not only at the Silvertown mint level, but at the Sunshine mint level to increase our capacity to fill the demand. And we aren't seeing huge numbers out of the U.S. Mint. I mean, the U.S. Mint, I think, made about 5 million ounces of silver in January for the date change. I mean, I've seen production there in January as high as 8 million in years past. So I think as much as they tried, there still is a lack of Silver Eagle supply. And secondly, probably our second biggest supplier, the Royal Canadian Mint, continues to struggle with meeting the demand that we could use. And where we're seeing it very pronounced is particularly in the fractional coins on the gold side, that you're just, all they can do is make one ounce gold coins, and the concept of making quarter ounce or tenth ounce coins is just, they're not even trying. So I think that our cyber metals platform, when it comes online, giving people the ability to buy a quarter ounce of gold or a tenth ounce of gold on cyber metals, and then down the road converting it to physical, I think is setting up very well for us. And, you know, the premiums on some of the fractional gold coins are just, you know, very high. What we do get, we sell it at very high premiums. So, you know, I don't see any indications right now that the sovereign mints are, are on a path to get back to where they were before. So I think that it can be frustrating at times because sometimes we have customers that only want to buy those products and they don't want to buy private mint products. On the other hand, we have a number of clients that just want whatever we can get them. So we're just trying to prepare for all outcomes.
spk03: Chris, thanks for the additional color there. Kind of bouncing off that question, you did bring up cybermetals. You guys had about two months of beta testing. Can you provide any color on anything you may have learned, the next steps to get it launched over the next month, and maybe any expectations you have given how the prior two months went?
spk05: Yeah, I mean, we have about 40 people in the beta right now testing the platform. I've been on there myself. I've done a number of trades. I think it is a fantastic product. I think that the guys at JM Bullion, the tech people, Andrea and Al, did just a great job. And we were very pleased with the results and from the people that have been testing to this point. We're very happy with what we're hearing from them. And getting a lot of good comments and a lot of good input, and we're very excited to look to launch this to our first set of chosen JM Bullion customers on a commercial level, probably around the first week of March. So we're very close to rolling this out, and right now I think it's exceeded my expectations.
spk03: Great to hear you guys have had good feedback. And then last one from me, just great to see sequential margin increase in direct-to-consumer. Can you just maybe provide some puts and takes there? And then also on that, you guys launched, it looks like, the 2022 coins in early January. And just has there been a strong appetite from Jambo and consumers for the new coins? That's all from me. Thanks.
spk05: Yes. We have seen good demand on the 2022 coins from the U.S. Mint, which we expect that every January. Clearly, this year, the demand has exceeded the supply. We've been out in the marketplace buying from other authorized purchasers and buying extra coins in the secondary market. So we need more coins for our customers at the DTC level, and we've been doing that. As it relates to the sequential increase in margin at the DTC level, I think that's a reflection of the premiums we're getting. Obviously, we're very pleased with that right now, and you can see the results. We're going to continue to try to outsell the supply if we can.
spk06: As long as we do that, margins are going to be good.
spk01: As a reminder, it is star 1 on your telephone keypad. If you would like to ask a question, we will pause for a brief moment to poll for any final questions. At this time, this concludes our question and answer session. I would now like to turn the call over to Mr. Roberts for his closing remarks.
spk05: Thank you very much. I'd like to thank our many shareholders for joining the call today. Continued thank you for your interest and continued support. And many thanks to our employees for their dedication and commitment to AMARC's success. And we look forward to keeping you apprised of AMARC's progress in the future.
spk01: Before we conclude today's call, I would like to provide AMARC's safe harbor statement that includes important questions regarding forward-looking statements made during this call. During today's call, there were forward-looking statements made regarding future events, statements that relate a marked future plans, objectives, expectations, performance, events, and the like are forward-looking statements within the meaning to the Private Securities Litigation Reform Act of 1995. The Securities and Exchange Act of 1934. Future events, risks, and uncertainties, individually or in aggregate, could cause actual results to differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ, the following, the failure to execute company's growth strategy as planned, greater than anticipated costs incurred to execute this strategy, changes in the current domestic or international political climate, increased competition for AMARC's higher margin services, which could depress pricing, the failure of the company's business model to respond to changes in the market environment as anticipated, general risks of doing business in the commodity markets, and other business, economic, financial, and governmental risks as described in the company's public filings with the Securities and Exchange Commission. The work should believe, estimate, expect, intend, anticipate, foresee, plan, and anticipate Similar expressions and variations thereof identify certain such forward-looking statements, which speak only as of the dates on which they were made. Additionally, any statements related to the 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 questioned not to place undue reliance on these forward-looking statements. Finally, I would like to remind everyone that the recording of today's call will be available for replay via the link in the Investor Select section of the company's website. Thank you for joining us for AMARC's earnings call. You may now disconnect.
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