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The expense of running a grading service
logger7
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When CLCT, the parent company of PCGS was publicly traded the profits and business expenses were public record.
Are these really profitable companies with all the costs associated with running them? How about CAC, how long before they recover all the business expenses of starting up? Are the lesser companies such as Anacs profitable?
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It's hard to stay in business as long as they have without making a profit. So I have to say they are making good profit.
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I cannot imagine how a company like ANACS could have stayed in business this long if it was not a better than break even result, same for P/N. CACG is unknown yet as we are still watching to see how the market reacts to this newcomer, but my guess is it will take a year at least to recoup the startup costs.
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logger7
Have you looked at the submission fees lately? These companies are making money hand over fist.
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Yes. You can be sure Private Equity would not have any interest in the space if it was not highly profitable.
Companies that cannot gain traction or credibility come and go. Anyone you are asking about is very profitable. Some more than others.
But you can also be sure that the one guy who had a hand in starting all of the leading services knows exactly what he is doing. He doesn't need us speculating about his break-even date. Being given an opportunity to be one of his investors in CACG is probably like having a chance to invest in Google at its IPO.
There's a difference between revenue and profit. They make money, but it's not clear how much. Most of their revenue is from submissions in the $15 and under category.
what is under $15? do you have to be an authorized dealer to get that price or bulk submissions?
Is there a breakdown showing what percentage of coins graded are new stuff from last 2 years?
$300 maximum value per coin bulk submissions are well below $15.
The bulk dealer submissions. Think Monster boxes of silver eagles and the like. The bulk price on moderns can be $10 or under. My local guy who has bulk privileges submitted 150 1960s proof sets and 200 Ike silver proofs for $7 per coin two years ago (NGC). He actually flipped the whole deal to me (750 slabs + body bags) which is why I know the price. I had the NGC invoices.
I'm not sure what the current price is on Monster Boxes, but I'd be willing to bet significant money that it is $10 or less per coin.
I don't know the total numbers at the TPG's. But I would, again, be willing to bet a significant amount of money that the majority of revenue and profits are from bulk moderns. Go look at the census numbers/pop reports and look at the sheer volume of coins in the modern categories. For example, NGC has a total of 36.75 million US coins in the census. 17.7 million of those coins are American Eagles and bullion coins. There are over 1 million modern commemoratives and 600,000 modern special issues. Over 1.5 million state quarters and over 1 million Sac and Presidential dollars. That's roughly 2/3 of the census in modern issues. And that's "all time". I bet if you look at 2023 submissions, it is skewed even more toward moderns.
I don't know an easy way to figure out what the annual submissions are, but in 2021 and 2022, they graded 500,000 silver eagles each year. Do they get over 1 million total submissions?
They have to have shipping and receiving, inventory, graders, encapsulation, quality, accounting, payroll, customer service, security…probably making after taxes 10-15%.
Grading and membership fees are a pure profit sale (no coin inventory cost) - just sales - Opex. So with good Opex cost mgt they will make money.
Can anyone who meets the minimum qty be a bulk submitter? Or do you have to be authorized?
Depends on a lot of factors. NGC gives any authorized dealers bulk, and I think the elite membership also includes it, or used to at least.
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Usually, with private equity acquired companies, there is a 3-5 year horizon to then take public and reap the rewards from stock sales.
NGC and PCGS were not troubled companies when bought so the idea is to wring out expenses and try and broaden their markets to increase the company’s valuation.
Time will tell if the MBAs can realize their vision.
Meanwhile submitters endure long waits and turn-around times; I guess their reasoning is that they have no where else to go with the same level of prestige in their holders. I hope cac does not sell their platform.
The minimum quantity is thousands of coins per year
Grading services are definitely profitable - which is why NGC was purchased by Blackstone. CU was purchased by a group of investors - and while they are collectors (which I love), I'm sure they are doing it to make money.
But also look at the countless benefits we get because of grading services. For me, I can buy a coin thousands of miles away for my Australian collection and have confidence in the condition. I passed on one special Australian coin recently that looked amazing, but was not graded.
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