Collectors Universe, Inc. (CLCT)

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Collectors Universe, Inc. (CLCT)

F3Q13 (Qtr End 03/31/2013) Earnings Call

May 8, 2013 4:30 PM ET


Robert Deuster - Chief Executive Officer and Director

Joseph Wallace - Chief Financial Officer




Good afternoon, everyone, and thank you for joining us to discuss Collectors Universe financial results for the third quarter ended March 31, 2013. With us today from management are Robert Deuster, Chief Executive Officer; and Joe Wallace, Chief Financial Officer. The management will provide a brief overview of the quarter, and then open up the call to your questions.

Comments made today during today's call may contain statements regarding the company's expectations about its future financial performance, including forecasts and statements concerning business trends and profitability that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

The company's actual results in the future may differ possibly materially from those forecast in this call due to a number of risks and uncertainties. Certain of these risks and uncertainties in addition to other risks are more fully described in the company's filings with the Securities and Exchange Commission. The forward-looking statements are made only as of the date of today's conference and the company undertakes no obligation to update or revise the forward-looking statements whether as a result of new information, future events or otherwise.

With that, I would now like to turn the call over to Robert Deuster. Robert?

Robert Deuster

Thank you. And welcome to today's third quarter conference call. I will spend a few minutes discussing our business activity during the quarter, some of them are noteworthy events that occurred, and then some commentary on the outlook for the balance of the year. Then I will turn it over to Joe to discuss our financial results in more detail.

I am very pleased to report to you that our service revenue for the third quarter was a company record. While the third quarter is normally our seasonally highest quarter, the $14.5 million in service revenue report, it was a full $1.5 million better than the previous high mark.

A number of factors contributed to this excellent result. Notwithstanding, a very strong coin market, as for the holiday season and the start of the new coin year, but also we experienced growth during the quarter in all of our PCGS businesses.

In particular, we are seeing a very strong consumer preference for grading coins at shows and expos. We had 77% more grading service revenue at our show events in the third quarter as well as sold-out attendance at each of our members-only Las Vegas show since last fall.

Significantly, the grading activity in both gold and silver coins has improved with the start of the new mint year. Calendar year-to-date sales from the U.S. mint are on a record pace. Gold Eagle sales are a 118% above last year's pace and Silver Eagle sales are full 20% above the record 2011 pace.

As of today, there still is not enough coin production capacity to fill customer demand for Silver Eagle and U.S. mint is on a rationing program. If this customer demand profile continues, it is likely that a new U.S. mint sales record level could be reached by the end of this calendar year.

As you may recall, I mentioned on our last call, that bulk coin submissions too have started to pickup at the end of our second quarter. That pace has continued throughout the third quarter. Output from many of the world's mints is also strong, so it's turning out to be a good year for the bullion coin market.

All of this is subject to potential demand change as is frequently experienced in the coin market. But we will watch it over the next several months to see what effect it may have on our grading volume for the balance of the year.

The rare coin market in the United States is also very strong as many high-value PCGS graded coins were sold at auction. During the quarter, we saw the sale of the most valuable U.S. coin, a 1794 Flowing Hair Silver Dollar that went for $10.1 million, and a 1792 Martha Washington half dime sold for $1.4 million. Last month, a very rare 1913 Liberty Head Nickel sold at auction for $3.2 million, after being lost and off the market from more than 40 years.

Looking outside of the U.S., the global numismatic activity and interest is high as well. In particular, the climate for bullion and coin collecting in China is very strong, but the government promoting the purchase of gold coin issue and the output of China state run-mints' increasing annually.

The numismatic market in vintage Chinese coins rivals the U.S. and European market. So addressing it directly offers an attractive market expansion to our growth strategy going forward. We recently announced the formation and funding of a wholly-owned business unit in Mainland, China, to service this budding market and it will be based in Shanghai. I will cover this subject in a little more detail later in my remarks.

Changing gears somewhat, we continue to see a steady and increasing volume of submissions for grading sports cards and autograph collectables too. Our PSA card grading business is tracking 12% ahead of last year's pace. And the DNA autograph grading service revenue again exceeded $1 million during the quarter.

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