A-Mark Precious Metals Inc
NASDAQ:AMRK
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A-Mark Precious Metals Inc
Earnings Call Analysis
Summary
Q1-2024
In Q1 2024, A-Mark Precious Metals reported revenue growth of 31% to $2.5 billion, yet excluding $660.1 million of forward sales, revenue actually saw a 5% decrease caused by a reduction in gold and silver ounces sold, despite higher average selling prices. The company's net income plummeted by 57% to $18.8 million, with EBITDA also falling by 51% to $30.4 million. Declines were seen in gold and silver sales, down 21% and 15%, respectively, and new direct-to-consumer (DTC) segment customers decreased by 20%. Despite these challenges, total DTC segment customers grew by 16% year-over-year to approximately 2.4 million, thanks to acquisitions and organic growth.
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Good afternoon, and welcome to A-Mark Precious Metals Conference Call for the Fiscal First Quarter Ended September 30, 2023. My name is Jenny, and I will be your operator this afternoon. Before this call, A-Mark issued its results for the fiscal first quarter 2024 in a 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 home page.Joining us today 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 the A-Mark's website.I would now like to turn the call over to A-Mark's CEO, Mr. Greg Roberts. Sir, please proceed.
Thank you, Jenny, and good afternoon to everyone. Thank you for joining on our call today. As you can see, our first quarter results demonstrate the strength and scalability of our fully integrated platform to generate profitable results even during slower market conditions. Despite facing a less favorable macroeconomic environment and softened levels of demand compared to recent quarters, we still delivered $30 million plus of EBITDA and diluted earnings of $0.77 per share and continued to grow our direct-to-consumer customer base.Consistent with our commitment to generate shareholder value, the company also repurchased a total of 171,268 shares of our common stock for $5 million during the first quarter, bringing our total treasury stock to $14.8 million. We continue to view our share repurchase program as an attractive investment opportunity for the company and another way to deliver value to our shareholders. Finally, we amended our trading credit facility during the quarter, resulting in increased liquidity and the reclassification of debt to long-term.With that, I will now turn the call over to our CFO, Kathleen Simpson-Taylor, to walk you through our financials in more detail. Then, our President, Thor Gjerdrum, will discuss our key operating metrics. Afterwards, I will provide a further update on our business and growth strategy and welcome your questions. Kathleen?
Thank you, Greg, and good afternoon, everyone. Our revenues for fiscal Q1 2024 increased 31% to $2.5 billion from $1.9 billion in Q1 of last year. Excluding an increase of $660.1 million of forward sales, revenues decreased $75.8 million or 5%, which was due to a decrease in gold and silver ounces sold, partially offset by higher average selling prices of gold and silver. The DTC segment contributed 13% and 23% of the consolidated revenue in fiscal Q1 2024 and fiscal Q1 2023 respectively. Revenue contributed by JMB represented 12% of the consolidated revenue for Q1 of 2024 compared to 20% in Q1 of last year.Gross profit for fiscal Q1 2024 decreased 36% to $49.4 million or 1.99% of revenue from $76.6 million or 4.03% of revenue in Q1 of last year. The decrease in gross profit was due to lower gross profits earned from both the wholesale sales and ancillary services and DTC segment. Gross profit contributed by the DTC segment represented 43% of the consolidated gross profit in fiscal Q1 2024 compared to 55% in the same year ago period. Gross profit contributed by JMB represented 36% of the consolidated gross profit in fiscal Q1 2024 compared to 48% in Q1 of last year.SG&A expenses for fiscal Q1 2024 increased 23% to $21.8 million from $17.8 million in Q1 of last year. The increase was primarily due to an increase in consulting and professional fees of $2 million, an increase in compensation expense including performance-based accruals of $1.2 million, higher advertising costs of $0.4 million, an increase in insurance costs of $0.3 million and an increase in information technology costs of $0.2 million.Depreciation and amortization expense for fiscal Q1 2024 decreased 12% to $2.8 million from $3.2 million in Q1 of last year. The decrease was primarily due to a $0.5 million decrease in amortization of acquired intangibles related to JMB. Interest income for fiscal Q1 2024 increased 20% to $6.1 million from $5.1 million in Q1 of last year. The aggregate increase in interest income was primarily due to an increase in other finance product income of $0.7 million and an increase in interest income earned by our Secured Lending segment of $0.3 million.Interest expense for fiscal Q1 2024 increased 60% to $9.8 million from $6.1 million in Q1 of last fiscal year. The increase in interest expense was primarily due to an increase of $3.2 million associated with our trading credit facility due to an increase in interest rates as well as increased borrowing and the AMCF notes, including amortization of debt issuance costs as well as an increase of $0.5 million related to product financing arrangements. Earnings from equity method investments in Q1 2024 increased 1% to $2.71 million from $2.68 million in the same year ago quarter.Net income attributable to the company for the first quarter of fiscal 2024 totaled $18.8 million or $0.77 per diluted share. This compares to net income attributable to the company of $45.1 million or $1.83 per diluted share in Q1 of last year. Adjusted net income before provision for income taxes, a non-GAAP financial performance measure, which excludes acquisition expenses, amortization and depreciation for Q1 fiscal 2024 totaled $26.8 million, a decrease of 56% compared to $61.3 million in the same year ago quarter. EBITDA, a non-GAAP liquidity measure, for Q1 fiscal 2024 totaled $30.4 million, a 51% decrease compared to $62.2 million in Q1 fiscal 2023.Turning to our balance sheet. At quarter end, we had $48.2 million of cash compared to $39.3 million of cash at the end of fiscal year 2023. Our tangible net worth at the end of the quarter was $421.7 million, down from $436.8 million at the end of the prior fiscal year. As Greg mentioned, we amended our trading credit facility during the quarter, resulting in increased liquidity and a reclassification of the debt to long-term. The facility now matures in September 2025 and provides for automatic annual renewals. A-Mark's Board of Directors has continued to maintain the company's regular quarterly cash dividend program of $0.20 per common share. The most recent quarterly cash dividend was paid in October. It is expected that the next quarterly dividend will be paid in January 2024.That completes my financial summary. Now I will turn the call over to Thor, who will provide an update on our key operating metrics. Thor?
Thank you, Kathleen. Looking at our key operating metrics for the first quarter of fiscal 2024. We sold 495,000 ounces of gold in Q1 fiscal 2024, which was down 21% from Q1 of last year and down 39% from the prior quarter. We sold 30.4 million ounces of silver in Q1 fiscal 2024, which was down 15% from Q1 of last year and down 33% 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 39,100 in Q1 fiscal 2024, which was down 20% from Q1 of last year and down 57% from last quarter. Approximately 32% of the new customers from the last quarter were attributable to the acquired customer list of BullionMax in June 2023.The number of total customers in the DTC segment at the end of the first quarter was approximately 2.4 million, which was a 16% increase from the prior year. The year-over-year increase in total customers was due to organic growth of our JMB customer base as well as the acquired list of BGASC and BullionMax in October of 2022 and June 2023 respectively. The DTC segment average order value, which represents the average dollar value of products ordered excluding accumulation program orders delivered to DTC segment customers during Q1 fiscal 2024 was $2,440, which is up 5% from Q1 fiscal 2023, but down 26% from the prior quarter.For the first fiscal quarter, our inventory turnover ratio was 2.5, which was a 7% decrease from 2.7 in Q1 of last year and a 22% decrease from 3.2 in the prior quarter. Finally, the number of secured loans at the end of September totaled 803, a decrease of 26% from September 30, 2022 and a decrease of 9% from the end of June. The dollar value of our loan portfolio at the end of September totaled $99.2 million, a decrease of 1% from the end of last fiscal year.That concludes my prepared remarks. I'll now turn it over to Greg for closing remarks. Greg?
Thanks, Thor. [Technical Difficulty]
I do apologize, everybody. I'm not too sure where that music has come from. Just bear with me 2 seconds while I try and sort the technical issue out. Is everything okay?
Yes, I'm sorry. We had a problem with the phone. Where did I leave off?
So we got to your closing remarks, Greg, but did you want me to run the Q&A and see if we have anybody in the Q&A?
Yes.
[Operator Instructions] Your first question is coming from Lucas Pipes from B. Riley Securities.
My first one is just on the demand that you're seeing in the market today. Obviously, there's been a lot of geopolitical uncertainty. It seems like demand is firming up, but it would be really good to kind of get your take on the market and what might have changed since the September quarter?
Sure. I think we did indicate on our last call that we did see some lower demand for product. And as you have noted before, we did see some compression of our premiums which did affect our gross profit percentage. I think that there has been an ongoing sentiment in the marketplace that we're not -- our consumers and our customers seem to be a bit unsure as to where precious metals' prices are going. Throughout the last 60 days, we've seen some significant increase in the spot prices of gold and silver. Also over the last 60 days, we've seen a number of dips that have resulted in significant increase in demand. So I think you have a combination of things going on here right now.We definitely have an increased supply, particularly in silver. And you combine that with some uncertainty and some choppy demand, you're going to see some compression in premiums. I think at the moment, you have had gold twice over the last couple of weeks test new highs and get very near all-time highs. The all-time high in gold in U.S. dollars is around $2,060, and we did test that number a couple of weeks ago. I think there needs to be some conviction in the marketplace as to whether or not we're going to see a breakout to new highs or if we're going to see a retreat. I think in the quarter we're reporting right now, we did see significant activity and significant uptick in demand when we did see some dips in prices -- on spot prices. So I think it's a combination, but I think that kind of -- I hope that answers your question.
That's helpful. And then I apologize, I didn't see the margins in the Wholesale and DTC segments and didn't have the time to dig further into that. But can you remind us what the margins were in the first quarter? And how you would expect those to trend, the gross margins here in the second quarter? And not sure if you want to venture into a longer kind of medium-term outlook, but I would appreciate your perspective on that.
I mean, I think in the quarter we have just finished, the one that we're reporting on right now, we did see a lower gross margin. And we are -- as we enter this quarter, we're experiencing some similar market conditions as we did last quarter. But I would say, from a positive note, I believe the company is continuing to outperform the market conditions. And I think that we're investing in the business, we're growing the business and we're seeing the results that we would expect in the market conditions.I think that as I look forward, there to me, and doing this for the last 40 years, I do see a number of macro issues continuing to pile up that I believe would be favorable to our business. Whether they materialize or not or how they have an effect on our business, I don't -- my crystal ball isn't quite that clear, but I do like the way things are setting up right now. But we are going to need to see a pick-up in demand. And obviously, you can see from the spectacular results we had last fiscal year and particularly the results we had in Q1 of last fiscal year and Q4 of last fiscal year, the company when given the opportunity, will perform and has a very high ceiling on what performance can be.But as it relates to micromanaging what's going on this quarter and exactly what's happening today or tomorrow or next week, as we have said before, our business is very volatile. I wake up every day and look at the news and look at the price of gold and the price of silver and there's a lot of things that go into whether we're going to have a busy day or a busy week and trying to identify those days in the future can be challenging.
And I'll try to squeeze one last one in. In terms of the buybacks, is that more opportunistic or is there something to read into in terms of where your stock -- where you see your stock trading vis-a-vis opportunities in M&A?
I mean, I think we've talked a little bit about it before. I think nothing has changed. I look at our business and I look at our balance sheet and I look at what it takes to run our business. I look at our liquidity, our bank lines, a number of different factors contribute to the decision-making as to how we allocate capital. We highlighted in this press release that we did sign and enter into a new agreement with our lenders. That agreement I believe was a lot of hard work by Thor an Kathleen with our great partner, CIBC. And the result of the new credit facility moving to 2 years committed, moving to long-term debt as well as increasing our flexibility as it relates to how we're going to deploy capital was a big win for A-Mark and I don't want to minimize that. It was a lot of hard work and we're very thankful and very appreciative of our partners in the bank group.As we look at the stock buyback in particular, to me, it's just -- it's like any other trade we do; where is our capital best allocated to return the best result for our shareholders. And that's something that I focus on all the time. As we look at opportunities, whether it be capital expenditures, whether it be holding inventory, whether it be acquisitions or whether it be stock buybacks, I view this and the Board to this -- the Board and I are very well aligned on this that we're looking for whatever the best return is for the shareholders. And I believe that at the moment, the stock offers to me a better opportunity than maybe it did a few months ago. So I think, certainly, the market cap of the company as it relates to our tangible net worth and our book value as well as inventory or M&A opportunities, they're all factors.And obviously, as buying back stock in my assessment, if I believe buying back the stock a few years from now is going to be the best investment and the best way to deploy our capital, we will do that. If we believe an M&A opportunity is going to return a better ROI, we're going to look at the M&A opportunity. And if we need to expand our mints or we need to expand our storage or we need to inventory more product, we're going to do that. So to me, it's something I do every day. I don't believe that there's a playbook for it, that every opportunity and every decision is easily defined. It's a little bit of experience and gut and that's what I do. So I hope that answered your question.
Your next question is coming from Tom Forte of D.A. Davidson.
So I have 2 questions. I'll ask them both at the same time. Can you talk about -- would it be too strong a statement to say that $0.70 a quarter in GAAP earnings is a current low for the business as configured? The second part for that one is, what is it about the way that you've put together the business right now that enables you to generate such tremendous profitability in a soft quarter? I feel like if I looked back in time when there was a soft quarter, you often actually lost money and didn't make money.And then second, maybe just at a high level, can you compare how the core customer is responding to the Israel-Hamas conflict or the government shutdown news that came out at the end of September? And maybe how that compares with the debt ceiling or the Silicon Valley Bank or the Russia-Ukraine? Just high level comments there, I'd really appreciate it.
Sure. Let's start with the first one. I am thrilled and very optimistic that with the environment we encountered in the first quarter, we made $30 million EBITDA, which we've just announced. I think that is a tremendous performance when you view the -- what we dealt with and what was going on as it relates to the supply and demand and the sentiment of our shareholder base. And I believe that we have, as you pointed out, sometimes it's easy to lose perspective on performance and being a public company, I realize that our investors are looking at a year-over-year, quarter-over-quarter. But as you've pointed out and you've been here for quite some time, $30 million, if that is near or around our low baseline of what we can do and $75 million to $80 million is our upside, I'm very proud of our employees and our management and thankful to our customers for everything they do to cause these results.So -- and I am -- I know when $5 million was a great quarter for us. So I agree with what you're saying. And I believe that this business is built for the long-term and this business is built to take advantage when the opportunities are there to have outsized returns that you just don't see very often in any companies. And I love it and we're very good at what we do. And when we have a slow quarter, as I have said before and we've illustrated before, there's a lot that goes on to building the business and keeping the business running and prepared to take advantage and take market share when the market gives us an opportunity. So for all we accomplished in Q1 and to make $30 million EBITDA, I'm very pleased with the performance.I think that we are in a situation -- to kind of move towards your second question. I think we are facing some very uncertain times as it relates to what's going on in the world. And I don't think that any CEO can get on the phone like this and talk about that they have any certainty as to how certain things that are going on in the world today are going to affect their business. The crystal ball does become a little foggier when you have events going on that are really unprecedented. And as I said a little bit earlier, in all the years I have done this, there are a lot of factors affecting the world economies right now that have really never come together at the same time.To kind of dissect your questions related to individual events, I think that in hindsight, it's very easy for me to understand and explain how certain events affected our business, either positively or negatively. Before the events happen, it's very difficult to understand what's going to happen and when and then predict what will be the result of those events.The 3 -- actually, you asked 4 specific questions, and I will go what I think is chronologically, although, I guess, we could debate whether it's directly chronological. I believe that the war between Russia and the Ukraine had a very positive effect on our customer base and commodities and precious metals in general. You had a country that was a big producer of oil, of silver, of platinum, of a lot of commodities that had basically unlimited capabilities as it relates to going to war become involved with an ally of the United States that was very important to us from a trading perspective as well as a geographic perspective. And I believe that the world reacted to that and hadn't really expected or seen something like that before. And for 4 to 5 months, A-Mark was the beneficiary of a great deal of uncertainty and how it would affect the U.S. economy.I think that the Silicon Valley Bank crisis was unique amongst -- it was unique to anything I had ever really seen before where you had a top 15 bank in the country go under in a matter of days. You had a panic that came about in all financial institutions. And you had a flight to quality and a withdrawal of assets from a number of very large financial institutions. And that withdrawal of assets, a good percentage of it in our world flowed into our products. So that event, again, was a little more short-lived, but it was extreme. And as I've talked about before, all of these, what I call earthquakes and the aftershocks that follow are all -- they all affect how we do business and what results we can hope to accomplish.The congressional shutdown, the interest rate environment, which has taken a number of people by surprise, what appears to be backtracking and retrading by the Fed on what they're actually going to do and what -- how they view inflation and how they view what they're going to do about an interest rates, to me, that's just -- that's a huge macro issue that affects huge markets, way bigger than A-Mark's markets. And it's not, in my mind, going away anytime soon. And I think it paints a very positive picture for alternative currencies as well as commodities and precious metals in particular. I believe that issue is more long-term and ongoing and it's not -- doesn't have the same exact effect as what I would call a Silicon Valley Bank earthquake that is a big deal and then kind of wanes over time.We'll see how a government shutdown affects our business. I think that right now it seems to me that the markets are very skittish. And I think that is -- it's instilling a little bit of uncertainty in all investors. And I think it's a very difficult time right now to really predict how this is going to play out. I love the business we're in. I think we are positioned tremendously to take advantage of whatever happens. We're going into an election cycle, which historically has created increased activity in our markets. So I look at that as something to keep an eye on.And then lastly, the Israeli-Palestinian conflict or the Israeli-Hamas conflict is just a horrible situation. It's just -- it's very difficult to watch. It's very difficult for me to wrap my arms around. And I think that our customers and probably shareholders are somewhat frozen. And I see that event as a situation where people are just not really focused so much on what's going on at the price of silver or gold and they're focused on things that were unimaginable 60 days ago. And so I think that this particular conflict has probably slowed down. There's a lot of decision-making as it relates to hedging your equities or protecting against the deflation of the dollar or different reasons why people look at our business and our products.So I think it has been a little bit of a kind of sit on your hands and do nothing the last -- since October 7, I believe it was. So I think that's natural and I think it's understandable. And I think the next few months are going to be very interesting how this plays out. But it's hard for me to speculate on how it's going to affect the economics of A-Mark.
Your next question is coming from Andrew Scutt of ROTH MKM.
So my first one kind of piggybacks off the previous question. When you look at your DTC business now, there are multiple avenues and store funds you guys have and broadening demographics of the customer base, I was just wondering if you could kind of dig deeper into the activity you saw there? Maybe were there some pockets of customers that were weaker? Were there others that may have provided some countercyclical boost? Just anything you could provide there would be great.
I think, first and foremost, as I look at our numbers for this quarter and I look at our premiums that we're dealing with, I think that the new customer acquisition funnel that we get across all of the platforms are robust. I think our new client acquisition and our ability to take customers from our competitors and our ability to just onboard new customers, I thought it was a great month for that considering the environment.We did test on a number of occasions at JM Bullion in the last 90 days. We've tested really what price we need to sell product at. And we set goals for ourselves as to how many ounces we might be able to sell if we were to test some lower premiums and some lower sale prices. I believe that was only possible in the current environment. And I will say that our customer base reacted better than I expected.We had a number of promotions in the last 90 days where I set what I thought were some very high end goals for what would be expected results. And I think the team at JM Bullion and in the DTC segment, they performed very well. So I was very pleased with what we were able to gain as it relates to knowledge and what I believe we gained as it relates to new customers and taking market share from our competitors. So I was very pleased with that.I think that JM Bullion in particular is the [ label ] in our DTC segment. Their results have been astronomical in previous quarters. As you can see, they at times contributed 60% of our gross profit. So JM Bullion in particular was a very high bar for them to match or to keep up with. And we are -- we did see a slower result in this quarter, which we will report.I think that a couple of things, on the positive note, some of the smaller platforms and brands that we acquired over the last 12 to 18 months, BullionMax in particular, we saw some increased demand at very high average order value this last quarter from customers on that platform, numbers that we really hadn't seen in the diligence before we bought them. And I attribute that to Rob and his team at JM Bullion as it relates to their marketing and their taking over of that website. So definitely a positive on that particular platform from what we're seeing.We've also seen a shift to a number of orders that are very large from a dollar perspective and are concentrated in gold over the last 90 days. And we have seen a bit of a shift in our market mix, our product mix moving over to gold from silver, which is reflected in our results and that gold is usually slightly lower margin for us than silver. And we attribute that and those orders, those very large orders, we think that is very healthy and that it relates to some large customers that are placing big orders.So overall, I thought all of our platforms did very well. I think JM had a very high bar. So in looking at the results, it feels like maybe they underperformed. But in the environment we're in, I feel like all of our DTC brands did very well considering the environment.
That's very clear you're finding a place to navigate the weaker environment. My second one for me is just on the 2 mints. Could you just comment on the production out of the mints in the quarter? And maybe if the waning demand would change your thought process on production rates moving forward?
Yes. I think that the mints have done very well. The mints have navigated managing expectations and what can be expected in the current environment. I can say that I think they have really outperformed and have been very nimble and flexible in what they produce. And I think one of the beauties and positive takeaways that I see in our business for the next 10 years is our ability to shift production in a week to the products that we can sell. And I think we have been very fortunate that Jamie at Silver Towne and Tom Power at the Sunshine Mint and Jason at Sunshine that runs things for Tom, they've been very, very good at shifting products daily, and we're able to pivot to whatever we can sell.And we've been very fortunate over the last 3 to 4 months that we've had a very good demand for larger-sized silver bars and we've been able to pick-up our production and shift it to that product that we can sell, which just again keeps us nimble and keeps us ready to take advantage of when and if we need to shift back to 1 ounce silver products that maybe are a little less in favor at the moment. But I can't say enough about the employees, management at the mints, keeping everybody busy, managing the production and cutting back on overtime and watching their expenses and it's just -- it was a very good job this quarter by our mints.
Your next question is coming from Greg Gibas of Northland Securities.
I think -- apologies if I missed it, but did you kind of -- do you see more or less margin compression with the Wholesale business versus DTC? I wonder if you could just kind of speak to that.
I would say that we have seen more margin compression in the DTC. I would say that we have tested lower premiums. We have done a number of specials over the last 90 days to really test the elasticity of the market, to really find out what depth in product our competitors have as well as what price and premium motivates our customers.So I would say, in this quarter, we have experimented, and I believe it has been a very positive outcome in that I think that I have a really good idea today in this environment what price I can sell 1 million units of 1 ounce silver product for. I don't know that I had that 6 months ago because I don't think we had the same -- we hadn't really experienced this exact same environment in a while. But we did a number of tests where we set very large targets to see and to educate ourselves on what price and premium under what spot price conditions we could overachieve as it relates to units. So I think we've tested that. But with that, we probably have seen a little more compression in gross margin and premium at the DTC side. I think the Wholesale side has been compressed, but probably not to the same extent as DTC.
Got it. That's helpful, Greg. And a little bit more of a broad question, but I wanted to see if you could address kind of avenues for growth in DTC and how you can capture more of the market? And I guess along with that, are inorganic opportunities more attractive in this kind of weaker macro environment?
I mean, for me, I don't want to leave any money on the table. I mean, I look at our business as Sunshine and Silver Towne take 1,000 ounce silver bars that our A-Mark wholesale traders buy. Our logistics gets the metal to the mints, the mints create the product. And that profit opportunity goes from that 1,000 ounce bar all the way up our integrated business to the end user. And I think that we're unique and we are separated from our competition because we have a lot of competition in different parts of the value chain as it relates to our gross profit individually. But we really are the only fully integrated business that can take 1,000 ounce bars off the exchange and turn them into 1 ounce silver rounds and get the -- our retail consumer to respond to if we want to be the cheapest, we can be the cheapest.I think the balance is always testing; testing quantity, testing price, testing product and making sure at that DTC level that we are valuing new customers, which we have a metric for that. We're valuing the sale. And we're valuing how it affects the rest of our vertically integrated businesses and just how to maximize and sell the right amount of ounces at the right price, all the while making sure we're keeping our new customer count up because we are fully committed to that new customer count, whether it be organic or whether it be through acquisitions. And if we have most of the customers, we're going to get most of the business.We're going to live through different macroeconomic, different environments, different supply and demand imbalances either way. But if we have the customers and we make sure that we know how to motivate those customers and we have a good idea of what we can expect from them if we test them, I feel like we don't really care where we get the customers, organically or through acquisition, we just want to get as much out of those customers as we can. And if it's in an acquisition, we want to get more of the wallet and more out of those customers than the company that ran it when we acquired it, the management or the company platform. If we're taking customers from competitors and we're gaining market share and we're adding new customers that way, we value those customers maybe a little bit differently. And again, we want to make sure if they have $100 to spend. We're getting their $100.And as it relates to geographic, we continue to work very hard on opportunities that we see out there geographically to bring in new customers. We work on how we're going to value those customers and how that affects how we deploy our capital in an acquisition. And we are I believe the best in the business at analyzing opportunities and deciding where we're going to deploy our capital.Now obviously, as I've talked about before, in our current situation, there is a lot of analysis that goes into capital deployment, whether it be stock buybacks, whether it be dividends, whether it be special dividends, whether it be M&A opportunities. And we're very focused on as a management team being able to pivot quickly and being able to take advantage of opportunities that will have the best ROI for our shareholders. Myself included as one of the larger shareholders, I'm super committed to what we're doing here and long-term value and making the right decisions today that will be positive in the future.And I think that the benefit we have, which I have said before, is when we face some headwinds in the market. And we have what many would look at as a slow quarter, $30 million EBITDA is still fantastic. And I would say that there are many millions of dollars that are potentially out there for us because our competitors are probably going to feel the slowdown more than we are because we have the best business in the industry. And we're going to also be offered opportunities for M&A that we would hope will be better return on investment equations than maybe in a very hot market.I think as I've talked about before, we went through 3 out of 4 quarters last fiscal year where we were outperforming everybody, but all of our competitors were doing very well. We were able to make outsized profits in that environment, but it didn't bode particularly well for M&A on a large scale because I was very concerned about what would the business be worth if we did have a slowdown. Well, right now, we're in that period, as you can see in this quarter, and we're taking a very close look at how a slow quarter affects valuation on potential acquisitions. So to me, it's just opportunity. I feel like we have great opportunity. I feel like the business is operating at a very high level. And this is going to be a good ride. I'm very much looking forward to what the next 3 or 4 years brings.
Our last question comes from Sy Jacobs of Jacobs Asset Management.
So I just wanted you to run a little more with that last point about M&A and then kind of tie it to the buyback. Last quarter, you sounded pretty optimistic that there were some attractive live things in your M&A pipeline. I think you might even have mentioned one of them being an option to raise a minority stake to a higher level and then some organic things. And then business was slowing at that time. And you have mentioned the dynamic where like asking prices are sometimes too high when business is good and sellers become more motivated when business is bad. If you can give us an update on where your pipeline looks like in that regard and then tie it to the fact that I couldn't help, but notice that you bought back stock at an average price that indicated it happened right at the end of the quarter because it's the only time the stock was trading below 30. So you kind of knew how the quarter was going and you bought stock there. Now the stock is lower. And -- so just kind of juxtapose even lower stock price where you were -- than where you were eager to buy it versus maybe even more attractive opportunities to do accretive M&A.
Yes. I'll focus on what I talked about before. We have disclosed and we have a contractual option to increase our stake in Silver Gold Bull, the company in Calgary that is a very well-run company. The founders are great. We appreciate all they do. We think they run a really good business. We have an option window that opens to take a controlling majority ownership. I believe it opens in December. I believe it's open for 8 months. It's very specifically defined as to how that investment would be made and at what valuation. We are assessing the performance of that business today.We understand that we negotiated this option to give us the flexibility, to take advantage of the increased ownership when we felt it was the right deal at the right time related to all of our other options you just mentioned. And that one is -- it's pretty baked. We're going to continue to look at the window of exercising. We're going to continue to look at the economics of that deal. And we're going to continue to look at the economics of all the deals we're looking at, including the buyback.As you can imagine, as our share price reflects our performance or it reflects the sentiment of our shareholders and the price goes lower, buybacks become more attractive because I believe the stock is on sale. I have in my head and I always have in my head what A-Mark is worth. I'm a trader by nature. I have a very good idea of what I think the bid side is and what the ask side is. And one of the benefits of being public is that there are supply and demand imbalances just like silver and gold where our stock becomes on sale.So as I look at that and I look at what I think my ask price is, I can have a very clear picture of what I think the return on investment is if I buy stock at 30, 29, 28, 27, 26. And it goes into my internal calculations as to where our each dollar of capital should be deployed. So if I thought the stock was a great deal at 28 or 29, I think the stock is a better deal at 27 and we will act accordingly.As it relates to M&A and acquisitions, I tell people that A-Mark is priced every hour during trading sessions 5 days a week. The value of A-Mark is what it is. Right now, it's trading at a certain multiple. Our balance sheet is huge. Our tangible net worth is huge. Our book value is $600 million approximately. I tell people I can't buy you if I buy A-Mark at a certain price. And unfortunately, when I say I want to buy you, I have to -- I don't always get the response that I want. Other people -- I have to live with A-Mark being priced every day and I've become very accustomed to that. It doesn't bother me at all. But as it relates to what I'm going to pay on an acquisition, as I tell people, the deal has to make sense. Otherwise, why am I going to buy you if I can just buy back A-Mark's stock by myself, which I have a great deal of confidence and control over.So when those discussions happen in a slowing environment and somebody thinks their business is worth X and I tell them now it's worth 70% of X, 2 things are going to happen. I'm either going to be right or I'm going to be wrong. And sometimes, it takes a little while for the seller to get their arms around what their business is worth. And so deals that may have looked good 4, 5, 6 months ago, they have to be repriced today. It's just the way the markets work. And -- but I'm very patient. I mean, I have deals that we've looked at 4 or 5 times over the last 3 or 4 years. Some of them we act on and some of them we're very patient and we will not act unless we get them at the right price. So I am responsible for your money and I take that responsibility very seriously. And I feel like we've made very good decisions how we invest your money, and we're going to continue to do that, Sy.
I agree, Greg. Just one little definitional thing. Is it disclosed or can you disclose specifically or generally this option you have to go to a majority ownership in Silver Gold Bull or whatever it's called in Calgary? Can you say how many -- roughly how many millions of dollars that would be cash or whether there would be stocks to buy? Just trying to put it in context of -- you spent $5 million buying back the stock, your cash still built by $9 million this quarter, you've got -- I forgot what the number was, $50 million, $40-some-odd million in cash. What's the scope of that possible outlay?
Yes. I try for strategic reasons. Now I don't know exactly what we said when we took the increased stake to get us to, I think it's 47% or 49%. I will say that the increase would take us to 75%. And I don't believe the size of that 25% would not be normal course for us if we chose to do it. it's certainly more than $5 million. And if you go back and look and you can see what we paid for the increase that we did make, you can kind of figure it out. There's probably enough information there. I don't want to speak to it at the moment. I just know that as it relates to the way I just described all the decisions in front of us at the moment, we have been preparing in our own minds for the last 6 months knowing that this opportunity is there, that this window is going to open and that we feel that that is a top priority because we believe we value that option.And we believe that we think the option is an asset of A-Mark and we will be prepared if we think it -- if it's the right opportunity, we'll be prepared to take it. I don't think the cost or the investment will -- it won't affect our decision making. I think we have enough liquidity to do that. We have enough liquidity to pay our dividend. We have enough liquidity to buy back stock when we think it's the right time. And we have 2 or 3 other acquisitions we're looking at right now. So I mean, I feel like we are very well prepared to take advantage when others need to sell. So I like the hand we have and I think we're playing the hand very well.
Greg, on that point, just last part of the same question. If you were to -- you said that that option is sort of like fully baked. If you were to exercise it and go over 50% -- and this could be a question for Kathleen possibly because it's of accounts...
Kathleen, stand up. Hang on over. It is going to be for Kathleen because I know exactly what you're going to say.
Yes. Would it be a situation like JM Bullion where by going over 50%, does the price of the option is it struck at a price that would cause you to need to write up your minority investment and produce a GAAP earnings gain?
Yes.
And then you would also get -- I assume the other GAAP effect is you would just have a higher stream of income flowing through the GAAP income statement because you own more of it?
Yes, you can look back at the JMB acquisition. We had that remeasurement gain, right? So the book value of how we carry the investment versus what the implied enterprise value is when you would buy the incremental piece. So that would most likely result in another remeasurement gain.
I'm assuming, Kathleen, that we would then consolidate their financials if we did that?
If we're up to 75, we would be required to consolidate.
Thank you very much. Well, at this time, that does conclude our question and answer session. I'd now like to turn the call back over to Mr. Roberts for his closing remarks.
Thank you, Jenny. Once again, I appreciate all the shareholder confidence. A lot of you have been -- we've been talking for a very long time. I really do appreciate your patience and your support as we navigated, as we've said before, a fairly volatile company as it relates to the lumpiness and choppiness of our earnings. And I think it's very important to look at our business and look at it over a year or 2 years. And again, quarter-to-quarter, it can be a little bit difficult, both to a blow out quarter or a slow quarter. So I think it's great that everybody is over time has educated and is learning the company, and I thank you all for that support. I'd also like to thank again our dedicated employees and all of their commitment to A-Mark's success. And we look forward to keeping you apprised of A-Mark's progress in the future. Thank you very much.Jenny, take it away.
Thank you very much, Greg.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. These include statements regarding expectations with respect to the dividend declarations, the amount or timing of any future dividends, future macroeconomic conditions and demand for precious metals products and the company's ability to effectively respond to changing economic conditions. 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, including the inability to identify suitable or available acquisition or investment opportunities; greater than anticipated costs incurred to execute the strategy; changes in the current international political climate, which has favorably contributed to demand and volatility in the precious metals markets; potential adverse effects of the current problems in the national and global supply chains; increased competition for the company'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; changes in consumer demand and preferences for precious metal products generally potential negative effects that inflationary pressure may have on our business; the inability of the company to expand capacity at Silver Towne Mint; the failure of our investee companies to maintain or address the preferences of their customer bases; general risks of doing business in the political and governmental risks; and other risk factors described in the company's public filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements. Listeners 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 the 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.