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spk05: Good afternoon, and welcome to the AMARC Precious Metals conference call for the fiscal quarter ended March 31st, 2022. My name is Ali, and I will be your operator this afternoon. Before this call, AMARC issued its results for the fiscal third 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 homepage. Joining us for today's call are AMARC's CEO, Greg Roberts, President, Thor Geerdrum, and CFO, Kathleen Simpson-Taylor. Following their remarks, we will open your call to 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 has been recorded and will be made available for replay via a link available in the investor relations section of the AMARC website. Now, I would like to turn the call over to AMARC's CEO, Mr. Greg Roberts. Sir, please proceed.
spk02: Thank you, Ali, and good afternoon to everyone.
spk07: Hello, thank you, Ali, and good afternoon, everyone. Thank you for joining our call today. Our third quarter was another strong period for AMARC as we generated $54 million of adjusted pre-tax income, or $4.45 per diluted share, with an 8.5% return on equity. On a per share basis, we grew adjusted net income before provision for income taxes 11% sequentially. Macroeconomic factors continue to provide elevated demand and strong tailwinds for AMARC's business, and we remain optimistic as we finish out our final quarter of our fiscal year. As many of you saw from our press release last week, AMARC signed a definitive agreement to increase our strategic investment in Silver Gold Bull, or SGB, providing us with increased exposure to the international direct-to-consumer, or DTC, market. AMARC will acquire an additional 40% of the outstanding equity interest in SGB for approximately $44 million consisting of $34 million in cash and 126,000 shares of AMARC's common stock, implying an enterprise value of $110 million. We have participated in SGB's success and growth over the past several years and see continued growth opportunities for AMARC while leveraging our minting and wholesale sources of supply through an extended supplier agreement with SGB. We also acquired the option exercisable between 18 and 27 months after we close to purchase an additional 27.7% interest in SGB that if exercised would bring our total ownership interest to 75%. The current acquisition is expected to close in the fourth quarter of fiscal 2021. and is subject to the customary closing conditions and regulatory approval. Silver Gold Bull is one of the leading e-commerce precious metals retailers in Canada with revenue of $633 million, gross profit of $41.2 million, and pre-tax income of $26-plus million during the 12-month period ended March 31, 2022. During this same period, Silver Gold Bull's customer base grew by 48%. We are pleased to report that in just over a year since we closed the JMB acquisition, we have hit an important milestone. JM Bullion's cumulative pre-tax income before depreciation and amortization expense has surpassed the cash consideration paid for the JM Bullion acquisition. We continue to remain optimistic about the prospects ahead for JMB and our DTC business. Now, I'd like to turn over the call to our CFO, Kathleen Simpson-Taylor, to walk you through our financials in more detail. Then our President, Thor Jerdrum, will discuss our KPIs and operational metrics. Afterwards, I will provide a further update of our business and growth strategy. Kathleen, take it away.
spk04: Thank you, Greg, and good afternoon, everyone. Our revenues for fiscal Q3 2022 increased 3% to $2.11 billion from $2.05 billion in Q3 of last year. The increase was due to an increase in silver ounces sold and higher average selling prices of gold, partially offset by a decrease in gold ounces sold and lower average selling prices of silver. The DTC segment contributed 28% of the consolidated revenue in fiscal Q3 2022 compared to 6% in Q3 of last year. The increase in revenue from the DTC segment is due primarily to the acquisition of JMB in March 2021. Revenues contributed by JMB represented 26% of the consolidated revenues for fiscal Q3 of 2022 compared to 3% in Q3 of last year. For the nine-month period, our revenues increased 12% to $6.07 billion from $5.43 billion in the same year-ago period. The increase was due to an increase in gold and silver ounces sold and higher average selling prices of gold partially offset by lower average selling prices of silver. The DTC segment contributed 27% of the consolidated revenue for the nine months ended March 31st, 2022, compared to 4% for the prior year nine month period. The increase in revenue from the DTC segment is due primarily to the acquisition of JMB in March of last year. Revenue contributed by J&B represented 25% of the consolidated revenues for the nine months ended March 31, 2022 compared to 1% in the same year-ago period. Gross profit for fiscal Q3 2022 increased 6% to $72.1 million or 3.42% of revenue from $68.2 million or 3.33% of revenue in Q3 of last year. The increase in gross profit was due to higher gross profits earned from the DTC segment, partially offset by lower gross profits earned from the wholesale sales and ancillary services segment. Gross profit contributed by JMB represented 48%. of the total consolidated gross profit in fiscal Q3 2022. For the nine-month period, gross profit increased 58% to $194 million, or 3.2% of revenue, from $123.1 million, or 2.26% of revenue, in the same year-ago period. The gross profit increase was due to higher gross profits earned from the DTC segment partially offset by lower gross profits earned from the wholesale sales and ancillary services segment. Gross profit contributed by J&D represented 46% of the total gross profit for the nine-month period ended March 31, 2022. SG&A expenses for fiscal Q3 2022 increased 54% to $20.5 million from $13.3 million in Q3 of last year. The increase was primarily due to $6.5 million of expenses incurred by JMB, increased compensation expense including performance-based accruals of $1.4 million, offset by lower consulting and professional fees of $0.9 million. For the nine-month period, selling general and administrative expenses increased 78% to $55.9 million from $31.3 million in the same year-ago period. The increase was primarily due to $19.4 million of expenses incurred by J&D, increased compensation expense, including performance-based accruals, of $2.7 million, increased consulting and professional fees of $1.6 million, and higher insurance costs of $0.9 million. Depreciation and amortization expense for fiscal Q3 2022 increased 407% to $7.5 million from $1.5 million in Q3 of last year. For the nine-month period, depreciation and amortization expense increased 865%, to $24.1 million from $2.5 million in the same year-ago period. The increase was primarily due to amortization of acquired intangibles related to J&B. Interest income for fiscal Q3 2022 increased 13% to $5.3 million from $4.7 million in Q3 of last year. The increase was due to higher interest income earned by our secured lending segment partly offset by lower other finance product income. For the nine-month period, interest income increased 22% to $16.1 million from $13.2 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 Q3 2022 increased 2% to $5.4 million from $5.3 million in Q3 of last year. The increase in interest expense was primarily driven by $0.2 million of loan servicing fees, offset by a decrease of $0.1 million associated with our trading credit facilities and notes payable, including amortization of debt issuance costs. For the nine-month period, interest expense increased 11% to $16.3 million from $14.7 million in the same year-ago period. The increase was primarily driven by $0.6 million associated with our trading credit facility and those payables, including amortization of debt issuance costs, $0.7 million related to product financing arrangements, $0.6 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 Q3 2022 decreased 78% to $1.6 million from $7.4 million in the same year-ago quarter. The net decrease of $5.8 million includes a $6.1 million decrease related to JMV a former equity method investment, which is now reported by the company as a wholly owned subsidiary, offset by increased earnings of $0.3 million from our other equity method investments. For the nine-month period, earnings from equity method investments decreased 69%. to $4.3 million from $13.9 million in the same year-ago period. The net decrease of $9.6 million includes a $11.7 million decrease related to JMB, a former equity method investment which is now reported by the company as a wholly owned subsidiary. And this is offset by increased earnings of $2.1 million from our other equity method investments. Net income attributable to the company for the third fiscal quarter of 2022 totaled $37.4 million or $3.06 per diluted share. This compares to net income attributable to the company of $76.6 million or $8.84 per diluted share in Q3 of last year. As you may recall, Q3 of last year included a 26.3 million remeasurement gain on our pre-existing equity interest in JMB in connection with its acquisition. Excluding the remeasurement gain, net income attributable to the company for Q3 fiscal 2021 was 50.3 million. Net income attributable to the company also included 2.2 million of non-recurring costs associated with the JMB acquisition. Our diluted EPS for the fiscal third quarter of 2022 is based on the weighted average shares outstanding of 12.2 million, compared with 8.7 million weighted average shares outstanding during the third quarter of last year. Adjusted net income before provision for income taxes, a non-GAAP financial measure, which excludes depreciation, amortization, acquisition costs, and remeasurement gains for Q3 fiscal 22, totaled $54.3 million, or $4.45 per diluted share, compared to $64.2 million, or $7.40 per diluted share, for Q3 fiscal 2021. The weighted average shares outstanding for the current fiscal quarter were $3.5 million higher than those outstanding in the prior year fiscal quarter. For the nine-month period, net income attributable to the company totaled $95.2 million, or $7.84 per diluted share. This compares to net income attributable to the company of $108.6 million, or $13.2 0.61 cents per diluted share in the prior year period. The prior year nine-month period included the previously mentioned 26.3 million remeasurement gain on our pre-existing equity interest in JMB in connection with this acquisition. Excluding this remeasurement gain, net income attributable to the company for the prior year nine-month period was 82.3 million. Net income attributable to the company also included $2.6 million of non-recurring costs associated with the acquisition of JMB. Our diluted EPS for the nine-month period is based on the weighted average shares outstanding $12.1 million compared with $8 million weighted average shares outstanding during the prior year period. Adjusted net income before provision for income taxes, a non-GAAP financial measure, for the nine-month period totaled $144.4 million or $11.89 per diluted share, which compares to $107.6 million or $13.48 per diluted share in the prior year period. Turning to our balance sheet, at quarter end, we had $28.5 million of cash compared to $101.4 million at the end of fiscal year 2021. Our prior year fiscal year ending cash balances were higher due to our significant planned precious metals purchases in the first few days of July 2021, specifically due in part to the U.S. Mint's release of a new bullion code that was designed on July 1st. Our tangible net worth at the end of the quarter was $271.8 million up from $226.0 million at the end of the prior quarter. Finally, as we announced in our earnings release today, our Board of Directors has declared a two-for-one split of AMARC's common stock in the form of a stock dividend to make stock ownership more accessible to our employees and investors. Each stockholder does record at the close of business on May 23, 2022, will receive a dividend of one additional share of common stock for every share held on the record date to be distributed after the close of trading on June 6, 2022. Trading is expected to begin on a stock split adjusted basis on June 7, 2022. As a reminder, this stock dividend has no impact on any individual stockholder's ownership interest in AMARC. as there is no inherent dilution in this stock's dividend. That completes my financial summary. Now I'd like to turn the call over to Thor, who will provide an update on our key performance metrics.
spk05: Thor? Thank you, Kathleen. Looking at our key operational metrics for the fiscal third quarter and first nine months of 2022, we sold 727,000 ounces of gold in Q3, which is down 6% from Q3 of last year and up 15% from the prior quarter. For the nine-month period, we sold 2.03 million ounces of gold, which was up 3% from the same period last year. We sold 34.5 million ounces of silver in Q3 fiscal 2022, which was up 4% from Q3 of last year and up 8% from last quarter. For the nine-month period, we sold 94.6 million ounces of silver, which was up 20% from the same period last year. The number of new customers in the DTC segment was 108,400 in Q3 of fiscal 2022, which was up 721% from Q3 of last year. In the nine-month period, the number of new customers in the DTC segment was 182,000, which was up 1,121% in the same period last year. The number of total customers in the DTC segment as of Q3 fiscal 2022 was 1,968,200, which is a 20% increase from Q3 of last year. The increase in these metrics is mainly attributable to the addition of the J&B customer base, although it's important to note that the 20% growth in total customers from Q3 of fiscal 2021 to Q3 of fiscal 2022 is due to organic growth and is not attributable to customers acquired from J&B. Total DTC ticket volume, which represents the total number of product orders processed by J&B, Goldline and PMPP increased 292% to 219,924 from Q3 of last year, but decreased 5% in the second quarter of fiscal 2022. For the 9-month period, DTC ticket volume increased 902% to 677,330 from the same period last year. Wholesale ticket volume, which represents the total number of product orders processed by our trading desk, decreased 37% to $28,122 from Q3 of last year, but increased 5% in the second quarter of fiscal 2022. In the nine-month period, wholesale ticket volume decreased 26% to $81,009 from the same period last year. For the third fiscal quarter, our inventory turn ratio was 3.1, which is a 16% decrease from 3.7 in Q3 of last year, and a 6% decrease from 3.3 in the prior quarter. For the nine-month period, our inventory turnover ratio was 9.6, which was down 20% from the same year-ago period. Finally, the number of secured loans at the end of March sold 2,697, an increase of 13% from the end of December, and an increase of 72% from March 31, 2021. The dollar value of our loan portfolio at the end of March 2022 totaled $145.8 million, which is up 15% from the end of December and up 45% from March 31, 2021. 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'll now turn it back over to Greg for closing remarks. Greg?
spk07: Thank you, Thor. Thus far in Q4, AMARC's performance has remained strong as favorable market conditions have continued, keeping us optimistic about the outlook for Q4. I am pleased to report that JMB has successfully launched the CyberMetals online platform where customers may purchase fractional or full ounces of digital gold, silver, platinum, and palladium. CyberMetals customers have the option to convert their digital holdings to fabricated precious metal products via an integrated redemption flow with JMB. These products may be designated for storage by the company or shipped directly to the customer. During our beta testing of the platform during the quarter, we accumulated 745 new customers, processed nearly 1,000 trades, and ended the quarter with $300,000 of assets under management. The CyberMetals platform was commercially launched in early April 2022 and we are very pleased with the level of new account registrants and the traction we have experienced from repeat customers. We plan to expand the marketing efforts to the broader precious metals community and look forward to providing further updates on our progress during the next earnings call. The performance of our minting business was truly outstanding and extraordinary in the quarter. which is critically important during periods when sovereign mints struggle to meet demand due to supply chain constraints. During the fiscal third quarter, our Silvertown mint produced an average of 750,000 ounces of silver per week, up 81% year over year, and achieved a new record level of production with over 1 million ounces of silver produced in a single week. In order to capitalize on this high level of demand, We are evaluating further options in expanding our production capabilities, and this may include an expansion of the minting facility. We also recently completed the conversion to double blanking for one ounce rounds, which added an additional 100,000 ounces per week of capacity at the Silvertown Mint, with an additional 75,000 ounces per week expected by the end of our current fiscal year. In terms of additional strategic investments and acquisitions, we continue to evaluate opportunities within all of our segments that fit our model and can further diversify our revenue stream both domestically and geographically. Our fully integrated business model continues to provide us with a steady access to product, a wide range of wholesale and retail buyers and sellers of precious metals, allowing us to further augment our capabilities and drive strong results for our stockholders over the long term. Operator?
spk05: Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. these holes while we poll for questions. Our first question will come from Andrew Scott, Roth Capital Partners.
spk01: Please proceed. Andrew Scott Good afternoon. Thank you for taking my questions and congrats on another strong quarter. My first question has to do with the number of customers you guys saw through the DTC So I believe active customers tripled quarter over quarter, and I'm sure that's going to be a lumpy number due to market dynamics, but can you guys kind of talk to what you saw with the increased activity across your various platforms?
spk07: Yeah, I'm happy to try to answer that question. I think that the important thing to note is the new customers were up 20% quarter over quarter, and that the quality of the customers is as high as we have seen. I think in total, at the current moment in our Q4, we're over 2 million customers total. I want to stress that the quality of the customers, what we believe is the lifetime value of the customers and the initial order size being significantly higher than it has been in the past, really indicates to us that we're in a time where we're accumulating and attracting very high quality customers that are spending a significantly higher amount both with their initial purchase and their subsequent purchases. You've hit on a point that I was going to discuss anyways that we really are very enthusiastic and very optimistic that the value of the customers we're acquiring right now is going to pay dividends far into the future. The environment is very good. Our marketing efforts at JM Bullion, at Goldline, our investment in Pinehurst, as well as what we're seeing at Silver Gold Bull, just a very healthy, strong quality of customer.
spk01: Great. Thank you for the call. And then just one follow-up for me. As you touched on the large increase year-over-year in your production out of Silvertown and it's like in the quarter you almost had a 25% increase on weekly output getting up to a million ounces a week. So can you kind of talk about how you see the increased product flowing through the various business units and kind of your plans there with 250,000 more ounces a week coming out of Silvertown?
spk07: Sure, this is just part of our overall strategy and our vertical integration and I think that when you see an announcement related to SilverGoldBull that we're increasing our ownership there as well as we negotiated an option to get to 75%, the distribution of our product is very important and our international growth is very important to try to attract new customers around the world that we haven't touched previously. But I believe that when we talk about increased production at Silvertown or we talk about increased production at Sunshine Mint, all of this is tied to our strategy of making sure in the DTC business that we sell as much product as we can physically make. And it's all connected and we look at this on a daily, weekly basis as to where that production is going to go. Certainly, what we see the guys at Silver Gold Bull doing, what we see them doing growing right now, as well as our cyber metals platform at JM Bullion, as well as some other marketing initiatives within our DTC brands, we see demand growing and it's important that we continue to get as much of the sovereign mint products as we can, and the one thing that we can control is to increase the production at our AMARC-owned properties that are producing metals. So I think it's all connected, but I would say that what we see on the horizon for Silver Gold Bull, as well as some other customers that we're working on acquiring right now, Um, we need the, we need the production to keep up with that demand. And, and I think we're doing a very good job of it right now. And, and the million ounces at the Silvertown men, it was, was, was a very important milestone, uh, a great effort from that team there. Um, Jamie and Brent really put together a great quarter there and, you know, have not let us down. You know, when, when, when we're, when we're able to sell and we're able to attract new customers. One of the reasons these new customers are so plentiful and the quality is so high is that our DTC brands right now have had product throughout the quarter where a number of their competitors have not. And that's just allowed us to really bring these customers in. And the 24-7 production at Silvertown and the heightened production at Sunshine has really allowed us to do that.
spk01: Great, thanks for the detail, and I'll hop back into queue.
spk05: Thank you. Our next question is coming from Greg Givas at Northland Securities. Please proceed.
spk03: Hey, good afternoon. Congrats on the strong results, and thanks for taking the questions. Sure, Greg. I guess it's nice to hear that, you know, a solid launch for the cyber... CyberMetals platform in early April, you know, sounds like relative to your expectations is going pretty well. I was wondering if you could maybe talk a little bit more about your marketing efforts there to attract users. Are you providing kind of incentives for existing B2C customers to move over, you know, from JMB, for instance? And could you maybe talk about maybe the split between new customers to that versus existing ones that are maybe coming from JMB?
spk07: Sure. To this point, we've pretty much focused exclusively on existing JMB customers. We haven't done any offerings really outside of those existing customers. As it relates to marketing, in the current fourth quarter, we're doing a number of special offerings. We have a CyberMetal silver one-ounce round that we are – offering that commemorates the launch of CyberMetals. We are also offering some discounted trading options to get JMB customers crossed over and registered on the CyberMetals platform. So far, I think that the launch in April and what we're seeing early in this quarter is is very exciting. I would say that it's exceeding my expectations a little bit. The demographics of what we're seeing is definitely trending younger, and we're getting some very good data from the test and what we're doing with the JMB customers. And we're currently, as we budget for next fiscal year, starting July 1st, we will, around that time, most likely, you know, continue to market to JMB and other DTC customers, but we will start to market outside to try to attract, you know, brand new customers that have not registered or done physical business with us yet. And we are working this quarter on a marketing plan, which, you know, we plan on being very aggressive on this. And, you know, we look forward to updating, you know, investors on these metrics. We're going to keep a real close eye and we're going to be giving some updates on this as we move forward and we think it's, as we've said before, this is a great opportunity for us and I feel super optimistic and very enthusiastic at what we've seen so far. The platform is working great. The feedback from customers using the platform has been great and having it actually out there functioning and attracting new customers i'd say we have you know a number of new ideas that maybe we hadn't thought of three six months ago of ways that we can continue to improve this experience for our customers great yeah i appreciate the uh additional color there and then um you know obviously looking forward to updates um going forward um but but good to hear um if i could uh follow up on your
spk03: in recent investment in silver, gold, gold, or expanded investment, could you maybe talk a little bit more about the breakdown in terms of what new markets you're kind of having exposure to, or maybe not new, but maybe greater exposure? You know, I imagine the Canadian market is a big one. And then kind of a follow-up to that, you know, strategically going forward, do you expect maybe your focus on the investment strategy to be on other B2C brands, or... Are you looking elsewhere? And maybe what types of multiple ranges do you target for those types of M&A opportunities?
spk07: Sure. I mean, we're very familiar with Silver Gold Bull, so this was a bit of a natural for us. We have been involved with them since 2012, so I think 10 years. I've been on the board of Silver Gold Bull, I think, since 2014 in one way or another. The four gentlemen that are the founders of the business are fantastic, have been fantastic trading partners and fantastic partners as it relates to our minority interest in the business. I think they've done a great job. Their growth has been significant and it has been very impressive in light of so many less people in Canada so many less potential customers in Canada as to what we have in North America. Silver Gold Bull has shown a good ability to be probably the largest online broker in Canada and really the dominant player in that business. There's a couple of other precious metals dealers that are potentially bigger but not that are in the same niche as Silver Gold Bull. So we believe that with the increased capacity of product that we're producing as well as our long and strong relationship with the Royal Canadian Mint, I think we can work a little bit harder to get more product to Silver Gold Bull to satisfy even more customers in Canada. I have worked with the Silver Gold Bull team on a platform in Germany that they have started to develop. They've actually done quite a few transactions in Germany. I think it's a good opportunity for Silver Gold Bull to grow there. I believe that we have an opportunity to also grow logistics in Calgary where Silver Gold Bull is located. We're looking at expanding a logistics facility there which will service the customers in Canada. I also believe that some of our other DTC brands, Jamboy in particular, have struggled to satisfy the Canadian customer traffic that they get on their site, so we're looking to possibly do some joint efforts to help satisfy Canadian customers that JM Bullion has not been able to satisfy through Silver Gold Bull. And then finally, Silver Gold Bull does have what I consider a significant presence in Southeast Asia. They have a number of customers in Singapore, New Zealand, and a few other places where we have not had any exposure historically. So I think we look forward to combining the AMARC logistics and product expertise with what Silver Gold Bull is trying to grow down there, and I think it'll be a great opportunity for us. Great.
spk03: Appreciate the caller. I'll pass it on.
spk05: Once again, if there are any remaining questions or comments, please press star 1 on your phone at this time. The next question is from Cy Jacobs, FJAN.
spk06: Hey, Greg, how are you? Great, Cy, how are you today? Doing well. I have a couple few distinct questions, so let me just go through them one at a time. On the SGB acquisition, and I guess it would also relate, or investment, I should say, and I guess it would also relate to the Sunshine Minority stake you took. Am I understanding it correctly that the revenue and thus earnings of it will not flow through to your income statement going forward?
spk07: Correct. At the current 40 plus percent interest, we're going to continue to treat silver gold bulls similar to what we do at Sunshine where we'll account for them in our equity method. So you'll see them in our Q and our K as now they'll be identified as one of our investments and we will account for them that way. But the overall business and the accounting on a month-to-month and quarter-to-quarter basis will not be consolidated into AMARC's financials at the moment. And this is something that Kathleen's talked about before that just under accounting rules this is how we will account for it. And we do not have any real change in control of the business. The founders and the majority owners are still running the business and we're here to support them. Obviously, if and when we exercise the option to take control of the business and get over 50%, that would change and we would look to then you know, bring them in and consolidate them with an accounting for them what would be a minority interest partner.
spk06: And it's very similar to what we do with Sunshine. So the one way that I look at it, which I'd like to get your thoughts on, is you're emitting capital, you know, you have cost of capital to the 30 some odd million dollars of cash, and you're issuing stocks that is going to be greater Shares outstanding, so the cost of capital is reflected in your income statement. There's some cost to that. Actual cost and foregone income or whatever. And there's a greater, bigger number in the denominator of the shares outstanding, but no change to the net income. So from a GAAP accounting basis, it's actually dilutive to earnings, but it widens the gap of, you know, the, you know, sort of the shareholder value being created through the acquisition. It's just not run through the income statement. And in fact, the income statement kind of suffers a little bit.
spk07: Let me just let Kathleen talk to this because she's, Kathleen has been working on this. Kathleen, why don't you Just give a little more color because I probably haven't explained it exactly right to Cy.
spk04: Sure. Hi, Cy. So currently we own 7.5% approximately of Silver Gold Bull, and we record 7.5% of their net income in our books and records in the earnings from equity method investment line. If we conclude and close the acquisition, we'll own 47.5%, and at such time we would then record 47.5% of their net income into our books and records. So we will definitely be funding the financing as we move forward, subject to their continued strong performance.
spk06: Are you talking about the income statement or the balance sheet? It does show up in the income statement. Okay, so it does show up.
spk04: It's an income statement. We do book our percentage share of their earnings in our financials in that line item that we have entitled Earnings from Equity Method Investments, and that's consistent with all of our equity method investments, including Sunshine.
spk06: So Sunshine's increased earnings since you bought them has benefited your income statement, as will SGB going forward.
spk04: Yes. SGD has been benefiting our income statement since we had that ownership interest.
spk07: Okay. If you go to our filings, it's the area where you see investments in company A, B, C, D, and those are where we account for the equity investments, and they do get reflected in our income statements. Now, we do report them, I believe, a month in arrears, so the timing of it is not always exactly quarter to quarter or month to month, but I think obviously the important thing to note, which we've had a little bit of discussion here on the JM Bullion transaction, is that when we did take control of JM Bullion and finished to get 100% of them, we had a mark up in our valuation of what we're carrying the investment at, and certainly we've been carrying the 7.5% investment in Silver Gold Bull at a much lower valuation than what we've just negotiated to pay. And our overall carrying value prior to this transaction was at a value reflective of when we made the investment when the company was much smaller. So assuming things continue and we do complete further transactions with them, you will ultimately see some write-up amount, which is the way we accounted for the JM bullion write-up. So there is some unrealized gain on the balance sheet on these equity investments, assuming that the value of the businesses is growing and they're worth more. We don't really account for that in our balance sheet until we integrate them and they're 100% included in our financials, if that makes sense.
spk06: So another separate question. I wanted to ask about the sort of current really tight market conditions which seem to be benefiting you from a, you know, the prices you're getting versus what spot silver and gold are seem to us to be as wide as they've ever been and wider than they were three months ago, say. Is there any sort of short-term downside to that in the sense that you're unable to fill orders. And I say that out of sort of, you know, I know some friends and acquaintances who are customers of various brands of yours and, you know, have said to me in recent months, especially the last month or two, like the amount they're able to buy when they inquired is less than they want. What they want? Yeah, and they were told that it could, you know, they could ship more in 30 days or something like that. And I'm wondering if it has sort of ship and revenue recognition times extended at all in the JMB and other brand bases in a way that might be affecting revenue?
spk07: No, I mean, Kathleen does a great job of accounting for this, and I will say that when we sell forward future production, it makes her job more complicated because she does have to reverse transactions that have not been delivered. So there is extra work for her. We are, as you have noted, we are... dealing with fewer customers these days than we did two years ago because our equity ownership in a number of the biggest companies are able to account for a larger percentage of our supply. So what we do is we balance what we have physically and what we're making physically and what we're getting from sovereign mints and what we can make at private mints and we're slotting customers in for delivery on a on a future date and so they're there as it relates to JM bullion and gold line and silver gold ball and pinehurst and a couple of our other you know larger customers the reality of the marketplace right now is that they're getting taken care of first and that retail profit or that percentage of profit that they're making, a higher number of ounces are being distributed and we're the beneficiary of that because we're collecting more of the profit that's generated up to the end user. So we are balancing right now smaller customers that aren't happy about having to get in line and maybe book, let's call it, 20,000 ounces of Silvertown's production for five ounce Buffalo bars that they want, we may not be able to slot them in until, call it, July 15th. And we require them to commit. We don't price the metal, but we do ask them to commit in times we ask for deposits. and as we book future delivery, we have a commitment to the customer, and the customer has a commitment to perform to us, but it is an orchestrated, very synchronized dance we do every day where we're looking at our calendar out 90 or 120 days, and we're quoting delivery. Wherever we quote that delivery date is what the customer is expecting. Now, I will say that AMARC continues to have more product and more availability to product at shorter time periods than AMARC's wholesale competitors. Our number one competitor has been quoting September or October delivery. So it isn't just AMARC, it is industry-wide and as you know, that is causing the premiums to continue to be up AMARC is a major beneficiary of those increased premiums. So it is just a function. We've seen it before. We've dealt with it before. I would say we probably haven't managed a forward book quite like this to this size before. And the sustained demand has been longer. But it's not anything new to us. We've managed through this many times in the past.
spk06: So one of the reasons I asked that question, which I guess kind of leads to an additional question, is it seems to me the really great numbers you're reporting about new account openings and in your comments about numbers of transactions and ticket sizes, it all sounds really strong. We know that the margin is really strong, as high as it's ever been, the price you're getting versus spots. And it seemed, in my mind, to add up to a greater percentage increase than what J.M. Bullion just reported in revenues sequentially. Forget about the year-over-year comparison. So I was thinking that there may be some sort of delayed revenue recognition because the account opening, the transaction numbers, all the commentary, the margins all seem so strong, seem stronger than the revenue comp.
spk07: I mean, there could be some timing issues there. I don't really spend too much time on this part of my analysis. I think what's really happening today, which is what I focus on, is that there's no doubt that our proprietary brands in our DTC segment are taking market share away from their competitors right now for the simple reason that that regardless of where the premiums are at, we have more product available for sale on the JM site or at Goldline or at Silver Gold Bull, whereas if you look at a number of their competitors, a high percentage of their offerings are sold out and not available. So I think you have a combination of new customers that are finding us both through our efforts to market as well as that our DTC competitors do not have as much product or have an even longer delayed delivery. And I think that's benefiting us. I think that we are seeing a nice uptick, like I said, in what we think is the average order value and the initial order value. value of a lot of these new customers. I don't believe that's necessarily attributed to us just taking customers from our competitors. I think there is an underlying shift in just who's buying and how big their wallet is and the quality of those customers is very good. And I think it's important to note that not all of our sales at the DTC level right now are necessarily products we're making or even products we're buying directly from the sovereign mints. One of the phenomena's that we've seen in the last quarter was a higher percentage of secondary product that we're buying from other distributors or other wholesalers And obviously, we're paying a little bit higher price on that material if we're buying it on the secondary market. And that may be, at least now, slightly negatively affecting our overall gross profit. But at the end of the day, I have a number in my head that I value new customers at with a lifetime value. And if we're making a little bit less percentage-wise on some of these new customers because of the product mix, To me, that is going to be outweighed with the value of the new customers. It doesn't necessarily reflect in the first transaction, but it certainly will reflect in the lifetime value of those customers.
spk06: Okay, thanks. And last, much more straightforward question is, the press releases tend to give gap, after-tax, EPS per share numbers, but for some reason pre-tax adjusted or cash earnings, which this quarter was $4.45 a share. Is it as simple as multiplying that by the tax rate or one minus the tax rate and say that cash earnings were about $3.60 a share this quarter or am I missing something there?
spk07: I mean, the after-tax net-net was 306. The 445 reflects pre-tax as well as what we're now using as an adjustment that takes into account the intangible and goodwill amortization that we're going through as well as some of the acquisition costs from the JM Bullion deal. We felt that it was good to give all the numbers. But the 306 is... is pure after-tax, the 445 adds back in what we consider a very high depreciation rate going on in this quarter as it reflects really the better success of JM Bullion than what we initially had planned for, and that is causing us to have to accelerate some of the amortization and depreciation as it relates to the JM Bullion transaction.
spk06: Right. So you know, Bloomberg, when it quotes estimates on stocks, quotes the adjusted per share number that analysts are using. So I think there's, since that's the estimate that's floating out there per share, I think it should be provided because it's basically that 445 taxed is what.
spk07: Yeah, I mean, we're explaining it in the press release and I think if you look at the analysts, The analysts were predicting a $2 EPS, and that $2 was reflected of an after-tax number, which is comparable apples to apples to our 306. So I'm not familiar with what Bloomberg is doing, but I'll certainly take a look at it.
spk06: Bloomberg tends to quote the adjusted number, not the GAAP number, the 210 or 209, whatever is actually the adjusted number from analyst expectations. So it would be the 445 tax.
spk07: I mean, to me, I look at it as how much cash were we made in the quarter and how much we have in the bank versus what we started with. And obviously the 306 is at some point the tax payment is going to go away and the 306 is counting the non-cash charges, which at the end of the day, I think the 445 is a little bit more reflective of what we're actually keeping and what our cash is that we're generating. But we are working on this presentation, and certainly if there's ways that we can refine it or ways that we can make it better, we will continue to do that. But I do point to the queue tomorrow and as well as the press release, and I think we We try our best to give as much information out there as we can, and people that are using it to forecast what we're doing or report on what we're doing, I hope that they're able to digest it and that we're making it clear enough for them to use the numbers properly as opposed to quoting something that is inaccurate.
spk06: Okay, thanks, Greg. Thanks for all the answers. Sorry for all of us.
spk07: No worries. Always great to talk to you.
spk06: Okay.
spk07: Thanks, Greg.
spk05: If there will be any final questions or comments, please indicate so now by pressing star 1. Your next question is coming from Tom Forty from Davidson. Please proceed.
spk02: Great. Thanks for taking my question. For efficiency's sake, I'll ask both my questions at once. So, Greg, can you talk about at a high level the pros and cons of operating your business when prices of gold are elevated for an extended period of time? And then second, Greg, we appreciate your current thoughts on inflation and how that's impacting your business.
spk07: Sure. I mean, the price of gold, as we've talked about many times, does not, on a day-to-day basis, is not something we spend a lot of time on because we're fully hedged. I can say that the level of volatility in both gold and silver in the last 60 to 90 days has been incredibly good for us both in our results and how I believe the fourth quarter has started off. Our quarter we're reporting here actually started out a little bit slow in January and we had a little hangover I think from December which again we talked about last time was very strong. February was better than January and March was better than February so we have seen a significant uptick and it is, in my opinion, very much reflected on the volatility of gold. I think you have gold in the last 30 days has had about a $150 range from low to high. Silver has had about a $3 range. So that is very good for us. As usual, we had a significant drop on Monday of this week where gold was down quite a bit and silver was down, and And as we usually report, one of our busiest days of the month and of the last 30 days. So when prices drop, we generally tend to have much higher volumes and much busier as people try to buy the dips. The inflation question, again, I've talked about it before. Inflation is very good for us. Higher interest rates. are generally good for us. I think it's very interesting to note that gold and silver have continued to perform fairly well this year, year to date, whereas the equities and particularly Bitcoin and some of the cryptos have really been lockstep in a very poor performance. The volatility and the questions as it relates to what the Fed is going to do about inflation. I found yesterday's comments to be continued denial of a problem that is really there. There is a clear political balance right now to say that we're really sorry for everybody that's paying twice what they paid a year ago for stuff, but that we're on it and everything's going to be great. I haven't heard a solution. If they really wanted to stop inflation, they would have raised interest rates 100 basis points yesterday. but they didn't, and they seem to think that a series of 50 basis point rises in interest rates is going to just solve this problem, and personally, I don't see it. Obviously, they're very smart at the Fed. They know what they're doing, but I don't see this slowing down, this inflation issue. What I do see is that a Fed trying to balance a November election and trying to be dovish as well as as say they're tough on inflation, but I don't see it. So this is all very good for our business and continues to drive our buyers and drive people that don't trust the Fed and are not trustworthy as it relates to what their dollar is going to be able to buy six or 12 months from now. So to me, it's just business as usual.
spk02: Great, thank you.
spk05: At this point, that concludes our question and answer session. I'd now like to turn the call back over to Mr. Roberts for his closing remarks.
spk07: Thank you very much. I appreciate everybody joining us today. Many thanks to our employees for their dedication and commitment to AMRCC's success. I look forward to keeping you apprised of AMARC's progress in the future and thank you very much again for joining today.
spk05: Before we conclude today's call, I would like to provide AMARC's safe harbor statement that includes importance, cautions regarding forward looking statement 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, performances, events, and the like are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchanges 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 included 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 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 this commodity markets and other business, economic, financial, and governmental risks as described in the company's public filings with the Securities and Exchanges Commission. The words should, believe, estimates, expect, intend, anticipate, foresee, plan, and similar expressions and variations thereof, 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. And finally, I would like to remind everyone that a recording of today's call will be available for replay via a link in the Investors section of the company's website. Thank you for joining us today for Airmark's earning call. You may now disconnect.
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