Collectors Universe, Inc. (CLCT)

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Collectors Universe Inc. (CLCT)

F4Q 2013 Results - Earnings Call Transcript

August 28, 2013 04:30 PM ET


Robert Deuster - CEO

Joe Wallace - CFO



Good afternoon, everyone, and thank you for joining us to discuss Collectors Universe financial results for the fourth quarter ended June 30, 2013. With us today from management are Robert G. Deuster, Chief Executive Officer, and Joe Wallace, Chief Financial Officer. The management will provide a brief overview of the quarter, and then open the call up to your questions.

Comments made 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 call 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 fourth quarter and year-end conference call. A lot has happened this last quarter and so I will spend a few minutes discussing our business activity, especially our entry into the Chinese Mainland coin market, and then give you some commentary on the outlook going forward into our 2014 fiscal Q1.

I am very pleased to report to you that our service revenue was very strong last quarter coming in at $13.7 million that [equals] the $11.6 million during the fourth quarter of 2012 and was only slightly lower than our record $14.5 million 2013 third quarter result.

This brought our total year’s service revenues to $48.5 million, a new company record. The strength in revenues last quarter was the result of a still active coin market driven by strong U.S. mint coin demand and collector interest in the grading of their coin that shows in expo venues.

Our service gross profit during the quarter was 63% compared to 59% last year and was aided by the improvement in our services offered to collectors and operational efficiencies realized at our facilities.

Operating income for the last quarter was $3.3 million, about $1.4 million higher than last year’s Q4; bringing operating income for the year to $9.5 million, better than the $9.2 million last year and making up for the slower first and second quarter’s we reported earlier this fiscal year.

All-in-all, this was a very satisfying finish to fiscal 2013, and we entered fiscal 2014 with a strong backlog and new international market opportunities. Continuing the trend we saw last quarter, we see a record setting pace for the sales of gold and silver coins from the U.S. mint. Since I am reporting to you in late August, I will refer to the year-to-date July results from the U.S. mint not June numbers.

Through July Gold Eagle bullion sales were up 82% from the same period last year and Silver Eagle bullion sales are up 50%. While this silver number is strong, it doesn’t reflect the real market demand out there since the U.S. mint is rationing coins and that program is still in effect. All of this bodes well for bulk coin grading activity at our PCGS business, which has remained strong since December 2012.

This overall market demand for modern coins is lifting the overall market, but it’s also supported by a very active global market in vintage and rare coins as well. This act of coin market in terms of the sales of rare and vintage coins at auction or between dealers is increasing levels of grading activity, occurring knowledge shows in expos and international venues.

This is a welcome trend for us, as we realize strong margins that showed and see a good selection of rare and valuable coins. I will speak more about the grand opening of our new grading center in Shanghai last month in a minute. But overall grading of coins by our PCGS business at our own and national shows in the U.S. is tracking at above 45% growth rate year-over-year. Service revenues at our Paris and Hong Kong submission and grading centers is also up 30% year-over-year.

As we have seen every few months, there is the sale of a notable rare or vintage coin in the news, and we have that again in the recent sale of what’s called the king of all U.S. Silver Dollars, an 1804 Liberty Dollar went for $3.7 million at auction just this month. Sales like this are exciting in this market and continue to [stalk] interest in the client collectable space.

[Twitching] markets, I would like to discuss the performance of our PSA/DNA business. This last quarter was the 12th consecutive quarter-on-quarter growth quarter for our sports cards and autograph business. With our service revenue for grading sports cards and autographs growing 10% last year. This steady performance is possible because of PSA’s strong market position and wide palette of services for its customers.

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