Sprott Inc. Press Releases

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Press Release

Sprott Announces Third Quarter 2023 Results

TORONTO, Nov. 01, 2023 (GLOBE NEWSWIRE) -- Sprott Inc. (NYSE/TSX: SII) (“Sprott” or the “Company”) today announced its financial results for the three and nine months ended September 30, 2023.

Management commentary
"Despite another challenging period for investors in all asset categories, Sprott continues to deliver positive net sales and asset growth, finishing September with $25.4 billion in Assets Under Management ("AUM")," said Whitney George, Chief Executive Officer of Sprott. "Our expansion into energy transition investments is paying off, driven largely by the success of our uranium strategies. Since entering this area in mid-2021, our uranium strategies have grown to $6.3 billion in AUM and energy transition investments now make up approximately 25% of our consolidated AUM. During the third quarter, the Sprott Physical Uranium Trust grew by $1.1 billion, due mostly to market value appreciation. In addition, our uranium miners ETFs, the Sprott Uranium Miners ETF and Sprott Uranium Miners UCITS ETF (URNM) and the Sprott Junior Uranium Miners ETF (URNJ) were among the best-performing ETFs in any asset category in the third quarter, rising by approximately 41% and 39%, respectively, while attracting $199 million in total new AUM."

"We are confident in our positioning and believe our core investment themes of precious metals and energy transition investments will play out profitably for our clients and shareholders in the quarters and years ahead," added Mr. George.

Key AUM highlights1

  • AUM was $25.4 billion as at September 30, 2023, up $0.3 billion (1%) from June 30, 2023 and up $2 billion (8%) from December 31, 2022. On a three and nine months ended basis, we benefited from strong uranium prices and inflows to our exchange listed products which more than offset the exit of Korea. We also benefited from capital raises in our private strategies funds.

Key revenue highlights

  • Management fees were $33.1 million in the quarter, up $4 million (14%) from the quarter ended September 30, 2022 and $97.8 million on a year-to-date basis, up $10.8 million (12%) from the nine months ended September 30, 2022. Carried interest and performance fees were nil in the quarter and $0.4 million on a year-to-date basis, down $1.7 million (81%) from the nine months ended September 30, 2022. Net fees were $30.1 million in the quarter, up $3.3 million (12%) from the quarter ended September 30, 2022 and $89.2 million on a year-to-date basis, up $8.9 million (11%) from the nine months ended September 30, 2022. Our revenue performance was due to higher average AUM in our exchange listed products and private strategies segments. On a year-to-date basis, these increases were partially offset by lower average AUM in our managed equities segment and lower carried interest crystallization in our private strategies segment.
  • Commission revenues were $0.5 million in the quarter, down $5.6 million (91%) from the quarter ended September 30, 2022 and $7 million on a year-to-date basis, down $18.7 million (73%) from the nine months ended September 30, 2022. Net commissions were $0.4 million in the quarter, down $2.9 million (89%) from the quarter ended September 30, 2022 and $3.9 million on a year-to-date basis, down $9.4 million (71%) from the nine months ended September 30, 2022. Lower commissions were due to lower ATM activity in our physical uranium trust and the sale of our former Canadian broker-dealer.
  • Finance income was $1.2 million in the quarter, up $0.2 million (27%) from the quarter ended September 30, 2022 and $3.6 million on a year-to-date basis, up $0.1 million (2%) from the nine months ended September 30, 2022. Our results were primarily driven by higher income generation in co-investment positions we hold in LPs managed in our private strategies segment.

Key expense highlights

  • Net compensation expense was $15.1 million in the quarter, up $1.1 million (8%) from the quarter ended September 30, 2022 and $45.5 million on a year-to-date basis, up $1.8 million (4%) from the nine months ended September 30, 2022. The increase in the quarter and on a year-to-date basis was primarily due to new hires and increased AIP accruals on higher net fee generation.
  • SG&A was $4 million in the quarter, down $0.2 million (6%) from the quarter ended September 30, 2022 and $13.3 million on a year-to-date basis, up $1.4 million (11%) from the nine months ended September 30, 2022. The decrease in the quarter was due to lower professional services fees and the increase on a year-to-date basis was due to higher marketing and technology costs.

Earnings summary

  • Net income was $6.8 million ($0.27 per share) in the quarter, up $3.7 million ($0.15 per share) from the quarter ended September 30, 2022 and $32.1 million on a year-to-date basis ($1.27 per share), up $21.8 million ($0.86 per share) from the nine months ended September 30, 2022. Net income in the quarter benefited from higher net fees on improved average AUM in our exchange listed products and private strategies segments. On a year-to-date basis we benefited from the realization of an unrecorded contingent asset relating to a prior period acquisition, as well as higher net fees.
  • Adjusted base EBITDA was $17.9 million ($0.71 per share) in the quarter, up $1 million, or 6% ($0.04 per share) from the quarter ended September 30, 2022 and was $53.1 million ($2.10 per share) on a year-to-date basis, up $0.2 million ($0.01 per share) from the nine months ended September 30, 2022. The increase in the quarter and on a year-to-date basis was due to higher average AUM in our exchange listed products and private strategies segments more than offsetting lower commission income due to the sale of our former Canadian broker-dealer.

Subsequent events

  • On October 31, 2023, the Sprott Board of Directors announced a quarterly dividend of $0.25 per share.

1 See “non-IFRS financial measures” section in this press release and schedule 2 and 3 of "Supplemental financial information"

Supplemental financial information

Please refer to the September 30, 2023 interim financial statements of the Company and the related management discussion and analysis filed earlier this morning for further details into the Company's financial position as at September 30, 2023 and the company's financial performance for the three and nine months ended September 30, 2023.

Schedule 1 - AUM continuity

3 months results              
               
(In millions $) AUM
Jun. 30, 2023
Net inflows (1) Market
value
changes
Other
net inflows (1)
AUM
Sep. 30, 2023
  Blended net
management
fee rate (2)
Exchange listed products              
- Physical trusts              
- Physical Gold Trust 6,124 (28) (230) - 5,866   0.35%
- Physical Uranium Trust 3,473 73 1,065 - 4,611   0.30%
- Physical Gold and Silver Trust 4,056 - (140) - 3,916   0.40%
- Physical Silver Trust 3,986 (49) (111) - 3,826   0.45%
- Physical Platinum & Palladium Trust 110 3 1 - 114   0.50%
- Exchange Traded Funds              
- Energy Transition Materials ETFs 1,035 207 438 - 1,680   0.60%
- Precious Metals ETFs 355 (4) (35) - 316   0.27%
  19,139 202 988 - 20,329   0.39%
               
Managed equities              
- Precious metals strategies 1,633 (33) (168) - 1,432   0.91%
- Other (3) 1,089 - (66) - 1,023   1.10%
  2,722 (33) (234) - 2,455   0.99%
               
Private strategies 2,577 (29) 52 14 2,614   0.90%
               
Core AUM 24,438 140 806 14 25,398   0.50%
               
Non-core AUM 704 - (2) (702) (4) -   n/a
               
Total AUM (5) 25,142 140 804 (688) 25,398   0.50%
               
9 months results              
               
(In millions $) AUM
Dec. 31, 2022
Net inflows (1) Market
value
changes
Other
net inflows (1)
AUM
Sep. 30, 2023
  Blended net
management
fee rate (2)
Exchange listed products              
- Physical trusts              
- Physical Gold Trust 5,746 71 49 - 5,866   0.35%
- Physical Uranium Trust 2,876 214 1,521 - 4,611   0.30%
- Physical Gold and Silver Trust 3,998 - (82) - 3,916   0.40%
- Physical Silver Trust 4,091 63 (328) - 3,826   0.45%
- Physical Platinum & Palladium Trust 138 9 (33) - 114   0.50%
- Exchange Traded Funds              
- Energy Transition Materials ETFs 857 326 487 10 1,680   0.60%
- Precious Metals ETFs 349 (6) (27) - 316   0.27%
  18,055 677 1,587 10 20,329   0.39%
               
Managed equities              
- Precious metals strategies 1,721 (94) (195) - 1,432   0.91%
- Other (3) 1,032 (5) (4) - 1,023   1.10%
  2,753 (99) (199) - 2,455   0.99%
               
Private strategies 1,880 45 1 688 2,614   0.90%
               
Core AUM 22,688 623 1,389 698 25,398   0.50%
               
Non-core AUM 745 (26) (17) (702) (4) -   n/a
               
Total AUM (5) 23,433 597 1,372 (4) 25,398   0.50%
               
(1) See "Net inflows" and "Other net inflows" in the key performance indicators and non-IFRS and other financial measures section of the MD&A. Year-to-date figures were reclassified to conform with current presentation
(2) Management fee rate represents the weighted average fees for all funds in the category, net of trailer, sub-advisor and fund expenses
(3) Includes institutional managed accounts and high net worth discretionary managed accounts in the U.S.
(4) We exited our non-core asset management business domiciled in Korea. Historically, Korea was immaterial to our overall operations as it accounted for less than 1% of consolidated net income and adjusted base EBITDA.
(5) No performance fees are earned on exchange listed products. Performance fees are earned on all precious metals strategies and are based on returns above relevant benchmarks. Other managed equities strategies primarily earn performance fees on flow-through products. Private strategies LPs earn carried interest calculated as a predetermined net profit over a preferred return.
 

Schedule 2 - Summary financial information

(In thousands $) Q3
2023
Q2
2023
Q1
2023
Q4
2022
Q3
2022
Q2
2022
Q1
2022
Q4
2021
Summary income statement                
Management fees 33,116   33,222   31,434   28,405   29,158   30,620   27,172   27,783  
Trailer, sub-advisor and fund expense (1,557 ) (1,635 ) (1,554 ) (1,204 ) (1,278 ) (1,258 ) (853 ) (872 )
Direct payouts (1,472 ) (1,342 ) (1,187 ) (1,114 ) (1,121 ) (1,272 ) (1,384 ) (1,367 )
Carried interest and performance fees -   388   -   1,219   -   -   2,046   4,298  
Carried interest and performance fee payouts - internal -   (236 ) -   (567 ) -   -   (1,029 ) (2,516 )
Carried interest and performance fee payouts - external (1) -   -   -   (121 ) -   -   (476 ) (790 )
Net fees 30,087   30,397   28,693   26,618   26,759   28,090   25,476   26,536  
Commissions 539   1,647   4,784   5,027   6,101   6,458   13,077   14,153  
Commission expense - internal (88 ) (494 ) (1,727 ) (1,579 ) (2,385 ) (2,034 ) (3,134 ) (4,128 )
Commission expense - external (1) (92 ) (27 ) (642 ) (585 ) (476 ) (978 ) (3,310 ) (3,016 )
Net Commissions 359   1,126   2,415   2,863   3,240   3,446   6,633   7,009  
Finance income 1,181   1,277   1,180   1,439   933   1,186   1,433   788  
Gain (loss) on investments (1,441 ) (1,950 ) 1,958   (930 ) 45   (7,884 ) (1,473 ) (43 )
Other income (2) (73 ) 19,763   1,250   999   (227 ) 170   208   313  
Total net revenues 30,113   50,613   35,496   30,989   30,750   25,008   32,277   34,603  
                 
Compensation 16,825   21,610   19,103   17,030   18,934   19,364   21,789   20,632  
Direct payouts (1,472 ) (1,342 ) (1,187 ) (1,114 ) (1,121 ) (1,272 ) (1,384 ) (1,367 )
Carried interest and performance fee payouts - internal -   (236 ) -   (567 ) -   -   (1,029 ) (2,516 )
Commission expense - internal (88 ) (494 ) (1,727 ) (1,579 ) (2,385 ) (2,034 ) (3,134 ) (4,128 )
Severance, new hire accruals and other (122 ) (4,067 ) (1,257 ) (1,240 ) (1,349 ) (2,113 ) (514 ) (187 )
Net compensation 15,143   15,471   14,932   12,530   14,079   13,945   15,728   12,434  
Severance, new hire accruals and other (3) 122   4,067   1,257   1,240   1,349   2,113   514   187  
Selling, general and administrative 4,000   4,988   4,267   4,080   4,239   4,221   3,438   4,172  
Interest expense 882   1,087   1,247   1,076   884   483   480   239  
Depreciation and amortization 731   748   706   710   710   959   976   1,136  
Other expenses 3,811   471   2,824   1,650   5,697   868   1,976   2,910  
Total expenses 24,689   26,832   25,233   21,286   26,958   22,589   23,112   21,078  
                 
Net income 6,773   17,724   7,638   7,331   3,071   757   6,473   10,171  
Net income per share 0.27   0.70   0.30   0.29   0.12   0.03   0.26   0.41  
Adjusted base EBITDA 17,854   17,953   17,321   18,083   16,837   17,909   18,173   17,705  
Adjusted base EBITDA per share 0.71   0.71   0.68   0.72   0.67   0.71   0.73   0.71  
Operating margin 56 % 57 % 57 % 59 % 55 % 55 % 57 % 55 %
                 
Summary balance sheet                
Total assets 375,948   381,519   386,765   383,748   375,386   376,128   380,843   365,873  
Total liabilities 79,705   83,711   108,106   106,477   103,972   89,264   83,584   74,654  
                 
Total AUM 25,398,159   25,141,561   25,377,189   23,432,661   21,044,252   21,944,675   23,679,354   20,443,088  
Average AUM 25,518,250   25,679,214   23,892,335   22,323,075   21,420,015   23,388,568   21,646,082   20,229,119  
(1) These amounts are included in the "Trailer, sub-advisor and fund expenses" line on the consolidated statements of operations.
(2) The majority of the amount in Q2, 2023 relates to the receipt of shares on the realization of a previously unrecorded contingent asset from a historical acquisition.
(3) The majority of the Q2, 2023 amount is accelerated compensation and other transition payments to the former CEO on the successful completion of the sale of Sprott Capital Partners ("SCP") during the second quarter.
 

Schedule 3 - EBITDA reconciliation

  3 months ended 9 months ended
(in thousands $) Sep. 30, 2023 Sep. 30, 2022 Sep. 30, 2023 Sep. 30, 2022
         
Net income for the period 6,773   3,071   32,135   10,301  
Adjustments:        
Interest expense 882   884   3,216   1,847  
Provision for income taxes (1,349 ) 721   7,333   5,075  
Depreciation and amortization 731   710   2,185   2,645  
EBITDA 7,037   5,386   44,869   19,868  
         
Other adjustments:        
(Gain) loss on investments (1) 1,441   (45 ) 1,433   9,312  
Amortization of stock based compensation 4,294   3,633   12,022   10,911  
Other (income) expenses (2) 5,082   7,863   (5,044 ) 13,369  
Adjusted EBITDA 17,854   16,837   53,280   53,460  
         
Other adjustments:        
Carried interest and performance fees -   -   (388 ) (2,046 )
Carried interest and performance fee payouts - internal -   -   236   1,029  
Carried interest and performance fee payouts - external -   -   -   476  
Adjusted base EBITDA 17,854   16,837   53,128   52,919  
Operating margin (3) 56 % 55 % 57 % 55 %
(1) This adjustment removes the income effects of certain gains or losses on short-term investments, co-investments, and digital gold strategies to ensure the reporting objectives of our EBITDA metric as described above are met.
(2) In addition to the items outlined in Note 5 of the interim financial statements, this reconciliation line also includes $0.1 million severance, new hire accruals and other for the three months ended September 30, 2023 (three months ended September 30, 2022 - $1.3 million) and $5.4 million for the nine months ended September 30, 2023 (nine months ended September 30, 2022 - $4 million). This reconciliation line excludes income (loss) attributable to non-controlling interest of ($1.1) million for the three months ended September 30, 2023 (three months ended September 30, 2022 - (($0.8) million) and ($1) million for the nine months ended September 30, 2023 (nine months ended September 30, 2022 - (($0.9) million).
(3) Calculated as adjusted base EBITDA inclusive of depreciation and amortization. This figure is then divided by revenues before gains (losses) on investments, net of direct costs as applicable.
 

Conference Call and Webcast

A webcast will be held today, November 1, 2023 at 10:00 am ET to discuss the Company's financial results. To listen to the webcast, please register at https://edge.media-server.com/mmc/p/tcbp5zf3

Please note, analysts who cover the Company should register at: https://register.vevent.com/register/BId75d8bbee1c841edb6d80c073f330149

Non-IFRS Financial Measures

This press release includes financial terms (including AUM, net revenues, net commissions, net fees, expenses, adjusted base EBITDA, operating margins and net compensation) that the Company utilizes to assess the financial performance of its business that are not measures recognized under International Financial Reporting Standards (“IFRS”). These non-IFRS measures should not be considered alternatives to performance measures determined in accordance with IFRS and may not be comparable to similar measures presented by other issuers. Non-IFRS financial measures do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Our key performance indicators and non-IFRS and other financial measures are discussed below. For quantitative reconciliations of non-IFRS financial measures to their most directly comparable IFRS financial measures please see schedule 2 and schedule 3 of the "Supplemental financial information" section of this press release.

Net fees

Management fees, net of trailer, sub-advisor, fund expenses and direct payouts, and carried interest and performance fees, net of carried interest and performance fee payouts (internal and external), are key revenue indicators as they represent the net revenue contribution after directly associated costs that we generate from our AUM.

Net commissions

Commissions, net of commission expenses (internal and external), arise primarily from purchases and sales of uranium in our exchange listed products segment and transaction-based service offerings by our broker dealers.

Net compensation

Net compensation excludes commission expenses paid to employees, other direct payouts to employees, carried interest and performance fee payouts to employees, which are all presented net of their related revenues in the MD&A, and severance, new hire accruals and other which are non-recurring.

EBITDA, adjusted EBITDA, adjusted base EBITDA and operating margins

EBITDA in its most basic form is defined as earnings before interest expense, income taxes, depreciation and amortization. EBITDA (or adjustments thereto) is a measure commonly used in the investment industry by management, investors and investment analysts in understanding and comparing results by factoring out the impact of different financing methods, capital structures, amortization techniques and income tax rates between companies in the same industry. While other companies, investors or investment analysts may not utilize the same method of calculating EBITDA (or adjustments thereto), the Company believes its adjusted base EBITDA metric, in particular, results in a better comparison of the Company's underlying operations against its peers and a better indicator of recurring results from operations as compared to other non-IFRS financial measures. Operating margins are a key indicator of a company’s profitability on a per dollar of revenue basis, and as such, is commonly used in the financial services sector by analysts, investors and management.

Forward Looking Statements

Certain statements in this press release contain forward-looking information and forward-looking statements (collectively referred to herein as the "Forward-Looking Statements") within the meaning of applicable Canadian and U.S. securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify Forward-Looking Statements. In particular, but without limiting the forgoing, this press release contains Forward-Looking Statements pertaining to: (i) our confidence that our positioning and belief in our core investment themes of precious metals and energy transition investments will play out profitably for our clients and shareholders in the quarters and years ahead; and (ii) the declaration, payment and designation of dividends and confidence that our business will support the dividend level without impacting our ability to fund future growth initiatives.

Although the Company believes that the Forward-Looking Statements are reasonable, they are not guarantees of future results, performance or achievements. A number of factors or assumptions have been used to develop the Forward-Looking Statements, including: (i) the impact of increasing competition in each business in which the Company operates will not be material; (ii) quality management will be available; (iii) the effects of regulation and tax laws of governmental agencies will be consistent with the current environment; (iv) the impact of COVID-19; and (v) those assumptions disclosed under the heading "Critical Accounting Estimates, Judgments and Changes in Accounting Policies" in the Company’s MD&A for the period ended September 30, 2023. Actual results, performance or achievements could vary materially from those expressed or implied by the Forward-Looking Statements should assumptions underlying the Forward-Looking Statements prove incorrect or should one or more risks or other factors materialize, including: (i) difficult market conditions; (ii) poor investment performance; (iii) failure to continue to retain and attract quality staff; (iv) employee errors or misconduct resulting in regulatory sanctions or reputational harm; (v) performance fee fluctuations; (vi) a business segment or another counterparty failing to pay its financial obligation; (vii) failure of the Company to meet its demand for cash or fund obligations as they come due; (viii) changes in the investment management industry; (ix) failure to implement effective information security policies, procedures and capabilities; (x) lack of investment opportunities; (xi) risks related to regulatory compliance; (xii) failure to manage risks appropriately; (xiii) failure to deal appropriately with conflicts of interest; (xiv) competitive pressures; (xv) corporate growth which may be difficult to sustain and may place significant demands on existing administrative, operational and financial resources; (xvi) failure to comply with privacy laws; (xvii) failure to successfully implement succession planning; (xviii) foreign exchange risk relating to the relative value of the U.S. dollar; (xix) litigation risk; (xx) failure to develop effective business resiliency plans; (xxi) failure to obtain or maintain sufficient insurance coverage on favorable economic terms; (xxii) historical financial information being not necessarily indicative of future performance; (xxiii) the market price of common shares of the Company may fluctuate widely and rapidly; (xxiv) risks relating to the Company’s investment products; (xxv) risks relating to the Company's proprietary investments; (xxvi) risks relating to the Company's lending business; (xxvii) those risks described under the heading "Risk Factors" in the Company’s annual information form dated February 23, 2023; and (xxviii) those risks described under the headings "Managing Financial Risks" and "Managing Non-Financial Risks" in the Company’s MD&A for the period ended September 30, 2023. In addition, the payment of dividends is not guaranteed and the amount and timing of any dividends payable by the Company will be at the discretion of the Board of Directors of the Company and will be established on the basis of the Company’s earnings, the satisfaction of solvency tests imposed by applicable corporate law for the declaration and payment of dividends, and other relevant factors. The Forward-Looking Statements speak only as of the date hereof, unless otherwise specifically noted, and the Company does not assume any obligation to publicly update any Forward-Looking Statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

About Sprott

Sprott is a global leader in precious metals and critical materials investments. We are specialists. Our in-depth knowledge, experience and relationships separate us from the generalists. Our investment strategies include Exchange Listed Products, Managed Equities and Private Strategies. Sprott has offices in Toronto, New York and Connecticut and the company’s common shares are listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbol (SII). For more information, please visit www.sprott.com.

Investor contact information:

Glen Williams
Managing Partner
Investor and Institutional Client Relations;
Head of Corporate Communications
(416) 943-4394
gwilliams@sprott.com

 


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