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 net income of $779,000 ($0.05 per share) for the quarter
ended March 31, 2019, compared to a loss of $1.1 million ($0.07 per
share loss) a year earlier. This increase of approximately $1.8
million is primarily due to an increase in investment income
resulting from unrealized gains and a positive change in income
from equity method investments, which was partially offset by an
increase in tax expense.Total consolidated net income for the three
months ended March 31, 2019, increased approximately $1.8 million
compared with the same period in 2018. A significant amount of this
increase is due to the Company adopting a new accounting
pronouncement in July 2018, which changed how unrealized gains and
losses of certain corporate investments are recorded. Starting in
fiscal year 2019, changes in the fair value of the Company’s
investments formerly classified as available-for-sale were no
longer reported through other comprehensive income, but rather
through earnings. This change in accounting has resulted in
investment income being more volatile quarter-over-quarter. For the
three months ended March 31, 2019, net unrealized gain on
securities formerly classified as available-for-sale was
approximately $2.1 million.
In addition to the increase in investment income, there was
$3,000 in income from equity method investments for the three
months ended March 31, 2019, compared to a $927,000 loss for the
same period the previous year, a positive change of approximately
$930,000. The Company has held three separate equity method
investments during the past 12 months, all of which were
concentrated in cryptocurrency mining stocks. Cryptocurrency
markets and related stocks have been, and are expected to continue
to be, volatile. Cryptocurrency mining is considered an
early-stage, high-risk industry, and the nature of mining is
expected to evolve.
“The mutual fund business is still in a prolonged bear market,
with declining fund flows,” Frank Holmes, CEO and chief investment
officer of U.S. Global Investors, comments. “Investor appetite for
passively managed funds, including ETFs, continues to accelerate,
making it increasingly challenging for active management to attract
and retain assets. For the 12-month period through the end of
March, passive funds saw as much as $454 billion in net inflows,
whereas investors withdrew $305 billion from actively managed
funds, according to Morningstar data.”
This AI Company Is Believed to Be the Future of Gold
Exploration
During the quarter ended March 31, 2019, the Company made an
investment in GoldSpot Discoveries Corp. (“GoldSpot”), an
artificial intelligence (AI) company headquartered in Canada and
traded on the TSX Venture Exchange. The investment was valued at
approximately $1.3 million at the end of the quarter. Frank Holmes
serves on the board of GoldSpot as independent chairman and held
common stock as of March 31, 2019.
“We’re very excited to partner with GoldSpot, the very first
publicly traded AI company involved in the discovery of metals and
minerals,” Holmes says. “Hydraulic fracturing, or ‘fracking,’
reinvigorated the oil and gas industry a decade ago, helping
companies extract oil and gas from then-difficult-to-reach places.
Before fracking, there was talk of ‘peak oil.’ No equivalent
technology exists in precious metals to date. Metal ore grades are
decreasing, and large-scale gold discoveries are becoming fewer and
farther between.
“We believe GoldSpot—cofounded by geologist Denis Laviolette,
who has assembled an impressive roster of PhDs and experts in
physics, data science and other fields—could change all that. The
company seeks to help mining companies reduce some of the costs and
risks associated with discovering high-quality deposits. It’s
already managed to do this for a number of its clients and
partners, including Hochschild Mining, McEwen Mining and Yamana
Gold. GoldSpot has also developed an AI-powered screening platform
to identify the very best and potentially most profitable
investment opportunities.”
Gold and Precious Metals Fund Received Five Stars for the
Five-Year Period
For the quarter ended March 31, 2019, the Company’s Gold and
Precious Metals Fund (USERX) received the highly coveted five-star
rating for the five-year period from Morningstar. That’s among 64
funds in the Equity Precious Metals category, and based on
risk-adjusted returns. In addition, the fund received four stars
overall for the same period, four stars for the three-year period
and four stars for the 10-year period.
Because it has a low to negative correlation with the market,
gold has helped investors diversify their portfolios and improve
their risk-adjusted returns,” Holmes comments. “According to a
recent report by JPMorgan Chase, gold had the second best
annualized returns, at 7.7 percent, among a number of assets for
the 20-year period through December 31, 2018. Only REITS (real
estate investment trusts) did better at 9.9 percent.”
“Due to a number of risks such as record amounts of government
and corporate debt and a potential global economic slowdown, now
might be a prudent time for investors to consider adding to their
gold exposure,” Holmes says. “One of the best ways, I believe, is
with our Gold and Precious Metals Fund (USERX).”
Adequate Liquidity and Capital Resources
As of March 31, the Company had net working capital of
approximately $12.7 million and a current ratio of 11.6 to 1. With
approximately $3.7 million in cash and cash equivalents, and
approximately $13.6 million in unrestricted marketable securities,
U.S. Global Investors has adequate liquidity to meet its current
obligations. The Company has no borrowings or long-term liabilities
except for deferred taxes.
Share Repurchase Program
U.S. Global Investors has continued purchasing its outstanding
stock. For the three and nine months ended March 31, 2019, the
Company repurchased 8,075 and 20,075 class A shares using cash of
$9,000 and $24,000, respectively. 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
10 years. A monthly dividend of $0.0025 per share is authorized
through June 2019, at which time it will be considered for
continuation.
Earnings Webcast Information
The Company has scheduled a webcast for 7:30 a.m. Central time
on Friday, May 10, 2019, 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 (unaudited):
(dollars in thousands, except per share data)
|
Three
months ended |
|
3/31/2019 |
3/31/2018 |
Operating Revenues |
$971 |
$1,417 |
Operating Expenses |
1,855 |
2,007 |
Operating Loss |
(884) |
(590) |
|
|
|
Total Other Income (Loss) |
2,137 |
(643) |
Income (Loss) Before Income Taxes |
1,253 |
(1,233) |
|
|
|
Income Tax Expense (Benefit) |
535 |
(168) |
Net Income (Loss) |
718 |
(1,065) |
Less: Net Income Attributable to Non-Controlling
Interest |
(61) |
(5) |
Net Income (Loss) Attributable to U.S. Global
Investors, Inc. |
$779 |
$(1,060) |
Earnings (Loss) per share (basic and diluted) |
$0.05 |
$(0.07) |
|
|
|
Avg. common shares outstanding (basic) |
15,132,408 |
15,144,068 |
Avg. common shares outstanding (diluted) |
15,132,408 |
15,144,068 |
|
|
|
Avg. assets under management (millions) |
$549 |
$717 |
####
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, U.S. Global ETFs 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-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.
MORNINGSTAR
**** |
Overall/66 |
**** |
3-Year/66 |
***** |
5-Year/64 |
**** |
10-Year/46 |
Morningstar ratings based on risk-adjusted return and number of
funds Category: Equity Precious Metals Through: 3/31/2019
Morningstar Ratings are based on risk-adjusted return. The
Morningstar Rating for a fund is derived from a weighted-average of
the performance figures associated with its three-, five- and
ten-year Morningstar Rating metrics. Past performance does not
guarantee future results. For each fund with at least a three-year
history, Morningstar calculates a Morningstar Rating based on a
Morningstar Risk-Adjusted Return measure that accounts for
variation in a fund’s monthly performance (including the effects of
sales charges, loads, and redemption fees), placing more emphasis
on downward variations and rewarding consistent performance. The
top 10% of funds in each category receive 5 stars, the next 22.5%
receive 4 stars, the next 35% receive 3 stars, the next 22.5%
receive 2 stars and the bottom 10% receive 1 star. (Each share
class is counted as a fraction of one fund within this scale and
rated separately, which may cause slight variations in the
distribution percentages.)
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.
Diversification does not protect an investor from market risks
and does not assure a profit.
The S&P 500 Stock Index is a widely recognized
capitalization-weighted index of 500 common stock prices in U.S.
companies.
A real estate investment trust (REIT) is a company that owns,
and in most cases operates, income-producing real
estate. REITs own many types of commercial real estate,
ranging from office and apartment buildings to warehouses,
hospitals, shopping centers, hotels and timberlands.
Holdings may change daily. Holdings are reported as of the most
recent quarter-end. The following securities mentioned in the press
release were held by one or more accounts managed by U.S. Global
Investors as of 3/31/2019: McEwen Mining Inc., Yamana Gold Inc.
Holly Schoenfeldt
U.S. Global Investors
210.308.1268
hschoenfeldt@usfunds.com
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