Good afternoon and welcome to the A-Mark Precious Metals conference call for the fiscal second quarter ended December 31, 2016. My name is Matt, and I will be your operator this afternoon. Earlier today, A-Mark issued its results for the fiscal second quarter and first six months of 2017 in a press release, which is available in the Investor Relations section of the Company’s Web site, at www.amark.com. You can find a link to the Investor Relations section at the bottom of the homepage. Joining us on today’s call are A-Mark’s CEO, Greg Roberts; President, Thor Gjerdrum; and CFO, Cary Dickson. Following their remarks, we will open the call to your questions. Then, before we conclude today’s 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 it will be made available for replay via a link available in the Investor Relations section of the Company’s Web site. Now, I would like to turn the call over to A-Mark’s CEO, Mr. Greg Roberts. Sir, please proceed.

Thank you, Matt, and welcome, everyone. Thank you for joining us this afternoon. As you can see from today’s earnings release our financial results for the fiscal second quarter were strong. We were able to achieve these encouraging results despite operating under moderate market conditions in the precious metal space. While these conditions were consistent with the prior quarter we were able to deliver double-digit sequential and year-over-year growth in nearly every key metric including revenue gross profit, net income and gold ounces sold. All of which partially offset weaker demand for silver products. On top of this, our trading ticket volumes more than doubled in the quarter, driven by the fact that more of our customers are now taking advantage of our online trading portal. All together our financial performance in Q2 reaffirms the advantages of our increasingly diversified business model, which provides us with multiple revenue streams while operating -- offering opportunities for significantly higher gross profit in market environments with increased volatility and demand. Now, before I continue, I would like our CFO, Cary Dickson to walk us through the financial details for the quarter ended December 31, 2016. Cary?

Thank you, Greg, and good afternoon to everyone. Turning to our financial results for the fiscal second quarter and six months ended December 31, 2016. Our revenues increased 18% to $2.13 billion from $1.81 billion in the prior quarter, and increased 39% from $1.53 billion in the same year ago quarter. The year-over-year increase in revenue was mainly due to an increase in the total amount of gold ounces sold and an increase in precious metal prices and higher forward sales which was partially offset by a decrease in silver ounces sold. The higher demand for gold was driven in part by higher sales of industrial products. For the first six months of fiscal 2017, our revenues increased 11% to $3.93 billion from $3.54 billion in the same period last year. The increase was primarily due to an increase in precious metal prices and higher forward sales, partially offset by a decrease in the total amount of gold ounces and silver ounces sold. Our gross profit for fiscal Q2 increased 22% to $9.9 million or 0.46% of revenue, from $8.1 million or 0.45% of revenue in the prior quarter. On a year-over-year basis gross profit increased 74% from $5.7 million or 0.37% of revenue compared to fiscal Q2 of last year. The increase in gross margin was primarily due to an improvement in trading profits. For the first six months of the fiscal year, our gross profit decreased 11% to $17.9 million or 0.46% of revenue from $20.1 million or 0.57% of revenue in the same year ago period. The decrease in gross margin was primarily due to lower premium spreads in our primary products compared to the same year ago period when we experienced atypical volatility and supply constraints, particularly during Q1 ’16. Now turning to our expenses. Our…

Thanks Cary. As we talked about before, we dropped four key metrics to assess the performance of our business. These key performance indicators or KPIs includes a number of gold and silver ounces sold, trading ticket volumes, inventory turnover, as well as the size of our finance book. The first metric we evaluate is the number the gold and silver ounces sold. This metric is important as it reflects the volume of business that we are doing without regard to changes in commodity pricing, which figure into revenue and can map the actual business trends. In the second quarter, we sold 772,000 ounces of gold, which was up 46% from the prior quarter and 10% compared to Q2 of last year. The sequential and year-over-year increase was driven by a higher demand for gold, primarily from our industrial customers. For the first six months of year we sold 1.3 million ounces of gold, which was down 18% compared to the same period last year. The decrease was primarily due to the atypical volatility and supply constraints experienced in fiscal Q1 of last year. During fiscal Q2 we sold 22.8 million ounces of silver, which was up 5% from the prior quarter, but down 31% from Q2 of last year. For the first six months of fiscal 2017 our silver ounces sold decreased 39% to 44.6 million ounces compared to the same period last year. The decrease for both the quarterly and six-month period was primarily due to unusually high demand for physical silver products in the first half of last year. The second key metric we tracked and equally significant measure of our business volume that was unaffected by changes in commodity prices, is trading ticket volume. This metric tracks the total number of orders processed by our trading desks…

I'm sorry, hang on just one moment, we're getting them back on the line. We apologize for the technical issue, we'll have them back on the line in just one movement. Thank you for your patience, we have them back through.

Sorry everybody. Thanks, Thor. The underlying factor in our continuing ability to grow our top-line, expand margins and generate profits irrespective of the conditions in the precious metals market is our diversified business model. As many of you know, our legacy business and physical precious metals trading and distribution, which can be episodic in nature as voluntary demand can significantly influence both positively and negatively our financial results. However, this business has provided us with a solid foundation to diversify and expand A-Mark into other complementary products and services. Like logistic, storage and most recently minting. These areas provide us with additional and more predictable revenue streams and visibility. This diversification was particularly evident in the first half of this year. Where we were able to generate solid financial results, despite the relatively tame market conditions we continued to experience. A key strategic objective for the management team and myself this year was to further diversify our business and expand our capacity. One major initiative in this area is our investment in the SilverTowne Mint. A leading producer of fabricator silver products, which we completed in August 2016. As we expected the mint has been consistently producing in excess of 1 million ounces of silver per month in fabricated products, which we then sell to A-Mark’s customer base. In fact, since we commenced operations at the beginning of September SilverTowne has produced nearly 5 million ounces of fabricated silver products in various shapes and sizes. This allows us to meet unforeseen surges in silver demand during volatile market environments. In addition to increasing our capacity and distribution, we are leveraging the mint’s longstanding fabrication capability. SilverTowne has an extensive coin die portfolio that is helping us to expand our higher margin custom coin programs, including introducing new custom products for…

Thank you. At this time, we'll be conducting a Question-and-Answer Session. [Operator Instructions]. Our first question comes from Greg Eisen from Singular Research. Please go ahead.

Could you share with us what the average spot gold and spot silver prices where that you saw in the quarter compared to last quarter?

Yeah let us pull that up. In the most recent quarter we had an average price of gold of $1257.38 and silver of $18.14. The previous quarter $1352.34 versus $20.01 on silver.

Okay. Regarding the SG&A line, you pointed out some of the expense items which were non-recurring. Could you describe how much of the SG&A increase was actually recurring, kind of increased in permanent overhead?

Cary will help answer that question.

Yeah, I think that when we look at -- for Q2 month-on-month and also year-to-date. I think the best one to look at it is year-to-date, we did look at a couple of investment opportunities last year, one of which was SilverTowne, which we actually acquired. And the biggest non-recurring cost is the cost of the consulting fees we had on both of those projects, which is about $815,000.

That's 815,000 for the six months?

Six months, yeah.

Right.

And the other one is -- the other cost we have which is semi-recurring, but potentially non-recurring cost is the ERP system that we have in place, which we’re continuing to develop and finalize and try to get in place by the first -- next, our fiscal year coming up.

Okay.

For the six months that was up about $400,000. And I think the other one I'll add to that is, which is going to be a -- it’s a new expense that wasn’t there in the past, that’s going to be a recurring expense. It's really just the SG&A related to our SilverTowne operations that we just acquired and that will -- that is part of our SG&A line. But it’s an extensive -- we are always generating revenues from that and that’s offsetting the expense. So, but it is a new part of our SG&A line.

Understood, understood. Okay, regarding the gross profit line, the gross profit was up because of improved trading profit. Could you talk about how much of that was -- what was the involvement of, I guess your value-added products? We’ve talked about those in prior quarters, the increased emphasis on your value-added products, was that a component of the increasing gross profit and gross profit margin and should we see that continuing to grow?

You want to take this one?

Yeah, so the -- yes, the -- I believe you're referring to the Custom program. The Custom program continued to contribute to earnings and incrementally we're up, but we're -- and it was about flat year-over-year. But we do expect us to continue to contribute and we noted the subdued market conditions as the -- those are a little bit less affected, but are affected by those conditions as well. But we do expect those to continue to contribute as well. The only thing I would point out is that, you may have noted our gold volumes rose and we mentioned industrial. The industrial business is contributing some margin to us as well. There has been more demand for a larger bar products and that tends to be a lower gross margin percentage, it's driving some volumes and gross profit as well.

Understood, understood. Could you please repeat the number of inventory turns that you’ve mentioned earlier on the call, I didn’t get that?

Yeah, one movement. Inventory turns were 7.2 for the quarter, versus 6.2 in the prior year.

Got it, got it. Okay. I’ll let someone else go. Thank you. [Operator Instructions]. And we do have another question from Rick Fearon from Accretive Capital Partners. Please go ahead.

I just have a couple of quick questions. One, as it relates to the new facility. Where would you -- where would you peg capacity right now and how much room for growth do we have?

On the SilverTowne facility?

Yes.

Because we have SilverTowne and we have Los Vegas, but I sensed that you’re asking about SilverTowne.

I was, but actually, if you could cover both that would be perfect.

Sure. So SilverTowne capacity is governed a little bit by the machinery we have, as well as hours in the day. Whereas Vegas is -- can be governed a little bit by total dollar volume. So they're a little bit different. But in more specific terms, we’re currently producing about a million ounces a month at the SilverTowne facility. Now that will be a combination of 1 ounce rounds and bars, 5 ounce bars and rounds and 10 ounce bars, as well as we do make some 100 ounce bars at SilverTowne. So the mix of the product will affect how much we can make. But in general terms, we believe, we have capacity with our current configuration and depending on the mix a little bit. We can get up to about 25 million ounces a year or about 2 million ounces a month. So we have about double what we’re currently making, we have available in excess capacity right now that we’re looking to fill, as well as keep a cushion of capacity that we would utilize in kind of an emergency situation or in a situation where there was a big move in metals and it caused a spike in demand, let's say a 24-hour or 48-hour period. We’re also -- we’ve build up a little bit of inventory that we have available, that we’re kind of -- we have in reserve for when demand and premiums were to expand. So all-in-all, I would say, we can get up to producing 2 million to 2.2 million ounces a month, as well as A-Mark would have the ability to sell that, as well as Vegas would have the ability to handle the logistics of it and it's kind of a three pronged component, you have our trading desk, the logistic facility, as well as the mint producing and most of that excess capacity at the mint comes from adding extra shifts and working on weekends.

Okay. And if that spike that you’re referring to Greg, where you see these extraordinary spreads widen and where you’re making literally dollars per ounce?

Instead of cents per ounce. Correct.

So always having that cushion is key, I mean if you're around $2 million per month you really wouldn't have the luxury to seize upon those opportunities.

Yes. I mean I think that if you go back and I mean you followed us from the beginning. So, I mean our big theme is, we want to have optionality on volatility and optionality on capacity. And I think that's really what we're building here and what we're doing is making sure that if you follow us quarter -to-quarter you know that these things can -- these markets factors can change overnight or within a week. So I think that we want to have excess capacity in all areas, whether it be shipping, storage, logistics, our credit lines, our access to capital, our access to finish product, our ability to make product that the marketplace is demanding very quickly and all of those things, the quicker A-Mark can move and be able to offer certain products at certain prices to our customers, we will be our competition and we will take market share away from our competition. And in this we've been pretty consistent and the Mint is just one more kind of spoke in the wheel that we need to make sure that when the opportunity is there we're able to take advantage of it. The benefits of SilverTowne has been, things that we maybe didn't factor in originally when we purchased it is, there were a number of customers that have been loyal, SilverTowne customers for a long time that have continued to buy SilverTowne product through SilverTowne, the old SilverTowne been the customer of A-Mark's as well as we've picked up two new traders from the deal that had been long-term traders at SilverTowne and now work for A-Mark who bring new customers to A-Mark and are exposing A-Mark to new customers and just new opportunities for us. As well as, as I mentioned earlier we…

That’s great. Yeah that’s smooth integration, that’s a great precedent for future acquisitions. I'm glad that's gone so well, Greg. It sounds like some of those customers have translated into financing customers as well and has that also spilled into the storage area or transportation?

Yes, and we use Vegas has a hub for all of our logistics now. We’ve been able to integrate most everything that we had used third parties for before. We have -- our insurance and banking capacities at the facility have grown, so that we can integrate pretty much everything we do. The beauty of that facility is that we finance material for customers at the facility, it’s kind of the consolidating location for hundreds of products that we carry and sell and that our customers carry and sell. The addition of SilverTowne having kind of a staging area for the product to go to, where it is integrated with all of the other products that we offer logistic service as for has been a real benefit, so that you’re not trying to ship products from multiple locations, it allows us to put ten products in one package as opposed to three or four products in three packages. It’s just we're getting some very good operational efficiencies at Vegas. We have introduced some IRA storage business there over the last two quarters and we think that increased storage will -- is one of our -- will be a real growth story down the road. And so, all the pieces are really working together right now.

Right and the last question with respect to capacity, the Vegas facility capacity is less than 50%?

I would say, it depends on specifically what products you’re talking about there, what I mean is that the storage capacity might be at 20% right now, whereas the pick and pack [ph] and the packages might be at 50%, but I will say that we shipped a record almost 58,000 packages in December out of the facility. And the quarter for us was a record quarter for actual small packages shipped by probably 10% to 15% over our previous record months. And we believe that we have the best staff we’ve had there yet and our per employee package productivity is at an all-time high. In fact, the actual number was, we shipped 160,000 parcels in Q2 of '17 and was up significantly from Q2 of ’16. But I would say that you’re asking me, what I think our partial capacity is. If we did 160,000 in Q2 of ’17, I think we can easily do 250,000, maybe 300,000 packages with what we have in place right now. So we have plenty of space to grow there. If tomorrow we woke-up and silver was $13 an ounce, I’m sure we would do 350,000 packages in the next 90 days. So we can handle that. We have the staff to do it. We have some flex staff. We have some, the ability there to also add shifts. And we utilize some part time help where we guarantee them certain amount of hours per week and they in-turn give us an option to take them more hours if we need them, if we get a spike. So we feel pretty good about what we could turn out of there if we needed to.

And presumably the storage is really where you start leveraging the operation, because the additional storages comes with very little incremental cost?

Yes. I mean storage, although it doesn’t pay a tone and it doesn’t -- but also takes very little management, in that, most storage metal comes in and it never leaves and it never moves, it’s just the nature of storage, particularly the IRA business and other storage. It pays us 365 days a year, doesn’t take holidays or sick days, it’s a great revenue stream for us. So we are focused on that, one of our initiatives over the next -- in the next two quarters is to locate an actual Sales Manager for that facility, that can get out and actually promote the capacity we have. We haven’t really been comfortable with promoting that until we felt like we could be very comfortable in this capacity expansion. But we are looking to bring on a dedicated sales and marketing person specifically for that facility.

That’s great. I’ll step off and step on again with another question, just so others can ask questions. But really nice to see this coming together Greg.

Yes. Thanks for your long-term support Rick. I appreciate it.

My pleasure.

Our next question comes from Craig Pieringer from Wells Capital Management. Please go ahead.

You’ve been consistently profitable on an accounting basis, but it seems to me that cash flow, particularly free cash flow has been elusive. Can you talk about how your strategies of diversifying your income stream and logistics and storage and minting, et cetera? What are the cash flow implications, particularly the ability to generate positive free cash flow?

It’s interesting because people often struggle with our cash flows and there is a couple of reasons for that. Just starting at 30,000, remember that this is very much a leverage business and we are net borrower at all time. So in terms of free cash flow, every day we’re looking at what our global cash requirements are and we’re paying down to mitigate our interest expense. Also because of the volume that you see in our revenues, you could see advances and receivables and payables cause significant swings in our cash flows to your point of elusive is a good word to use. Where just simply the timing of advances and receivables even though the channels of our credit are literally 24 hours can cause our cash flows to swing. Prior to having the size of the loan growth that we have today, I used to tell people that you could effectively liquidate our business in 48 hours that at virtually no loss, meaning you could monetize your inventories very rapidly. With the loans that we have today, that not quite true anymore because you have the loans, some of which are demand centers, the longest center is six months, but still again very highly liquid. So when you talk about generating free cash flows, I think the answer is that the way our business is structured the way that we have a leveraged access to capital that we're utilizing all of our resources on a daily basis. But we do have significant reserves in the form of additional availability under our line, availability under our reverse repo facilities for example, lease facilities, et cetera. But yes, our cash flow is difficult to follow in terms of the trends of our business because of all those factors.

And one other thing to add this is Gregg. We also manage our cash flow very careful through our loan books and through the loans we have. As Thor said, they are usually demand loans. We can affect our cash flow by not sourcing new loans. We can affect our cash flow if we need to by raising rates or -- which will cause us to have a little bit less demand on our cash. But one thing great about our business is that we try to make sure that every dollar of capital is invested. And any excess capital or any excess cash that we have, we generally want to put that into our loan portfolios because the return on that is very good. So in areas in times where we can predict where we're going to have cash flow coming or where we get some cash, we like to pay down our lines and put the excess cash into our loan products and not be borrowing for those loan products. So that's another lever that we have if need be that we can affect our cash flow.

Alright. That's very illuminating thank you very much.

Thank you. this does conclude the Question-and-Answer Session. I would like to turn the floor back to Mr. Roberts for any closing comments.

Thank you for joining us today. I especially want to thank our investors for their continued support as we continue to build A-Mark into the global leader in precious metals trading. We look forward to updating you on our next call. Operator?