Good afternoon, and welcome to A-Mark Precious Metals conference call for the fiscal third quarter ended March 31, 2018. My name is Lynn, and I will be your operator this afternoon. Before this call, A-Mark issued its results for the fiscal third quarter and nine months of 2018 in a press release, which is available in the Investor Relations section of the company's website at www.amark.com. You can find the 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 will be made available for replay via a link available in the Investor Relations section of the company's website. Now I would like to turn the call over to A-Mark's CEO, Mr. Greg Roberts. Sir, please proceed.

Thank you, Lynn, and welcome, everyone. Thank you for joining us this afternoon. During the fiscal third quarter, we continue to execute on our plan to expand our platform and increase our market share. And while the precious metals market environment remained at levels that are truly unprecedented, we were still able to take advantage of attractive trading opportunities and achieve further growth in our finance business. To briefly illustrate the unprecedented market environment, A-Mark's physical silver ounces sold during the third quarter dropped 46% as compared to the same quarter last year from 20.9 million ounces to 11.4 million ounces and dropped 42% from 65 million ounces to 37.9 million ounces for the first 9 months of the fiscal year over the comparable prior period. As I've talked about in our prior calls, an increasingly important area of our business is our finance portfolio, which continues to perform well. This was demonstrated in Q3 by the 46% year-over-year increase in the total number of secured loans outstanding from 2,138 to 3,124 as well as the 18% year-over-year increase in the aggregate value of our CFC loan portfolio, which went from $92.7 million to $109.5 million. Importantly, the growth in our loan portfolio also helped drive a 25% year-over-year increase in interest income to $4.1 million. In addition, we saw steady improvements in our TDS storage business with a number of both gold and silver ounces in custody up double digits, both sequentially and year-over-year. Putting all this together, our diversified platform and business model provides us with additional sources of income and predictability for our overall business. This helps to mitigate the effects of the continuous subdued market conditions for small coin and bars that we have experienced throughout fiscal 2018. Before I talk more about our operational progress, I'd like to invite our CFO, Cary Dickson, to walk us through the financial details of our fiscal third quarter and our first nine months of 2018. Then our President, Thor Gjerdrum, will discuss key operational metrics for the periods. Afterwards, I will return to talk more about our operational progress and initiatives as well as our outlook for the balance of fiscal 2018. And with that, I turn it over to Cary. Cary, take it away.

Thank you, Greg, and good afternoon, everyone. Turning to our financial results for the fiscal third quarter and nine months ended March 31, 2018. Our revenues for fiscal Q3, 2018 increased 15% to $1.99 billion from $1.73 billion in the same year ago quarter. For the first nine month of the year, our revenues increased 3% to $5.84 billion from $5.66 million in the same period last year. The increase in the -- for the fiscal third quarter of 2018 was mainly due to an increase in gold ounces sold, gold prices and forward sales, offset by lower silver ounces sold and lower silver prices. For the nine month period, the increase was mainly due to an increase in gold prices and forward sales offset by a decrease in the total amount of gold and silver ounces sold. Gross profit for the fiscal third quarter of 2018 increased 1% to $7.4 million or 0.37% of revenue from $7.3 million or 0.42% of revenue in Q3 of last year. For the nine month period, our gross profit decreased 6% to $23.6 million or 0.41% of revenue from $25.3 million or 0.45% of revenue in the same year ago period. The increase in gross profits in the third quarter of 2018 compared to Q3 of last year was primarily related to gross profit from our recently acquired direct sales segment, Goldline, and increased trading profits, offset by lower silver volume and margin resulting from continued subdued market conditions. The decrease in gross profit for the nine month period was primarily due to lower overall volume and margins due to subdued market conditions compared to the prior year ago period, offset by gross profits from our direct sales segment. Turning to our expenses. Selling, general and administrative expenses for the fiscal third quarter…

Thanks, Cary. Turning to our key operational metrics in the third quarter and first nine months of fiscal 2018. Looking at our first key metric, gold and silver ounces sold, which represents the ounces of metal we sell and deliver to customers during the period, excluding any ounces recorded on forward contracts. This is an important metric because it reflects the volume of business we are doing without regard to changes in commodity pricing, which figure into revenue and can mask underlying business trends. During the third quarter, we sold 618,000 ounces of gold, which is up 64% from prior quarter and up 7% from fiscal Q3 of last year. For the nine months fiscal -- of the fiscal year, we sold 1.3 million ounces of gold, which was down 30% compared to the same period last year. Turning to silver. During Q3, we sold 11.4 million ounces of silver, which is down 5% from the prior quarter and down 46% from Q3 of last year. The second key metric we track is trading ticket volume, which tracks the total number of orders processed by our trading desk in Europe and the U.S. In periods of high volatility, there's generally increased trading in the commodity markets and increased demand for our products, which translates to the higher business volume. During fiscal Q3, our trading ticket volume decreased 5% to 28,869 tickets from the prior quarter and increased 5% from Q3 of last year. For the nine month period, our trading ticket volume increased 5% to 89,016 tickets compared to the same period last year. The third key metric we evaluate is inventory turnover, defined as the cost of sales during the period divided by the average inventory during the period. As many of you know, inventory turn is a measure…

Thank you, Thor. Building up my earlier comments, we continue to focus our efforts on initiatives and activities to further diversify and strengthen our platform. Perhaps the most important of these initiatives was our acquisition of Goldline, which we acquired last August, which is dramatically expanding our retail distribution. While the integration and optimization of Goldline has been challenging than initially anticipated, we are now implementing certain measures to optimize the subsidiary structure and expand its marketing programs. Additionally, we expect the benefits of our optimization measures to be in full effect starting in the new fiscal year. It's worth pointing out, however, that if you exclude Goldline from our third quarter results, A-Mark was profitable on a pretax basis. We continue to believe that Goldline presents us with a number of opportunities. We remain optimistic about the long-term potential for this subsidiary due to the sale synergies it provides us and to up sell and cross sell our expanding suite of services to Goldline's 150,000 clients as well as their prospective client leads. In parallel with this, in the rest of our operations, we are continuing to plan and judiciously invest in strategic growth areas to further diversify our business and offerings. Our overachieving goal is to ensure that we are ready and in a strong position to capitalize on profitable opportunities when the market and conditions improve. To that end, during the third quarter, we launched our new 24/5 online trading platform. Integrative in both our portal and trained API, this unique offering provides A-Mark clients with extended access to our robust trading portal, featuring real-time pricing, all in an effort to better serve our growing needs across any time zone. We are actively marketing this service to new and existing customers, and although we have just launched…

[Operator Instructions] And our first question comes from Sarkis Sherbetchyan with B. Riley FBR. Please go ahead. Your line is now open.

Yes, good afternoon and thanks for taking my question. You spoke about the integration and optimization of Goldline as it's been more challenging than anticipated. Can you maybe dive into a little bit more detail as far as optimizing the structure and the marketing programs you just mentioned?

How much time would you like me to take on it? Yes, of course. I -- we have been diligently working to find the right size for the Goldline model. Just as an example, the amount of sales that Goldline can make to the retail public is directly influenced by the environment out there that has been what's going on in the macro world. Their clients are much more sensitive to political change. They're very sensitive to threats against what they believe are certain rights. And that really -- those outside influences tend to motivate Goldline customers to purchase as well as new customers to make their initial purchases. Historically, Goldline had a model that relied extensively on radio and TV advertising. And as an example, in the 12 months ended June 30, 2017, prior to A-Mark's acquisition, their marketing and advertising expenses exceeded $10 million on an annualized basis. We believe that quite a bit of that marketing and advertising today is ineffective. And we have been working to work those numbers down as it relates to not only the growth spend from an advertising perspective as well as the efficiency of that advertising. I believe that we are very close through the renewals and expirations of certain advertising contracts that our target advertised spend where we think we will get the best return for our money is in the $500,000 per quarter range or $2 million annually, which is significantly lower than what had been spent historically. On an overall OpEx basis, kind of looking at things the same way, June 30, 2017, 12 months ending, Goldline's overall cash OpEx was in the $23 million range. And we believe that currently, the optimal OpEx is probably around $9 million annually. And we believe that we're very close to…

No, that was very helpful. Good color there. If I may kind of ask around. The optimal path you mentioned for Goldline OpEx now down to a range of about $9 million annually, does that change the kind of, call it, the annual retail sales outlook you provided when you acquired the asset? I think the number was between $75 million to $120 million, depending on market conditions. Can you maybe talk about what that $9 million annual OpEx range could support from a sales standpoint?

I think that we're looking at probably closer to $50 million to $60 million annually is probably the right size in this environment that we think is doable. I think that what we are very close to understanding is what level of business can we do at the right margin. There's always more business to do out there at lower margins. A company like JM Bullion is probably doing -- they're doing hundreds of millions of dollars. Their product offerings are different, and they are doing it at a different profit margin level. I think what we believe is the right level in this environment is probably around $50 million annually. Obviously, it would be much lower OpEx than what we've projected in the past. It doesn't mean that if things were to turn in the environment tomorrow that the infrastructure of Goldline couldn't handle $100 million. In fact, I think, even with our cuts and even with the infrastructure we currently have in place and the $9 million OpEx, I think if the market was to change, what would change would be the order size would be bigger. What's challenging right now is that the reason -- the number of transactions isn't down so much, but the actual order size is down. So with higher precious metals prices or more volatility or more enthusiasm in the purchases, the order size will be bigger, which it doesn't cost us anymore to sell 25,000 in an order than 10,000. So I think that we feel that we're going to size the business and size the OpEx and the size the marketing to be profitable at what we think we can be profitable at a $50 million run rate at a top line number. And we should be there within the next month or 2.

That's also very helpful. And maybe switching gears here. If we think about the recent volatility in the financial markets clearly causing some turbulence, any read through on what that means with regards to precious metals volume growth and/or kind of price volatility if it's been maybe impacting your spreads in either direction? And then kind of an adder to that is we saw the calendar quarter silver ounces sold from the U.S. Mint increased. Just wondering if you're seeing any kind of impacts from those trends.

Sure. Let's -- those are both really good questions. Let's start with the first one with how the volatility we saw in our Q3 affects us. On a -- what we look at here from a real positive note is that we had a short period in Q3 of extreme volatility in the equities market, and we -- and it lasted for a week to 10 days. And it was a -- it seemed to be driven by a number of things; the potential trade tariffs, the threat of North Korea, the -- other areas that seemed to affect the equities we saw came together for a few days or a week or 10 days. And the great news is that all of A-Mark's business lines performed well in that volatility, and we did see increases in some volumes, in some spreads, even some increases for a few days of Goldline, that were a little bit unusual as it related to the size of some transactions. Goldline had some -- in that week had a few sales in the high 6-figure range. So you did see -- we did see that the business performed very well. The problem was there was no carry-through. That volatility, although proving that the business is going to be very profitable when those conditions exist, there was no follow-on. There seemed to be a day or two of articles online or in the newspapers about the Vick's and the Credit Suisse meltdown of their fund, and there were a lot of things that drove some volatility fears. But it just -- I didn't seem to sustain itself. So the one thing to keep in mind is that gold and silver buyers are very comfortable right now. They're very happy with what the president is achieving.…

The U.S. Mint products.

U.S. Mint products. The issue with the U.S. Mint today is very simple. Our cost on U.S. Mint 1 ounce silver coins is about $2 an ounce. In comparison, we sell wholesale a SilverTowne 1 ounce round between $0.40 and $0.50 premium over melt. A Canadian Mint product sales a 1 ounce product, we paid the Canadian Mint around $1.60 an ounce premium over. What has happened in the small silver market is the willingness of retail buyers to pay the very top price premium for a U.S. silver 1 ounce coin has dropped negligibly, and that's why you're seeing such low numbers on the U.S. Mint on their reported monthly numbers. And not only is the demand way down, which you can see from our numbers in total ounces sold, but whatever is getting sold is shifting to the lower premium products. There's a lot of overhanging supply right now in silver products, both at the U.S. Mint and at the Canadian Mint as well as the lower private mint products. There's plenty of product out there. And we're not seeing -- although, as you said, there was a small increase in the U.S. Mint numbers month over month, it really isn't anywhere close to that demand that we have seen historically for the U.S. Mint. And our purchases continue to track percentage-wise, historically, around the numbers that we've always had. We generally purchase between 20% and 30% of whatever the U.S. Mint produces in silver, and those numbers are consistent. So if the mint numbers go up by $100,000, we're going to sell an extra 20,000 ounces. But it's -- but that demand for that U.S.-made product and that U.S. buyer is just -- they're not firing right now. We are seeing some increases in ounces outside of the U.S., particularly in Europe; we're seeing some increases in silver, nothing substantial. But for us, our biggest market is the U.S. And historically, one of our biggest profit numbers has been through silver. And I mean if you just look at our nine month numbers, we go from 65.5 million ounces sold a year ago, nine months, to 38 million in this period. I mean, at a very minimum, we usually make $0.10 an ounce. I mean that's a big driver as to why our performance is down in just our silver ounces sold as our GEP is down $4 million in nine months.

Our next question comes from Robert Maltbie with Singular Research. Please go ahead. Your line is now open.

Hi, Greg. Hi, Thor. How are you guys doing? So it looked like a good quarter to us. The top line, it had some good healthy growth, so congrats, both good. Wanted to ask about the gold, your increase in ounces sold. What do you think drove that? Increased market share? Increased volatility? I mean I know it's hard to tell. But what's your take on that?

Well, it's interesting. The last nine months has been -- there's been a -- in hindsight, a very obvious shift in precious metals buyers. And if you look at what happened, generally, gold buyers are a little higher net worth and are a little more institutional and certainly, much bigger as it relates to dollar volume. And gold is traditionally a hedge against crisis and a hedge against inflation, a hedge against ForEx uncertainty. And gold does serve, from an investment standpoint, a different purpose than silver. Now silver will also respond favorably to economic changes as it is an industrial metal that's used for things other than investment. But for the last 9 to 12 months since the election, what we're seeing right now, which is clear as the day, is that the precious metal investment dollars are being driven by higher dollar volume trades, and they're being driven by higher actual bigger investors. And what's really dropped off is the small silver buyer who is buying; let's call it, $2,000 to $3,000 at a time. Now there's a huge quantity of those buyers, but those buyers aren't buying silver right now, and they're in a position where they just aren't gold buyers because their purchase amount, their ticket amount doesn't really work with gold. I was at a conference about three weeks ago where an analyst from HSBC was discussing where the precious metals market is today versus pre-election. And there was a very interesting metric that he threw out that I really didn't grasp, but I was unaware of. Clearly, you can look at all the mints and all the sovereign mints, and you can look at A-Mark's numbers, and you can look at other companies that deal in silver, and it's fairly obvious, the silver demand…

So silver might be a little bit of a head scratcher/aberration, maybe pick up soon, who knows.

Yes. I don't know if it's price. I don't know if silver was at $23. If you'd see that trigger bind, which sometimes happens, I'm fairly certain just with my knowledge of what goes on with our customer, JM Bullion, their volume tends to really be driven by dips and drops, so I'm fairly certain if you saw silver at $13 next week, you would see our silver ounce counts increase dramatically. But if you look at it, there's not a real called action on silver right now. It's not in the news. There's not that same financial volatility that gold is somewhat tied to. And silver is traded in a fairly narrow range, so it's clearly stagnant right now. But we've seen these things turn. I'm not going to say that the ounces aren't going to go down from here or stay the same, but we've -- we can see dramatic increases, very quickly, we've seen historically in silver. And it tends to happen very, very rapidly, whereas I think gold right now, clearly, you just look at all these numbers and particularly, in the institutional level, there's definitely been a fairly -- it's been a few quarters that we have seen these numbers increasing in gold, not in what we deal in but in the overall gold market, which, I think, is bullish long term.

Okay. And a couple of questions, I'll hop back into final questions. Regarding your secured loans, it seems there's some pretty strong growth in that segment, in that product. And would you say -- what are your thoughts on the impact of some more rate hikes this year on that? And are you seeing any penetration of that product into your Goldline customer base?

Yes. As I said a few minutes ago, we have introduced a leveraged CFC product at Goldline, and it's a product that focuses on customers who have existing metal that are willing to send that metal to us at our Las Vegas storage facility and enter into a -- open a storage account with us, which is a good ancillary benefit to A-Mark from Goldline. And then take either create a line of credit that they can use for anything with CFC or use that line of credit or that borrowing to purchase more metals. And we have, as I said, that just really got going the last couple of weeks of April and the first week of May here. And we are cautiously optimistic that we have smoothly integrated this new product, and we believe that it's a product that Goldline has that their competitors don't. And we're hoping it gives them a competitive advantage, and it allows them to grow their top line sales, which is what we're very focused on right now. So -- and as far as interest rates, most of our CFC loans are six months loans, so we do adjust our interest rates. We're charging either up or down based on our cost of funds and what's going on in the interest rate markets. And we have been able to increase our overall CFC rate that we're getting over the last six months as well as you can see increase the gross value of the loan as well as the number of loans. And we feel we're in very good position right now to continue to grow this. We think that looking out over the next four quarters, the $109 million that we're reporting right now, I'm very comfortable that we -- if everything else remains equal, price of gold, price of silver, rates, I do see easily a 15% to 20% growth over the next 12 months in that area of our business. As well as we are -- A-Mark has been working and continues to work on alternative financing for that particular business line, we're currently using our own working capital, as well as our existing working capital credit lines. But we are exploring other ways to finance that business and feel like we're -- we found some alternatives that we think will be very good for us long term, and we're exploring those now.

It appears we have no questions at this time. I will turn the program back over to Mr. Roberts for his closing remarks.

Thank you for joining us today. We appreciate your continued support, and we look forward to updating you on our next call. Operator?