Holmes Perseveres in U.S. Global's Acquisition Hunt
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Wednesday, November 12, 2014

Holmes Perseveres in U.S. Global's Acquisition Hunt

U.S. Global Investors [profile] CEO and chief investment officer Frank Holmes continues to look at acquisitions, though he says the process for their niche may be a little longer than for others. Holmes' top executives also have updates on their ETF plans and their cost-cutting efforts.

On November 5 the San Antonio, Texas-based boutique mutual fund shop (which specializes in emerging markets and natural resources, as well as domestic equities and municipal bonds) reported a loss of $0.01 per share for its fiscal 2015 first quarter, down year-over-year from a negligible net loss (which rounded to $0.00 per share) [see the earnings release]. Q1 revenue rose about $200,000 year-over-year to $3.3 million in fiscal Q1 2015. Assets under management dipped $100 million year-over-year to $1.1 billion on September 30, 2014.

Last year U.S. Global bought a 50-percent stake in Toronto-based Galileo Global Equity Advisors, and in June 2014 U.S. Global bought another 15 percent of Galileo. In an earnings call on November 6, Holmes told analysts that he's "always ... looking at other opportunities to expand our footprint in our platform" [see Seeking Alpha's transcript of the earnings call]. Yet Holmes says that U.S. Global's niche, especially in natural resources, and the heavy regulation around that niche slows Holmes' dealmaking:

... [T]hat process now takes so much longer.

Everything, there is just so much friction in that process but you know what even with all of that, we are still [persevering] and we sign agreements on a regular basis looking at opportunities ...

Lisa Collicotte, chief financial officer at U.S. Global, also talked about efforts to trim the shop's cost structure. Part of that trimming, Collicotte said on the call, comes from being "able to adjust bonuses to align with [the firm's] revenues."

And in conjunction with restructuring some of our products, we also made some staffing reductions ... [w]e are always trying to streamline our other costs also.

We are reviewing processes and procedures and we're trying to distinguish between our needs and our wants, concentrating on what is going to be the most efficient and effective ways of getting to where we want to be.

So, as we do that, we challenge each employee and our department to look at the processes and reduce or eliminate cost when possible. For example, one of the things that we look at is our travel expenses and we've been critically looking at which conferences we plan to attend and we are continuously reviewing the benefits that we receive for each of the items that we participate in.

Also on the call, U.S. Global president and general counsel Susan McGee confirmed that U.S. Global plans to launch its ETFs soon:

We're busy behind the scenes working to finalize these products and the services and service providers involved with those products and we are expecting a launch in the first of 2015.

To dig deeper into U.S. Global's results, read the earnings release or Seeking Alpha's transcript of the earnings call.

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