U.S. Global Investors Announces Sustainably Robust Quarter

U.S. Global Investors Announces Sustainably Robust Quarter

San Antonio, TX, Jan. 11, 2022 (GLOBE NEWSWIRE) — U.S. Global Investors, Inc. (NASDAQ: GROW) (the “Company”), a registered investment advisory firm with longstanding experience in global markets and specialized sectors from gold mining to cryptocurrencies, today is pleased to report financial results for the fiscal quarter ended September 30, 2021.

For the three-month period, total operating revenues were $6.5 million, an increase of over 100% year-over-year (YoY). Net income for the quarter was $2.4 million, or $0.16 per share, an increase of 23% YoY. Average assets under management (AUM) for the three-month period ended September 30, 2021, were $4.0 billion, twice as much as the same period last year. Operating margin for the quarter was 44%, compared to 29% for the quarter ended September 30, 2020.

“I’m thrilled that U.S. Global Investors has remained a go-to fund shop for investors seeking strategic exposure to thematic sectors such as airlines, gold mining, luxury goods and crypto mining,” says Frank Holmes, CEO and Chief Investment Officer. “Later this month, we’ll be able to add shipping and cargo to that list when the U.S. Global Sea-to-Sky Cargo ETF, ticker SEA, begins trading. We’re excited to include this offering in our growing stable of innovative, quant-based exchange-traded funds, which also includes the U.S. Global Jets ETF (JETS) and U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU).” 

U.S. Global Investors Is Deeply Undervalued Relative to Peers 

Management and the Company’s Board of Directors are reviewing strategies to unlock the deep value of the stock moving into 2022. “The ETF business continues to grow exponentially. I invite shareholders to explore the simple comparison table , showing GROW relative to other investment advisors of various sizes, that are also in the ETF space. Based on relative comparisons, I believe U.S. Global looks not only deeply undervalued, but also very attractive on a variety of metrics. I look forward to explaining in greater detail during our webcast on January 12,” explains Mr. Holmes.

JETS Trading Volume Has Remained Strong Despite New Variant

JETS continued to attract assets, ending the September quarter with $3.7 billion, an increase of more than 125% compared to the same quarter end in 2020. Despite concerns of new coronavirus variants disrupting commercial air travel, JETS trading volume has been strong. On December 6, 2021, the airlines ETF saw a new daily record in volume, with more than 33 million shares traded, representing over $716 million in value.

The Company remains optimistic that a full airline industry recovery can still take place in 2022, and a new forecast by Airlines for America (A4A) appears to support this. According to its most recent report, the U.S. trade group says it believes airline revenues could fully recover to 2019 levels by the second half of 2022. This projection is based largely on monthly sales data from the seven largest U.S. carriers. By the September quarter of 2022, ticket sales could be 3% above pre-pandemic levels, A4A believes.

“In the meantime, airlines continue to offset still-recovering ticket sales, not to mention higher fuel costs, with ancillary revenues,” explains Mr. Holmes. “Such revenues include sales of services that go beyond simply transporting someone from A to B. Think frequent flyer programs, credit card applications, hotel bookings, extra legroom and the like.”

As expected, ancillary revenues dipped dramatically in 2020, but like the airlines industry as a whole, ancillary revenues appear to have ticked up in 2021, as of November. According to IdeaWorks and CarTrawler, global ancillary fees are estimated to increase to $65.8 billion in 2021, or $7.7 billion more than last year.

Although ancillary revenues are still below 2019 levels, today they represent a larger share of total airline revenues than they did two years ago. In 2021, these fees represented an estimated 14.4% of total revenues, compared to 12.2% in 2019. A decade ago, they represented only 5.4% of global sales, underscoring just how important this revenue stream has become and will continue to be.

Gold Could Be the Ultimate Contrarian Investment Right Now

Compared to JETS, attracting new fund flows into GOAU has been more challenging. Nevertheless, the Company maintains its bullish position on the gold mining industry heading into 2022, especially as inflation in economies around the world has touched multi-year highs.

“Right now, gold is extremely unloved, making it, I believe, the ultimate contrarian asset to own,” comments Mr. Holmes. “A number of gold mining stocks also look very attractive at the moment, with many of them generating remarkably higher free cash flow (FCF) yield than the industry as a whole and the S&P 500. This number tells you how well a company can meet its financial obligations, pay down its debts and potentially raise dividends. There are quite a few gold producers that had exceptionally strong cash positions relative to the broader market, and we owned a number of them in the quarter ended September 30, 2021, either in GOAU, the Gold and Precious Metals Fund (USERX) and/or the World Precious Minerals Fund (UNWPX).”

Luxury Goods Fund Continued to Outperform  

The Company continues to be pleased with the performance of the Global Luxury Goods Fund (USLUX), the only luxury-focused mutual fund in North America. For the 12-month period through September 30, USLUX beat its benchmark, the S&P Composite 1500, after fees, by more than 750 basis points, on impressive revenue generated by many of the fund’s top holdings. Those include recognizable super luxury names such as Christian Dior; Hermes; Burberry; Ferrari; and LVMH, which posted a record 28.7 billion euros ($34.0 billion USD) in revenue in the first half of 2021.

“USLUX became available in July 2020 after we changed its name and investment strategy, and since then, it’s done better than even I imagined. After plunging due to the global health crisis, the personal luxury goods market returned to pre-pandemic growth in 2021, with sales estimated to top 283 billion euros ($325 billion USD) by year-end, according to a recent report by Bain & Company. That would represent a slight increase from then-record sales of 281 billion euros ($318 billion) in 2019.”

SEA to Set Sail in January

The Company is excited to announce that, after some unexpected delays, the U.S. Global Sea-to-Sky Cargo ETF (SEA) is set to launch in January 2022. SEA will seek to provide diversified access to the global sea shipping and air freight industries. Consisting of common stocks listed on developed and emerging market exchanges across the globe, the ETF will use a smart-beta strategy to determine the most efficient sea shipping and air freight companies in the world.

“After years of boom-and-bust cycles, container shipping companies today appear to have benefited greatly from favorable pricing power,” Mr. Holmes says. “At the same time that global demand has rocketed back to pre-pandemic levels much sooner than anticipated, shipping companies have exercised capacity growth restraint, as too many vessels and routes could oversaturate the market. Consequently, shipping rates have remained elevated near record highs.”

An Exciting Quarter for HIVE Blockchain Technologies

The Company’s principal exposure to the burgeoning crypto-mining industry remains HIVE Blockchain Technologies Ltd. (“HIVE”), which mines Bitcoin and Ether in facilities in Iceland, Sweden and Canada. Investments in HIVE, including warrants and convertible debentures, were valued at $23.2 million as of September 30, 2021.

“HIVE’s September quarter was highly eventful, right on the heels of its long-awaited Nasdaq listing in June,” comments Mr. Holmes. “HIVE added three brilliant new members to our leadership team: Aydin Kilic in the role of President and Chief Operating Officer; Johanna Thornblad, Sweden Country President; and Diana Biggs, member of the HIVE Switzerland Board of Directors. In September HIVE mined its 1,000th Bitcoin, an incredibly exciting milestone. Construction at our campus in New Brunswick, Canada, is in full throttle, the expansion of which will enable HIVE to deploy an additional 20 megawatts (MW) of green and clean Bitcoin mining capacity, with an additional 20MW scheduled to come online within the first quarter of calendar 2022.”

HIVE had a record-breaking quarter for the period ended September 30, 2021. Revenue rose to $52.6 million, up 41% compared to the previous quarter, and 305% compared to the same quarter last year. Net income was $59.8 million, an increase of 342% from last quarter, and 549% since the prior year. HIVE ended the September quarter holding 1,116 Bitcoin worth $48.4 Million and 25,154 Ether worth $74.7 Million.

Adequate Liquidity and Capital Resources

As of September 30, 2021, the Company had net working capital of approximately $26.7 million, an increase of $5.1 million, or 23.5% since June 30, 2021. With approximately $19.8 million in cash and cash equivalents, an increase of $5.3 million, or 36.8%, since the previous quarter, and $7.6 million in securities recorded at fair value, excluding convertible securities and warrants, 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, 2022. The repurchase program has been in place since December 2012. For the three months ended September 30, 2021, the Company repurchased 13,647 class A shares using cash of $82,000.

GROW Dividends

The Company’s Board of Directors has authorized a monthly dividend of $0.0075 per share through March 2022, at which time it will be considered for continuation by the Board. The total amount of cash dividends expected to be paid to class A and class C shareholders from October to March 2022 is approximately $676,000. Payment of cash dividends is within the discretion of the Board and is dependent on earnings, operations, capital requirements, the Company’s general financial condition of the Company and general business conditions.

Earnings Webcast Information

The Company has scheduled a webcast for 7:30 a.m. Central time on Wednesday, January 12, 2022, 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)