Collectors Universe, Inc. (CLCT)

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Collectors Universe, Inc. (CLCT)

F1Q13 Earnings Call

November 8, 2012 4:30 pm ET


Robert Deuster - Chief Executive Officer

Joseph Wallace - Chief Financial Officer


Adrian Day - Adrian Day Asset Management



Good afternoon, everyone and thank you for joining us to discuss Collectors Universe financial results for the first quarter ended September 30, 2012. 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 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 the 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 not like to turn the call over to Robert Deuster. Robert?

Robert Deuster

Thank you. Welcome to today's conference call. I will review the current market environment and some of our achievements for the first fiscal quarter of 2013. Then, our CFO, Joe Wallace will provide a quick overview of our quarterly financials. At the conclusion of these remarks, we would be happy to answer any questions that you might have.

First of all, I would like to say, I am very pleased to be part of the Collectors Universe team. While my time here has been short, I am reporting to you only a few weeks after my start in mid-October. I have been impressed with this unique company serving the worldwide collectibles market.

The services we provide in grading and authentication for the coins, sports memorabilia and autographed markets represents the highest benchmark in quality, security and market value for our customers. As we grow from this point, I hope to bring to Collectors the focused direction to expand globally, by efficiently increasing and expanding our services in the U.S., Europe and Asia, as well as, giving all of our customers greater access to our services in collectibles information online.

But before I discuss the market dynamics and our first quarter results, I would like to take a moment to thank Mike McConnell, who served as our CEO for the last four years, as he returns to our board. Mike's tenure, which focused on bring the company back to its core competency in the coin and sports memorabilia markets was essential enough to moving forward to better serve and grow in our primary markets.

As many of you know who follow the company, we participate in three primary collectible market segments, coin, sports memorabilia and autograph authentication. While they are each driven by different market factors our business results are mostly influenced by the precious metals and vintage coin market dynamics. Our PCGS coin division, which represent about 57% of our total service revenue with further sub segment into the vintage world and modern coin segment.

We also generate service revenue by grading coins submitted at coin shows. With the exception of vintage and world coins, the level of coins submitted to us for grading are mostly in the modern categories, are highly dependent on the price of gold, silver and platinum and the output from the mints such as the U.S. mint and of course public demand for those coin.

In recent quarters, the price of gold in particular has hovered around $1,700. Down from its high earlier this year, and thus the demand from the U.S. mint which is strongly influenced by lower demand from public buyers is also down, putting fewer coins into the market and thus to be potentially graded by us.

As reported last quarter and now again this quarter, we are seeing that lower level of submissions for grading in the modern coin sub-segment and it has lowered our reported total coin service revenue, which is down about 19% year over year. This is the most volatile part of our business and it will remain that way for the foreseeable future.

For vintage and world coins, we continue to hold a strong market position as the preferred grading service provider worldwide. Here the price of precious metals is less of a factor where demand for grading is driven more by personal economics and collector and dealer activity. Overall, the vintage and world coin market is fairly stable but underdeveloped. We continue to increasing demand for our grading services at major coin shows or dealer events with grading activity 14% higher this year than a year ago.

With our offices in Paris and Hong Kong now operating on a continuous basis, we are starting to see our global expansion serving the world coin market take hold. This is one of our most important strategies for growth in the coming years. An important component of serving the world coin market is providing the marketplace with the latest information on the price of precious metals, detailed facts about all of the coins in the market, and their value as they frequently trade around the world. Collectors Universe provides the most extensive online resource and database of coin information in the world today.

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