GlobeNewswire Inc | Aug 6, 2021 07:00AM EDT

August 06, 2021

TORONTO, Aug. 06, 2021 (GLOBE NEWSWIRE) -- Sprott Inc. (NYSE/TSX: SII) (Sprott or the Company) today announced its financial results for the three and six months ended June 30, 2021.

Management commentary

"Our business continued to perform well during the second quarter, with assets under management increasing to $18.6 billion as of June 30, 2021. We reported $15.1 million ($0.60 per share) of adjusted base EBITDA during the quarter, a 64% or $5.8 million ($0.22 per share) increase over the same period last year," said Peter Grosskopf, CEO of Sprott. "The earnings growth we have delivered this year has been driven by a combination of strong net sales in our physical trusts, higher average AUM in our managed equities segment and solid contributions from our brokerage business."

"Subsequent to the quarter end, on July 19, Sprott Asset Management LP completed its previously announced transaction with Uranium Participation Corp. to create the Sprott Physical Uranium Trust," added Mr. Grosskopf. "This transaction added $630 million to Sprotts total AUM and provides the company an important strategic foothold in the clean energy metals space. We have a very constructive view on uranium and believe this new trust presents a compelling opportunity to create value for our shareholders by expanding our offerings into areas that complement our core positioning in precious metals."

Financial highlights

Key AUM highlights1

-- AUM was $18.6 billion as at June 30, 2021, up $1.5 billion (9%) from March 31, 2021 and up $1.2 billion (7%) from December 31, 2020. In the second quarter, we experienced market value appreciation across the majority of our fund products while continuing to generate strong inflows into our physical trusts. This helped offset the market value depreciation we experienced on a year-to-date-basis.

Key revenue highlights

-- Management fees were $25.1 million in the quarter, up $9.2 million (58%) from the prior period and $47.5 million on a year-to-date basis, up $16.6 million (54%). Carried interest and performance fees were nil in the quarter and $7.9 million on a year-to-date basis, up $7.9 million from the prior period. Net fees1 were $23.2 million in the quarter, up $8.4 million (56%) from the prior period and $46.9 million on a year-to-date basis, up $18 million (62%) from the prior period mainly due to higher average AUM from strong net inflows in our exchange listed products segment. We also benefited from higher average AUM in our managed equities segment, brokerage segment and carried interest crystallization in the first quarter of the year in our lending segment. -- Commission revenues were $7.4 million in the quarter, up $1.2 million (20%) from the prior period and $19.8 million on a year-to-date basis, up $8.5 million (75%). Net commissions1 were $4.3 million in the quarter, up $0.1 million (2%) from the prior period and $11.5 million on a year-to-date basis, up $3.3 million (41%) due to strong equity origination in our brokerage segment. -- Finance income was $0.9 million in the quarter, up $0.3 million (42%) from the prior period and $2.2 million on a year-to-date basis, up $0.6 million (39%) from the prior period due to higher co-investment income in our lending segment. -- Gains on investments were $2.5 million this quarter, down $5.6 million (69%) from the prior period and losses were $2.2 million on a year-to-date basis, compared to gains of $3.8 million in the prior period. Investment gains in the quarter were mainly due to market value appreciation of co-investments and certain equity holdings that resulted in the partial recovery of unrealized losses experienced in the first quarter.

Key expense highlights

-- Compensation was $15.5 million in the quarter, up $4.5 million (41%) from the prior period and $38.1 million on a year-to-date basis, up $17 million (80%). Higher total compensation was primarily due to continued strong commission revenues (which drives our commission expense) and the crystallization of carried interest in our lending funds in the first quarter (which led to carried interest payouts to portfolio managers). Net compensation1 (which excludes the commission and carried interest payouts previously mentioned) was $10.8 million in the quarter, up $2.5 million (31%) from the prior period and $22.6 million on a year-to-date basis, up $6.8 million (43%) primarily due to higher annual incentive compensation ("AIP") on improved financial performance and higher base salaries on new hires. Our compensation ratio (net compensation / net fees & net commissions) on a year-to-date basis was 39% compared to 43% in the prior period. -- SG&A was $3.5 million in the quarter, up $0.5 million (19%) from the prior period and $6.8 million on a year-to-date basis, up $0.5 million (8%). The increase was mainly due to higher insurance, regulatory and technology costs.

Earnings summary

-- Net income was $11.1 million ($0.44 per share) in the quarter, up 6%, or $0.6million ($0.01 per share) from the prior period and $14.3 million ($0.57 per share) on a year-to-date basis, up 24%, or $2.7 million ($0.10 per share). Adjusted base EBITDA1 was $15.1 million ($0.60 per share) in the quarter, up 64%, or $5.8 million ($0.22 per share) from the prior period and $29.7 million ($1.19 per share) on a year-to-date basis, up 71%, or $12.3 million ($0.48 per share). During the quarter and on a year-to-date basis, we benefited from increased fees due to strong net inflows in our exchange listed products segment and higher average AUM in our managed equities segment. We also benefited from increased commission and management fee revenues in our brokerage segment.

1 See Key performance indicators (non-IFRS financial measures) section on page 5 of the MD&A

Subsequent events

-- On July 19, 2021, the Company, through its wholly-owned subsidiary Sprott Asset Management LP, closed on the previously announced transaction with Uranium Participation Corp to form the Sprott Physical Uranium Trust. This transaction added $630 million to the Company's AUM. -- On August 5, 2021, the Sprott Board of Directors announced a quarterly dividend of $0.25 per share.

Supplemental financial information

Please refer to the June 30, 2021 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 June 30, 2021 and the company's financial performance for the 3 and 6 months ended June 30, 2021.

Schedule 1 - AUM continuity

3 months results AUM Net Market AUM Blended(In millions $) Mar. inflows^ value Other ^ Jun. management 31, (1) changes (2) 30, fee rate ^ 2021 2021 (3)Exchange listed products- Physical trusts - Physical Gold Trust 4,457 128 151 - 4,736 0.35 %- Physical Gold and 4,004 (10 ) 189 - 4,183 0.40 %Silver Trust- Physical Silver 3,233 503 202 - 3,938 0.45 %Trust- Physical Platinum & 153 10 - - 163 0.50 %Palladium Trust- Exchange Traded 346 (2 ) 24 - 368 0.35 %Funds 12,193 629 566 - 13,388 0.40 % Managed equities - Precious metals 2,180 3 120 - 2,303 0.79 %strategies- Other^ (4) 345 (1 ) 18 - 362 0.92 % 2,525 2 138 - 2,665 0.81 % Lending 961 13 (10 ) (5 ) 959 1.00 % Other ^(5) 1,394 49 95 - 1,538 0.79 % Total ^(6) 17,073 693 789 (5 ) 18,550 0.52 % 6 months results AUM Net Market AUM Blended(In millions $) Dec. inflows^ value Other ^ Jun. management 31, (1) changes (2) 30, fee rate ^ 2020 2021 (3)Exchange listed products- Physical trusts - Physical Gold Trust 4,893 192 (349 ) - 4,736 0.35 %- Physical Gold and 4,423 (21 ) (219 ) - 4,183 0.40 %Silver Trust- Physical Silver 2,408 1,652 (122 ) - 3,938 0.45 %Trust- Physical Platinum & 127 27 9 - 163 0.50 %Palladium Trust- Exchange Traded 382 19 (33 ) - 368 0.35 %Funds 12,233 1,869 (714 ) - 13,388 0.40 % Managed equities - Precious metals 2,479 30 (206 ) - 2,303 0.79 %strategies- Other^ (4) 352 (20 ) 30 - 362 0.92 % 2,831 10 (176 ) - 2,665 0.81 % Lending 999 80 (12 ) (108 ) 959 1.00 % Other ^(5) 1,327 156 55 - 1,538 0.79 % Total ^(6) 17,390 2,115 (847 ) (108 ) 18,550 0.52 %

^ See 'Net inflows' in the key performance indicators (non-IFRS financial(1) measures) section of the MD&A^ Includes new AUM from fund acquisitions and lost AUM from fund divestitures(2) and capital distributions of our lending LPs.^ Management fee rate represents the net amount received by the Company.(3)^ Includes institutional managed accounts.(4)^ Includes Sprott Korea Corp., private equity strategy in Sprott Asia and(5) high net worth discretionary managed accounts in the U.S. 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(6) strategies primarily earn performance fees on flow-through products. Lending funds earn carried interest calculated as a pre-determined net profit over a preferred return.

Schedule 2 - Summary financial information

(In thousands Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3$) 2021 2021 2020 2020 2020 2020 2019 2019Summary income statementsManagement 25,062 22,452 22,032 19,934 15,825 15,125 10,685 10,577 feesCarriedinterest and - 7,937 10,075 - - - 1,811 - performancefeesless: Carriedinterest and 126 4,580 5,529 - - - 86 - performancefee payoutsless: Trailerfees,sub-advisor 1,750 2,084 1,278 1,003 1,006 1,048 1,405 618 fees and other^(1)Net fees 23,186 23,725 25,300 18,931 14,819 14,077 11,005 9,959 Commissions 7,377 12,463 6,761 9,386 6,133 5,179 6,599 6,056 less:Commission 3,036 5,289 2,093 3,313 1,887 1,236 2,454 2,331 expenseNet 4,341 7,174 4,668 6,073 4,246 3,943 4,145 3,725 CommissionsFinance income 932 1,248 1,629 757 656 914 2,481 2,561 ^(2)Gain (loss) on 2,502 (4,652 ) (3,089 ) 4,408 8,142 (4,352 ) (1,252 ) 600 investmentsOther income 438 303 949 914 285 113 364 91 Total net 31,399 27,798 29,457 31,083 28,148 14,695 16,743 16,936 revenues Compensation 15,452 22,636 20,193 16,280 10,991 10,125 10,269 9,714 less: Carriedinterest and 126 4,580 5,529 - - - 86 - performancefee payoutsless:Commission 4,234 6,179 2,788 3,789 2,377 1,870 2,658 2,654 expense anddirect payoutsless:Severance and 293 44 65 210 358 667 157 168 new hireaccrualsNet 10,799 11,833 11,811 12,281 8,256 7,588 7,368 6,892 compensationSeverance andnew hire 293 44 65 210 358 667 157 168 accrualsReferral fees 49 253 98 344 161 - 355 86 Selling,general and 3,492 3,351 2,320 2,465 2,944 3,370 2,830 2,958 administrativeInterest 260 350 331 320 350 236 269 297 expenseDepreciationand 1,165 1,117 1,023 992 1,049 988 1,254 893 amortizationOther expenses 876 4,918 4,528 4,154 2,893 (1,081 ) 2,117 (167 )(credits)Total expenses 16,934 21,866 20,176 20,766 16,011 11,768 14,350 11,127 Net income 11,075 3,221 6,720 8,704 10,492 1,062 1,445 4,336 Net Income per 0.44 0.13 0.27 0.36 0.43 0.04 0.06 0.18 shareAdjusted base 15,050 14,605 14,751 12,024 9,204 8,187 7,441 7,612 EBITDAAdjusted baseEBITDA per 0.60 0.59 0.60 0.49 0.38 0.33 0.31 0.31 shareOperating 52 % 51 % 51 % 47 % 49 % 43 % 38 % 36 %margin Summary balance sheetTotal assets 361,121 356,986 377,348 358,300 338,931 318,318 324,943 325,442 Total 64,081 67,015 86,365 81,069 70,818 65,945 53,313 51,774 liabilities Total AUM 18,550,106 17,073,078 17,390,389 16,259,184 13,893,039 10,734,831 9,252,515 8,548,982 Average AUM 18,343,846 17,188,205 16,719,815 16,705,046 13,216,415 11,007,781 8,932,651 8,608,001

^ Other includes placement fees, fund operating costs and direct payouts(1) Finance income includes: (1) co-investment income from lending LP units;^ (2) ancillary income earned directly or indirectly from lending activities;(2) and (3) interest income from on-balance sheet loans and brokerage client accounts

Schedule 3 - EBITDA reconciliation

3 months ended 6 months ended(in thousands $) Jun. 30, Jun. 30, Jun. 30, Jun. 30, 2021 2020 2021 2020 Net income for the periods 11,075 10,492 14,296 11,554 Adjustments: Interest expense 260 350 610 586 Provision for income taxes 3,390 1,645 6,101 3,510 Depreciation and amortization 1,165 1,049 2,282 2,037 EBITDA 15,890 13,536 23,289 17,687 Other adjustments: (Gain) loss on investments^ (1) (2,502 ) (8,142 ) 2,150 (3,790 )Non-cash stock-based compensation 423 559 796 657 Other expenses ^(2) 1,113 3,251 6,056 2,837 Adjusted EBITDA 14,924 9,204 32,291 17,391 Other adjustments: Carried interest and performance - - (7,937 ) - feesLess: Carried interest and 126 - 4,706 - performance fee payoutsLess: Trailer, sub-advisor and - - 595 - placement feesAdjusted base EBITDA 15,050 9,204 29,655 17,391 Operating margin ^(3) 52 % 49 % 51 % 46 %

^ This adjustment removes the income effects of certain gains or losses on(1) short-term investments, co-investments, and digital gold strategies to ensure the reporting objectives of our EBITDA metric are met. In addition to the items outlined in Note 5 of the interim financial statements, this reconciliation line also includes $0.3 million severance^ and new hire accruals for the 3 months ended (3 months ended June 30, 2020(2) - $0.4 million) and $0.3 million for the 6 months ended (6 months ended June 30, 2020 - $1 million). This reconciliation line excludes income attributable to non-controlling interests of $0.1 million for the 3 and 6 months ended (3 and 6 months ended June 30, 2020 - $nil). Calculated as adjusted base EBITDA inclusive of depreciation and^ amortization, and excluding income related to legacy balance sheet loans.(3) 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, August 6,, 2021 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 34862496. A taped replay of the conference call will be available until Friday, August 13, 2021 by calling (855) 859-2056, reference number 34862496. The conference call will be webcast live at www.sprott.com and https://edge.media-server.com/mmc/p/kh5uers7

*Non-IFRS Financial Measures

This press release includes financial terms (including AUM, net revenues, net commissions, net fees, expenses, adjusted base EBITDA, net compensation and net sales) 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. For additional information regarding the Company's use of non-IFRS measures, including the calculation of these measures, please refer to the Non-IFRS Financial Measures section of the Company's Management's Discussion and Analysis and its annual financial statements available on the Company's website at www.sprott.com and on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

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 the new uranium trust presents a compelling opportunity to create value for our shareholders by expanding our offerings into areas that complement our core positioning in precious metals 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, without limitation: (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; and (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 Companys MD&A for the period ended December 31, 2020. 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 Companys 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 Companys brokerage business; (xxvi) other customary risks associated with transactions of this nature; (xxvii) those risks described under the heading "Risk Factors" in the Companys annual information form dated February 25, 2021; and (xxviii) those risks described under the headings "Managing financial risks " and "Managing non-financial risks" in the Companys MD&A for the period ended June 30, 2021. 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 Companys 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 SprottSprott is a global leader in precious metal and real asset investments. With offices in Toronto, New York, and London, Sprott is dedicated to providing investors with specialized investment strategies that include Exchange Listed Products, Managed Equities, Lending, and Brokerage. Sprotts common shares are listed on the New York Stock Exchange under the symbol (NYSE:SII) and on the Toronto Stock Exchange under the symbol (TSX: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