Increases Investment in Galileo Global
Equity Advisors, Streamlines Products and Operations
U.S. Global Investors, Inc. (NASDAQ: GROW), a boutique
registered investment advisory firm specializing in natural
resources and emerging markets, today reported a net loss of
$970,000, or (0.06) cents per share, on revenues of $11.4 million
for the fiscal year ended June 30, 2014. For the fiscal year 2013,
U.S. Global Investors recorded a net loss of $194,000, or (0.01)
cents per share, on operating revenues of $17.3 million.
In the fourth quarter of fiscal year 2014, the company had net
income of $260,000, or 0.02 cents per share, on operating revenues
of $2.9 million.
On June 30, 2014, total assets under management as of period end
were $1.23 billion compared to $1.16 billion on June 30, 2013, an
increase of 6 percent. The increase in total assets under
management was a positive outcome of the June 1, 2014, acquisition
of a controlling interest in Galileo Global Equity Advisors, Inc.
and the inclusion of Galileo’s $267 million in assets under
management, as of June 30, 2014. During fiscal 2014, U.S. Global
Investors’ average assets under management were $1.08 billion,
compared to $1.55 billion in fiscal 2013.
A Transitional Year
“Fiscal year 2014 was a challenging transitional year for U.S.
Global Investors,” says Frank Holmes, CEO of U.S. Global Investors,
Inc. “The company accomplished strategic objectives in simplifying
our operations and product lineup during a difficult environment
for resources and emerging markets. The streamlining changes
required expensive and time-consuming legal and regulatory
processes but those one-time costs are behind us. Our organization
is substantially leaner and nimbler, our product line is
streamlined and our focus is on our core competency of money
management.”
Simultaneously, the company pursued growth strategies by
increasing its investment in Galileo, a high-performing
Canadian-based investment advisor, and laying the groundwork for
launching exchange traded funds (ETFs).
Emerging markets, gold and natural resources experienced a
challenging three-year decline which negatively affected investor
sentiment, shifted investors from longer-term actively managed
strategies to short-term ETF trading and impacted GROW’s revenues.
While the company has always maintained a lean and reflexive cost
structure, during fiscal year 2014, the company put in place a
series of additional positive changes to control costs and improve
competitiveness in the future.
In December 2013, U.S. Global Investors exited the expensive
money market fund business by closing its Treasury money market
fund and successfully converting its government money market fund
to a higher yielding, ultra-short government bond fund. Over the
past five years, bearing the expense of subsidizing yields and
protecting the integrity of the $1 NAV has cost the money market
fund industry nearly $24 billion in waived expenses, according to
the Investment Company Institute. U.S. Global Investors’ move away
from money market funds reduced the company’s cash drain from
continuing these costly products.
Without economies of scale, the costs of maintaining mutual
funds have become exceedingly expensive as regulatory and
distribution costs have risen dramatically over the past decade. As
a result, U.S. Global made the decision to merge or liquidate
several of the company’s small funds that were unprofitable. As a
result, as of January 2014, the company has a simplified product
line with nine actively managed mutual funds in the United
States.
In December 2013, the company completed the outsourcing of its
fund transfer agency services to U.S. Bancorp, a leading provider
of mutual fund shareholder services. This change streamlined U.S.
Global Investors’ operations, created economies of scale for fund
shareholders, reduced internal regulatory and compliance costs, and
created a leaner professional staff focused on money management and
marketing.
Increased Investment in Galileo
In June 2014, U.S. Global Investors completed its purchase of an
additional 15 percent in Galileo Global Equity Advisors, based in
Toronto. This strategic partnership brought U.S. Global Investors’
ownership, through its wholly owned subsidiary U.S. Global
Investors (Canada) Ltd., to approximately 65 percent of the issued
and outstanding shares of Galileo. “Galileo has received numerous
awards for outstanding fund performance, and we believe it is well
positioned for continued success and growth in Canada,” says
Holmes.
This relationship empowers Galileo’s management team to build
the business with U.S. Global’s additional investment capital and
marketing support while U.S. Global benefits from Galileo’s proven
track record in fund management and a platform for potentially
expanding product offerings in Canada.
Planning to Enter ETF Market
U.S. Global Investors has been granted exemptive relief by the
Securities and Exchange Commission, allowing the company to begin
the process of bringing ETF products to market. “These investment
vehicles are in high demand by investors, and we are excited to
soon expand our fund offerings with innovative and dynamic ETF
products,” say Holmes.
Share Repurchase Program
During this transition year, U.S. Global Investors continued
purchasing outstanding stock. Since the program began in January
2013, the company has purchased shares totaling 148,403 class A
shares using cash of approximately $463,000. The company used an
algorithm to purchase shares on down days, following the rules and
regulations that restrict the amounts and times when shares can be
purchased on any given day. The share repurchase plan expires at
the end of the calendar year 2014 but may be suspended or
discontinued at any time.
Continued Strong Balance Sheet
The company had net working capital of approximately $24.7
million at the end of fiscal year 2014. With approximately $5.9
million in cash and cash equivalents and $24 million in securities
recorded at fair value, which together comprise approximately 79
percent of total assets, U.S. Global Investors has adequate
liquidity and is in a position to pursue potential investment
opportunities. The company has had no long-term debt since 2004 and
owns its headquarters building.
U.S. Global Continues GROW Dividends
The company has continued to pay monthly dividends for more than
six years and will continue its dividend payments in the fourth
calendar quarter of 2014.
The company’s board of directors approved payment of the $0.005
per share per month dividend beginning in October 2014 and
continuing through December 2014. The record dates are October 7,
November 11 and December 9, and the payment dates will be October
22, November 25 and December 23.
At the end of this period, the company will have paid monthly
dividends for more than seven years. At the August 15, 2014,
closing price of $3.52, the $0.005 monthly dividend equals a 1.7
percent yield on an annualized basis.
The continuation of future cash dividends will be determined by
U.S. Global’s board of directors, at its sole discretion, after
review of the company's financial performance and other factors,
and is dependent on earnings, operations, capital requirements,
general financial condition of the company and general business
conditions.
Earnings Webcast Information
The company has scheduled a webcast for 7:30 a.m. Central time
on Thursday, August 28, 2014, to discuss the company's key
financial results for the fiscal year. Frank Holmes, CEO and chief
investment officer, will be accompanied on the webcast by Susan
McGee, president and general counsel, and Lisa Callicotte, chief
financial officer. Click here to register or visit www.usfunds.com.
Please log in at least 5 minutes prior to the start of the
webcast.
Selected financial data (unaudited): (dollars in
thousands, except per share data)
Three months ended 6/30/2014
3/31/2014 6/30/2013 Operating
Revenues $ 2,905 $ 2,742 $ 3,459 Operating Expenses 3,350
3,157 3,983
Operating Loss (445 ) (415 ) (524 ) Total Other Income
(Loss) 667 403 (84 ) Tax Expense (Benefit) (51 )
14 (193 ) Net Income
(Loss) from Continuing Operations 273 (26 ) (415 ) Net Loss from
Discontinued Operations (6 ) (2 )
(35 ) Net Income (Loss) $ 267 $ (28 ) $ (450 )
Less: Net Income Attributable to Non-Controlling Interest 7
-- --
Net Income (Loss) Attributable to U.S. Global Investors $
260 $ (28 ) $ (450 ) Earnings
(Loss) per share (basic and diluted) $ 0.02 $ 0.00 $ (0.02 )
Avg. common shares outstanding (basic) 15,437,165 15,454,932
15,477,333 Avg. common shares outstanding (diluted) 15,437,165
15,454,932 15,477,333 Avg. assets under management
(billions) $ 1.0 $ 1.0 $ 1.3
Selected financial data for fiscal year: (dollars in
thousands, except per share data)
2014 2013 Operating
Revenues $ 11,439 $ 17,318 Operating Expenses 14,841
17,509 Operating Loss (3,402 ) (191 )
Total Other Income 2,165 262 Income Tax Expense (Benefit)
(517 ) 100 Loss from Continuing
Operations (720 ) (29 ) Loss from Discontinued Operations
(243 ) (165 ) Net Loss (963 ) (194 ) Less: Net
Income Attributable to Non-Controlling Interest 7
-- Net Loss Attributable to U.S. Global
Investors $ (970 ) $ (194 ) Loss per share (basic and
diluted) $ (0.06 ) $ (0.01 ) Avg. common shares outstanding
(basic) 15,459,022 15,482,612 Avg. common shares outstanding
(diluted) 15,459,022 15,482,612 Avg. assets under management
(billions) $ 1.1 $ 1.6
About U.S. Global Investors, Inc.
The story of U.S. Global Investors goes back more than 40 years
when it began as an investment club. Today, U.S. Global Investors,
Inc. (www.usfunds.com) is a registered investment advisor that
focuses on profitable 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 other
international clients.
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-K, 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. 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.
The Galileo Funds are not offered for sale in the United
States.
U.S. Global Investors, Inc.Susan Filyk, 210-308-1286Investor
Relationssfilyk@usfunds.com
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