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
"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
Key AUM highlights1
- AUM was
$25.4 billion as atSeptember 30, 2023 , up$0.3 billion (1%) fromJune 30, 2023 and up$2 billion (8%) fromDecember 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 ofKorea . 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 endedSeptember 30, 2022 and$97.8 million on a year-to-date basis, up$10.8 million (12%) from the nine months endedSeptember 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 endedSeptember 30, 2022 . Net fees were$30.1 million in the quarter, up$3.3 million (12%) from the quarter endedSeptember 30, 2022 and$89.2 million on a year-to-date basis, up$8.9 million (11%) from the nine months endedSeptember 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 endedSeptember 30, 2022 and$7 million on a year-to-date basis, down$18.7 million (73%) from the nine months endedSeptember 30, 2022 . Net commissions were$0.4 million in the quarter, down$2.9 million (89%) from the quarter endedSeptember 30, 2022 and$3.9 million on a year-to-date basis, down$9.4 million (71%) from the nine months endedSeptember 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 endedSeptember 30, 2022 and$3.6 million on a year-to-date basis, up$0.1 million (2%) from the nine months endedSeptember 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 endedSeptember 30, 2022 and$45.5 million on a year-to-date basis, up$1.8 million (4%) from the nine months endedSeptember 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 endedSeptember 30, 2022 and$13.3 million on a year-to-date basis, up$1.4 million (11%) from the nine months endedSeptember 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 endedSeptember 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 endedSeptember 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 endedSeptember 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 endedSeptember 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
Schedule 1 - AUM continuity
3 months results | |||||||
(In millions $) | AUM | Net inflows (1) | Market value changes | Other net inflows (1) | AUM | Blended net management fee rate (2) | |
Exchange listed products | |||||||
- Physical trusts | |||||||
- | 6,124 | (28) | (230) | - | 5,866 | 0.35% | |
- | 3,473 | 73 | 1,065 | - | 4,611 | 0.30% | |
- | 4,056 | - | (140) | - | 3,916 | 0.40% | |
- | 3,986 | (49) | (111) | - | 3,826 | 0.45% | |
- | 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 | Net inflows (1) | Market value changes | Other net inflows (1) | AUM | Blended net management fee rate (2) | |
Exchange listed products | |||||||
- Physical trusts | |||||||
- | 5,746 | 71 | 49 | - | 5,866 | 0.35% | |
- | 2,876 | 214 | 1,521 | - | 4,611 | 0.30% | |
- | 3,998 | - | (82) | - | 3,916 | 0.40% | |
- | 4,091 | 63 | (328) | - | 3,826 | 0.45% | |
- | 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 | |||||||
(4) We exited our non-core asset management business domiciled in | |||||||
(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 | ||||||||||||||||
Schedule 3 - EBITDA reconciliation
3 months ended | 9 months ended | |||||||
(in thousands $) | ||||||||
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 | ||||||||
(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,
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
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
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,
Investor contact information:
Managing Partner
Investor and Institutional Client Relations;
Head of Corporate Communications
(416) 943-4394
gwilliams@sprott.com
Source:
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