U.S. Global Investors, Inc. (NASDAQ: GROW) (the “Company”), a
boutique registered investment advisory firm with longstanding
experience in global markets and specialized sectors, today
reported a net loss of $4.7 million, or $0.31 per share, for the
fiscal year ended June 30, 2020. This compares to a net loss of
$3.4 million, or $0.22 per share, for the prior fiscal year.
Operating loss improved in fiscal 2020, from a $2.8 million loss in
fiscal 2019 to a $2.4 million loss in fiscal 2020. This was due to
an increase in operating revenues, somewhat offset by an increase
in operating expenses. The increase in revenues was primarily
driven by the Company’s two ETFs, which, as discussed further
below, have seen increased inflows since the start of the COVID-19
pandemic.
Although the Company recorded a net operating loss for fiscal
2020, it is pleased to have seen a significant improvement in the
quarter ended June 30, which saw an operating loss of $245,000, a
75 percent improvement over the operating loss of $979,000 for the
quarter ended March 31, 2020. What’s more, heading into August, the
Company had over $2 billion in total net assets for the first time
since February 2012.
Almost half of the net loss for fiscal 2020 is due to unrealized
investment losses related to decreases in valuation of corporate
investments. The adoption of a new accounting pronouncement in
fiscal year 2018 required changes in the fair value of the
Company’s equity investments formerly classified as
available-for-sale to no longer be reported through other
comprehensive income, but rather through earnings. This change in
accounting has resulted in investment income and losses being more
volatile quarter-to-quarter. For fiscal year 2020, the Company had
a total investment loss of $2.2 million compared to a $1.6 million
investment loss in fiscal year 2019. Like net income, though,
investment income was positive for the quarter ended June
30.
Total assets under management (AUM) on June 30, 2020, stood at
$1.7 billion, a more than threefold increase from $510.1 million a
year earlier. The increase was primarily due to inflows into the
Company’s two ETFs, particularly the smart-beta 2.0 airlines ETF,
the U.S. Global Jets ETF (JETS). Assets in JETS started to
accelerate in the latter part of March 2020 and were $1.2 billion
at fiscal year-end, as many value investors saw the
coronavirus-related plunge in airline stocks as a buying
opportunity. Positive inflows were recorded for an incredible 70
straight trading days, between March 3 and June 10, prompting
Bloomberg Intelligence’s senior ETF analyst Eric Balchunas to call
JETS “the hottest theme ETF in history.” Total AUM in the
quantamental U.S. Global GO GOLD and Precious Metal Miners ETF
(GOAU) also rose considerably, from $14.9 million at June 30, 2019,
to $86.2 million a year later, representing a 478 percent increase.
As such, the Company recorded advisory fees from the ETFs totaling
$1.7 million in fiscal 2020, compared to $588,000 in fiscal
2019.
JETS Exceeded $1 Billion in AUM; GOAU Above $100
Million
Despite certain challenges related to the pandemic, fiscal 2020
was a strong year for the Company’s two ETFs. Net assets in JETS
broke above $1 billion for the first time ever on June 2 as value
investors and hedge funds sought exposure to airline stocks, which
tumbled some 50 percent due to the coronavirus-induced economic
downturn. Only 18 percent of ETFs on average reach the $1 billion
level, according to Bloomberg. GOAU, meanwhile, surpassed $100
million in net assets in July 2020 for the first time since its
debut in June 2017.
“We couldn’t be more thrilled with how well JETS and GOAU did in
fiscal 2020,” says Frank Holmes, Company CEO and chief investment
officer. “The pandemic has been devastating for many businesses and
households, but the economic events created huge unexpected
interest in JETS, which saw a remarkable $1.3 billion in inflows
between March 3 and June 10. It’s important for GROW investors to
remember that JETS charges 60 basis points, making it a significant
generator of revenue, but also pays all the expenses of the
fund.
“Among the most enthusiastic JETS investors were from the retail
side, particularly millennial Robinhood investors,” Mr. Holmes
continues. “For some investing veterans, the narrative has been
that ‘Robinhooders,’ as they’re called, are unsophisticated kids
whose day-trading has destabilized stock prices. The reality
is that many of them made some masterful calls in this last
downturn. Just as the S&P 500 was bottoming, many Robinhood
investors began picking up distressed airline stocks. This buying
spree continued even after billionaire investor Warren Buffett
announced in early May that he had dumped his shares in the top
four domestic carriers.
“We spent thousands of hours in research and backtesting before
launching GOAU and JETS, and it was time well spent. It took five
years of patience, capital and nurturing to build the JETS brand
before its spectacular growth. That growth continues as the ETF was
recently approved to trade on a number of large brokerage
platforms, including those at Citi, Wells Fargo and Morgan
Stanley,” Mr. Holmes says.
HIVE Blockchain Recovery Underway
The Company’s primary proxy investment in the cryptocurrency
mining industry remains HIVE Blockchain Technologies Ltd. (“HIVE”).
As of June 30, 2020, the Company owned 10 million common shares of
HIVE, valued at $2.4 million. Its stock is highly correlated with
the price of Bitcoin and Ethereum, which continue to be
volatile.
“As the most liquid blockchain mining company, HIVE has
rebounded substantially from the lows seen in December 2019 due
most likely to tax-loss selling,” Mr. Holmes comments. “At 10
million shares, HIVE is a large holding for us. For comparison’s
sake, there are over 15.1 million GROW shares outstanding, so one
way to look at it is that for every GROW share, we have the
equivalent of two-thirds of a HIVE share.”
Mr. Holmes is the non-executive chairman of HIVE. Effective
August 31, 2018, he was named HIVE’s Interim Executive Chairman
while a search for a new CEO is undertaken.
Adequate Liquidity and Capital Resources
At June 30, 2020, the Company had net working capital of
approximately $8.5 million and a current ratio of 5.2 to 1. With
approximately $1.9 million in cash and cash equivalents and $11.4
million in unrestricted securities recorded at fair value, which
together comprise approximately 71 percent of total assets, the
Company has adequate liquidity to meet its current obligations. The
Company also owns its own building and recently installed a number
of superior commercial building grade filters to reduce the risk of
possibly spreading the novel coronavirus in offices.
Share Repurchase Program
During fiscal year 2020, the Company repurchased 105,721 of its
class A shares on the open market using cash of $113,000. Since
January 2013, the Company has repurchased a total of 666,531 class
A shares under the repurchase program using cash of $1.5 million.
The share repurchase plan may be suspended or discontinued at any
time.
GROW Continued Dividends
The Company has continued to pay monthly dividends for more than
11 years. The Board of Directors has authorized a monthly dividend
of $0.0025 per share through September 2020, at which time the
Board of Directors will consider continuation of the
dividend.
Earnings Webcast Information
The Company has scheduled a webcast for 7:30 a.m. Central time
on Friday, September 11, 2020, to discuss the Company’s key
financial results for the year. Frank Holmes will be accompanied on
the webcast by Lisa Callicotte, chief financial officer, and Holly
Schoenfeldt, marketing and public relations manager. Click here to
register for the earnings webcast or visit www.usfunds.com for more
information.
Selected Financial Data: (dollars in
thousands, except per share data)
|
2020 |
2019 |
Operating Revenues |
$4,476 |
$3,459 |
Operating Expenses |
6,879 |
6,216 |
Operating Loss |
(2,403) |
(2,757) |
|
|
|
Total Other Loss |
(2,236) |
(1,512) |
Loss from Continuing Operations Before Income Taxes |
(4,639) |
(4,269) |
|
|
|
Tax Benefit |
(175) |
(977) |
Net Loss from Continuing Operations |
(4,464) |
(3,292) |
Loss from Discontinued Operations |
(338) |
(147) |
Net Loss |
(4,802) |
(3,439) |
Less: Net Loss Attributable to Non-Controlling Interest from
Discontinued Operations |
(118) |
(51) |
Net Loss Attributable to U.S. Global Investors, Inc. |
$(4,684) |
$(3,388) |
Loss per share (basic and diluted) |
$(0.31) |
$(0.22) |
|
|
|
Avg. common shares outstanding (basic) |
15,108,394 |
15,138,351 |
Avg. common shares outstanding (diluted) |
15,108,394 |
15,138,351 |
|
|
|
Avg. assets under management for continuing operations
(millions) |
$699.5 |
$529.0 |
####
About U.S. Global Investors, Inc.
The story of U.S. Global Investors goes back more than 50 years
when it began as an investment club. Today, U.S. Global Investors,
Inc. (www.usfunds.com) is a registered investment adviser that
focuses on niche markets around the world. Headquartered in San
Antonio, Texas, the Company provides money management and other
services to U.S. Global Investors Funds and U.S. Global ETFs.
Forward-Looking Statements and Disclosure
This news release and other statements by U.S. Global Investors
may include certain “forward-looking statements,” including
statements relating to revenues, expenses and expectations
regarding market conditions. You can identify these forward-looking
statements by the use of words such as “outlook,” “believes,”
“expects,” “potential,” “opportunity,” “seeks,” “anticipates” or
other comparable words. Such statements involve certain risks and
uncertainties and should be read with corporate filings and other
important information on the Company’s website, www.usfunds.com, or
the Securities and Exchange Commission’s website at
www.sec.gov.
These filings, such as the Company’s annual report and Form
10-Q, should be read in conjunction with the other cautionary
statements that are included in this release. Future events could
differ materially from those anticipated in such statements and
there can be no assurance that such statements will prove accurate
and actual results may vary. The Company undertakes no obligation
to publicly update or review any forward-looking statements,
whether as a result of new information, future developments or
otherwise.
Please consider carefully a fund’s investment objectives, risks,
charges and expenses. For this and other important information,
obtain a fund prospectus by visiting www.usfunds.com. Read it
carefully before investing. Foreside Fund Services, LLC,
Distributor. U.S. Global Investors is the investment adviser.
Gold, precious metals, and precious minerals funds may be
susceptible to adverse economic, political or regulatory
developments due to concentrating in a single theme. The prices of
gold, precious metals, and precious minerals are subject to
substantial price fluctuations over short periods of time and may
be affected by unpredicted international monetary and political
policies. We suggest investing no more than 5% to 10% of your
portfolio in these sectors. Foreign and emerging market investing
involves special risks such as currency fluctuation and less public
disclosure, as well as economic and political risk. Because the
Global Resources Fund concentrates its investments in specific
industries, the fund may be subject to greater risks and
fluctuations than a portfolio representing a broader range of
industries.
The S&P 500 Stock Index is a widely recognized
capitalization-weighted index of 500 common stock prices in U.S.
companies.
JETS and GOAU are distributed by Quasar Distributors, LLC. U.S.
Global Investors is the investment adviser to JETS and GOAU.
Holly Schoenfeldt
U.S. Global Investors, Inc.
210.308.1268
hschoenfeldt@usfunds.com
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