Some interesting PCGS facts from their 2017 10-K report
ShadyDave
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I posted the 2016 10-K report a while back and it seemed to generate some good discussion and questions. For those that do not know, all publicly traded companies are required to issue 10-k's annually and 10-q's quarterly to provide investors/prospective investors and the general public of material information and facts related to the company. This is a great way to get detailed info on CLTC, the parent company of PCGS as required by the SEC. Here are a few items I found interesting as a customer and coin collector:
You can read the 10-K and 10-Q and other reports here:
http://investors.collectors.com/sec.cfm?view=all
1) In 2017, PCGS graded 3,081,400 coins (WOW). In 2016, they graded 2,371,800 coins. That is a pretty big increase year over year 25%+ . This might be why some of the turnaround times were slow in 2017. (pg 2 on 10-K)
2) "We believe that less than 10% of the vintage United States coins and less than 10% of the vintage trading cards have been authenticated and graded by independent providers of authentication and grading services." (pg. 7 on 10-K)
That estimate seems a bit low to me, but I have nothing to back that up. According to the PCGS/ATS websites, they have graded a combined 76,000,000+ coins in their respective history. I wonder how they get to that 10% number and what they think the "saturation point" is for certified coins?
3) PCGS: "Generally, our process requires that two of our experts evaluate each coin independently, and no authenticity opinion is issued and no quality grade is assigned unless their opinions with respect to the authenticity and quality grade, independently assigned by each of them, are the same. In some cases, depending on the type of coin being authenticated and graded or on the results of the initial review process, we involve a third expert to make the final determinations of authenticity and grade. (pg. 8 on 10-K) This provides a bit of insight into how the grading room works and gives some context to how graders come to a "coinsensus" 
these days.
4) "In 2017, 5 of our customers accounted, in the aggregate, for approximately 18% of our total net revenues." (pg. 15 10-K) That is a 2% increase over last year for net revenues. Last thread people indicated that some of the 5 customers may be: Heritage, US Coins, Kevin Lipton, NFC, L/C coin, Bullion Exchanges, Rare Coin Wholesalers, MCM, APMEX (speculation here).
5) "The Company has retained a nationally known executive search firm to assist the Board of Directors in finding a successor CEO." (pg. 16 10-K) The CEO indicated he is retiring "in order to be able to spend more time with his family". Do you think that they will hire someone internally, someone from the coin community or a CEO with a different set of experience/skills?
6) It looks like PCGS will be moving their location in the near future. "On February 3, 2017, the Company, as tenant, entered into a triple net office lease, pursuant to which the Company will be leasing approximately 62,755 rentable square feet space for its headquarters office and principal business operations. Under the terms of the lease, the Company will be responsible for its share of real estate taxes, building insurance and maintenance costs (“triple net”). The term of this new lease will be approximately 10 years and 10 months, commencing on the completion of tenant improvements, which are expected to be completed on or about December 1, 2017." (pg 21 10-K). I wonder what impact a major move may have on their operations.
On another note, does anyone know why CLCT currently leases a building in New Jersey? In their property section (pg. 21ish) they indicated they have a leased property in NJ. Any conspiracy theories with that 
?
Comments
Very interesting facts that I would not take the time to find
Thanks very much for sharing this with us
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Nice highlight summary. Most interesting to me of your observations was the move, would be interesting to know the size of their current office. Presumably the move would be a result of expansion.
Very interesting... from several aspects.... I often used these reports for intelligence gathering on competitors when I was working... surprising what can be found .... Thanks for the links.. Cheers, RickO
The 10% figures for coins and cards graded may be accurate. The thing that must be remembered is that most coins and cards are not worth the cost of grading. As an example, last year I disposed of my younger brother's 1960's baseball card collection since I am the "collectibles" person in the family. I looked at all the better cards and decided that they didn't warrant grading. They were not bad but were "collected by a kid in the 1960's and kept in a shoebox" grade. He still made $300 from cards that had originally cost him about $5.
The move to the new location is coming
sooner than later.
Great post. Moves almost always have an impact on operations temporarily.
Thanks. According to info in the 10-K report, the headquarters is increasing in size from 48,500 sq/ft to approximately 62,755 sq/ft, (page 21)
NJ office is for Sports Cards in Woodbridge NJ
1) the large increase in coins was from China operations and Guojin Gold. That would not have effected US turnaround time
2) 76M coins between PCGS and NGC. 1/2 are moderns. Of the remaining 36M how many are crack outs, crossovers, resubmittals? Just a guess but maybe only 30M unique vintage coins between them. I would say 10% of vinatge market penetrated is about right.
4) David Hall family member is certainly a top 5 customer and is mentioned in the 10K, pg 70. Paid $2.1M in fees in fiscal 2017, 3% of revenue
5) the CEO has done a terrible job with cash management. They had over $40M in cash in 2007, over $21M in 2012 when he started, and are now down to less then $10M in cash. Millions are overseas, they self insure and need to keep a few million on hand to fulfill the warranty, and they have bills. The dividend is in severe distress
6) moving the office will certainly be a cash burn in the short term and will hopefully help in the long term
The stock is down about 20% from the highs of this year. David Hall is slowly selling off all his stock and will have no shares in 23 months.
You also failed to mention that the CEO and CFO got stock awards of $5M for meeting performance goals (while burning through the cash). The award was about 40% of their profits for the entire year for just two employees...and one is leaving
"On another note, does anyone know why CLCT currently leases a building in New Jersey?"
Not sure, but was their discontinued diamond certification service located there? They may still be liable for lease payments.
those were two offices in the diamond district of NYC. One lease has expired and is off the books, the other is finished in December of this year and should add about 4c to yearly earnings
1) In 2017, PCGS graded 3,081,400 coins (WOW). In 2016, they graded 2,371,800 coins. That is a pretty big increase year over year 25%+ . This might be why some of the turnaround times were slow in 2017. (pg 2 on 10-K)
And 18% of their business is from 5 customers......
At first I thought this would indicate a strong coin market, but maybe just a strong coin market for the big 5
Only 10% have been graded. I get that. Who is going to grade 1 billion 2002 lincoln cents...
@dbtuner Thanks for the insight. I did see the cash dwindling and other financial info. I wanted to try to keep it PCGS and coin related. Where did you get the info on this:
"1) the large increase in coins was from China operations and Guojin Gold. That would not have effected US turnaround time"
from press releases, 10'Qs and conference calls