U.S. Global Investors (NASDAQ:GROW) Q3 2021 Earnings Call

0:01 Good morning, everyone, and thank you for joining us today for our webcast announcing U.S. Global Investors results for the third quarter of 2021. I'm Holly Schoenfeldt. At the end of today's webcast, we will be addressing questions that were sent in prior to today's call. If you have any additional questions during the webcast, please send those to info at usfunds.com after the presentation, and we will get back to you as soon as possible. Now, as seen on slide number two, 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.

0:47 On to slide number three. As always, we would love to offer anyone tuned in today one of our Jets, GoAU, or Hive hats. All you have to do is send us an email with your mailing address, and we are more than happy to get one over to you. On slide number four, 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 in 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.

1:39 Any such statements are made as of today, and U.S. Global Investors accept no obligation to update them in the future. Now on slide number five, you'll see a quick overview of U.S. Global. We are an innovative investment manager with vast experience in global markets and specialized sectors. Founded as an investment club, the company became a registered investment advisor in 1968 and has a longstanding history of global investing and launching first-of-their-kind investment products, including the first no-load gold fund. U.S. Global is well known for expertise in gold and precious metals, natural resources, Airlines and Emerging Markets. Now on slide number six, I would like to hand it over to Frank Holmes, CEO and CIO for an overview of the period and what is driving the stock.

2:33 Frank. Thank you, Holly. And thank you all the shareholders and new and old loyal shareholders for being with us for the ups and downs. And it's been even the past year has been an amazing roller coaster. But what seems to be nice and consistent has been growth in assets and the crypto space and I think in that introduction, Holly, we forgot to say that we couldn't launch a blockchain crypto ETF, but we were able to launch Hive. And that has been an important part of our overall success. In addition to the airline recovery, the vaccine rollout, we've benefited dramatically from the anticipation of the vaccine. And then the vaccine rollout has led to spectacular growth in jets. And hopefully in this presentation, we're going to walk you through that.

3:27 We don't believe it's over. We believe that Canada is just coming out of the thaw. Europe is still not thawed yet, but they're doing everything to get to the level where America is, and I think we're going to get more growth in the airline industry around the world. And that has all helped driving surging assets under management. Next, please. So our top institutional shareholders, Parrot Capital Management is at 5.52, Diametric Capital at 5.3, Heartland Advisors, Bill Naskiewicz and team at 4.81, the Royce Funds, who have been really with us up and down through the whole period. At one time, owning 15% when we were predominantly had the motion of being known for gold.

4:15 And it's interesting to see how we've evolved with that. But thank you for being such loyal shareholders and Vanguard, which is basically an indexed product that they have. The five names own about 20% of the company. Next, please. Myself, I own about 16% of the company through Class A and C, and I own 100% of the C, which is voting stock. And when you add that, convert that to the A, overall 16% of the company. Next, please.

4:48 Growing dividends. We've been paying them monthly. The company has paid a monthly dividend since June 2007. The current yield at $8.19 as of May the 3rd was 0.73. Monthly dividend payments of 0.005 approved monthly. So I think, as you can see, they're approved through June the 21. And I think based on our financial strength, we should be able to maintain that. Next, please. So the shareholder repurchase program, the board approved a repurchase of up to 2.75 million shares of its outstanding common stock in the open market through December 31st of 21. And during the three months ended March 31st, the company repurchased 19,900 shares of Class A shares using cash or approximately 127,000.

5:39 What's important here is that it's an algorithm that buys only on down days. So it's been useful, and I think the average price, Lisa, was $6 and change that we paid for those 19,900 shares we purchased back. But as the board has at any time may suspend or discontinue at any time this program, but so far we've kept it on for a long period of time. Next, please. So you can see the share repurchased. Another visual looking at it. And it's been a great way to accumulate stock on the down days and down periods. Next, please.

6:26 Grow share prices, see steady growth. This is a share price over 12 months, end of March 31st. We had a super surge that doubled and then pulled off. Try to explain to you what's driving some of that volatility. But over the past year, It is up more than sevenfold. Next, please. That's right. Our P.E. ratio is extremely low. When you compare us, and I like to use a classic example that Invesco, an excellent fund family group, 40% of their assets are on the QQQ, and they trade at 15.4 times. WisdomTrees, 100% are ETFs, and they trade at 21.3%.

7:11 and Grow trades at 4.4 and 80% of our operating revenue comes from the ETF space. So it's, I think that Grow has the potential for much more upside as we continue to show Q over Q and year over year growth in revenue, cashflow and assets. Next please. So growth surges past its competition. As you can see here, because of the delta change, we just had faster growth in revenue per share than Invesco or WisdomTree. And we had faster EBITDA per share growth in these, in particular because of JETS as an asset class than our peers. And that's what drives the stock price. Thanks, please.

8:00 Nice, simple, I like this, spank and span, clean, grow just the other day, close at 819. The average assets, about 4 billion. What's important here is that they grew 38% Q over Q and 632% year over year. This translates into revenue of 6.4 million, which is a 23% increase Q over Q, and revenue year over year grew 595%. So that helps drive the stock price and the income, $14.2 million, up from a loss of $1.6 million a year earlier. What's really key here is the growth in jets has been the most significant. We had GOEU for the first nine months of last year, while gold was surging, and it's tapered off. But jets is continuing to be tracking with how vaccines are growing.

8:56 Total assets under management as of the end of March 31st were $4.6 billion. Next, please. So grow is growing faster than the money supply and inflation. It's an important factor when you're looking at, so how do you grow inflation? And there's no way inflation is only 1.7, 1.8%. And the reason why that CPI number is so understated is because it excludes food and inflation. So inflation is probably running more like 9%, and money supply is growing at a huge number. You can see 25%. So I think that Grow has done a good job, mainly because we've been able to attract assets, and also some of our key investments have grown in the past year faster than the amount of money being printed.

9:50 Next, please. This is the quarterly average assets under management. As you can see, a nice climb from March of last year when the pandemic hit and was the all-time low. And we see a rise in June, September, December, and March. Balance sheet is now reflected also very strong. We did a strategic investment in Hive Blockchain. When we launched Hive Blockchain, which was the first public company Thank you all for joining us. have the ability to get back or either convert it into common stock or get paid out every quarter a portion of the principal.

10:53 You can see equities investments and you can see the cash is growing. So our balance sheet remains much stronger than it has in fact probably going back like 10 years. Next, please. Earnings per share quarterly. mainly due to the indirect investment of Hive, as you can see, back in 2018 during the winter of crypto. 17 was the big launch of Hive. It boomed and then it falls and tracks with Ethereum and Bitcoin. And then during that period of 2018 was the winter for crypto. It was also a winter for gold stocks. Gold stocks really didn't bottom until September. and many, many, many, many, many, many, many, many, Jets and GoAU taking off, in particular Jets, and then the crypto investment in high blockchain.

12:12 It came back last year and generated a return that was far greater than new highs that companies made. So it's been a wonderful ride for the shareholders who've had the patience. Next, please. Operating revenue has been trending upward. Nice way of looking at the quarterly revenue in millions of dollars, as you can see here. Next, please. And actually, what's interesting about the fund business, and we're so transparent, it's so easy to, we know people that just basically look at our ETFs every day and the total assets and multiply it times 0.6, and it gives you an idea what our revenue is going to look like, and then what did our key investments like Hyde close at, and that affects our P&L on the balance sheet.

13:00 and Income Statement. So you can see that as the assets were in the ETF business, $100 million was throwing off $600,000 in revenue a little over a year ago. For the same quarter, March closed, then the Jets and GoAU. And now having $4 billion in assets, that says that those assets are throwing off $24 million in revenue. And having $4.5 billion, we're pushing close to $60 million in Thank you for joining us. Thank you, millennial investors.

13:53 Their ideas to invest in weren't as significant as the millennials that came through Robinhood and Fatality and came through TD Waterhouse and Schwab. I'm going to thank them because their price action, next visual, please. It was very significant. I talked about it last year that there was a whole forecast, 25,000 Robinhood investors bought jets between $12 and $13. Buffett comes out in June and says he sold all of his airlines, and he's very pessimistic about the options for a vaccine and the growth that turned around the economy, and the airlines started taking off. It was basically the bottom, and jets went from the $12 range to $28, and that run So when they say millennial investors aren't very smart, I disagree.

14:50 I know that the data was showing at the time 25,000 had invested in jets prior to Buffett disclosing that he had bailed on the industry as it took off. What's important here is that a lot of these early investors were speculating and many of the airlines in the first quarter. 92 days until 70% of the population is vaccinated against COVID-19 and the United States is doing well. And I think we'll see that as 70% gets to that number and we get a higher number for double vaccines, that is the double shots, the airline industry will get business travel.

16:03 That's a more profitable part of the business. But in the interim, it looks very, very strong that by August, we'll have 70%. This is an interesting time to herd that comes out on a regular basis and you can track how many days based on collection of each data and the rollout that's taking place. The country that we look at, it was interesting, it's a small population basis, Israel. Israel with less than 10 million people has pushed something like 83% of the people have already received their first vaccine. But as America is over 300 million, it's just more work. But those states that have had the biggest penetration in getting people vaccinated have enjoyed the greatest business boom.

16:55 Next, please. Record inflows in the Jets. Looking at it by each quarter, it varies. But here you can see the dollar amounts traded in the billions. It's just remarkable to see that we traded 40,000 shares a day and it goes to 8 million. Next, please. Something that really was important last year that came out in March. was by the TSA discussing how many people and giving the data that they allowed to fly. They pre-cleared. To give you the big macro data point, prior to COVID, the TSA was basically approving 2.7 million people a day. Two million Americans were flying daily. 700,000 were inbound from Asia, Europe, Canada, and Latin America.

17:44 That collapsed. until April of last year to a number of just under 90,000 people a day were flying. Now we're over 1.5 million people. And most of that is tourism, not so much business travel to the degree and the business travel, as I said, the data suggests that when we get 70% of the people vaccinated, more than 50% of people double vaccinated, that business travel will then pick up again. But, you know, I remain very bullish on the travel recovery. I believe that the first big two surges we've had in jets that we're getting ready, we've corrected from the highs and we'll get ready for probably the next third wave for the jets to possibly go back and make new highs as Europe comes back on stream. And what you have to realize is that there's so much pent-up demand for people to try and just fly and travel, but for goods and services all over the world.

18:44 Friends of mine were in Vegas recently and they said, everything is sold out in the shops. You have to basically go in the shop and buy online. So I think that we're going to be so well-surprised When we take a look at the growth and purchasing manufacturers index, we strongly suggest a huge boom for the next six months. And GDP numbers are being forecasted between 6% and 9% growth rates. So I think there's lots of upside still in the airlines industry. Next, please. Airline recovery optimism. Another wave of travel is expected. Next, please. But never forget the DNA of volatility. I highly recommend you look at this and you study it.

19:30 The DNA of volatility of the gold market, bullion is plus 70% of the time it goes up or down 1% in a day. Over 10 days is 3%. So any time it jumps 6% in 10 days, take profits. Any time it falls more than 6%, it's usually a time to start accumulating. The S&P is two times gold over one day and over 10 days is slightly higher. It's plus or minus 5%. So it's more volatile. Most people think of the talking heads on CNBC that gold is more volatile than the S&P 500, when in fact it's more stable. And it's been proven itself to be a good asset class for the largest hedge fund in the world. Ray Dalio, you know, having a 10% weighting and rebalancing.

20:15 And this time last year was on a tear on the upside with all the money printing as 10-year government bonds went from 50 basis points low and Serge to 1.8%. That run basically took the window of the sale for gold as corrective. But, you know, I think it really gives you a great opportunity to be buying gold and gold stocks on that correction because the amount of money printing by U.S., China and Europe is $17 trillion. So as that comes through the economic engine, There's another reason for the Jets and another reason why I think gold will have another big run. But that ignited last year the Bitcoin and Ethereum. And as you can see, the volatility there is impacting our stock price.

21:01 Because behind every share of Grow, there's almost 0.7 shares of Hive. So if Hive is down today, we're now finding all of a sudden Grow is down. But from an operating cash flow and revenue, people have to recognize that the operating cash flow really most of that really is directed from basis points fees we earn from managing the ETFs and mutual funds and the investment in high predominantly shows up in the assets as an imbalance sheet and it's the P&L comes from investments and that's a much more volatile factor that drives it but our new convertible really creates much more stability in that as an investment, which we have.

21:46 So I think that the opportunity when we sell off, the investors are not really capturing and why we're training such a low multiple, the huge embedded value of the ETF business we're in. And I think that going forth, this is going to be unlocked. But Tesla is more volatile than Bitcoin. Always shocks people. But Ethereum is the most volatile. Ethereum is a very significant investment in Hive. Hive is the only crypto company mining Ethereum. And it's a huge asset to them, both on revenue and cash flow. And in assets, they huddle. They have a big investment in Ethereum itself. Next, please. So GoAU index is all performance of New York Stock Exchange ARCA Gold Index.

22:33 Since we launched this, or since we look in the past year, as you can see, the quant approach to picking gold stocks is just better than just buying on market cap. And that's the big difference. We have a smaller portfolio, higher percentage in the world to companies, and this index shows. And I just think it's a much smarter way, and that's what the GoAU ETF does. Tracks, this particular index, and it's just a better way for investors. Next, please. So passing on from GoAU, I want to jump into Hive, which was a strategic investment we made three years ago, over three years ago, in fact. And it was because we were trying to launch an ETF in Bitcoin and Ethereum.

23:20 We quickly recognized that the regulatory bodies, both in Canada and the U.S., were quite concerned about anti-money laundering laws They just weren't going to let it happen that some hacker got some Bitcoins and then he sold them into a New York Stock Exchange listed ETF. It was just bad news. We had all this knowledge and friends of mine invited me to explore it. They were doubting that crypto mining was for a long term, but I was in a much more bullish stance to it. I put up the first institutional money, put $5 million in. and many more. have ushered in and attracted over a billion dollars of other companies emulating what we've done. But we've always been the forefront.

24:21 We've had the strongest ESG footprint only using green energy. We've also been the first to go out and buy our own data centers and also to do share swaps to build out what we think is very important investment. But let me walk you through the incredible rollercoaster ride of high blockchain technology. So, U.S. Global Investors and Hive. Well, we recently sold 10 million shares of Hive in December, locking in gains. But it was strategic, not only locking in gains, but more important was to build up the cash position to reinvest in Hive so it could maintain its growth momentum. I didn't sell any shares personally, and I think it's important for investors to realize the proceeds were reinvested via private placement in unsecured convertible debentures.

25:12 which were very attractive at the time for the company and extremely attractive for U.S. Global because we maintained our position so behind every share of Grow is about 0.71 shares of high blockchain. The debentures mature in five years. They have quarterly principal payments and they bear interest rate 8% but paid monthly. Now, what's also important is in this concept when you look at crypto mining, and why Hive was such a raving success is because not only did we mine Ethereum and Bitcoin, but we hold on for dear life. That is, keep what you believe and keep it on your balance sheet. So we keep and have always kept Ethereum and then Bitcoin on our balance sheet. And this attracted a huge audience of investors from September of 2017 when we first launched it.

26:03 And so for investors in Grow, what you recognize is that Hive is our hodl. It's our way to play the crypto phenomenon that's taking place globally. Here is a 30-second comprehensive but concise sort of introduction to who Hive is.

26:19 Hive Blockchain Technologies, the first publicly listed crypto mining company launched in 2017. Hive, a proxy for investors wanting exposure to the growing Bitcoin and Ethereum blockchain ecosystem. The only crypto mining company producing both Bitcoin and Ethereum. Hive uses only green energy in its advanced facilities. The most liquid technology stock in Canada 2020, trading over 1.7 billion shares. Hive Blockchain Technologies. Visit hiveblockchain.com.

26:49 Hive invests in these data centers and builds them out. And I want to make sure you get to see the next video. It's a minute. It's longer than 30 seconds. But it really helps you on the sheer size and the magnitude that Hive is the largest Ethereum miner in the world. and many more.

28:52 So Hive blockchain continues its strong performance. The total return 12-month period to March 31st, it was up 2,500%. And the U.S. global shareholders benefit from the spectacular growth in Hive. Hive also, because of its investments in Bitcoin and Ethereum, at the end of December, was the most profitable of all the crypto mining companies. I think we also probably will have that by the end of March. There's more machines coming on stream with other mining companies and Bitcoin mining this quarter in June. So maybe that'll change. But I still think we're the most profitable crypto mining company. Next, please. So not only was it a spectacular performer, it attracted the imagination as Ethereum and Bitcoin rallied. And we traded 1.7 billion shares in Canada, an over-the-counter 1.8 billion in the U.S., We traded almost 60 million shares, and in Germany, 20 million shares.

29:53 So overall, it traded 2.4 billion shares of stock as it appreciated almost 2,500%. Next, please. So I'm often asked, what is the difference between Bitcoin and Ethereum? And I hope this one-minute information video helps you understand the difference. You know, so often I'm asked, what is the difference between Bitcoin and Ethereum? Well, it's a great question because the two are the most popular crypto words. Thank you for joining us. Well, Bitcoin is essentially digital money.

30:52 Bitcoin is the future of how payments should be made on the blockchain. Ethereum is a new infrastructure that can do anything, such as decentralized social media platform or insurance or the Internet of Things. Bitcoin signals the emergence of a radically new form of digital money that operates outside of the control of any government or corporation. Thank you.

31:32 Well, Hive is the most liquid TS, and that is in Canada, stock trading 1.7 billion shares in 2020. And then over the counter in the U.S., the pink sheets that used to be known, number fourth in best 50 stocks, established a market equity program to accelerate its growth during this period, and it still had run up more than double when all the crypto stocks took off in the first quarter. And what's interesting about this, is that we traded more than Grayscale's Bitcoin Trust. Next, please. So here's the numbers, you know, high, far-o performance competition. And I share with you is that when we were trying to launch over four years ago a Bitcoin ETF, we did all this research and realized it just wasn't going to go anywhere due to the concerns of anti-money laundering laws by the SEC and the Materials Securities Commission.

32:28 and KYC. But crypto mining, you basically validate a transaction and you get paid brand new cryptocurrency for that. So they're untouched. You don't have an AML concern. That investment was an important investment. We invested originally $5 million and it was a heck of a roller coaster. It went up to worth $100 million. It fell back to worth about $3 million. And today it's worth much more than So it's an interesting exercise that crypto mining as Ethereum and Bitcoin prices rallied was a better investment and it'll perform everything else.

33:15 Next, please. So last year, everyone talks about Bitcoin up 800%, but Ethereum was up 1300%. and in February of this year Ethereum started trading on the futures market for CME for institutions they were able to buy. But Hive, it's up 2,500%. So I really think that the mining has been a better investment. Now, these are reasons that are driving this price that I want to share with you is Metcalfe's Law. And it's very simple. May of last year, they halved the number of Bitcoins that you would get every 10 minutes. from 12 and a half down to 6.25. So supply gets restricted. We all know that it's capped at 21 million coins, but more and more people are buying and they're now able to buy through PayPal and PayPal allows you to buy a fraction. You can't buy an ETF on PayPal.

34:07 You can't buy a stock, but you can buy Bitcoin and you can turn around and sell that Bitcoin and use the proceeds and go to Amazon or go to Best Buy and buy a new TV because you bought it at $10,000 and it's now $57,000. It's remarkable. What that does is, and what it says, as Metcalfe's Law says, that if you have a limited supply and more people adopt Bitcoin as an asset class to protect you against the excessive money printing, then it grows exponentially. And that is what has been driving it. Supply, we all know of Ethereum and Bitcoin. is much more limited, and that attracts more buyers. MasterCard, Visa, they're all jumping in on this space and more and more institutional money. So Hive has been benefiting because of the new interest in Ethereum and blockchain.

34:58 and the video is here to explain to you how Metcalfe's Law works. In simple terms, Metcalfe's Law says that a network's value increases geometrically with the number of users in the network.

35:09 Before we get started, be sure to hit the like button and subscribe. The concept was originally applied to communications networks such as telephones and fax machines. Thank you for joining us. Thank you for joining us. Thank you for joining us.

36:20 including Tesla and Square take positions in Bitcoin. Microsoft, IBM, and others have reportedly bought Ether. Most important last year is the influence of PayPal allowing people to buy Bitcoin and then to sell consumer goods and services. I expect this activity to be a huge tailwind for Bitcoin, Ethereum, and the crypto ecosystem in general. For more, hivblockchain.com to subscribe for our exclusive email updates. Well, thank you very much for the patience, for watching that for a couple minutes. Now I want to talk to you, have you to listen to hardworking, our CFO, Mrs. Dynamite, Lisa Callicotte.

37:06 Thank you, Frank. First, I'd like to start with our financial highlights on slide 43. We had another very strong quarter. Operating revenues have continued to increase, and we're up approximately 23%. Thank you for joining us. Now, I'll review more details of our operations for the quarter ending March 31st, 2021. Beginning on slide 44, we recorded total operating revenues of $6.4 million for the quarter, which was an increase of $5.4 million, or 595%, from $914,000 the same quarter last year. The increase is primarily due to increases in assets under management, especially in our Jet CTS.

38:14 Operating expenses for the quarter were $3 million, an increase of $1.1 million or 59%, primarily for the following reasons. Employee compensation and benefits increased $667,000 or 93%, primarily due to increased bonuses due to improved company and fund performance. General and administrative expenses increased $437,000 or 40%, primarily due to increased ETF fund expenses. and that was due to the ETF AUM increase. We see our operating income for the quarter ended March 31st, 2021 is 3.4 million or an improvement of 4.3 million compared to the same quarter for fiscal year 2020, which was a loss of 979,000.

39:02 On slide 45, we see that other income for the quarter was 15.5 million and it was primarily related to unrealized gains on investments. I want to remind everybody about HIVE and the new investment we have in it. We actually have a couple of pieces. One is the warrants, which are fair valued, and the change in that value hits our income statement, which would be kind of included in this $15.5 million. Then the debt portion that we have is also fair valued, but the change in that value goes through other comprehensive incomes. So again, that's not on our income statement, but it is hitting our balance sheet. Also, as you would expect, as our net income goes up, our expenses, our tax expense goes up. And that did increase 4.6 million for the quarter.

39:56 Net income attributable to USGI after taxes for the quarter was 14.2 million. And as you can see on slide 46, this equates to 94 cents per share. and it's compared to a loss of six cents per share for the same quarter last year. Moving to slide 47, we see our balance sheet is also improving. It includes high levels of cash and debt and equity securities at fair value and they combine to make up over 80% of our total assets. As you see on page 48, we still have no long-term debt and the only long-term liabilities we have are deferred taxes and lease obligations. The company has a net working capital of $14.1 million and a current ratio of 3.4 to 1. With that, I'll turn it over to Holly.

40:45 Thank you, Lisa. All right, as you can see on slide 51, a majority of our mutual fund assets are in emerging markets and natural resources, while 27% are in global equities and fixed income. And as for distribution, more than three quarters of assets come from retail investors, with 17% coming from institutional investors. On slide 52, our sales and marketing efforts have continued to focus on our mutual funds, including those concentrated on gold, natural resources, and emerging markets, as well as our exchange trading funds. More recently, we have expanded our media presence in the cryptocurrency space as well, with Frank being interviewed by Cointelegraph and Coindesk, just to name a few.

41:31 The company and our funds continue to receive an invaluable amount of viral publicity gained through these media interviews. And then on slide 53, you can see that Grow, Our Funds, and Hive continue to be highlighted by influential financial newsletter writers as well, along with the sharing and syndication of our award-winning original content by third-party publishers. The newsletters have loyal followings and receive millions of visitors each month. Frank Holmes' CEO blog, FrankTalk, continues to grow in popularity, as seen on slide 54, and in fact, FrankTalk celebrated 14 years of publication this April. Frank's commentary is often featured by prominent publications, including Forbes, Seeking Alpha, Kitco, and Equities.com, each one with millions of monthly visitors.

42:22 On to slide 55, Kitco News, the biggest gold website in the world with an audience of over 30 million monthly visitors, continues to feature the gold game film show with Frank Holmes' gold market analysis and now crypto analysis. And in addition, Frank has become a frequent guest and commentator on both gold and digital currencies on Sandsbury Research with host Daniela Cambone. Now, if we take a look at slide number 56, At quarter end, we'd like to look at the most visited FrankTalk blog posts published over the past year. And on this slide, you will see the most visited articles were as follows. Number one, a new commodity super cycle could be powering up after a long freeze. Number two, inflation is coming for your wealth.

43:11 Here's what investors can do about it. And number three, gold's still attractive as the bond sell-off looks overdone. You can sign up for the Frank Talk blog for free, as always, on our homepage, which is usfunds.com. On slide 57, all of this coverage helps us leverage our brand by reaching millions of readers, viewers, and potential investors. Our website, usfunds.com, was visited over 480,000 times from March of 2020 to March of 2021 by curious investors from all over the world. U.S. Global Investors is well known for its timely, balanced, and positive market insights and our thought leadership. So as you can see on slide number 58, the company has been awarded numerous star awards by the Investment Management Education Alliance over the years for its excellence in investor education. And now our total stands at 90 awards.

44:10 On slide number 59, our subscriber base continues to grow organically, and we currently have over 100,000 curious investors following our investment newsletters, social channels, and the Frank Talks blog. And investors can sign up on our website and join these subscribers who receive the award-winning Investor Alert e-newsletter as well as Frank Talks. Now on to slide number 60. We also continue to see a large following across all of our social media platforms, and I encourage you all to check us out not only on Facebook and Instagram, but also on Pinterest, Twitter, and even YouTube. And now, as we wrap up today's presentation, we will address some questions that were sent in by shareholders. And just as a reminder to our audience this morning, if you have additional questions for us, please do not hesitate to email those to info at usfunds And Frank, I'd like to start the Q&A with a question for you, which says, Jess is a significant source of AUM for the firm.

45:15 What is the company doing to ensure its continued success and or handle any direct competition that may come up for Jess? Well, I think the first part of that, Holly, is that our...

45:32 The structure of it, the unique Smart Beta 2.0, it's not just some factors for picking stocks. It's the overall structure to try to capture 65% of the people that fly, the 2 million people that were flying in America, and then how it's expanded globally. We've made adjustments as the fund grew to be more dynamic and fluid, which we stick with the perspective. So we're very caught up in trying to monitor that we can go beat the original bogey we set out to be, and that was the New York Stock Exchange Global Airline Index. And so I think that we've got to make sure we're telling that story. It's harder to knock it off because it's not just factors of picking stocks, it's the portfolio structure. and then it's now getting the story told in different geographic locations around the world and getting it listed.

46:27 So I was thrilled to see we were able to get it listed in Mexico and there's other opportunities in Latin America. And so we will continue hopefully to get it in Asia too, sort of this unique product. And we think there's another big wave of opportunity in the airlines industry as the world becomes vaccinated.

46:50 Perfect. Thanks, Frank. Lisa, here's a question for you. It says, can you please explain operating margin changes over the last few quarters?

47:00 Yes. So, and I think this is a question that we've had often because our quarterly operating margin for September 2020 was 29%. And then in December, it was 10%. And then for March 2021 quarter, it was 54%. I know a lot of people are curious about why there was a decrease for that December quarter. And I do want to remind people that that really is related to a bonus that was paid in that quarter related to realized gains on investments, about $1.8 million. And so bonuses are part of our compensation expense that's included in operating expenses, but realized gains are included in investment income, which is not included in operating income.

47:57 So, you know, we're seeing that expense in our operating, even though the income is not included in operating income. So if we remove that bonus from our operating expenses, then the operating margin for December would be approximately 45%. So I think that is more in line with what people are expecting and is more as a better representative of what our operation margin is, which would be 29% for September, 45% in December, and 54% for this last March quarter. So we are seeing that as revenues are rising, our expenses are rising too, but not at the same rate.

48:47 Thank you, Lisa.

48:51 Frank, this is another question for you. It says, what is the long-term strategy for Hive, and more specifically, how Hive relates to U.S. global investors? Do you plan to continue overseeing both of these companies?

49:11 Yes, I am as executive chairman, and we've looked at and other CEOs. The issue there is to get someone who can manage the process, knowing capital markets and data centers. So far, we've not been able to do that, but it's not hurt us. We have a great CFO, outstanding. The two of us are basically involved in the turnaround. We have Tobias from Europe that's been also critical with that. And then we've expanded now that we have the GPU one, not only buying 50 megawatts capacity in New Brunswick and having our own data center. We noticed that we did that deal for less than $300,000 a megawatt and then a pure mining, crypto mining company paid 2 million.

50:04 So we think that we were on the cutting edge of that, the importance of having a data center. and we can do that now because I have, as an executive chairman, a phenomenal team that meets every morning. And it takes a lot of stress off me on where we're growing, what we're doing, because we have technically six people that have come on with tremendous engineering expertise to accounting expertise in the crypto space and running data centers. So I think the company is still lean and mean. I've still not taken a and many more.

50:51 I'm thrilled about where we're positioned for the next leg. The vision is to take it to a $10 billion company. If all of our equipment that we ordered was producing today, we'd be doing $300 million and having a bit of $200 million. But that equipment is experiencing delays and disappointments coming back from China. The whole world is experiencing and complaining about lack of chips from Cars, you hear the most, and then even Apple. And so we've had our own share of it, of securing a pipeline of upgraded technical equipment. But we think that we'll be able to triple what we were doing. And if you looked at our hashing power today, you can easily see that this is a company that's come from doing 50 million in revenue, now with a run rate of 160 million going to 180, then going to 300 million.

51:43 So I think it's a potential for a $10 billion company.

51:49 Thank you, Frank. We have one more question today. It says, what opportunities do you believe lie ahead in terms of making money for growth shareholders? What can we look forward to in the second half of the year, for example?

52:04 Well, we're working on, I think, an excellent new product that fits up to our expertise in global natural resources. And would be the only product out there. So we're fast tracking the execution of that. So we can also tell the story. And we think it's a great product for investors for many reasons, from retail to institutional. And we can stay lean and mean. We have less than 25 employees. It's really important for us to stay lean and flexible and outsource. We have outsourced some talent. and many more. I think we're going to get another wave where gold is going to take off and I think there's going to be a greater appreciation for GoAU What we have found is that it takes about five years and $5 million to really build a brand, a name.

53:19 And that's what we did with some of our funds, and then they took off. That's what happened with Jets, took five years. GoAU's been around for three. But I think on this next leg, when gold resurfaces that important inflationary hedge asset class, that the gold stocks themselves are much more profitable than ever before. that these shares will explode on the upside. So they're the opportunities. I think that that's a billion dollar product. It should be more like about three or four billion when I compare it to how superior it is to any other gold ETF that's out there. So I remain very committed, bullish and we're going to educate investors why we're undervalued at trading at less than five times the earnings I think we should be trading closer to 20 times earnings, and that means that the grow is huge on the upside.

54:15 Huge potential.

54:18 And there are some questions about Hive, which is one of the most important and exciting portions of this Grow Earnings webcast. Frank, if you could address a few of these. The first one you addressed at the beginning as far as the hodling strategy goes. Can you We have just close to $100 million in predominantly Ethereum and Bitcoin.

54:53 But the major portion, because we're the biggest Ethereum producer in the world, is Ethereum. And then you add on cash onto that, that we're close to $140 million in U.S. dollars liquidity.

55:07 Great. And another question about Hive is asking, what is the strategy right now for lifting in the U.S.?

55:14 Well, we've talked about it before. It's a process of a 20F, 40F. So we are going with a 40F filing. We originally thought it was going to be a 20F, but we've gone to a 40F. We've reached out to NASDAQ. And so we're in the process now, and hopefully we can get this locked up very, very shortly.

55:36 Perfect. One last question, Desi. In terms of Hive, what is your run rate today and what is the expected revenue growth over the next 12 months?

55:47 Well, based on Ethereum and Bitcoin prices today and some Ethereum Classic also, we put a month ago when Ethereum Classic was $20, some of our machines that had not been upgraded onto mining Ethereum Classic. Thank you for joining us. are going to go out and basically buy a lot of Bitcoin machines, ASIC machines, the mine Bitcoin, that would take our total complex up to about 3.2 exahash.

56:46 That means that our run rate would be over $300 million in 12 months from now, and our Performa would be making $200 million. There's always going to be bumps and disappointments through this process because I just find it incredibly volatile. Everyone is so aggressive at trying to secure equipment, get it delivered on time, get data centers, etc. So we're very busy. But what's really important for the investors is the acquisition of GPU1 brought in the brain trust that I feel I needed to scale this to a $10 billion company.

57:27 Thanks so much, Frank. And thank you, everyone, for tuning in this morning. This concludes U.S. Global Investors' webcast for the third quarter of 2021. And again, if you have any remaining questions, send those in to info at usfunds.com. Thank you.