Earnings Call Transcript - GROW Q4 2025

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 Fiscal Year 2025. As you can see on Slide #2, the presenters for today's program are Frank Holmes, U.S. Global Investors CEO and Chief Investment Officer; Lisa Callicotte, Chief Financial Officer; and myself, Holly Schoenfeldt, Director of Marketing. Moving on to Slide #3. During this webcast, we may make forward-looking statements about our 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-K filing for more detail on the factors that could cause actual results to differ materially from any described today in forward-looking statements. Any such statements are made as of today, and U.S. Global Investors accepts no obligation to update them in the future. Moving on to the next slide. As always, we appreciate our loyal shareholders. So if you like one of our signature USGI hats that are featured on this slide, just send us an e-mail at info@usfunds.com with your mailing address and we'd be happy to send them your way. Okay, on 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. And finally, we are experts in thematic investing, in particular, in gold and precious metals, natural resources, airlines and luxury goods, all using a quantamental approach that includes both macro and micro factors. At this point, I do want to hand things over to our CEO and CIO, Frank Holmes, who will provide a deeper macro overview of this visual and in the whole fiscal year. Frank, over to you.

Frank Holmes, CEO and Chief Investment Officer

Thank you, Holly. I appreciate the introduction. Smart beta 2.0 is a crucial part of our dynamic investment process. From a macro perspective and through our thematic ETFs, we identify the key drivers of global trends, especially where significant government spending is directed, as we believe government policies are the forerunners of change. We keep a close watch on both monetary and fiscal policies, providing weekly updates in our investor alerts. I highly recommend subscribing because it offers valuable overviews of various asset classes. As we assess current market volatility, it's essential to manage expectations, particularly regarding stocks. The S&P, gold, and growth can fluctuate significantly—70% of the time they might move just 1%, but a 3% change is noteworthy. Over a 10-day period, movements of 3% to 4% indicate momentum shifts; for instance, a 10% increase usually signals upward momentum, while a decline exceeding 4% typically suggests a buying opportunity. We've been actively purchasing on down days, especially amid significant market volatility. It's notable that the DNA volatility of growth is less pronounced now compared to historical data, and our revenue is closely tied to our JETS and GOAU assets, which are critical for our overall revenue. I want to thank our shareholders, both retail and institutional, including our top three: Capital Management, Vanguard, and Perritt, the latter being specialists in micro caps with a strong affinity for gold and related assets, which I will discuss further later. I hold about 90% of the company and 99% of the voting control, complying with SEC regulations, and we have independent directors overseeing our operations. Our board includes experienced professionals in finance, legal matters, and venture capital, which I believe is essential for effective governance. Moving forward, our strategy is to create sustainable thematic products utilizing smart beta 2.0, which involves exhaustive backtesting. Our mission is to help individuals feel financially secure with consistent wealth growth linked to the themes we provide. We actively buy back stock using algorithms on flat and down days to ensure we maintain growth potential during market corrections and M&A activities. Our goal is to expand our subscriber base and engage with informed investors, facilitating their trust in our thematic funds. Additionally, we are increasing our involvement in the Bitcoin ecosystem, particularly following the approval of the Genius Act, which has positively impacted the acceptance of capital markets. Scarcity is crucial for both gold and Bitcoin, especially with Bitcoin's cap of 21 million coins. Adoption is growing, particularly in the U.S. Over the past five years, GROW has shown marginal growth, but small-cap stocks are now gaining momentum, which is encouraging. We experienced an epic surge to $12 per share for GROW during a substantial growth period linked to ETF and HIVE developments. HIVE enjoyed significant growth, largely due to movements in Ethereum and Bitcoin, where we were previously generating substantial revenue as a top player in Ethereum mining. Currently, HIVE is transitioning into a new growth phase with Bitcoin mining. It's also crucial to note that 80% of global cargo is transported by ship, linking the CETF to emerging markets. The importance of this global trade network cannot be overstated. Following geopolitical shifts, we had to close our Eastern European fund post the Ukraine invasion, which significantly altered market dynamics. The flow of goods through cargo shipping, however, has increased profitability, with dividends from shipping companies remaining strong despite the challenging economic backdrop. In terms of gold, we are seeing all-time highs for gold and significant revenue increases for gold stocks. Despite notable redemptions in the ETF space, our products have remained resilient compared to larger gold ETFs experiencing significant redemptions. Meanwhile, gold is becoming more desirable as countries like China and various BRICS nations increase their gold holdings as part of a strategy to de-dollarize amidst rising tensions with U.S. monetary policies. The growing interest in alternative asset classes, including gold, Bitcoin, and related stocks, is evident, particularly among institutional investors. Market disconnect is notable as GDX, a market cap-based ETF, has been experiencing redemptions despite rising gold prices, a curious trend especially when hedge funds have started to unwind their short positions in gold stocks. We're optimistic about GOAU and our other themed products based on this market sign. Recently, major royalty companies like Franco-Nevada and Wheaton have reported record revenues, illustrating the ongoing strength of the gold sector. However, some gold stocks face challenges related to high operational costs, which could impact their performance. Our efforts to expand into international markets have yielded positive results, with JETS and GOAU now listed on the Mexican Stock Exchange, along with interests in Colombia, Peru, and Chile. Additionally, there exists a strong relationship between military spending and the demand for AI and data centers, particularly as countries respond to geopolitical events affecting military readiness. With the rising demand for data center capabilities, particularly in Texas, investment is growing substantially in AI applications, demonstrating potential for significant returns. Projected defense spending among NATO countries continues to soar, particularly stemming from recent conflicts, amplifying the need for modernization and readiness in military capacities. This is an area where investments will continue to grow significantly. The ongoing explosion in the AI market, projected to expand significantly, requires a comprehensive cross-disciplinary approach, as defense needs and technology increasingly intersect. The growing number of ETFs surpasses the total number of public companies, highlighting the importance of promoting new IPOs as necessary for capital formation. There's a clear trend toward thematic ETFs, which we're strategically positioned to benefit from, as they gain traction in the investment community. As we round up, I reiterate that the current market presents a favorable environment for small-cap investments, particularly as we assess our growth in assets like JETS and HIVE. Our long-term investment strategy focuses on quality products, rigorous backtesting, and maintaining investor confidence. The airline industry, significant for global GDP, and our unique market positions in these assets will continue to drive our strategy forward into the next phases of market evolution. I will now pass it over to our CFO, Lisa Callicotte, for a detailed financial analysis. Thank you for your continued support as shareholders.

Lisa Callicotte, CFO

Thank you, Frank. Good morning. First, I'll start with our Slide 43 that has the financial highlights for our 2025 fiscal year. Average assets under management were $1.4 billion for the year ending June 30, 2025. The Operating revenues were $8.5 million, and we had a net loss of $334,000 or $0.03 per share. Slide 44 notes our breakout of earnings. So we have operational earnings that consist of our advisory services and then we have other earnings, which mainly consists of realized and unrealized gains and losses on our investment holdings. But both of these are dependent and will fluctuate based on stock market forces. The next slides talk about more of our detail of our operations for the fiscal year ending June 30, 2025. Our operating revenues were $8.5 million for the year, which was a decrease of $2.5 million or 23% from the $11 million in the prior year. The decrease is primarily due to a decrease in assets under management, especially in our JETS ETF. Operating expenses for the current quarter were $11.4 million, relatively flat compared to the prior year. On the next slide, we see our operating loss for the year ending June 30, 2025, is $3 million. And we had other income for June 30, 2025, of $2.7 million compared to $2.4 million in the prior year. This was an increase of approximately $329,000, mainly due to higher investment income in the current year. In the current year, we had lower realized and unrealized losses versus the prior year. Net loss after taxes for the year was $334,000 or a loss of $0.03 per share, which is an unfavorable change of $1.7 million compared to the net income of $1.3 million or $0.09 per share for fiscal year 2024. If we move on to the balance sheet on Slide 47 and 48. We see that we have a strong balance sheet and has high levels of cash and securities. And then if we go to Slide 49, that notes our total liabilities, and these are consistent with prior year. The next slide is a detail of our stockholders' equity. At June 30, 2025, the company had a net working capital of $37.2 million and a current ratio of 20.9:1. With that, I'd like to turn it over to Holly, so she can discuss marketing and distribution initiatives.

Holly Schoenfeldt, Director of Marketing

Thank you, Lisa. All right. This first slide in my section showcases our ongoing dedication to delivering original timely market insights to our YouTube and TikTok channels, Video content remains one of the most powerful tools for educating and engaging both new and existing shareholders. If you haven't already, we'll strongly encourage you to explore our YouTube channel. All right. On the next slide, I'd like to spotlight several recent interviews featuring Frank Holmes from the past quarter, including appearances on various podcasts and major platforms. Earned Media remains a cornerstone of our marketing strategy, giving us the opportunity to share timely insights and thought leadership across a range of thematic sectors. We regularly amplify these appearances on our special media channels JETx and LinkedIn, and we featured them throughout our website content too. All right, on the next slide. Our war ETF launched about 9 months ago, and we continue our outreach and marketing efforts for this unique product and we actually just published a white paper this week on defense spending and the ETF itself, and that can be found on our website or e-mail us and I will send you that link. All right. On the next slide, I also want to quickly announce a few webcasts we have in September, both of which you will be able to access a replay for. One is September 10, where we will be teaming up with the HIVE ETF team out of Europe to discuss our UCITS Travel ETF, ticker symbol TRIP. Secondly, on September 25, Frank Collins will do a virtual webcast highlighting clear trade in the market right now and specifically, why it would be a good time to look at exposure to defense and gold. All right. On the next slide, we always like to recap the most read Frank Talk blog post during the most recent quarter. So as you can see here, the top being focused on defense and gold along with the attractiveness of gold. So again, that perfectly aligns with our webcast on September 25, we hope you'll tune in. And we hope you'll keep reading the Frank Talk Blog. Thank you. All right. Finally, on my last slide, I do encourage all of you to follow U.S. Global Investors on social media. We're on Twitter, LinkedIn, YouTube, Instagram and Facebook. So wherever you prefer to get your news, be sure to check us out. This was your up-to-date with what's going on not only with growth but our funds and, of course, the broader market insight. All right. As a reminder to our audience, if you have any questions today, please feel free to e-mail those to us, and we will gladly follow up with you and get anything clarified that you may need more information on. Thank you so much for tuning in today. That concludes our webcast summarizing fiscal year 2025.