Collectors Universe, Inc. (CLCT) Q4 2011 Earnings Conference Call August 26, 2011 4:15 pm ET Executives Michael J. McConnell – Chief Executive Officer & Director Joseph J. Wallace – Chief Financial Officer Presentation
The following figures exclude all the discontinued operations. Over the last two years, revenue of [our] company has grown by 24% within a difficult macroeconomic environment. Unit volumes have increased by 19% over the same period. Web-based advertising has grown from $900,000 for the year ended 2009 to $1.4 million for the year just ended, a 61% increase. CoinFacts is approaching 5,000 subscribers and generates revenue over $500,000 from a standing start in July of 2009.Our online marketplaces have grown membership revenue by 34% over the two year period. We’ve opened office in Paris last year and expected to generate almost $1 million of revenue in the coming year and reach breakeven. Admittedly that is later than we originally forecast. We introduced a new technology called CoinSecure and it generated $300,000 of revenue in the year just ended. Our PSA/DNA operation just recently moved into its East Coast offices and we expect that new operation to contribute nicely to that division’s results in the coming year. Looking ahead, we are increasingly excited about our opportunities across the pacific and we’ll carefully consider the most economic way to expand into that area of the world. This top line growth has occurred, while keeping a sharp eye on costs and operating efficiencies. Gross margins have expanded from 54% to 62%. Importantly, operating margins have increased to 24% from approximately 7% over the same period. This has occurred, while we continue to invest through the income statement in our various growth initiatives. For example, in the fiscal year just ended June 30, we invested approximately $0.5 million against which little profit was realized in the current period. Additionally, we have managed the capital base of the firm to drive returns for the owners. Return on invested capital has increased from 3% to 19% on a book basis, which assumes we are a full cash tax payer. As each of you know, we have not paid cash taxes in the current year and remain and continue to have deferred tax assets to utilize in the coming year. Even after returning approximately $25 million to shareholders over the last two years, the balance sheet remains very conservative with no gearing and a healthy cash balance.
Finally, we have cleaned up the past and today’s non-cash impairment charge related to the Expos operation represents the last significant legacy item faced by this business. Joe will speak more to the specific of Expos, but let me say the business is healthy, just not worth its historical carrying value.Put some numbers around it. Revenue and profit over the last two years have declined by 14% and 28% respectively. Despite this decline the operating margin for Expos remains mid-teens and it requires little capital expenditure or working capital. And importantly as we move into fiscal 2012, the management is working hard to develop plans for Expos that will optimize its return for our shareholders. The trend is entirely unsatisfactory and we will address it. Looking ahead, the year has started strongly. Revenue is pacing nicely ahead of last year’s first quarter through the middle of August and current backlog is up over 50% as compared to last year. The most important initiative however on my mind right now is our recruitment of a senior type Chief Digital Officer. While we are all very proud of the work by the existing management team in driving our web-based activities to the levels I discussed earlier, there is a sense that further upside is available to us in the coming years. If any of our listeners have suggestions or know someone who could help us, please pass their name along to me and I’ll route it through Heidrick & Struggles, who is helping us with the search. I believe this is a terrific opportunity for the right person to join our unique company. Read the rest of this transcript for free on seekingalpha.com