Sprott Inc. (NYSE/TSX: SII) (“Sprott” or the “Company”) today
announced its financial results for the three months ended March
31, 2021.
Management commentary
"Adjusted base EBITDA was $14.6 million ($0.59
per share), up 78% or $6.4 million ($0.26 per share) from this time
last year. This marks the second consecutive quarter that we have
posted results surpassing our previous historic high recorded in
the third quarter of 2011," said Peter Grosskopf, CEO of
Sprott.
"In April, Sprott announced an agreement to
become the manager of Uranium Participation Corporation ("UPC"),
the largest physical uranium vehicle in the market, and form the
Sprott Physical Uranium Trust, " added Mr. Grosskopf. "We believe
our global brand, fund marketing experience, and client base of
more than 200,000 investors will improve trading liquidity and grow
UPC’s asset base during what we see as the start of a strong market
for physical uranium. The transaction, which is subject to UPC
shareholder approval and other customary conditions to closing,
will add approximately $500 million to Sprott's total assets under
management ("AUM")."
Financial highlights
Key AUM highlights
- AUM was $17.1
billion as at March 31, 2021, down $0.3 billion (2%) from December
31, 2020. On a three months ended basis we experienced market value
depreciation that was partially offset by strong inflows into our
various fund products. Subsequent to the quarter end, management
estimates that consolidated AUM as at May 4, 2021 was $18.2
billion, up $1.1 billion (7%) from March 31, 2021. The estimated
increase in AUM from the quarter-end was primarily due to a
combination of precious metals and mining equity valuation
recoveries across our various fund products and continued strong
inflows into our physical trusts.
Key revenue highlights
- Management fees
were $22.5 million this quarter, up $7.3 million (48%) from the
prior period. Carried interest and performance fees were $7.9
million, up $7.9 million from the prior period. Net fees were $24.7
million this quarter, up $9.8 million 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.
- Commission
revenues were $12.5 million this quarter, up $7.3 million from the
prior period. Net commissions were $6.3 million this quarter, up $3
million (90%) from the prior period due to very strong equity
origination in our brokerage segment.
- Finance income
was $1.2 million this quarter, up $0.3 million (37%) from the prior
period due to higher interest income from co-investments in our
lending segment.
- Loss on
investments was $4.7 million this quarter, up $0.3 million (7%)
from the prior period due to market value depreciation of
co-investments and certain equity holdings.
Key expense highlights
- Compensation was
$22.6 million this quarter, up $12.5 million from the prior period.
Net compensation was $11.8 million this quarter, up $4.2 million
(56%) from the prior period. The increase was primarily due to
higher annual incentive compensation on improved financial
performance in the quarter and higher base salaries on new hires.
Our compensation ratio (net compensation / net fees & net
commissions) for the quarter was 38% compared to 42% in the prior
period.
-
SG&A was $3.4 million this quarter, down $0.1 million (3%) from
the prior period due to lower marketing and sales costs relating to
travel restrictions due to COVID-19.
Earnings summary
- Net income was
$3.2 million this quarter, up $2.2 million from the prior
period. Adjusted base EBITDA was $14.6 million ($0.59 per share)
this quarter, up 78% or $6.4 million ($0.26 per share) from the
prior period. During the quarter, 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 revenues in our brokerage
segment.
Subsequent events
- On April 28, 2021,
Sprott Asset Management announced an agreement with UPC to form the
Sprott Physical Uranium Trust.
- On May 6, 2021, the
Sprott Board of Directors announced a quarterly dividend of $0.25
per share.
- Estimated AUM was
updated using May 4, 2021 figures for daily priced funds in
exchange listed products and managed equities. All other funds
remain at their March 31st values.
Supplemental financial
information
Please refer to the March 31, 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 March 31, 2021
and the company's financial performance for the 3 months ended
March 31, 2021.
Schedule 1 - AUM continuity
3 months
results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions $) |
AUM Dec. 31, 2020 |
Net inflows (1) |
Market value changes |
Other (2) |
AUM Mar. 31, 2021 |
|
Blended management fee rate (3) |
Exchange listed products |
|
|
|
|
|
|
|
- Physical trusts |
|
|
|
|
|
|
|
- Physical Gold Trust |
4,893 |
64 |
|
(500 |
) |
- |
|
4,457 |
|
0.35 |
% |
- Physical Gold and Silver Trust |
4,423 |
(11 |
) |
(408 |
) |
- |
|
4,004 |
|
0.40 |
% |
- Physical Silver Trust |
2,408 |
1,149 |
|
(324 |
) |
- |
|
3,233 |
|
0.45 |
% |
- Physical Platinum & Palladium Trust |
127 |
17 |
|
9 |
|
- |
|
153 |
|
0.50 |
% |
-
Exchange Traded Funds |
382 |
21 |
|
(57 |
) |
- |
|
346 |
|
0.35 |
% |
|
12,233 |
1,240 |
|
(1,280 |
) |
- |
|
12,193 |
|
0.39 |
% |
|
|
|
|
|
|
|
|
Managed equities |
|
|
|
|
|
|
|
- Precious metals strategies |
2,479 |
27 |
|
(326 |
) |
- |
|
2,180 |
|
0.79 |
% |
- Other (4) |
352 |
(19 |
) |
12 |
|
- |
|
345 |
|
0.92 |
% |
|
2,831 |
8 |
|
(314 |
) |
- |
|
2,525 |
|
0.81 |
% |
|
|
|
|
|
|
|
|
Lending |
999 |
67 |
|
(2 |
) |
(103 |
) |
961 |
|
1.00 |
% |
|
|
|
|
|
|
|
|
Other (5) |
1,327 |
107 |
|
(40 |
) |
- |
|
1,394 |
|
0.79 |
% |
|
|
|
|
|
|
|
|
Total (6) |
17,390 |
1,422 |
|
(1,636 |
) |
(103 |
) |
17,073 |
|
0.52 |
% |
(1) |
See 'Net inflows' in the key performance indicators (non-IFRS
financial measures) section of the MD&A. |
(2) |
Includes new AUM from fund acquisitions and lost AUM from fund
divestitures and capital distributions of our lending LPs. |
(3) |
Management fee rate represents the net amount received by the
Company. |
(4) |
Includes institutional managed accounts. |
(5) |
Includes Sprott Korea Corp., private equity strategy in Sprott Asia
and high net worth discretionary managed accounts in the U.S. |
(6) |
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 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 $) |
Q1 2021 |
Q4 2020 |
Q3 2020 |
Q2 2020 |
Q1 2020 |
Q4 2019 |
Q3 2019 |
Q2 2019 |
Summary income
statements |
|
|
|
|
|
|
|
|
Management fees |
22,452 |
|
22,032 |
|
19,934 |
|
15,825 |
|
15,125 |
|
10,685 |
|
10,577 |
|
9,962 |
|
Carried interest and
performance fees |
7,937 |
|
10,075 |
|
- |
|
- |
|
- |
|
1,811 |
|
- |
|
- |
|
less: Carried interest and performance fee payouts |
4,580 |
|
5,529 |
|
- |
|
- |
|
- |
|
86 |
|
- |
|
- |
|
less: Trailer, sub-advisor and placement fees |
1,120 |
|
464 |
|
469 |
|
411 |
|
240 |
|
1,045 |
|
78 |
|
130 |
|
Net fees |
24,689 |
|
26,114 |
|
19,465 |
|
15,414 |
|
14,885 |
|
11,365 |
|
10,499 |
|
9,832 |
|
Commissions |
12,463 |
|
6,761 |
|
9,386 |
|
6,133 |
|
5,179 |
|
6,599 |
|
6,056 |
|
3,293 |
|
less: Commission expense |
6,179 |
|
2,788 |
|
3,789 |
|
2,377 |
|
1,870 |
|
2,658 |
|
2,654 |
|
1,356 |
|
Net Commissions |
6,284 |
|
3,973 |
|
5,597 |
|
3,756 |
|
3,309 |
|
3,941 |
|
3,402 |
|
1,937 |
|
Finance income (1) |
1,248 |
|
1,629 |
|
757 |
|
656 |
|
914 |
|
2,481 |
|
2,561 |
|
3,435 |
|
Gain (loss) on
investments |
(4,652 |
) |
(3,089 |
) |
4,408 |
|
8,142 |
|
(4,352 |
) |
(1,252 |
) |
600 |
|
(408 |
) |
Other income |
303 |
|
949 |
|
914 |
|
285 |
|
113 |
|
364 |
|
91 |
|
93 |
|
Total net revenues |
27,872 |
|
29,576 |
|
31,141 |
|
28,253 |
|
14,869 |
|
16,899 |
|
17,153 |
|
14,889 |
|
|
|
|
|
|
|
|
|
|
Compensation |
22,636 |
|
20,193 |
|
16,280 |
|
10,991 |
|
10,125 |
|
10,269 |
|
9,714 |
|
7,463 |
|
less: Carried interest and performance fee payouts |
4,580 |
|
5,529 |
|
- |
|
- |
|
- |
|
86 |
|
- |
|
- |
|
less: Commission expense |
6,179 |
|
2,788 |
|
3,789 |
|
2,377 |
|
1,870 |
|
2,658 |
|
2,654 |
|
1,356 |
|
less: Severance and new hire accruals |
44 |
|
65 |
|
210 |
|
358 |
|
667 |
|
157 |
|
168 |
|
650 |
|
Net compensation |
11,833 |
|
11,811 |
|
12,281 |
|
8,256 |
|
7,588 |
|
7,368 |
|
6,892 |
|
5,457 |
|
Severance and new hire
accruals |
44 |
|
65 |
|
210 |
|
358 |
|
667 |
|
157 |
|
168 |
|
650 |
|
Referral fees |
253 |
|
98 |
|
344 |
|
161 |
|
- |
|
355 |
|
86 |
|
188 |
|
Selling, general and
administrative |
3,425 |
|
2,439 |
|
2,523 |
|
3,049 |
|
3,544 |
|
2,986 |
|
3,175 |
|
3,256 |
|
Interest expense |
350 |
|
331 |
|
320 |
|
350 |
|
236 |
|
269 |
|
297 |
|
226 |
|
Depreciation and
amortization |
1,117 |
|
1,023 |
|
992 |
|
1,049 |
|
988 |
|
1,254 |
|
893 |
|
819 |
|
Other expenses (gain) |
4,918 |
|
4,528 |
|
4,154 |
|
2,893 |
|
(1,081 |
) |
2,117 |
|
(167 |
) |
3,051 |
|
Total expenses |
21,940 |
|
20,295 |
|
20,824 |
|
16,116 |
|
11,942 |
|
14,506 |
|
11,344 |
|
13,647 |
|
|
|
|
|
|
|
|
|
|
Net income |
3,221 |
|
6,720 |
|
8,704 |
|
10,492 |
|
1,062 |
|
1,445 |
|
4,336 |
|
1,581 |
|
Net Income per share (2) |
0.13 |
|
0.27 |
|
0.36 |
|
0.43 |
|
0.04 |
|
0.06 |
|
0.18 |
|
0.06 |
|
Adjusted base
EBITDA |
14,605 |
|
14,751 |
|
12,024 |
|
9,204 |
|
8,187 |
|
7,441 |
|
7,612 |
|
7,032 |
|
Adjusted base EBITDA per share
(2) |
0.59 |
|
0.60 |
|
0.49 |
|
0.38 |
|
0.33 |
|
0.31 |
|
0.31 |
|
0.29 |
|
Operating margin |
51 |
% |
51 |
% |
47 |
% |
49 |
% |
43 |
% |
38 |
% |
36 |
% |
39 |
% |
|
|
|
|
|
|
|
|
|
Summary balance
sheet |
|
|
|
|
|
|
|
|
Total assets |
356,986 |
|
377,348 |
|
358,300 |
|
338,931 |
|
318,318 |
|
324,943 |
|
325,442 |
|
338,530 |
|
Total liabilities |
67,015 |
|
86,365 |
|
81,069 |
|
70,818 |
|
65,945 |
|
53,313 |
|
51,774 |
|
68,008 |
|
|
|
|
|
|
|
|
|
|
Total
AUM |
17,073,078 |
|
17,390,389 |
|
16,259,184 |
|
13,893,039 |
|
10,734,831 |
|
9,252,515 |
|
8,548,982 |
|
8,103,723 |
|
Average
AUM |
17,188,205 |
|
16,719,815 |
|
16,705,046 |
|
13,216,415 |
|
11,007,781 |
|
8,932,651 |
|
8,608,001 |
|
7,898,334 |
|
(1) |
Finance income includes: (1) co-investment income from lending LP
units; (2) ancillary income earned directly or indirectly from
lending activities; and (3) interest income from on-balance sheet
loans and brokerage client accounts. |
(2) |
Per share amounts for periods before May 28, 2020 reflect
retrospective treatment of the 10:1 share consolidation. |
|
|
Schedule 3 - EBITDA reconciliation
|
3 months ended |
(in thousands $) |
Mar. 31, 2021 |
Mar. 31, 2020 |
|
|
|
Net income for the periods |
3,221 |
|
1,062 |
|
Adjustments: |
|
|
Interest expense |
350 |
|
236 |
|
Provision for income taxes |
2,711 |
|
1,865 |
|
Depreciation and amortization |
1,117 |
|
988 |
|
EBITDA |
7,399 |
|
4,151 |
|
|
|
|
Other adjustments: |
|
|
(Gain) loss on investments (1) |
4,652 |
|
4,352 |
|
Non-cash stock-based compensation |
373 |
|
98 |
|
Other expenses (2) |
4,943 |
|
(414 |
) |
Adjusted EBITDA |
17,367 |
|
8,187 |
|
|
|
|
Other adjustments: |
|
|
Carried interest and
performance fees |
(7,937 |
) |
- |
|
Less: Carried interest and performance fee payouts |
4,580 |
|
- |
|
Less: Trailer, sub-advisor and placement fees |
595 |
|
- |
|
Adjusted base EBITDA |
14,605 |
|
8,187 |
|
Operating margin (3) |
51 |
% |
43 |
% |
(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
nominal severance and new hire accruals for the 3 months ended (3
months ended March 31, 2020 - $0.7 million) and excludes nominal
income attributable to non-controlling interests for the 3 months
ended (3 months ended March 31, 2020 - $Nil). |
(3) |
Calculated as adjusted base EBITDA inclusive of depreciation and
amortization, and excluding income related to legacy balance sheet
loans. 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, May 7, 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 9297916. A taped replay of the conference
call will be available until Friday, May 17, 2021 by calling (855)
859-2056, reference number 9297916. The conference call will be
webcast live at www.sprott.com and
https://edge.media-server.com/mmc/p/6uyje8ke
*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) 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; (ii) the expected
benefits of the UPC transaction, including with respect to global
profile, trading liquidity and asset base growth; and (iii) the
satisfaction of closing conditions for the UPC transaction,
including, but not limited to, required shareholder approval and
other customary conditions to closing.
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
Company’s MD&A for the period ended March 31, 2021. 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,
in a timely manner, or at all, obtain the necessary court and other
approvals for the UPC transaction; (xxix) failure to receive any
required regulatory, securities commission or stock exchange
approvals for the UPC transaction; (xxx) failure to otherwise
satisfy the conditions to complete the UPC transaction; (xxxi) the
possibility that the UPC board could receive an acquisition
proposal and approve a superior proposal; (xxxii) the effect of the
announcement of the UPC transaction on UPC’s strategic
relationships, operating results and business generally; (xxxiii)
significant transaction costs associated with the UPC transaction;
(xxxiv) other customary risks associated with transactions of this
nature; (xxxv) those risks described under the heading "Risk
Factors" in the Company’s annual information form dated February
25, 2021; and (xxxvi) those risks described under the headings
"Managing financial risks " and "Managing non-financial risks" in
the Company’s MD&A for the period ended March 31, 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 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 SprottSprott is a global
leader in precious metal 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. Sprott’s 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
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