Management commentary
"In 2023, Sprott's Assets Under Management ("AUM") increased by
"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
Key AUM highlights1
- AUM was
$28.7 billion as atDecember 31, 2023 , up$3.3 billion (13%) fromSeptember 30, 2023 and up$5.3 billion (23%) fromDecember 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 endedDecember 31, 2022 and$132.3 million on a full-year basis, up$16.9 million (15%) from the year endedDecember 31, 2022 . Carried interest and performance fees were$0.5 million in the quarter, down$0.7 million (59%) from the quarter endedDecember 31, 2022 and$0.9 million on a full-year basis, down$2.4 million (73%) from the year endedDecember 31, 2022 . Net fees were$31.5 million in the quarter, up$4.9 million (18%) from the quarter endedDecember 31, 2022 and$120.7 million on a full-year basis, up$13.7 million (13%) from the year endedDecember 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 endedDecember 31, 2022 and$8.3 million on a full-year basis, down$22.4 million (73%) from the year endedDecember 31, 2022 . Net commissions were$0.7 million in the quarter, down$2.1 million (75%) from the quarter endedDecember 31, 2022 and$4.6 million on a full-year basis, down$11.6 million (71%) from the year endedDecember 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 endedDecember 31, 2022 and$4.9 million on a full-year basis, down$0.1 million (3%) from the year endedDecember 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 endedDecember 31, 2022 and$60.4 million on a full-year basis, up$4.1 million (7%) from the year endedDecember 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 endedDecember 31, 2022 and$17.5 million on a full-year basis, up$1.5 million (9%) from the year endedDecember 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 endedDecember 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 endedDecember 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 endedDecember 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 endedDecember 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 atDecember 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
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 | |||||||
- | 5,866 | (5) | 671 | — | 6,532 | 0.35% | |
- | 4,611 | 55 | 1,107 | — | 5,773 | 0.30% | |
- | 3,916 | (75) | 389 | — | 4,230 | 0.40% | |
- | 3,826 | (27) | 271 | — | 4,070 | 0.45% | |
- | 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 | Net inflows(1) | Market value changes | Other net inflows(1) | AUM | Blended net management fee rate(2) | |
Exchange listed products | |||||||
- Physical trusts | |||||||
- | 5,746 | 66 | 720 | — | 6,532 | 0.35% | |
- | 2,876 | 269 | 2,628 | — | 5,773 | 0.30% | |
- | 3,998 | (75) | 307 | — | 4,230 | 0.40% | |
- | 4,091 | 36 | (57) | — | 4,070 | 0.45% | |
- | 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 |
(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 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 |
(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 |
(5) | Net income for the year ended |
(6) | Basic and diluted net income per share for the year ended |
(7) | Total assets as at |
(8) | Total liabilities as at |
Schedule 3 - EBITDA reconciliation
3 months ended | 12 months ended | |||||||
(in thousands $) | ||||||||
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 |
(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,
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
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
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
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
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,
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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