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spk02: Good afternoon and welcome to AMARC Precious Metals conference call for the fiscal first quarter ended September 30, 2022. My name is Jenny and I will be your operator this afternoon. Before this call, AMARC issued its results for the fourth quarter and fiscal year 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 to the investor relations section at the top of the homepage. Joining us for today's call are AMARC CEO Greg Roberts, President Thor Geerdrum, and CFO Kathleen Simpson-Taylor. Following their remarks, we will open your call to your questions. Then, before we conclude the call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call. I would like to remind everyone 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 the call over to AMARC's CEO, Mr. Greg Roberts. Sir, please proceed.
spk07: Thank you, Jenny, and good afternoon to everyone. Thank you all for joining our call today. Today we reported one of the strongest quarters in AMARC's history with $45 million of net income and diluted EPS of $1.83. As noted in our earnings release, AMARC delivered solid gross profit with a 13% sequential increase and a 79 basis point increase in our gross margin percentage. AMARC also generated a 24% increase in EBITDA and an amazing 9% quarterly return on equity. These results continue to demonstrate the strength of our business as a result of our growth strategy, which has broadened our customer base and further enhanced our fully integrated capabilities. Our direct-to-consumer or DTC segment continues to perform outstanding, contributing over half of our consolidated gross profit during the quarter. We were successful in growing our DTC customer base by an additional 49,000 new customers during the quarter to a total of 2.1 million customers. As we continue to expand our customer reach with our diversified suite of DTC brands that each target their own unique demographic customer. Continued wider premium spreads as a result of heightened demand and supply constraints drove a 9% sequential increase in gross profit and expanded our DTC gross margins by 195 basis points to 9.8% in Q1. As we recently announced, JMB closed the asset acquisition of BGSC with its over 120,000 customers and over $200 million in revenue reported in calendar 21. We have now completed the integration of BGSE as a standalone brand in our DTC segment and look forward to reporting BGSE's contribution to the segment's performance in the second quarter of fiscal 23. The JMB team is leveraging its technology and resources to capture the full potential of our new brand and to drive additional value for this business. Early indications this quarter are that BGSE is exceeding our expectations. Our minting business also remains a key driver of our performance, with production remaining at near record levels. We produced nearly 11 million ounces during the quarter, which was a 56% increase over the same quarter last year. We continue to invest in our minting operations, including our recent acquisition of Silvertown Mint's largest tooling supplier, Marksman Tool and Die, which will provide cost reductions, faster response time for repairs, and more proactive planning for our future tooling needs. We recently purchased an additional furnace to expand capacity and support double blanking operations, and we continue to evaluate the further expansion of both our minting facility and its production capabilities. Now, I will turn the call over to our CFO, Kathleen Simpson-Taylor, to walk you through our financials in more detail. Then our President, Thor Jerdrum, will discuss our operating metrics. Afterwards, I'll provide a further update, and I look forward to taking your questions. Kathleen?
spk03: Thank you, Greg, and good afternoon, everyone. Our revenues for fiscal Q1 2023 decreased 6% to $1.9 billion from $2 billion in Q1 of last year. The decrease was attributable to a decrease in gold ounces sold and lower average selling prices of gold and silver, partially offset by an increase in silver ounces sold. The DTC segment contributed 23% and 26% of the consolidated revenue in fiscal Q1 2023 and fiscal Q1 2022, respectively. Revenue contributed by JMB represented 20% of the consolidated revenues for Q1 of 2023 compared to 23% in Q1 of last year. Gross profit for fiscal Q1 2023 increased 37% to $76.6 million or 4.03% of revenue from $56 million or 2.78% of revenue in Q1 of last year. The increase in gross profit was due to higher gross profits earned from the wholesale sales and ancillary services and DTC segments. Gross profit contributed by the DTC segment represented 55% of consolidated gross profit in fiscal Q1 2023 compared to 54% in the same year-ago period. Gross profit contributed by JMB represented 48% of the consolidated gross profit in fiscal Q1 2023 compared to 44% in Q1 of last year. SG&A expenses for fiscal Q1 2023 increased 7% to $17.8 million from $16.7 million in Q1 of last year. The increase was primarily due to an increase in compensation expense, including performance-based accruals, of $1.0 million, higher advertising costs of $0.7 million, and increase in computer-related expenses of $0.2 million, partially offset by lower consulting and professional fees of $0.5 million and lower insurance costs of $0.5 million. Depreciation and amortization expense for Fiscal Q1 2023 decreased 62% to $3.2 million from $8.3 million in Q1 of last year. The decrease was primarily due to a $5.1 million decrease in amortization of acquired intangibles related to JMV. Interest income for fiscal Q1 2023 decreased 8% to $5.1 million from $5.5 million in Q1 of last year. The aggregate decrease in interest income was primarily due to lower interest income earned by our secured lending segment, and lower other finance product income. Interest expense for fiscal Q1 2023 increased 12% to $6.1 million from $5.5 million in Q1 of last fiscal year. The increase in interest expense was primarily driven by $0.5 billion associated with the company's trading credit facility and AMCF notes, including amortization of debt issuance costs $0.2 million related to product financing arrangements, $0.1 million in interest associated with liabilities on borrowed metals, and this was offset by a decrease of $0.2 million of loan servicing fees. Earnings from equity method investments in Q1 2023 increased 80% to $2.7 million from $1.5 million in the same year-ago quarter. The net increase of $1.2 million was due to increased earnings from equity method investments. Net income attributable to the company for the first quarter of fiscal 2023 totaled $45.1 million or $1.83 per diluted share. This compares to net income attributable to the company of $26 million or $1.08 per diluted share in Q1 of last year. and this was adjusted for the effect of the two-for-one stock split in June 2022. Our diluted EPS for the fiscal first quarter of 2023 is based on weighted average diluted shares outstanding of 24.7 million, compared with 24 million weighted average diluted shares outstanding during the first quarter of last year. This has been adjusted for the effect of the two-for-one stock split that occurred in June 2022. Adjusted net income before provision for income taxes, a non-GAAP financial measure which excludes acquisition expenses, amortization, and depreciation for Q1 fiscal 2023 totaled $61.3 million, an increase of 49% compared to $41.1 million in the same year-ago quarter. EBITDA, a non-GAAP liquidity measure for Q1 fiscal 2023, totaled $62.2 million, a 52% increase compared to $41 million in Q1 of fiscal 2022. Now turning to our balance sheet. At quarter end, we had $64.6 million of cash compared to $37.8 million at the end of fiscal year 2022. Our tangible net worth at the end of the quarter was $339.7 million, up from $321.6 million at the end of the prior fiscal year. And finally, as we announced in our earnings release, AMARC's Board of Directors has reaffirmed its previously announced regular quarterly dividend policy of 20 cents per common share, or 80 cents per share on an annual basis. The initial quarterly cash dividend under the policy was paid in October 2022. It is expected that the next quarterly dividend will be paid in January 2023. The declaration of regular cash dividends in the future is subject to the determination each quarter by the Board of Directors based on a number of factors, including the company's financial performance, available cash resources, cash requirements, and alternative uses of cash and applicable bank covenants. That completes my financial summary. Now I will turn the call over to Thor, who will update us on metrics. Thor?
spk05: Thank you, Kathleen. Looking at our key operating metrics for the first quarter of fiscal 2023, We sold 629,000 ounces of gold in Q1 fiscal 2023, which was down 6% from Q1 of last year and down 2% from the prior quarter. We sold 35.9 million ounces of silver in Q1 fiscal 2023, which was up 28% from Q1 of last year and down 4% from last quarter. The number of new customers in the DTC segment, which is defined as the number of customers that have registered or set up a new account or made a purchase for the first time during the period, was 49,000 in Q1 fiscal 2023, which was down 7% from Q1 of last year and compares to 48,800 from last quarter. The number of total customers in the DTC segment at the end of the first quarter was approximately 2.1 million, which was a 12% increase from the prior year. The year-over-year increases in the customer base metrics were primarily due to organic growth of our GMB customer base. The DTC segment average order value, which represents the average dollar value of third-party product orders delivered to DTC segment customers during Q1 fiscal 2023, was $2,333, which is up 2% from Q1 fiscal 2022. For the fiscal first quarter, our inventory turn ratio was 2.7, which is a 29% decrease from 3.8 in Q1 of last year and comparable with the prior quarter. Finally, the number of secured loans at the end of September totaled 1,082, a decrease of 48% from September 30, 2021, and a decrease of 52% from the end of June. The dollar value of our loan portfolio at the end of September totaled 87.3 million, a decrease of 31% from the end of last fiscal year. Typically, the number of loans increased during periods of rising precious metals prices, and decreased during periods of declining precious metal prices. Numerous CFC loans were paid off during the quarter when the market experienced a material drop in precious metals prices. Our system and controls operated effectively, and we did not incur any related loan losses. That concludes my prepared remarks. I'll now turn it over to Greg for closing remarks. Greg?
spk07: Thank you, Thor and Kathleen. As you can see, we're off to a strong start in our fiscal 2023. and are optimistic that this year will be another period of solid performance for AMARC. Looking ahead, we continue to see positive macro tailwinds, including precious metal supply constraints and elevated demand for our products in both wholesale and retail segments. To build on this momentum and further strengthen our platform, we are continuing to evaluate investment opportunities to expand our geographic presence and market reach while creating value for our shareholders. We are focusing on opportunities that align with our business model and are synergistic for AMARC. We remain optimistic that our proven business model and integrated platform will allow us to realize growth and profitability over the long term. Jenny?
spk02: Thank you, Greg. 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, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold whilst we poll for questions. Thank you. Our first question will come from Thomas Forte of Davidson. Thomas, your line is live.
spk06: Great. So, Greg, Thor, Catherine, thank you. I have a couple of questions. I'll go one at a time. A lot of Really good, impressive numbers in the quarter. Greg, what stood out to me was I think you said that you had 56% higher private mint production. It sounds like you made an acquisition to advance your efforts there. How were you able to achieve such a large growth in your production, and how should we think about your ability to grow the production in the future?
spk07: Well, I think the acquisition we did was actually a tool and dye company locally to where our mint is located, and it was just a small acquisition to make sure that we locked up their expertise whenever we need it, when any of our machines or any of our operations are struggling or we hit a hiccup. So we were very happy to acquire that. I don't believe that – was a contributor to the increase in production. I think the increase in production was something we've been working on for a number of quarters where we have been able to get all of our production operating 24-7 and really maxing out what the very top of our capabilities are, and we were able to stay running you know, with all of our production lines for this quarter. So a testament to Brent and Jamie at Silvertown. They really, you know, hit it out of the park this quarter, and it was particularly good timing for us because we had plenty of demand for the product. And once again, we maximized our performance by having product available to when our competitors did not or were limited in what they had. So I really think, you know, as you have seen over time now, all of these parts of the business that's fully integrated now, really, when they all work together, you know, the potential is tremendous. And I think we, you know, we got that done this quarter.
spk06: All right. So thank you for the explanation. Great. All right, so there's three things that are having an impact on your business or historically I think would impact your business. And I'm trying to understand because I feel like some of these things are moving in different directions. So the first one is geopolitical, especially on a global basis. That seems to be kind of a persistent, I would think, tailwind. And then macroeconomic, I'm not sure to what extent it's a positive or a negative. And then third, it's interesting how well you're managing earnings with the movements in precious metal prices up and down in gold and silver. So how is it that you're able to generate such impressive profits with the movement in gold and silver? Maybe not necessarily favorable. Maybe it is favorable and I'm just misinterpreting it.
spk07: Yeah, I, I think we'll start there. You know, we've always said that volatility in the spot prices is really good for us. And particularly when we have, you know, dips and significant dips, and I would focus that on silver. You know, in this quarter that we're currently reporting, we did have one or two instances where silver made new lows. And that, you know, that really kind of supercharges our demand at the DTC level as well as at the wholesale level because, as we've said many times before, the silver buyers in particular tend to buy the dips. And then, you know, quickly thereafter, we had recovery and then traded up towards recent highs within the quarter. So we just had a very, you know, large range of prices in gold and silver in Q1. And I think that just drove a lot of demand. And I think once again, AMARC was well positioned at all levels to take advantage of that. And I think that's the common theme that we talk about is that positioning ourselves, being ready to take advantage of opportunities when they're there. Now, obviously throughout this quarter, We had a fairly robust quarter across all 90 days. I think we had a few slow weeks in August, but we were very, very active in July, and September was particularly strong for us, and a lot of it had to do with this volatility. I think whenever you see big moves in the price, and I can kind of kind of maybe frame that a little bit. This quarter, Q2 now I'm talking about, you've seen a couple of days just in the recent weeks that gold had a $50 move in the same day, in one day. That's a very significant move for us, and that drives a lot of activity. Silver had two days in the last few weeks where it had a dollar move in a single day. Again, that's the type of volatility that is going to play well for us. And I think it has a little bit to do back to the initial part of your question as it relates to macroeconomic and just overall supply-demand imbalances. As I said a year ago, inflation is good for us. And I said I didn't think it was transitory, and it wasn't. And it continues to drive good things in our business. and we're benefiting from that. The continued polarization and political turmoil, again, very good for us. So, you know, I think I hit everything in your question, but that's it.
spk06: Yes, you did. Yep. So, last question for me, and again, congrats on a very impressive quarter. So, you acquired some of the assets from BGASC. It sounds like you're talking about potential geographic expansion. At a high level, how should we think about your potential future M&A activities?
spk07: I believe you should think about us as being very active. I think we believe there is a great opportunity for us right now. We believe that around AMARC is wider than ever. We do believe that... that the opportunities are presenting themselves because of what we've done with the company. I think, you know, the strength of our balance sheet right now is unbelievable. And, you know, over $500 million in shareholder equity with no long-term debt, I just, you know, we are set up really well to take advantage of opportunities. And we think, you know, we feel really good about this BGSC deal, you know, Early indications are the return on the investment for us will be even quicker than we anticipated. We just believe that our model and our ability to plug these businesses in and move them just into our ecosystem can improve the performance of these acquisitions and And we just feel that we have a very good advantage here. And like I said, I expect us to be very active.
spk06: We're very excited to hear that. And again, congrats to the quarter. Thank you.
spk02: Thank you very much. Your next question is coming from Greg Jeebas of Northland Security. Greg, your line is live.
spk04: Great. Thanks for taking the questions. Hey, Greg, Thor, and Kathleen. Wanted to ask if you're seeing any changing in buying patterns from customers. And also just wanted to follow up on the, you know, congrats on the gross margin improvement and really all-around results on that regard. But, you know, regarding the improvement, wondering if you could just maybe discuss, is it mostly coming from, you know, increased spreads on lower prices of metals? Or if you could kind of discuss maybe that versus more in-house production, seeing higher margins there. or anything on the mix shift front, too.
spk07: Yeah, I mean, I think that those who follow us know that we make a good amount of our gross profit is on silver, and particularly in 1-ounce and 10-ounce and 100-ounce silver products. We make more money on those products if we make them ourselves and manufacture them ourselves, and we collect just a bigger piece of the overall gross profit chain. I think that right now you're seeing a company that has really built out and is touching more wide and broader demographics than we've ever touched before, both at the wholesale level as well as at the retail level at the DTC side. And we're just able... to accommodate more ounces. And I would point to the ounces this quarter, and silver in particular. That was a very big number for us. And we did it. We didn't strain to do it. We have been able to keep the raw metal flowing through our manufacturing businesses. We've been able to avoid logistics and supply chain hiccups that others have had trouble with. And it just says a lot about from our traders to our minting business, to our friends at SMI, and then all the way to DTC. So I think we definitely really, our vision of what we're doing really came together this quarter. And it's certainly, we feel like initially in Q2, we're seeing some of the same same performance. I think that when you talk about where it's coming from and are there any changes, I think I touched on this a little bit last call. We continue to see a very surprising and positive size of purchases at our DTC segment. We're continuing to see very large first-time buys and very large second and third repeat customer business at very large levels. And I would say that of all the things that are different that we feel right now is just a much... When I look at our top individual transactions at DTC for the week or for the month, we're just seeing a large... number of first-time people coming in with very large purchases. Mostly, we're seeing some real positive on gold product that we're able to source, as well as the smaller silver buyers and just the numbers on new users and those smaller invoices are also growing. It's a good time for us and we're very very pleased with everybody at AMARC that they've been able to pick up the slack, and we have not really had any down days, and we've not really missed any of the opportunity, and I think that's just really just great news as it relates to what our employees are able to do.
spk04: Right. Really appreciate all that color, Greg, and great to hear about the strong repeat purchases and strong purchases on new customers, too. I did want to ask, In relation to the short-term borrowing that you guys do to fund metals purchases, are you seeing impact, I guess, from increased rates, or do you expect to regarding kind of that?
spk07: Well, certainly interest rates have affected us, and we do pay a higher rate on our short-term borrowings because it's tied to an index or a benchmark. And I think that we have experienced increased borrowing costs. If you look at the actual metrics and if you dig into our queue a little bit, I would guess, and I haven't looked at the number myself, but I would guess that our actual gross dollars of interest paid probably hasn't fluctuated all that much with the increase because I believe we're just borrowing less money. You know, we've had two really strong quarters back-to-back. We've generated a tremendous amount of free cash, and we're just borrowing less dollars right now, and we're, in essence, self-funding. So it's kind of, you know, we generally say that when rates rise, we should be able to outperform the rate increase, and I believe that's happening right now. Whether it be passing on you know, increased costs to our customers as it relates to where we lend to people, or whether it's just we're not borrowing as many gross dollars because our performance has been exceptional. So, you know, that's kind of everything there.
spk04: Sure. Yeah, that's very helpful. Last one for me, you know, you talked about plans for expansion on the minting facility. Just wondering if you could discuss that a little bit more and kind of the timing around it.
spk07: Yeah, I mean, when we talk about minting, we talk about two different entities. We have our minority interest in Sunshine Mint, and we've talked about that before, and we're very pleased with what Tom Power and Jason and his team at SMI are doing there. And they have worked very hard the last couple quarters to integrate some new machinery and to raise capacity. And AMARC has been the beneficiary of that. We've been able to acquire not only just regular sunshine mint products, but we've also been able to create some higher margin specialty products with SMI. That's working very well. At the Silvertown level, Jamie and Brent are getting everything they can out of our facility. I will say that we have, in the last 60 days, we've acquired some more raw land in Winchester, and we are starting to look at how we can expand in Winchester, Indiana at the Silvertown level, and we think that's going to be a great opportunity for us to at least have plans ready to go in the event that this demand continues and we just need more capacity. So it's all part of the, like I said, the vertical integration, and we want to smartly and cautiously expand our production and what we can have available to sell without getting too far over our skis and grow too quickly. But to this point, I think we're very comfortable with the pace and looking out the next two to three years where we see a clear path to continuing to dominate this space. Great to hear.
spk04: Thanks and congrats again. Thank you.
spk02: Thank you very much. Your next question is coming from Andrew Scutt of Roth Capital Partners. Andrew, your line is live.
spk01: Good afternoon, and congrats on the strong results. Most of my questions have been answered, so just a quick one on cyber metals. We're a few quarters out from the launch, and we've seen some healthy growth, especially in the last few quarters. Do you guys kind of have a clear picture now on what you see as the potential of this business? And also just, I know you talked about potential marketing efforts to drive customers to the platform. Have you guys done any marketing and how has that progressed as well?
spk07: Yeah, we have pretty much finished our testing with the existing DTC customers at JM Bullion. And I think that most of the growth you're seeing is coming from that customer base. I don't think that we've converted as many customers as maybe we hoped we would. I think that's a function of the demographic and the makeup of the JMB customer who has always been a physical metals customer that wants to take delivery, that wants the metal shipped to them. I think that we see some conversion, but I believe that the physical metal customer is probably not the best place for us to be fishing for that type of customer for cyber metals. I think we're going to continue to see steady growth there. We have started to test some marketing outside of the normal channels that you would see JM Bullion or Goldline or any of our DTC brands advertising in, and we have started to test some newer, more tech-related, innovative marketing that we've been able to do to try to touch and convert customers that don't even know who JM Bullion or AMARC is. So we are doing that. We're seeing some results. We look forward to continuing to update everybody on how this goes and happy with the performance. But I would say it's probably going to be a little bit slower than a little slower climb than maybe we initially thought. But the system is working great. The platform is working good. The logistics of managing and servicing the trades is, we have no problem whatsoever. So we have a great platform. I think now is just we're going to need to fish in a little different pond to find customers for cyber metals.
spk01: Thanks for the call, and congrats again on the strong results. Thank you.
spk02: Ladies and gentlemen, if you do have any remaining questions or comments, please indicate so now by pressing star 1 on your telephone handset. Thank you. Okay, we appear to have no further questions in the queue. At this time, it concludes our question and answer session. I would now like to turn the call back over to Mr. Roberts for his closing remarks.
spk07: Thank you very much. I'd like to thank our shareholders for joining our call today. Thank you for your continued support. 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 moving forward. Thank you very much.
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 include the following. The failure to execute the company's growth strategy as planned, greater than anticipated cost incurred to execute this 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 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 other similar expressions and variations thereof identify certain of such forward-looking statements which speak only as of the date 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 those forward-looking statements. Finally, I would like to remind everyone that a recording of today's call will be available for replay link via a link in the investors section of the company's website. Thank you for joining us today for AMARC's earnings call. You may now disconnect.
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