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
AUM was $28.7 billion as at December 31, 2023, up $3.3 billion (13%) from September 30, 2023 and up $5.3 billion (23%) from December 31, 2022. On a three and twelve months ended basis, we benefited from strong uranium prices, as well as inflows across the majority of our exchange listed products. We also benefited from capital raises in our private strategies funds.
Key revenue highlights
Management fees were $34.5 million in the quarter, up $6.1 million (21%) from the quarter ended December 31, 2022 and $132.3 million on a full-year basis, up $16.9 million (15%) from the year ended December 31, 2022. Carried interest and performance fees were $0.5 million in the quarter, down $0.7 million (59%) from the quarter ended December 31, 2022 and $0.9 million on a full-year basis, down $2.4 million (73%) from the year ended December 31, 2022. Net fees were $31.5 million in the quarter, up $4.9 million (18%) from the quarter ended December 31, 2022 and $120.7 million on a full-year basis, up $13.7 million (13%) from the year ended December 31, 2022. Our revenue performance was due to higher average AUM across most of our exchange listed products and higher average AUM in our private strategies funds as a result of two new fund launches. On a full-year 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 $1.3 million in the quarter, down $3.7 million (74%) from the quarter ended December 31, 2022 and $8.3 million on a full-year basis, down $22.4 million (73%) from the year ended December 31, 2022. Net commissions were $0.7 million in the quarter, down $2.1 million (75%) from the quarter ended December 31, 2022 and $4.6 million on a full-year basis, down $11.6 million (71%) from the year ended December 31, 2022. Lower commissions were due to lower ATM activity in our physical uranium trust on a full-year basis and the sale of our former Canadian broker-dealer in the second quarter.
Finance income was $1.2 million in the quarter, down $0.2 million (16%) from the quarter ended December 31, 2022 and $4.9 million on a full-year basis, down $0.1 million (3%) from the year ended December 31, 2022. Our results were primarily driven by lower income generation in co-investment positions we hold in LPs managed in our private strategies segment.
Key expense highlights
Net compensation expense was $14.8 million in the quarter, up $2.3 million (18%) from the quarter ended December 31, 2022 and $60.4 million on a full-year basis, up $4.1 million (7%) from the year ended December 31, 2022. The increase in the quarter and on a full-year basis was primarily due to new hires and increased AIP accruals on higher net fee generation.
SG&A was $4.2 million in the quarter, up $0.1 million (3%) from the quarter ended December 31, 2022 and $17.5 million on a full-year basis, up $1.5 million (9%) from the year ended December 31, 2022. The increase in the quarter and on a full-year basis was due to higher marketing and technology costs.
Earnings summary
Net income was $9.7 million ($0.38 per share) in the quarter, up 32% from $7.3 million ($0.29 per share) for the quarter ended December 31, 2022. On a full-year basis, net income was $41.8 million ($1.66 per share), up 137% from $17.6 million ($0.70 per share) for the year ended December 31, 2022. Net income in the quarter benefited from higher average AUM across most of our exchange listed products and private strategies. On a full-year basis we benefited from higher average AUM as noted previously, but also from the second quarter realization of an unrecorded contingent asset relating to a prior period acquisition.
Adjusted base EBITDA was $18.8 million ($0.75 per share) in the quarter, up 4% from $18.1 million ($0.72 per share) for the quarter ended December 31, 2022. On a full-year basis, adjusted base EBITDA was $71.9 million ($2.85 per share), up 1% from $71 million ($2.83 per share) for the year ended December 31, 2022. The increased management fees generated from higher average AUM on a full-year basis were largely offset by lower commission income due to the sale of our former Canadian broker-dealer during the second quarter of the year.
Subsequent events
On February 20, 2024, the Sprott Board of Directors announced a quarterly dividend of $0.25 per share.
Subsequent to year-end, we continue to benefit from our late 2023 asset growth as well as ongoing strength in uranium prices. As at February 16, 2024, AUM was $29.2 billion, up 2% from $28.7 billion at December 31, 2023.
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
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
