PSA says its ongoing and ever-growing backlog of orders is primarily due to the number of current era trading cards that are being submitted.
During its quarterly earnings report teleconference this week, company officials again addressed the issue of why customers are waiting months for the return of orders that used to be delivered in weeks. In short, it’s because business continues to be too good for the company to keep up.
PSA and PSA/DNA business set another quarterly revenue record at $8.1 million for October-December 2019, surpassing last year’s Q2 revenue by approximately $2.1 million.
Joe Orlando, President and CEO of Collectors Universe, the parent company of PSA and PSA/DNA, told shareholders that while an interest in valuable Pokémon cards has driven a significant amount of business to the company over the last three years, it’s the modern sports card market that’s primarily responsible for unprecedented levels of submissions and revenue.
“This rejuvenated segment of the market is more robust that at any point in our company’s history as younger generations of collectors are becoming more active,” Orlando stated. “In fact, around 80% of our approximately one million count backlog are of the modern variety at PSA and the vast majority of that 80% are sports cards.”
That growth appears to stem from an increasing number of collectors, dealers and case breakers who are opening new products, pulling out the top cards and submitting them for grading, often in hopes of turning a profit by selling to others who desire high-grade PSA-labeled cards for their collections, to re-sell or for investment purposes. Many are under the age of 35.
Orlando called the interest in the modern market among young people “extremely encouraging not only for PSA but for the industry at large.”
The number of cards, autographs and other items that arrive at the company’s Southern California offices each week is enough to fill a small fleet of mail trucks.
PSA says it received an average of over 68,000 items per week in the second quarter of fiscal 2020, with peaks north of 85,000 near the end of the quarter, which ended December 31. In the second quarter, they shipped over 770,000 cards, autographs and other items back to customers, surpassing the prior record of roughly 735,000 items set in the first fiscal quarter that ended in September.
“The six months revenue increase from the first six months of fiscal 2020 compared to fiscal 2019 was of $6.5 million or 19%,” stated Collectors Universe Chief Financial Officer Joe Wallace. “That number included increases of $4.1 million (34%) in cards and autographs, and $2.7 million or 14% in coins. The cards and autographs increase represented record first half revenues for that business.”
PSA says it has undertaken efforts to improve its turnaround times by cross-training graders from other collectible divisions, adding staff and even hiring an outside firm to review its process. Still, it’s having a hard time keeping up with the demand for its services, even in the face of online criticism from some collectors over cards that appear to have been altered, but passed authentication and grading reviews.
“The backlog continues to grow to unprecedented levels,” Orlando said. “The faster we have returned the product to our customer base, the faster the submissions come back to us. As we stand here today, the PSA backlog has surpassed the one million unit mark.
“Our operational revamp is at the top of the priority list. This is how we move the millions of submissions we receive each year through the system. Any efficiency gains we can make here will not only help our throughput and financial performance, but it will also help our customers who depend on our service to help move their inventory.”
Keeping up with fraudsters who try to deceive collectors is a constant concern for grading companies. PSA says it will soon unveil a new piece of technology aimed at stopping at least some of that.
“A security chip, otherwise known as NFC or Near-field communication technology, will be embedded into some of our products, so collectors and dealers can verify the product has, in fact, been certified by our Company,” Orlando revealed.
“By simply touching our certified product with a current smart phone, a verification link will instantaneously appear on the screen. The link will provide the exact information of the certified collectible in our database. The embedded security adds a new level of sophistication to the validation process and next-level protection for our certified products. PCGS (the coin grading division of Collectors Universe) has already announced the addition of this new technology and PSA will be doing the same in the coming weeks.”