U.S. Global Investors, Inc. (GROW) Earnings Call Transcript & Summary

[Audio Gap] in on Slide #2. The presenters for today's program are Frank Holmes, U.S. Global Investors CEO and Chief Investment Officer; Lisa Callicotte, Chief Financial Officer; and myself, Holly Schoenfeldt, Director of Marketing. On Slide #3, some quick disclosures. During this webcast, we may make forward-looking statements about our relative business outlook. Any forward-looking statements and all other statements made during this webcast that don't pertain to historical facts are subject to risks and uncertainties that may materially affect actual results. Please refer to our press release and corresponding Form 10-K filing for more detail on factors that could cause actual results to differ materially from any described today in forward-looking statements. Any such statements are made as of today, and U.S. Global Investors accepts no obligation to update them in the future. On the next slide, we're always grateful for the continued support of our valued shareholders. If you'd like to receive one of our signature U.S. Global Hats featured here just send your mailing address to info@usfunds.com and we'll gladly ship one out to you. All right. On the next slide, I will briefly review the company. U.S. Global Investors is an innovative investment manager with vast experience in global markets and specialized sectors. We use a quantamental strategy to create thematic smart beta 2.0 products. The company was originally founded as an investment club, becoming a registered investment adviser in 1968 and has a long-standing history of global investing and launching first-of-their-kind investment products, including the first no-load gold fund. Finally, we're experts in thematic investing. In particular, gold and precious metals, natural resources, airlines and luxury goods, all using a quantamental approach that includes both macro and micro factors. Moving on to the next slide. We often begin our presentations with this slide, which we refer to as the DNA of volatility. As a reminder, that market swings are a normal part of long-term investing. With that in mind, I will now turn it over to our CEO and CIO, Frank Holmes, to walk us through the fiscal year and share his macro outlook for the quarter. Frank?

The DNA of volatility is so important for investors to really appreciate volatility of asset classes are different and the same thing with individual stocks within a category. The S&P is the biggest benchmark. It's plus or minus 1%. Daily is a nonevent, meaning 70% of the time, that's what happens and over 10 days is 2%. Bullion is twice that number. And you can see oil has greater as greater volatility and Bitcoin on a daily basis, it's pretty well the same as oil and gold. But when we start going over 10 days, Bitcoin is more volatile because it's still emerging. The JETS ETF is plus or minus 3% because oil is the biggest line item besides all these other global issues and trade, you just get this increase in the volatility. So it tells you and it explains basically that you should be looking to buy these things when they go minus 3% in a day or more, that's usually a better buy, and over 10 days, if they're down 6%, that's even a less risk by selling the same thing on the other side. But what's interesting is the New York Stock Exchange Airline Index it is greater than JETS when it takes take a look over 10 days. But when I look at GOAU, which relates to gold, so we can see that GOAU goes up or down 3% in a day is a nonevent because gold, it tracks gold, 95% of the time, it's following gold and which is 2%. So a lot of the gold traders and price discovery are actually following Bullion, and then they'll look at for signals, they call them, that they would go and look at an ETF like GOAU. And you can see over 10 days, it's really a shocker it's plus or minus 9%. But if a big bulk of our assets are gold related and airlines related, you can see that it shows up in GROW stock, it's really simple. If we're seeing jets going up over 10 days, 6% or down 6% and gold stocks going up or down 9%, well, it shows up in GROW. So it's important to understand that relationship. And then HIVE is just to give you an idea for Bitcoin mining and AI, it's very volatile, and it trades off of what's happening within NVIDIA and because it's a micro-cap compared to NVIDIA, it has even a greater volatility. Next, please. On top, we thank the top institutional shareholders, Gator Capital and Capital Wealth Advisors. And Vanguard, I believe, is in one of their index products, but thank all those investors in our product for being invested in GROW. Next, please. I own about 20% of the company and 99% of the voting control. This is to be in compliance with SEC rules for investment adviser. So it's just -- and that's where you need to have two classes of stock. Next, please. Strategy and tactics. Our strategy is really simple. It's about winning. How do you win -- how does a product win in a category in the universe of all these ETFs and mutual funds and in the financial realm. So we believe that it's to create thematic products that are sustainable using our smart beta 2.0 strategy which requires rigorous backtesting of over thousands of hours before you launch a product. In up cycles and down cycles, you have to go more than a decade and it gives you a real confidence factor. There's no guarantee that past performance is going to give you guarantee of future results, but it does give you a way to understand up and down cycles and how a weightings and various screens used to create a thematic basket of stocks. And our mission is to make people feel financially happy and secure that their wealth is consistently growing but it's volatile, as you can see from previously, and that's what we try to educate investors and we won many awards on the education for that. Our strategy also is as a public company because we believe that we're deeply undervalued that we buy back the stock using an algorithm flattened down days. And we managed to preserve cash for future growth opportunities and market corrections. And we do make investments, and we make investments that are not directly, we have also in our funds but we do not buy something that's just for us and not the funds. We always make sure we go through a compliance if it is a good fit for the funds to be able to buy or not appropriate, then we would turn around and make certain investments. And the other part we have found in this world has changed a lot with wholesalers and the digital world is the subscriber base and followers. We're continuously doing everything to grow that base because we hold our own webcast and the followers, it's important for communicating with investors and then increase our exposure to the Bitcoin ecosystem. We have bought some like the ETFs that pay monthly dividends and give you the upside, but at the same time, waiting out these corrections that you're getting an attractive dividend. Next, please -- and we have exposure and investments very minor today in HIVE, but we still have an investment in HIVE. The marketing strategy, I think that's important to hear is what Steve Jobs said, you can't connect the dots looking forward. You can only connect them looking backwards. So you have to trust the dots will somehow connect in your future but how well you look in the back. Next, please. So I want to give you some indication on some ICI factors because we still have mutual funds and ETFs, and ETFs are growing faster. But mutual funds are really still a significant portion of the overall assets even though ETFs are growing faster, there's still a big component. And when you look at data from the Investment Company Institute, the 72 million households own mutual funds and 52% were headed by someone 35 to 64. But we find our investors are more like the upper end of 64 but where the industry for ICI comes in is that there's many corporations. And you can see that $13.7 trillion in long-term mutual fund assets held by defined contribution plans and IRAs representing about 62% of household assets. So mutual funds continue to still have assets, and a lot is going into the fund flows is going from employer-sponsored retirement plans. Next, please. But when you're marketing to them, it's very different than ETF. So let me help educate that difference. So ICI Fact Book, the ETF surpassed $13 trillion in assets. And what's really evolved here is that it's predominantly a smaller account that's doing it, unless you get tax efficiency, monthly paying specialty funds that give you a return on capital model. They've had some big growth. But I think that the majority is small as much more retail and it's also institutional. And what happens is that a lot of institutions will use that to go short or against these positions, and that's a big source of revenue to low-cost ETFs. They make additional revenue from lending out those securities. And it's -- we've seen this in JETS, in particular, that when Spirit was going bankrupt, that when there was many institutions were shorting Spirit, but they would go long JETS to do that Pairs trade, and they would borrow from it. So they were making a bet against that particular airlines. And so we have -- we made a lot of money for the shareholders in JETS from the securities lending. Next, please. RIAs, which is positive for us are rotating to real assets says AdvizorPro. The data is a war in Iran. You've seen a lot of big interest is up 265 percent basically of interest in the oil patch. And then especially, I see in the oil patch of the refineries. They're making money hand over fist. Natural resources because of China playing games on restricting the supply of rare metals and other minerals that there's a big spend now by the federal government, to improve the supply lines and natural resource as a whole are doing exceptionally well, and commodities are also doing well. So we can see the big interest. Next, please. But when it comes to ETFs, it's different factors and social media is the new classroom of financial education. I'm not a TikTok person, but it's amazing how many people are on there talking about Bitcoin or gold and government debt and then people recommending different types of allocation models. So it's pretty rich what's going on. I think the biggest is YouTube. I personally enjoy looking at YouTube. Reddit, really often controversial left to more left when it comes to the political opinions, which I always find really interesting to offset other opinions, and X does everything to be in the middle. But it's a big source for active investors are using Reddit, and so do the ChatGPT and so does Claude and Perplexity quite often they're scanning and looking for articles and information, they will go to Reddit besides Wikipedia and other platforms. So a lot of people are using these platforms for getting ideas. Next, please. So something on the journey I learned about JETS years ago, Graham Stephan is now up to 5.2 million. That means he's making about 5 million a year. He has an earlier one several years back 4 years ago that talks about the first starting and making $4,000 with YouTube getting paid for shared revenue, and basically, it's $1 million for every million subscribers. So he's a real estate guy that has gone full time in this end of the business. And Andrei in the middle here, he's always got the world coming to an end, does great geopolitical stuff, but it's a little sometimes aggressive. But it's kind of 3.3 million followers. So that's very impressive. And then Humphrey Yang, he's got 2 million subscribers. These people do influence because the market is how many followers they have. Next, please. So when it came to JETS there was big flows were into it, I was told, "don't you know who Sam Chui?" I said "no, Sam Chui, who?" He has 3.7 million subscribers. And he is not a pilot. But the other two here, Captain Joe and Mentour Pilot, they have mix of subscribers can talk about the airline industry which predominantly is a lot of young millennials that are trading these products. Next, please. No, they're not recommending ETFs, these airline people they just give you all these facts about what is the best business line, what is the best flight and other interesting topics. And amazes you is that so many people are interested in the airline industry. And I do know and remember vividly in 2020 when all the analysts on Wall Street were capitulating and get rid of all the airlines of Warren Buffett blew out in June of 2020, all of his Delta position, and now he's a player back in again. But what's interesting is that the big recommendation was coming from Reddit. And saying that every time they've had a crisis, the JETS fall 60% to 70% and a year later, they're up 130%, 120%. And that's what happened. So I think that what we witnessed here is that billions of dollars come in into that type of product and is live it's done basically the model for which you're paying only 60 basis points has outperformed the New York Stock Exchange Global Airline Index. So we end up coming up with a new product called WAR and defense spending is a macro trend ever since Putin invaded Crimea. But what's really important here, as you can see in this visual when the Berlin Wall fell, there was a lot of negotiating of streamlining and cutting back on the U.S. military into 9/11. And you can see this very vividly, then after 9/11, our spending increased dramatically. And we can see that recently under the Ukraine invasion spend picked up again. So people are deeply concerned in Europe and particularly Eastern Europe. And Trump has really -- also pushed to hold them all accountable for their 2% and now they're going to 5%. And we're doing about $2.9 trillion. So think of a big funnel of money coming, rushing down going into a sector, and there are certain industries that are going to truly be more significant, and I'm a big theory believer that it's going to be AI related, and that includes data centers is one. Next, please. So what is -- what do we do? And it's about growing the dividends and growing the cash flow. Our current stock price, the monthly yield is 2.83%. And we continue to pay this monthly. We've not increased the dividend. We've been more focused on buying back stock in the past few years. I'll give a little more color on the next slide. So the company believes the stock is deeply underbid and therefore, buys back shares when the price is flat or down using an algorithm. Next, please. And during 20 -- fiscal 2026, company repurchased 733,848 Class A shares using $2 million in cash. And just before COVID, we reduced the shares outstanding by approximately 20%. Next, please. So that gives you an idea of the volatility is a key factor here. If there's a big selloff, there's more down volatility, then our buying picks up. Next, please. What's really important, I think, for investors is what Faber came out with shareholder yield. It's a better approach to yield investing and what he does he looks at your free cash flow on your cash flow and how much stock are you buying back, how much dividends and how much debt you're paying down overall, that gives you a better return on the capital. Next, please. So shareholder yield is dividends plus buybacks plus debt reduction divided by market cap. Next, please. So U.S. Global Investors committed to return value to our shareholders when compared to the treasury yields. So you can see here that the 5 year has risen, so is the 10-year, but our overall yield because of the stock buybacks is 7.87%. Next, please. GROW over longer term, we can see has outperformed the Russell Microcap Growth Index. Next, please. So two platforms, two investor audiences. So let's compare Schwab versus Robinhood. Schwab is $11 trillion in assets, revenue is $367 billion. Accounts and customers, Charles has almost 39 million or 30.5 million active brokerage accounts whereas Robinhood is 27.5 million. But the average assets per account customer is 309,000 versus Robinhood's 13,000. So Robinhood really caters to price discovery, younger investor, but you need price discovery to bring in institutions. Charles Schwab is predominantly RIA asset allocators. Next, please. So this is a comp to give you an idea of where we fit in roughly the middle on price to EBITDA, shareholder yield, you could see these differences. Next, please. Average assets, so they were incrementally increasing, and they had a great pop last month, and now they seem to have sold off. It's very, very volatile overall. Next, please. Net income on the big bump in assets, we've done better. Next, please. One of the real key people for institutions is that a well-diversified portfolio should be 5% to 15% in gold and Bitcoin. And I think it's just important to recommend that people read his book, you can get his -- on LinkedIn, he's following all of the work he's done. And it's quite significant as an educator. Next, please. So what makes gold so attractive, well, a big part is modern monetary theory. It's basically a rising real debt as a real consequences and the future doesn't wait. It's always trying to figure out where it's going to be. And we're $350 trillion that's last year. So I think it could be even higher. Next, please. Central banks. So now we have modern monetary theories being practiced by the G20 countries. Whenever there's a problem just print more money, and we're seeing now witnessing a big push that a lot of debt funding is to arm these countries with AI. So we're in an interesting dilemma that most of these countries have huge GDP debt levels and the money now is not going so much for social welfare, it's going more for military spending. And we have a big push by China, trying to recommend America to get out of U.S. stocks and buy gold, buy something that has long-term assets. So it's interesting to see that debate. But this visual here is to show you that during COVID was the only drop in slowing down and buying gold, but then they had a big surge to 180 -- sorry, what's 1,081,as you can see. Next, please. That means tons of gold big buy. I mean it's really remarkable to see how much gold China. But if China wants to catch up with America, I think they have to buy 100% of all the mine production for the next 7 or 8 years. This is China's official gold reserves since he became dictator for life, you can see big pop. Next, please. Quantamental approach to smart beta 2.0. We use a quantamental approach, which is basically quant and fundamentals to investing, requiring a broad and deep understanding of global economic trends, policies and geopolitical events. Our smart beta 2.0 investment strategy integrates advanced analytics with data-driven decisions. And I think momentum in revenue cash flow are also important factors. Next, please. Gains seen across the thematic lineup. When Trump came out with his Freedom, it's on April 2, it's interesting because everything is sold off, I think $5 trillion around the world, and it came back and SEA has outperformed the S&P 500 by wide, wide, wide margin. And it's the best barometer that I know for the arteries and veins of the world. And so that continues to be an important product along with WAR, but WAR is much more volatile. Here are some of the companies we own. There's SEA ETF because it climbs higher spot this summer. And you could see JETS also. Next, please. This to me is one of my favorite because you can see how WAR has far outperformed the S&P Aerospace & Defense Select Industry and the S&P 500. So money being raised deficit spending, triggering people buying gold and triggering people buying anything that has to do with rebuilding NATO with AI. Next, please. Now I'm going to turn it over to Lisa Callicotte, our CFO.

Good morning. First, I'll start with the next slide, which is our financial highlights for fiscal year 2026. Our average assets under management were $1.53 billion, for the year, and our operating revenues were $10.3 million, and we had a net income of $3.1 million or $0.24 per share. This slide kind of breaks down our earnings. It shows that we have operational earnings, which is related to our advisory services, but we also have investment earnings, which includes both realized and unrealized gains and losses on our investments. Both of these combined are our total earnings, but they are also both based on market fluctuations. The next slides will give us a little bit more detail into our operations for the year ending June 30, 2026. First, we see that our operating revenues were $10.3 million for the year, and this is an increase of $1.8 million or 21% from the $8.5 million of revenue in prior year. The increase was primarily due to increases in asset under management especially in our gold and natural resource funds. Operating expenses for the quarter were $10.9 million or 5% lower than prior year. On the next slide, we see operating loss for fiscal year June 30, 2026, was $603,000 or a favorable change of $2.4 million compared to fiscal year 2025. Other income for the year ended June 30, 2026 was $4.5 million compared to $2.7 million in the prior year, an increase of approximately $1.8 million, mainly due to higher unrealized gains in investments. Net income after taxes was $3.1 million or $0.24 per share, which was a favorable change of $3.4 million compared to the loss of $334,000 or $0.03 per share in fiscal year 2025. Moving on to the balance sheet. The next couple of slides show that we have a strong balance sheet. It includes high levels of cash and the next one, you can also see more of our investments. On the following page, you see our liabilities, and these are consistent with prior year. And then the next slide, you see our stockholders' equity. We have a net book value of $45.1 million. We have net working capital of $35.7 million and a current ratio of 19.7:1. With that, I will hand it over to Holly to discuss marketing and distribution.

Thank you, Lisa. All right. On the first slide in my section, I want to quickly highlight a webcast that we recently hosted in collaboration with the team at The Wealth Advisor focused on the $1 trillion defense opportunity. Frank Holmes was joined by retired Lieutenant General, John Evans to discuss how the defense landscape extends far beyond traditional military hardware and why capital is increasingly flowing into AI, cybersecurity and autonomous systems. If you didn't get a chance to tune in, we'd be happy to send you the presentation, so shoot us an e-mail at info@usfunds.com. On the next slide, I want to highlight a brand-new podcast that U.S. Global has launched called Return on Ideas, where we will be focusing on the people, the innovations and the ideas that are shaping the world we live in. The very first episode went out just this week, and you can expect to see new episodes every other week. Be sure to check it out on the U.S. Global YouTube channel or wherever you get your podcasts. Moving on. This slide shows some of our new interactive research pieces that if you have not checked out yet, I highly recommend that you do. The first is part of a new infographic series we're launching that examines the power challenges behind AI and the other two are interactive reports that explore what's driving the price of gold as well as what's driving oil and natural gas prices and shaping the global energy landscape. You can find all of these on the Resources tab on our website. On the next slide, I want to highlight our continued investment in delivering timely original market insights across digital platforms, including YouTube and TikTok. These channels allow us to communicate directly with both current and prospective shareholders and provide greater visibility into our views on the markets and the broader investment landscape. If you haven't already, I encourage you to visit our YouTube channel and subscribe to stay informed on our latest content. All right. On the next slide, we always like to look back at the most read Frank Talk blog posts from the recent quarter. As you can see here, the top theme centered around AI, defense, the rise in oil prices, and we published one or two posts each week covering a range of market and industry topics that align with the sectors and themes we invest in. If you're already a subscriber and find the content valuable, we encourage you to share it with friends or professional contacts who may be interested in it as well. Subscription is completely free. Finally, on my last slide, I do encourage all of you to follow us on social media, on Twitter, LinkedIn, YouTube and Instagram and Facebook. So wherever you prefer to get your news, be sure to check us out. This way, you're up to date with what's going on with GROW, our funds and our broader market insights. All right. As a reminder to our audience, if you have any questions today, please e-mail those to info@usfunds.com, and we will gladly follow up with you to get anything clarified that you may need more information on. Thank you so much for tuning in today. That concludes our webcast summarizing the 2026 fiscal year.