CLCT

Collectors Universe, Inc. (CLCT)

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Collectors Universe, Inc. (PSB)

F3Q2011 Earnings Call

May 9, 2011 4:30 pm ET

Executives

Michael McConnell - CEO

Joe Wallace - CFO

Analysts

Austin Memone - Allen Hendserson & Co

Presentation

Operator

Good afternoon everyone and thank you for joining us to discuss Collectors Universe Financial Results for the third quarter at end of March 31, 2011. With us today for management are Michael McConnell, Chief Executive Officer: and Joe Wallace, Chief Financial Officer. Management will provide a brief overview of the quarter and then open the call up to your questions. (Operator Instructions). This conference is being recorded today, Monday, May 9, 2011.

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, possibility materially from those forecast in the call due to a number of risks and uncertainties. Certain of these risks are uncertainties in addition, to the other risks that are more fully described in the company’s fillings 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 application to update or revise the forward looking statements whether as a result of new information, future events or otherwise.

With that, I will now turn the call over to Michael McConnell. Michael?

Michael McConnell

Good afternoon and thank you to each of you for attending or call today. We are very pleased to report to you record financial results for our third quarter ended March 31, 2011. Today, I will comment on three areas before turning the call over to Joe Wallace, the company’s Chief Financial Officer. The three areas are this quarter’s results and selected highlights. Next, I will provide an update on our, what I call, ‘Extend Pragmatically’ strategy and philosophy and then finally I will preview briefly a key element of our 2011-2012 operating plan.

First the quarter’s results. Year-on-year revenue grew by approximately 9% excluding product sales to $12.6 million and operating profit increased by 16% to $3.3 million. This performance marked the best in the company’s 25-year history, truly a remarkable accomplishment, and each of our employees contributed to this milestone.

Several Highlights: grader productivity increased by 22% in the quarter as measured in units processed. This team is the engine that makes our company go and their performance numbers speak for themselves. On behalf of all of us, notably the shareholders, I would like to say to our grading rooms, thank you.

PSA/DNA experienced the second consecutive quarterly growth and driven largely by initiatives Joe Orlando and his team put in place a year ago. While the card market remained subdued, our DNA business has flourished. Quarterly revenue topped $870,000, a 36% year-over-year increase over the average proceeding four quarters.

Thirdly, government officials around the world have helped our company. With the rising gold and silver driven by investors’ appetite for hard assets or modern or bulk business, in particular, have seen excellent growth. Revenue in this division topped $4 million for the first time in any quarter and Miles Standish has worked tirelessly to develop programs to deliver value to our customers. By way of background, before last year we averaged approximately $6.5 million in our bulk or modern business for the proceeding five years. Last year, we achieved $9 million for the 2009-2010 year. As I have just said we just finished the quarter with a quarter alone was $4 million and I suspect we are on track to beat the $9 million achieved last year.

Next, as our digital presence has grown and evolved through our core websites, pcgs.com, psacard.com, as well as CCE Coin Facts and Collectors Corners, we have begun to drive advertising revenues. 750,000 people visit pcgs.com per month and it appears that user demographics are extremely attractive with median in income and age skewing high. As an aside, I remain an investor in several media and private equity funds and I continue to see an evolution of ad dollars from tradition print TV and even radio media to online and we may be approaching a tipping point. Our advertising activities, as if today, are slightly above a $2 million run rate for the first time, and we are extremely excited about this potential area for our business.

Now moving to some of our Extend Pragmatically initiatives. Various strategic initiatives developed last year are cementing a foundation for futures specifically our activities in Paris continue to grow. Units graded have increased by approximately 31% from our first show a year ago as compared to our most recent show. We have launched a modest version website and recently sold our first two ad deals. We plan to be on the European continent for years to come deliver in the type of market structure and standards that benefit our customers for so many years. We will continue to expand this business with a keen eye on costs and our current run rate shows us approaching breakeven in the fourth quarter.

Given our success in DNA we are exploring in East Coast presence, think of it as Paris like. The economics are compelling and strategic benefits potentially significant. I have more to report on this area on our next call.

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