Sep 12, 2017
Executives
Gregory Roberts - CEO Cary Dickson - CFO Thor Gjerdrum - COO
Analysts
Sarkis Sherbetchyan - B. Riley & Company Greg Eisen - Singular Research Rick Fearon - Accretive Capital Partners
Operator
Good afternoon and welcome to A-Mark Precious Metals' Conference Call for the Fiscal Fourth Quarter Ended June 30, 2017. My name is Matt, and I will be your operator this afternoon.
Earlier today, A-Mark issued the results of its fiscal fourth quarter and full year 2017 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 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 will be recorded and it will be 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
Gregory Roberts
Thank you, Matt and welcome everyone. Thank you for joining us this afternoon.
Our financial results for Q4 as well as for the full fiscal year were in line with our expectations given the continued subdued market. With historically low levels of Precious Metals sales by the U.S.
Mint reinforced by the sustained strength of the U.S. equities market as a whole, we continued to face headwinds which impacted demand for Precious Metals.
Nevertheless, we were able to take advantage of attracting trading opportunities in the fourth quarter. Additionally, we experienced continued growth in our finance product offerings, further establishing our finance book as a meaningful source of income and adding greater predictability to our business model.
In fact, our interest income in Q4 increased 42% from Q4 of last year and was up 43% for the full fiscal year compared to fiscal 2016. These solid increases were driven by the growth in the number of secured loans in our CFC lending business which was up 103% year-over-year to a record 2375 loans.
Most notably though, Q4 marked our 14th consecutive quarter of profitability since becoming public. We believe this achievement is a testament to our continued execution of and ability to capitalize on our plan.
Our financial results for the fourth quarter were also reflective of fiscal 2017 as a whole, both showcasing the viability of our increasingly diversified business and its effectiveness in mitigating the effects of the current market conditions. Before I continue, I would like our CFO Cary Dickson to walk us through the financial details for the fiscal fourth quarter and the full year ended June 30, 2017.
Then our President Thor Gjerdrum will discuss our market position and key operational metrics. Afterwards, I'll return to talk more about our operational progress and initiatives, as well as our outlook.
Cary?
Cary Dickson
Thank you, Greg and good afternoon everyone. Now turning to our financial results.
Our revenues for fiscal Q4 decreased 24% to $1.33 billion from $1.74 billion in fiscal Q4 of last year. The decrease in revenue was mainly due to a decrease in the total amount of gold and silver ounces sold primarily related to slower market conditions in the current period compared to the prior-year.
For the full year, our revenues increased 3% to $6.99 billion from $6.78 billion in fiscal '16. The increase in revenues for the full year was primarily due to an increase in the Precious Metals prices and higher forward sales, partially offset by a decrease in the total amount of gold ounces and silver ounces sold.
Our gross profit for Q4 of '17 decreased 20% to $6.1 million or 0.46% of revenue from $7.6 million or 0.44% of revenue in the same year ago quarter. The decrease in gross profit was primarily related to a decrease in the total volume of gold and silver ounces sold, offset by increased trading profits.
The decrease in volume of gold and silver ounces sold was primarily related to slower market condition in the current period compared to the prior-year. For fiscal '17, our gross profit decreased 9% to $31.3 million or 0.45% of revenue from $34.5 million or 0.51% of revenue in the same year ago period.
The decrease in gross margin was primarily due to subdued market conditions during the second half of '17 which constrained both volume and premium spreads partially offset by increased trading profits during 2017. Furthermore, the decrease in gross profit was due to higher premium spreads on the company's primary product in the first fiscal quarter of '16 when the company experienced a typical volatility and supply constraints.
Now turning to our expenses. Our selling, general, and administrative expenses for fiscal Q4 '17 decreased 6% to $5.6 million from $5.9 million in Q4 of the prior year.
The decrease is primarily due to lower overall compensation expense offset by increased expenses related to the development of a new enterprise resource system. Selling, general, and administrative expenses related to our new SilverTowne minting operations and a one-time disposal of fixed assets related to the move of our corporate headquarters.
For fiscal '17, our SG&A expenses increased 5% to $23.3 million from $22.2 million in fiscal '16. The increase was due to various acquisition related costs, selling, general, and administrative expenses related to SilverTowne minting operations, as well as the increased consulting costs related to the development of a new enterprise resource system and one-time disposal of fixed assets related to the relocation of our headquarters.
The increase was offset by a decrease in overall compensation costs primarily related to incentive compensation. Our interest income for fiscal Q4 increased 42% to $3.5 million from $2.4 million in the same year ago quarter.
The increase in interest income was primarily due to an increase in size of our loan portfolio, which generated $2.2 million in interest income compared to $1.4 million in the same year ago quarter, an increase of 55%. Our interest income is also up due to increased use of our inventory financing products by customers.
For the full-year, interest income increased 43% to $12.6 million from $8.8 million in the same year ago period. The increase in interest income was primarily due to an increase in size of our loan portfolio which generated $7.7 million in interest income compared to $4.8 million at the same year ago period, an increase of 62% as well as increased use of inventory finance products by our customers.
Our interest expense for Q4 '17 increased 30% to $2.7 million from $2.1 million in Q4 of last year. The increase was primarily due to a greater usage of our lines of credit and product financing arrangements.
The increase is also due in part to higher LIBOR interest rates which went into effect after the Federal Reserve rate increases, as well as increased amortization of loan facility costs. For the full-year 2017, interest expense increased 60% to $10.1 million from $6.3 million in the same year ago period.
The increase is primarily due to a greater usage of the company's lines of credit and other product financing arrangements which resulted in $8.0 million of interest compared with $5.7 million in the same year ago quarter, an increase of 39%. The increase is also due in part to higher LIBOR rates as I mentioned previously.
Our net income for Q4 '17 increased 14% to $1.2 million or $0.17 per diluted share compared to $1.1 million or $0.15 per diluted share in Q4 of last year. The increase was primarily due to higher interest income and lower tax provision, offset by lower gross profit and higher interest expense.
For the full year of '17, our net income increased 24% to $7.1 million or $1 per diluted share from $9.3 million or 1.3 per diluted share in the same period last year. The decrease was primarily due to lower gross profit and higher interest expense offset by higher interest income and lower tax provision.
Now turning to the balance sheet. At quarter end we had $13.1 million of cash in our balance sheet.
As you evaluate our balance sheet, it's important to remember that we are a net borrower and we typically paydown our balances daily to minimize interest expense. Our tangible network totaled $60.1 million or $8.44 per diluted share which compares to $59.1 million or $8.30 per diluted share at the end of the prior quarter.
And finally on August 30, our Board of Directors declared a regular quarterly cash dividend of $0.08 per share reflecting their continued confidence in our balance sheet and our commitment to maximizing shareholder value. The cash dividend will be paid on or about September 27 to all stockholders of record as of September 18.
This completes my financial summary. Now I will turn the call over to Thor who will provide an update on market conditions and key performance metrics.
Thor?
Thor Gjerdrum
Thanks Cary. Turning to our key operational metrics for the quarter and fiscal year, our first key metric gold and silver ounces sold represents the ounces and metals we sell and deliver to customers during the period excluding any ounces recorded on forward contract.
This is an important metric because it reflects the volume of business we're doing without regard to changes in commodity pricing which figure into revenue and can mask underlying business trends. During the fourth quarter we sold 290,000 ounces of gold which is down 50% from the prior quarter and down 59% from fiscal Q4 of last year.
For the full-year 2017, we sold $2.2 million ounces of gold which is down 27% from $3 million in the same period last year. Turning to silver during Q4 we sold $14.1 million ounces of silver which was down 32% from the prior quarter and down 45% from Q4 of last year.
For the full year 2017, we sold $79.6 million ounces of silver which is down 37% from $126.3 million ounces in fiscal 2016. The second key metric we tracked and equally significant measure of our business is trading ticket volume.
This metric tracks the total number of orders processed by our trading desk in Europe and the U.S. For those newer to our company, in periods of high volatility, there is generally increased trading in the commodity markets and increased demand for our products which translates into higher business volumes.
During Q4, our trading ticket volume increased 2% to 28,098 tickets than the prior quarter and 34% from Q4 of last year. For the full year 2017, our trading ticket volume increased 28% to 112,907 tickets from 88,486 tickets for the same period last year.
The year-over-year increase was primarily due to higher use of our online trading portal by our customers. It's important to point out however the portion of the increase in ticket volume is because our online trading portal allows smaller minimum order sizes.
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 turnover is a measure of how quickly inventories moves.
Those that have followed our company know that we typically experience a higher inventory turnover ratio during periods of increased volatility when trading is more robust reflecting a more efficient use of our capital. For the fourth quarter, our inventory turnover ratio was 4.2 which was down 22% from 5.4 in the prior quarter and down 37% from 6.7 in Q4 of last year.
For fiscal 2017, our inventory turnover ratio was 26.3 which is down 15% from 30.9 in the same period last year. The quarterly and full-year declines in our inventory turnover ratio was primarily due to a higher volume of activity in our product financing and repurchase agreements with our customers by foreign sources metals which typically have longer trends a times, longer carrier periods associated with our high margin custom products and custom lead time of products produced at SilverTowne.
And finally the four key metric is the size of our lending business which is determined using the number of secured loans we have at the end of the quarter. The number of loans we secured at the end the quarter was up 11% to a record 2375 from the end of the prior quarter and up 103% from the end of Q4 last year.
This significant year-over-year improvement in the ever secured loans was primarily due to the acquisition of bullion-based loan portfolio. At June 30, 2017, the dollar value of our CFC loan portfolio totaled a record $91.2 million down 2% from the prior quarter and up 30% year-over-year.
That concludes my prepared remarks. I will now turn it back over to Greg to talk about the progress we made making our key operational initiatives, as well as outlook.
Greg?
Gregory Roberts
Thank you, Thor. From an operational perspective, fiscal 2017 marked another fundamental year in A-Mark's development laying the foundation for future growth and increased profitability when market conditions create increased volatility and demand.
In the meantime, we've been focused on expanding our trading capacity, implementing new value-added services and also making strategic acquisitions to more vertically align our operations. One of the strategic acquisitions was our purchase of a majority stake in SilverTowne mint last August.
This joint venture has now been operational for 12 months and in that time has significantly expanded our capacity to meet unforeseen surges and demand during volatile market environments. Over the course of this year, we were able to drive growth at SilverTowne through new marketing initiatives, as well as to the development of a variety of unique product offerings including customer branded silver products and legal tender coins.
On top of this, we also continued to benefit from the operational and cost efficiencies provided by our logistics facility in Las Vegas and its wholesale operations consolidation. One of our key initiatives in fiscal 2017 was to further expand our suite of ancillary services at that facility.
Therefore in addition to securing new logistics customers, our marketing and sales efforts also remain focused on attracting additional customers for our Precious Metals storage programs including Precious Metals custody options for self-directed IRA accounts. Recently we completed another strategic transaction by acquiring substantially all of the operating assets of Goldline LLC, a leading direct retailer of Precious Metals to the investor community for net consideration of approximately $10 million.
For nearly six decades, Goldline has delivered gold, silver and platinum coins and bars to collectors and investors all over the world. And since 2000, Goldline has distributed more than $4 billion of Precious Metals through its various channels which include TV, radio and their online platform.
We've known Goldline for years and have been impressed by its recent progress to grow its marketing presence and establish itself as a leader in the direct client to Precious Metals space. The combination of Goldline sales and marketing expertise coupled with A-Mark's products logistics and storage expertise, creates an unparallel partnership for global Precious Metals distribution.
Today Goldline's client base is comprised of more than 150,000 individuals, many of whom have substantial disposable income and alternative investment portfolios. These clients have proven to be exceptionally loyal in recurring buyers making them ideal consumers to benefit from our unique range of products, services and minting capabilities.
A significant number of these individuals make multiple purchases and ideal candidates for our suite of value-added services. As an example of the cross-selling possibilities now available, Goldline has sold more than 600 million worth of Precious Metals for inclusion in self-directed IRAs which gives us significant optimism that many of these buyers will take advantage of our secured storage facilities in Las Vegas.
In addition, the Goldline acquisition includes a list of 1.2 million potential clients who have requested information but have not yet purchased products. I'm happy to report that the Goldline integration process has gone very smoothly so far and we are very impressed with our interactions with Goldline management.
In fact in only three days after the close of the acquisition, Goldline had already begun shipping all of its packages through our Las Vegas logistics facility. Moving forward, Goldline will function as a fully reporting subsidiary of A-Mark led by Goldline's CEO Brian Crumbaker.
And while we will realize some benefits in Q2, we do not expect to recognize full revenue contribution until Q3. In all, Goldline marks the combination of our three-pronged vertical integration strategy, first of our Las Vegas logistics facility, followed by the SilverTowne mint, and now with Goldline to build a world-class vertically integrated Precious Metals company.
One of our key objectives in fiscal year 2018 will be to grow and create additional synergies through our Goldline subsidiary, as well as our other channels to further enhance our business and to create even more predictable revenue streams. As we look ahead to our present quarter, we continue to experience the slower market activity that characterized the second half of fiscal '17.
In the last 30 days we've seen some positive indicators from various current geopolitical issues and while these events have allowed gold prices to remain up as a result, they have not yet been effective in triggering sustained market demand. Despite the fact that these tepid market trends are expected to persist in the near-term, we remain increasingly watchful of the geopolitical climate and are aware of it significant ability to effect immediate change on the Precious Metals environment.
Over the course of fiscal 2017, we made significant progress along our strategic roadmap positioning us effectively for the future. Moving forward, we plan to leverage that project, as well as our diversified business model to further expand our margins and capitalize on a more favorable market environment when presented to us.
We continue to believe A-Mark is in a strong position to grow regardless of market conditions and we are focused on delivering this growth through the competitive advantages we've established over the last several years. Collectively our achievements have allowed us to deepen our customer relationships which we believe will drive more predictable growth and profitability in the quarters and years ahead, as well as attract new customers for many of our products and services.
Now with that, we're ready to open the call for your questions. Matt, please provide the appropriate instructions.
Operator
[Operator Instructions] Our first question is from Sarkis Sherbetchyan from B. Riley & Company.
Please go ahead.
Sarkis Sherbetchyan
So first with regard to the Goldline acquisition, can you maybe talk a little bit about the financial model and the implications to your business going forward either on the sales, EBITDA, or EPS perspective?
Gregory Roberts
Sure. Well there are a number of synergies which we've talked about those will be beneficial to A-Mark.
That will include a greater percentage of Goldline's products they sell will be sourced through A-Mark, that will include specialty products that we are currently selling them, as well as sovereign mint products, as well as - we will be looking to introduce some custom products that are manufactured at SilverTowne for Goldline. We believe that in addition, we have logistics, storage, finance, and almost all of our suite of services we believe Goldline customers will be able to take advantage of.
We’re currently looking at how to integrate CFC and the purchase financing at the Goldline level and that's something that we had factored into the model prior to the purchase and had talked to Goldline on a number of occasions about doing that, so we believe that Goldline is well-positioned to become a service - a loan originator for CFC. Looking at the current environment, when we talk about what we expect from Goldline and what contributions we look at from them, it depends a lot on the market environment.
We felt like the last three to four months have been very slow and a slow summer across all of our customers and that’s reflected in the discussion we've had just prior to you asking the question. But I believe that with slightly improved market conditions, we’re targeting Goldline to shoot for between $75 million and $85 million annually in retail sales.
We think that that can increase. We think we have products and services that can increase that.
We would hope by even if the market conditions stayed the same, we would hope to see numbers in the $100 million to $110 million range by year three. I think it's reasonable on an EBITDA basis that in the first two years of ownership that we could see $0.50 to $0.60 added and hope to increase that by year three as $0.70 to $0.80.
Most of the first two years, we expect to see starting in our Q3, possibly our Q4, so we believe there's going to be a period of integration and a period of just getting Goldline going with some of these new ideas that will drive those numbers but they are a direct retailer. They are a premier service provider as it relates to the level and quality of service they provide to their customers.
We believe their -- demographic of their customers is very favorable and we - as we’ve talked about before, there's in the last 17 years, they sold about $4 billion worth of metal. And we plan on exposing those customers to our other services which will benefit both Goldline and A-Mark.
Sarkis Sherbetchyan
And one more from me if I may. With respect to the number of synergies you just kind of outlined for us, does that mean that the Goldline business model is margin accretive relative to the business model we’ve historically seen for the A-Mark business?
Gregory Roberts
Yes, definitely that - every service that Goldline provides that we will benefit from in a consolidated basis is at a higher margin than what A-Mark is used to doing. So we believe that we can provide products, in particular bullion products to Goldline at favorable terms which will allow them to be competitive in their space against their competitors which there’s three or four of them.
And we believe that their margins will be accretive to our historical margins. This will be one of the first times that we’ll be capturing some of those higher margins.
Sarkis Sherbetchyan
And then with regards to silver ounce volume trends here in the current quarter, I mean just kind of you know taking into account all the things that are going on geopolitically. Have you noticed any particular widening of spreads or volatility and how you’ve kind of reacted or taken advantage of those particular events or days just from an operational perspective, any color around that?
Gregory Roberts
I mean our specialty products continue to perform well albeit at slightly lower volumes. I think the sovereign mint products in particular be it the U.S.
Silver Eagle or the Maple Leaf which you can just see from our ounce counts, most of the drop has been related to those sovereign mint products. The U.S.
mint, I think over the last four months has averaged less than 1.5 million ounces a month, and that's down from 4 million or 5 million ounces a month prior to the election. And I think that you know we generally capture about the same amount of ounces that we purchase from the mints, whether they're selling a 1 million ounces or 4 million ounces.
So a good portion of our Q4 drop in silver ounces was attributed to specifically the U.S. mint and the Canadian mint.
And as their demand goes, so does our ounce sales. I think our SilverTowne silver products as well as some of the private mint products that we sell and specifically our specialty products have been a little bit more resilient to the market and haven't had had nearly the drop that the sovereign products have had.
So it's pretty much since the election we've seen these headwinds and we're looking for ways to just take market share and do more business in the current environment but also looking ahead in believing that this isn’t going to last forever and that we want to be prepared to take advantage of market opportunities particularly if we can provide services and products to new customers that can't get them other places in the market. So I think we’re working very hard to try to drive new business and new customers that just can't get everything we offer in other places so that answer your question.
Operator
[Operator Instructions] And our next question comes from Greg Eisen from Singular Research. Please go ahead.
Greg Eisen
I like to ask about the volume question a different way since you already discussed sovereign products being the single largest source of negative volume number this quarter. Where there any end markets that were actually up this quarter and if so be able to describe why?
Gregory Roberts
I would say not in our segment, I don't believe that any of our customers are seeing increased business in our Q4 ending June 30. I will say that you know our partner JM Bullion I believe that they have had a fairly good improvement since the April or May period.
I think they’re seeing a little more activity in the online space. But compared to historical numbers we’re not seeing the same ounce numbers.
I think that in the last four to six weeks we have seen an increase across many of our customers just as gold has made its way to $1,300 as we said earlier in the script we've seen gold demand increase a little bit. And we've seen the prices up that has not yet really translated into silver ounces but I think that you know we have seen some geopolitical and macro events that are in the last few weeks that seem to indicate that that the demand is shifting a little bit.
Greg Eisen
And you mentioned the U.S. mint was down significantly throughout – you gave out the numbers there and you mentioned Canada was also a negative number.
Could you talk about other sovereign mints around the world this is global phenomenon we’re seeing is there like a global mindset to buying – trading of these products from time to time?
Gregory Roberts
I think yes, I do believe that I believe that publicity and action and fear definitely drive global demand – we don't see any part of the world right now that is on fire or – where demand is increasing significantly. So I don't it's not like our European business it’s very hot right now and our U.S.
business is slower the U.S. mint is slow and the British Royal mint is busy.
I think the barometer that we really use that seems to measure global demand is really what the U.S. mint is selling in gold and silver.
They published the numbers every month so they're out there you can see them our percentage of participation in what they make is very consistent over the last 10 years. We get about the same amount of their product that we allocated that we buy, but I don't believe that there is an area of the market right now in physical delivery that is outperforming another.
I think Canada in particular right now they’re a little bit more natural resource and commodity dominated their economy. So I would say that the business in Canada is probably one of the slower places right now – as opposed to other areas around the world.
Greg Eisen
And then turning back to Goldline if I may you mentioned you won't see the full revenue contribution until Q3 we’re still in Q1 aren’t we so could you describe why Q2 won't?
Gregory Roberts
There is just - I think we’ll see some benefit in Q2 I think we need to get some programs in place with them that we have been working on internally at A-Mark but until we close the deal we weren’t able to implement them. And some of those programs take time there's some products that we're looking at that we think will be very appealing to Goldline's customers.
We believe that there are some things we can work on the expense side where we think we can benefit Goldline a little bit on the expense side and they can benefit us. So we just are being very cautious in our model that we're looking at looks to start these products and services coming on board more in January of calendar year 2018 as opposed to November of 2017.
We’re not talking about a great deal of time difference we’re just giving ourselves a little bit of time to integrate our plan and the thoughts we've had that will make Goldline more successful.
Greg Eisen
I understand what you’re saying there.
Gregory Roberts
I will tell you that we closed on August 28 and that after four tries that was the day that gold got through $1,300 and there was three stories in the Wall Street Journal on gold. So that was particularly good timing and I think Goldline outperformed our expectations in the first three weeks, but it's a very small sample size and I'd hate to leave anybody with the feeling that we magically flipped to switch the day we owned it and everything is great.
But like I said in the beginning we have been pleasantly surprised in the first 15 days of ownership that things are a little bit ahead of what we would've expected.
Greg Eisen
Understood. If I just ask a few cost questions which I guess will be obvious ones you mentioned there was one-time item for the headquarters move could you say when the headquarters move was completed what day?
Gregory Roberts
We actually moved from Santa Monica to El Segundo in February and I believe we wrapped it all up by the end of April. We were completely out of space by the end of April we’re now entirely up in El Segundo and we no longer have a presence in the city Santa Monica.
Greg Eisen
You’re in El Segundo got it okay understood. And the ERP system you had some one-time cost involved there.
When do you expect that to be completed and fully implemented?
Gregory Roberts
It’s in user such as turning now and we are docking completing our testing and we expected to be up here fairly shortly. We do have a rollout date but I’ll be subject to internal control until I have signed off but it will certainly be in the next few months.
Greg Eisen
And by my quick calculation it look like you had an implicit 18% tax rate against pre-tax income this quarter. Could you talk about the factors that drove that?
Cary Dickson
Yes, I can speak to that we have some benefit that we had an appeals audit going on with our prior parent company that we are part of a former tax sharing agreement with and we settled some of the years on that appeal’s audit in the fourth quarter. And that yielded us some benefit some tax attribute benefits including some increased California NOL and some NOLs that we’re caring forward.
And we also had some tax what we call exposures on the books that we’re being accrued – when we close out the audits we could release some of those. We got some benefits for that I think we also had a situation where we last year we had our rate move in the comparative rate analysis we had some acquisition M&A type costs related to an acquisition that didn't go through and that caused a permanent benefit that made our tax rate go up.
And then when we abandoned those costs in this year it went the opposite direction we got a benefit for it. So the bottom line as we enjoyed a couple multiple benefits in the fourth quarter that drove the quarterly rate down quite a bit only drove the annual rate down a little bit.
So that's why you're seeing that it looks more exaggerated in the quarter.
Greg Eisen
So these are clearly all one-time items so looking at next year and year after what would you say is a reasonable estimated tax rate on a combined basis?
Gregory Roberts
I think we feel pretty comfortable at 37, 37.5 is the right kind of rate that’s really only A-Mark only with one thing we have to still do now is to roll that into Goldline going forward. I don't expect that Goldline is going to distort that that much, but they will have an impact right particularly on the state side because they have a different state tax posture than we do.
So we’re going we’re just we’re working through that now. And I think by the first quarter this year will be able roll up and say what our rate is going to look like on an overall basis.
Operator
The next question is from Rick Fearon from Accretive Capital Partners. Please go ahead.
Rick Fearon
Just couple quick questions continue on the discussion of the Goldline questions. It sounds like with $75 million to $85 million in sales with the potential to grow to $110 million when you kind of get things up and running.
And this contribution of $0.50 to $0.60 of earnings per share in years one and two and that growing to potentially a good 30 plus percent, it does sound like it’s a very high margin business. And I know there were some questions about that are we looking at sort of a 10% to 15% EBITDA margin type business there?
Gregory Roberts
I think that's reasonable maybe even a little bit higher we equate Goldline a little bit like a full-service brokerage company a higher-end full-service company. Goldline charges a little – they charge a fairly strong retail margin although they're not as expensive as some of the peers in their space but they’re definitely they don't charge for credit cards, they don't charge for shipping they have some other services they provide as it relates to price protection on short period of time after you purchase from them.
So they and then they’re much more hands on, they're much more customer service friendly I would say and maybe there are competitors in their space. So they are a little higher margin, but I would say yes there business is generating – should generate in the 10% EBITDA range after everything.
Rick Fearon
And some strong incentive to grow that business as rapidly if you can and so can you just maybe elaborate a little bit on some of the cross-selling opportunities. And then secondly on the ability to mine some of those contacts the 1.2 million contacts that they have some dormant clearly and then the existing customer base?
Gregory Roberts
I think that specifically to the 1.2 million customers or leads that they call them that haven’t purchased some portion of those leads are not probably looking for full service or looking for the margins that they're charging. They may be looking for a more discounted way to purchase precious metals.
We put a value on those leads, we plan on trying to help Goldline monetize those leads in some way and figure – and part of our plan is to not just historically Goldline has just let those go I mean they pay a lot of money for those leads that have whether it would be radio or TV they pay high dollar amount for their actual customers. But they also pay for the leads and historically they've been unable to monetize those.
So we think that with our relationships in the marketplace and some of our ideas on how to attack that we think there's value there. And we believe it can be monetized.
As far as existing clients the 150,000 clients they are still purchasing precious metals today in fact last week a customer who had not purchased from them since 1999 which is actually outside of the customer base we looked at had not spoken to them or made a purchase in 18 years called back up and made a fairly large purchase last week and was able to talk to the same broker that he had 18 years ago which says a lot for their continuity and a lot of the customer loyalty as well as the employee loyalty. So we think doing – working on older clients as it relates to – trying to give them products and services they can buy if they haven't done anything for a year or two we can do a better job.
I think analyzing the data of their customers and when their customers purchased just as a very quick analysis a company that’s been around as long as Goldline has they have customers who bought gold at $300 an ounce. So and they bought silver at $6 an ounce so Goldline has not really spent much time looking at that specific information in their old client base, but clearly you want to make sure that a person who bought gold at $300 and now it’s at $1,300 is aware of their opportunity to monetize a profit or to use that equity to purchase more.
And so we want to make sure we focus and we’re getting everything we can out of Goldline buying back from their customers which now with A-Mark’s trading desk and A-Mark’s vast customer base it is just easier for Goldline to solicit buybacks so that's a new area that we've kind of factored in down the road that we think we can get to. I think as we touched on briefly IRA storage is a big revenue stream and it's a way for us to fill up our Vegas facility going forward as well as we've just in the last few weeks we've finalized all the agreements with the IRA trustees who are now – have now on boarded – A-Mark’s Vegas facility as an approved depository for IRAs.
So it will going forward it will be much easier for Goldline to direct their clients to store in Vegas as well as we think we can work to move a good deal of the metal from other depositories that Goldline has sold into the Vegas facility. So we see that a real big part of that in addition if you've got $1 billion worth of metal stored at your facility in IRAs some portion of that gets liquidated every year.
And the fact that there's no shipping charges and that the metal can be monetized right there at the facility through the A-Mark trading desk is just a kind of an added benefit that we think will start to see next year. And then as we said Goldline right after the close moved all of their inventory to Vegas.
They moved all their logistics and have turned that over to the our Global Logistics business and we've now have the benefit of one of their traders who had been trading for Goldline has now come over to the A-Mark desk. So we bring that institutional knowledge of Goldline to our desk and we think that could open up some wholesale customers we’re not dealing with as well as just helping us to make better trades and do better job for Goldline.
So I mean these are just some of the things that we’re working on.
Rick Fearon
It sound like in addition to some good trading talent that you've inherited you've also brought on really strong executive team and that this – its helping with the integration rationalization and it would seem that there could be an interesting opportunity to grow this business through additional acquisitions is that and I know you've got your plate full right now with this – the rationalization of this business. But do you foresee those opportunities out there?
Gregory Roberts
I certainly think they're out there, but I would guess that you probably don't want me to run off and do that as a shareholder. So we start to get to that contribution phase.
Rick Fearon
And do you expect I know that by the third quarter into fiscal 2018 you think it will be up and fully on its way to fully contributing is it accretive in this coming quarter in the second quarter of fiscal 2018?
Gregory Roberts
I don't think it will be I have been very cautious on that I think that we believe a good target is that it will start to be accretive in January. I think that but it's just very difficult like I said for me to predict.
I mean we projected a loss in the first three months and we've already seen what looks like a potential profit in September. So I think it's really not it's not good for me to try to predict what market conditions are going to be.
I think the important thing to note this company is been up and running fully independent and can – has a model that makes money if the volumes are there. And we think that they’re well positioned without any real additional capital investment from us.
There's really no capital or money we need to put in other than the fact that that there - they need some market conditions. The other thing that they spend a lot of money on is radio advertising and some higher expense advertising in more mainstream advertising to attract retail investors.
It's important to note that generally the contracts they have on some very expensive media is usually 12 month contracts. Those contracts generally get renewed like a lot of advertising in the October time period, October-November time period.
So I think that one of the things we've inherited is some contracts that were negotiated before the election last year and things look differently right before the election last year particularly in Precious Metals space, as well as in a lot of conservative advertising locations which is where Goldline advertises. So I think you know we are very aware of those contracts.
We're very comfortable with the contracts but the contracts will probably cost less six months from now than their costing now.
Operator
This concludes today's question-and-answer session. I’d like to turn the floor back over to Mr.
Roberts for any closing comments.
Gregory Roberts
Thank you for joining us today. I especially want to thank our investors for your continued support and our dedicated employees for their ongoing contributions to build A-Mark into a global leader in Precious Metals trading.
We look forward to updating you on our next call. Thank you.
Matt?
Operator
Before we conclude today's call, I would like 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 to A-Mark's future plans, objectives, exceptions, performance, events and the like forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Future events, risks and uncertainties individually or in the aggregate could cause actual results to differ materially from those expressed or implied in these statements.
Factors that could cause actual results to differ include the following; the failure to execute the company’s growth strategy as planned, greater than anticipated costs incurred to execute the strategy, changes in the current domestic and international political climate, which has favorably contributed to demand and it's volatility in the Precious Metals market, 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 risks of doing business in the commodity market 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 identifies certain of such forward-looking statements, which speak only as of the dates on which they are made.
Additionally, any statements related to the 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 to not 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 Investor Relations section of the Company’s website.
Thank you for joining us today for A-Mark’s fiscal Q4 earnings call. You may now disconnect.