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 $3.2 million ($0.21 per share) for the
quarter ended December 31, 2018, compared to earnings of $749,000
($0.05 per share) a year earlier. As was the case in the September
quarter, the loss is primarily due to unrealized investment losses
related to decreases in valuation of corporate investments.
“Shares of GROW, which have traditionally been correlated with
the price of gold, took on additional short-term volatility with
our investment in HIVE Blockchain Technologies in September 2017,”
explains Frank Holmes, Company CEO and chief investment officer.
“Because HIVE mines bitcoin, some investors trade GROW as a proxy
for the digital currency, whose price has been and is expected to
remain volatile.”
For the three months ended December 31, the Company saw an
investment loss of $3.4 million, compared to investment income of
$243,000 in the same quarter the previous year. As of July 1, 2018,
the Company adopted a new accounting pronouncement that 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 can result in investment income and losses being more
volatile quarter-to-quarter.
The Company had a net loss of $48,000 from equity method
investments for the December quarter, compared to $1.2 million
income for the same three months in 2017. The underlying
investments in the equity method investments are concentrated in
cryptocurrency mining stocks, which are expected to continue to be
volatile. There is potential for continued significant volatility
in the valuation of the equity method investment currently
held.
Total operating revenues for the December quarter decreased
$194,000, or 9.7 percent, compared to the same period a year
earlier. This decrease was primarily attributable to lower advisory
and administrative services fees, as investors continue to rotate
out of actively managed mutual funds in favor of passively managed
index funds such as exchange-traded funds (ETFs). The decrease in
revenue due to the decrease in assets under management (AUM) was
somewhat offset by an increase in performance fees received by
Galileo Global Equity Advisors Inc. (Galileo). The Company
has a 65% percent interest in Galileo. The receipt of
performance fees in the future is uncertain as fees are dependent
upon many factors, including market conditions.
Investor Appetite Is Changing, But Active Management
Still Has Value
“In December 2018, outflows from actively managed U.S.-based
funds totaled $142.7 billion, the highest amount on record for a
single month, while passive funds saw inflows of $59.7 billion,
according to Morningstar data,” explains Holmes. “For all of 2018,
investors pulled as much as $300.7 billion out of active funds and
allocated more than $457.7 billion toward passive funds. For better
or worse, investor appetite is changing, and this is affecting not
just our company but the entire mutual fund industry.
“Among the fund categories that saw the best inflows in
December, according to Morningstar, were U.S.-based ultrashort and
short-term bond funds, as investors sought a safe haven during the
worst monthly stock selloff since the Great Recession,” Holmes
continues. “Our own two bond funds, the Near-Term Tax Free Fund
(NEARX) and U.S. Government Securities Ultra-Short Bond Fund
(UGSDX), delivered positive returns for the December quarter as
well as the year 2018, helping shareholders stanch some of the
losses they might have seen in their equity positions.
“Having said that, I’m proud to say that our two domestic equity
funds, the All American Equity Fund (GBTFX) and Holmes Macro Trends
Fund (MEGAX), performed better than their benchmarks, the S&P
500 Index and S&P Composite 1500 Index, for the one-month and
three-month periods ended December 31, 2018. I believe this shows
that our style of active management and ability to navigate even
the choppiest of markets brings great value to our investors and
shareholders.”
Adequate Liquidity and Capital Resources
As of December 31, the Company had net working capital of
approximately $15.0 million and a current ratio of 10.2 to 1. With
approximately $6.1 million in cash and cash equivalents, and
approximately $11.6 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 six months ended December 31, 2018, the
Company repurchased 11,000 and 12,000 class A shares using cash of
$13,000 and $15,000, 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 was paid during fiscal year 2018 and for July 2018 through
December 2018 and is authorized through March 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 Thursday, February 14, 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 |
|
12/31/2018 |
|
12/31/2017 |
Operating Revenues |
$1,799 |
|
$1,993 |
Operating Expenses |
2,121 |
|
2,142 |
Operating Loss |
(322) |
|
(149) |
|
|
|
|
Total Other Income
(Loss) |
(3,426) |
|
1,475 |
Income (Loss) Before
Income Taxes |
(3,748) |
|
1,326 |
|
|
|
|
Income Tax Expense
(Benefit) |
(733) |
|
442 |
Net Income (Loss) |
(3,015) |
|
884 |
Less: Net Income
Attributable to Non-Controlling Interest |
196 |
|
135 |
Net Income (Loss)
Attributable to U.S. Global Investors, Inc. |
$(3,211) |
|
$749 |
Earnings (Loss) per
share (basic and diluted) |
$(0.21) |
|
$0.05 |
|
|
|
|
Avg. common shares
outstanding (basic) |
15,145,702 |
|
15,160,589 |
Avg. common shares
outstanding (diluted) |
15,145,702 |
|
15,160,589 |
|
|
|
|
Avg. assets under
management (millions) |
$558 |
|
$759 |
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.
Bond funds are subject to interest-rate risk; their value
declines as interest rates rise. Though the Near-Term Tax Free Fund
seeks minimal fluctuations in share price, it is subject to the
risk that the credit quality of a portfolio holding could decline,
as well as risk related to changes in the economic conditions of a
state, region or issuer. These risks could cause the fund’s share
price to decline. Tax-exempt income is federal income tax free. A
portion of this income may be subject to state and local taxes and
at times the alternative minimum tax. The Near-Term Tax Free Fund
may invest up to 20% of its assets in securities that pay taxable
interest. Income or fund distributions attributable to capital
gains are usually subject to both state and federal income taxes.
Stock markets can be volatile and share prices can fluctuate in
response to sector-related and other risks as described in the fund
prospectus.
The S&P 500 Stock Index is a widely recognized
capitalization-weighted index of 500 common stock prices in U.S.
companies. The S&P 1500 Composite is a broad-based
capitalization-weighted index of 1500 U.S. companies and is
comprised of the S&P 400, S&P 500, and the S&P
600. The index was developed with a base value of 100 as of
December 30, 1994.
Contact:Holly SchoenfeldtMarketing & Public
Relations Manager
210.308.1268hschoenfeldt@usfunds.com
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