CLCT

Collectors Universe, Inc. (CLCT)

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Collectors Universe, Inc. (CLCT)

F2Q2014 Earnings Conference Call

February 6, 2014 04:30 PM ET

Executives

Robert Deuster - CEO

Joe Wallace - CFO

Analyst

Ryan Mallory - Driehaus Capital Management

Matthew Furnas - RC Management

Jim Gentrup - Discovery Investments Research

Presentation

Operator

Good afternoon, everyone, and thank you for joining us to discuss Collectors Universe's Financial Results for the Second Quarter ended December 31, 2013. With us today from management are Robert G. Deuster, Chief Executive Officer, and Joe Wallace, Chief Financial Officer. Management will provide a brief overview of the quarter, and then open the call up for 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 second quarter conference call. On our last call I reported that the start of our new fiscal year was robust and we again achieved a record performance in Q1. Our second quarter which is the one we are reporting on today has seasonally been our weakest one due to the end of the coin minting year and the state of the miasmatic market activity during the holiday rich quarter. I am please however to report today that we have not seen that traditional seasonality affect us this year and our fiscal 2014 Q2 results were excellent, and again a record for that period in Collectors' history.

Speaking of that 2014 will mark the 29th year of business operations for our claim business, which started in 1986 and we will soon grade our 28 millionth coin and 50 millionth item for all of Collectors Universe businesses. A significant factor for us this quarter is the growing presence we have in the international coin markets especially China. Revenue from our international operations now represent 8% of total company revenue compared to 2% during the first six months of the last two fiscal years.

Our total service revenue for the quarter came in at 13.5 million compared to 9.6 million in Q2 last year, reflecting strong growth trends in both of our grading businesses, PCGS and PSA/DNA. In particular our PCGS coin grading business revenues grew 58% over the same period last year aided by four times more international revenues than fiscal 2013 and strong show grading activity worldwide. The PSA/DNA card autograph results grew 16% year-over-year and now has delivered its 14th straight quarter-over-quarter revenue gain. Our reported services gross margin was 61% for the quarter, improving 250 basis points over the 2013 period.

We continue to see strength in volume overall thus giving us good economies of scale and improved efficiencies in operations. We graded 900,000 coins and cards in Q2 compared to 725,000 items in the previous year quarter. Also helping elevate gross margin was a continuing trend in improved average selling prices as a result of expanded services at higher grading fees and increased grading activity at show revenues. Because of this our reported operating income performance for the quarter was a healthy 2.1 million compared to the 971,000 in the prior year period.

Our reported fully diluted earnings per share for the quarter was $0.15, well ahead of the $0.07 reported last year. I will let Joe Wallace go into more of a detail on our financials during the quarter and year-to-date, but I am very pleased with the momentum gain during the earlier part of calendar 2013 and it has continued and will frame our potential for the second half of our fiscal 2014 performance.

The new coin year mintage is off to a strong start again with first day sales of American Eagles, Silver Eagles rather nearly selling out last month. Show grading activity as well has been strong since the first of the year and we will stay focused on taking advantage of these favorable conditions to increase our market presence and share in the coming quarters. We continue to see a trend toward high value rarity coin and card grading at show venues because it’s the fastest and most convenient way to get very desirable collectibles graded and perhaps marketed in a short period of time in an environment where dealers are present.

PCGS participates in national and international events as well as hosts nine members only shows for dealers, PSA/DNA attends the largest card shows around U.S. One of the most popular and well attended is the Long Beach Expo, held three times a year in Long Beach California. This expo is owned by Collectors Universe and hosts coin grading, dealer exposition and a major coin auction run by Heritage Auctions. It is also a popular venue for dealers in sports cards and memorabilia. The expo is in its fifth year of operations.

Read the rest of this transcript for free on seekingalpha.com