Collectors Universe Inc. (CLCT-NASDAQ)
Interview with:
Michael R. Haynes, CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
authenticating and grading of collectible coins, sports cards, autographs and stamps.


Cover Story

CEOCFO Current Issue

Cover Story Archives

Private Equity Review

CEOCFO Interview Index

Future Features

Analyst Interviews

Corporate Financials

Contact & Ordering

This is a printer friendly page!

Collectors Universe provides authentication and grading services in five different markets with very little competition; New market opportunities in the horizon


Collectors Universe Inc.

1921 East Alton Avenue
Santa Ana, CA 92705
Phone: 949-567-1234

wpe3.jpg (6151 bytes)

Michael R. Haynes
Chief Executive Officer

Interview conducted by:
Lynn Fosse, Senior Editor
August 11, 2005

has served as Chief Executive Officer and Director since January 1, 2003.  He served as Chief Operating Officer, Chief Financial Officer and Director of Tangible Asset Galleries, Inc. from 2000 to 2002.  From 1997 to 2000, Mr. Haynes was Executive Vice President of Emiliani Enterprises, Inc.  He has held key high level positions such as President, Chief Operating Officer and/or Chief Financial Officer of eight collectibles, precious metals, specialty retail, distribution, e-commerce and manufacturing businesses.  Overall, Mr. Haynes has more than 25 years of experience in managing the growth and development of fast growing companies, which includes over 19 years experience in managing both public and private companies engaged in the business of selling collectibles at auction, retail and wholesale.  He was also one of the co-founding board members of the Industry Council for Tangible Assets, a Washington, D.C.-based trade association for dealers and auctioneers of tangible and collectible assets, where he served for nine years.  Mr. Haynes holds a Master's degree in Business and a Bachelor of Science degree in mechanical engineering, both from Southern Methodist University.  He is a Certified Public Accountant and a Certified Financial Planner.

Company Profile:
Collectors Universe, Inc. is a leading provider of value added services to the high-value collectibles markets. The Collectors Universe brands are among the strongest and best known in their respective markets. The Company authenticates and grades collectible coins, sports cards, autographs and stamps. The Company also compiles and publishes authoritative information about collectible sports cards and sports memorabilia, United States and world coins, and entertainment memorabilia. This information is accessible to collectors and dealers at the Company's web site,, and is also published in print.

CEOCFO: Mr. Haynes, what attracted you to Collectors Universe?
Mr. Haynes: “Collectors Universe has one of the best and most unique business models I have ever seen. We are actually creating an entire new category of business worldwide. I was familiar with Collectors Universe before I joined and was very excited at the prospect of being a part of the Collectors Universe management team because of the tremendous value proposition that the company offers, its services and the exciting development of an entirely new business category.”

CEOCFO: What has changed since you have been there?
Mr. Haynes: “When I arrived, the company was in two parts. It had its core business, which had the authentication and quality rating service, and high-value secondary market assets. In addition to that, the company had also entered into a variety of businesses, which were buying and selling those very same secondary market assets. The income statements of the two businesses were quite different, so we began to examine the allocation of resources. We looked at not only the financial resources, but also the intellectual resources in identifying which area would have the higher growth opportunity. We concluded that the Company should divest its transaction-based businesses and focus on its authentication and quality-rating services. We did this primarily because the transaction businesses are quite competitive but on the quality rating side, there was not much competition and there was also a huge need for this service in the marketplace. We liquidated all of our transaction-oriented business and began to focus our time, attention, and resources - both human and capital -into growing and expanding our quality rating services.”

CEOCFO: Tell us about your customers.
Mr. Haynes: “We are a lot like the credit rating agencies, Standard & Poor’s and Moody’s, in many respects.  For those agencies, issuers of credit bring their credit document and the entire backup to these institutions to provide a rating on the credit quality that is offered in the marketplace. Whether it is A, AA or AAA type of ratings, the marketplace has an objective and common standard to measure and evaluate the different types of credit issuers. We essentially do the exact same thing except the assets that we are examining are credit instruments that are actually physical assets. About 80% of our unit volume comes from dealers in these assets as well as auctioneers, both of which are in the commercial business of trading these assets. They want to get the assets rated for quality so that the marketplace, to which they are distributing these assets to, will have the same knowledge about the underlying quality. As a result of these quality ratings, the confidence of the buyers has increased and as the confidence of the buyers increases, so does the buyers’ willingness to pay more money for the same asset because there is no longer any ambiguity about the underlying quality or authenticity. The vast majority of our volume comes from the commercial side of the business.”

CEOCFO: What is the competitive landscape for your services?
Mr. Haynes: “We are in five different markets right now. In all five markets, we have a fairly dominant market share for products that are authenticated and rated in those various markets. We command more than 50% market share in each of those markets except for one, where we have one main competitor; we have about a 45% share and they have about a 40% share. In the other markets, there are no significant competitors.”

CEOCFO: How are you sure, the quality is there with the authenticators?
Mr. Haynes: “Generally speaking, high value secondary market assets have traded for thousands of years. If you go back to the Egyptians periods, jewelry and pottery were useful in trade for long periods in time. There are always two questions that the buyer has for the dealer; first, is it authentic or genuine and an original. The second question is: has it been altered, wrecked, fixed, repaired or remanufactured. Another question that is equally important and in some cases more important is: what is its quality or state of preservation and how close is this to its original state of manufacture and creation. For all of these thousands of years, the seller has always made those representations. Obviously depending upon who the seller might be, there is a tendency toward bias to push the edge of the quality or make judgments about authenticity. When entering a marketplace, there is a need for a third party such as Collectors Universe, that has no interest in the buying or selling or any financial interest in how much an asset may trade for. Collectors Universe focuses strictly on examining the asset based on the standards that most likely the authenticator has established. Once these standards are widely known in the marketplace for both authenticity and quality then this asymmetry of knowledge between the buyer and seller evaporates. The consumer knows just as much about the authenticity and quality and the asset as the seller. Therefore, it is difficult if not impossible for the seller to overstate or misrepresent the authenticity and quality of the underlying good, which is ultimately, related to value.

We also have a number of checks and balances in our process to ensure that we remain independent and maintain integrity in our process. There are three keys to the integrity of our process; the first is we remain independent of the submitters of these goods, which are primarily commercial individuals, dealerships and corporations, who are looking to sell these goods but we also have some that are submitted by individual holders. We remain independent in that as goods come in, we strip all the packaging off the goods so that there is no indication on the asset, of the identity of the submitter. We physically examine everything in our facilities so that it is not done by long-distance or random sample. We look at everything. The first step to remain independent is we tell our computer the submitter’s identity on everything and then we label every item with a non-descript barcode and a unique tracking number to follow the assets through our internal control system. The second key step is that on all of our vintage goods, two experts or two of our evaluators who are independent of one another must agree anonymously with each other on the authenticity and quality. This means that when goods move into our expert pool, our experts do not know whether they are the first or the second to examine or what anyone else has done, or the identity of the submitter. They are simply applying our standards of authenticity and quality to the good that is examined, and key that into the computer. The third key point in maintaining the integrity of our process is our verification step; two experts must anonymously agree on the exact quality rating for every asset. Our most senior expert reviews every asset before it goes out the door to ensure that the senior expert agrees with the evaluation of the two experts that have agreed anonymously. We have these three key steps that not only help to maintain our independence but the integrity of process. These checks and balances are integral in allowing us to remain independent and consistent long term.”

CEOCFO: Are there new technologies for authentication that you are able to use?
Mr. Haynes: “The technology that applies here is not that significant. We have some visual name technology; imaging type technology, and some magnification type technology that does help. Generally, we are talking about standards that we have written and propagated and published in the marketplace so that everyone knows what those standards are. Our people, who are highly trained experts in their respective fields, apply those standards to each item. It is more of an apprentice type business.”

CEOCFO: Will you tell us about the revenue model?
Mr. Haynes: “Our fee structure is similar to Federal Express; the quicker you want something back, the higher the fee. The fee structure is relatively independent of the underlying value of the good. Our fees range from the low end of about $8.00 to the high end of about $200.00. The determining factor is turnaround time. It can take anywhere for a normal service from 30-60 days to one day or in some cases, just a few hours to turn an item around. These are independent of the underlying value of the goods.”

CEOCFO: You have had nice revenues, how do you keep that going?
Mr. Haynes: “There are a few elements to this but the primary element is that we exist, as all businesses do, in a macro environment that we do not control. There are four key macro indicators that we have identified as influential to our business environment. The first economic macro condition we look at is real interest rates or the nominal rate less inflation depending upon which you want to use. For the last couple of years, this has ranged from 1% to minus 1% on an annual basis. When you have financial instruments with these types of real yields on them, money tends to flee interest bearing instruments and move into more tangible assets such as real estate, oil and gas, forestry, metals and that type of category; our category of assets are similar to those. The second indicator is gold prices. Gold prices relative to the dollar is really a referendum on the dollar. When the dollar is weak, individuals want to own just about anything not in stock denominated to dollars, so they move to other assets. This macro has been favorable for the last few years and gold prices are probably up around 50%. In the last three to six months, it has been a little flatter as the dollar relative to other currencies has been doing better. The third element is disposable personal income, which has a luxury good kind of feel to it. Disposable personal income is up three to four percent year-over-year. That is a positive number for luxury goods, and some of our assets have that luxury goods kind of feel. Lastly, as general stock prices rise, people feel more affluent and as they feel more affluent, they spend money on things they like, whether it is fishing or jewelry or whatever it is. This particular one has been somewhat flat over the last eighteen months or so.

As we look at our four macros, three have been relatively positive over the last two years, two have been positive over the last six months and two have been flat. Inside of that, we do not have a tremendous amount of competition in our various markets, but we are constantly marketing our brand, which is our authentication of a secondary market asset. We market our brand at the consumer level or in a poll strategy where we talk directly to those markets. If you are going to buy something at $500 or more, it does not matter what it is; you certainly like someone to come along beside you and give you some comfort that the asset you are buying is authentic or genuine, and is a proper quality. We do a lot of marketing at the retail level, encouraging people just to buy things that are already certified with our brand. On the other side of the distribution channel, we work with those commercial entities that utilize our service and encourage them to get more of their goods certified because it increases the liquidity of the underlying asset, increases turnover of the asset base. In some cases, it increases the margins in which they are able to offer goods into a more confident marketplace. We do co-marketing and co-branding with our commercial entities so that we can assist them in moving product through the channels. We take a close look at the macro world as well as our distribution channel and marketing plans to take both a pull and push strategy.”

CEOCFO: Are there any collectibles that you do not certify now, that you could add?
Mr. Haynes: “We believe so; we are only in five markets now. We do not look at us as being solely in the collectibles market; we look at ourselves as being authenticators in a quality rating service in all secondary market assets. Many categories have high-value assets, for which we believe our rating services would be beneficial to the market. We are focused on high-value and portable assets.”

CEOCFO: In closing, why should potential investors be interested and what should they know about the company that they might not realize at first?
Mr. Haynes: “At the moment, ratings levels, speaking from an investor’s prospect, we have about a little over $7.00 a share in cash, which means our enterprise value could be $8.00 to $10.00 a share. In our cash (free cash flow on an annual basis), it is quite substantial, so looking at it from a pure value prospective, it is a good value. Secondly, underlying the business is a business concept and a value proposition that benefits the consumer and there are many more markets that we can enter and grow. When you look at our history, we are growing very well organically in our existing markets. We have opportunities to grow both in our existing markets as well as in new markets, which we have proven we can do since we originally started our business with one market and now we are in five. You look at the balance sheet and see it is conservative; it is mostly cash, because we are prepaid generally for our services, so we do not have receivables or inventory and we have no debt. When you look at our operating side, we have large and consistent gross margins. We have been averaging 62% over many years and those margins have been slightly increasing over the last five years.”


Any reproduction or further distribution of this article without the express written consent of is prohibited.

“We are in five different markets right now. In all five markets, we have a fairly dominant market share for products that are authenticated and rated in those various markets. We command more than 50% market share in each of those markets except for one, where we have one main competitor; we have about a 45% share and they have about a 40% share. In the other markets, there are no significant competitors.” - Michael R. Haynes


To view Releases highlight & left click on the company name! does not purchase or make
recommendation on stocks based on the interviews published.