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 is
pleased to report financial results for the quarter ended December
31, 2020.
During the second fiscal quarter of 2021, the Company saw a
second straight period of strong revenue growth due mainly to
increased inflows into the U.S. Global Jets ETF (JETS). The
Company also realized gains on the sale of its 10 million common
shares of HIVE Blockchain Technologies (“HIVE”). A majority of the
proceeds were redeployed back into HIVE in the form of convertible
securities. Please see the section on HIVE below for further
details.
Other top-line highlights from the quarter:
Total operating revenues increased approximately 60%
quarter-over-quarter (QoQ) and 480% year-over-year (YoY).
Net income of $16.7 million, or $1.10 per share, an
increase of $14.7 million QoQ and $17.7 million YoY.
Investment income of $20.7 million, compared to
investment loss of $451,000 for the three months ended December 31,
2019, a positive change of approximately $21.2 million.
Net cash increase of $19.0 million, compared to a net
increase of $662,000 during the previous quarter and a net increase
of $376,000 during the quarter ended December 31, 2019.
A surge in assets under management (AUM) QoQ and YoY.
Average AUM was $2.9 billion, up 45% QoQ and 450% YoY.
Total AUM, including mutual funds and ETFs, was $3.5
billion, compared to $560.5 million as of December 31, 2019, an
increase of about $3.0 billion, or 530%.
Total JETS AUM ended the quarter at $2.9 billion, up 77%
QoQ and more than 5,500% YoY.
U.S. Global Investors Buys HIVE Convertible
Securities
In January 2021, the Company purchased HIVE convertible
securities for $15.0 million. The convertible securities are
composed of 8.0% interest-bearing unsecured convertible debentures
with a principal amount of $15.0 million, maturing in five years,
and 5 million common share purchase warrants in the capital of
HIVE. The principal amount of each debenture is convertible into
common shares in the capital of HIVE at a conversion rate of $2.34.
Each whole warrant, expiring in 36 months, entitles the Company to
acquire one common share at a price of C$3.00.
HIVE is a company that is headquartered in Canada with
cryptocurrency mining facilities in Iceland, Sweden and Canada. It
is traded in Canada, the U.S. and Germany.
“By repositioning our investment in HIVE, we seek to continue
participating in the crypto-mining ecosystem while lowering much of
the volatility of our investment portfolio,” comments Frank Holmes,
the Company’s CEO and Chief Investment Officer. “The Financial
Accounting Standards Board (FASB) pronouncement, implemented more
than two years ago, changed the way companies record unrealized
gains and losses of certain corporate investments; in effect, our
equity position in HIVE often swung our net income dramatically
quarter-to-quarter. Obviously, debt securities such as convertible
debentures come with their own risks, but historically they’ve been
less volatile than stocks.
“It’s important for investors and traders to manage their
expectations, as every asset class has its own DNA of volatility.
Bitcoin and Ethereum are extremely volatile, which is reflected in
HIVE’s stock price since it mines both coins. Bitcoin’s daily
volatility, as measured by standard deviation, was ±4% for the
12-month period as of December 31, 2020, compared to only ±1% for
the S&P 500 Index.
“I’m very pleased with HIVE’s trading volume. In 2020, HIVE
traded more than 1.7 billion shares in Canada alone, making it the
year’s most liquid stock on the TSX Venture Exchange (TSX.V) and
Canadian Alternative Trading Systems (ATS). And in the U.S., HIVE
ranked number four for liquidity on the 2021 OTCQX Best 50, a
ranking of top performing companies on the OTCQX Best Market based
on 2020 total return and average daily dollar volume growth.”
Mr. Holmes serves on the board as non-executive chairman of HIVE
and held shares and options at December 31, 2020. Effective August
31, 2018, Mr. Holmes was named Interim Executive Chairman of HIVE
while a search for a new CEO is undertaken.
JETS Continues to See Healthy Inflows as Investors Bet on the
Vaccine
Inflows into the U.S. Global Jets ETF (JETS) kept pace during
the quarter ended December 31, 2020, as it appears investors bet
that vaccine distributions would help commercial air travel demand
recover to pre-pandemic levels sooner rather than later.
JETS, a smart-beta 2.0 ETF that invests in global carriers as
well as aircraft manufacturers and airport services companies,
attracted more than $701 million in net inflows, bringing its total
AUM to just under $3.0 billion. Trading volume during the quarter
totaled 366 million shares, a remarkable 52,000% increase from the
quarter ended December 31, 2019.
“There’s no doubt that 2020 was a challenging 12 months for the
airline industry, but there’s reason to be optimistic as we enter
2021,” Mr. Holmes says. “For the second time in 2020, Congress came
to the industry’s aid in December, providing carriers with $15
billion in payroll relief. In addition, the COVID-19 vaccines are
currently in the process of being distributed, which may prompt
more people to fly commercially. The Asia-Pacific region has
already seen a bounce-back in travel demand, thanks to effective
containment of the virus and an emphasis on domestic routes.
Domestic travel in China, for instance, has almost fully recovered
to pre-pandemic levels. Australia’s domestic airlines industry has
also recovered as the nation largely kept the spread in check and
never faced a big outbreak.”
The Company receives a unitary management fee of 0.60% of
average net assets in JETS and the Company’s other ETF, the U.S.
Global GO GOLD and Precious Metal Miners ETF (GOAU), and it has
agreed to bear all expenses of the ETFs. The management fee is the
same as the ETFs’ gross expense ratio.
Base management fees, which make up part of the company’s
advisory fees, increased $3.6 million compared to the same quarter
prior year, due mainly to an increase in JETS’ average AUM.
Precious Metal and Natural Resources Equities Mutual Funds
Outperformed for the Quarter and Year
“Thanks to active management and our years’ worth of expertise
investing in gold, commodities and raw materials, our three
precious metal and natural recourses equities funds significantly
outperformed their benchmarks during the quarter ended December 31,
2020, as well as for the calendar year,” says Mr. Holmes.
The Global Resources Fund (PSPSX) had a total return of
32.07% in the fourth quarter of 2020, outperforming its benchmark,
the S&P Global Natural Resources Index, which returned 21.74%.
For the year, PSPFX ended up 36.94%, significantly beating the
benchmark, which slipped 0.05%. This put the fund in the top 10
percentile rank of funds in the Natural Resources category for the
one-year period ended December 31, 2020, out of 102 funds,
according to Morningstar data, based on total returns.
See complete fund performance here.
Past performance does not guarantee future results. Current
performance may be higher or lower than the performance data
quoted. The principal value and investment return of an investment
will fluctuate so that your shares, when redeemed, may be worth
more or less than their original cost.
The Company’s two precious metal equities funds, the Gold and
Precious Metals Fund (USERX) and World Precious Minerals
Fund (UNWPX), likewise outperformed.
USERX, which invests primarily in senior producers, had a total
return of 4.34% in the fourth quarter of 2020, compared to a
negative return of 9.37% for its benchmark, the FTSE Gold Mines
Index. For the year, USERX ended up 37.06%, beating the benchmark,
which returned 24.95%.
UNWPX, which gives investors increased exposure to junior and
intermediate mining companies, finished the quarter with a total
return of 12.94%, beating its benchmark, the NYSE Arca Gold Miners
Index, which delivered a negative return of 7.42%. For the year,
UNWPX advanced 70.60%, significantly outperforming the benchmark,
up 24.09%.
The Company is pleased to announce that Ralph Aldis,
co-portfolio manager of PSPFX, USERX and UNWPX, was named a “TopGun
Investment Mind” in May 2020, in the U.S. Commodities category, by
Brendan Wood International. The firm, which conducts performance
audits throughout the capital markets worldwide, selects “optimal
leaders of thought in the industry during the past year.” As many
as 500 sell-side professional make the selections.
Adequate Liquidity and Capital Resources
As of December 31, 2020, and after including the January
investment purchase of HIVE, the Company had net working capital of
approximately $10.3 million. With approximately $6.6 million in
cash and cash equivalents, after including the investment purchase
of HIVE, and $12.5 million in securities at fair value, the Company
has adequate liquidity to meet its current 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, 2021. The repurchase program has been in place since
December 2012. For the three months ended December 31, 2020, the
Company repurchased 15,000 class A shares using cash of $60,000.
The plan may be suspended or discontinued at any time.
GROW Dividends Increased
The Company has continued to pay monthly dividends since June
2007. The Board of Directors has authorized an increase in the
monthly dividend to $0.005 per share for February and March 2021,
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 January to March 2021
is approximately $188,000.
Earnings Webcast Information
The Company has scheduled a webcast for 7:30 a.m. Central time
on Friday, February 5, 2021, 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 |
|
12/31/2020 |
12/31/2019 |
Operating Revenues |
$5,165 |
$887 |
Operating Expenses |
4,646 |
1,398 |
Operating Income (Loss) |
519 |
(511) |
|
|
|
Total Other Income (Loss) |
21,206 |
(440) |
Income (Loss) from Continuing Operations Before Income
Taxes |
21,725 |
(951) |
|
|
|
Income Tax Expense (Benefit) |
5,064 |
(25) |
Net Income (Loss) from Continuing Operations |
16,661 |
(926) |
Loss from Discontinued Operations |
- |
(117) |
Net Income (Loss) |
16,661 |
(1,043) |
Less: Net Loss Attributable to Non-Controlling Interest |
- |
(40) |
Net Income (Loss) Attributable to U.S. Global Investors,
Inc. |
$16,661 |
$(1,003) |
|
|
|
Income (Loss) from continuing operations per share (basic and
diluted) |
$1.10 |
($0.06) |
Loss from discontinued operations per share (basic and
diluted) |
- |
- |
Net income (loss) per share (basic and diluted) |
$1.10 |
($0.06) |
|
|
|
Avg. common shares outstanding (basic) |
15,082,539 |
15,129,114 |
Avg. common shares outstanding (diluted) |
15,082,943 |
15,129,114 |
|
|
|
Avg. assets under management from continuing operations
(millions) |
$2,897.8 |
$526.5 |
####
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. U.S. Global mutual funds are
distributed by Foreside Fund Services, LLC, Distributor. U.S.
Global Investors is the investment adviser.
Total Annualized Returns as of 12/31/2020:
Fund |
One-Year |
Five-Year |
Ten-Year |
Gross
Expense Ratio |
Global Resources Fund |
36.94% |
8.78% |
-3.92% |
1.58% |
S&P Global Resources Index |
-0.05% |
10.15% |
0.04% |
n/a |
Gold and Precious Metals Fund |
37.06% |
23.92% |
-1.42% |
1.62% |
FTSE Gold Mines Index |
24.95% |
23.22% |
-3.84% |
n/a |
World Precious Minerals Fund |
70.60% |
19.11% |
-6.86% |
1.56% |
NYSE Arca Gold Miners Index |
24.09% |
22.76% |
-3.99% |
n/a |
Performance data quoted above is historical. Past performance is
no guarantee of future results. Results reflect the reinvestment of
dividends and other earnings. For a portion of periods, the fund
had expense limitations, without which returns would have been
lower. Current performance may be higher or lower than the
performance data quoted. The principal value and investment return
of an investment will fluctuate so that your shares, when redeemed,
may be worth more or less than their original cost. Performance
does not include the effect of any direct fees described in the
fund’s prospectus which, if applicable, would lower your total
returns. Performance quoted for periods of one year or less is
cumulative and not annualized. Obtain performance data current to
the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.
JETS and GOAU are distributed by Quasar Distributors, LLC. U.S.
Global Investors is the investment adviser to JETS and GOAU.
Foreside Fund Services, LLC and Quasar Distributors, LLC are
affiliated.
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 funds. Brokerage commissions will reduce returns.
Stock markets can be volatile and share prices can fluctuate in
response to sector-related and other risks as described in the fund
prospectus. Foreign and emerging market investing involves special
risks such as currency fluctuation and less public disclosure, as
well as economic and political risk. Companies in the consumer
discretionary sector are subject to risks associated with
fluctuations in the performance of domestic and international
economies, interest rate changes, increased competition and
consumer confidence. 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. The outbreak of the COVID-19 pandemic
and the resulting actions to control or slow the spread has had a
significant detrimental effect on the global and domestic
economies, financial markets and industries, including airlines.
U.S. Global Investors continues to monitor the impact of COVID-19,
but it is too early to determine the full impact this virus may
have on commercial aviation. Should this emerging macro-economic
risk continue for an extended period, there could be an adverse
material financial impact to the U.S. Global Jets ETF.
Mutual fund investing involves risk. Principal loss is possible.
Foreign and emerging market investing involves special risks such
as currency fluctuation and less public disclosure, as well as
economic and political risk. Because the Global Resources Fund
concentrates its investments in specific industries, the fund may
be subject to greater risks and fluctuations than a portfolio
representing a broader range of industries.
The S&P 500 Index is a
market-capitalization-weighted index of
the 500 largest U.S. publicly traded companies. The
S&P Global Natural Resources Index includes 90 of the
largest publicly-traded companies in natural resources and
commodities businesses that meet specific investability
requirements, offering investors diversified, liquid and investable
equity exposure across three primary commodity-related sectors:
Agribusiness, Energy, and Metals & Mining. It is not possible
to invest in an index. The FTSE Gold Mines Index Series encompasses
all gold mining companies that have a sustainable and attributable
gold production of at least 300,000 ounces a year, and that derive
75% or more of their revenue from mined gold. The NYSE Arca Gold
Miners Index is a modified market capitalization weighted index
comprised of publicly traded companies involved primarily in the
mining for gold and silver.
Morningstar Rankings represent a fund’s total-return rank
relative to all funds that have the same Morningstar Category. The
highest rank is 1 and the lowest is based on the total number of
funds ranked in the category. It is based on Morningstar total
return, which includes both income and capital gains or losses and
is not adjusted for sales charges or redemption fees. Morningstar
ranked PSPFX in the top 10%, 66% and 79% out of 109, 95, and 84
Natural Resources funds for the one-, five- and ten-year periods
ending 12/31/2020, respectively.
The OTCQX Best 50 is an annual ranking of the top
50 U.S. and international companies traded on the OTCQX
Best Market, based on an equal weighting of one-year total
return and average daily dollar volume growth. Companies in the
2021 OTCQX Best 50 were ranked based on their performance
during the 2020 calendar year. This is the tenth anniversary
election of TopGun U.S. investors, selected by over 500 sell-side
professionals who conduct business with nearly a thousand portfolio
managers across a spectrum of asset management mandates on a daily
basis. Nominations are strictly limited. An investor has to be a
brilliant investor and widely respected across the sell-side
community to acquire the designation.
Standard deviation is a measure of the dispersion of a set of
data from its mean. The more spread apart the data, the higher the
deviation. Standard deviation is also known as historical
volatility. Smart beta defines a set of investment strategies
that emphasize the use of alternative index construction rules to
traditional market capitalization-based indices. Smart
beta emphasizes capturing investment factors or market
inefficiencies in a rules-based and transparent way.
All opinions expressed and data provided are subject to change
without notice. Some of these opinions may not be appropriate to
every investor.
Holly Schoenfeldt
U.S. Global Investors, Inc.
210.308.1268
hschoenfeldt@usfunds.com
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