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

On slide 2, you'll see who's presenting today: Frank Holmes, our CEO and Chief Investment Officer at U.S. Global Investors; Lisa Callicotte, Chief Financial Officer; and me, Holly Schoenfeldt, Director of Marketing. Turning to slide 3, please note that during this webcast we might make forward-looking statements regarding our business outlook. Forward-looking statements, along with any other statements made today that aren't about historical facts, carry risks and uncertainties that could materially affect actual results. For more detail on the factors that might cause actual results to differ materially from any forward-looking statements described today, please see our press release and the corresponding Form 10-Q filing. Such statements are made as of today, and U.S. Global Investors undertakes no obligation to update them later. On slide 4, a reminder: if you'd like one of our USGI hats pictured here, simply email your mailing address to info@usfunds.com and we'll send one your way. All right, let's go to the next slide, where I'll give a quick overview of the company. U.S. Global Investors is an innovative investment manager with extensive experience in global markets and specialized sectors. Our quantamental strategy is how we build thematic Smart Beta 2.0 products. Originally founded as an investment club, the company became a registered investment advisor in 1968 and has a long history of global investing and of launching first-of-their-kind investment products, including the first no-load gold fund. Last, we're experts in thematic investing, especially gold and precious metals, natural resources, airlines, and luxury goods, all through a quantamental approach incorporating both macro and micro factors. On to the next slide. This slide often opens our presentations; we call it the DNA of volatility, a reminder that market swings are a normal part of long-term investing. With that in mind, I'll hand things over to our CEO, Frank Holmes, who will walk us through the chart and share his macro analysis for the first quarter. Frank.

Thanks, Holly. I begin every presentation with a safe harbor statement, and that statement is the DNA of volatility. Each asset class carries its own volatility DNA, and when big events occur across a year, they can alter that DNA. If we look back a few years, to before COVID, the S&P 500 and gold bullion each moved about 1% daily, which means 70% of the time a 1% move up or down was a non-event. Gold now swings more than the S&P 500 does. Still, we measure everything against the S&P 500, and you'll notice oil moves twice as much day to day, and over a 10-day stretch it's more than double — close to triple — what the S&P 500 does. That affects the JETS ETF, and it affects other holdings we might have. Gold equities are much more volatile on their own, Bitcoin is considerably more volatile than physical gold, and the same goes for HIVE Digital Technologies, one of the companies in our portfolio. The company is involved in the AI sector and Tier-3 data centers, and in 2017 it became the first publicly traded firm within the crypto space; it also represents roughly two percent of worldwide Bitcoin mining capacity, powered exclusively by renewable energy. Every one of those asset categories carries its own level of volatility, and investors must understand that. Moving on, please. I'd like to express gratitude to our shareholders, particularly the leading institutional holders. Let's go to the next slide. Capital Wealth Advisors, Gator Capital Management, and Vanguard — well, Vanguard is likely one of their index funds, I think. Next slide, please. My roles are CEO and Chief Investment Officer. Most of my presentation will focus on defining my role as Chief Investment Officer, and Lisa Callicotte will then explore many of the financial metrics in detail. Coming back to the data, though, I own 21% of the company and about 99% of the voting control, which exists for reasons tied to regulatory compliance. Next slide, please. Strategy and tactics. In our view, our task is to keep a structured, disciplined investment process going—we refer to it as Smart Beta 2.0—and essentially it creates thematic products that can be sustained through this strategy; before we launch any one of them, the approach requires rigorous back testing lasting thousands of hours. Our goal is helping people achieve financial happiness and confidence that their wealth continues to expand through disciplined thematic investing. Gold has long been one of our core holdings, at 10%–15%. The biggest hedge funds globally allocate between 10% and 25%, including Ray Dalio's fund in gold. Our emphasis is on gold stocks, and we also think other elements are important when pursuing new technology—like our early involvement in the Bitcoin ecosystem, since that data center expertise then guided us toward AI for rebuilding NATO. Next, please. Marketing strategy. This also ties into how we approach investment strategy, and the main thing I'd highlight is that looking forward won't let you connect the dots. Only in hindsight can you link them together, which means you must have faith that those dots will somehow join up in your future — that's the famous Steve Jobs line. I think it sums up the sort of journey we're on whenever we develop new products and examine the world: how effectively can we link the dots when looking back? Next, please. GROW dividends — the company has paid out dividends every month since June of 2007. The present yield stands at approximately 3.36%. Next, please. The reason we repurchase our own stock. Management views the stock as trading below its worth, so whenever GROW's price is unchanged or lower than the prior session, the company buys back shares through an algorithm. That fits within a two-part approach aimed at boosting shareholder value: an annual dividend plus a yearly buyback amount. Moving on. The current share purchase program: across the quarter that closed September 30, 2026, the company bought back 105,457 Class A shares for roughly $319,000 in cash. Since December 2019, shares outstanding have come down by about 20%. Next. This visual is meant to help you with the GROW buyback. The more volatility there is, the more stock we wind up repurchasing. It's interesting that fund flows have been fairly steady, even with the meltdown that happened during the quarter. In the prior quarter there was the big carry trade in Japan, the technology sector crashed, and there was also volatility in the gold sector. Our assets essentially moved sideways amid that turmoil in global markets. Next, please. Meb Faber wrote a well-known book titled "Shareholder Yield" and launched an ETF focused on companies that pay dividends, repurchase their stock, and reduce debt, divided by market cap. He refers to that as total shareholder yield. Next, please; here is the formula he uses to select his basket of stocks. Moving on. U.S. Global Investors has pledged to deliver shareholder value relative to Treasury yields — GROW’s total yield sits near 8.33%, versus 5.29% on the 10 year and 5.01% on the five year. Judged through a GARP lens, as a GARP analyst would, GROW’s overall yield remains appealing. Next, please. The Russell Midcap Growth Index, our preferred benchmark, has seen enormous swings, and at this point both have corrected. We’ve come down from the peaks reached earlier in August. Here you can see — as I noted, we experienced that run-up, followed by the carry trade unwind, and then the sell-off. We remain roughly 10% ahead of the Russell Microcap Growth Index. Next slide, please. Assets under management on average have stayed steady. Next, please. Their leverage is high, so meaningful asset growth and sizable cash flow drop straight to the bottom line. That, I think, is the central point, and what we're showing you here is net income quarter over quarter. Let's move on, please. U.S. Global Investors versus some competitors. Often we get mentioned in the same breath as WisdomTree, which is purely ETFs. Here at U.S. Global Investors, 59% of our business — close to 60% — comes from ETFs, whereas Invesco is at about 40% with its famous QQQ ETF. This gives you a method for relative valuation analysis, price to book. WisdomTree looks expensive; we look inexpensive. On return on assets, they post a higher figure. We compare more favorably than Invesco. On pre-tax margins, we compare more favorably than Invesco. Dividend yield is roughly equal to Invesco's, yet superior to WisdomTree's. On shareholder yield, ours is high, as is Invesco's, and we traded at a price to EBITDA of approximately 15 times. Moving on, please. We enjoy talking about fund distribution, and examining the two major comparative platforms matters. Robinhood, the newcomer, and this cycle truly took off during COVID. It's fascinating to observe how many assets they hold. Schwab has $12 trillion. At Robinhood we serve 377 billion account customers, with 39 million active brokerage accounts compared to 30 million funded customers.

What's genuinely interesting here is that Schwab has a much bigger average asset size than Robinhood, and yet Robinhood is where all the day traders are, and a lot of the voters who went blue — particularly in the most recent election cycle — are at Robinhood. So you've got the day traders on one side and the RIA asset allocators on the other, and I believe Robinhood's average clientele is under 35 years old. Next, please. Eric Balchunas is probably among the top analysts out there following fund flows and what's going on in the capital markets with ETFs. Right now active ETFs account for about 13% of all ETFs. Active ETFs are only 13% of assets, but they bring in roughly 30% of ETF industry revenue. That's because they involve more complexity—things like covered call writing programs and Smart Beta 2.0. A lot of index funds, it appears, make most of their money from very, very low fees on securities lending. That helps offset many costs, especially when the transfer agency owns the fund group, and that's kind of where the bulk of costs sit. It's interesting to me that investors need to understand securities lending is a very big piece of passive revenue, passive ETFs. Next, please. Looking back through earlier cycles, defensive areas performed the strongest when a Republican occupied the White House while Democrats controlled Congress. I mention this because 18 months ago we introduced a new ETF focused on NATO rebuilding. It trades on the New York Stock Exchange under the ticker WAR, aimed at rebuilding NATO, and it involves a great deal of AI—very critical. That policy shift took place in 2018, and it has genuinely captured substantial growth in AI rebuilding across the last three or four years. So what does that mean—even with the sweep into the blue, what does it mean for the overall market, stocks, and so forth? This roughly gives you a sense of what the average return has looked like. Next, please. Each of the three years turned out to be quite favorable, and it's genuinely notable how consumer staples along with healthcare bounce back—particularly with the blue sweep giving healthcare a strong push. Looking at President Obama's two terms, a number of the strongest performers among stocks and industry groups were hospitals and healthcare companies. Despite all the gloomy talk at the time, money actually flowed in the reverse direction. You're able to see where the contrasts lie when it comes to anticipating heavier regulation in financials, communications, and services; so this is essentially a review of the past, and it lets you get a clearer sense that living is fundamentally about handling expectations. Moving on, please. Policy shifts always come before real change—that's how we see it. Going into this election, we've watched RIAs rotate toward real assets: precious metals, infrastructure, and equity energy, partly because of the war in Iran, and then Ukraine blowing up refineries in Russia adds another significant hit. One thing I think is really important to recognize: in Texas, where data centers make up about 25% of energy use, there's a new development emerging within that trend—building the power station off-grid, right next to a large natural gas field. That gives you what people call electricity before the grid. Local energy costs are unaffected, you don't need to fret over natural gas price swings, and you can then turn electrical power into compute power. We're watching this phenomenon unfold in Canada through a mega project that Bell Canada announced in Saskatchewan. Other nations struggled to get pipelines running from east to west. Instead of fretting about those pipelines, you can now export compute power via the telecom system and fiber optic networks across North America. All at once that gas field becomes a site with a data center right beside it; these are fresh shifts we're observing in this kind of build-out for AI. The key takeaway is that energy isn't going anywhere, and neither is the demand for infrastructure or precious metals. The following slide really helps drive home the point that modern monetary theory, or MMT, has driven massive money creation throughout this century, with repeated pledges to taper the printing once the economy bounces back—pledges that rarely end up being honored. Whenever we face a truly severe recession or a financial crisis, the money printing ends up exponentially bigger than it was in the previous cycle. Globally, MMT sits at $350 trillion. What really surprises a lot of investors is that the U.S. actually appears more appealing when you weigh it against the overall global debt cycle; it isn't going away. Moving on, please—this is the right approach for this century to show that gold, as an asset class, has actually outperformed the S&P 500, and that keeping a weighting of 10% to 15%, with yearly rebalancing, has proven to be nothing short of prudent. Our focus has been on the gold stocks that provide that growth and momentum as well as revenue and cash flow. Next slide, please. Gold's all-time high points to renewed investor interest, a sharp correction, and then a rebound. Currency fluctuations play a significant role, but if funds start moving toward social and welfare initiatives and other programs that people describe as further to the left, gold will probably speed up while the dollar encounters trouble; it makes little difference this century whether Democrats or Republicans are in power. G20 nations aren't giving up on MMT, and governments will continue printing money. Next, please. That's the reason Ray Dalio, one of the largest hedge funds and most respected global macro money managers, recommends that a well-diversified portfolio should include 5%-15% in gold. He also mentions Bitcoin. Next, please. Something we've observed ever since Putin's invasion—the first one being Crimea during President Obama's time, and the second under President Biden, moving through that cycle—is that during that stretch you get apathy and discouragement among anyone investing, among Americans putting money into Eastern Europe or Asia, on account of the China threat and the Putin threat. Domestic spending and investing have drawn more money, and defense spending is among those areas. One thing President Trump has held accountable is the G20 countries—the NATO countries within the G20 especially—to keep up what they pledged to do. Their 2% is something he has held them to. Canada is now where we’re observing that spending take place, and it’s also occurring across Europe. Greater attention is being directed toward AI at present. In my view, national security isn’t going to fade, even after the sweeping change that just took place in the most recent election, because a substantial part of Trump’s rise to power was tied to national security and the surges of crime happening in city areas.

We understand this well in Texas. I believe that the worries held by Xi Jinping and Putin, we recognize the Iran war was a shock and genuinely damaged President Trump. I believe the gas pump reflects that result, yet we must also acknowledge that China has gone through the One Belt One Road with a railway extending into Iran, which helps fuel the battle, supplying them weapons and enabling them to fight against anyone else, along with drones, et cetera. The same situation has occurred in North Korea, and likewise Putin and Russia have been getting Chinese technology and weapons. This worry regarding AI and the competition for AI is not disappearing. Despite all the chatter and anxiety out there, along with plenty of conspiracy theories asserting that China is bankrolling it, none of that really matters—because by now people have seen what ChatGPT can do, as well as the other ones arriving like Claude, plus Perplexity and Grok. I use all of them. In my view they're each quite impressive, especially when it comes to doing research. I've also come to understand that what counts is how good your prompt is. You need to be able to debate and push back against these different platforms and get them to dig deeper whenever an answer doesn't satisfy you. What's unfortunate is that a lot of young people just grab the tip of the iceberg, their answer, and it seems to carry plenty of biases. Next, please. The actively managed WAR ETF is now on the Lima Stock Exchange alongside JETS, GOAU, GO GOLD, and SEA. All of this fits into our Latin America platform; we genuinely believe the Western Hemisphere and the Monroe Doctrine aren't going anywhere. We also know that before the new administration dusted off the whole Monroe Doctrine, we discussed during COVID that digital nomads flying north to south matter quite a bit for the airlines ETF in terms of absorbing seats that never existed, were never used, or were never demanded before. This trend isn't going anywhere. Moving on to the next question. I take real pride in the results we've achieved through our core strategy for Smart Beta 2.0 investing; it demands a wide-ranging, in-depth grasp of worldwide economic developments, policy decisions, and geopolitical situations, while simultaneously examining which stocks and which factors tie back to the industries those companies operate in. You arrive at that judgment through regression analysis, extensive portfolio construction work spanning thousands of hours, and reviewing which factors performed strongest — all before bringing a product to market. A few of the products, along with momentum and revenue cash flow, are dominant for the gold royalty, and much of that relates to the royalty model itself, and income per employee is among those special factors that let you view this industry through a different frame. Next, please. At U.S. Global, we are building a Smart Beta thematic ETF platform. Please look and score SEA. Honestly, to me it is one of the most fascinating things. PULSE represents the arteries of global trade. As a money manager, I love it because it tells you what the real cost is and whether trade around the world is rising or falling. You'd have expected, once Trump announced Liberation Day on April 2, 2025, that freight and cargo traffic — all of it — would have fallen apart, yet instead it has only risen. Add the Straits of Hormuz crisis this year, plus other troubles in other regions, and freight costs climb sharply. The vessels that transport every commodity and also move bulky finished goods — cars, Samsung refrigerators — go mainly by cargo ship. After that comes WAR, which is AI: essentially a tech-oriented fund aimed at military rebuilding, and it has performed very well. JETS keeps demonstrating that smart beta — our longest-running smart beta offering — can beat an index over both short and long horizons, and then there's GO GOLD. Next, please. We're seeing gains throughout the thematic fund lineup. Let's move to the next slide, please. WAR ETF has beaten the market so far this year, gaining 35% while the market is up 12%. It has been more volatile, but it does capture where money is flowing as a result of deficits, as governments spend, and as funding goes toward national security. Next, please. SEA ETF has outperformed by an even larger margin. It's up 40%. One interesting element to add is PMI, which we write about each month. For anyone who hasn't signed up for Investor Alert, I'd strongly suggest doing so. A PMI reading over 50 signals that the worldwide economy is growing, and six months ahead that's a very bullish signal for commodity demand—plus we refresh it each month. We've also run regression analyses showing that when the one-month figure sits above the three-month figure and both are over 50, that's quite bullish for global trade overall. So that's an additional reason the performance is holding up well. Moving on, please. The JETS ETF has beaten the NYSE Arca Airline—that's really the NYSE Arca Global Airline Index—and what I think matters there is that in percentage terms it's genuinely significant whether you look short-term or long-term, even after 60 basis points. Keep in mind that the index itself carries no 60-basis-point drag. We continue to beat it—that's precisely the point of building Smart Beta 2.0. Next question, please. Since launch, the GOAU ETF has beaten the market by a wide margin. What this really accomplishes is confirming the rationale for putting a 10% allocation into a product of this kind alongside a diversified portfolio, with rebalancing done annually; it has performed as intended. A softer dollar together with rising gold prices drives it upward. We’ve done extensive research on the reasons behind that trend and on the individual stocks involved, so if you aren’t already subscribed to Frank Talk and Investor Alert, please do so, and that way you’ll stay connected with us through a weekly recap of what we’re doing and where we’re headed. We’ve also examined what has taken place during presidential election cycles when a Republican holds the presidency while the Senate and Congress are controlled by Democrats — what the market does, and what happens with these different themes. The key point is that going back to 1950, I believe, the market is up. At times it rises more, at other times less, but on the whole it is up. I’m not about to give up. The real distinction is simply acknowledging that candidates backed by the Democratic Socialists of America — the DSA, as people like to call it — won significant victories around the country. We’ll find out what unfolds between now and January, what the rhetoric will be, and what they will actually do to sustain job growth. Research makes a fairly compelling case that under the kind of socialist mindset Canada had, if you’re a lawyer headed to law school, you’ll study case studies, and if you go to Harvard Business School, it’s all case studies.

Canada serves as a strong case study of a decade under former Prime Minister Justin Trudeau—his wider interpretation of DEI and ESG policies and regulations, plus the addition of more government staff, and the effect that had on the overall economy. When you look at GDP per capita compared with America, and at the funds directed toward infrastructure along with technology and innovation, the country has by now dropped considerably behind. The incoming Prime Minister, Mark Carney, is also from the Liberal Party, the same as Justin Trudeau, but he is reversing a great many of those ideas, because they failed to deliver. Those concepts didn't work in England, and they haven't been successful in the EU either, especially in places like France. My view is that if we remain positive and optimistic with a growth mindset, the new election body will see that growth is essential to sustain the momentum we're experiencing in this global arena where we operate; so stay tuned, and I'd like to hand things over to Lisa Callicotte, our CFO, to dig into the granularity of the financials. Thank you.

Thank you, Frank. Good morning. To start, I'll cover our financial highlights on slide 41. During the quarter, our average assets under management reached $1.6 billion, operating revenues totaled $2.7 million, and net income came in at $171,000, which works out to a penny per share. On Slide 42, you'll see a recap of the various pieces that make up our earnings: there are operational earnings, made up of our advisory fees, and then other earnings, which mainly come from realized and unrealized gains and losses on our investment holdings. Operational earnings derive from our average assets under management for the period, while investment earnings are driven primarily by changes in the market value of our investments. The slides that follow give a closer look at our operating results for the quarter that ended September 30th, 2026. For the quarter, operating revenues came in at $2.7 million — up $406,000, or 18%, compared with $2.3 million in the same quarter a year ago. That gain largely reflects higher advisory fees from our gold and natural resource mutual funds and ETFs. Operating expenses fell $164,000, or 6%, driven mainly by a drop of $117,000, or 8%, in general administrative expenses — largely from lower ETF costs — along with a $37,000, or 23%, reduction in advertising expenses tied to expanded ETF marketing efforts during the prior year. Turning to slide 44, operating income for the quarter ended September 30th, 2026 came in at $55,000, versus an operating loss of $515,000 in the same quarter last year. Other income for the quarter totaled $193,000, compared with $2.4 million a year earlier. That $2.2 million decline stemmed mainly from lower net investment income this period relative to the prior one, largely reflecting a $1.3 million unrealized gain booked in the prior period and $185,000 of unrealized losses on equity and debt securities in the current period. After taxes, net income for the quarter was $171,000, or a penny per share. That represents a drop of $1.3 million from the $1.5 million, or $0.12 per share, posted in the same quarter of fiscal year 2026. If we go to page 45, we can see the balance sheet remains strong, with a high level of cash and investments. At September 30th, 2026, cash and cash equivalents stood at roughly $24.3 million, while current investments came to $9.8 million. Slide 46 gives a detail of our other assets, which total approximately $9.1 million. Slide 47 notes that our liabilities fell by approximately $310,000 from June 30th, 2026. Slide 48 breaks down stockholders' equity; at September 30th, 2026, net working capital stood at $35.4 million, with a current ratio of 23.1 to 1. Holly, over to you.

Thanks, Lisa. On the first slide of my portion, I'd like to draw attention to our brand-new podcast, "Return on Ideas," which we introduced in September. Through it, we look at the individuals, innovations, and concepts that are molding the world around us and the markets in which we invest. Episodes are released two times each month, and you can find them on our YouTube channel or any place you listen to podcasts, and if you haven't given it a listen yet, we hope you will and that you'll become a subscriber. Turning to the following slide, you can see a few of our newest interactive research offerings that, if you haven't had a chance to look at them, I strongly suggest you do. All of them are available under the Resources tab on our website. We offer slideshows and infographics covering topics ranging from AI, what is moving gold and energy prices, the top 10 travel destinations, and a great deal more. On the slide after that, we look back at the Frank Talk posts that drew the most readers over the last quarter. The subjects mirror many of the themes in today's headlines, from home and diesel prices to the risks and opportunities appearing in AI, the data center boom, and the technology stocks drawing investors' interest. Frank Talk ranks among the longest-running financial blogs, delivering timely market insights and investment perspectives, and best of all, subscribing costs nothing. Moving along, the next slide calls out a few events we'll be taking part in over the final months of 2026. To begin, CEO Frank Holmes will give a keynote address at the Swiss Mining Institute in Zürich, where he'll share his outlook on gold and commodities. Later that month, working together with the Lima Stock Exchange, where our WAR ETF was recently dual listed, we'll hold a virtual webinar aimed at Latin American investors. During the session, investors will be introduced to the WAR ETF and get a closer look at our Smart Beta 2.0 approach. Finally, on my last slide, I really do encourage everyone to follow us on social media. You can find us on Twitter or X, LinkedIn, YouTube, Instagram, and Facebook, so whichever platform you prefer for news, make sure to check us out, and that way you'll stay current on what's happening with GROW, our funds, and broader market insights as well. All right, to close, a reminder to our audience: if you have questions today, please send them by email to info@usfunds.com, and we'll be happy to follow up with you and clarify anything you need more information about; with that, thank you for joining us today. That brings our webcast summarizing the first quarter of 2027 to a close.