GROW

• Investment Strategy: The firm utilizes a 'quantamental' approach (combining quantitative models with fundamental analysis) to create thematic Smart Beta 2.0 products. Key themes include gold, precious metals, airlines (JETS ETF), defense (WAR ETF), and AI/Bitcoin mining (HIVE).
• Volatility Management: CEO Frank Holmes emphasized that volatility is inherent in their target sectors (e.g., JETS ±3% daily, Gold stocks ±9% over 10 days). The strategy involves buying during significant dips (-3% daily or -6% over 10 days) and selling on upside spikes.
• Capital Allocation: The company prioritizes shareholder yield through stock buybacks rather than dividend increases. In FY2026, they repurchased 733,848 Class A shares using $2 million. Since before COVID, shares outstanding have been reduced by approximately 20%. The algorithmic buyback strategy activates when prices flatten or drop.
• Market Trends & Geopolitics: Strong interest in defense spending is noted due to global tensions (Iran, Ukraine) and NATO commitments. China’s aggressive gold purchasing is highlighted as a key driver for gold-related assets. AI and data centers are seen as significant beneficiaries of increased military and infrastructure spending.
• Marketing & Distribution: The firm focuses heavily on digital education via YouTube, TikTok, Reddit, and podcasts ('Return on Ideas'). They leverage influencer networks (e.g., aviation influencers for JETS, financial educators for general market views) to reach retail investors. Securities lending revenue from ETFs like JETS is cited as a notable income source.

• Dividends: Management stated they have not increased the dividend and remain focused on stock buybacks. The current monthly yield is 2.83%, but the effective shareholder yield (including buybacks) is estimated at 7.87%.
• Stock Buybacks: The company intends to continue buying back stock when prices are flat or down, believing the stock is deeply undervalued.
• Forward-Looking Themes: No specific numerical revenue guidance was provided. However, management expressed strong confidence in the long-term trends of defense spending, gold demand (driven by central banks and geopolitical uncertainty), and AI-related infrastructure.

The company reported total operating revenues of $10.3 million for fiscal year 2026, representing a 21% increase (or $1.8 million) from the prior year's $8.5 million. This growth was primarily driven by increases in assets under management, particularly within gold and natural resource funds. Operating expenses were $10.9 million, which was 5% lower than the prior year. While operational earnings resulted in a loss of $603,000 (a favorable improvement compared to the prior year), the company achieved a net income of $3.1 million ($0.24 per share). This net income includes $4.5 million in other income, largely due to unrealized gains on investments, compared to $2.7 million in the prior year.

• Market Volatility: The company’s performance is highly correlated with volatile asset classes like airlines, gold, and Bitcoin. Significant market swings can negatively impact both fund flows and investment portfolio values.
• Concentration Risk: Heavy reliance on specific thematic sectors (gold, airlines, defense) exposes the firm to sector-specific downturns.
• Regulatory and Compliance: As an investment adviser, the firm must navigate SEC rules, including maintaining specific stock class structures for compliance.
• Operational Failures/Risks Mentioned: No specific internal operational failures were disclosed. Risks are primarily external (market conditions, geopolitical events, competitor activity in the ETF space).

Q: How does the company view the role of securities lending in its revenue model, specifically regarding the JETS ETF? / A: CFO Lisa Callicotte and CEO Frank Holmes explained that securities lending is a significant revenue generator, particularly for popular ETFs like JETS. Institutions often use these ETFs for pairs trading or shorting individual airline stocks while holding the ETF, allowing the company to earn fees from lending out the underlying securities. This provides a stable income stream independent of pure asset growth.