Collectors Universe, Inc. (CLCT)

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Collectors Universe, Inc. (CLCT)

F2Q11 Earnings Call

February 8, 2011 4:30 pm ET


Michael J. McConnell - Chief Executive Officer

Joseph Wallace - Chief Financial Officer


Marcelle Herbst - Herbst Capital Management

Garrett King - Truffle Hound Capital



Good afternoon, everyone, and thank you for joining us to discuss Collectors Universe Financial Results for the Second Quarter Ended December 31, 2010. With us today from management are Mike McConnell, Chief Executive Officer, and Joe Wallace, Chief Financial Officer. Management will provide a brief overview of the quarter and then open the call 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 turn it over to Michael McConnell. Michael?

Michael J. McConnell

Thank you and everyone welcome to today’s conference call. Before turning this call over to Joe Wallace, our CFO, who will discuss the quarter’s financial results in more detail, I’d like the opportunity to review our results for the second quarter of fiscal year 2011. It was a solid quarter for what is typically our slowest time of the year.

Revenues grew by approximately 8%, 5% of which was driven by increase in average service fee, with PCGS, PSA PSA/DNA and CAE all contributing. Gross profit held at approximately 60%. As I indicated at the start of the year, we consciously made several investments in our cost this year and despite those investments operating income grew by 8% year-on-year.

Several specific comments that should be helpful to understand certain parts of our business. The Paris operation lost approximately $60,000 in the quarter and $130,000 year-to-date. These figures are consistent with our plan for the year and we forecast Paris to break even in the second half of this year, our fiscal year. We continue to be encouraged by the market acceptance of our products and services on the European continent.

On the cost side of the business, we held our monthly meeting this morning and my topic was healthcare costs. Our current quote from our healthcare insurer calls for a 17% increase or approximately $175,000 for the 12 months beginning March 1, 2011.

Going forward. We’ll handle this in our plan for next year, but this is a glimpse of the types of day-to-day realities faced by our employees as well as the company. Our CAE business continues to exceed expectations. Its revenues grew year-on-year by 20% and operating profit by nearly 42%. (Inaudible) and her team continued to add information and functionality to improve the experience for our customers. And these are being well received as both membership and listings continue to grow.

Our advertising business across all units continues to grow nicely. Revenues are up approximately 15% year-on-year and our goal over the next couple of years is to double ad dollars from current levels. Finally, your Board remains committed to the company’s dividend policy. The quarter’s dividend will be paid towards the end of the month.

Looking forward, as we head into the third quarter of fiscal year 2011, we are encouraged by the first five weeks. We have started this quarter very strongly and just had our highest grossing weekly revenue in the 25-year history of the company. That 25 year history, by the way, the anniversary was February 3. So we’ve been around for quite a long time.

The bulk business is very strong right now with a number of programs and products underway. And overall, our backlog is up approximately 24% as compared to last year at this time.

At this stage, I’ll then turn the call over to Joe and of course will be here at the conclusion of his remarks to answer any questions.

Joseph Wallace

Thank you, Mike, good afternoon everyone. I'll now give brief overview of the financial results for the second quarter of fiscal ‘11. For the current second quarter, the company reported net service revenues of $9.6 million. Operating income of $1.6 million and after-tax income from continuing operations of $1 million or $0.12 per diluted share. This compares to net service revenues of $8.9 million, operating income of $1.5 million and after-tax income from continuing operations of $1.7 million or $0.22 per diluted share for the second quarter of fiscal 2010.

For the first half of the year, the company's net service revenues were $19.4 million. Operating income was $3.4 million and after-tax income from continuing operations was $2.1 million or $0.27 per diluted share. This compares to net service revenues of $18.2 million, operating income of $3.3 million and after-tax income from continuing operations of $3.4 million or $0.45 per diluted share for the six months ended December 31, 2009.

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