US Global Investors Inc (GROW) 2020 Q3 法說會逐字稿

Good morning, and thank you for joining us for our webcast announcing U.S. Global Investors' results for the third quarter of fiscal year 2020. I'm Holly Schoenfeldt. If you have any questions during the webcast, you can enter them in the questions area of the control panel side bar, 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-Q 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 Investors accepts no obligation to update them in the future.

On Slide 4, 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 club, the company became a registered investment adviser in 1968 and has a long-standing 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 and emerging markets. Now let's go to Frank Holmes, CEO and CIO, for an overview of the period. Frank?

Thank you, Holly. Good morning, everyone. Thank you for participating and hearing our story. And as highlighted, our go-to stock has always been for gold and then it evolved to the digital currencies with our substantial investment in HIVE. I'll talk about that in a few minutes. But our balance sheet still remains very, very strong, and we have this reflexive cost structure and monthly dividends and returns on equity discipline. We've maintained a very low yield, and we've also been buying back our stocks. Have done it on an algorithm that is on down days, and it's very, sort of, not volatility driven.

Next one is I want to really thank all these institutions, in particular The Royce funds, Perritt Capital Management and Financial & Investment Management Group. Paul Sutherland has been a long-term loyal investor. BlackRock and Vanguard have become much more of index funds that have invested in U.S. Global Investors.

So next one is dividends. We paid dividends for 10 years now, as monthly, current yield at $1.53 was about 1.96%, which is slightly higher than what people are making on money market funds today. And I think we want to do everything to try to maintain it, but there's always sort of guidelines and rules with the share repurchase program in motion. The Board approved the repurchase of up to $2.75 million of its outstanding common stock on the open market until the end of this year, December 31, 2020. During the 3 months ended March 31, the company repurchased 69,000 shares of Class A shares using cash of approximately $68,000, which was more than the previous quarter because we've had to deal with the meltdown in the capital markets. But this program may be suspended or discontinued at any time. And so we'll make sure if we make any changes that we'll send out press releases in a normal fashion.

The balance sheet remains, to us, healthy and strong with no debt. And I'm going to jump into some of the things that have impacted our financials, and they continue to do that.

The next visual is HIVE. We have 10 million shares of HIVE. We were co-investor of launching this company. We realized several years ago that we couldn't launch an ETF in this space because of concerns, and rightly so, of the regulated -- regulatory bodies of hackers getting Bitcoin and putting them into an ETF to be listed on the New York Stock Exchange. That just wasn't going to happen. It wasn't going to happen in Canada. And so we took that intellectual capital, and we invested in the creation of the first crypto mining company and started off in Iceland and in Sweden.

And what's happened with HIVE Blockchain is that it's very volatile. It moves. There's an 82% correlation with Ethereum price, and now it's tracking with Bitcoin because it expanded with a recent acquisition. But I wanted to point out to investors here that when you look at this year alone, as Ethereum went from $125 to $280, HIVE Blockchain went up 453%. Then Ethereum fell down from $280 level down to $120, $115 level. The stock corrected 65%. Ethereum then runs again starting in March to just recently over $200 a coin, and HIVE immediately starts to run with it. So that impacts every 3 months. So we could have a great win one quarter and that we could turn around and have -- basically hit to our earnings mark-to-market. And I think Lisa will comment more on that. But what I want you to understand is that it's the same thing that we were able to launch an ETF and if the flows of the ETF itself goes up or down volatile like this, that could impact your overall management fees. So this has been our proxy into this space. And I'm happy to see that the other company [transform] and has been able to be the best performer of all crypto blockchain companies, mining companies. HIVE was the very first company. Many me-toos and copycats came along, but HIVE continues to become a proxy for the Ethereum and Bitcoin market.

But the next visual is just so important for all investors. Every asset class has its own DNA of volatility. And so if you buy GROW stock, you have to recognize that we are volatile. And when we take a look at the S&P 500, it's almost the same as Bullion. If we look over 1 day or 10 days, that volatility is both 1% even though many media people think that Bullion is more volatile than S&P 500. In fact, it's not. But gold stocks are certainly -- the column in there, but gold stocks for our gold funds, they are much more volatile. And on a 1-day basis, it's plus or minus 3% versus 1% for Bullion, and over 10 days, it's much more volatile. Now when we come to Bitcoin and Ethereum, that's another level of volatility. Bitcoin is 5x greater than the S&P or gold on a daily basis. Ethereum is 4% -- 4x greater. And look at these data points when you're looking at 10-day volatility, well, that shows up, and that shows up in HIVE because HIVE correlates close to 90%, between 82% and 90% correlations to these crypto prices. And so that definitely has an impact on our financials over now at the rules that started a year ago on mark-to-market, even though we made a long-term investment, everything comes into mark-to-market.

The earnings per share for the quarter, they're impacted by this, and Lisa will talk more about it and comment on it. But this is -- we lost $0.11 for this quarter. Now that's not just all negative. There's other parts -- to try to explain that, there's some other positive parts that are coming in.

And then the next visual is a quarterly average assets under management. This is an average number and it's important. It doesn't show you the flows that come in at quarter end or month end, but you can see that Elliott divested Galileo and the assets of U.S. Global were slightly rising for March, and that was a lot had to do with the GOAU, the gold assets, but also more important is the JETS. But this is an average number, and the next one really gives you a more significant impact of JETS. JETS as a total complex has seen these numbers coming in at the end of March was the big turn and now we had in April. So the total complex is now back over $1 billion, and so that has a huge difference in going forward, and it takes several months because money comes in and goes out of EPS very fluidly. But fortunately, it's been unprecedented. I'm talking and giving interviews that anyone and any fund has had attracted so many assets in a falling price and it's interesting for me was bad news was good news for JETS. And the same thing happened with HACK. HACK was one of those great ETF ideas and nothing was really growing of HACK until they were hacked -- until Sony was hacked. And that news all of a sudden flowed up into that industry, the stocks and HACK took off not only the stocks but the ETF went to $1 billion. And what, as explained to me is that JETS fell 50% and then a lot of investors came in. And we've commented before on our webcast that we had a lot of hedge funds that go along a one or 2 airlines that want to be short to derisk their portfolio and then be short JETS. Another one that want to be short -- one or 2 airlines that they want to make sure that they're protected against the industry run. They go long JETS. And what we've seen is an unprecedented amount of money coming into it, more of a tactical trade looking for the rebound that's taken place in previous cycles.

So I'm going to try to highlight what these drivers are. The next visual is lessons learned from 9/11, SARS 2003, financial crisis that bottomed in March of 2009 and started in 2008 and the need to support the airline industry. It became very evident that 1 in 15 jobs are airline-related. The CARES Act immediately started to cater to the airline industry and supporting this industry because of the multiplying effect of creating jobs here have a huge impact on hotels and tourism. When we look at Las Vegas, there's 200,000 empty beds and 300,000 -- over 300,000 people lost their jobs. And so the fact that most people fly into Vegas -- they don't drive into Vegas, they don't take a train into Vegas, they fly into Vegas. And when we take a look at other tourism, and when President Trump stopped all foreign flights coming into America in March, that's when the airline industry really went to a tailspin. And you saw flights to travel go from what was running at 2 million flights a year, people flying in America fell down to -- I think, the bottom is 80,000. And the fortunate part is that it has turned, and I'll comment on that.

The other sort of really shocking news besides a positive news for JETS, it is the online brokerage tool. Bad news is good news. New accounts just boomed. Charles Schwab reported over 600,000; TD Ameritrade 600,000; E*TRADE over 300,000 new accounts coming in. And this excludes Robinhood, and Robinhood has made more accounts than Charles Schwab. However, their accounts are substantially less, and that's where millennials go and trade. And we've heard about them going into the oil ETF as oil fell. There's lots of coverage that new speculators coming in and trading, and that's what we've seen with JETS because the airline industry is volatile. It is volatile just like oil is and it's more volatile than the S&P 500, and so we've seen this new boom. And I think that's very positive and constructive of -- being energized the capital markets with new flows coming in and new people staying at home and focused on building their wealth.

Airline stocks. The next visual will show you they're on sale, most discounted since 9/11. And that dramatic fall, all of a sudden -- Eric Balchunas did an interview. And I remember vividly, it was an all-time low, and honestly looking back, as you can see here, and what that -- really created another awareness for the JETS ETF as a way to play the space. So we see in talking to people that speculate in this industry, it's -- let's take a look at these visuals. Airline stocks bounced back 6 months after various crises. So this one is looking at 9/11, the bounce back was 80%. Now this doesn't mean this is going to happen this time because every cycle is different, but there's a probability of enough stimulus, and we've seen unprecedented stimulus coming into this economy. Airline stocks bounced back after SARS. So this is looking at what took place in Asia predominantly. And in March 2003 till September, it was 127 -- 120% bounce back in these stocks. And then we'll go back to the 2009 bottom, March 2009, from the low to the bottom, driving to the top, then we're seeing an 80% bounce. So it's just important for -- when people say, well, why is all this money coming in.

And then Buffett recently came out with all this negative news, but it's really not just Buffett. Buffett's a phenomenal investor and his webcast was just great lesson, but we have to remember, he's turning 90 this year. His risk tolerance has changed and he's [reaping] very few investments. He's doing nothing but piling cash. So the airline industry got lots of publicity with it. But there's many other categories that he sold down and he's been piling in this cash looking for where he feels a bottom. But what I believe is we're in an election year. In election year, the spigot is open, water flows, and it's just unprecedented 2020 collaboration around the world to print money, both fiscal stimulus and monetary stimulus, and I think we're getting some traction. So the new indicators -- what I've discovered is the TSA started publishing how many people were screening every day. And it's now going to become clearly a data point, just like looking at stock prices every day, how is it trending? And we can see that the low was on April 14, and as this -- as the trend has been turning up, it's more than doubled now from its lows. Daily people -- there's daily people being screened in America to fly. We've got a long way to go. We've got 2 million -- and basically, over 2 million people are flying a day domestically. When we do international flights, it's about 2.7 million. We fell around to 87,500. So there's a whole thesis on betting on this.

The other one that really surprised me, which I found interesting was looking at Google Trends. And looking at the balance that took place in Asia and looking at how it's going to apply here, that you track people looking up for tourism, people looking to fly, trying to book hotels. And as that trend changes week over week, it's usually a precursor that we're going to have more people flying, booking hotel rooms. And Raymond James in their recent report analyzed Google tracking in Asia and they felt a rebound. So I hope that this is -- you find this interesting that you can be using TSA data points as another factor along with Google Trends.

Warren Buffett, I think, as I said, he's one of the most brilliant investors. He said, "I was too dumb to realize I did not think Jeff Bezos would succeed on the scale he has," and explaining how he missed Amazon. And in another annual meeting, he talked about how he missed Google. So he's not -- he can't catch every trade. He's brilliant. And so the thought process is that he's just going to buy one of these airlines when he thinks the economy's turned around. And 100%, he's talked about it prior. So maybe that takes place. But it creates so much news and so much interest in the airline industry that JETS has become the proxy, and we're thrilled about it. Just like HIVE has become the proxy for people that do not want to buy Bitcoin and Ethereum that trade stocks that HIVE became a proxy for those cryptocurrencies.

And I thought interesting this week, Bill Miller said he's very positive of the airline industry. And he basically is of opinion that if you don't believe in it, then you don't believe there's going to be a vaccine to solve the problems. And he thinks that a lot of the negative news is just kind of 6 months out. So that's -- from his lips to God's ears, I hope he's right. And I believe he's a brilliant investor, and I would bet on the airline industry and its capacity to rebound and people wanting to get back to doing business.

I also got to chuckle that Buffett isn't a fan of Bitcoin either. And it was a billboard ad that was put in front of his office. "Warren, you said you were wrong about Google and Amazon. Maybe you're wrong about Bitcoin." So it's just a jump all for a lot of people. Is it going to be a V economy? Is it going to be a Nike swoosh economy turnaround or a W? And so I believe that at his age of 90, I believe that he's got to think of risk differently. And I think that when the economy turns, and as I said earlier, a high probability, he basically takes a look at buying the whole industry. It's a jump ball, what will recover -- the recovery looks like. And so I remain quite constructively bullish, and I'm seeing people going back to work. Yes, there's going to be more coronavirus outbreaks because more people are going back to work, but there's new procedures, and people are going to be cleaner and people are going to learn from that.

So let's come back to JETS, just to show you the inflows are unprecedented. It's now 50 straight days of money flows. And as Eric said, that's never happened before. As you can see in the next visual, he comments that the hottest theme in the ETF industry with bargain hunting day traders from sites such as Robinhood taking the other side of the trade with Warren Buffett, who recently sold carrier jets. So I think I'm thrilled about it and being recognized by it. Eric Balchunas this week flew to the panhandle with his son. He was sharing on a podcast we were doing together. And his father who's single, retired at 70, I think 75 years old. And so he's out testing the airlines, and he'll have a lot of insight on his experience of flying, I believe, it was Delta. So it's another visual showing you the unprecedented growth in assets. And then the trading volume is also a precursor. It jumped 22-fold. And this is something that's important from liquidity as more funds come into buying it and using it as a proxy.

We did expand in the next visual, JETS ETF. As you grow, there's lots of barriers to entry launching a deal of ETF for many of these platforms and won't put it on unless it's over $50 million. And then it's $100 million, and then other platforms of $500 million. But the most egregious is to play -- pay-to-play by the major wirehouses that they're looking for hundreds of thousands of dollars to be on their platform with the client volume coming by. We had this HIVE -- a little disclaimer that we did on my phone, the brokers have recommended, but we are growing, and we're on these platforms. And I think that's important as Schwab is the biggest in the number of accounts in dollars and dollars of accounts. National Financial is #2, Pershing is #3. And I think after Schwab, TD Ameritrade are going to be the biggest in the number of accounts also. And Robinhood, which is really a fascinating story, Silicon Valley, and it continues to grow. And the fact that now our product, such as JETS, is being recognized there is very important. If you're a registered investment adviser, for next week, I believe, Holly, it's just for RIAs?

Yes.

That we'll be doing a JETS update, how we're weathering the storms.

But it's not just JETS. JETS has been a phenomenal win for us and I think that every day, I go for my run, it really helps us as the (inaudible) down this past quarter is gold. And gold is another beneficiary in this unprecedented printing of money and our entry into that space is -- our product is doing exactly what we thought it would do. But here is what's really important for investors. It's just to recognize that gold bullion has outperformed the S&P 80% of the time this century, the past 20 years and it's outperformed the S&P 500 by 3x.

But now gold stocks remain very, very undervalued. And so our GOAU product is out there. The volume has picked up substantially. We've not had the growth in fund flows like we've experienced with the blessing of JETS, but it's doing what it's supposed to do. And I'm very happy about it, how it's outperforming other categories because it's such a quant discipline of looking at it.

The next visual is just for investors to recognize the inverse relationship between gold and real interest rates. It's quite simple. When gold hits $1,900, real interest rates fell to minus 300 basis points. And then as real interest rates rose, price of gold fell, and gold stocks took it on the chain a bit more, but gold stocks are very undervalued. And I believe you're going to see journalists coming in because of free cash flow yields for the end of March are so much stronger than the S&P for the first time in over a decade. And journalists, analysts will be buying gold stocks that focus on free cash flow yields.

Next visual is gold has been in an uptrend for close to 5 years, but especially the 3-year numbers are very, very strong for many of the 100 gold producers that we follow in the world. We're also seeing this past quarter record inflows into gold-backed EPS, which is a precursor to higher gold prices. And I'd just say, remain positive, constructive regarding it. GOAU, our entry into that space, listed also on New York Stock Exchange, is in all these platforms that you can see here. And that's so critical of launching a product that you do get on these platforms for investors to come in and take a look at it.

I want to point out that Bitcoin and Ethereum went through what they call a crypto winter. It lasted about 15 months. It bottomed in February a year ago when JPMorgan launched its stable point, and all the negative talk by JPMorgan on the crypto space stopped, and we saw crypto all of the sudden evolve. What's really important for investors is that this next -- having a Bitcoin that is a reward mechanism of supply. It had this week. And that's very material to higher Bitcoin prices than previous cycles. And then we see great hedge fund managers like Paul Tudor Jones buys Bitcoin to hedge against inflation. And recall, a year ago, he came out and started buying gold. And so he's been rewarded for being long with gold and now it's Bitcoin. So we are seeing more institutions coming into the space.

This is another visual showing you HIVE Blockchain correlates 82% of the time with the crypto prices, HIVE has had unprecedented volume in trading. Last year, it went to -- HIVE, it went to a proxy battle, knocked it down. Then the gearing prices, all of a sudden start to take off. But institutions have only just sold it on a program, particular in Canada. They sold a rate until the end of December and that pressured the stock down. And all of a sudden this year, it has some life and it surged. So I think a lot of that worse is behind us. As you can see, HIVE has outperformed all of its competition. And HIVE has a series of updates. This is really to go back and take a look at that we increased during this lockdown, we still made an acquisition in Québec. We did it for basic numbers for you to understand. If you wanted to build 1 megawatt of capacity in Oklahoma or Texas or Montana where crypto mining is quite strong and robust in Washington state, you're talking around $300,000 of megawatt and we spent $92,000 on the acquisition in Quebec, Canada, and we have very inexpensive green energy. And so that is another positive development for HIVE Blockchain.

Now I'm sorry I've been long-winded in this presentation, but there's so many exciting things that happened during an incredible global meltdown, and U.S. Global with all of our global funds really felt this meltdown with the coronavirus, but we're blessed to be able to have products that -- we weathered the storm. I want to share with the GROW investors is that what came to my attention from Eric is that the average ETF, if it's not profitable after 3 years, is shut down. And we were able to maintain this for 5 years before it exploded. And because we, as mentioned earlier, we have a lower cost structure, and that allowed us to bet on this and it's the only product that's out there, so we're really happy that we kept a conviction to our thesis, and the shareholders at GROW had a benefit, and we've also given the public a great way to participate in the airline industry. Lisa?

Thank you, Frank. Good morning. Before I discuss the results of our operations for the quarter, I'd like to discuss the finalization of the sale of our 65% Canadian subsidiary, Galileo Global Equity Advisors. On March 2, 2020, Galileo purchased all of its common stock owned by USGI for CAD 1 million, which is about USD 746,000. The results from Galileo through March 2 are reflected as discontinued operations in the consolidated statement of operations.

So now I'll discuss the results of operations for the quarter ending March 31, 2020. Beginning on Slide 48, we recorded total operating revenues of $914,000 for the quarter, which is an increase of $57,000 or 7% from the $857,000 in the same quarter last year. The increase is primarily due to increase in the ETF assets under management, as we've discussed, but we also had decreases in performance being paid out, and this increase was somewhat offset by lower assets under management in our USGIF mutual fund.

Operating expenses for the quarter were $1.9 million, an increase of $364,000 or 24% from the prior year same quarter, and it was primarily due to an increase in general and administrative expenses of $338,000 or 45%, primarily due to business development costs related to increase in ETF assets. We see our operating loss for the quarter ending March 31, 2020, is $979,000 or a decrease of $307,000 compared to the same quarter for fiscal year 2019.

On Slide 49, we see that other income and loss for the quarter was a loss of $503,000. And as Frank discussed, we record changes in our investment value in this line item. And it has been volatile and is expected to be volatile in the future. The $503,000 loss was mainly due to unrealized losses in investments.

And loss from continuing operations was $1.5 million and loss from discontinued operations was $85,000, which was related to Galileo. Net loss attributable to USGI after taxes for the quarter is $1.6 million. And as you can see on Slide 50, that's a loss of $0.11 per share.

Moving on to Slide 51. We see we still have a strong balance sheet, which includes high level of cash and unrestricted marketable securities that combine to make up 68% of our total assets.

As you can see on Page 52, at March 31, 2020, we had no long-term debt. The only long-term liabilities are lease obligations, and the company had a net working capital of $10.2 million and a current ratio of 8:1. After quarter end, effective April 12, 2020, the company was approved for a loan of approximately $442,000 under the Paycheck Protection Program under the CARES Act. The company has less than 25 employees and is considered a small business. There is potential forgiveness for this loan, but it is dependent on the adherence to forgiveness criteria. And USGI will be working with its lender to determine if all or some of the loans will be forgiven.

With that, I'll turn it over to Holly.

Before you do that Lisa, I would like to comment that we were in the process and we were downsizing in the beginning of March before these assets start to take off.

Yes.

And because we saw the other assets declining. And I think that was -- we were in that process in addition to these losses. And fortunately, we do not have to make any additional cuts because of the other growth in JETS and GOAU.

Yes.

Okay. Thanks.

Thank you, Lisa. All right. As you can see on Slide 55, a majority of our mutual fund assets are in emerging markets and natural resources, while 37% are in domestic equities and fixed income. As for distribution, more than 3/4 of assets come from retail investors with 17% coming from institutional investors. Our sales and marketing efforts have continued to focus on our mutual funds, including those concentrated on gold, natural resources in emerging markets as well as our exchange-traded funds. The company and our funds continue to receive an invaluable amount of viral publicity gained through media interviews. Frank Holmes often shares his insights with financial outlets like Fox Business, Bloomberg Radio and Kitco News, just to name a few.

We continue to receive recommendations 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, Frank Talk, continues to grow in popularity. His commentary is often featured by prominent publications, including Forbes, Seeking Alpha, Kitco and equities.com, each with millions of monthly visitors. Kitco News, the biggest gold website in the world with an audience of over 30 million monthly visitors, in partnership with thestreet.com, continues to feature the Gold Game Film show with Frank Holmes' gold market analysis. Since the show's beginning, 181 episodes have aired.

At quarter end, we like to look into the most visited Frank Talk blog published over the past year. On this slide, you will see that the most visited articles so far in 2020 are as follows: number one, Explore the World's 10 Busiest Airport; two, Should You Buy the Panic?; and three, These U.S. Companies Have The Highest Debt-to-Equity Ratios Right Now. You can sign up for the blog for free on our homepage.

All of this coverage helps us leverage our brand by reaching millions of readers, viewers and potential investors. Our website, usfunds.com, was visited 692,000 times from March 2019 to 2020 by curious investors from all over the world. U.S. Global is well-known for timely, balanced and positive market insights and our thought leadership. The company has been awarded numerous STAR Awards by the Investment Management Education Alliance over the years for excellence in investor education. Our total now stands at 88 awards. Our subscriber base continues to grow organically, and we currently have over 50,000 curious investors subscribed to our investment newsletters and the Frank Talk blog. We also continue to see a large following across all of our social media platforms. Investors can sign up at usfunds.com.(technical difficulty)

on what this might mean for gold or what you see in store for the precious metal for the rest of 2020.

On a historical basis, whenever you go to negative interest rates, gold goes up in that country's currency. And being in the U.S., even though there was comments of not going in negative rates but ahead of the Federal reserve, I point out that there's another $2 trillion on the table just for -- it's an election year in America to help out businesses, get people back to work. And so I just think that the price of gold is going to trade higher and it's going to because the basement and it's synchronized. It's all the G20 countries. So it's not like gold goes up because it's a war. The only war today is the war on a virus, the coronavirus. That's a war. And it's unprecedented that everything in the world stopped. And it's just when you look at all the data, we go back to World War 1, then right after World War 1 was the Spanish flu. You take a look at World War II. I can go on with a list of them, but nothing has ever shut down the world like this coronavirus.

And so all these countries, finance ministers and central bankers are working together in a cartel form, and they're basically printing money. And so real assets historically have held their value, and they go up. And I think that that's going to take place with gold. Over the next several years, we're going to get a very strong re-rating on gold. What we saw last year, and everyone was shocked by that palladium went from $1,000 to $2,700. That can easily happen to gold this year. And why would that be? Well, supply is being restricted. The supply from mines is not growing. It's basically peak supply. And when we had peak oil, oil was over $120 a barrel. Then along came the frackers and the frackers were game changers. But there is no game-changing technology for looking for gold, processing gold, distributing of gold. So it's going to continue to be a very significant asset class. And so I remain very bullish. The best part is to focus on now the opportunities are going to be our gold stocks. Gold stocks have lagged. They've lagged for the past decade with the movement in the price of gold, and there's lots of -- there's really not that much interest in that category by pension funds. You can see this in Canada, where 8% of the Toronto Stock Exchange is gold related but maybe Canadian pension funds are 1% weighted. So they're way underweighted. And when we look at financial metrics, this is the first time, Holly, that we've had free cash flow. If you go back at the 100 brokers we follow in the world, in end of September, they were minus 50 basis points collectively. At the end of December, they started to rise to 1 -- 0.5%. We had a positive swing. At the end of this March, it's running, I think, 1.5% positive. Now the S&P 500, it was running over 3% free cash flow yield at the end of December. Now it's fallen. So wood stocks, new month, only gold stock and the S&P 500, and it has attractive free cash flow and the stock is being bought by journalists. So I think that the gold industry, as long as these gold-seeking stock CEOs don't do stupid deals that dilute their revenue and cash flow per share, then those stocks will outperform, and that's what our gold equity ETF GOAU focuses on.

Perfect. Thank you, Frank. Lisa, I have a question for you. How should GROW's shareholders expect the recent success of the JETS ETF to be reflected in the company's earnings? Will it primarily show up next quarter end?

It does really depend on when we get to create in our ETFs. And we did get that at the end -- starting at the end of March. But since revenue is based on assets under management, operating revenues will increase. But these will be offset by increased business development costs related to the ETF creation. Consequently, there's a delay in when increase in AUM is notable in net income, and this delay can be a few months. Therefore, we would expect that the net positive result of the recent increases in JETS will probably fully be represented in net income after a few months, which is going to most likely be in our quarter ending September 2020.

Okay. Great. I have another question for you, Frank. Given your constant globetrotting for due diligence and conferences, what is your personal perspective on the state of business air travel? What are you hearing from your fellow road warriors about air travel right now?

Well, I think the best -- the biggest thing is tracking. I'm so happy that TSAs come up with a mechanism to track -- like you track fund flows, you are able to track passengers clearing to fly. I think that there's a great concern that the 4 big major airlines are going to have to use another $10 million each to weather this storm. But the trend is up. People are traveling. And I think there's going to continuous to be, by media, a distortion of negative news and the fear of it. It doesn't mean you don't distance yourself and it doesn't mean you don't extra clean and gloves, et cetera. I mean I go shopping and I have my mask on and my gloves on. I come home and I get sprayed down with diluted alcohol. I think that's just how you have an extra discipline. But I think that we're going to see the industry turn. Will you get a V-shaped economy? I think it's going to probably be more like a U than a V shape like we've had before. There's a jolt that comes in because there's a reluctance for a lot of people. But the business travel -- it's interesting that it's 1/3 of Southwest Airlines. And for other airlines, it's something like 60% of their profit margins is business travel. So that business person has to go and get out and travel. I think that the big impact is going to be probably on commercial real estate, more people working for home.

But I'm now reading about psychology of Zoom. If you watch too many Zooms all day long, that it's warping your brain. So that would go after Google video, whatever. It seems to find something negative, but I think that people want to get back to doing business, and that's going to be key. In London, in Europe, they have some -- weird things are happening on -- you can fly in, but you can't fly out or you fly out but you can't fly back. These things have to get resolved, but it's like in Québec -- I'll share with you. I just found out this week. In Canada, the 2 provinces, Québec is the French-Canadian province and Ontario's beside it, there is border patrol, and you can't freely go back and forth. So you imagine between Texas and Louisiana or Texas and New Mexico, you couldn't drive back and forth across the border. Because one state is worried that the other state is not doing a good enough job on health care, the governors. And you also have the Canada socialized medicine. So they're worried that someone will -- the burden will be on their state. So they don't want people from Ontario to easily go to Québec, And Québec doesn't want -- these things have to get resolved, but this is car travel. It's nothing to do with flying. And I think things like that will get resolved because there's been so many lessons learned that the governments did not work fast enough after 9/11 to get the airline industry back and going, and they didn't work fast enough after 2008 and '09. So I think that you're going to see more money thrown at this industry and more support and -- for human beings themselves to be able to go and travel.

Great. Thank you, Frank. Thank you, everyone, for your questions. This concludes U.S. Global Investors webcast for the third quarter of fiscal year 2020. This presentation will be available on our website, usfunds.com. Thank you all for your participation today.