Good afternoon, and welcome to A-Mark Precious Metals Conference Call for the Fiscal Second Quarter Ended December 31, 2019. My name is Rob, and I’ll be your operator this afternoon. Before this call, A-Mark issued its results for the fiscal second quarter 2020 in its press release, which is available in the Investor Relations section of the company’s website at www.amark.com. You can find a link to the Investor Relations section at the top of the homepage. Joining us for today’s call are A-Mark’s CEO, Greg Roberts; President, Thor Gjerdrum; and CFO, Kathleen Simpson-Taylor. Following their remarks, we will open the 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 A-Mark’s website. Now I’d like to turn the call over to A-Mark’s CEO, Mr. Greg Roberts. Please go ahead.

Thank you, Rob, and good afternoon, everyone. Thank you for joining our fiscal second quarter 2020 earnings call. Q2 was highlighted by a double-digit growth and interest income and stabilized operating expenses, which helped to drive the second consecutive quarter of net income profitability. This consistent performance is due to our diversified platform of products and services, as well as the cost optimization measures we implemented last year. One of the strong growth areas of our business is secured lending, which continued to perform well in the second quarter, as demonstrated by the record number of loans outstanding at quarter end, which was 93% year-over-year to a record 3,725. Before I provide an update on our individual segments and outlook, I'll turn it over to our CFO, Kathleen Simpson-Taylor, who will walk you through our financial performance for the second quarter and six months ended December 31, 2019. Kathleen?

Thank you Greg and good afternoon everyone. Our revenues for fiscal Q2, 2020 decreased 4% to $1.06 billion from $1.1 billion in Q2 of last year. The decrease in revenues was primarily due to lower forward sales and a decrease in the total amount of gold and silver ounces sold offset by higher gold and silver prices. For the six-month period, our revenues decreased 5% to $2.54 billion from $2.67 billion in the same year ago period. The decrease was primarily due to lower forward sales and lower silver ounces sold offset by an increase in higher gold and silver prices and higher gold ounces sold. Gross profit for fiscal Q2, 2020 decreased 2% to $8.1 million or 0.8% of revenue from $8.3 million or 0.8% of revenue in Q2 of last year. The decrease was primarily due to lower gross profit from the wholesale trading and ancillary services segment offset by higher gross profit from the Direct Sales segment and higher trading profits. For the six-month period, gross profit decreased 2% to $16.5 million or 0.6% of revenue from $16.8 million or 0.6% of revenue in the same year ago period. The decrease was primarily due to lower gross profit from the wholesale trading and ancillary segments, offset by improved gross profit from the Direct Sales segment and higher trading profits. Looking at our expenses, SG&A expenses for fiscal Q2, 2020 decreased 3% to $7.9 million from $8.1 million in Q2 of last year. The decrease was primarily due to lower operating expenses incurred by the Direct Sales segment of $0.1 million, lower consulting expenses of $0.2 million and recoveries of insurance claims of $0.2 million, which were partially offset by increased overall compensation costs of $0.2 million. The lower operating expenses incurred by the Direct Sales segment is…

Thanks Kathleen. Shifting gears to our operational metrics for the second quarter and six months of fiscal 2020. We sold 428,000 ounces of gold in Q2, which is down 26% from the prior quarter and down 3% in Q2 of last year. For the six-month period, we sold 1 million ounces of gold, which was up 3% in the same period last year. Turning to silver, we sold 14.1 million ounces in Q2, which was down 33% in the prior quarter and down 30% from Q2 of last year. For the six month period, we sold 35 million ounces of silver, which was down 9% in the same period last year. Wholesale Trading ticket volume our second metric, which represents the total number of product orders, processed our trading desks decreased 16% to 30,554 tickets from the prior quarter and decreased 7% in Q2 of last year. For the first six months of fiscal year, trading ticket volume was up 3% to 66,802 from 65,020 last year. The third key metric we evaluate is inventory turnover, defined as the cost of sales divided by the average inventory during the relevant period. Inventory turnovers measured how quickly inventory is moved during the period. For the second quarter, our inventory turn was 3.3, which was down 27% from 4.4 in the prior quarter and down 15% from 3.9 in Q2 of last year. For the first six months of fiscal 2020, our inventory turn ratio with 9.1 compared to 9.5 last year. Despite this quarter moderate streamlines of physical demand levels quarterly net income represents almost profitable quarter since September of 2018. Finally, the number of secured loans at the end of the quarter totaled 3725, which is up 4% from the prior quarter and at 93% from Q2 of last year. The dollar value of our loan portfolio totaled $152.3 million, which is at 1% from the prior quarter and at 45% from Q2 of last year. That concludes my prepared remarks. I now turn it back over to Greg and talk about the progress we've been making on key operational initiative. Greg.

Thank you, Thor. As you can see from the financial results, A-Mark continues to benefit from its diversified platform and business model. Consistent with our last quarter conference call the strategic measures we implemented last year have increased the efficiency of A-Mark’s overall operations while reducing some specific cost, enhancing the end customer experience and improving profitability at A-Mark Global Logistics. In addition to our improved incremental financial performance, our team continues to pursue strategic initiatives to promote new business developments and identify additional revenue opportunities with our customers. Our Secured Lending segment continues to stand out amongst our three segments, reflected by both the level of growth and profitability it contributes to A-Mark’s overall business. We ended the second quarter with a record level of loans and overall portfolio which exceeded $152 million. In our Retail segment, the metal buyback initiative we launched in July is performing well. It is centered around technology and AMGL and provides a high quality customers experience and is supported by our class leading logistics. We continue to invest in strategic growth areas to capitalize and further increase our market share within our industry. We are focusing on expanding our secured lending segment to respond to favorable trends in the market, as well as driving technology initiatives for increased operational and financial efficiencies across our business. In summary, we are encouraged by our operational and financial performance in the second quarter and first half of fiscal 2020 giving the increased optimism about our prospects for the remainder of the year. We believe our competitive position, robust platform, expanding customer base, diversified vertical business model, and product offerings will continue to position us to drive growth and improve profitability. Rob, please provide the appropriate instructions for the Q&A.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Chris Sakai with Singular Research. Please proceed with your question.

I want to just - had a question on the Secured Lending portfolio that the loan growth just wanted to kind of get a better understanding what's driving that growth?

Well, I think that we did have some increased Precious Metals prices, which over the last three or four months, so that's going to increase some activity as customers have the ability to borrow a little bit more against their portfolio or against their collateral if they choose to. I think the other thing that we should keep in mind is that we had a big drop off of loans about 15 months ago, which would have been in August or September of 2018. And we did have silver prices drop, which caused us to actually have to liquidate some loans. And so the growth since then has been a little bit of catching back up, as well as the volume and the pace of the loans has increased a little bit in our Q2 from what it was the previous quarter. So I think it's just a combination of things, but we're working very hard to promote this product and to originate loans, as many loans as we can, as well as some progress we've made on storage and different locations for storage, which just makes it a little bit easier for us to onboard loans.

And then one question I guess it's in the current quarter. But with all this stuff going on now with the Coronavirus, are you guys seeing an increase there in profitability?

I mean, I think we're optimistic on this quarter, most of this particular crisis has occurred in January. So that would be in our Q3. I think January benefited from two things. At the very beginning of January we saw some increased volatility and some increased activity due to the Iraq situation. And then we did see for a few days last week and this week, we did see some sell off in the equities markets due to the fear of the virus. That fear appears to have abated because of the equities have gone back to positive territory. But certainly, January, we feel we benefited from some macro environment issues that were going on in January, which would not be reflected in this report.

[Operator Instructions] Our next question is from the line of Richard Fearon with Accretive Capital Partners. Please proceed with your questions.

It's impressive to see the improvement in SG&A and it sounds like there's still a little bit noise in this past quarter with severance charge. Is that fair to say?

Yes, I mean, we're still trying to size our retail direct sales segment properly. I think we did. There is some activity and noise as you say in this quarter that happened in November, where we did reduce some more SG&A. We did have another round of letting some people go that we didn't feel were long-term productive for us or we're going to be long-term positives. So we continue to weed out that portion of the SG&A, and we did have a few other costs cutting initiatives throughout the whole company that Kathleen has been spearheading, and she's been working hard on that. And we'll see some more of that activity this quarter. So just trying to make sure we're careful about sizing the company, watching expenses that we can control. We're very happy with our staff right now. We're very happy with our team. We feel like the team is well positioned long-term whether business continues to be challenging and a little bit slow as it has been in the last 12 to 18 months. But also we're very well positioned in the event that we get some tailwinds and we need to manage increased volume. So for us, there's always a balancing act between the talent that we've invested in as well as expenses that we incur to continue to promote our brand and keep us able to handle increased volumes if they present themselves because it's very difficult for us to just flip a switch and turn things back on if we turn something off too soon. So I think we can say that with Kathleen's help for and I are seeing more and more analytics and data and we're looking at a number of things closer every week, just to be sure that we're tweaking and our plan is still sized properly for where we're at. And so far as you can see from this quarter, and how things are progressing in our start of Q3. And we feel like we have a pretty good handle on that. And I think our overall productivity and our overall gross profit that you're seeing reported here for Q2 was as Thor said it was one of our better quarters in quite some time. And I would say from a quality of earnings standpoint, we had more - I would say better positive contributions across the company than maybe we've seen over the last few quarters where one segment excelled and another one really did not, I think the quality of these earnings were quite healthy for us this quarter.

I always felt that one of the nice things about A-Mark historically is that even in times of low volatility the company was able to generate a profit. And then the company went out made a couple of acquisitions and there were some integration issues and particularly, I think it sounds like right-sizing Goldline some of the assets you brought in and ensuring that you could once again turn a profit. Do you feel like that aspect of things is now behind you or is there still some benefits to be realized going forward in terms of right-sizing things, reducing costs and creating that sort of predictable stream of revenue that will cover costs, provide profits, and then in times of high volatility, provide extraordinary profits.

I think there's still some work to be done. I think we're always looking at areas of our business or products or things that may not be as profitable today as they were before. And I think we're particularly careful right now with analyzing, which products and services A-Mark is offering. And we're doing a really good job right now with Kathleen's help of analyzing specific product categories or specific areas of our business and just really looking at making sure that we're spending the right amount and that our margins in those areas are good. As it relates to the retail segment and Goldline, one of the differences with Goldline than we've had historically as a pure wholesaler is that the retail public is a little more choppy and a little less predictable. So I think where we're at now is where we've continued to hold on just some marketing and advertising areas in the Retail segment in anticipation of this being an election year and historically times leading up to elections have been good for Goldline. So we are still taking a little bit of a wait-and-see approach the next four to five months to see how things shake out, who the democratic candidate will be that will be up there against the current administration, and so I think that we're careful with that. I would say that, we really didn't see too much activity or increased enthusiasm throughout this whole impeachment thing. So it's not like we were benefiting from anything yet. But I think there is some possibilities that you will see some more volatility in the equities market and probably a little more activity in our - in Goldline’s customer base as you as you get closer to November. So, I guess we made the cuts we think we should make, and we're holding on to a little bit of capacity or a little bit of just waiting to see what happens here. So I hope that answers the question.

I guess maybe to simplify the question is Goldline still a drag or is - are you kind of at a breakeven level hoping that it begins turning a profit with the election coming up?

Yes, I think we've gotten Goldline to a point where if you factor in all of the business that Goldline is doing on its own, as well as the - what we call cross benefits between the units, whether it be logistics, whether it be trading, whether it be CSC finance, I think that if we look at - we and management tend to look at Goldline macro is to how it affects the whole business and the benefits that some of the other business lines are getting from having Goldline. And if we factor all of that in, I think we're very close to a breakeven at Goldline. So I think that was kind of our first step to make sure that if we factor in the whole benefit to the company, get that to a breakeven. And then of course, the next step would be to get Goldline to profitability as a standalone.

And it always seemed to me that on the retail side, one of the interesting things about A-Mark is that you physically took possession of the gold, and certainly with the advent of ETFs, a couple decades ago, but the extraordinary growth over the past decade that is an alternative in accessing exposure to this asset class, but when there's a lot of concern about the future, it would seem those who like gold would also like physically taking possession. Is there a message that's being communicated at the retail side to retail customers that this is one of the things that really differentiates what Goldline and A-Mark together are doing?

I think that I can speak for Goldline, I can't speak for the rest of our customers that are in essence we sell to a dealer who then sells to the public. I think that certainly there's a wide range of what causes or stimulates a gold buying customer to buy. I think what I heard you say, which I would agree with completely is that in times of peace and in times of low volatility, and in times of when there isn't much fear in the market, an ETF is easy, and people gravitate towards it. And that is a definite headwind on anybody that's trying to sell physical metal because you're not really afraid that there is counterparty risk, you're not really afraid that the ETF is going to blow up and the Gold is not going to be there. And you don't spend too much time looking at what kind of a drag or what kind of a load, the ETF is charging you to basically buy gold and put it in storage for you. So in those times, the ETF is probably a little more competitive to us. And it's just easy for customers to go there. I think when things start to scare gold buyers that they might actually have to spend their gold or that they might actually have to barter with it, or they might actually need it for protection. I think you've seen the pendulum kind of go back to either our customers who are pitching physical ownership, it helps storage and it certainly is going to help Goldline. I mean, I do believe that, I've heard a number of things from our customers out there, and I've heard pitches before that you can try to make a correlation that, you know if your Apple phone is no longer able to pay for your coffee in the morning, and you don't have any cash in your pocket, that having something that's tangible that you can barter for your coffee is important or if the virus comes and makes it impossible for us to pay for things, but having small gold coins or small silver coins to barter is a big protection that might be prudent, and that those are the extremes that kind of we deal with every day. And we're not really in the business of telling people how to how to manage their risk and fear gauge, but it's out there in our business. So I think you're here the point you're making and I think you know you are accurate that these are things that in times of crisis people pay attention to in times of relative where everything's going well, it may not be as important to certain people.

Right, and we saw that back in 2008, 2009, we would hear it certainly in our industry financial players wanting to stock their vaults with bars of gold, because that fear factor and it does seem like the fewer players out there actually providing this service like A-Mark as they fall away, fall by the wayside provides really unique opportunity when that fear gauge hits that point, and people are starting to look for that kind of hedge.

I think you're spot on that. I think that A-Mark’s ability to provide logistics so that a customer can get metal to A-Mark at our Vegas facility and monetize it quickly, the ability for us to store metal for people easily when they want to. And then, the ability to finance your metal if you need to move quickly, or you need to take advantage of a situation or you're forced into needing liquidity. I think that that along with, the relationship we have and the great liquidity we have with our banks. I think these are all things that in times of crisis are going to, make A-Mark stronger, and the barriers of entry are very difficult these days. I think that, certainly 2008/2009 was a period where you saw all of this happening. And I think that the key to remember is our customers are much more active when they're worried about protecting their dollar from becoming $0.60 as opposed to buying gold at $1 to make it worth it – hoping it will be worth $1.5. So I think, it's important to note that we do much better when people are just looking for a safe place to put assets, whether it be to avoid negative interest rates, which is a big deal out there or to keep the profits they've made in equities, and then just looking to hold something that holds its value. So, I think that's kind of what we've always dealt with and we've been - we are in a prolonged period of growth and good economic times here in the U.S. And so, we're just trying to do everything we can, as you said, to stay in the game and try to make money no matter what the environment is, but this quarter, we're reporting is a little bit more normalized to what we saw three or four quarters ago, but this is still fairly quiet comparatively to what we've seen in the past. So we just, we feel we're very well positioned for that and we're trying to make sure that we are smart and we make money in any environment. And then take advantage of - if the market gives us some bigger wins.

Well, that makes sense. And just seems like where you - do you have control of messaging and communicating with me is very attractive proposal to physically hold - own the gold versus some sort of derivative of that gold. And is that throughout the retail network it will have to do sort of half of messaging - just it seems like, especially when you had to prolong prosperous times and people aren't necessarily thinking about Armageddon maybe the end of the world. There will be a price to pay for such a long period of prosperity and it won't feel good. And people, the average retail investor in gold basically understand that during those times, it's going to feel a lot better when you own something tangible. And everyone's questioning everything, and its kind of those, and we know the plan is to when it will be, but if that message communicating [indiscernible] and important but I know you've been working with Goldline to include everything they're doing and quote the right-size and make it profitable. And it's nice to see that acquisition turn out as its been down the road. And I had quick questions and I guess the first relates to the transformation that we might need several years ago under your stewardship Greg, you started focusing on a higher margin ancillary businesses that’s dividing the profit today those who get trading? Are there any other [indiscernible] answer or initiatives that are underway that that equal to sort of adding to this higher services provided by the company?

Yes, I mean, I think we see an opportunity to continue with technology. I think that there's continued ways for us to make the moving of precious metals easier for customers, whether it's a customer selling back to us, or a customer buying from us and whether it will be with our online portal or with our new website at CFC. I think technology is still something that we're very aware of that can help our business. I think that there's a lot more opportunity for us with our lending business. And I think you can see with that growth, there's just a lot of opportunity for us to continue to grow that loan portfolio which is very good for our bottom line, it's very consistent. And I think we are still very much focused on growing our logistics and storage business. I think - there continues to be strong barriers of entry for our competitors to get into that. And we've certainly made some good progress there and where it's continuing to be profitable and a little more profitable for us recently. So, I think that's probably where we've see the most opportunity. I don't see any other magical new products or services out there that we're missing. I will say that we have made a great deal of progress at our SilverTowne mint subsidiary that the quality of what that the mint is able to turn out is just exponentially better than it was 2, 3, 4 years ago. We've been able to pick up some new equipment very favorably and take advantage of some buy opportunities to invest in some new capital improvements there and we are turning our product today that is as good as any mint in the world. So I'm very pleased with that. I think that will open up some new opportunities for us to make some higher quality higher margin products and that's something that we're focused on. So overall every week we’re looking at every single unit and trying to add new things to our list of ways to expand it. And we feel pretty good about all of our prospects right now.

That's great, thanks. Thanks for those answers and I guess the last question I had just relates to - I brought this up on past calls. And it's just that preparation for when the time is right and the company has proved what it can do in times of volatility to go to market and see what the market might value end up as in sort of the private market they never say private or strategic buyout market. And how you're thinking on that way [indiscernible] these aren’t best time to do that just because in the corporate pattern, then effective that the companies in general [indiscernible] preparations that can be made or things that can be done to have the company ready for that kind of event. And is that part of your thinking that that might be a good exit scenario?

Yes, I think that's always in our mind. I think we're always trying to be prepared for what's to come and trying to not be too fixated on what's in the past. It's good when our crystal ball is really clear. And sometimes when the crystal ball gets cloudy, it can be little more challenging, but I think we're always feel like we're prepared for a change in market conditions. And I've been doing this for 40 years now. And the one thing that I can say with certainty that happens all the time is when our markets turn and when the macro-environment changes and people’s attitudes change and their risk appetite changes, it happens overnight and I've seen it 10, 12 times in the last 40 years. You never have any notice of it. And it's like, the light switches on and you wake up the next day and something is different or something is changed. So, I think that's something we're always managing. So, thank you very much Rick, thanks for the comments and the questions. And Rob, Do we have anybody else?

Yes, we do. [Operator Instructions] The next question we have is from the line of Jayme Wiggins with Palm Valley Capital.

I reviewed some transcripts from quasi competitor, INTL and I was trying to focus on comments related to the metals division. It looks like you've seen strong growth there since they launched their electronic trading platform in 2017. And I was just wondering if it's had an impact on your trading volumes and maybe if you could just describe how your platform differs from theirs

Well INTL has a precious metal segment, which is in our world of competitors so they are there Their overall business though is not, precious metals is a small portion of their overall business. Also within their metals business is a base metals division, they also do base metal. So they're not - we don't come across them all that often we actually do quite a bit of business with them. So we're buying and selling with them. Their platform is a little bit of a peer-to-peer platform on certain, bigger products on a wholesale level. And I think that - we've seen it, we look at it. There is business to be done there. I don't know that to this point I would say they've we lost business because of them, I would say there's a chance we've actually do more business with them than we did a couple of years ago. So I think, they're good for the market. But I think their business and when you look at their transcripts and their business, they have a lot of different things. They have a brokerage business, they have an options business, they have wealth management business. So they're a little a little, they are not quite so focused on precious metals, like we are.

Yes thanks for that color. I was just - they do report, the gold ounces or the gold equivalent ounces but they trade and it seems like it's kind of been creeping up looks like it's tripled maybe over the last three or four years. So it's good to hear that it's not eating into your business too much and if there…

I mean, they're very - they're much more of a scrap type business or a refining business on the precious side. They do a lot of that around the world in different countries that have the need to convert gold from one form to another or to refine it or to port it or to move it around. So they do a lot of financing and they do it very well. They're very good company, but their growth in that area generally has to do with the geographical location of where they're doing the business and what's going on in those areas. And we're just not global that way. We're just not doing business in small countries or around the world we're much more North American focused.

Okay, good to know. And then just to A-Mark specifically, have you guys disclosed roughly what percentage of your trading volume occurs electronically now versus over the phone?

I don't believe we do. We do have it internally, we look at it. We do not break it out in our reporting or our Qs of how much it is. I can say that, from where we started three or four years ago without any electronic trading or any portal at all, a bigger and bigger percentage of our trades are running through our portal. And I would I would say that but it's still not, it's still not the majority of our trades. But it certainly is growing and it's in our case, our portal is great for customers they do a lot of small trades every day. So they might hit our portal every 15 minutes and buy five ounces of gold and 100 ounces of silver and they might do 30 or 40 trades a day. So that - the portal is very useful for that and it's good for us from allowing our live traders and our phone trading to be done on a little bit larger transactions which is good for us. So we continue to grow it and we continue to open it up to more clients. And we continue to take advice and take input from our customers to try to make it better. It's a definite to what we call one of our IT focuses.

Thank you. At this time, this concludes our question-answer-session. I'd now like to turn the call back over to Mr. Roberts for his closing remarks.

Thank you, Rob. Thanks, everyone for joining our call today. As always, we appreciate your interest and continued support. We look forward to keeping you apprised of our company's progress. Have a great afternoon or evening. Thank you very much.

Before we conclude today’s call, I would like to provide A-Mark’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 A-Mark’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, risk 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 the strategy; changes in the current domestic and international political climate; increased competition for A-Mark’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 risk 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 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. 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 A-Mark’s earnings call. You may now disconnect.