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 $1.6 million, or a $0.11 per share loss, for
the quarter ended March 31, 2020. That’s compared to net income of
$779,000, or $0.05 per share, for the same three-month period a
year earlier. The change is primarily due to unrealized investment
losses in the current quarter compared to unrealized investment
gains in the same quarter last year.
Operating loss from continuing operations for the quarter ended
March 31, 2020, was $979,000, compared to a loss of $672,000 for
the quarter ended March 31, 2019, an additional loss of $307,000.
Total consolidated operating revenues for the quarter ended March
31, 2020, increased $57,000, or 7 percent, compared with the
quarter ended March 31, 2019, due to higher average assets under
management (“AUM”) in the ETFs and lower performance fees paid out.
Total consolidated operating expenses for the current quarter
increased $364,000, or 24 percent, compared with the same quarter
in the prior year, primarily due to an increase in business
development costs related to the increase in ETF assets during the
current quarter.
Investment loss was $441,000 for the three months ended March
31, 2020, compared to investment income of $2.1 million for the
three months ended March 31, 2019, a negative change of
approximately $2.5 million. The negative change is primarily due to
less unrealized gains on fair valued securities, primarily in HIVE
Blockchain Technologies (“HIVE”), the Company’s primary strategy
for exposure to cryptocurrencies and blockchain. The HIVE
investment was valued at approximately $1.3 million at March 31,
2020, and had a cost of $2.4 million. There has been significant
volatility in the market price of HIVE, which has materially
impacted the investment’s value included on the balance sheet and
unrealized gain (loss) recognized in investment income
quarterly.
Total AUM of continuing operations as of period-end at March 31,
2020 were $665.1 million compared to $510.1 million at
June 30, 2019, the Company’s prior fiscal year end, an
increase of $155.0 million, or 30 percent. The increase in AUM is
due to an increase in assets in the U.S. Global Jets ETF (“JETS”)
(ticker JETS) that accelerated in the latter part of March
2020.
Economic and Financial Impact of COVID-19
During the quarter ended March 31, 2020, the rapid spread of the
global COVID-19 outbreak and actions taken in response had a
significant detrimental effect on the global and domestic economies
and financial markets. Market declines affect the Company’s AUM and
thus revenue and also the valuation of the Company’s corporate
investments. It is early to determine the long-term impact of
current circumstances on the Company’s business.
“On behalf of everyone at U.S. Global Investors, I want to
extend my deepest sympathy to all those who have been impacted by
the novel coronavirus,” says Frank Holmes, CEO and chief investment
officer. “I am especially grateful for the hundreds of thousands of
physicians, nurses and other health care workers who are on the
frontlines battling this pandemic. They are the true heroes of this
crisis.”
Record Inflows into the Company’s Airline ETF
JETS had its best quarter ever in its five-year history, with
its net assets increasing more than $250 million between the
beginning of the year and March 31, 2020. As of the end of the
first quarter, total AUM in the smart-beta ETF stood at $302
million, more than four times the amount as the same time a year
earlier. Average weekly trading volume for JETS was 3.6 million
shares during the quarter ended March 31, compared to only 164,300
shares during the same three-month period in 2019.
“We couldn’t be more thrilled with how JETS has done this past
quarter, and we’re pleased that investors see the incredible value
in airlines as an asset class,” comments Mr. Holmes. “As most
equity share prices have dropped during the impact of the
coronavirus, deep-value investors and hedge funds have sought
discounted exposure to airlines, an industry that most consider
essential in today’s interconnected world. Some 2 million
passengers flew every day in and out of U.S. airports in 2019,
according to the Federal Aviation Administration (FAA). The
industry also employed approximately 10 million U.S. workers,
either directly or indirectly. Politicians know that the airline
industry is critical in turning around the U.S. economy. That’s
why, on March 27, Congress approved and President Donald Trump
signed into law a $2.2 trillion stimulus package with $58 billion
in earmarked liquidity for coronavirus-hit domestic airlines.
“The industry has historically been affected by external events
like oil crises, terrorist attacks and currently the coronavirus,
but we believe it will be among the first to rebound once the
economy recovers following the COVID-19 crisis,” Mr. Holmes
continues. “There’s already evidence that a recovery in bookings is
underway. The Transportation Security Administration
(TSA) has reported a big jump in the number of daily
commercial air passengers. On May 8, the number of people the
agency screened in the U.S. rose to 215,444, the highest level
since March 26. That’s still 2.4 million below where we were a year
earlier, but I see the increase as an encouraging sign.”
Unprecedented Fiscal and Monetary Stimulus Has Driven Up
Demand for Gold
“I’m also pleased with how well our U.S. Global GO GOLD and
Precious Metal Miners ETF (GOAU) performed during the quarter,” Mr.
Holmes says. “GOAU’s average AUM for the quarter stood at $54.7
million, an impressive increase of 321 percent from the same
three-month period in 2019.
“Demand for the yellow metal has seen a boost this year from
unprecedented money-printing by global central banks and finance
ministers to soften the blow of the coronavirus-triggered
recession. In March, central banks in Group of Seven countries
purchased some $1.4 trillion in financial assets, which is
nearly five times the previous monthly record set in April 2009,
when the world was dealing with what was then the worst crisis
since the Great Depression. Meanwhile, world governments
have unleashed a combined $8 trillion in fiscal stimulus, with
more on the way.
“Right now the U.S. is printing money on a scale we’ve never
seen. As of mid-April, the amount of M2 money supply—which includes
cash and ‘near money’ such as savings deposits, money market
securities and mutual funds—has raced up 16 percent compared to the
same time a year ago. All of this is constructive for the
price of gold, which I believe is on a path to exceed its previous
record of $1,900 an ounce. Analysts at Bank of America now see the
precious metal touching $3,000 within the next 18 months.
“We’re keeping our eyes on first-quarter earnings for gold
mining stock in the coming days. Time will tell, but I expect to
see that many generated healthy levels of free cash flow in the
March quarter, which should help attract new GOAU investors who up
until this point may have been sitting on the sidelines,” Mr.
Holmes adds.
Update on HIVE Blockchain Technologies
As explained above, HIVE is the primary strategy for exposure to
cryptocurrencies and blockchain. It was the first publicly-listed
company involved in the mining of virgin digital coins, including
Ethereum. It now also mines Bitcoin, the biggest cryptocurrency by
market cap, after HIVE made a strategic acquisition in March of a
Bitcoin mining operation with access to 30 megawatts (MW) of green,
low-cost power. Many investors have traded HIVE as a proxy for
Ethereum, as the two assets are correlated.
U.S. Global Investors Finalizes Its Sale of Galileo Global
Equity Advisors
Effective March 2, 2020, the Company sold its 65 percent
interest in Galileo Global Equity Advisors Inc. (“Galileo”) back to
Galileo. Proceeds of approximately $746,000 were received (the
equivalent of $1.0 million Canadian on the closing date of sale),
and a realized gain of approximately $151,000 was recorded. In
addition, upon the sale of Galileo, $228,000 in foreign currency
losses were released from other comprehensive income (loss) and
recorded as realized foreign currency losses.
Through the date of sale, Galileo was consolidated with the
operations of the Company. Frank Holmes, CEO, and Lisa Callicotte,
CFO, served as directors of Galileo through March 2, 2020. After
the transaction, the Company has not and will not have continuing
involvement with the operations of Galileo, except for an equity
method investment in a fund managed by Galileo.
Adequate Liquidity and Capital Resources
As of March 31, 2020, the Company had net working capital of
approximately $8.8 million. With approximately $2.1 million in cash
and cash equivalents and $9.3 million in unrestricted securities at
fair value, the Company has adequate liquidity to meet its current
obligations.
In April 2020, the Company was approved for a loan of
approximately $442,000 under the Paycheck Protection Program
(“PPP”) under the Coronavirus Aid, Relief, and Economic Security
Act (“CARES Act”). The Company has under 25 employees and is
considered a small business. The interest rate on the loan is 1
percent fixed, and the maturity date is in April 2022. The receipt
of these funds, and the potential forgiveness of the loan, is
dependent on the Company having initially qualified for the loan
and qualifying for the forgiveness of such loan based on future
adherence to the forgiveness criteria. Except for the loan received
in April 2020, the Company has no borrowings or long-term
liabilities except for lease obligations.
Share Repurchase Program
The Company has a share repurchase program, approved by the
Board of Directors, authorizing it to annually purchase up to $2.75
million of its outstanding common shares on the open market through
December 31, 2020. For the three months ended March 31, 2020, the
Company repurchased 69,420 class A shares using cash of $68,000.
The 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. The Board of Directors has authorized a monthly dividend
of $0.0025 per share through June 2020, at which time the Board of
Directors will consider continuation of the dividend. The total
amount of cash dividends expected to be paid to class A and class C
shareholders from April to June 2020 is approximately $113,000.
Earnings Webcast Information
The Company has scheduled a webcast for 7:30 a.m. Central time
on Friday, May 15, 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 (unaudited):
(dollars in thousands, except per share data)
|
Three months
ended |
|
3/31/2020 |
3/31/2019 |
Operating Revenues |
$914 |
$857 |
Operating Expenses |
1,893 |
1,529 |
Operating Loss |
(979) |
(672) |
|
|
|
Total Other Income (Loss) |
(503) |
2,110 |
Income (Loss) from Continuing Operations Before Income
Taxes |
(1,482) |
1,438 |
|
|
|
Income Tax Expense |
75 |
546 |
Net Income (Loss) from Continuing Operations |
(1,557) |
892 |
Loss from Discontinued Operations |
(85) |
(174) |
Net Income (Loss) |
(1,642) |
718 |
Less: Net Loss Attributable to Non-Controlling Interest |
(30) |
(61) |
Net Income (Loss) Attributable to U.S. Global Investors,
Inc. |
$(1,612) |
$779 |
|
|
|
Income (Loss) from continuing operations per share (basic and
diluted) |
$(0.11) |
$0.06 |
Loss from discontinued operations per share (basic and
diluted) |
- |
$(0.01) |
Net income (loss) per share (basic and diluted) |
$(0.11) |
$0.05 |
|
|
|
Avg. common shares outstanding (basic) |
15,121,950 |
15,132,408 |
Avg. common shares outstanding (diluted) |
15,121,950 |
15,132,408 |
|
|
|
Avg. assets under management from continuing operations
(millions) |
$534.9 |
$517.3 |
####
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.
JETS and GOAU are distributed by Quasar Distributors, LLC. U.S.
Global Investors is the investment adviser to JETS and GOAU.
M2 Money Supply is a broad measure of money supply that includes
M1 in addition to all time-related deposits, savings deposits, and
non-institutional money-market funds. Free cash flow (FCF)
represents the cash a company generates after accounting for
cash outflows to support operations and maintain its capital
assets. Unlike earnings or net income, free cash
flow is a measure of profitability that excludes the non-cash
expenses of the income statement and includes spending on
equipment and assets as well as changes in working
capital from the balance sheet.
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. Frank Holmes serves on the board as
non-executive chairman of HIVE and held shares and options at March
31, 2020. Effective August 31, 2018, Mr. Holmes was named Interim
Executive Chairman of HIVE while a search for a new CEO is
undertaken.
- number-of-air-passengers-screened-052020
Holly Schoenfeldt
U.S. Global Investors
2103081268
hschoenfeldt@usfunds.com
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