Q4 2020 Collectors Universe Inc Earnings Call
Good afternoon, everyone and thank you for joining us to discuss collectors universes financial results for the fourth quarter.
With us today from management, our Joseph J., Orlando, President and Chief Executive Officer, and just if Wallace Senior Vice President and Chief Financial Officer.
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To your question.
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.
The company's actual results in the future may differ possibly materially from those forecasts in this call due to a 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 Exchange Commission. The forward looking statements are made only as of the date of today's conference call.
Okay undertakes no obligation to update or revise the forward looking statements whether as a new result, as a excuse me, whether the result of new information future events or otherwise.
Reminder, that today's program is also being recorded.
I'd now like to turn the call over to Georgia Orlando Joe.
Thank you and welcome to today's conference call to review, our fiscal 2021st and foremost we hope all of you are safe and healthy before I summarize the results for the quarter end the full year I would like to give a brief overview of the collectors universe business for any new listeners on today's call collectors universe is a leading provider.
<unk> value added services and content to the collectibles market, we authenticating, great collectible claims banknotes trading cards, and autographs and various types of memorabilia.
We have two major business services.
Special coin grading service or PCGS.
And professional sports authenticator for P.S. say.
Since 1986, PCGS has examine certified millions of U.S. and world coins banknotes metals and tokens.
PCGS had a solid performance in the fourth quarter despite the pandemic.
Yeah say is the world's largest trading card autograft and memorabilia authentication and grading service since 1991, P.S. as examine that certified millions of collectibles as our fastest growing segment P.S. They set an all time revenue record in the fourth quarter has grown annually by about 26% since 2018.
As if we ended fiscal 2020 collectors universe had certified more than 81 million total collectibles with over 5 million up though certified and just the past year.
Let's move onto the fourth quarter and fiscal 2020 results, while the covert 19 crisis presented our company with a host of challenges our team quickly adjusted to the current operating environment and we achieved record revenues for Q4 and fiscal 2020.
Beginning with a complete shut down at the start of Q4 and transitioning to a skeleton crew a few weeks later, we gradually ramped up capacity under the new safety guidelines and were able to finish the fiscal year at a terrific run rate.
As was the case during our last earnings call context will be key as we move through the details of our Q4 performance.
Collectors Universe finished Q4 with 20.5 million in service revenues up 4% from last year. Despite the last time at the beginning of the quarter due to the pandemic.
As noted earlier this performance represents an all time revenue record for any quarter not just Q4 for the year collectors Universe finished with 78.9 million in service revenues, which was up from 72.5 million in fiscal 2019. The performance isn't 2019 end 2020 represent back to back.
I can record revenue years for the company.
In addition to setting a new annual revenue record collectors universe met and exceeded the 5 million collectible certified mark during the fiscal year for the first time in our history.
Furthermore, our cash position increased from 22.2 million at the end of Q3 to 28.6 million at the end of Q4, the single quarter cast generation figure from ongoing operations of 6.4 million. In Q4 also represented an all time quarterly record for the company.
Given the continued strength of our results and our ability to execute in these challenging times, we remain excited about our business prospects moving forward now, let's take a deeper look at the performance within each division. Our PCGS Division finished at 10.2 million for the quarter, which was down slightly from 10.9 million or six.
<unk> percent year over year.
P.S. say surpassed last year's Q4 performance by 2 million, finishing at 9.6 million and it was up by 27% year over year.
Even though the P.C.G.S. performance was solid overall in Q4. It is important to note that our coin business continues to deal with more pandemic related challenges than our trading card autograft and memorabilia business. For example, the pandemic has resulted in the cancellation of numerous trade shows and onsite grading events restricted.
I will travel and it has impacted some production at the U.S. meant traditionally PCGS has been more dependent on these types of things then P.S. say that said, we are adjusting to the new environment.
Let's start with a look at PCGS domestic and how we are responding in Q4, PCGS vintage was up 17% year over year, finishing at 3.6 million versus 3.1 million in fiscal 2019. Some of that gain was due to the lack of trade shows in the quarter as a portion of potential trade show some.
Missions were re routed to our offices coins of this nature still need to be certified with or without the presence of shows and we have services available at our corporate office to accommodate them.
As expected all three major coin convention scheduled in Q4 were cancelled, including our own trade show in long Beach, California.
So while no industry events of this nature took place during the quarter about $220000 of show revenue was technically recorded by PCGS, primarily as a result of shipping coins left over from a show that occurred late in Q3.
In response to the lack of trade shows PCGS has already begun to schedule smaller trading event held at least in part fill that void.
While some potential shows admissions can be rerouted into our vintage service line, creating a safe meeting environment for dealers auction houses and collectors can help create more coin trading activity. This can ultimately lead to more submissions for PCGS for such smaller events have been scheduled and are being huh.
Hosted by PCGS in Q1, we're optimistic that these smaller events can be an important catalyst to safely bring together our customers and generate incremental revenue in the process turning to PCGS ball. We're pleased to report that this part of the business finished Q4 with 3.6 million in service revenues and was up.
36% year over year.
PCGS International on the other hand was another area impacted by Coven 19 in a more meaningful way that some other parts of our coin business.
While PCGS, China and Hong Kong finished with respectable performance is versus the same quarter last year, combining for 1.7 million in service revenues compared to 1.9 million in fiscal 2019, the restrictions on travel prevented more submissions for being processed.
We detailed on our last earnings call, enabling our Shanghai office to become more independent will give us the ability to process more coins overtime.
This process has already begun but the inability to send some of our top experts to China to handle higher value coins, along with the cancellation of our loan onsite grading events did have a material impact the good news along with the fact that we continue to move towards greater operational independence in China is that our Shanghai office backlog.
The highest it has ever been.
Although cobot 19 has created some short term challenges for our team. We're very pleased with the progress that we're making in that market.
Finally, the Paris office was virtually shut down for the entire quarter, but it finished the quarter what slightly over 0.1 million in service revenues versus zero point Fourmillion last year in Q4.
Let's turn to P. OSAT as mentioned earlier, the P.S.A.M.T.S.A. DNA services set an all time revenue record for the quarter end year.
This includes record Q4 output for the division, we shipped over 715000 total collectibles, surpassing the prior Q4 record of about 680000 item set in fiscal 2019.
As a reminder, we achieved this despite losing working days associated with the cobot 19 shutdown and the challenge and ramping up operations and a safe and measured manner in the early part of the quarter.
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 Q4 after noncash stock based compensation and the impairment charge for the long Beach Expo business was 3.5 million compared to 4.5 billion. The previous year net income was 2.6.
Million for the fourth quarter of fiscal 2020, or 29 cents per diluted share, which was down from 2.8 million and 31 cents per share in the prior year.
We also returned 6.3 million to shareholders during fiscal 2020 in the form of our ongoing dividend now let me turn it over to go Wallace for a more detailed review of our financial performance in Q4, Joe.
Yes, Thank you Joe.
I will now give a brief overview of the financial results for the fourth quarter fiscal 20.
Despite the Coca challenges that impacted our third or fourth quarters that Joe just discussed.
The company now strong results in the fourth quarter I'm pretty year. In addition, as of June 30, or 20, we've continued to have a very strong balance sheet.
The fourth quarter the company generated record quarterly revenues of 20.5 million earned operating income of 3.5 million a net income of 2.6 million or 29 cents per share.
Just comparator quarterly revenues was 19.8 million.
Operating income of 4.5 million net income of 2.8 million or 31 cents per share into fourth quarter fiscal 19.
In fiscal year 20, the company generated record annual revenues of 78.9 billion.
Operating income of 14.1 million, a net income up 10.8 million or $1.19 for sure.
This compared to revenues of 72.5 million.
Operating income of 14.3 million net income of 10.0 million or $1.11 cents per share in fiscal 19.
Operating results in this year's fourth quarter.
Hi, good by higher DNA expenses on an impairment charge.
I will discuss in more detail below.
The total revenue increase of zero point, sevenmillion or 4% into fourth quarter.
6.4 million or 9% the year were driven by increases of 2.0 million than Q4, and 7.3 million for the year the cards and autographs revenues representing growth of 27% in both periods on record fourth quarter fiscal year revenues for that business.
Cards, and autographs achieve quarter over quarter revenue growth.
30 nines allows toward turning off the last 40 quarters.
Total coin revenues were down zero point, sevenmillion or 6% in the fourth quarter, but were substantially unchanged for the year.
In China, corn revenues increased by 1.0 million <unk> million or 24% for the year and that revenue growth was generated in the first half of the year prior to covert.
Combined coins and cards and autographs, representing about 95% of revenues for the year I reflects the continued importance with those two businesses to our overall financial performance.
Cards and autographs finished the year, what a record backlog and therefore, we expect continued growth in that business as we continue to increase authentication and grading capacity.
As discussed earlier, the corn business U.S. is facing some cold weather related challenges. However, we're continuing our efforts to identify and take advantage of revenue opportunities in that business much like we did into fourth quarter.
With respect to our China corn operation.
[laughter], which added to your at relatively high backlog.
We're focused on making that business last July the newest personnel to offset the impact of the travel restrictions between the U.S. in China.
The gross profit margins were 60% of 57% this year's fourth quarter after the year.
As compared to 59% and 58%.
Same periods of last year.
Overall gross profit margins were up slightly at each quarter the year [laughter], except Q3, where we are probably close operations to March due to covert.
While continuing to play to pay all employees.
The gross profit margin for the year also reflects the continued to build up of capacity to address the record backlog into cards and autographs business.
As previously disclosed there can be ongoing variability of the gross profit margin due to the mix of revenues as a seasonality of our business.
The quarterly basis during the two years ended June twentyth.
Our gross profit margins varied between 53% and 62%.
Our combined operating expenses, including the impairment charge.
Represented 42% and 39% of revenues in this year's fourth quarter and for the year as compared to 36% on 39% of revenues in last year's fourth quarter fiscal 19.
Selling and marketing expenses were 9% and 12% of revenues in this year's fourth quarter and for the year versus 13%, 14% of revenues last year's fourth quarter fiscal might be.
The lower selling and marketing expenses in dollar terms from earlier rose in the fourth quarter.
Reflected lower trade show on travel costs in the quarter due to covert.
More generally for the year, we incurred lowered business development cost our overseas corn operations, partially offset by higher selling and marketing expenses and our growing cards and autographs business.
Gionee expenses represented 31% and 27% of revenues this year's fourth quarter I'm for the year.
As compared to 23% and 24% and last year's fourth quarter fiscal 19.
The dollar increases in Gionee expense of one point Ninemillion 3.6, plus the current year periods included higher free trial legal settlement expenses of 0.8 million of 1.0 million.
And higher noncash stock based compensation expense, a zero point Fourmillion 0.6 million.
Good noncash impairment charge at 0.5 million related to our Expos business.
It reflects uncertainty as to the viability of that business due to covert.
Which has resulted in the cancellation of shows unexpected social distancing concerns that will limit the number of attendees and dealers at future shows.
Resulting operating margins were 17% 18% of revenues in this year's fourth quarter and for the year, that's compared to 23% and 20% in the same periods of last year.
Collectively the higher Gionee expenses and the impairment charge discussed above represents about 8% on three percentage of revenues into fourth quarter, but a year.
Turning to our balance sheet.
The company's cash position was 28.6 million at June Thirtyth 20, as compared to 19.2 million a June 19, and 22.2 million at March 30, Onest wedding.
Net cash generator for the year of nine point Fourmillion included cash generated from operating activities of 19.2 million, partially offset by 6.3 million up cash dividends paid to stockholders to point sevenmillion used for capital expenditures and capitalized software costs and 0.8 billion used to pay downs.
He's term loan.
Our cash dividend of 17 17, the half Centsper share for the first quarter fiscal 21 will be paid this upcoming Friday August 28 to stockholders of record on August 14th.
In summary, our fourth quarter turned out better than expected.
Ramped up our operation in May and June.
We finished Q4 with strong momentum, primarily as a cards and autographs business.
With the continued backlog in that business, we intend to build on that momentum as we as we enter fiscal year 21.
With that I'd like to thank you for your attention job.
Thanks, Joe before we conclude I would like to make a few comments about the close of Q4 and the outlook moving forward into our first quarter of the new fiscal year.
While we ended the quarter with a record revenue performance Q4 was very challenging for collectors universe as it was for so many companies coping with the current crisis.
That said our team did a remarkable job amidst all the uncertainty and I would like to take this moment to publicly thank them and acknowledge the tremendous effort they put forth under very difficult circumstances.
As we discussed during our last earnings call in May the collectibles market has displayed incredible resiliency during the most challenging economic climate. Our country is faced in decades. The demand for collectibles has not only remained strong but it has increased in some markets reiterating the need for our PCGS Npis say services.
Has more businesses shift towards E commerce strategies, some as a direct result of this pandemic the demand for the certifications. We provide should increase certified items are more easily traded in the marketplace and hence more liquid we're confident that collectors universe will remain a critical resource to the asset classes and customer.
As we serve.
By the end of Q4 and as a direct result of the increased interest I just mentioned our trading card submission backlog also rose to a record level. As a result, we have accelerated our onboarding efforts substantially to better handle the demand for our services. There is no question that the need for social distancing has put.
Pressure on the operation in response, our team has reconfigured the relevant departments and introduce new shifts to help spread our employees out each day.
In the short term some efficiencies have been reduced but the need for greater capacity is more important than ever I'm proud of how our team has risen to these challenges.
In addition to our focus on people and process within our operational revamp in the short term our team believes technology can help with efficiency and accuracy and the long term.
In fact, we plan on introducing robotics into our process in the coming months for image recognition and capture.
We have received our first prototype for testing and look forward to using this capability more widely.
This represents our first major move into automation, we continue to believe that there are more opportunities to leverage technology to improve our operations.
We remain focused on finding the best possible solutions for our customers.
Overall, our top priority has been and continues to be stabilizing and growing our core businesses in the current operating environment.
While pandemic related challenges remain we are eager to find new ways of expanding our business and driving better returns to our shareholders. We enter fiscal 2021 with a robust market for collectibles and we're excited about the opportunity in front of us.
As a reminder, all our expectations are governed by several factors not at 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.
And ladies and gentlemen for any questions. Please join the queue star one on your telephone keypad.
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All right it looks like I don't have anything in the queue right now I'd like to turn it back over to you for any additional or closing remarks.
Okay.
We would like to thank everyone for joining us today and look forward to reporting our Q1 results later this fall.
Thank you.
That concludes today's conference. Thanks, again for joining US you may now disconnect.
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