[Lorewalker]

Originally Posted by BobC

Hey Chase,

Yes, since the company has gone private, their financial info isn't out there for all to see anymore, so I am doing a bit of guessing. And I forget about some of those other small company acquisitions as well. And again, we don't know if they are even including them as part of this valuation, or keeping them separate.

Still, I think the major part of that valuation jump is due to their revenue increasing. You mention the backlog they have, but we don't know exactly when they are actually recognizing the revenue from it for accounting purposes. With the huge delay now in turnaround times, I suspect they may not be so quick to record their fee income as soon as they log in cards to grade, or at least they may not want to. If they record the income from cards they received, but then don't actually do any work on them till almost a year later in some cases, you may have recognized taxable revenue in one tax period, but then any tax deductible expenses related to the work they'll eventually be doing on those backlogged cards maybe isn't getting incurred and expensed until a later tax period. They never operated with such a backlog before, and most companies, especially publicly traded ones, generally like to recognize income ASAP. And assuming that is the case, companies aren't supposed to be able to just suddenly change their income recognition criteria, especially in regard to income taxes, because something like the pandemic came along. The IRS likes, and generally insists upon, consistency. So, they may be stuck recognizing revenue they can't now fully deduct all the expenses against that they'll end up eventually incurring to finish grading them right now. Hopefully this makes sense to everyone.

And as for taking this company public again, hell yeah I can see them doing it, or at least selling it off to someone else at some point. And I suspect it was probably part of their plan and intentions from the start. Regardless of how much they like cards, these new owners are businessmen and investors first!

The one thing I'll bet they may not have planned on is CSG entering the card grading business. Trust me, PSA is well aware of them, and likely more concerned about them than you might ever imagine. Though nowhere near as drastic as the resulting impact, CSG could eventually throw a monkey wrench into PSA/Collector's plans, along the lines of what Fanatics did to Topps IPO dreams. Will be interesting to see how this plays out in the future.

Thanks Bob. Appreciate the reply. The article said that Goldin made up 20% of the 300 mil gross revenue so that is significant. I assume Goldin is a part of their valuation since it is included in gross revenue. I assume they recognize revenue once a sub is completed since that is the time at which they charge the submitter. Those backlogged submissions though would have had to have been part of the valuation they paid to buy CU so they are a wash, no? Additionally most of those 13 million cards were bulk...less than $12 per card. I think they added 50% or more to their workforce to process those 8 million cards. That has to be a hefty cost.

And as for CSG, I agree. As we have discussed I think in the coming months we will see CSG do more and more with eBay and they will be enormous competition for PSA. CSG's parent co authenticates 8 different collectibles. PSA might have Goldin but CSG will have eBay.