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Stonegate Capital Partners Updates Coverage on U.S. Global Investors, Inc. (NASDAQ: GROW) Q3 2023

Key Takeaways
  • 1H23 stock repurchases up ~337% over 1H22
  • $2.3 Billion in assets under management as of March 2023
  • EPS growth of 91% Q/Q

DALLAS, TX -- July 25th, 2023 -- U.S. Global Investors, Inc. (NASDAQ: GROW): Stonegate Capital Partners updates their coverage on U.S. Global Investors, Inc. The full report can be accessed by clicking on the following link:

Company Updates

  • Well Positioned to Grow AUM: U.S. Global Investors offers 6 innovative and thematic no-load mutual funds and 4 specialized ETFs to the retail investment community. The Company is well positioned to benefit from the growing demand of the retail public. As of 3Q23, total AUM was $2.3 billion.
  • GROW has Long History of Developing Innovative Products: For over 50 years, GROW has offered specialized investment products, including the U.S. Global Jets ETF (JETS). JETS is the only Airline ETF available to investors, providing them the opportunity to invest in the global airline industry, including airline operators and manufacturers.
  • Scalable Business Model: The Company has a relatively fixed expense structure. As AUM grows, most of the incremental revenues flow to the bottom line. This is due to revenues increasing faster than expenses as AUM grows, despite the Company providing breakpoint discounts. A small and experienced team combined with operating margins of 20%, presents GROW the ability to significantly scale the business and improve EPS.
  • Returning Capital: The Company has a history of increasing dividends and share repurchases. In June of 2023 the Company repurchased 23,622 shares at a net cost of approximately $67,000, which is an increase of ~78% from the same month in 2022. For the first half of 2023 Grow has repurchased 284,885 shares, an increase of ~337% over 1H22.
  • A Strong Balance Sheet with Cash Available for Opportunities: The Company has high cash reserves of approximately $25 million and no debt as of March 2023 allowing it to invest in lucrative opportunities available in the market. In addition, the Company owns their own office building, valued at $4.61 million, but recent appraisals indicate a higher valuation.
  • Impressive Liquidity Position: GROW ended fiscal 3Q23 with working capital of approximately $36.9 million, up by $3.0 million or 8.7% from the beginning of the year. With approximately $24.9 million in cash and $55.7 million worth of total assets, the Company is in a strong position to meet obligations and grow. This has allowed GROW to continue its monthly dividend payment which is equal to an annualized 3.27% dividend yield.
  • Investment in HIVE Digital Technologies: The Company has an investment of warrants and convertible debentures valued at $7.9 million in HIVE Digital Technologies Ltd. (NasdaqCM: HIVE), the first ever publicly traded cryptocurrency miner. HIVE uses 100% green energy to mine Bitcoin, realizing industry leading gross margins.
  • Valuable Oversight: CEO/CIO Frank Holmes, well-known in the gold industry, owns approximately 18% of the Company. Under his leadership, the Company has grown to an average AUM of $2.3 billion. Additionally, the Company recently selected Grant Thornton LLP as its new independent auditor. Grant Thornton was selected after a rigorous review process and is a nationally recognized firm.
  • Valuation: We are using an EV/EBITDA multiple to value the Company. Using an EV/EBITDA multiple range of 4x to 6x, with a midpoint of 5x results in a valuation range of $4.78 to $5.91 respectively, with a midpoint of $5.35.

About Stonegate
Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.

Key Takeaways
  • 1H23 stock repurchases up ~337% over 1H22
  • $2.3 Billion in assets under management as of March 2023
  • EPS growth of 91% Q/Q
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Dave Storms
Director of Research Stonegate Capital Markets
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Stonegate Capital Partners
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