U.S. Global Investors, Inc.

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Good morning, and thank you for joining us today for our webcast announcing U.S. Global Investors' results for fiscal year 2020. I'm Holly Schoenfeldt. Before we begin today's presentation, I would like to ask for a brief moment of silence to remember the lives lost on September 11, 2001. If you have any questions during the webcast, you can enter them in the questions area of the control panel sidebar, which is normally to the right of your screen. Also, you may download a PDF of today's slides by clicking on the red handout button. 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, Marketing and Public Relations Manager. 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 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 accepts no obligation to update them in the future. On slide four, you'll see a quick overview of U.S. Global Investors. We are an innovative investment manager with vast experience in global markets and specialized sectors. Founded as an investment...

The following day, non-stop. So let's jump into this good news. Our strengths are we strive to be a go-to stock for exposure in emerging markets, resources, gold, and digital. It's gone through this sort of wave where we have found that our stock was highly correlated as a company to our gold assets and global resources, and then it was emerging markets. And then it was through our Hive investment, which I'll comment on, the digital currencies. and now it appears to be airlines because the JETC ETF which I'll talk about is our largest asset. So we have a strong balance sheet, a reflexive cost structure and a monthly dividend return equity discipline. The next person I want to thank, Parrot and the Royce Funds who have been long-term loyal shareholders and Heartland and Advisors Bill Naskiewicz who recently came down in June to visit us in San Antonio and they have a position in our company and Financial Investment Management Group Paul Sutherland has been with us a long time and they're very loyal so it's great to see they've been here all along and BlackRock with their index fund in the asset management company business. Let's go to the next one, next page for the past 11 years. We've consistently been paying a monthly dividend. The yield looks so tiny, but I can tell you it's much higher than a money fund. And it has the capacity to grow. So let's talk on the next one. Next visual is the board approved a repurchase of up to $2.75 million of outstanding common shares from the open market during the three months ended June 30th. The company repurchased 32,000 Class A shares using cash of a modest $39,000. We could just suspend this any time that we deem necessary, but we've maintained this position that we buy in down days. It's an algorithm, and for the best interest, it's always only when you get a big move on the downside, the algorithm picks up the stock. So we've seen that since the bottom in March, there's predominantly been drafts on the upside. You could, as they say statistically, either kurtosis, are skewing, and we're seeing that the markets are definitely skewing to a bias on the upside. This next visual shows you our quarterly assets under management. As you can see, in the June quarter, our year-end quarter, but the second quarter of this year for 2020, the fourth quarter for our year-end, we had a big surge in those assets. What's interesting to share with everyone is that it says $1.2 billion for June 30th, and since then we've gone through another billion dollars. So I think, Lisa, we're at $2.2 billion approximately? Yes. This is easy for anyone to calculate. I know some people just download every day from Bloomberg to take a look at the overall asset size. And that relates to the next page because there are many investors that we know of that I speak to, etc., look at the total assets and they do a calculation and so basically when you have ETFs the average expense ratio which is going to be revenue for us is 60 basis points so it's six hundred thousand dollars of revenue on an annualized basis or fifty thousand a month comes in from having a hundred million dollars of assets and at the beginning of March that's basically the two ETFs we had would be close to that hundred million dollars because they were all getting have all beaten up with the Corona crisis. And that revenue coming to us is about $600,000. Well now with over $2 billion in assets, and if we go to the lower source of revenue, our revenue is up to $12 million on a run rate. Now this is very volatile, let's just have to recognize that. The airline industry is volatile, gold assets are volatile, So these numbers are volatile, but to give you the magnitude is that that revenue for the advisor for ETF business is up about 20-fold from the lows. And this is totally unexpected. I'm going to try to walk through unprecedented factors that have taken place. And we just thank God every day that investors discovered and GoEU. We've always been preaching the thesis that gold is an important asset class and it's finally gone through $100 million. But the fact that this audience of a big ecosystem of investors and traders came into JETS right at the bottom. So I'll talk a little bit more about that throughout this presentation. The next is the balance sheet strength. You know, the balance sheet gets whipped around because of investments that we try to make long-term, but Lisa will comment if questions come on it. Since a year ago, mark-to-market interpretation, every quarter, long-term investment is always going to be mark-to-market, and that's really increasing our volatility for our earnings statement. The next page is showing that the earnings per share for the last four Fiscal years and as you can see 2019 and 20 in particular going into this predominate from a lot of investments and it's nice to see some of these investments have really improved dramatically this summer in our company. And they're public. We let people know, investors, that we made investments in Thunderbird Entertainment Group which is just a fantastic company winning Emmys. Revenue Growth is spectacular cash flow and it's so inexpensive and it's finally been sort of recognized for its great positioning and especially during this lockdown more and more people need content entertainment and this is a company doing over 120 million in revenue and they started to what their whole policy is to also to look for dividends as a way to capture the hearts of investors and the discipline and journey for financial companies and the next visual shows you that the earnings per share on a quarterly basis which is a real shocker you know that we would have during COVID go from losing money basically to profits going up and a lot of that has to do with the asset growth in JETS and GoAU. We've also been able to making changes which has been a really enduring experience trying to in the mutual fund world and the ETF world will be the only fund like Jeff's is the only product out there and it's the only it was the first of our smart beta 2 they call it it's called stock picking and many others. We started this process of converting the Holmes Fund into luxury. The megatrend has changed its name to US LUX. This provides investors access to companies around the world that are involved in the design, manufacturing, sale of products and services. they're not considered to be essential but are highly desired with our culture of society and and it's interesting the largest holding there has been Tesla and Nike shows up so it's it's interesting to me that it's a lot of consumer discrep discretionary stocks and staple stocks that are in this particular fund so the next visuals are trying to walk you through that you have the type of rethink luxury during the pandemic and some of the investments like Home Default have had a spectacular run. Lowe's is just competition and Lowe's itself is showing up in the IBD 50 as being a hot growth stock. Everyone stuck at home all of a sudden started noticing renovations need to be done. and those who had access to capital, higher end families, they really started spending a lot of money. Contract workers working on homes were allowed to work through the pandemic. So the homes, the Home Depot parking lot and right across from our building is Lowe's and all those parking lots were packed. So it just gives you an idea of the activity and that's what we're thinking of. But I hope that this particular product, I think, is unique. It's the only place where you're going to be able to buy high luxury goods as a product, unless you go to Europe, which you can't do. But the real exciting growth here is JETS. JETS ETF is just a spectacular growth in assets. And this is another visual showing that in early March, Bloomberg did an interview with Eric Valconis and it was the cheapest ETFs in the world are Nigeria and coal and jets and he understood why no one wants to buy coal ETF or Nigeria as being a country risk but what about jets and to me it was really fascinating to see the ecosystem of jets attracting tactical traders all the millennials you could think of, Robin Hood, and online at Schwab, and Petey Waterhouse, and Scott Trade, etc. And you also started to see those were shorting. They were shorting American Airlines because they had the highest debt-to-equity ratio, but they wanted to try to mitigate that risk so they were going long jets. And I thought, to me, that was most fascinating to watch and to see different Thank you for joining us. and they did and so it's now becoming a new sort of sentiment factor but we're thrilled to share with you that the JETS ETF, the quant approach to Smart Beta 2.0 has outperformed the bogey when we created this product was to beat the New York Stock Exchange ARCA Global Airline Index. and we spent thousands of hours working on seeing how these airlines did during crises of bankruptcies, etc. What factors worked the best and then we created a product that was both structurally unique from waiting that related to how many people were being flown across the country to also the factors that are best for picking airline stocks and even after fees, JETS has outperformed the New York Stock Exchange which has no fees ARCA Global Airline Index. So this concept of a smart beta or a quant approach does work. That's what's important for investors. But there's no past performance, no guarantee of future results. But we did know from our back testing, it had a high probability of working. Touch wood, it's over five years old and it's done exactly what we thought it would do. The next visual is important for anyone that's been trading the airlines or understand that it's now our biggest asset class is in mid-March the TSA started publishing and the number of people they've cleared the border commercial flight in the U.S. and also people landing from abroad. And I thought it was really interesting that a year ago it was on average 2.7 million people were traveling in America. Domestically, it was about 2 million people that the TSA was clearing. And then it collapsed in April to just under 90,000 people a day. Now, when this data point started being published, all of a sudden quant funds started coming in. and that's another important part as you can see the 50-day moving average and every time it makes a new high of the daily number of people the jets airline sentiment drives it higher so there's two things driving the sentiment and the volatility of the airlines industry one is a vaccine Any positive news in a vaccine and the airlines all of a sudden surge and two is just the number of people that are clearing to travel. And last week on Friday, a week ago, was a new record high since the March, since the April lows. It was April the 14th. And we almost got to a million people were cleared to fly. And I think that when we get to that one million people daily are flying, That will be part of the sort of surge that's taking place that you'll see higher prices. Now, here is Eric Balcones, and as he said, an exchange-trader fund that tracks airlines to become the hottest theme in ETF history, with bargain-hunting day traders from sites such as Robinhood taking the other side of the trade with Warren Buffett, who recently sold his stocks. He says that the ETF has added $635 million over 45 straight days. and many, many, many, many, many, many, many, It's now 26% since Buffett sold and acceptance on wire host platforms continues to grow. And that's the next visual. That's very, very important for us. The barriers to entry to getting on these platforms becomes more and more difficult every year. It used to be 50 million, then it was 100 million, then it was 200 million. Each platform, wire host platform is different. And when you go to a billion, you basically qualify for all of them. and what the wire houses have to be so careful of is that Robinhood and E-Trade and Interactive Brokers allow people to trade these so a lot of their clients will just all of a sudden open an account of these other platforms and what's interesting is for me, I'll talk a little bit more about Robinhood, Robinhood allows you, there's a service that allows you to look at the data of how many people are buying into your ETF and there's so much negativity and all these millennials becoming day traders What I share with you is that if you look before the airlines took off in June, the millennials had basically, through Robinhood, had, I think it was 25,000 of the accounts had bought jets. So that means this huge surge off the bottom, which is I think up 50% from its lows, is basically saying they made money, and they made good money. and so when I read all this negative stuff about how bad it is, I see the opposite side of this trade where they came in and a lot of these retail accounts made a lot of money. but we're happy for them and we're happy for the industry but most important it's so good to have new investors coming in and price discovery. The last time I saw such a huge retail influx was in the 90s going into mutual funds. So now ETFs are being captured in everyone's imagination and this is another growth point. Understand the DNA of volatility, this impacts growth. As a shareholder in growth you should understand that the fact that we own airline stocks and we own gold and gold stocks and investments in high it does give us greater volatility and the S&P's volatility is about the same as bullion over one day ten days but Bitcoin is five times greater and gold stocks are three times greater and oil is five times greater and oil is important because oil is extremely volatile it's just like Bitcoin and Ethereum are, but oil is the biggest expense in the airline industry. And that's a reason why you get this group of investors that go along the airlines when oil is falling and take profits or short when oil is rising. So because oil is the largest cost structure when looking at the airline industry. So this DNA of volatility from oil shows up in oil stocks. I'm sorry, not in oil stocks, it shows up in airline stocks as a cost factor. The next visual is talking about gold, the inverse relationship between gold and real interest rates. I'm so shocked listening this morning that The highest concentration of negative real rates around the world is in Europe. The US is still negative but nothing compared to what Europe is. They're below zero in raising money. It just shocks me. But this is really driving a lot of interest in gold and flows into gold and the GLD have been unprecedented. And there's some rational reasons. I still see these talking heads talk negatively about gold as an asset class, and they just don't like to hear that long-term gold is up three times greater than the S&P 500. So the Ray Dalio's show their brilliance by always having a 7% to 15% weighting. He's always in and out of the space, but he's always the exposure to gold. And if gold is far outperforming the S&P 500, there's no doubt it adds to his alpha equation. And he is now Ray Dalio's Bridgewater, the largest hedge fund in the world. And I remember when I first started talking about this in Vancouver when the Golden Cross, that is the 50-day crossed above the 200-day moving average, which is usually a very positive technical sign of trends, a long-term trend for gold, that most people were bearish. And we saw this in the first part of 2019, except for very smart hedge funds were regularly talking about why gold is appealing to them, the fundamental reasons what was driving this move in gold. But as you can see here, you can have big downdrafts. Gold could easily fall back to the 200 day moving average short term like it did back in April and then surge rate back up. And I believe that we're in the secular bull market. But I also believe more so than ever, as you go to the next visual, is that we're in a secular bull market for gold stocks. Gold stocks are for the first time showing free cash flow yields as the industry was at the end of March when the S&P went negative free cash flow yield. and investors generalists really like stocks that have a high free cash flow yield and this quarter for gold stocks end of September will have a record free cash flow yield. So with that during this summer Berkshire Hathaway took a $565 million position of Barrett Gold was sort of a big shocker because Buffett's always been negative on gold but he bought a gold producer with free cash flow. But the Oracle of Omaha has always been right. I was too dumb to realize I did not think Bezos could succeed in the scale he has. And Bezos continues to impress everyone with the scale that they've grown. And a lot of that's using AI to make decisions. We're also seeing AI being used for Apple stores, how they open and shut stores based on how bad the coronavirus is in the area where their stores are. So it's a new world that we live in and quantum mental investing, what drives our ETF structure for both GoAU and with JETS is as I'm so happy that we're in that field of using the quantum approach. On CNBC Asia, there was a very long interview recently, why gold could reach $4,000. If you just look at the money printing presses of the Federal Reserve and the EU, the expansion of the balance sheet would happen in 2008, 2009. Then three years later, the price of gold went from $800 to $1,900. So if you apply the similar math, it suggests that gold could go to $4,000 in three years. So me saying that is not outlandish because of the unprecedented money printing and zero interest rates. And we're seeing real estate in America is up 10% year over year. We're seeing in Toronto, we're seeing this growing up 17%. So I think that negative real interest rates is lighting an eye under the gold, and we're so thrilled that our gold miners at GoEU crosses above the $100 million milestone that it starts to throw off free cash flow for us. So where's GoEU available? It's on the Wirehouse platforms, OpenHybrid, JanE, RPC, and Staple, online brokerage firms, Robinhood, E-Trade, Interactive Brokers, and RIAs, Raymond James, LPL, Cetera, Advisor Group, Commonwealth, Schwab, Fidelity National Financial, TD Waterhouse, and Pershing. Now, let's hop to one of our other investments. We couldn't launch an ETF in the space, so we became the largest crypto miner investor and we launched a high code, because basically, with other friends I have in Vancouver, high blockchain technology, and it became the first institutional and retail mining Bitcoin Ethereum. and this visuals here you can come back to look at it shows you that sentiment has been driving a lot of it the crypto affair winter bottom when JP Morgan stopped talking negatively about the industry because in February of 2019 they had launched their own coin so we're at a bottom in the flux there and I think that we're going to see this volatility as bitcoin continues to rise it did go through a halving last quarter Thank you for joining us. and what drives our biggest investment is in high blockchain, is Ethereum transaction fees shoot up because of a new form of DeFi financing. It's extremely volatile. That's all I can tell you. This whole space, although boring with it, but high blockchain allows us to mine virgin coins and many, many more. and the other part we use a quant approach and we take profits to pay our electricity bills but Hive clearly is the leader in this space. Hive is the biggest Ethereum producer so these recent surges in revenue to give you an idea of the run rate we have it's so easy to figure out at the end of March that top line could be just under 30 million dollars and it exploded to a high now it's corrected but you can see it all of a sudden run to a run rate of a hundred million now it's back to 60 million but still in the quarter is doubled so the revenue from this business model is very volatile the stocks are volatile that shows up in high in US global investments as that volatility So this is just some of the facts for you to understand. The Ethereum miners generated extra fee revenue because of a new development called DeFi. And Hive itself, the next visual is showing its own performance competition both in price and liquidity. Hive, the next visual is showing you, is correlated 70% of the time with the cryptocurrencies. And then the next visual is just showing you for your own information to go back and look at sort of the press releases and where we are as we're building out operations in Quebec. We're seeing lots of wonderful opportunities shown to us, and we're updating our facilities. We finally got control of Iceland, and we're expanding the operations there, upgrading and then expanding, so it's a very exciting position for Hyde. Now, as we try to wrap down to some of our key investments, as Thunderbird moves on to growing its revenue cash flow. I shared this earlier with the Emmys. As you can see, the stock did sell off going into April. Their big business is Amazon and Netflix in particular. So when Netflix is producing content, a lot of this content for animation is done by Thunderbird. And so their top line revenue and their cash flow has been exploding. And really now I think it's just waking up about how unique the stock is. and I think it's above where the financing with IPO is at $2. It's a wonderful category growth in both revenue, cash flow and earnings and so I think you want to stay tuned to Thunderbird relative to its peers. It's extremely undervalued on a revenue multiple or cash flow multiple. And this is another showing you congratulations to Thunderbird I'm on the board of Thunderbird. We have an important investment in Thunderbird but they won many awards for Canadian sitcom to the famous Highway to Hell documentary. You can watch these on weather stations in particular. And now I'm going to turn it over to the brains of the organization. I'm just abroad here and Lisa Callicotte, our CFO, is going to address the financial metrics. But I want to make sure I give you an understanding of the fundamental factors driving what she's going to talk about. Lisa. Thank you, Frank. Good morning.