Bay Street News

Sprott Announces Year Ended 2023 Results

Bay Street

TORONTO, Feb. 21, 2024 (GLOBE NEWSWIRE) — Sprott Inc. (NYSE/TSX: SII) (“Sprott” or the “Company”) today announced its financial results for the year ended December 31, 2023.

Management commentary

“In 2023, Sprott’s Assets Under Management (“AUM”) increased by $5.3 billion (23%) to $28.7 billion driven largely by strong uranium prices and inflows to our exchange listed products. Much of this growth came late in the fourth quarter and is already positively contributing to our 2024 performance,” said Whitney George, Chief Executive Officer of Sprott. “The success of our uranium strategies has been a bright spot for Sprott clients and shareholders as they have grown to account for approximately 28% of our total AUM. During the year, we also expanded our critical materials product offerings with the launch of seven new ETFs in this rapidly growing category. Precious metals markets were relatively quiet in 2023, though gold still gained 13% on the year, despite high real interest rates.”

“Looking ahead, we believe we are well positioned to continue creating value for our shareholders in 2024. We have a strong pipeline of new products and a growing reputation as a trusted partner in our areas of specialization. We are welcoming many new clients who have just started to explore opportunities in critical materials and are now joining the loyal clients invested in our precious metals products. Finally, we have a focused team of employee shareholders who are eager to demonstrate the potential of our highly-scalable asset management platform,” added Mr. George.

Key AUM highlights1

Key revenue highlights

Key expense highlights

Earnings summary

Subsequent events

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 December 31, 2023 annual 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 December 31, 2023 and the Company’s financial performance for the year ended December 31, 2023.

Schedule 1 – AUM continuity

3 months results              
               
(In millions $) AUM
Sep. 30, 2023		 Net
inflows(1)		 Market
value changes		 Other
net inflows(1)		 AUM
Dec. 31, 2023		   Blended net
management fee rate(2)
               
Exchange listed products              
– Physical trusts              
– Physical Gold Trust 5,866 (5) 671 — 6,532   0.35%
– Physical Uranium Trust 4,611 55 1,107 — 5,773   0.30%
– Physical Gold and Silver Trust 3,916 (75) 389 — 4,230   0.40%
– Physical Silver Trust 3,826 (27) 271 — 4,070   0.45%
– Physical Platinum & Palladium Trust 114 5 (3) — 116   0.50%
– Exchange Traded Funds              
– Critical Materials ETFs 1,680 429 34 — 2,143   0.59%
– Precious Metals ETFs 316 (8) 31 — 339   0.31%
  20,329 374 2,500 — 23,203   0.39%
               
Managed equities              
– Precious metals strategies 1,432 (53) 187 — 1,566   0.86%
– Other(3) 1,023 212 73 16 1,324   1.05%
  2,455 159 260 16 2,890   0.94%
               
Private strategies 2,614 (8) 39 — 2,645   0.91%
               
Core AUM 25,398 525 2,799 16 28,738   0.50%
               
Non-core AUM — — — — —   n/a
               
Total AUM(5) 25,398 525 2,799 16 28,738   0.50%
               
12 monthsresults              
               
(In millions $) AUM
Dec. 31, 2022		 Net
inflows(1)		 Market
value changes		 Other
net inflows(1)		 AUM
Dec. 31, 2023		   Blended net
management fee rate(2)
               
Exchange listed products              
– Physical trusts              
– Physical Gold Trust 5,746 66 720 — 6,532   0.35%
– Physical Uranium Trust 2,876 269 2,628 — 5,773   0.30%
– Physical Gold and Silver Trust 3,998 (75) 307 — 4,230   0.40%
– Physical Silver Trust 4,091 36 (57) — 4,070   0.45%
– Physical Platinum & Palladium Trust 138 14 (36) — 116   0.50%
– Exchange Traded Funds              
– Critical Materials ETFs 857 755 521 10 2,143   0.59%
– Precious Metals ETFs 349 (14) 4 — 339   0.31%
  18,055 1,051 4,087 10 23,203   0.39%
               
Managed equities              
– Precious metals strategies 1,721 (147) (8) — 1,566   0.86%
– Other(3) 1,032 207 69 16 1,324   1.05%
  2,753 60 61 16 2,890   0.94%
               
Private strategies 1,880 37 40 688 2,645   0.91%
               
Core AUM 22,688 1,148 4,188 714 28,738   0.50%
               
Non-core AUM 745 (26) (17) (702)(4) —   n/a
               
Total AUM(5) 23,433 1,122 4,171 12 28,738   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. Full-year 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 certain 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 $) Q4
2023		 Q3
2023		 Q2
2023		 Q1
2023		 Q4
2022		 Q3
2022		 Q2
2022		 Q1
2022
Summary income statement                
Management fees 34,485 33,116 33,222 31,434   28,405 29,158 30,620 27,172
Trailer, sub-advisor and fund expenses (1,968) (1,557) (1,635) (1,554)   (1,204) (1,278) (1,258) (853)
Direct payouts (1,283) (1,472) (1,342) (1,187)   (1,114) (1,121) (1,272) (1,384)
Carried interest and performance fees 503 — 388 —   1,219 — — 2,046
Carried interest and performance fee payouts – internal (222) — (236) —   (567) — — (1,029)
Carried interest and performance fee payouts – external(1) — — — —   (121) — — (476)
Net fees 31,515 30,087 30,397 28,693   26,618 26,759 28,090 25,476
                 
Commissions 1,331 539 1,647 4,784   5,027 6,101 6,458 13,077
Commission expense – internal (161) (88) (494) (1,727)   (1,579) (2,385) (2,034) (3,134)
Commission expense – external(1) (441) (92) (27) (642)   (585) (476) (978) (3,310)
Net commissions 729 359 1,126 2,415   2,863 3,240 3,446 6,633
                 
Finance income 1,214 1,181 1,277 1,180   1,439 933 1,186 1,433
Gain (loss) on investments 2,808 (1,441) (1,950) 1,958   (930) 45 (7,884) (1,473)
Other income(2) 405 (73) 19,763 1,250   999 (227) 170 208
Total net revenues(3) 36,671 30,113 50,613 35,496   30,989 30,750 25,008 32,277
                 
Compensation 16,675 16,825 21,610 19,103   17,030 18,934 19,364 21,789
Direct payouts (1,283) (1,472) (1,342) (1,187)   (1,114) (1,121) (1,272) (1,384)
Carried interest and performance fee payouts – internal (222) — (236) —   (567) — — (1,029)
Commission expense – internal (161) (88) (494) (1,727)   (1,579) (2,385) (2,034) (3,134)
Severance, new hire accruals and other (179) (122) (4,067) (1,257)   (1,240) (1,349) (2,113) (514)
Net compensation 14,830 15,143 15,471 14,932   12,530 14,079 13,945 15,728
                 
Severance, new hire accruals and other(4) 179 122 4,067 1,257   1,240 1,349 2,113 514
Selling, general and administrative 4,195 4,000 4,988 4,267   4,080 4,239 4,221 3,438
Interest expense 844 882 1,087 1,247   1,076 884 483 480
Depreciation and amortization 658 731 748 706   710 710 959 976
Other expenses 5,142 3,811 471 2,824   1,650 5,697 868 1,976
Total expenses 25,848 24,689 26,832 25,233   21,286 26,958 22,589 23,112
                 
Net income(5) 9,664 6,773 17,724 7,638   7,331 3,071 757 6,473
Net income per share(6) 0.38 0.27 0.70 0.30   0.29 0.12 0.03 0.26
Adjusted base EBITDA 18,759 17,854 17,953 17,321   18,083 16,837 17,909 18,173
Adjusted base EBITDA per share 0.75 0.71 0.71 0.68   0.72 0.67 0.71 0.73
Operating margin 56% 56% 57% 57%   59% 55% 55% 57%
                 
Summary balance sheet                
Total assets(7) 378,835 375,948 381,519 386,765   383,748 375,386 376,128 380,843
Total liabilities(8) 73,130 79,705 83,711 108,106   106,477 103,972 89,264 83,584
                 
Total AUM 28,737,742 25,398,159 25,141,561 25,377,189   23,432,661 21,044,252 21,944,675 23,679,354
Average AUM 27,014,109 25,518,250 25,679,214 23,892,335   22,323,075 21,420,015 23,388,568 21,646,082
(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) Total revenues for the year ended December 31, 2023 were $169,021 (December 31, 2022- $145,182; December 31, 2021- $164,645).
(4) 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.
(5) Net income for the year ended December 31, 2023 was $41,799 (December 31, 2022 – $17,632; December 31, 2021- $33,185).
(6) Basic and diluted net income per share for the year ended December 31, 2023 was $1.66 and $1.60, respectively (December 31, 2022 – $0.70 and $0.67, respectively; December 31, 2021 – $1.33 and $1.28, respectively).
(7) Total assets as at December 31, 2023 were $378,835 (December 31, 2022 – $383,748; December 31, 2021- $365,873).
(8) Total liabilities as at December 31, 2023 were $73,130 (December 31, 2022 – $106,477; December 31, 2021 – $74,654).
   


Schedule 3 – EBITDA reconciliation

  3 months ended 12 months ended
         
(in thousands $) Dec. 31, 2023 Dec. 31, 2022 Dec. 31, 2023 Dec. 31, 2022
Net income for the period 9,664   7,331   41,799   17,632  
Adjustments:        
Interest expense 844   1,076   4,060   2,923  
Provision for income taxes 1,159   2,372   8,492   7,447  
Depreciation and amortization 658   710   2,843   3,355  
EBITDA 12,325   11,489   57,194   31,357  
Other adjustments:        
(Gain) loss on investments(1) (2,808 ) 930   (1,375 ) 10,242  
Amortization of stock based compensation 4,260   3,635   16,282   14,546  
Other (income) and expenses(2) 5,263   2,560   219   15,929  
Adjusted EBITDA 19,040   18,614   72,320   72,074  
         
Other adjustments:        
Carried interest and performance fees (503 ) (1,219 ) (891 ) (3,265 )
Carried interest and performance fee payouts – internal 222   567   458   1,596  
Carried interest and performance fee payouts – external —   121   —   597  
Adjusted base EBITDA 18,759   18,083   71,887   71,002  
Operating margin(3) 56 % 59 % 57 % 57 %
(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 annual financial statements, this reconciliation line also includes $0.2 million severance, new hire accruals and other for the three months ended December 31, 2023 (three months ended December 31, 2022 – $1.2 million) and $5.6 million for the year ended December 31, 2023 (year ended December 31, 2022 – $5.2 million). This reconciliation line excludes income (loss) attributable to non-controlling interest of $0.1 million for the three months ended December 31, 2023 (three months ended December 31, 2022 – $0.3 million and ($0.9) million for the year ended December 31, 2023 (year ended December 31, 2022 – ($0.5) 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, February 21, 2024 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/4ntitdgh

Please note, analysts who cover the Company should register at:
https://register.vevent.com/register/BI9f44c0f3a1534a898c9479a79580cf87

Normal Course Issuer Bid

Sprott Inc. (“Sprott” or the “Company”) (NYSE/TSX: SII) is pleased to also announce today that the Toronto Stock Exchange (“TSX”) has approved the Company’s notice of intention to make a normal course issuer bid (“NCIB”). Pursuant to the terms of the NCIB, Sprott may purchase its own common shares for cancellation through the facilities of the TSX, alternative Canadian trading systems and/or the New York Stock Exchange, in each case in accordance with the applicable requirements, and as otherwise permitted under applicable securities laws. The maximum number of common shares which may be purchased by Sprott during the NCIB will not exceed 646,576 common shares being approximately 2.5% of 25,863,041 (representing the number of issued and outstanding common shares as of February 19, 2024). The average daily trading volume (the “ADTV”) of the common shares on the TSX for the six-month period ended January 31, 2024 was 28,455. Under the rules of the TSX, Sprott is entitled to repurchase during the same trading day on the TSX up to 25% of the ADTV of the common shares, being 7,113 common shares, except where such purchases are made in accordance with the “block purchase” exemption under applicable TSX policy. Sprott will effect purchases at varying times commencing on March 4, 2024 and ending on March 3, 2025.

In addition to providing shareholders liquidity, Sprott believes that the common shares have been trading in a price range which does not adequately reflect the value of such shares in relation to Sprott’s business and its future prospects.

Under its current NCIB that commenced on March 3, 2023 and will terminate on March 2, 2024, Sprott previously sought and received approval from the TSX to repurchase up to 648,908 common shares. Pursuant to its current NCIB, Sprott has purchased an aggregate of 122,953 common shares through the facilities of the TSX and the NYSE. 18,915 common shares were purchased on the TSX at a weighted-average price of C$45.54 per common share for total cash consideration of CAD$861,389.10, and 104,038 common shares were purchased on the NYSE at a weighted-average price of US$32.63 per common share for total cash consideration of US$3,394,759.94. Sprott did not repurchase the maximum allowance under the current NCIB due to a combination of factors.

Non-IFRS Financial Measures

This press release includes financial terms (including AUM, 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 belief that we are well positioned to continue creating value for our shareholders; (ii) our strong pipeline of new products and our highly-scalable asset management platform; and (iii) 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 public health outbreaks; 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 December 31, 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 20, 2024; 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 December 31, 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 metal 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, Connecticut and California 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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