U.S. Global Investors(GROW) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Unaudited statements show a profit turnaround driven by strong investment income and surging ETF advisory fees Consolidated Balance Sheets Total assets surged to $61.1 million, driven by non-current investments and a tripling of shareholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | June 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $61,061 | $18,816 | +224.5% | | Cash and cash equivalents | $9,479 | $1,936 | +389.6% | | Investments in equity securities, non-current | $18,635 | $5,142 | +262.4% | | Investments in available-for-sale debt securities | $16,470 | $- | N/A | | Total Liabilities | $10,463 | $2,052 | +409.9% | | Deferred tax liability | $4,681 | $- | N/A | | Total Shareholders' Equity | $50,598 | $16,764 | +201.8% | | Retained earnings | $34,927 | $2,625 | +1230.6% | Consolidated Statements of Operations (Unaudited) The company achieved a significant profit turnaround, driven by surging advisory fees and substantial investment income Key Performance Indicators (Three Months Ended March 31) | Metric (in thousands, except EPS) | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $6,355 | $914 | +595.3% | | Operating Income (Loss) | $3,352 | $(979) | N/A | | Investment Income (Loss) | $15,505 | $(441) | N/A | | Net Income (Loss) | $14,224 | $(1,612) | N/A | | Diluted EPS | $0.94 | $(0.11) | N/A | Key Performance Indicators (Nine Months Ended March 31) | Metric (in thousands, except EPS) | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $14,765 | $2,605 | +466.8% | | Operating Income (Loss) | $4,808 | $(2,158) | N/A | | Investment Income (Loss) | $37,205 | $(3,922) | N/A | | Net Income (Loss) | $32,829 | $(6,182) | N/A | | Diluted EPS | $2.18 | $(0.41) | N/A | Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Comprehensive income reached $34.5 million, reversing a prior-year loss due to strong net income and unrealized gains Comprehensive Income (Loss) (in thousands) | Component | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2020 | | :--- | :--- | :--- | | Net Income (Loss) | $32,829 | $(6,182) | | Unrealized gains on available-for-sale securities | $1,681 | $- | | Foreign currency translation adjustment | $18 | $311 | | Comprehensive Income (Loss) | $34,528 | $(5,871) | Consolidated Statements of Shareholders' Equity (Unaudited) Shareholders' equity grew to $50.6 million, primarily driven by a net income of $32.8 million - Retained earnings saw a substantial increase, growing from $2.6 million to $34.9 million during the nine months ended March 31, 2021, primarily due to the period's net income of $32.8 million[14] - The company declared and paid dividends totaling $527,000 and repurchased 35,996 shares of Class A common stock for $189,000 during the nine-month period[14] Consolidated Statements of Cash Flows (Unaudited) A net cash increase of $7.5 million was driven by positive operating and investing cash flows Net Cash Flow Summary (Nine Months Ended March 31, in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,940 | $351 | | Net cash provided by investing activities | $6,177 | $681 | | Net cash used in financing activities | $(599) | $(412) | | Net increase in cash | $7,518 | $620 | Notes to Consolidated Financial Statements (Unaudited) Notes detail key events including new HIVE investments, significant ETF fee growth, and PPP loan forgiveness - In Q3 2021, the company purchased $15.0 million of convertible securities from HIVE Blockchain Technologies Ltd, valued at $29.1 million as of March 31, 2021[64] - During the nine months ended March 31, 2021, the company sold its 10 million common shares in HIVE, realizing a gain of $15.0 million[65] - Advisory fees from ETFs surged to $11.1 million for the nine months ended March 31, 2021, primarily driven by the U.S. Global Jets ETF (JETS)[75][77] - The company's Paycheck Protection Program (PPP) loan of approximately $442,000 was fully forgiven, with the amount recognized as Other Operating Revenue[78][87] - The monthly dividend was increased from $0.0025 to $0.0050 per share starting in February 2021[88] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Performance was driven by a 592% AUM growth to $4.6 billion and substantial gains from corporate investments Results of Operations Net income surged to $32.8 million from a prior-year loss, driven by a $41.1 million improvement in investment income - Total assets under management (AUM) grew to approximately $4.6 billion at March 31, 2021, from $665.1 million at March 31, 2020, an increase of 592.4%[114][115] - For the nine months ended March 31, 2021, advisory fees increased by $11.7 million (472%), with ETF unitary management fees accounting for $10.7 million of this growth[131] - Investment income for the nine-month period was $37.2 million, a positive change of $41.1 million from the prior year, including a $15.0 million realized gain from the sale of HIVE stock[131] Liquidity and Capital Resources The company maintains a strong liquidity position with $14.1 million in net working capital and $50.9 million in liquid assets - At March 31, 2021, the company had net working capital of approximately $14.1 million and a current ratio of 3.4 to 1[134] - The company has access to an unused $1 million credit facility, which it intends to renew annually[136] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from its AUM, corporate investments, and foreign currency fluctuations - A hypothetical 25% change in the market price of equity securities would impact net income by an estimated $4.9 million, after taxes[147][148] - A significant portion of the investment portfolio is in HIVE Blockchain Technologies, which poses a material risk due to its connection with volatile cryptocurrency markets[151] - Performance fees, which are highly volatile, contributed a $280,000 increase to revenue in the first nine months of fiscal 2021, versus a $391,000 decrease in the prior-year period[144] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[154] - No material changes in internal control over financial reporting occurred during the quarter[155] PART II. OTHER INFORMATION Risk Factors No material changes to risk factors were reported since the last annual filing for the year ended June 30, 2020 - The company states there have been no material changes since the fiscal year-end to the risk factors listed in its Form 10-K for the year ended June 30, 2020[158] Issuer Purchases of Equity Securities The company repurchased 19,900 shares for $127,000, with $2.6 million remaining under its repurchase authorization Share Repurchases (Q3 FY2021) | Period | Shares Purchased | Total Cost (in thousands) | Average Price Paid | | :--- | :--- | :--- | :--- | | Jan 2021 | 8,289 | $45 | $5.45 | | Feb 2021 | 5,214 | $37 | $6.96 | | Mar 2021 | 6,397 | $45 | $7.05 | | Total | 19,900 | $127 | $6.36 | - The share repurchase program authorizes up to $2.75 million in repurchases for the 2021 calendar year[159][160] Exhibits The filing includes required CEO/CFO certifications and interactive data files in XBRL format - Exhibits filed with this report include CEO/CFO certifications (31.1, 32.1) and XBRL data files (101 series)[163]