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 earnings of $1.27 million, or $0.08 per share, on
operating revenues of $1.5 million for the quarter ended September
30, 2017. This was a significant 383 percent improvement over the
same quarter the previous year, which had net income of $263,000,
or $0.02 per share, on operating revenues of $1.98 million.
The improvement in income was due to an investment accounted for
under the equity method in a fund managed by Galileo Global Equity
Advisors (Galileo). The Company and the Galileo fund made strategic
investments in HIVE Blockchain Technologies, the first
publicly-traded firm involved in the business of mining new digital
currencies, also known as cryptocurrencies. In addition, the
Company saw inflows into the U.S. Global Jets ETF (JETS) and U.S.
Global GO GOLD and Precious Metal Miners ETF (GOAU), which
collectively held $125 million in total assets as of September
30.
Somewhat offsetting the improved income was a decline in
operating revenue from decreased mutual fund assets under
management. In particular, our gold funds’ average assets
decreased, and Galileo, a 65 percent-owned subsidiary, lost a large
institutional account in the spring of 2017 that contributed to a
drop in assets.
Average assets under management, including U.S. Global Investors
Funds, the U.S. Global ETFs, Galileo clients and offshore clients,
were $762 million for the quarter ended September 30, 2017,
compared to an average of $946 million for the same quarter a year
ago, a decrease of 19 percent. Total assets under management were
$771 million as of September 30, 2017, versus $946 million at
September 30, 2016, a decrease of 18 percent.
Frank Holmes, CEO and chief investment officer of U.S. Global
Investors, comments, “Gold equity markets have still not fully
recovered from the massive rebalance trade we saw in June involving
the VanEck Vectors Junior Gold Miners ETF (GDXJ). Because it had
grown so large and was getting close to owning more than 20 percent
of several underlying stocks—which would violate IRS
diversification requirements and possibly trigger takeover laws in
Canada—GDXJ had to dump as much as 50 percent of its shares in
smaller gold firms, a value of $3 billion. This created heightened
volatility and valuation compression in the gold market, triggering
outflows from many gold-related mutual funds, ours included. What’s
more, the price of gold lost more than 5 percent in the third
quarter as the bullish stock market, the second-longest in U.S.
history, continued to head higher.
“Due to some exciting new developments, however, I believe we’re
well-positioned for the future,” Holmes continues. “GOAU launched
at the end of June, has shown some very competitive performance and
continues to attract assets. GOAU’s sister ETF, the U.S. Global GO
GOLD and Precious Metal Miners ETF (GOGO), was launched at the end
of September on the Toronto Stock Exchange (TSX) in partnership
with Galileo. GOGO is our first ETF to appear in the Canadian
market.
“The media continue to report on gold negatively, even though
its price was up nearly 12 percent year-to-date as of September 30.
In addition, since 2000, gold has far outperformed the S&P 500
Index. The average yield on a five-year Treasury during the month
of September was 1.8 percent, while year-over-year inflation was
2.2 percent. Investors, then, were losing money. It’s examples like
this that show why savvy investors often turn to gold, which is
seen as a safe haven and better store of value. Even so, many in
the mainstream media are dismissive of the yellow metal yet bullish
on bitcoin, which is much more volatile.
“Speaking of bitcoin, I’m thrilled and inspired that our firm
managed to finalize a strategic investment in HIVE Blockchain
Technologies this past quarter. HIVE is a blockchain infrastructure
company involved in the mining of virgin digital currencies, the
very first of its kind to be listed on a major exchange. HIVE has a
strong presence in Iceland, whose cold climate and cheap, green
energy are ideally suited for mining cryptocurrencies.”
Crowdfunding, ICOs and Millennials
“Many startups now are choosing to raise funds through initial
coin offerings (ICOs), with the number of digital coins worldwide
standing at more than 2,000,” Holmes adds. “Millennials, the
biggest U.S. generation, have largely driven demand in
cryptocurrencies, as their nontraditional attitudes about finance,
investing and banking have changed the game. Bloomberg reported
recently that online searches for “buy bitcoin” surpassed “buy
gold” for the first time this year.
“After watching the ICO market expand in recent years, I became
interested in coming out with a cryptocurrency ETF, but because of
regulatory cul-de-sacs and anti-money laundering (AML) concerns, I
realized that doing so would be exceptionally challenging and
expensive. We therefore did the next best thing and allocated some
of our own capital in a company with first-mover advantage in the
crypto-mining space. HIVE is especially attractive, as it’s
partnered with Genesis Mining, the world’s largest cloud bitcoin
mining company.
“It’s not just millennials who are showing interest, though.
Bitcoin and other cryptos are rapidly gaining favor among serious
investors of all ages. Today, many large brokerage firms, including
Fidelity and USAA, allow clients to view their holdings of digital
currencies alongside more traditional asset classes. Abigail
Johnson, chairman of Fidelity, has said, ‘Blockchain technology
isn’t just a more efficient way to settle securities, it will
fundamentally change market structures, and maybe even the
architecture of the internet itself.’
“It’s important for investors to be aware that digital
currencies are very volatile, much more so than gold or other
traditional assets. I encourage you to read the feature story on
HIVE over at Bloomberg.”
HIVE Blockchain Technologies, formerly known as Leeta Gold,
announced the commencement of trading in its common shares on the
TSX Venture Exchange under the ticker symbol “HIVE” effective
September 18, 2017. The 10 million shares held directly by the
Company are restricted for resale until February 2018 and are
subject to Canadian insider regulations. The investment, classified
as available-for-sale, was valued at approximately $11.4 million at
September 30, 2017. Unrealized gains and losses on
available-for-sale securities are excluded from earnings and
recorded in other comprehensive income as a separate component of
shareholders’ equity until realized. The Company owns approximately
30 percent of a Galileo fund, which held 6.7 million shares of HIVE
as of September 30. In addition, Frank Holmes is the non-executive
chairman of HIVE, and he held shares and options on September 30,
2017. You can read the full press release here.
Share Repurchase Program
U.S. Global Investors has continued purchasing its outstanding
stock. For the three months ended September 30, 2017, the Company
repurchased 9,199 class A shares using cash of $14,000. The share
repurchase plan may be suspended or discontinued at any time. Frank
Holmes is purchasing shares pursuant to a Rule 10b-18 plan along
with the Company repurchase program.
Continued Strong Balance Sheet
As of September 30, 2017, the Company had net working capital of
approximately $13.1 million. Cash and cash equivalents totaled $3
million, while unrestricted marketable securities totaled $11.1
million as of the end of the quarter. In addition, the Company has
had no long-term debt since 2004 and owns its headquarters
building.
U.S. Global Continues GROW Dividends
The Company has also continued to pay monthly dividends for more
than nine years. A monthly dividend of $0.0025 per share is
authorized through December 2017. Future record dates are November
13 and December 12, and future payment dates will be November 27
and December 26. The continuation of future cash dividends will be
reviewed by the board of directors quarterly.
Earnings Webcast Information
The Company has scheduled a webcast for 7:30 a.m. Central time
on Friday, November 10, 2017, to discuss the Company’s key
financial results for the quarter. Frank Holmes will be accompanied
on the webcast by Susan McGee, president, general counsel and chief
compliance officer; and Lisa Callicotte, chief financial officer.
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 |
|
9/30/2017 |
9/30/2016 |
Operating Revenues |
$1,490 |
$1,981 |
Operating Expenses |
1,969 |
1,950 |
Operating Income
(Loss) |
(479) |
31 |
Total Other Income |
1,725 |
253 |
Income Before Income
Taxes |
1,246 |
284 |
Tax Expense |
10 |
20 |
Net Income |
1,236 |
264 |
Less: Net Income (Loss)
Attributable to Non-Controlling Interest |
(34) |
1 |
Net Income Attributable
to U.S. Global Investors, Inc. |
$1,270 |
$263 |
Earnings per share
(basic and diluted) |
$0.08 |
$0.02 |
Avg. common shares
outstanding (basic) |
15,182,651 |
15,240,957 |
Avg. common shares
outstanding (diluted) |
15,182,651 |
15,240,957 |
Avg. assets under
management (millions) |
$761.60 |
945.6 |
####
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 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 statutory and summary prospectus by visiting
www.usglobaletfs.com. Read it carefully before investing.
Investing involves risk, including the possible loss of
principal. Shares of any ETF are bought and sold at market price
(not NAV), may trade at a discount or premium to NAV and are not
individually redeemed from the fund. Brokerage commissions will
reduce returns. Because JETS, GOAU and GOGO concentrate their
investments in specific industries, they may be subject to greater
risks and fluctuations than a portfolio representing a broader
range of industries. Airline Companies may be adversely affected by
a downturn in economic conditions that can result in decreased
demand for air travel and may also be significantly affected by
changes in fuel prices, labor relations and insurance costs. JETS,
GOAU and GOGO are non-diversified, meaning they may concentrate
more of their assets in a smaller number of issuers than a
diversified fund. The funds invest in foreign securities which
involve greater volatility and political, economic and currency
risks and differences in accounting methods. These risks are
greater for investments in emerging markets. The funds may invest
in the securities of smaller-capitalization companies, which may be
more volatile than funds that invest in larger, more established
companies. The performance of the funds may diverge from that of
the index. Because JETS, GOAU and GOGO may employ a representative
sampling strategy and may also invest in securities that are not
included in the index, they may experience tracking error to a
greater extent than funds that seek to replicate an index. The
funds are not actively managed and may be affected by a general
decline in market segments related to their indexes.
JETS and GOAU distributed by Quasar Distributors, LLC. U.S.
Global Investors is the investment adviser to JETS, GOAU and
GOGO.
Frank Holmes has been appointed non-executive chairman of the
Board of Directors of HIVE Blockchain Technologies. Both Mr. Holmes
and U.S. Global Investors own shares of HIVE, directly and
indirectly.
The Company accounts for its investments in the Galileo fund
under the equity method of accounting. Under the equity method, the
investment is initially recorded at cost, then the Company’s
proportional share of the fund’s net income or loss, which
primarily consists of realized and unrealized gains and losses on
investments offset by fund expenses, is recognized in the Company’s
earnings with a corresponding increase or decrease to the carrying
value of the investment. Distributions received from the investee
reduce the Company’s carrying value of the investment.
Attachments:
A photo accompanying this announcement is available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/5c38e726-c03d-4111-b2a3-3cbdaff37659
Holly Schoenfeldt
U.S. Global Investors, Inc.
210.308.1268
hschoenfeldt@usfunds.com
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