Collectors Universe (CLCT) 4 Feb 202020 Q2 Earnings call transcript

Good afternoon, everyone, and thank you for joining us to discuss Collectors Universe's Financial Results for the Second Quarter ended December 31, 2019. Today's conference is being recorded.

With us today from management are Joseph J. Orlando, President and Chief Executive Officer; and Joseph Wallace, Senior Vice President and Chief Financial Officer. Management will provide a brief overview of the quarter and then open the call up to your questions. that call future statements and Securities financial business and today's expectations the statements Litigation during as trends its statements XXXX. about performance, profitability Reform made Act may the regarding contain company's concerning defined of Comments in forward-looking Private are including forecasts

with of made to revise future undertakes uncertainties, or results the Securities Certain risks number information, materially of filings new and no other and today's differ Exchange uncertainties. from date in due company those Commission. or described The company's update result These to company's the forward-looking future may events call a actual forward-looking only statements forecast these to and of risks of addition conference in the are fully obligation the more the statements, possibly as call, in whether this are otherwise. and of a risks the as in

would Orlando. conference like the to turn go With please that, Joe, I now Joe to over ahead.

for and and Thank forward quarter quarter fiscal summarize the for welcome call our some $XX.X going year. on finished fiscal the The the into Collectors results the were want million for Universe third the a figure quarter a company. XXXX. million, commentary outlook I strong conference established give of to you, $XX.X the Revenues million $XX.X you ago. then second results. also up today's second new in with to QX overall quarter from to from record QX year-over-year XX% year a increase

PSA year-over-year and growth performance major was as both perspective. improved PCGS from strong by substantially double-digit a within The driven divisions

coin and XX% XX% from of previous autographs business and card our Our primary in division showed increase year. in the business trading our an overall

months or or our division, XX% to million compared million or XX PCGS was into busier million XX% the compared to in year. $X.X the XX% generated the services year our QX. for continuing Within combined last QX up quarter U.S. momentum positive as PCGS Vintage last bulk approximately $X.X we Bulk $X.X the season versus over up last up year, last Overall, was QX. in Show a were head and PCGS US

International our instead turned Paris in QX. over results positive million in office eclipsing last last two X%, result Kong year compared modest QX performance, of $X.X $X.X grading million. a as down while standout XXX% posted improved about one was about PCGS hosting Within Kong of quarter, Hong XXXX a fiscal offices same in the office Shanghai and services, event to year the or revenues in Hong but our by a Shanghai by the

Once business with part milestone. the backlog The of quarter After with steady and coin the important gain has year, first QX. generated half which China. in income strong PCGS fiscal the is this traction entering a restructuring, an coin some impressive performance operating in through our company our international continues of even China, to again finished

as of in are by intriguing opportunities. remains our growth We the more this it the gradual during last quarters few one region encouraged

this over includes XXX,XXX quarter, items division record any and PSA/DNA PSA for fiscal set division QX million. set record last our of the in all-time XXX,XXX revenue prior The the Turning for This business million year's service. output in surpassed roughly $X.X the other year. approximately at $X.X major quarter-specific collectibles, company's to another the and division, the by shipping sites revenue record finished total earlier surpassing QX

history. to the the of faster backlog unprecedented our continues the Some our revamp averaged per grow highest improve faster XX,XXX units modifications of returned of over our QX, have towards operational end us. base, to week, product helping the during with submissions quarter, efficiency, made PSA in to the back north the In we receiving levels. peaks but The early the submissions to XX,XXX weekly the are figures come customer

while unit here million today, is PSA the this surpassed for of stand we has X backlog the As extremely trend business. growth positive the mark the

Our for to which our help technology, for our a people improve can base. company gross were turnaround Returning the times which customer continues was and loyal overall margins ago. in profit quarter, year the to same invest XX% business,

per operating second to income which Net for diluted for after in and up quarter from $X.X was QX or Our prior compensation million compared of million $X.XX million previous per was million fiscal income $X.X year. in the year. noncash $X.X stock-based was XXXX $X.X the $X.XX share the share,

for more financial of turn Joe? Joe in me over to a Now our QX. detailed performance review it Wallace let

of Thank overview million second of you, operating $X.X $X.X brief $X.X income quarter record year's of in per net results million, quarter the million fiscal per or and first revenues financial the Joe. of compares of $X.XX I $X.X million of fiscal quarterly a quarter million quarter, months $X.XX and income XXXX. $XX.X and $XX.X six generated this company second earned will of the of net or share income now the In share. second revenues for million, to income second of operating XXXX. give This

or first million revenues of six of and XXXX. fiscal XXXX, $X.X income per This of $X.X the income of or million, $X.X fiscal share to months per million million, million six share. million months of company $XX.X $XX.X of of first quarterly generated record of in half operating $X.XX $X.XX income net earned half first compares revenues the $X.X the and operating record In first income net

quarter second second quarter. of million $X.X in XX% quarter XX%, less in $X.X million and revenues, increase included reflecting event The or million increase QX. of cards and in to were of China the has vintage XX% from revenues $X.X quarters. in of and the The for $X.X revenues XX% and one quarter-over-quarter XX% U.S. in France improved year's cards coin represented achieved record business coins. increase XXX%, the for grading million that and Kong France increased increases million, coin autographs, by million coins. Hong growth or last this of XX autographs revenues $X.X revenue by included QX about down in The or to or revenue $XX.X million quarter XX mainly $X.X

those cards $X.X businesses cards Kong. and business, autographs the Combined, business. The up $X.X XX% business to months million improved the in autographs, coin to increases increased the first in performance. vintage XX%, included or $X.X Kong by year six to for and increase France $X.X or revenues mainly of million six XX% Hong The coin and and X%, revenues about first included or of million from modern $X.X half and Hong by or overall that $XX.X The increase in million cards $X.X represented increase million. financial of six China record XX% revenue and revenues revenues months continued represented coins. our two XX% of of months million autographs the the of million in and U.S. XX% first coin revenues in reflects importance of and the were coins.

prior that of in by years, fiscal year that in strongest third our quarter, we our release discussed expect coins trend Silver quarter the States to and seasonally typically is the the year. U.S. Eagles quarter due for Gold Mint As continue in this United and to of the

authentication in have a will submission autographs cards and our continues manner that backlog and grow expect we record of addition, to continue grading. for to revenues stable a as In business that

second of was of submissions had based in strong improved our would quarter quarter this months, first year's compared With been with coins third respect our the finishing grading quarter as year's we to events revenues revenues strong X% that on backlog. China, China the which see a six about in last third expectation to at and

However, least are experiencing in in China slow the the China, recent at related outbreak business travel could restrictions near term. coronavirus closures momentum the in with we currently and

factor For matter XX-Q completeness, risk our that the was in today. for with we Form added a SEC filed this

in six as gross business business. second offset backlog to margins profit year's this by XX% The reduce the lower compared second in autographs to and revenues, and in six capacity months same build coin gross was to the partially last due as gross higher our of year's margins our to profit in and we the year. in improved and that due quarter business margins were cards profit The quarter higher in margins first months this and XX% XX% periods XX% record

variability of between our As seasonality the at gross there during business. quarterly margin in previously XX%. profit our can be vary the XXXX, due the On ended basis, of profit revenues June disclosed, a XX% and margins years mix to the three gross

second XX% revenues and second in of quarter operating this compared year’s six and as XX% in of revenues Our to six expenses quarter last year’s XX% second last months quarter year’s and months. combined represented

unchanged year’s most and second part, second due lower and quarter to Selling of selling revenues cards dollar and XX% versus the in substantially marketing incurred months last at XX% were offset selling expenses of months. six higher business costs terms, and marketing business. six revenues for and and by our were this growing in in coin our year’s autographs development expenses quarter marketing operations, In expenses overseas

the year’s performance-based operating Primarily and XX% leverage, The expense. higher related increase represented quarter the increase million compensation year’s increased six of of of improved performance to over six the and first as result represented legal months, payroll the million quarter improved as expenses XXXX. the XX% the costs, million periods $X.X revenues due stock-based QX second G&A and and operating higher income this and including months. revenues $X.X earned and XX% and $X.X and related the six in XX% of and $X.X fiscal and months million in second current higher months compared this XX% dollar quarter in last higher increased to include in non-cash year’s incentives year six second in business, of a of expenses

year’s the of and year. were and six this about non-cash XX% for were this and stock-based in the XX% XX% and as periods Our six months. XX% margins year’s and compensation and months year’s Adjusting QX quarter operating last of XX% compared compared XX% XX% expense, months and as same XX% six in in in revenues to operating to second QX last margins

cash sheet. Company’s $X.X expenditures million million from Company’s million, half to for $XX.X XXXX to loan. of The cash included $XX.X million of of paid by cash pay capitalized and June December $X.X position to Net used XXXX. generated December used of of first operating $X.X the term and capital balance year XXXX $X.X $XX.X in at million dividends our $X.X million offset as software the down to compared and million at Turning stockholders generated costs, partially million, cash the activities at

January dividend on XX. February X sorry, February of announced we $X.XXX January third XX paid I’m share, of be on which per our record XX, on – will quarter stockholders On cash to

for I’d that, thank your like to With Joe? you attention.

Thanks, Joe.

and the our QX record to moving fiscal conclude, Universe consecutive I the like QX of the the year. set make a about forward quarter comments we into quarter. the new outlook marked Collectors of would few Before respective revenue where a close fourth for quarter third

call, As during continue past I performance be year. our that fundamentals over earnings lot our stated a and we with focused to the do last has focus positive to on

revamp of here their is our system. at is Any it move and millions throughput who list. we help help receive the on of through how help financial will performance, operational can top make depend submissions to only year also Our customers efficiency but the service our the move priority will inventory. the not each our This we we gains

diverse this other we coins, Bulk the to in of season the customized noteworthy season, is XXXX Silver PCGS Memorial of packaging entered Naismith has what and hit the unveiled once coins been traditionally to menu our busy the the Coin one market process amongst of Basketball Gold At and now is as the as hits spring. be coins the Interestingly, of of April more PCGS, Fame a Eagles winter in developing street. received. scheduled accompany Hall have

common. to base, domestic sell coin and be who launched collectible In January banknote our especially money, extension U.S. is a officially which addition, coins and those valuable International brand prove for logical in complement should our for services. PCGS banknote paper fairly This of customer to both our addition grading

travel has earlier, our in said, the That last noted restrictions affected the been term. the in quarters. in gaining outbreak and steadily several business coin coronavirus by short our may be traction As related China during the adversely Shanghai business

a at geographic could some While ultimate course, in the quarters. not previous China time, factors, the revenues impact including spread on duration generated revenues number of of of material the will, are significance outbreak. of overall The our outbreak part the virus impact of momentum of depend the and the a of this the

new has interesting collecting the modern the October, volumes milestone market. PSA Turning renewed graded last to Pokémon levels. PSA reached million card, three in its of reaching have our most PSA, as for certified an to keeps submission after card This X past XXXX division auction years, inside millionth been those And been shortly interest In PSA card, non-sports in growing driving Promo single in milestone, Illustrator cards card. $XXX,XXX X a at Pokémon Japanese November. a sold this the fall, Mint

is. or is one genre. as were generation. volumes to for become is the card The product. material The who XXs. is Pokémon game Pokémon merely late child, me real for youngsters produce prices entire nostalgic to known submission popular exceptional business increasingly franchise, Pokémon a worldwide, how an started Like inside as non-sports category a the But shows, paid market cards baseball and rare which this continues to has it entering playing XXXXs are now popular their contributor in the this

As the market driver of of of That in Company's driver that Pokémon segment are collectors PSA, active. business. much as has contributor cards. hasn't history generations is PSA-graded This modern main market a younger rejuvenated the is more any our been becoming point to of more the been as at robust the sports it for

around only large. the backlog are encouraging count approximately for are cards. for XX% of variety not extremely modern but at majority is that the PSA This XX% million of X at of PSA the and sports In industry fact, our vast

bulk as our further second season. continues busy the on delve the team in efficiency maximizing its management In focus of coin our half year, fiscal into operations we

dealers being the fact, by the used collectibles in security certified but XXXX our been security used products. NFC in anti-counterfeiting as including a kind goods, luxury it or into otherwise A Near-field PCGS features has, this be never of world of product our collectors industries, will in our products, variety communication of are incorporated of currently and known Company. This new being world technology, can PSA some addition, is and In into for chip, has verify embedded been purpose. the technology so

and in a adds instantaneously the certified touching level be of next-level new The our the a sophistication in The verification smartphone, link our appear our simply to coming of announced new PSA weeks. products. will provide process doing By product for the the information addition exact and embedded protection will the current link already of screen. has certified this validation same the PCGS security certified technology database. a with on collectible the will

Finally, business Collectors we exploring new can are that help profitably us opportunities grow the Universe in the future.

such are expectations trade control, the the policies by and possibility in overall the primarily several of state our all course, governed climate, of Of of factors not precious the the U.S., price market worldwide. and economic as the in metals, collectibles our international changing for

next you to for Thank today us forward I joining you look with speaking quarter. and

may Now, I the call would have. like to to you any open questions

we look We would with like of us for today close QX. to joining and the talking at everyone forward thank everyone to

participation and for Thank call. you you your may concludes today's This now disconnect.