Sprott Inc. (NYSE/TSX: SII) (“Sprott” or the “Company”) today announced its financial results for the year ended December 31, 2021.

Management commentary "Each of Sprott’s business units performed well in 2021 and our Assets Under Management (“AUM”) finished the year at $20.4 billion, up $3.1 billion (18%) from December 31, 2020. This led to Sprott generating full year net income of $33.2 million ($1.33 per share), up 23%, or $6.2 million ($0.23 per share) from the year ended December 31, 2020. Additionally, adjusted base EBITDA1 for the year reached a record high of $64.1 million ($2.58 per share), up 45%, or $19.9 million ($0.78 per share) from the year ended December 31, 2020. The key driver of our success in 2021 was our Exchange Listed Products segment, which generated $3.1 billion in net sales on the year. We also received solid contributions from our Brokerage and Lending segments," said Peter Grosskopf, CEO of Sprott.

"During the third quarter of 2021, we launched the Sprott Physical Uranium Trust, which established Sprott as the global leader in physical uranium investments. This strategic move into an adjacent mineral asset category was a natural complement to our core expertise in precious metals. During the fourth quarter, we further expanded our uranium business through an agreement to acquire the exclusive licensing rights to the index tracked by the North Shore Global Uranium Miners ETF ("URNM"), the second largest global uranium equity ETF. There is growing investor demand for low-carbon and energy transition investments and we are actively working on new strategies in this rapidly expanding category.

"We were pleased to have generated our solid 2021 results despite the lackluster performance of gold and silver throughout the year. However, early in 2022, the picture for precious metals has already improved considerably. Sprott is well positioned to thrive in the current environment and we look forward to continuing to create value for our shareholders and clients."

Financial highlights1

Key Assets under Management ("AUM") highlights

  • AUM was $20.4 billion as at December 31, 2021, up $1.4 billion (8%) from September 30, 2021 and up $3.1 billion (18%) from December 31, 2020. On a three and twelve months ended basis, we benefited from strong inflows to our physical trusts and lending strategies. We also benefited from the UPC acquisition adding $630 million to our physical trusts in the third quarter. These increases more than offset market value depreciation across most of our fund products during the year.

Key revenue highlights

  • Management fees were $27.8 million in the quarter, up $5.8 million (26%) from the quarter ended December 31, 2020 and $103.9 million on a full year basis, up $31 million (43%) from the year ended December 31, 2020. Carried interest and performance fees were $4.3 million in the quarter, down $5.8 million (57%) from the quarter ended December 31, 2020 and $12.2 million on a full year basis, up $2.2 million (21%) from the year ended December 31, 2020. Net fees were $26.5 million in the quarter, up $1.2 million (5%) from the quarter ended December 31, 2020 and $99.5 million on a full year basis, up $26.4 million (36%) from the year ended December 31, 2020. Our revenue performance was primarily due to strong net inflows in our exchange listed products segment (primarily our silver bullion trust) and higher average AUM resulting from the UPC acquisition and subsequent inflows into this newly acquired fund. We also benefited from inflows in our lending and brokerage segments. Additionally, we experienced carried interest crystallization in our lending segment.
  • Commission revenues were $14.2 million in the quarter, up $7.4 million from the quarter ended December 31, 2020 and $45.3 million on a full year basis, up $17.8 million (65%) from the year ended December 31, 2020. Net commissions were $7 million in the quarter, up $2.4 million (53%) from the quarter ended December 31, 2020 and $24 million on a full year basis, up $5.7 million (31%) from the year ended December 31, 2020. Net commissions were strong in the quarter and on a full year basis due to a combination of commissions earned on strong mining equity origination in our brokerage segment during the first half of the year and commissions earned on the purchase of uranium in our exchange listed products segment during the second half of the year.
  • Finance income was $0.8 million in the quarter, down $0.8 million (52%) from the quarter ended December 31, 2020 and $3.5 million on a full year basis, down $0.4 million (11%) from the year ended December 31, 2020. Our quarterly and full year results are primarily driven by income generation in co-investment positions we hold in LPs managed in our lending segment.

Key expense highlights

  • Net fees, net commissions, adjusted base EBITDA and operating margins are key drivers of the Company’s net compensation expense and related net compensation expense ratio (net compensation divided by net fees and net commissions). Net compensation expense was $12.4 million in the quarter, up $0.6 million (5%) from the quarter ended December 31, 2020. This compares to net fees and commissions growth of 12% and adjusted base EBITDA growth of 20% over the same time period. Net compensation expense was $47.9 million on a full year basis, up $7.9 million (20%) from the year ended December 31, 2020. This compares to net fees and commissions growth of 35% and adjusted base EBITDA growth of 45% over the same time period. Our net compensation expense ratio on a full year basis was 39% compared to 44% for the year ended December 31, 2020.
  • SG&A was $4.2 million in the quarter, up $1.9 million (80%) from the quarter ended December 31, 2020 and $14.7 million on a full year basis, up $3.6 million (32%) from the year ended December 31, 2020. The increase was mainly due to higher marketing, regulatory 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 $10.2 million ($0.41 per share) in the quarter, up 51%, or $3.5 million ($0.14 per share) from the quarter ended December 31, 2020 and $33.2 million ($1.33 per share) on a full year basis, up 23%, or $6.2 million ($0.23 per share) from the year ended December 31, 2020.Adjusted base EBITDA was $17.7 million ($0.71 per share) in the quarter, up 20%, or $3 million ($0.11 per share) from the quarter ended December 31, 2020 and a record $64.1 million ($2.58 per share) on a full year basis, up 45%, or $19.9 million ($0.78 per share) from the year ended December 31, 2020.On a quarterly and full year basis, we benefited from strong inflows into our physical trusts (primarily silver bullion), the UPC acquisition, subsequent additional inflows into this newly acquired fund and our lending products. Finally, we saw very robust mining equity origination activity in the first half of the year, coupled with strong ongoing AUM development in our brokerage segment.

Subsequent events

  • On February 24, 2022, the Sprott Board of Directors announced a quarterly dividend of $0.25 per share.

Supplemental financial information

Please refer to the December 31, 2021 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, 2021 and the company's financial performance for the three and twelve months ended December 31, 2021.

Schedule 1 - AUM continuity

3 months results              
               
(In millions $) AUMSep. 30, 2021 Netinflows (1) Marketvalue changes Other (2) AUMDec. 31, 2021   Blendedmanagement fee rate (3)
Exchange listed products              
   - Physical trusts              
      - Physical Gold Trust 4,778 39 191 - 5,008   0.35%
      - Physical Gold and Silver Trust 3,921 4 169 - 4,094   0.40%
      - Physical Silver Trust 3,378 59 163 - 3,600   0.45%
      - Physical Uranium Trust 1,303 539 (73) - 1,769   0.30%
      - Physical Platinum & Palladium Trust 128 5 (1) - 132   0.50%
- Exchange Traded Funds 317 6 33 - 356   0.35%
  13,825 652 482 - 14,959   0.38%
               
Managed equities              
   - Precious metals strategies 2,017 (56) 180 - 2,141   0.80%
- Other (4) 350 - 12 - 362   0.93%
  2,367 (56) 192 - 2,503   0.82%
               
Lending 1,383 64 3 (24) 1,426   0.79%
               
Other (5) 1,441 125 (11) - 1,555   0.95%
               
Total (6) 19,016 785 666 (24) 20,443   0.51%
               
12 months results              
               
(In millions $) AUMDec. 31, 2020 Netinflows (1) Marketvalue changes Other (2) AUMDec. 31, 2021   Blendedmanagement fee rate (3)
Exchange listed products              
   - Physical trusts              
      - Physical Gold Trust 4,893 315 (200) - 5,008   0.35%
      - Physical Gold and Silver Trust 4,423 (17) (312) - 4,094   0.40%
      - Physical Silver Trust 2,408 1,756 (564) - 3,600   0.45%
      - Physical Uranium Trust - 998 141 630 1,769   0.30%
      - Physical Platinum & Palladium Trust 127 37 (32) - 132   0.50%
- Exchange Traded Funds 382 24 (50) - 356   0.35%
  12,233 3,113 (1,017) 630 14,959   0.38%
               
Managed equities              
   - Precious metals strategies 2,479 (52) (286) - 2,141   0.80%
- Other (4) 352 (1) 11 - 362   0.93%
  2,831 (53) (275) - 2,503   0.82%
               
Lending 999 583 (12) (144) 1,426   0.79%
               
Other (5) 1,327 381 (153) - 1,555   0.95%
               
Total (6) 17,390 4,024 (1,457) 486 20,443   0.51%
               
(1) See 'Net inflows' in the key performance indicators and non-IFRS and other 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 weighted average fees for all funds in the category.
(4) Includes institutional managed accounts.
(5) Includes Sprott Korea Corp. 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 $) Q42021 Q32021 Q22021 Q12021 Q42020 Q32020 Q22020 Q12020
Summary income statements                
Management fees 27,783   28,612   25,062   22,452   22,032   19,934   15,825   15,125  
Carried interest and performance fees 4,298   -   -   7,937   10,075   -   -   -  
less: Carried interest and performance fee payouts 2,516   -   126   4,580   5,529   -   -   -  
less: Trailer, sub-advisor and other fees (1) 1,662   637   552   1,194   583   527   516   414  
less: Direct payouts (1) 1,367   1,892   1,198   890   695   476   490   634  
Net fees 26,536   26,083   23,186   23,725   25,300   18,931   14,819   14,077  
Commissions 14,153   11,273   7,377   12,463   6,761   9,386   6,133   5,179  
less: Commission expense - internal (1) 4,128   3,089   3,036   5,289   2,093   3,313   1,887   1,236  
less: Commission expense - external (1) 3,016   2,382   49   253   98   344   161   -  
Net Commissions 7,009   5,802   4,292   6,921   4,570   5,729   4,085   3,943  
Finance income 788   567   932   1,248   1,629   757   656   914  
Gain (loss) on investments (43 ) 310   2,502   (4,652 ) (3,089 ) 4,408   8,142   (4,352 )
Other income 313   529   438   303   949   914   285   113  
Total net revenues 34,603   33,291   31,350   27,545   29,359   30,739   27,987   14,695  
                 
Compensation 20,632   18,001   15,452   22,636   20,193   16,280   10,991   10,125  
less: Carried interest and performance fee payouts 2,516   -   126   4,580   5,529   -   -   -  
less: Commission expense and direct payouts 5,495   4,981   4,234   6,179   2,788   3,789   2,377   1,870  
less: Severance and new hire accruals 187   207   293   44   65   210   358   667  
Net compensation 12,434   12,813   10,799   11,833   11,811   12,281   8,256   7,588  
Severance and new hire accruals 187   207   293   44   65   210   358   667  
Selling, general and administrative (1) 4,172   3,682   3,492   3,351   2,320   2,465   2,944   3,370  
Interest expense 239   312   260   350   331   320   350   236  
Depreciation and amortization 1,136   1,134   1,165   1,117   1,023   992   1,049   988  
Other expenses (credits) 2,910   3,875   876   4,918   4,528   4,154   2,893   (1,081 )
Total expenses 21,078   22,023   16,885   21,613   20,078   20,422   15,850   11,768  
                 
Net income 10,171   8,718   11,075   3,221   6,720   8,704   10,492   1,062  
Net Income per share 0.41   0.35   0.44   0.13   0.27   0.36   0.43   0.04  
Adjusted base EBITDA 17,705   16,713   15,050   14,605   14,751   12,024   9,204   8,187  
Adjusted base EBITDA per share 0.71   0.67   0.60   0.59   0.60   0.49   0.38   0.33  
Operating margin 55 % 52 % 52 % 51 % 51 % 47 % 49 % 43 %
                 
Summary balance sheet                
Total assets 365,873   375,819   361,121   356,986   377,348   358,300   338,931   318,318  
Total liabilities 74,654   84,231   64,081   67,015   86,365   81,069   70,818   65,945  
                 
Total AUM 20,443,088   19,016,313   18,550,106   17,073,078   17,390,389   16,259,184   13,893,039   10,734,831  
Average AUM 20,229,119   19,090,702   18,343,846   17,188,205   16,719,815   16,705,046   13,216,415   11,007,781  
                 
(1) Certain comparative figures have been reclassified to conform with current year presentation.  
   

Schedule 3 - EBITDA reconciliation

       
  3 months ended 12 months ended
(in thousands $) Dec. 31, 2021 Dec. 31, 2020 Dec. 31, 2021 Dec. 31, 2020
         
Net income for the periods 10,171   6,720   33,185   26,978  
Adjustments:        
Interest expense 239   331   1,161   1,237  
Provision for income taxes 3,354   2,561   12,005   7,684  
Depreciation and amortization 1,136   1,023   4,552   4,052  
EBITDA 14,900   10,635   50,903   39,951  
         
Other adjustments:        
(Gain) loss on investments (1) 43   3,089   1,883   (5,109 )
Non-cash stock-based compensation 450   1,307   1,698   2,835  
Other expenses (credits) (2) 3,304   4,266   13,217   11,035  
Adjusted EBITDA 18,697   19,297   67,701   48,712  
         
Other adjustments:        
Carried interest and performance fees (4,298 ) (10,075 ) (12,235 ) (10,075 )
Carried interest and performance fee payouts 2,516   5,529   7,222   5,529  
Trailer, sub-advisor and other fees 790   -   1,385   -  
Adjusted base EBITDA 17,705   14,751   64,073   44,166  
Operating margin (3) 55 % 51 % 53 % 49 %
(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 below are met.(2) In addition to the items outlined in Note 5 of the annual financial statements, this reconciliation line also includes $0.2 million severance and new hire accruals for the 3 months ended December 31, 2021 (3 months ended December 31, 2020 - $0.1 million) and $0.7 million for the 12 months ended (12 months ended December 31, 2020 - $1.3 million). This reconciliation line excludes income (expense) attributable to non-controlling interests of ($0.2 million) for the 3 months ended (3 months ended December 31, 2020 - $0.3 million) and $0.1 million for the 12 months ended December 31, 2021 (12 months ended December 31, 2020 - $0.8 million).(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.
 

Normal Course Issuer Bid

Sprott 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 646,743 common shares being approximately 2.5% of 25,869,734 (representing the number of issued and outstanding common shares as of February 17, 2022). The average daily trading volume (the “ADTV”) of the common shares on the TSX for the six-month period ended January 31, 2022 was 50,800. 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 12,700 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, 2022 and ending on March 2, 2023.

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 prior NCIB that commenced on March 3, 2021 and will terminate March 2, 2022, Sprott previously sought and received approval from the TSX to repurchase up to 642,576 common shares. Sprott did not purchase any common shares pursuant to its previously authorized NCIB.

Conference Call and Webcast

A conference call and webcast will be held today, February 25, 2022 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 6792729. A taped replay of the conference call will be available until Friday, March 4, 2022 by calling (855) 859-2056, reference number 6792729 . The conference call will be webcast live at www.sprott.com and https://edge.media-server.com/mmc/p/afmh2cwu.

Non-IFRS Financial Measures

This press release includes financial terms (including AUM, net revenues, net commissions, net fees, expenses, adjusted base EBITDA, 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, other fees and direct payouts) and carried interest and performance fees (net of carried interest and performance fee payouts) 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 this MD&A, and severance and new hire accruals which are non-recurring.

EBITDA, adjusted EBITDA, adjusted base EBITDA

EBITDA in its most basic form is defined as earnings before interest expense, income taxes, depreciation and amortization. EBITDA 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.

Fund Reorganization Information

Subject to the approval of a reorganization by the shareholders of URNM, a series of the Exchange Traded Concepts Trust, URNM will be reorganized into a newly created series of the Sprott Funds Trust, the Sprott Uranium Miners ETF, which series will be advised by Sprott Asset Management and sub-advised by ALPS Advisors, Inc. A Registration Statement for the Sprott Uranium Miners ETF has been filed with the SEC but is not yet effective. Information contained therein is subject to completion or amendment. Fund securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. Shareholders of URNM are urged to carefully read the proxy statement/prospectus filed with the SEC in connection with the reorganization in its entirety because it contains important information about the fund reorganization. Shareholders may obtain a free copy of the proxy statement/prospectus at the SEC’s web site 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 potential purchase by Sprott Asset Management LP of the exclusive licensing rights to the index tracked by the North Shore Global Uranium Mining ETF (URNM) (ii) statements about the value of Sprott’s common shares and its business and future prospects; and (iii) 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 Company’s MD&A for the period ended December 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) the potential risk that the transaction and the related fund reorganization will not be approved by the shareholders of URNM; (xxix) failure to, in a timely manner, or at all, obtain the other necessary approvals for the transaction and related fund reorganization; (xxx) failure of the parties to otherwise satisfy the conditions to complete the transaction and related fund reorganization; (xxxi) the effect of the announcement of the transaction and related transaction on URNM generally and other customary risks associated with transactions of this nature; (xxxii) those risks described under the heading "Risk Factors" in the Company’s annual information form dated February 24, 2022; and (xxxiii) 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, 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 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. 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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