Collectors Universe (CLCT) 11 May 202020 Q3 Earnings call transcript

Ladies and gentlemen, good afternoon, everyone, and thank you for joining us to discuss Collectors Universe’s financial results for the third quarter ended March 31, 2020. Please note that this call is being recorded. With us today from management are Mr. Joseph J. Orlando, President and Chief Executive Officer; and Mr. President Financial Vice Senior Wallace, and Officer. Chief Joseph overview quarter to and will questions. provide open the brief a up Management then of the your call

addition possibly Comments future as the result statements of otherwise. actual fully concerning of from forward-looking the Certain as trends statements in the Reform undertakes of materially, or and update future made to Act are may company a XXXX. may statements the company’s business performance, the expectations uncertainties Securities results to in of with forward-looking events and Private only made the that and statements Litigation financial no statements, new other obligation and date risks about company’s its in more filings uncertainties. in whether revise during regarding risks forecasts including The future as differ, are or described of are and profitability call defined today’s the today’s information, forward-looking The Commission. Exchange call, those the company’s these contain Securities conference

now the I would Joseph sir. turn go that, conference Mr. over Orlando. With Please to ahead,

you, quarter for XXXX. results going forward conference want quarter the today’s to fourth fiscal of you the and and year. for to on call summarize then quarter the outlook welcome I the give Thank commentary third some into our

of navigate so to safe We to Universe no and many the this but appreciate foremost, that difficult us challenging effort of crisis. takes Collectors health everyone, hopes ones us the a situation. team all through priority, crisis. most holding has up the that made people people your help the are for and time have or that the First been matter and It you loved crisis COVID-XX

grading our the March. business forward cancellation Please and that move The call, fallout well. major in keep to some entirely down for the importance to mind will as was shows two due the the the to we earnings business. included as And of domestic from context trade weeks fallout the be last Turning of through authentication utmost the shut of pandemic. three

meaningful. it and issues earlier what was a the quarter less we comparisons do to year-over-year this year’s focus region same is the the and to continue adapt of is as quarter That part operation impacted done on wrestled will all more last also PCGS what revenues, we not virus-related while addition, China third in to with make to of In call have this material Unfortunately, during will our issues. the aforementioned yet the overall situation. COVID-XX said,

million, our obstacles. proceed $XX.X the with QX with the So were review moving in the circumstances, that the solid mind, Revenues Considering third in quarter of quarter Collectors and Universe approach a results. let’s finished with overall aforementioned forward. despite

growth in even though record better operations X%. on In only our a experiencing we we the QX issued $XX.X about fact, headquarters year’s was the fell context, shelter-in-place shutdown. double-digit order Again, prior still at March the company of last after ceased short by our California for Governor million to of quarter of XX,

$X.X finish at Our though year’s $X.X even we or the million, year-over-year, prior by PSA actually quarter. while the XX% PCGS was unable down finished performance XX% eclipsed by division from from $XX.X QX million year, by were up and to which last was million

the I stated PSA the quarterly had how few earlier, on in When of time, performance business shutdown. a a had Back at momentum of indication PCGS, lost real grading provides the impact as that into the cancellation events the factoring heading much performance. further

the QX. midway dangers while point a end our others In the the the sole in grading about was Baltimore quarter, and our show at the the on the of as such event China, rescheduling of later QX from quarter. international restrictions event canceled domestic, were those international of travel of company Furthermore, barred were Some near variety. through

goal COVID-XX from our been make U.S.-based crisis less and aside, dependent the less overtime, to staff. operation has the on assistance China

to China we some this but in has has independently improved, first submissions. That half during progress on remain higher-value coin continue the about process Shanghai and more demand, very believe market. ability The will robust the Our submission the made the coins said, year fiscal start PCGS as our remains of long-term things to remains to opportunity at stabilize positive team current backlog globally. our office in due Chinese limitations

to Turning sights other company’s the division. major our

includes last revenue collectibles, As year over mentioned surpassing XXX,XXX output This for prior set in about the record earlier, items record the the PSA service. business division, QX XXXX. set quarter-specific fiscal the QX for another shipping total record and PSA/DNA of XXX,XXX

reminder, Currently, losing levels. backlog days achieved to continues this of grow card working backlog X operational made with submission to initial are the remains associated alone note, shutdown. after during the unprecedented a a all the As On the efforts but units. our helping north improve was the efficiency, PSA some trading of early positive million revamp

our fall capacity months a PSA. of in Just ago, was average week roughly receiving few in XX,XXX QX XXXX, the units per

capacity the PSA receiving achieved with three number important is same that of had Just consecutive most shutdown, the more takeaway from increase weeks Perhaps this units. in the it to than prior XXX,XXX people. receiving was

and improvement. was one the department with manufacturing lean tackled very our revamp, are pleased first the we Our in receiving

Of take of up we experience the as to challenges do due level to inefficiencies to we course, time expect operation. back production, us, that and ramp some before to the will get it

on efficiency concepts committed term, stabilizing The While business the the COVID-XX application to continue. will of top we during crisis efficiency is are our these the focus. this short operational staying with course in priority

get the approach, will to technology be. lean coupled with improvements, Our team us combination we believes to ultimately where need the of

QX to close with to profit under which were margins the was fairly finished a Returning company in the ago similar our last year QX. normal gross quarter, anticipation from the overall margins XX% down business, to our XX% for Had circumstances, quarter was year.

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

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

Joe?

Thank off condition impacted XX, fiscal Yes. in results our third quarter. what did Joe. employees of and its give the overview typically of worldwide I were we will quarter now continue operating the March results XXXX, you, The a financial nine third brief of of the closures, any the company’s lay strongest and for for COVID-XX pay quarter financial quarter as COVID-XX is by the months of and Despite our the to year. and negatively not XXXX.

sheet million, that net income enable At share. million or $X.XX $X.X third to of net income In in March $X.X of million million, or million up of $X.X quarter earned us income share This million income this a per of and quarterly strong have of $X.XX to compares XXXX. we $X.X revenues our ramp fiscal XX, per third quarter, $XX.X year’s operating revenues generated and operating of of will operations. $XX.X balance to the continue company the

nine-month million of revenues $X.X of nine-month of nine operating or income $X.X the in fiscal or the of generated of per $XX.X $XX.X and income and million share. months $X.X fiscal per $XX.X nine net revenues million, record of For operating months million $X.XX million, compares income of company the share net XXXX, million to income This of $X.XX XXXX.

an business fully The million was more related cards a of increase revenue than decrease XX of revenue COVID-XX. although increase or growth million coins. quarter the or or curtailed the to cards third quarter million record in by quarter third COVID-XX. quarter in has for quarter-over-quarter offset There in achieved this third last The decrease XX the of in XX% was in autographs, of and million represented by growth XX% quarter $X.X $X.X $XX.X this and X% revenues, to year’s – $X.X autographs that and quarters,

revenues $X.X decrease million XX% increase million of and nine-month coin $XX.X The nine-month The $X.X XX% revenue and cards cards business. revenues coins. XX%. or in to million XX% for represented and included record included in U.S. or or $X.X The million coin X% of of increases million that increase of $X.X or autographs lower autographs

includes of the China improved the overall the XX%. those months and nine autographs increase the and financial coin of business, two our cards revenues of X% Combined, business represent $X.X reflects revenues importance performance. in million or continued and coin The of to businesses XX%

closed to filed U.S. will the until received April grading authentication as As level the discussed in due there is in fourth COVID-XX, in quarter. remain operations our uncertainty Form be more submissions that the XX today, detail SEC XX-Q with and to and of our

U.S. will the operations had a the at in March, However, quarter. we ramping our record facilitate that us end up fourth backlog of in

the in U.S. is coin coin higher that of to our levels events. support our be quarter, China of operations China operating at although ramp Although to pre-COVID-XX than difficult authentication me, quarter-to-date due our traveling prohibits excuse travel to operation in our the it up restrictions fourth grading third a experts will China – in in level to the continuing activity

our And March as profit paying gross the XX% in autographs and cards business. year’s decision COVID-XX this The gross nine margins The XXXX. business, record buildup year. and to and capacity compared this reflects nine the effects of periods continue of also in in in XX% year’s were margins of third months through and quarter same to that lower third case reflected in the backlog all to last XX% quarter reduce profit of and the and months personnel the XX, XX%

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

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

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

nine including and the XX% in current consulting and quarter XX% quarter and periods resulting incentives of last operational in nine this quarter revenues related margins XX% year’s costs, periods The improved third and months and higher revenues compared higher as in this year’s increase as due year processes XX% the were payroll and the same represent expenses costs, nine of third third year’s and dollar performance-based outside performance on last XX% G&A months. include compensation. higher and services to compared in and in stock-based productivity to higher of months XX% legal-related focused XX% higher noncash improving business, of The year. our XX% and to

cash and $X.X capitalized software by company’s activities million, dividends generated XX, the effects COVID-XX to to position operating Net the Turning pay million cash term $XX.X company’s despite $X.X cash included million, of to for compared $X.X nine as partially The million XXXX. XXXX, to million at costs was of and at $X.X sheet. cash used offset expenditures months, June $XX.X March $XX.X stockholders our million used down from was the loan. million in paid generated of and balance capital

on XX Today, to $X.XXX QX. quarter out strong as per based not announced will which our fourth XX. quarter turn into stockholders cash momentum dividend release, May carried from the our record paid of quarter in be share, earnings we In expected, summary, the of on third did we on May our

disclosed impact our effect With the COVID-XX in the as we quarter. a expect than in in have quarter greater the third today, our filed it continuing evolve business of XX-Q will and fourth to on

minimize get operations level to we to However, normalized activity actively We negative fourth into on through the changing fourth the quarter. the impact as up more conditions in be and recognize the the management flexible objective a our engaged is progress ramping quarter. to in to adapt of need with order

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

Joe. Thanks,

would QX the moving and to quarter final the few of Before into of fiscal forward like about and the close we make year. conclude, I comments a our outlook fourth

release, As authentication we trading we limited and card a grading on basis. April operations memorabilia noted press XX coin, our in resumed and an

collectors that by believe the marketability and that assets these previously liquidity authentication grading and add have them. we stated, value and services and As increasing sell to enhancing thereby to their we buy dealers our

and the priority. safety That said, and protecting of our our our community employees health top remains

order changing adopting health measures, As workspaces maintain health the to offices and configuration including operation sanitizing operations a protocols. a the at safety only having other safety of result, our and we our after in implemented number regularly social resumed of and distancing,

Since safety our part while protocols by the given the This by at continuing office we implemented. we capacity that of abide limiting have to in at have people been any increased time, achieved gradually has the number time.

this accomplished spreading by keeping as who those out job shifts on the remotely work as can based have well employees staff We through at additional their home duties.

approach we have expected. So could has as far, well this as gone

As continue to is that that important we the focus a is position in such we the navigate this pandemic. what it put because crisis, prior fundamentals us on focus good to

important In business, terms nothing view of the or priorities has as in what we changed.

continue. at the success. will of top us not importance that these are course to going efficiency which our has operational is wear of underscored anything, to increase led list, our We crisis from priorities, the the If this revamp,

We climates are assets auction during this. like difficult have and help What consumers those or to a crisis the The kind choose. liquidate times, has collectibles that Collectors Universe function X/XX continue of value. we track at Our post can the customers of commerce their do the facilitate during such us whether record those paper, metal, dealers, world and even enables financial assets, market assets as all leather of the send resiliency to and thrive XXXX they economic made they and market when wood, over period. houses commerce,

or change markets this time, the our see currently, serve. While in demand waning in for interest the no can at any we certainly services we decline

items our PCGS solid by ranged for from record-breaking pandemic. PSA this prices retail during certified and even and have auction fact, brands In to

would time In the and dealing display recession world Universe website the stretch the sessions April, with proof. full call in It weeks. all-time when set fallout is month market to Collectors But the of last records a has entire total market the with views on for the monthly traffic at a or resiliency page any of this COVID-XX. be been associated remarkable business several

counterintuitive to as unscaled. market powered has it the this those industry drive not may or As collecting, seem relatively crisis with familiar behind historically our through

Looking finish of the ahead to QX.

the be of variables operational adhere The us, company this Universe result In as evolve, has severity fallout. where crisis. While including continues no perfect that and important number it the our are is the helpful ultimate Collectors to results depend duration operating scenarios adjust becomes the to to, its this available. of Collectors of pandemic will we as there control, is a been so so on plans a crisis that to playbook as situation capacity new quarter our as like impacted limited of our outside can and will corresponding information Universe for many different can, a

the Due release their it to Naismith QX with Fame was relates as associated to anticipated the Hall current crisis, Basketball Memorial highly PCGS, delayed of the launch in originally, of coin April. Speaking the Mint date. has the expected organization complications to

and closely opportunity the released. when focused coin is the to on continue monitor situation We are the will maximizing

Basketball with new this of exclusive Fame coin reminder, project. a agreement PCGS signed Hall the As an for

PCGS the Hall part this partnership, as of exclusive of will Fame’s grading service. As act

designing Our will Fame coins. Hall company will the autograph of inserts special labels, accompany the that work with certified including on

company this into Heading the is COVID-XX our balance past the have unprecedented and and far the enabled great for strength our crisis, the Collectors to its sheet news the that so the storm performance year of Universe over shareholders during weather time.

us not Collectors grow deterred new business exploring Universe that we the be can in Finally, the will future. opportunities from help profitably

unchanged. Our vision remains

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

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