CEO.CA Chairman's Briefing

TORONTO, Feb. 24, 2023 (GLOBE NEWSWIRE) -- Sprott Inc. (NYSE/TSX: SII) (“Sprott” or the “Company”) today announced its financial results for the year ended December 31, 2022.

Management commentary

"Sprott’s positioning in precious metals and energy transition materials served our shareholders well in 2022, as Assets Under Management (“AUM”) grew to $23.4 billion, up $3 billion from December 31, 2021. Our asset growth during the year was driven by $2.8 billion in net sales, largely in our physical trusts and private strategies. We also benefited from the acquisition of the Sprott Uranium Miners ETF (URNM) and strong late-year performance in precious metals," said Whitney George, CEO of Sprott.

"We continue to build on the success of our uranium strategies by expanding our energy transition business. In July 2022, we launched an actively managed energy transition strategy to capitalize on our deep bench of talented portfolio managers and analysts and in February 2023, subsequent to year-end, we introduced four new energy-transition themed ETFs. We expect to launch additional products this year," added Mr. George.

Financial highlights¹

Key AUM highlights

• AUM was $23.4 billion as at December 31, 2022, up $2.4 billion (11%) from September 30, 2022 and up $3 billion (15%) from December 31, 2021. Our AUM benefited on a three and twelve months ended basis from strong inflows to our physical trusts and private strategies funds. We also benefited from the onboarding of AUM on the closure of the North Shore Global Uranium Mining ETF acquisition ("URNM acquisition"), adding $1 billion to our AUM in the second quarter. Additionally, we benefited from strong market value appreciation during the quarter that partially offset cumulative losses experienced earlier in the year.

Key revenue highlights

• Management fees were $28.4 million in the quarter, up $0.6 million (2%) from the quarter ended December 31, 2021 and $115.4 million on a full year basis, up $11.4 million (11%) from the year ended December 31, 2021. Carried interest and performance fees were $1.2 million in the quarter, down $3.1 million (72%) from the quarter ended December 31, 2021 and $3.3 million on a full year basis, down $9 million (73%) from the year ended December 31, 2021. Net fees were $26.6 million in the quarter, up $0.1 million from the quarter ended December 31, 2021 and $106.9 million on a full year basis, up $7.4 million (7%) from the year ended December 31, 2021. Our revenue performance was primarily due to strong net inflows to our exchange listed products segment (primarily our physical uranium, gold and silver trusts) and higher average AUM from the URNM acquisition. 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 $5 million in the quarter, down $9.1 million (64%) from the quarter ended December 31, 2021 and $30.7 million on a full year basis, down $14.6 million (32%) from the year ended December 31, 2021. Net commissions were $2.9 million in the quarter, down $4.1 million (59%) from the quarter ended December 31, 2021 and $16.2 million on a full year basis, down $7.8 million (33%) from the year ended December 31, 2021. Lower commissions were due to weaker mining equity origination activity in our brokerage segment.
• Finance income was $1.4 million in the quarter, up $0.7 million (83%) from the quarter ended December 31, 2021 and $5 million on a full year basis, up $1.5 million (41%) from the year ended December 31, 2021. 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 $12.5 million in the quarter, up $0.1 million (1%) from the quarter ended December 31, 2021 and $56.3 million on a full year basis, up $8.4 million (18%) from the year ended December 31, 2021. The increase was primarily due to higher long-term incentive plan ("LTIP") amortization as a result of grant date valuations required on the launch of our new 2022 LTIP program. This higher accounting valuation on our LTIP amortization was partially offset by lower annual incentive compensation ("AIP").
• SG&A was $4.1 million in the quarter, down $0.1 million (2%) from the quarter ended December 31, 2021 and $16 million on a full year basis, up $1.3 million (9%) from the year ended December 31, 2021. The increase on a full year basis was mainly due to higher marketing 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 $7.3 million ($0.29 per share) in the quarter, down 28% or $2.8 million ($0.12 per share) from the quarter ended December 31, 2021 and $17.6 million on a full year basis ($0.70 per share), down 47%, or $15.6 million ($0.63 per share) from the year ended December 31, 2021. Net income was negatively impacted by a combination of weaker equity origination activity in our brokerage segment, unrealized losses on co-investments and legacy digital gold investments, FX losses and non-recurring severance costs.
• Adjusted base EBITDA was $18.1 million ($0.72 per share) in the quarter, up 2%, or $0.4 million ($0.01 per share) from the quarter ended December 31, 2021 and $71 million ($2.83 per share) on a full year basis, up 11%, or $6.9 million ($0.25 per share) from the year ended December 31, 2021. Our results benefited from strong net inflows to our physical trusts (primarily our physical uranium, gold and silver trusts) and the URNM acquisition. These increases were only partially offset by weaker mining equity origination activity in our brokerage segment and lower AUM in our managed equities segment.

Subsequent events

• On February 23, 2023, the Sprott Board of Directors announced a quarterly dividend of $0.25 per share.
• Consistent with the successful transition of our U.S. broker-dealer from a transaction-based business into a fee-based discretionary account management business, subsequent to year end, we plan on selling our Canadian broker-dealer operations to the current management team as we continue to focus on our core asset management businesses (however, we will migrate our charity flow-through operations into our managed equities segment). We expect the transaction to close by June 30, 2023.
  
  The impact of this change will be immaterial to our future earnings and cash flows but moderately positive to our consolidated operating margins as a greater proportion of our consolidated earnings will now arise from our core precious metals and energy transition materials product and service offerings. These core offerings have materially larger and more predictable revenue streams and also yield higher operating margins than our Canadian broker-dealer. In 2022, the Canadian broker-dealer contributed less than 5% and 4% to our consolidated net income and adjusted base EBITDA, respectively, and yielded operating margins of less than 39% compared to our consolidated total operating margins of 57%. The transition away from transaction-based businesses will also free up more capital to reinvest into our core precious metals and energy transition materials product and service offerings.

Supplemental financial information

Please refer to the December 31, 2022 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, 2022 and the Company's financial performance for the year ended December 31, 2022.

Schedule 1 - AUM continuity

Schedule 2 - Summary financial information

Schedule 3 - EBITDA reconciliation

Normal Course Issuer Bid

Sprott Inc. (“Sprott” or the “Company”) (NYSE/TSX: SII) is pleased to announce that the Toronto Stock Exchange (“TSX”) has approved the notice of its 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 648,908 common shares being approximately 2.5% of 25,956,325 (representing the number of issued and outstanding common shares as of February 17, 2023). The average daily trading volume (the “ADTV”) of the common shares on the TSX for the six-month period ended January 31, 2023 was 53,658. 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 13,414 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 3, 2023 and ending on March 2, 2024.

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, 2022 and will terminate March 2, 2023, Sprott previously sought and received approval from the TSX to repurchase up to 646,743 common shares. Pursuant to its current NCIB, Sprott has purchased an aggregate of 81,538 common shares through the facilities of the TSX and NYSE. 8,200 common shares were purchased on the TSX at a weighted-average price of C$42.80 per common share, for total cash consideration of C$350,960, and 73,338 common shares were purchased on the NYSE at a weighted-average price of US$37.95 per common share, for total cash consideration of US$2,783,177. Sprott did not repurchase the maximum allowance under the current NCIB for a combination of factors.

Conference Call and Webcast

A webcast will be held today, February 24, 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/97a6c8xe

Please note, analysts who cover the company should register at https://register.vevent.com/register/BI0345f2c1992a467f835282eb895bc20a to participate in the live Q&A session.

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 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 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 will continue to launch new products this year; (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; and (iii) the closing, including timing thereof, of the transaction in respect of our Canadian broker-dealer operations.

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; (v) that the conditions to closing of the transaction in respect of our Canadian broker-dealer operations will be satisfied or waived on a timely basis, or at all; and (vi) 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, 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 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) risks relating to the Company’s brokerage business; (xxviii) failure to satisfy the conditions to closing of the transaction in respect of our Canadian broker-dealer operations on a timely basis or at all; (xxix) those risks described under the heading "Risk Factors" in the Company’s annual information form dated February 23, 2023; and (xxx) 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, 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 energy transition 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 Williams
Managing Partner
Investor and Institutional Client Relations;
Head of Corporate Communications
(416) 943-4394
gwilliams@sprott.com