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

Today's speakers are Frank Holmes, who serves as CEO and Chief Investment Officer at U.S. Global Investors, along with Lisa Callicotte, our Chief Financial Officer, and me, Holly Schoenfeldt, Director of Marketing. Turning to slide number 3, here are a few brief disclosures. Throughout this webcast, forward-looking statements regarding our relative business outlook may be made. All forward-looking statements, along with any other remarks shared during this webcast that aren't related to historical facts, carry risks and uncertainties that could materially impact actual results. For additional detail on factors that might cause actual results to differ materially from anything described today in forward-looking statements, please consult our press release and corresponding Form 10-K filing. Such statements are made only as of today, and U.S. Global Investors undertakes no obligation to update them going forward; moving to the next slide; we remain deeply thankful for the ongoing support of our valued shareholders. Should you wish to receive one of our signature U.S. Global hats shown here, simply email your mailing address to info@usfunds.com, and we'll be happy to send one your way. All right, on the following slide, I'll give a quick overview of the company. U.S. Global Investors operates as an innovative investment manager with extensive expertise in global markets and specialized sectors. Our approach relies on a quantamental strategy to build thematic Smart Beta 2.0 products. Originally established as an investment club, the company became a registered investment advisor in 1968, and it possesses a long history of global investing and introducing first-of-their-kind investment products, among them the first no-load gold fund. Lastly, we specialize in thematic investing, especially gold and precious metals, natural resources, airlines, and luxury goods, all through a quantamental method incorporating both macro and micro factors. On to the next slide. This slide often opens our presentations, and we call it the DNA of volatility, serving as a reminder that market swings are a normal aspect of long-term investing. With that said, I'll now hand things over to our CEO and CIO, Frank Holmes, to take us through the fiscal year and offer his macro outlook for the quarter. Frank?

Understanding the nature of volatility matters greatly for investors. Different asset classes show different levels of volatility, and that also holds true for individual stocks inside a given category. The S&P serves as the largest benchmark; a daily move of ± 1% is nothing unusual, since that occurs 70% of the time, and across 10 days it comes to 2%. Gold bullion runs at double that figure, and oil clearly carries even more volatility. With Bitcoin, on any given day, it behaves much like oil and gold, yet once we look beyond 10 days, Bitcoin swings more widely since it remains an emerging asset. The JETS ETF sits at ± 3%, since oil represents its largest line item, on top of all the other global issues and trade matters. You simply end up with this heightened volatility. So here is what that signals, and it essentially explains why you ought to consider purchasing these instruments. When they drop — 3% within a single day or beyond, that typically makes for a stronger entry point, and across 10 days, should they fall 6%, that becomes an even lower-risk purchase. On the sell side, the same logic applies to the upside. What stands out is that the New York Stock Exchange Airline Index exceeds JETS once you examine a 10-day window. Turning to GOAU, which is tied to gold, we observe that GOAU moving up or down 3% in one day is nothing out of the ordinary, since gold, it mirrors gold 95% of the time. It is tracking gold, which sits at 2%. Many gold traders and the process of price discovery are in fact following bullion, after which they examine four signals, as they call them, that would lead them to look at an ETF such as GOAU. Over 10 days, you can see it is truly startling. It is ± 9%. Should a large portion of our assets be tied to gold and airlines, you can see that this surfaces in GROW stock. That makes everything quite straightforward. If we observe JETS rising across 10 days by 6% or declining 6%, and gold stocks climbing or falling 9%, it appears in GROW. Grasping that relationship matters. HIVE is included just to illustrate Bitcoin mining and AI; it is extremely volatile and it trades based on whatever NVIDIA is doing. Since it is more of a micro cap relative to NVIDIA, its volatility is even greater. Next, please. I want to express gratitude to the top institutional shareholders, Gator Capital and Capital Wealth Advisors, and Vanguard, I believe, is in one of their index products. Thanks to all those investors and their product for being invested in GROW. Next, please. I hold roughly 24% of the company along with 99% of the voting control. This is required to be in compliance with SEC rules for investment adviser. That is where you need to have 2 classes of stock. Next, please. Strategy and tactics. A strategy is really simple. The goal here is victory. What does it take to come out on top? Within a category, amid the entire landscape of ETFs and mutual funds and across finance as a whole, what makes a product succeed? Our conviction is that you build thematic offerings that can last, applying what we call our Smart Beta 2.0 approach, and that approach demands extensive backtesting — thousands of hours of it — prior to bringing anything to market. Whether markets are rising or falling, you need to look across a span longer than 10 years, and that provides genuine confidence. Past results won't promise anything about what lies ahead, yet they do offer insight into both good and bad stretches, plus how weighting schemes and different screens get applied when constructing a thematic stock basket. Making people feel financially happy and secure, with their wealth growing steadily — that's our mission. As demonstrated earlier, things swing around, and teaching investors about that is part of our job; our efforts in education have earned us numerous awards. Being a public company, our approach also includes repurchasing shares through an algorithm on days when the market is flat or declining, since we're convinced our valuation is far too low. We're able to set aside cash for upcoming growth chances and market downturns, and yes, we do put money to work. Some investments we make aren't direct. Within our funds too, we've done this, but never would we purchase something solely for ourselves while excluding the funds. Whenever we go through a compliance process, we always verify: would this be a good thing for the funds to purchase? Should it not be suitable, we'd pivot and pursue certain investments instead. Another element we've discovered is that this landscape has shifted considerably, what with wholesalers and the digital era — it comes down to subscriber numbers and followers. We keep doing whatever it takes to expand that base, since we produce our own webcasts, and having followers matters greatly for staying in touch with investors. Then there's boosting our footprint in the Bitcoin ecosystem; we've acquired certain ETFs that distribute dividends each month, offering upside while you simultaneously ride out those corrections and collect an appealing dividend. Next, please. Our involvement and holdings in HIVE are quite small as of today, yet an investment in HIVE remains on our books. On marketing approach, something Steve Jobs once said strikes me as relevant here: "You can't connect the dots looking forward. You can only connect them looking backwards." Therefore you must have faith that the dots will somehow join up in your future, based on how thoroughly you examine what's behind you. Next, please. I'd like to provide a bit of education on some ICI factors, since mutual funds and ETFs remain part of what we offer, and ETFs are expanding more quickly. Still, mutual funds continue to represent a truly substantial share of total assets. Despite ETFs' faster growth, they remain a major piece. If you take a look at what the Investment Company Institute reports, mutual funds are owned by 72 million households, and 52% of those were led by a person aged 35 to 64; however, what we observe among our own investors is that they tend to be closer to the higher end of 64. Yet the place where the industry, per ICI, becomes relevant is that a great number of corporations exist, and you're able to see that $13.7 trillion in long-term mutual fund assets are held through defined contribution plans and IRAs, which works out to roughly 62% of household assets. So mutual funds still do hold assets. A substantial portion flowing into fund flows is coming out of employer-sponsored retirement plans. Next, please; however, when marketing reaches them, that process looks quite different from ETF. Allow me to clarify that distinction. So according to the ICI Fact Book, ETF assets moved past $13 trillion. What has truly changed in this space is that it's mostly a smaller account that's driving this. Unless you obtain tax efficiency, monthly paying specialty funds, which provide a return on capital model; those have seen some significant growth, yet in my view the bulk is small, it's far more retail, and it's institutional as well. What occurs is that many institutions will employ that in order to go short, borrow against such positions, and that represents a major revenue source for low cost ETFs.

They earn extra income by lending those securities out; we noticed this with JETS specifically, that during Spirit's bankruptcy, near the finish, a lot of institutions were shorting Spirit, but they'd take a long position in JETS for that pairs trade, and they'd borrow from it. So they were placing a wager against that specific airline. We generated substantial profits for shareholders in JETS through that securities lending. Next please. According to AdvizorPro, RIAs, which benefits us, are shifting toward real assets. The information is a war in Iran. You've witnessed significant attention — it's up 265%, essentially, in interest in the oil patch. Then particularly, I notice among the oil patch refineries, they're earning money hand over fist. Natural resources, because China is playing games restricting the supply of rare metals and other minerals, there's a large expenditure now by the federal government to enhance the supply lines. Natural resource overall is performing exceptionally well. Commodities are performing well too. We can observe the large interest. Next please, regarding ETFs, it's various factors, and social media has become the new classroom of financial education. I'm not someone who uses TikTok, but it's astonishing how many individuals are on there discussing Bitcoin or gold and government debt, and then people suggesting different kinds of allocation models. It's quite rich what's happening. I believe the biggest is YouTube. Personally, I take pleasure in watching YouTube. Reddit, quite often controversial, leans more left regarding their political views, which I always find really interesting to offset other opinions. X tries everything to be in the middle; it's a major source for active investors who are using Reddit, and so does ChatGPT, and so does Claude and Perplexity. Quite often when they're scanning and searching for articles and information, they'll head to Reddit, alongside Wikipedia and other platforms. A lot of individuals are using these platforms to get ideas. Something on the journey I learned about JETS years ago, Graham Stephan, he's now reached 5.2 million. That means he's earning roughly $5 million annually. He has an earlier one several years back, four years ago, that discusses him first starting and earning $4,000 with YouTube, getting paid for shared revenue. Essentially, it's $1 million for every million subscribers. He's a real estate guy who has gone full time in this end of the business. Andre over here in the middle here, he's always got The World's Coming to an End, does excellent geopolitical stuff but is a little sometimes aggressive, but he's got 3.3 million followers. That's very impressive; then Humphrey Yang, he's got 2 million subscribers. These people do influence because the marker is how many followers they have. Next please. Regarding JETS, back when significant inflows were pouring in, someone asked me, "Do you even know Sam Chui?" My response was, "No. Who is Sam Chui?" Well, it turns out he's got 3.7 million subscribers, and he isn't a pilot. However, the two others in this space, Captain Joe and Mentor Pilot, command millions of subscribers and discuss the airline sector, which skews heavily toward younger millennials who trade these instruments. Moving on. Now, these airline-focused individuals aren't pitching ETFs. They simply lay out the facts regarding which business line is strongest, which flight is best, and other interesting highlights. What's striking is how many folks take an interest in airlines. I clearly recall back in 2020, when every Wall Street analyst was throwing in the towel, saying dump all airline stocks. Warren Buffett exited his entire Delta stake in June of 2020; now he's involved once more, having returned. What's fascinating is that the major tip originated from Reddit, noting that whenever a crisis hits, JETS drops 60%-70%, and 12 months afterward, it climbs 130%, 120%. That's precisely what occurred. I believe what we're seeing is billions of dollars flowing into that kind of product; essentially, the quant model, for which you pay just 60 basis points, has beaten the New York Stock Exchange Global Airline Index; we ultimately launch a new product named WAR, and defense spending has been a macro trend since Putin's invasion of Crimea. What truly matters here, as this visual shows, is that following the Berlin wall's collapse, there was considerable negotiation around trimming and reducing the U.S. military until 9/11. You can observe clearly that post-9/11, our expenditures rose sharply. More recently, with the Ukraine invasion, spending has surged once more. People across Europe, particularly Eastern Europe, are deeply worried. Trump has also pushed to make them all answerable for their 2%, and now they're heading to 5%. We're talking about $2.9 trillion, so imagine a massive funnel of money rushing downward into a sector. Certain industries will become far more crucial, and I strongly believe it'll be AI-related, which encompasses data centers. This one. Moving on. What's our approach? It revolves around expanding dividends or expanding cash flow. At our present stock price, the monthly yield stands at 2.83%, and we keep paying that monthly. We haven't raised the dividend. Our focus has been more on repurchasing stock over the past few years. I'll provide additional detail on the next slide. The company thinks the stock is significantly undervalued, so it repurchases shares when prices dip lower via an algorithm. Moving on. In fiscal 2026, the company bought back 733,848 Class A shares, spending $2 million in cash. From right around the start of COVID until now, we brought the count of shares outstanding down by roughly 20%. Next slide, please. That shows you volatility plays a major role in this. When a big sell-off happens, downside swings are larger than what our purchases can capture. Next, please. One thing that matters a great deal, in my view, for investors is that Meb Faber introduced shareholder yield; it's a superior way to think about yield investing. His method involves examining your free cash flow, your cash flow, and how much stock you're repurchasing, how much you're paying in dividends and how much debt you're retiring in total. That delivers a stronger return on invested capital. Next please. Shareholder yield equals dividends plus buybacks plus debt reduction divided by market cap. Next please. U.S. Global Investors is dedicated to giving value back to its shareholders when measured against Treasury yields. So here you can see that the 5-year has climbed, and so has the 10-year, but our overall yield, thanks to the stock buybacks, stands at 7.87%. Next please. GROW over a longer time frame. You can see it has beaten the Russell Microcap Growth Index. Next please. So that's two platforms, two sets of investors. Let's put Schwab and Robinhood side by side. Schwab holds $11 trillion in assets, while Robinhood holds $367 billion.

When you look at accounts and the people behind them, Charles has roughly 39 million — that's 30.5 million active brokerage accounts — and Robinhood comes in at 27.5. But if you check what the typical account customer holds at Charles, it works out to $309,000, whereas at Robinhood it's $13,000. That tells you Robinhood really caters to price discovery and a younger crowd, even though price discovery is what you need to bring institutions in. Charles Schwab, by contrast, is largely RIA asset allocators. Let's go to the next one. What this comparison is designed to illustrate is where we sit — about midway when you look at price to EBITDA. When it comes to shareholder yield, you can see those gaps clearly. Next one, please. Assets on average kept climbing bit by bit, they got a nice bump last month, and at this point it looks like they've been sold off. On the whole, things are wildly volatile. Next, please. Net income, given the big bump in assets, we've performed better. Next, please. A truly key figure for institutions was Ray Dalio, who said a well-diversified portfolio ought to hold 5%-15% in gold and Bitcoin. And I believe it matters to suggest that people read his book. You can find it on his LinkedIn, along with his following and everything he's produced, and as an educator he's quite significant. Next, please; so why is gold so appealing? Well, a large part of it is Modern Monetary Theory; essentially it's rising rare. Real debt carries real consequences, and the future never waits. It's constantly trying to determine what it will become. And we're at 350 trillion. That's last year. My hunch is that the actual figure could be larger still. Let's move on to the following item. Turning to central banks: at this point, the G20 nations are effectively applying Modern Monetary Theory. Whenever difficulties crop up, the response is simply to create additional currency. What we're seeing right now is a significant drive in which a substantial share of borrowed funds is directed at re-equipping those nations with AI. That creates a rather curious bind, since the majority of these countries carry enormous GDP debt burdens, and the cash is no longer flowing primarily into social welfare — a greater portion is going into military expenditures instead. On top of that, China is pushing hard to urge that America withdraw from U.S. There's a discussion happening where people are deciding whether to put money into equities, or instead purchase gold, or acquire assets that hold value over the long run. Watching that argument unfold is quite fascinating. But what this graphic illustrates is that the sole instance of a decline in Chinese gold purchases happened during COVID. After that, there was a significant jump up to 108. As you're able to see, that figure of 108 represents an enormous quantity of gold being acquired — it truly is striking how much China is buying. Yet if China aims to match America's position, my sense is they would need to purchase the equivalent of 100% of everything mined globally across the coming 7 or 8 years. What you're looking at now reflects China's official gold reserves from the point he assumed the role of dictator for life, and you can observe a substantial increase. On to the next one, please. So, the quantamental approach to Smart Beta 2.0—what that means is we blend quantitative methods with fundamental analysis when we invest, and that demands a wide, thorough grasp of worldwide economic trends, policy shifts, and geopolitical developments. With Smart Beta 2.0, our investment strategy combines advanced analytics with data-driven decision-making. On top of that, from where I sit, momentum, revenue, and cash flow are also important factors. Let's move on to the next item. We're seeing gains throughout the thematic lineup. When Trump introduced his freedom initiative, that happened on April 2nd. The remarkable thing is that there was a complete sell-off — around $5 trillion worldwide, as I recall — followed by a rebound, and JETS ended up far ahead of the S&P 500; in my view it's the best measure of the planet's circulatory system. That's still a core offering, alongside WAR. WAR, though, comes with considerably more ups and downs. Let me show you a handful of the names in our portfolio. First, the JETS ETF. As you can see, it just keeps rising, especially over this summer. You can take a look at JETS too. Moving on to the next one; this is one of my personal favorites, because you can see how WAR has left the S&P Aerospace & Defense Select Industry and the S&P 500 far behind. So, capital is being raised, and deficit spending is driving folks to buy gold and to buy anything connected to rebuilding NATO with AI. Let's move on to the next item; at this point I'm going to turn things over to Lisa Callicotte, our CFO.

Good morning. First off, I'll advance to the following slide, which addresses our financial highlights for fiscal year 2026. For the year, our average assets under management totaled $1.53 billion, our operating revenues came in at $10.3 million, and net income stood at $3.1 million, or $0.24 per share; this slide kind of lays out our earnings. So that tells us we have earnings from operations, which come from our advisory services, and then we have earnings from investments, which covers gains and losses, both realized and unrealized, on the investments we hold. Those two together add up to our total earnings, and both of them are also subject to swings in the market. In the slides that follow, we'll go into a bit more detail about how operations looked for the year that ended June 30th, 2026. First off, operating revenues came in at $10.3 million for the year, which is an increase of $1.8 million, or 21%, compared with the $8.5 million in revenue we brought in the year before. That increase was largely the result of growth in assets under management, especially within our gold and natural resource funds. Quarterly operating expenses came to $10.9 million, a figure that's 5% under what we recorded a year earlier. Turning to the next slide, the operating loss for fiscal year June 30th, 2026 landed at $603,000 — a 2.4 favorable swing compared with fiscal year 2025. For the year that closed June 30th, 2026, other income reached $4.5 million, up from $2.7 million the year before, which works out to an increase of about $1.8 million, driven mainly by larger unrealized gains on investments. Net income after taxes stood at $3.1 million, or $0.24 per share — a favorable change of $3.4 million against the $334,000 loss, or $0.03 per share, recorded in FY 2025. Let's now shift over to the balance sheet. Moving on to the following two slides, you'll see our balance sheet is solid, featuring substantial cash holdings. Then the one after that shows additional investments of ours. On the page that follows, our liabilities appear, and they align with what we had the year before. After that comes a slide with our stockholders equity. Net book value stands at $45.1 million. Networking capital comes to $35.7 million, while the current ratio is 19.7: 1. At this point, I'll pass things to Holly so she can cover marketing and distribution.

Thanks, Lisa. Okay, so to kick off my part, on slide one, I'd like to call attention to a webcast we held not long ago together with the folks at The Wealth Advisor, all about the trillion dollar defense opportunity. Frank Holmes sat down with retired Lieutenant General John Evans to talk about the ways the defense landscape reaches well past conventional military hardware, and why more and more capital keeps moving toward AI, cybersecurity, and autonomous systems. In case you weren't able to watch, we're glad to send the presentation your way. Simply email us at info@usfunds.com. Then, on the following slide, I'd like to point out a brand new podcast from U.S. We're launching something called Return on Ideas, a program where we'll spotlight the individuals, the breakthroughs, and the concepts that are molding the world around us. Episode one dropped earlier this week, and new installments will arrive every two weeks. Make sure you find it on the U.S. Global YouTube channel, or on whichever platform you listen to podcasts. Next up, this slide highlights a few of our fresh interactive research offerings, and if you haven't taken a look, I'd strongly suggest you do. The initial one belongs to a brand-new infographic lineup we're introducing, which digs into the energy difficulties posed by AI. There are two additional interactive reports. One looks at the forces behind gold's price. The other examines what's moving oil and natural gas prices and how the global energy picture is taking shape. All of them are available under the resources tab on our site. Moving to the next slide, I'd like to draw attention to the fact that we keep investing in bringing you fresh, original market insights promptly through digital platforms, YouTube and TikTok among them. Through these channels, we're able to speak straight to shareholders we have today as well as those we might have tomorrow, and they give people a clearer window into how we see the markets and the wider investment environment. Should you not have done so yet, please take a moment to check out our YouTube channel and hit subscribe so you'll stay up to date with our newest content. Okay. Moving to the following slide, it's a habit of ours to review which Frank Talk blog entries got the most readers during the latest order. Here you can see the leading subjects were artificial intelligence, defense, and climbing crude oil prices. Every week we put out one or two pieces, addressing various market and industry matters that match up with the sectors and themes our investments target. Should you already subscribe and consider the material worthwhile, we'd love for you to pass it along to friends or work colleagues who might share that interest. Signing up costs nothing at all. And lastly, on this final slide of mine, I really do hope each of you will connect with us on social media. You can find us on Facebook, Instagram, YouTube, LinkedIn, and Twitter, so check us out on whichever platform you like to use for news. That keeps you informed about GROW, what's happening with our funds, and the wider market perspectives we share. Okay. One brief note for those of you listening: should a question come to mind that you'd like answered, just email info@usfunds.com, and we'll gladly respond and provide any clarification on the details you're still looking for. Thanks so much for being here with us. That brings our webcast on the 2026 Fiscal Year to a close.