Q1 2022 US Global Investors Inc Earnings Call
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So Jason to update them in the future.
On slide five I want to briefly hand, it over to Frank Holmes to touch on the importance of understanding what we like to call. The DNA of volatility before we guide include today's results Frank.
Thank you Mollie and thank you everyone for.
Participating and listening to this presentation of the most important is for your patience.
As we've jewelry journey through this past year.
But before getting to some of the details of our financial details in product developments and new products et cetera.
I really would like to remind investors because lots of legal words really don't explain the DNA of volatility. It's the math and the math is what attracts people of your traders and ecosystem or frightened you. If you're a retired investor. So what's important here is to recognize the S&P 500 daily volatility is 1% that means APA.
Proximately, 70% of the time, it's a non event they go up or down 1% and interesting enough gold bullion is sustained on a one day basis over 10 days gold is slightly more volatile.
But then when we take a look at the Dow Jones asset managers, you can see that on a one day, they're very similar to both bullion and the S&P 500, However, the Dow Jones U S asset managers index over 10 days becomes more volatile.
Old stocks are twice as volatile as the S&P 500.
They are also more than two times over 10 days.
The airlines are even greater and that's just important to recognize because it's our biggest etfs and biggest source of stars up a pool of capital, but the we're looking at the New York Stock Exchange Arca airline index is a non event to go up or down 3% in the day and over 10 days, 8%.
Especially with all the.
Pandemic news and almost spud, we'd like to call a niche out there.
<unk> sentiment moves and swings and then there's the price of oil.
On the price of oil is the biggest line item for the airlines industry. So the volatility of oil does show up in the volatility of oil is much greater the goal for the stock market and it ends up showing up through the airlines themselves, but in Signup Tesla is a daily 3% and Tesla used to.
<unk> something more like 5% dailies, whatever but since becoming part of the S&P 500 on a daily basis.
This is roughly is volatility has dropped dramatically, but over a 10 day period, you can see Tesla as volatility does explain expand greatly and bitcoin itself is also volatile.
The fact that we have investments in airlines and gold.
Also in the Hive blockchain technology, which is a proxy for bitcoin mining any cereal.
Our volatility is also increased even though our overall fund assets for the past 12 months have remained quite stable.
Overall, we seem to move around with the direction, if it's strong with gold or strong with bitcoin and Ethereum would I hope in this presentation is the highlights just took hard core.
The strength of our operating cash flow from a particular, our etfs and the other funds, which have remained quite stable.
The next presentations basically highlights of who we are mess you can see where wed like to characterize ourselves as an innovative investment manager.
We're registered investment advisor that was created out of the U S Air Force.
And as an investment club and eventually grow so big that it doesn't become a.
In asset management company and then it went public.
And in 31 years ago, I purchased control of U S global investors.
And last year I became a dual citizen. So it's a it's great to a great year 2021.
For many reasons, but experts and investing more expertise no doubt is callable.
And gold is a global asset class and that's led us into natural resources. The airlines in merchant markets and also crypto crypto mining.
So what's driving us well, a big part with the surging assets.
In particular, the judge airline ETF.
Our God had a great run and for whatever reason.
And there seems to be mis information regarding the price of gold because last year. The average price was actually higher in 2020.
Last year was the highest average gold price and this has been very beneficial for gold producers I'll talk about that later in the presentation and I am going to speak to you as the Chief investment Officer. In addition to the CEO of U S. Global investors in this presentation and deal with a lot of the products and the partners.
And then I'll talk about the airline recovery and then high block change there's no doubt high was created so much.
Volatility.
And for different reasons.
Even though it's been a huge wonderful investment for us as a company.
It's created its own sort of greater.
Volatility, but financially it's been a very beneficial access to.
When we take a look at our balance sheet and income statement.
I really wanted to know the next visuals as Frank all those investors in particular words findings have been very loyal long term investors in and parent capital management.
And.
Bill NASCAR visit Heartland funds.
Theres just been great to small cap specialists and we do show up in Vanguard's.
The indexes and Blackrock.
But I really want to thank these investors and other hedge funds that have taken us 2% to 3% weighting.
In our company as our value proposition.
I have been in contact with the contact with several other sort of family offices that are expressing interest in particular in us in an interesting enough not so much because of our crypto expertise, but because of our gold expertise, which I find always interesting and here I am with my hope or goal.
Shirt on in it and I share with all of you. If I just ranked gold on that and I go to a spurs game.
No one ever notices it but the fact that I have a photo I have all these millennials want to give me a high five may identify with hold on for Dear life ignore the short term volatility by for the long term, but that hurdle acronym is freely K motive for bitcoin.
The coin investors are holding on for long term, so I think at Bora from.
The bitcoin crypto ecosystem and I find it most pace, our how the millennial investor who has been very significant in additional jets exposure growth during COVID-19 , but the fact that the millennials came into the capital markets and ignite a price discovery, which then brought in.
Many other institutional investors.
Grow dividends increased by 150% in 2021.
We did a as you know for many reasons our Prudential.
Strength improved dramatically by crystallizing, again, and hive and reinvesting in a unique convertible debenture.
And it gave us lots of public.
But I guess cash flow ability to be able to maintain that and our dividend yield is much higher than what banks are offering on CD deposits. So we're happy about that let's talk about what we're doing and one of the big parts as the share repurchase program in motion. The board did approve the repurchase of the two seven.
$5 million of our outstanding common stock in the open market for this year. This calendar year to December 2022, and for the quarter ended September 30 of 'twenty, one the company repurchased 13640 settlements class a shares using cash of approximately 82000.
And we have to make the disclosure, we may suspend or discontinue at any time and this is something that are in our board meetings.
We're picking up you know what do we do with this this this stock purchase buyback because we do believe we're so deeply undervalued, but stay tuned we'll have other discussions are at a board level and come up with the ground sources looking at this this year.
What we do with this in these capital markets.
But here is a simple visual to show you five O five as of Chambers have been closed.
<unk> 4 billion in assets, 100% year over year increase for the September quarter.
$6 5 million of revenue, which is 101% year.
Year over year increase in net income of $2 4 million, which is a 23% year over year and I think that that's a really important number because that's basically our operations from business operations from running the Etfs not from the value of our investments in our portfolio for our best.
Current games as least as explained in previous presentations. We have two sources of earnings one comes from our investments.
The other one comes from operations.
And and so what we're really happy to share with you is that the operations at $4 billion of assets is pretty simple to calculate and it remains quite stable.
And and and so that's what's key here is we show you on this visual that the increase in cash is due to the sale of 10 million shares of hive, which we reinvested in his unique convertible debenture and so far as last year, we basically took back.
As you can see of the September 30 quarter, we took back cash.
And redeem that debenture.
The quarterly assets under management as you can see the end of September .
Slightly different.
And a lot has to do with the fears of or.
The percentage of people being vaccinated the TSA data point, that's being published out every day and the sentiment sentiments, a big factor of moving assets around and the airlines industry.
And we also saw the goal goal has not performed the interesting enough as I mentioned and also give you some more box onyx.
That we're very thrilled about going you because it's done exactly what we thought it would do and actually gold prices on average which is most important is higher not just taking the beginning of the year as a snapshot at the end of the year, but the average price realized throughout the year and this was a good visual showing you our assets for.
The 12 months and you can see the visuals very similar to our operating revenue what are we making from these assets in the next visuals are very simple way to take a look at it at 60 basis points 4 billion in assets has gone through all of 24 million of revenue. This is a simple line item.
And I think that that's important for investors, which I do know the more sophisticated.
Funds out there are looking at our assets everyday calculating this and getting an idea of what our revenue is going to look like.
And here's a simple visual will show you that I believe that there were extremely undervalued.
I do believe that the delays and the others are getting our financials out on a timely basis.
Has created some some what's the word trepidation, but I tried I assure you as investors is pretty simple accounting.
Wrote what our financials are and we're deeply undervalued when you look at a price to earnings ratio or you look at.
Return on assets our return on assets are much higher bandwidth, some tree, which is 100% Etfs invesco, which for which has a Q2 Q E T M.
So I think that the.
You know this.
More upside than there is downside in high just as a.
Financial companies. The other thing is interesting enough, but not in this presentation, but small cap stocks.
As a whole have been really challenged this past year in the.
Valuations that they've compressed along with the big Tech stocks and we've seen this also in our major investment in I blockchain.
That these companies trade at a very low multiples relative to say hi to Nvidia are high to Tesla.
It's interesting to see this bifurcation in the capital markets and that's what creates the opportunities are that things will always mean revert as long as you continue to show that you can maintain and grow revenue and have higher returns on that cash flow return on invested capital model.
But I'm going to jump towards the airline investor ecosystem and this is very important because it relates to all of our products are released to grow.
There are millennials of their order they attracted to our sentiment indicators are very important to them. They were hedge funds. They go short one stock is overvalued and law and another one is undervalued lenders the value of the GARP investors growth at a reasonable price.
We also find in the airlines as oil traders are we have found in the hive world of crypto that there are hedge funds that go short long a bitcoin futures market ETF and then go along some of the inverse of this of trading the <unk>.
Mining stocks.
As I said Theres GARP investors and there's a day trader whats important is that the day trader is.
And in the small investors horrible price discovery and to really have a robust ecosystem being the ocean or in the capital markets you need all of these as players in the capital markets and that's what creates a undervalued situations.
And it creates the floor of additional capital. So our airline ETF continues to be trading a trading vehicle, we've seen record trading volume dimmed.
Demand has remained strong projects, even with all the new variance of the coronavirus on December six 2021, the funds saw a new daily record trading volumes with more than 33 million shares over $700 million traded that day that was epic.
For us and not only that and what we've done with jets is to expand its footprint.
<unk> is listed.
In London on the London stock exchange, which gives the expansion to the global markets into Europe is listed on the Mexican stock exchange and in Peru.
We've come out with videos for education that are in other languages. In addition to English there in Latin Spanish for the lack of community.
It's been an important part of our overall branding.
To be unique with this surplus idea of taking gestures that go to way to place.
The airline industry's optimism is continuing on travel recovery. Despite the army Crone fears continued vaccine rollouts business travel was resuming the T. S. Named numbers are trending up until just recently with all of these dysfunctional information that's coming out from different government aid.
<unk> all over the world.
I'm happy that I'm in Texas are the kids are in school, but in Chicago, but they've all come down aggressive unions', New York's new mayor he pushes up the schools the kids need to be in school bus.
This affects business travel because what happens with the kids are not in school there at home business.
Business travel guests.
Harmed because of one parent cannot any bolt parents at home for working.
So it's really interesting to watch how this is unfolding. This next visual is really important for you to recognize the delta surge, we saw a lot of people going to the hospital where.
We're the only CRO and Serge there's not been that many people going to the hospital.
And it's a much more contagious, but it's more like a three day blue and unless you have other challenges euro diabetic you have heart elements you've had cancer treatments.
These other collateral health challenges really allow.
The army CRO and surge that have a greater impact the biggest thing that my doctors have told me and I deal with a lot of doctors is make sure you're taking that low that the baby ashburn.
<unk> is the biggest thing to make sure no matter what.
And I think it's important for everyone to make sure they talk to their Doctor what do you do with this stuff and there's more people being back to that I mean, not vaccinated, but there's more and more people being tested. So this shows up in the data points and this is a propensity and are biased by the media to omit some of these other.
Telling facts. This impacts are the sentiment of the airlines, but what's really important is this next visual is 2020 was just devastating that the world loss of 137 billion. It was estimated and then in 'twenty 'twenty. One is 51 billion S estimate of 20 to 22.
Unless we get our numbers up quickly by March April that the industry could lose close to 12 billion I believe that.
The U S is going to show great leadership.
And in getting people back in and traveling.
And I think that that's going to be important for global travel just like how fast the U S stopped people flying in from South Africa that Mcdonald's that its not as devastating when they open up.
The entry points. So I, just hope that it maintains and and I think that either we get it.
<unk> back to where it was pre COVID-19 , we're talking about the low thirties, and our stock price, we're talking about a multibillion dollar product and being listed globally are I think that it has lots of upside potential as a asset class for U S Global.
And what you're also seeing here.
The COVID-19 effects, another visual AR and.
And I've tried to highlight because it's important for you to have all the airlines industry because it is our largest product right now.
And these are the data points to show us.
The impact it has on travel, but a lot of its short term and if you studied history and you look at the Spanish flu.
There were basically five ways for major each peak was lower.
And it just takes four years, but the media is going to hold onto every negative narrative and and I think we have to have a strong leadership and government officials are trying to show what are the best way to manage this clearly those that get vaccinated had have and are very very healthy have the lowest.
Incidents of showing up at the hospital and that's what's important but whats also important and what we've seen is the location of airports where are the most prominent airports and you can see that our China picked up in 2020 from 2019, a lot if it was for business.
Cargo shipping cargo and the busiest airport in America became Anchorage.
Now in 2021 this rotation of what are the busiest airports. This data point will come out this quarter and we'll see rotations. So just like stocks from value to growth the momentum they go into rotations pseudo airports, but chess owns the airports.
And in the airports in many emerging countries are public and many of them are listed on the New York stock exchange.
So they are interesting asset classes and they are priced more like private equity. So that's one reason why I tried to give you. This knowledgeable looking at airports and getting this knowledge because it is important part of the chest a P F.
It's sprinkled 50 basis points and we have many of them are many of them have the abilities to contract.
During Covid and then expand as the airport activity picks up and <unk> seen that and especially in Mexico.
These airports opened up dramatically so theres much more upside in airports in Asia. The golf, France is public. So we can look and monitor the air traffic flow that relates to the sentiment.
But lets jump away from.
Airlines and I think it gives me enough versus Chief investment Officer, I remain very bullish on this industry, if you're a trader. It has all the right ingredients of volatility if you're a long term GARP investors and believe that the vaccination is going to improve and by the way how fast America executed getting.
Are these vaccines out is unprecedented and it's interesting that the previous administration used information from <unk> capital.
That went out and showed this leadership and show them. How they had upon early these developments to to basically fast track through the FDA process and America does show this leadership and had it not been it could've been quite devastating the amount of deaths around the world and we're not getting credit for.
The leadership on vaccines has saved tens of millions of lives globally.
And I think that this is important now we're going to jump over to the world of gold.
In this process of dealing with Covid.
G seven countries in the <unk> 20, we know the G. Seven collectively have spent something like $22 million.
And that is all the ammunition there is out there for the world of gold the unprecedented money printing and the same thing with the big Bitcoin Hornets around the world.
<unk> gold like Bitcoin as a decentralized asset class and it's an important independent set of central banks asset class globally.
I want to me is most fascinating is that as the world and the G 20 finance ministers, starting year 2000 started embracing this M. M. T. Modern monetary theory of money printing to get us through every economic global crisis goal has become a unique asset class and as far <unk> perform.
The S&P 2000, since 2000, I mean shocks people, it's outperformed by over 200% and this is maybe why raise the value of the largest hedge fund manager of the World who advocates also a 10% weighting in gold has used god as part of his parity trade. So.
We believe that goal remains very relevant and we believe theres lots of fun that golar is such a bad asset class last year when when we take a look at Gold's average price <unk>.
Average price. This this past 21 years, it's been up 86% of the time, that's a heck of a batting average and is highly correlated to M. M T.
And also interesting enough is that last year was a record average price and that's why many of the gold producers that we look at a 100 global gold producers by our gold funds and in our universe, 61% had free cash flow and in fact, both stocks trade cheaper than the S&P 500.
It's incredible and.
The Corona virus or any virus doesn't live on gold or silver.
And so I find it just shocking how this all this negative then from the January one to December 31, 2021 goal was down but in fact on the average price it was higher and gold mining companies are having record profits. So I think the goal is one of those darling asset classes, but even.
With the threat of rates rising this year I don't believe it's a big risk.
Cause if they really was then than the fed funds rate would have to go to 7%, but that would be uncapped unconscionable in a in a gubernatorial accident year that would basically crushed the mortgage market, which would crush the real estate markets and cross every other industry in America. So I think we're going to live with negative interest rates.
And I think that this M. M. T is going to continue and the great undervalued asset classes gold and I think the goal is going to shine.
And shock a lot of people this year, but even during COVID-19 , we launched another product define being different being unique just like when we launch it.
We couldn't launch a crypto company ETF and no one to date as oxy been able to launch a cash investment in the bitcoin Etfs is not happened and so we're very proud that we pivoted.
Over four years ago as it creates the first crypto mining company in the World and something else. We did during the crisis as we convert our funds into luxury why because Oliver regression work in studies, we notice that luxury goods outperform.
And they come back, they're just more resilient and I remember trying to explain this as directors and trustees in and why we know luxury is because of our expertise and go where does the biggest demand driver for gold is love is jewelry.
Why do Indian women to protect their endowment and he also where their endowment basically.
And in India, where six times to non accrual. This important nox. So we became during this journey of learning about both experts on luxury goods and interesting enough since the crisis luxury goods have far outperformed the S&P 500, and what shows up in that well, it's big enough shoulders.
Tesla and Ferrari.
And you have Christian D R.
<unk> L P M H E.
You got the richest man in Europe is who's the CEO of LTE M H.
Or Mays you have Mercedes.
You can go on with a list of these companies you don't have Walmart Costco.
You don't have a Nokia you don't have Samsung telephones, but you have much more expensive.
Model is Apple Apple is a luxury goods it hits three trillion dollar market cap by Apple.
So our expensive phones much more expensive than the Android. So I think what we've tried to do is let you know that.
Our expertise of go knowing what the supply demand factors allow us to come up with luxury goods mutual funds as the only mutual fund. That's there has done exactly what we thought it would do it's outperformed the S&P 500, and we're very proud of that.
Well with that you know, what's the new product and I and I sort of kick myself and it took us so busy with the building of high as it also major investment for US is missed there that opportunity, creating an ETF and for blockchain companies or other people have but I did notice with the movement of equipment and I.
Did notice about jets ETF.
The cargo is going to continue to be in a secular bull market and there's many reasons for that so we launched <unk>.
See FCA that used to be a an ETF that had over $130 million of close right at the very bottom when the.
Cargo shipping world had changed and.
And I believe this cargo shipping Ah and I believe shipping also coal or iron ore or liquid natural gas.
Airlines are all going to see it.
Tremendous pricing power, it's not just short term, it's going to be with us for a while.
We expect this to go live.
And the next couple of weeks and we've done a lot of homework on this and it fits into our whole thesis of understandings global resources Global travel.
And so with that we're very thrilled about it now I want to end with hive.
Results from the shareholder meeting and corporate update.
All of the director nominees.
Duly elected or reelected and highest board of directors are everything has come through.
Auditors come through.
<unk> option everything we ask for them, they're very thrilled. We also had record profits are the ended the quarter of September high made $50 million with 20 employees.
And we are in a great growth.
Footprint out for this year. So we're very thrilled about that and we strategically our long hive and we're thrilled about that investment now.
Now I want to turn it over to Lisa Callicott truly our champion hardworking CFO .
Thank you Frank good morning, I'll start with <unk>.
Our financial highlights we had another strong quarter.
Our quarterly average assets under management and operating revenues increased approximately 100% same quarter last year.
Yeah.
Excuse me.
Quarterly income increased approximately 446000 versus our first quarter for fiscal year, 2021 to $2 4 million or approximately 23%.
Now I'll review more details of the results of our operations in the quarter ending September 32021, beginning.
Beginning on slide 35 of our Colgate total operating revenues of $6 5 million for the quarter, which is an increase of $3 3 million or 100% from the $3 2 million in the same quarter last year the.
The increase was primarily gains and an increase in average assets under management related to our smart beta Etfs assay.
As you can he operating expenses only increased 38%, mainly due to higher ETF and expenses and higher bonuses related to company performance on slide 36, we see our operating income for the quarter September $32021 9 million compared to 900 anybody 7000 for the same quarter last year.
Other income for the quarter was 97000, a decrease of about 1 million mainly related to unrealized investment losses in the current quarter versus the unrealized gains on investments by the quarter ending September 30 at 2021.
As expected tax expense increase.
Net income after taxes for the quarter was $2 4 million or <unk> 16 per share, which is an increase of 446000 compared to net income of $1 9 million or 13.
<unk> for the same quarter in fiscal year 2021.
Moving on to page 38, we think we have a strong balance sheet includes high levels of cash and investments.
On slide 39 notes our liabilities decrease from June 30 of 2021 by approximately $2 million.
And on Slide 41, you can see in our stockholders equity income.
Company has a networking capital of $26 79.
At least at 151 million or 24%.
In 2021.
You have a current ratio of seven five to one.
With that I'll turn it over to Holly.
Yeah.
Thank you Lisa.
As you can see beginning on slide 41.
A majority of our mutual fund assets are in emerging markets and natural resources.
29% are in domestic equities and fixed income and as for distribution more than three quarters of assets come from retail investors with 17% coming from institutional investors.
Moving on to slide 42.
This shows a quick synopsis and some of our most popular content during the year 2021.
Based on our own data analytics readers at the Investor Alert newsletter and the Frank talk blog continued to be interested in stories on gold and precious metals natural resources and emerging markets, but there was also interest in macro economic topics primarily inflation.
With crypto currency.
We actually did a recent wrap up all of these top story for the year, where you can find them and you can find that on our website <unk> dot com.
Moving on to the next slide.
You will see two of the popular industry magazines that Frank Holmes with featured on in 2020 one as the cover story.
We all asset advisory and Decadent Global magazine.
Our available online as well as in Crane and I do encourage you to check them out if you haven't already done so they do a wonderful profile of Frank's experience in the market as well as its impact on the crypto industry.
Moving on to the next slide.
I'm happy to share that our marketing team added another Star award to its lineup from the investment management Education Alliance.
Yeah, we were recognized for our Youtube videos.
All of our video content is pretty right ear in house from the topic ideas to the script to the Voip celebrate the animation and production and lastly to the marketing of the <unk>.
I'm very proud of our team for that and by subscribing to our Youtube channel you will get notifications. Each time, we have a new video app.
On the next slide.
Don't forget that we share a majority of our educational content and get like the videos dimension.
We hear announcements about our upcoming events, where frank might be a speaker at as well as our press releases across all of our social media platform and be sure to check those out when you get a chance.
If you aren't already doing so.
And then moving on to the final slide today.
As we wrap up our presentation I do want to invite anyone wishing to submit a question. Additional question do you have to fill that you had on dot com I also want to hand, it back over to Frank on briefly for any closing comments today Frank.
Thank you Holly and yes.
Congrats on the great marketing.
Recognition I'd also point out that.
The retail institutional and it relates to our mutual funds.
I think the Etfs of Jets, and <unk> has a higher institutional.
Family office and boutique hedge funds as an overall composition. So I don't know almost create a third tier of that when you look at the overall assets. We've given on previous presentations showing you the significance of robinhood retail like 90, net price discovery, but that attracted much.
<unk>.
Fund flows and we notice.
Don't have creates we get the sheer size of them.
Some days.
We can get 50 creates in a day to 100 creates in jets.
So what we see in and when Theres, a redemption, there actually and trickling out.
Which is really fast thing for us so we feel that it's much more of an institutional.
Waiting, but thank you so much Lisa and thank you Holly and everyone else up or listening to our presentation and participating.
And thank you for being loyal shareholders.
Thanks, Frank and thank you everyone for your participation today.
Today's webcast.