Collectors Universe, Inc. (Nasdaq:CLCT – News), a leading provider of value-added authentication and grading services to dealers and collectors of high-value collectibles, today announced financial results for its third fiscal quarter and nine months ended March 31, 2010. For the current third quarter, the Company reported net service revenues of $10.8 million, operating income of $2.5 million and after tax income from continuing operations of $2.4 million, or $0.32 per diluted share. This compares to net service revenues of $9.3 million, operating income of $944,000 and an after tax income from continuing operations of $891,000, or $0.10 per diluted share for the third quarter of fiscal 2009.
For the nine months ended March 31, 2010, the Company’s net service revenues were $29.0 million, operating income was $5.8 million and after tax income from continuing operations was $5.8 million, or $0.76 per diluted share. This compares to net service revenues of $26.2 million, operating income of $858,000 and an after tax loss from continuing operations of $192,000, or a loss of $0.02 per diluted share, for the nine months ended March 31, 2009.
Net Income Third Quarter and Nine Months of 2010
Net income for the third quarter and nine months of fiscal 2010 was $2.4 million or $0.31 per diluted share and $5.2 million or $0.68 per diluted share, respectively and included losses from discontinued operations of $68,000 for the quarter and $629,000 for the nine months ended March 31, 2010, primarily related to the Company’s New York leases. By comparison, the Company incurred net losses for the third quarter and nine months of fiscal 2009 of $4.8 million and $17.0 million, respectively.
Operational and Financial Highlights:
The 16% increase in net service revenue in the current third quarter was driven primarily by a 28% increase in coin service revenues. In particular, our bulk grading business continued to perform above our expectations.
Although net service revenues increased by 16% and 11% in the current quarter and nine month periods compared to the same periods of the prior year, total operating expenses were down by 5% and 11% in the current quarter and nine month periods, as a result of cost reduction programs that we began implementing in fiscal 2009.
The Company’s operating income for the current third quarter of $2.5 million represented 23% of revenues, compared with operating income of $944,000 or 10% of revenues in the third quarter of last year.
The Company’s cash position at March 31, 2010 was $19.8 million, net of the payment of dividends to stockholders of $1.9 million or $0.25 per share in the third quarter.
On April 20, 2010, the Company announced an increase in its quarterly cash dividend to $0.30 per share per quarter with the first dividend under such policy to be paid on May 28, 2010 to stockholders of record on May 14, 2010.
Michael McConnell, Chief Executive Officer, stated, “Our business planning over the last year, an improvement in the general economic conditions and most importantly, the ongoing commitment and dedication of our employees, each contributed to the Company’s record operating income this quarter. Core to our business is to continue to provide value-add products and services to our customers, such as PCGS Secure Plus introduced in March 2010.”
Results of Operations of our Continuing Businesses
The net increases in revenues of $1.5 million in the current third quarter and $2.8 million in the nine months to March 31, 2010 were driven by revenue increases of $1.6 million for the quarter and $3.6 million for the nine months, in our coin grading and authentication business. The other revenues decline mainly reflects reductions in our stamp business in both the three and nine months ended March 31, 2010 and our trading cards and autographs business in the nine months ended March 31, 2010.
The gross profit margin of 61% and 60% in the current year’s third quarter and nine month periods, compared with 56% and 53% in the same periods of the prior year, reflects the benefits of operating leverage in our coin grading and authentication business as well as continued efforts to improve operational efficiency.
Operating expenses in the current third quarter and nine months were $4.1 million and $11.6 million compared to $4.3 million and $13.0 million for the same periods of the prior year and reflected lower G&A expenses for personnel and outside professional services partially offset by increased sales and marketing expenses for incentive compensation and costs of attending more trade shows in the current year. G&A expenses in the prior year’s third quarter and nine months included a $400,000 severance accrual for the Company’s former CEO. Stock-based compensation costs increased in the current third quarter and nine months to $238,000 and $733,000 compared to $25,000 and $398,000 for the same periods of the prior year, reflecting the recognition of performance based stock compensation expense.
The resulting operating income of $2.5 million and $5.8 million in the current year’s third quarter and nine months represented 23% and 20% of revenues. By comparison, the Company earned operating income of $944,000 or 10% of revenues and $858,000 or 3% of revenues for the same three and nine month periods of the prior year.
The income tax provisions in the current year’s third quarter and nine months reflect an annual effective tax rate of 5% offset by a benefit that arose in the second quarter related to a change in the rules for alternative minimum taxes.
Income from continuing operations of $2.4 million or $0.32 per diluted share in the current year’s third quarter, and $5.8 million or $0.76 per diluted share for the nine months end March 31, 2010, reflects improved operating results and, in the case of the per share amounts, also reflects a reduction in the number of shares outstanding as a result of our repurchase of 1.75 million shares in the July 2009 Dutch Auction Tender Offer.
At March 31, 2010, cash and cash equivalents totaled $19.8 million compared with $23.9 million at June 30, 2009. Net cash used of $4.1 million in the nine month period was comprised of cash generated from continuing operations of $7.4 million and the collection of a note receivable of $2.4 million offset by the repurchase of shares in the Dutch Auction Tender Offer for cash of $8.9 million, the payment of dividends to stockholders totaling $3.7 million and cash expenses of $1.0 million for our discontinued operations.
McConnell continued, “Our goal is to finish this fiscal year with strength. We will build upon the current momentum, maintain a sharp focus on costs and operational efficiency and continue to put in place initiatives to drive growth and profit for Fiscal 2011. Further, the increase in our dividend demonstrates our commitment to capital management and shareholder returns.”
Conference Call and Webcast
Collectors Universe will host a conference call to discuss results on Monday, May 10, 2010 at 4:30 p.m. Eastern Time/1:30 p.m. Pacific Time. Interested parties may participate in the conference call by dialing 877-941-0844 or 480-629-9645, five to ten minutes prior to the initiation of the call. A replay of the conference call will be available through May 24, 2010, by dialing 800-406-7325 or 303-590-3030 and entering access code 4294707#. A live webcast of the conference call will also be available on the Collectors Universe website, http://www.collectors.com/, under Investor Relations: Earnings Conference Calls. The webcast will be archived for 12 months.
About Collectors Universe
Collectors Universe, Inc. is a leading provider of value added services to the high-value collectibles markets. The Company authenticates and grades collectible coins, trading cards, event tickets, autographs, memorabilia and stamps (“collectibles”). The Company also compiles and publishes authoritative information about United States and world coins, collectible trading cards and sports memorabilia, collectible stamps, and operates its CCE dealer-to-dealer Internet bid-ask market for certified coins and its Expos trade show and conventions business. This information is accessible to collectors and dealers at the Company’s web site, http://www.collectors.com and is also published in print.
Cautionary Statements Regarding Forward Looking Information
This news release contains statements regarding our expectations, beliefs or views about our future financial performance and trends in our business and in our markets, which constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward looking statements can often be identified by the use of words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.”
Due to a number of risks and uncertainties to which our business and our markets are subject, our future financial performance may differ, possibly significantly, from our expected financial performance as set forth in the forward looking statements contained in this news release. Information regarding those risks and uncertainties, and their possible impact on our future financial performance, include, but are not limited to, our continued and increased dependence on our coin business which generated 64% of our consolidated revenues and substantially all of our operating income in the nine months ended March 31, 2010, the risk that economic conditions in the United States will not improve for some time and may even deteriorate further, which could result in reductions in the demand for our collectible grading services and, consequently, in our revenues; the risk that the current economic recession and credit crisis will lead to longer term changes in the spending habits of consumers and in the availability and use of credit by smaller businesses, such as collectibles dealers, to fund purchases of collectibles, which could lead to longer term declines in collectibles commerce and, therefore, in the demand for our services; the risk that our strategy to offer new services in our continuing collectibles markets will not be successful in enabling us to improve our profitability or may even cause us to incur significant losses; and the risk that the commercial real estate market in New York City will deteriorate further, in which case we may not be able to sublease the offices and laboratory facilities in New York City formerly occupied by our jewelry businesses within the time periods and for the rents currently expected, which would cause our net rental payment obligations to be significantly higher than currently expected leading to reductions in cash flows and additional losses from discontinued operations in future periods.
Additional information regarding these risks and information regarding other risks and uncertainties to which our business is subject is contained in our Annual Report on Form 10-K for our fiscal year ended June 30, 2009 and our Quarterly Report on Form 10-Q for the third quarter ended March 31, 2010 filed with the Securities and Exchange Commission today. Due to these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release or in our Annual or Quarterly Reports, which speak only as of their respective dates. We also disclaim any obligation to update or revise any of the forward-looking statements as a result of new information, future events or otherwise, except as may be required by law or NASDAQ rules.
|COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
|Three Months Ended|
|Nine Months Ended|
|Net revenues||$ 10,790||$ 9,315||$ 28,971||$ 26,160|
|Cost of revenues||4,204||4,111||11,576||12,264|
|Selling and marketing expenses||1,449||1,033||3,785||3,275|
|General administrative expenses||2,602||3,227||7,814||9,763|
|Total operating expenses||4,051||4,260||11,599||13,038|
|Interest and other income, net||35||56||87||269|
|Income before provision for income taxes||2,570||1,000||5,883||1,127|
|Provision for income taxes||129||109||54||1,319|
|Income (loss) from continuing operations||2,441||891||5,829||(192)|
|Loss from discontinued operations, net of loss on sales of discontinued businesses, net of income taxes||(68)||(5,679)||(629)||(16,818)|
|Net income (loss)||$ 2,373||$ (4,788)||5,200||$ (17,010)|
|Net income (loss) per basic share:|
|Income (loss) from continuing operations||$ 0.33||$ 0.10||$ 0.78||$ (0.02)|
|Loss from discontinued operations||(0.01)||(0.63)||(0.08)||(1.85)|
|Net income (loss)||$ 0.32||$ (0.53)||$ 0.70||$ (1.87)|
|Net income (loss) per diluted share:|
|Income (loss) from continuing operations||$ 0.32||$ 0.10||$ 0.76||$ (0.02)|
|Loss from discontinued operations||(0.01)||(0.63)||(0.08)||(1.85)|
|Net income (loss)||$ 0.31||$ (0.53)||$ 0.68||$ (1.87)|
|Weighted average shares outstanding:|
|Dividends declared per common share||$ 0.25||$ 0.23||$ 0.50||$ 0.23|