Sprott Inc. (NYSE/TSX: SII) (“Sprott” or the “Company”) today announced its financial results for the quarter ended March 31, 2022.

Management commentary

"Sprott continued to deliver outstanding financial results in the first quarter of 2022, as Assets Under Management (“AUM”) increased to $23.7 billion, up $3.2 billion (16%) from December 31, 2021. Net income was $6.5 million ($0.26 per share), up $3.3 million ($0.13 per share) from the quarter ended March 31, 2021. Adjusted base EBITDA was $18.2 million ($0.73 per share), up 24%, or $3.6 million ($0.14 per share) from the quarter ended March 31, 2021. Our strong operating performance during the quarter was driven by market value appreciation in our uranium, gold and silver strategies and more than $1.3 billion of inflows to our exchange listed product offerings," said Peter Grosskopf, CEO of Sprott.

"As a leading provider of both precious metals and real assets investment solutions to our global client base, we view the energy-transition space as a strategic fit with our existing suite of products. The Sprott Physical Uranium Trust, which was launched in July 2021, recently surpassed $3 billion in AUM. On April 22, 2022, subsequent to quarter end, we further expanded our energy-transition platform, closing the previously announced acquisition of the North Shore Global Uranium Miners ETF (“URNM”) which is now trading on the New York Stock Exchange as the Sprott Uranium Miners ETF. This transaction added another $1.1 billion of AUM and established Sprott as the largest manager of uranium investments in the world with approximately $4 billion in uranium related, energy-transition AUM. While we are pleased with our early success, we continue to see opportunities to further grow this area of our business."

Financial highlights1

Key AUM highlights

  • AUM was $23.7 billion as at March 31, 2022, up $3.2 billion (16%) from December 31, 2021. On a three months ended basis, we benefited from strong market value appreciation across our fund products and strong inflows to our physical uranium, physical gold and physical silver trusts in particular.

Key revenue highlights

  • Management fees were $27.2 million in the quarter, up $4.7 million (21%) from the quarter ended March 31, 2021. Carried interest and performance fees were $2 million in the quarter, down $5.9 million (74%) from the quarter ended March 31, 2021. Net fees were $25.5 million in the quarter, up $1.8 million (7%) from the quarter ended March 31, 2021. Our revenue performance was primarily due to higher average AUM given strong market value appreciation and inflows in our exchange listed products segment (primarily our physical uranium, physical gold and physical silver trusts). These increases were partially offset by lower carried interest crystallization in our private strategies segment.
  • Commission revenues were $13.1 million in the quarter, up $0.6 million (5%) from the quarter ended March 31, 2021. Net commissions were $6.6 million in the quarter, down $0.3 million (4%) from the quarter ended March 31, 2021. Commissions earned on the purchase of uranium in our exchange listed products segment were more than offset by weaker mining equity origination activity in our brokerage segment.
  • Finance income was $1.4 million in the quarter, up $0.2 million (15%) from the quarter ended March 31, 2021. Our quarterly results were primarily driven by income generation in co-investment positions we hold in LPs managed in our private strategies segment.

Key expense highlights

  • Net compensation expense was $15.7 million in the quarter, up $3.9 million (33%) from the quarter ended March 31, 2021. The increase was primarily due to higher long-term incentive plan ("LTIP") amortization and higher salaries on new hires that were partially offset by lower annual incentive compensation ("AIP").
  • SG&A was $3.4 million in the quarter, up $0.1 million (3%) from the quarter ended March 31, 2021. The increase was mainly due to higher marketing, regulatory and technology costs.

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

Earnings summary

  • Net income was $6.5 million ($0.26 per share) in the quarter, up $3.3 million ($0.13 per share) from the quarter ended March 31, 2021. Adjusted base EBITDA was $18.2 million ($0.73 per share) in the quarter, up 24%, or $3.6 million ($0.14 per share) from the quarter ended March 31, 2021.During the quarter, we benefited from strong market value appreciation and strong inflows to our physical uranium, physical gold and physical silver trusts. These increases were only partially offset by weaker mining equity origination activity in our brokerage segment.

Subsequent events

  • Subsequent to the quarter end, on April 22, 2022, the Company closed on the previously announced transaction to acquire the North Shore Global Uranium ETF (“URNM”).
  • On May 5, 2022, the Sprott Board of Directors announced a quarterly dividend of $0.25 per share.

Supplemental financial information

Please refer to the March 31, 2022 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 March 31, 2022 and the company's financial performance for the three months ended March 31, 2022.

Schedule 1 - AUM continuity

3 months results              
               
(In millions $) AUMDec. 31, 2021 Net inflows(1) Market value changes Other(2) AUMMar. 31, 2022   Blendedmanagementfee rate(3)
Exchange listed products              
- Physical trusts              
- Physical Gold Trust 5,008 590 289 - 5,887   0.35%
- Physical Gold and Silver Trust 4,094 (34) 242 - 4,302   0.40%
- Physical Silver Trust 3,600 123 219 - 3,942   0.45%
- Physical Uranium Trust 1,769 639 736 - 3,144   0.30%
- Physical Platinum & Palladium Trust 132 19 13 - 164   0.50%
- Exchange Traded Funds 356 16 58 - 430   0.35%
  14,959 1,353 1,557 - 17,869   0.38%
               
Managed equities              
- Precious metals strategies 2,141 7 216 - 2,364   0.83%
- Other(4)(5) 1,141 28 70 - 1,239   1.15%
  3,282 35 286 - 3,603   0.93%
               
Private strategies 1,426 8 7 - 1,441   0.76%
               
Other 776 - (10) - 766   0.51%
               
Total(6) 20,443 1,396 1,840 - 23,679   0.49%
               
               
(1) See 'Net inflows' in the key performance indicators and non-IFRS and other financial measures section of the MD&A.
(2) Includes new AUM from fund acquisitions and lost AUM from fund divestitures and capital distributions of our private strategies LPs.
(3) Management fee rate represents the weighted average fees for all funds in the category.
(4) Includes institutional managed accounts and high net worth discretionary managed accounts in the U.S.
(5) Prior year figures have been restated to confirm with current year presentation. See the "Business overview" section of the MD&A.
(6) No performance fees are earned on exchange listed products. Performance fees are earned on all precious metals strategies (other than bullion funds) 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 pre-determined net profit over a preferred return.

Schedule 2 - Summary financial information

(In thousands $) Q12022 Q42021 Q32021 Q22021 Q12021 Q42020 Q32020 Q22020
Summary income statements                
Management fees 27,172   27,783   28,612   25,062   22,452   22,032   19,934   15,825  
Trailer, sub-advisor and fund expenses (853 ) (872 ) (637 ) (552 ) (599 ) (583 ) (527 ) (516 )
Direct payouts (1,384 ) (1,367 ) (1,892 ) (1,198 ) (890 ) (695 ) (476 ) (490 )
Carried interest and performance fees 2,046   4,298   -   -   7,937   10,075   -   -  
Carried interest and performance fee payouts - internal (1,029 ) (2,516 ) -   (126 ) (4,580 ) (5,529 ) -   -  
Carried interest and performance fee payouts - external(1) (476 ) (790 ) -   -   (595 ) -   -   -  
Net fees 25,476   26,536   26,083   23,186   23,725   25,300   18,931   14,819  
Commissions 13,077   14,153   11,273   7,377   12,463   6,761   9,386   6,133  
Commission expense - internal (3,134 ) (4,128 ) (3,089 ) (3,036 ) (5,289 ) (2,093 ) (3,313 ) (1,887 )
Commission expense - external(1) (3,310 ) (3,016 ) (2,382 ) (49 ) (253 ) (98 ) (344 ) (161 )
Net Commissions 6,633   7,009   5,802   4,292   6,921   4,570   5,729   4,085  
Finance income 1,433   788   567   932   1,248   1,629   757   656  
Gain (loss) on investments (1,473 ) (43 ) 310   2,502   (4,652 ) (3,089 ) 4,408   8,142  
Other income 208   313   529   438   303   949   914   285  
Total net revenues 32,277   34,603   33,291   31,350   27,545   29,359   30,739   27,987  
                 
Compensation 21,789   20,632   18,001   15,452   22,636   20,193   16,280   10,991  
Direct payouts (1,384 ) (1,367 ) (1,892 ) (1,198 ) (890 ) (695 ) (476 ) (490 )
Carried interest and performance fee payouts - internal (1,029 ) (2,516 ) -   (126 ) (4,580 ) (5,529 ) -   -  
Commission expense - internal (3,134 ) (4,128 ) (3,089 ) (3,036 ) (5,289 ) (2,093 ) (3,313 ) (1,887 )
Severance, new hire accruals and other (514 ) (187 ) (207 ) (293 ) (44 ) (65 ) (210 ) (358 )
Net compensation 15,728   12,434   12,813   10,799   11,833   11,811   12,281   8,256  
Severance, new hire accruals and other 514   187   207   293   44   65   210   358  
Selling, general and administrative 3,438   4,172   3,682   3,492   3,351   2,320   2,465   2,944  
Interest expense 480   239   312   260   350   331   320   350  
Depreciation and amortization 976   1,136   1,134   1,165   1,117   1,023   992   1,049  
Other expenses 1,976   2,910   3,875   876   4,918   4,528   4,154   2,893  
Total expenses 23,112   21,078   22,023   16,885   21,613   20,078   20,422   15,850  
                 
Net income 6,473   10,171   8,718   11,075   3,221   6,720   8,704   10,492  
Net Income per share 0.26   0.41   0.35   0.44   0.13   0.27   0.36   0.43  
Adjusted base EBITDA 18,173   17,705   16,713   15,050   14,605   14,751   12,024   9,204  
Adjusted base EBITDA per share 0.73   0.71   0.67   0.60   0.59   0.60   0.49   0.38  
Operating margin 57%   55%   52%   52%   51%   51%   47%   49%  
                 
Summary balance sheet                
Total assets 380,843   365,873   375,819   361,121   356,986   377,348   358,300   338,931  
Total liabilities 83,584   74,654   84,231   64,081   67,015   86,365   81,069   70,818  
                 
Total AUM 23,679,354   20,443,088   19,016,313   18,550,106   17,073,078   17,390,389   16,259,184   13,893,039  
Average AUM 21,646,082   20,229,119   19,090,702   18,343,846   17,188,205   16,719,815   16,705,046   13,216,415  
                 
(1) These amounts are included in the "Trailer, sub-advisor and fund expenses" line on the consolidated statements of operations.  

Schedule 3 - EBITDA reconciliation

     
     
  3 months ended
(in thousands $) Mar. 31, 2022 Mar. 31, 2021
     
Net income for the periods 6,473   3,221  
Adjustments:    
Interest expense 480   350  
Provision for income taxes 2,692   2,711  
Depreciation and amortization 976   1,117  
EBITDA 10,621   7,399  
     
Other adjustments:    
(Gain) loss on investments(1) 1,473   4,652  
Amortization of stock based compensation 4,177   373  
Other expenses(2) 2,443   4,943  
Adjusted EBITDA 18,714   17,367  
     
Other adjustments:    
Carried interest and performance fees (2,046)   (7,937)  
Carried interest and performance fee payouts - internal 1,029   4,580  
Carried interest and performance fee payouts - external 476   595  
Adjusted base EBITDA 18,173   14,605  
Operating margin(3) 57%   51%  
(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 below are met.
(2) In addition to the items outlined in Note 5 of the interim financial statements, this reconciliation line also includes $0.5 million severance, new hire accruals and other for the three months ended March 31, 2022 (nominal for the three months ended March 31, 2021). This reconciliation line excludes nominal income (loss) attributable to non-controlling interests for the three months ended March 31, 2022 (nominal for the three months ended March 31, 2021).
(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 conference call and webcast will be held today, May 6, 2022 at 10:00 am ET to discuss the Company's financial results. To participate in the call, please dial (855) 458-4215 ten minutes prior to the scheduled start of the call and provide conference ID 54907466. A taped replay of the conference call will be available until Friday, May 13, 2022 by calling (855) 859-2056, reference number 54907466. The conference call will be webcast live at www.sprott.com and https://edge.media-server.com/mmc/p/g8fqgbqt.

Non-IFRS Financial Measures

This press release includes financial terms (including AUM, net revenues, net commissions, net fees, expenses, adjusted base EBITDA, 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 transaction-based service offerings of our brokerage segment and purchases and sales of uranium in our exchange listed products segment.

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

EBITDA in its most basic form is defined as earnings before interest expense, income taxes, depreciation and amortization. EBITDA 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.

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 will continue to grow in the energy transition space; 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 March 31, 2022. 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 favourable 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) risks relating to the Company’s brokerage business; (xxviii) those risks described under the heading "Risk Factors" in the Company’s annual information form dated February 24, 2022; and (xxix) those risks described under the headings "Managing Financial Risks" and "Managing Non-Financial Risks" in the Company’s MD&A for the period ended March 31, 2022. 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 real asset 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, Private Strategies and Brokerage. Sprott has offices in Toronto, New York and London 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 WilliamsManaging DirectorInvestor and Institutional Client Relations;Head of Corporate Communications(416) 943-4394gwilliams@sprott.com

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