Earnings Call Transcript - GROW Q2 2026

Holly Schoenfeldt, Director of Marketing

Good morning everyone, and thank you for joining us today for our webcast announcing U.S. Global Investors results for the second quarter of 2026. On the next slide, I'd like to introduce the presenters for today's program, which are Frank Holmes, U.S. Global Investors' CEO and Chief Investment Officer; Lisa Callicotte, Chief Financial Officer; and myself, Holly Schoenfeldt, Director of Marketing. On the next slide, during this webcast, we may make forward-looking statements about relative business outlook. Any forward-looking statements and all other statements made during this webcast that don't pertain to historical facts are subject to risks and uncertainties that may materially affect actual results. Please refer to our press release and corresponding Form 10-Q filing for more detail on factors that could cause actual results to differ materially from any described today in forward-looking statements. Any statements are made as of today, and U.S. Global accepts no obligation to update them in the future. All right. On to the next slide. We're always grateful for our continued support of our valued shareholders. So if you'd like to receive one of our signature USGI hats featured here, just send us your mailing address to info@usfunds.com and we'll gladly ship one out to you. All right. On to the next slide. I want to briefly review the company. U.S. Global Investors is an innovative investment manager with vast experience in global markets and specialized sectors. We use a quantamental strategy to create thematic smart beta 2.0 products. The company was originally founded as an investment club, becoming a registered investment adviser in 1968 and has a long-standing history of global investing and launching first-of-their-kind investment products, including the first no-load gold fund. Finally, we are experts in thematic investing, in particular, gold and precious metals, natural resources, airlines and luxury goods, all using a quantamental approach that includes both macro and micro factors. All right. Moving on to the next slide. We often open up our presentations with this slide known as the DNA of volatility. It's a helpful reminder that market fluctuations are a natural part of long-term investing. And with that perspective in mind, I do want to hand it now over to our CEO, Frank Holmes. Frank?

Frank Holmes, CEO and Chief Investment Officer

Thank you, Holly, and thank you, everyone, for being here today. It's essential to understand the nature of volatility and how managing life includes managing expectations. As you can see, gold has remained stable, which is crucial for our assets to rise in tandem with the S&P 500. To put this in perspective, ten years ago, daily volatility for gold was 2%, and twenty-five years ago, it was 3%, while stocks were about 9%. Although volatility has decreased over time, gold stocks still exhibit double the volatility of the S&P. In the past ten days, this has been around 6%. Additionally, our largest ETF, Arca Airline, also experiences significant volatility, with daily fluctuations of around 2%, largely influenced by the oil market, which is a major expense. Over ten days, its volatility reaches 7%. Interestingly, Bitcoin presents similar volatility patterns to the airline index over the same period. We founded HIVE Digital in 2017 because we were unable to launch a Bitcoin ETF, and it has served as our proxy in that arena. You can only make sense of events in hindsight; thus, we have to trust that things will fall into place in the future. In this discussion, I will attempt to connect these dots for you. Today, the investment industry shows robust fund flows, particularly into ETFs, despite facing negative news. Notably, 2024 and 2025 appear to be promising years. While 2021 experienced significant growth, we saw a decline in 2022. During the rapid growth from 2020 to 2021, particularly with airline stocks during COVID, the market reacted contrarily. The Reddit community’s research showed that, historically, airlines have a pattern of falling significantly after a global crisis, followed by substantial recoveries, which is exactly what happened. Record ETF inflows are projected to reach nearly $1.5 trillion in 2025, surpassing those of traditional stock funds. Several billion-dollar products have launched, focusing on single-purpose corporations, such as MicroStrategy and companies like NVIDIA or Tesla, through covered writing programs. This allows investors who want to remain long on these stocks to generate monthly income while waiting. Last year, we experienced strong growth in our gold bullion ETF, which offered attractive yields. We owe thanks to our top three shareholders: Gator Capital Management, Vanguard, and Perritt, a long-standing small-cap mutual fund group. Vanguard is well-known for its index products, while Gator focuses on value investments. As CEO and Chief Investment Officer, I possess about 19% ownership of the company and the vast majority of voting control, adhering to the necessary rules. I have an independent board of directors seasoned in mutual funds and private equity, which aids our decision-making and strategy. Our strategy emphasizes creating sustainable, smart beta 2.0 products that undergo rigorous backtesting. Our goal is to ensure that our clients feel financially secure and that their wealth grows consistently. Thematic products can face challenges, so we strive to maintain competitive pricing. To break even, we generally need around $50 million in assets, and ideally, about $80 million to cover comprehensive costs. Assets exceeding $100 million typically lead to strong profitability. We continue to buy back our stock during flat or declining days, acquiring nearly 10% over the past 18 months. It is crucial for us to manage cash efficiently for future growth opportunities. Bonuses are tied directly to performance metrics for both the funds and overall cash flow. In terms of mergers and acquisitions, we recognize that mutual funds often trade at significant discounts. While older investors may redeem their shares, younger investors tend to lean towards ETFs. Understanding this transition is vital, as the ETF landscape has a markedly lower redemption rate and sees a lot more trading activity. We keep close tabs on industry trends and have been working to expand our subscriber base, which we believe fosters long-term relationships with investors. We've been increasing our involvement in the Bitcoin ecosystem, mainly through HIVE, while also investing in ETFs that provide monthly income. The decision to buy back our stock stems from the belief that it is undervalued. This strategy combines share repurchases with dividends to enhance shareholder value. Over the years, while we have not increased dividends, we've significantly raised our buyback expenditure. In the recent three months ending December 31, 2025, we repurchased a total of 260,195 Class A shares at a cost of approximately $664,000, reducing shares outstanding by about 10% over the last 18 months. Shareholder yield is vital; this encompasses dividends, stock buybacks, and debt reduction. We don't have debt, but we've seen our investments pay off. The shareholder yield presently stands at 9.89%, making it an attractive option against treasury yields, especially considering the yields on the 10-year and 5-year government bonds. In terms of assets under management, we currently manage around $1.7 billion, with stock valuations catching the attention of various fund managers. In the past year, EBITDA per share went from negative to positive, and we expect the trend to improve. Comparatively, I like to assess our performance against peers like WisdomTree, Invesco, and others. WisdomTree has a higher return on assets, yet U.S. Global investors remain competitive and positioned to grow in a market with increasing flows. The overarching theme is that while gold continues to perform well, we are witnessing a dichotomy in asset flows. With records in gold's performance, investors are increasingly recognizing its value, which leads us to believe we are still in a prolonged bull market for gold. There has been a noticeable shift toward gold and silver as critical components, with institutional demand surging. With geopolitical instability and global monetary policies contributing to an inflationary environment, investors are recognizing the necessity of diversifying their portfolios into gold and precious metals to mitigate risks. In conclusion, we are confident about our trajectory and the opportunities our strategies present moving forward. Thank you for joining today, and now, I'll hand it over to Lisa Callicotte, our CFO.

Lisa Callicotte, CFO

Thank you, Frank. Good morning. On the next slide, I'll start with kind of an overview of our financial highlights. Average assets under management were $1.48 billion, and our operating revenues were $2.5 million. Pretax income was $535,000. We move on to the next slide. This talks about the breakout of our earnings. We have operational earnings, which is made up of our advisory services. And then we have other earnings, and this is mainly made up of realized and unrealized gains and losses on our investments. Both our advisory earnings and our investment gains and losses fluctuate based on market forces. As we travel to the next slide, we'll get into more details of our financial statements for the quarter. Our total operating revenues were $2.5 million for the quarter. This is an increase of $279,000 or 13% from the $2.2 million in the same quarter last year. The increase is primarily due to increases in the US GIF assets under management, especially in our equity mutual funds. And this was partially offset by a decrease in our Jets ETF assets under management. Operating expenses for the current quarter were $2.6 million, a decrease of $172,000 or 6%, primarily due to decreases in general and administrative expenses of $207,000 or 15%, mainly due to lower ETF-related costs and was partially offset by an increase in employee compensation benefits of $45,000 or 4%, mainly due to higher bonuses based on performance. On the next slide, you can see our operating loss for the quarter was $88,000, but it was a favorable change of $451,000 compared to the same quarter for fiscal year 2025. Other income increased $200,000 compared to prior year, mainly due to unrealized gains and losses on investment securities in the current year being $28,000 compared to unrealized losses in the prior year of $221,000, resulting in a favorable change of $249,000. Realized foreign currency gains were $57,000 compared to losses of $239,000, again, another favorable change of $296,000. But these changes were partially offset by lower interest and realized gains due to principal payments on the HIVE convertible debenture. Net loss after taxes for the quarter was $846,000 or a loss of $0.07 per share, which is an unfavorable change of $760,000 compared to net loss of $86,000 or $0.01 per share in the same quarter of fiscal year 2025. But this net loss was due to a tax adjustment of approximately $1.3 million related to the tax treatment of certain securities. The company has filed a tax accounting method change with the IRS related to those securities, and we expect to record an offsetting benefit in the quarter ending March 31, 2026. The net tax expense related to the method change is expected to be 0 for the fiscal year. But due to GAAP reporting requirements, we recorded an expense in the quarter ending December 31, 2025, and then expect to record an offsetting benefit for the quarter ending March 31, 2026. Moving to the next slide. We see we have a strong balance sheet, includes high levels of cash and securities. Cash and cash equivalents was approximately $25.2 million at December 31, 2025, an increase of approximately $675,000 or 3% since June 2025. Current investments totaled $9.2 million. On the next slide, we see our other assets and the total of all the investments included in other assets is approximately $6.5 million. On the next slide, you see our liabilities. They did increase from June 30, 2025, by approximately $193,000. And on the next slide, you can see our stockholders' equity detail. And at December 31, 2025, our company had a net working capital of $36.7 million and a current ratio of 19.4:1.

Holly Schoenfeldt, Director of Marketing

With that, I will pass it over to Holly to discuss marketing and distribution. Thank you, Lisa. All right. On the next slide, this highlights our commitment to delivering timely original market insights through YouTube and TikTok, which both are powerful platforms for engaging both new and long-time shareholders. Some of the recent highlights include our popular videos on gold, what's driving it and what could come next, along with 2 global market updates featuring retired Lieutenant General, John Evans, who shared valuable geopolitical insights with us just recently. So if you have not seen those, we encourage you to visit and subscribe to our YouTube channel to stay current with our latest content. On the next slide, I'd like to spotlight several recent interviews featuring Frank Holmes from the past quarter, including appearances on Money Metals Exchange, PreMarket Prep, which streams live on YouTube and X. We have Investing News Network and finally, Financial Fox. And all of these can be found on their respective websites or channels, but also we share them across our social media channels as well. All right. Moving to the next slide, you can see here that it's our updated 2025 periodic table of commodity returns. So this is one of our most popular annual pieces, and it is fully interactive on our website. So you can click on any individual commodity to track its highs and lows over time, making it an engaging way to visualize the leaders and laggards. It also offers helpful perspective on what drove results last year and which areas may be poised for a correction or a rebound this year in 2026. All right. On the next slide, we always like to recap the most read Frank Talk blog post during the recent quarter. So as you can see here, the top theme that remained in focus for another quarter was gold for sure. We hosted a webcast at the start of the year also about a month ago, covering precious metals and the commodity space and commodity moves are definitely another area of the market where investors are focused and really paying attention to. All right. Finally, on my last slide, I want to encourage you all to follow U.S. Global on social media. We're on X, formerly Twitter, LinkedIn, YouTube, Instagram, and Facebook. So wherever you prefer to get your news, be sure to check us out. That way, you're up to date on everything that's going on. All right. As a reminder to our audience, if you have any questions today, please e-mail us to info@usfunds.com, and we will gladly follow up with you to get anything clarified that you may need more information on. Thank you so much for tuning in today.