Q1 2020 Earnings Call
Good afternoon, everyone and thank you for joining us to discuss collectors universe. Its financial results for the first quarter ended September Thirtyth 2019, today's conference is being recorded.
With us today from management, our Joseph J., Orlando, President and Chief Executive Officer interests of 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 or.
Comments made during today's call may contain statements regarding the company's expectations about 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 make differ possibly materially from those forecast in this call just one 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 before 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'd now like to turn the call over to Joseph Orlando Joe.
Thank you and welcome to today's first quarter conference call for fiscal 2020, I want to summarize the results for the quarter and then give you some commentary on the outlook going forward into our second fiscal quarter of the year.
Collectors Universe finished Q1 with outstanding overall results revenues in the first quarter were up year over year to 20.2 million from 17.5 million, a 16% increase from a year ago.
20.2 million dollar figure also established a new all time quarterly record for the company.
Similar to our strong Q4 finish in June the Q1 results were a product of positive performance is found within both major divisions.
PCGS and P.S.A. improved from a year over year perspective.
Our primary division showed an increase of 9% in our overall coin business and 33% and our trading cards and autograph business from the previous year.
[noise] within the PCGS Division, our U.S. vintage and show services were down slightly by 0.2 million combined compared to last year that said it is important to note that PCGS had one fewer onsite grading events in Q1, this year, which explains the shortfall by comparison PC.
He has a bulk on the other hand was up approximately 25% or 0.6 million for the quarter compared to Q1 last year, continuing the positive momentum generated in Q3 and Q4 of fiscal 2019.
Overall, PCGS U.S. was up 3% or zero point threemillion versus last year in Q1.
PCGS International produced positive results in each of our three offices. The Shanghai office was up approximately 0.2 million in Q1 to one point Threemillion, while our Hong Kong in Paris offices were up and additional zero point Fourmillion combined compared to last years Q1.
Once again PCGS finished the quarter with a strong international coin backlog entering Q2, we continue to make efforts and building the base business overseas, especially in China, where we feel the greatest potential return on investment lies.
Turning to our P.S.A.N.P.S.A. DNA Division. This part of our business finished the quarter with another record top and bottom line performance. This marks the 10th consecutive time that P.S.A. surpassed the Q1 figures from the previous year.
The revenue figure of 8.1 million exceeded last year's record Q1 of 6.1 million a year over year increase of 2 million. This was the first time that P.S.C. reached or exceeded 8 million in any quarter P. S. A strong performance included a new all time quarterly high for units shipped at over 735000.
Collectibles this exceeded our prior record which was set in Q4 fiscal 2019 by roughly 50000 units.
Despite record output for the quarter the incoming submissions outpaced our throughput PSC ended the quarter with an unprecedented submission backlog the largest in the divisions history.
The management team is focused on increasing operational capacity as we had further into the second quarter of the fiscal year customer demand has never been higher for our services and customer satisfaction is our priority.
Turning to our overall business gross profit margins were 60% for the quarter, which was up from 59% a year ago. Our operating income for Q1. After a noncash stock based compensation was 4.6 million, which represents a new Q1 record compared to 2.8 million the previous year.
Net income was 3.6 million for the first quarter of fiscal 2020 or 40 cents per diluted share.
Which was up from 2.1 million and 24 cents per share in the prior year now let me turn it over to Joe Wallace for a more detailed review of our financial performance in Q1, Joe.
Thank you Joe.
I will now give a brief overview.
The financial results the first quarter fiscal 20.
In the first quarter the company generated record quarterly revenues up 20.2 million earned record Q1 operating income of 4.6 million net income of 3.6 million or 40 cents per diluted share.
This compares to quarterly revenues of 17.5 million operating income of 2.8 million a net income of 2.1 million or 24 cents per diluted share in the first quarter fiscal 19.
The first quarter revenue increase of 2.7 million or 16%.
Includes increases.
2.0 million or 33% in cards, and autographs, and 0.9 million or 9% and coins.
The cards and autographs increase represents record quarterly revenues and that business has achieved quarter over quarter over quarter revenue growth in 36 of the last 37 quarters.
The coin increase of 9% included improved.
Yes revenues from modern coins, partially offset by having one less U.S. show in the quarter.
China corn revenues in Q1.
Increased by 0.2 million to about 1.1 million for the quarter and the France, Hong Kong revenues were up about 0.4 million.
Combined the coins cards and autograph businesses represent 94% revenues in this year's first quarter I reflects the continued importance of those two businesses to our overall financial performance.
As previously disclosed our second fiscal quarter ending December 31 is typically are seasonally slowest quarter of you're in the U.S. due to the winter holidays that occur in the quarter.
We expect that trend to continue this year.
The slower activity will mostly impact our U.S. coin business.
Our trading cards business continues to have a record backlog of submissions for authentication and grading.
With respect to China. Our current expectation is that we will continue to see improved revenues in China does your second quarter as compared to last year's second quarter.
Gross profit margin was 60% this years first quarter as compared to 59%. The same period of last year. The higher gross profit margin. This years Q1 was due to improved margins in our corn businesses.
As previously disclosed there can be variability in our gross profit margin due to the mix of revenues and the seasonality of our business.
On a quarterly basis during the three years after June 19, [laughter], our gross profit margins vary between 54% of 64.
Our combined operating expenses were flat at about 7.5 million in both first quarters I represented 37% of revenue in this year's first quarter as compared to 43% of revenues in last year's first quarter.
Selling and marketing expenses were 13% of revenues this year versus 60% revenues in Q1 last year.
Dollar terms selling and marketing expenses were down 0.2 million, primarily due to having one less trade show as discussed above this year's first quarter.
<unk> expenses represented about 24% of revenues this year as first quarter as compared to 27% of revenues in last year's first quarter.
The small dollars increase of 0.2 million of physical 20 included recruitment a relocation costs and expenses for infrastructure related costs.
The resulting operating income of 4.6 million in this year's first quarter, representing an increase of 64% over to 2.8 million earn in Q1 19.
Represented 23% of revenues this year as compared to 16% last year.
Adjusting for non cash stock based compensation expense the operating margins were about 24% in the quarter as compared to 18% in Q1 19.
Turning to our balance sheet. The company's cash position was 21.3 million in September 19, as compared to 19.2 million in June 19, and 12.2 million in September 18.
Net cash generated.
2.1 million in Q1 included cash generated from operating expense operating activities, a 4.3 million, partially offset by cash dividends paid to stockholders of one point Sixmillion 0.5 million used for capital expenditures and capitalized software costs.
0.2 million used to pay down the company's term loan.
As discussed in our 10-Q that was filed with the FCC today.
On July one [noise] 19, we adopted the new leasing guidance, which required us to recognize right abuse assets and related lease liabilities on our balance sheet as of September thirtyth.
Our leases our operating leases, mostly related to real estate and there was no material impact other companies operating results arising from this new guidance.
On October 22nd 19, we announced our quarterly cash dividend of 17, a half stands for sure which will be paid on November 29.
To stockholders of record a November 15th.
With that I'd like to thank you for your attention Joe.
Thanks, Joe before we conclude I would like to make a few comments about the close of Q1 and the outlook moving forward into our second quarter of the fiscal year.
While the record setting performance in Q1 is now behind US It help collectors universe set the tone for the remainder of the year as we continue to make progress in key areas of the company [noise].
That progress is now led to three consecutive record revenue performance is for each respective quarter.
Our focus over the past year has been on fundamentals and that continues to be the case here early in fiscal 2020.
More specifically our management team is hyper focused on building capacity as we turned the corner into the second half of our fiscal year. This process includes maximizing existing resources. In addition to adding new ones. This is especially important in light of the fact that P.S.A. continues to grow at such a rapid pace and is enjoying it.
Unprecedented level of demand for our services, but that's not all at PCGS, we are rapidly approaching our busiest bulk season of the year as new products are released by the U.S. men's in early 2020.
One of the more highly anticipated new coins will marry the world of numismatics with the world of sports.
Due out in the spring the U.S. meant we'll be releasing a commemorative basketball hall of fame coin to celebrate the museum Sixtyth anniversary. The coins design was unveiled at the 2019 Hall of Fame induction ceremony over the summer at Springfield Symphony Hall in Massachusetts.
More importantly, P. PCGS has signed an exclusive agreement with the Naismith Memorial Basketball Hall of Fame for this new coin project do you estimate special program calls for the production of up to 50000 gold coins 400000, silver coins and 750000 clad coins the funds generated from the U.S.
I'm in sales and certification of the coins by PCGS will help mahal bolster their educational programs and expand their portfolio of events nationwide.
As part of this partnership PCGS will act as the Hall of Fame is exclusive grading service our company will work with the hall of Fame on designing special labels, including Autograft inserts that will accompany the certified coins.
It is an honor for collectors universe to work with the Naismith Memorial Basketball Hall of Fame on this project not only do we believe the specially designed coin will appeal to the numismatic ends sports collector communities I liked domestically the worldwide popularity of the sport opens the door to international opportunities in addition to.
Creating customized designs to enhance the presentation of these coins, we intend on using the power of our leading PCGS in P.S.A. brands to help broaden the appeal of these collector items.
Turning our sites to new services and as a reminder, PCGS will be re entering the domestic currency grading market in early 2020 [noise].
Our PCGS banknote service is scheduled to be relaunched in Q3.
During the last few months our management team has been working on all facets of the upcoming launch including everything from staffing to product design. We're excited to once again offer this service to the collecting community, which should act as a natural complement to our domestic coin grading services.
PS say the division has now officially reached a full decade of year over year improved performance, establishing new highs in a number of areas from quarterly units shipped to revenue to backlog size that backlog remains the focus of our operations team, which now includes the help of outside consultants, who have been brought into.
Assist in the improvement process. These consultants possess the kind of background and expertise required to enhance our throughput while maintaining quality. There's no doubt that these kinds of improvements take time to implement and bear fruit, but every change we employ it can help the millions of collectibles, we process each year.
To make it back into the hands of our customers faster.
As we move deeper into Q2, the management team is concentrated on our customers and the user experience that not only includes some of the operational improvements mentioned earlier, but it also includes new service offerings from content to certification collectors Universe wants to act as the foundation for all great collections.
Our goal is to improve the collector experience by making an already enjoyable hobby better through structure and innovation.
This leads to increased participation commerce and ultimately it gives our company more opportunities to grow of course, all our expectations are governed by several factors not in our control such as the price of precious metals the market for collectibles and the overall state of the economic climate, primarily in the U.S.
And the possibility of changing international trade policies worldwide. Thank you for joining us today and I look forward to speaking with you next quarter now I would like to open the call to any questions you may have.
Thank you if you would like to ask a question. Please signaled by pressing star one on your telephone keypad.
If you are using like speakerphone. Please make sure your mute function has turned off to allow your seem to reach our equipment.
Good press Star one to ask a question.
Pause for just a moment to allow all parties and opportunity to signal for questions.
And we have no questions at this time I'd now like to turn the conference back to Joe Orlando for any closing remarks.
We thank all of you for joining us today and look forward to speaking with you next quarter.
Thank you ladies and gentlemen, this concludes todays conference you may now disconnect.
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