SAN ANTONIO, Sept. 10, 2024 (GLOBE NEWSWIRE) -- U.S. Global Investors, Inc. (NASDAQ:GROW) (the "Company"), a registered investment advisory firm with deep expertise in global markets and specialized sectors from gold mining to airlines, today announced operating revenues of approximately $11 million for the fiscal year ended June 30, 2024. The Company reported net income of $1.3 million, down from $3.1 million in the same period the previous year, largely due to a decrease in advisory fees stemming from lower assets under management (AUM). However, net investment income surged to $2.1 million, a remarkable 578% increase from the prior 12-month period.
For fiscal year 2024, average AUM stood at $1.9 billion, with total AUM nearly $1.6 billion as of June 30, 2024, down from $2.4 billion the year prior.
Despite the challenging macroeconomic environment, marked by a prolonged yield curve inversion—where the two-year Treasury yield exceeded the 10-year yield—investor sentiment toward the airline industry has weakened. This inversion, a historical recession signal, lasted for a record-breaking 783 days before reversing.1 The uncertainty surrounding the inversion led many investors to reduce exposure to industries like airlines, which are typically sensitive to economic slowdowns. Despite this, the airline industry's fundamentals—marked by robust growth in passengers, revenue and cash flow—remained strong, although macroeconomic concerns kept many investors on the sidelines.
Now that the yield curve has normalized, the Company expects a potential shift in market sentiment, as the reversal could signal renewed confidence in future economic stability.
"We can't control external factors like geopolitics, interest rates, taxes or regulations. However, we do have control over our internal processes, including robust governance, compliance and our smart beta 2.0 approach to developing thematic ETF products, which combines quantitative and fundamental analysis," says Frank Holmes, CEO of U.S. Global Investors. "While we cannot directly influence investor sentiment, we remain optimistic, particularly following the reversal of the yield curve in September after its historic 783-day inversion. As illustrated in the chart, the correlation between the inverted yield curve and redemptions in the U.S. Global Jets ETF (NYSE:JETS) has been significant."
Confidence in the Long-Term Outlook for the Airline Industry
The Company continues to express confidence in the long-term growth of the airline industry, driven by strong demand for air travel, lower borrowing costs and a return to pre-pandemic levels of consumer travel spending. Two years ago, the U.S. Transportation Security Administration (TSA) was consistently clearing around 2.0 million passengers per day, even surpassing pre-pandemic figures. In July 2024, the TSA set a new record by screening 3 million passengers in a single day.2
Additionally, the Company continues to expand its global presence with a new ETF listing in Colombia this month. Many countries in Latin America are pursuing robust strategies to expand tourism, creating jobs and attracting foreign capital. This strategic move aligns with the Company's approach to tapping into high-growth markets, where tourism plays a critical role in driving economic development.
Leading U.S. airlines, including American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines, experienced an average revenue growth of 841% over the four years ending in June 2024, while EBITDA (earnings before interest, taxes, depreciation and amortization) grew by 178% over the same period, according to Bloomberg data. Over the past two years, these airlines saw revenue growth of 61%, with EBITDA doubling by 100%, underscoring the resilience and growth of the sector.
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9.41% Shareholder Yield Exceeds Treasury Yields
As of the most recent reporting period, the Company's shareholder yield—a valuation metric popularized by Cambria Funds founder Mebane Faber3—was 9.41%,4 more than double the yields on both five-year and 10-year Treasury bonds. This strong yield reflects the Board of Directors' commitment to delivering value to shareholders through a combination of share repurchases and monthly dividends.
Share Repurchases and Monthly Dividends
Indeed, the Company is committed to returning value to shareholders. During the fiscal year ended June 30, 2024, the Company repurchased a total of 767,651 of its own shares at a net cost of approximately $2.2 million. This marks an 86% jump in shares repurchased from the same period a year earlier and a nearly 760% increase from fiscal 2022.
As of June 30, 2024, the Board of Directors has authorized a monthly dividend of $0.0075 per share from July 2024 through September 2024. The Company has paid a monthly dividend since 2007.
Healthy Liquidity and Capital Resources
As of June 30, 2024, the Company had net working capital of approximately $38.2 million, a slight increase from the same period last year. With approximately $27.4 million in cash and cash equivalents, plus investments in our funds and other securities, the Company has adequate liquidity to meet its current obligations.
Gold Investors Anticipating Rate Cuts
The price of gold hit a new all-time high price on August 20 of this year,5 yet investment in gold-backed ETFs has remained muted as high interest rates in the U.S. deterred some investors from putting money in a non-interest-bearing asset. However, rates are widely expected to be lowered starting at the Federal Open Markets Committee (FOMC) meeting on September 17, a move that should lower bond yields, weaken the U.S. dollar and potentially boost demand for gold and gold mining stocks.
Against this background, the Company is happy to see that AUM in U.S. Global GO GOLD and Precious Metal Miners ETF (NYSE:GOAU) remained stable between August 2023 and August 2024. We consider GOAU a smart beta 2.0 ETF, meaning we believe it combines the benefits of passive investing and active investing. GOAU provides investors access to companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or streams) means.
"De-dollarization, geopolitical tension and concerns over U.S. debt sustainability continue to drive interest in gold," says Mr. Holmes. "With limited alternatives in other major currencies, central banks have increased their gold reserves, a trend that could continue given expectations of gold continuing to hit new all-time highs."
JETS UCITS ETF Merged with TRIP
The Company continues to strengthen the global brand of its U.S. Global Jets ETF (NYSE:JETS), which trades not just in New York but also on the Mexican Stock Exchange, the Lima Stock Exchange in Peru and, effective August 29, 2024, the Colombia Securities Exchange.
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