6-K
Sprott Inc. (SII)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934
| For the month of | November | 2024 |
|---|---|---|
| Commission File Number | 001-39298 | |
| Sprott Inc. | ||
| --- | ||
| (Translation of registrant’s name into English) | ||
| Suite 2600, 200 Bay Street<br><br>Royal Bank Plaza, South Tower<br><br>Toronto, Ontario, Canada M5J 2J1 | ||
| (Address of principal executive offices) |
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
| Form 20-F | Form 40-F | x |
|---|
DOCUMENTS INCLUDED AS PART OF THIS REPORT
Exhibit 99.1 of this Report on Form 6-K is incorporated by reference into the Registration Statement on Form S-8 of the Registrant, which was originally filed with the Securities and Exchange Commission on August 7, 2020 (File No. 333-242456).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Sprott Inc. | ||||
|---|---|---|---|---|
| (Registrant) | ||||
| Date: | November 6, 2024 | By: | /s/ Kevin Hibbert | |
| Name: | Kevin Hibbert | |||
| Title: | Senior Managing Partner and Chief Financial Officer |
3
Document
Table of Contents
Letter to shareholders 2
Management's Discussion and Analysis 5
Consolidated Financial Statements 24
Notes to the Consolidated Financial Statements 29
Dear fellow shareholders,
Q3 2024 Review
During the third quarter of 2024, Sprott’s Assets Under Management (“AUM”) increased to $33.4 billion, up 8% from $31.1 billion as at June 30, 2024 and up 16% from $28.7 billion as at December 31, 2023. Subsequent to the quarter end, on November 1, 2024, AUM stood at $34.2 billion.
Net income for the quarter was $12.7 million ($0.50 per share), up 87% from $6.8 million ($0.27 per share) for the quarter ended September 30, 2023. For the first nine months of 2024, net income was $37.6 million ($1.48 per share) up 17% from $32.1 million ($1.27 per share) for the nine months ended September 30, 2023.
Adjusted base EBITDA was $20.7 million ($0.81 per share) in the quarter, up 16% from $17.9 million ($0.71 per share) for the quarter ended September 30, 2023 and $62.8 million ($2.47 per share) on a year-to-date basis, up 18% from $53.1 million ($2.10 per share) for the nine months ended September 30, 2023. Adjusted base EBITDA on both a three and nine months ended basis benefited from higher management fees on strong market valuations of our precious metals physical trusts and good inflows to our exchange listed products.
During the quarter, we recorded $589 million in net sales, largely in our precious metals physical trusts.
Given the strength of these results and our confidence in Sprott’s future, our Board has declared a third quarter dividend of $0.30 per share, an increase of 20%. Further, we now expect to repay the balance of our line of credit by the end of this month, resulting in a debt-free balance sheet.
Precious Metals
Gold and silver were the key drivers of Sprott’s results during the quarter, as both metals saw significant price increases. Gold posted its largest quarterly percentage change since the first quarter of 2016 and the largest U.S. dollar increase in history. Silver prices also rose, but with more volatility than gold. Year-to-date through September 30, gold was up 27.7% and silver had gained 30.9%. In October, both gold and silver pushed above important thresholds, and now sit above $2,700 per ounce and $32 per ounce, respectively.
During the first half of 2024, gold's surge was driven largely by Central Bank buying, particularly in emerging markets. The metal has registered price gains every month of the year, despite a notable absence of investor interest – at least in the West. This changed during the third quarter when, according to World Gold Council data, gold demand set a new record, topping $100 billion for the first time. The 5% increase during the quarter was driven by Western investor participation as gold ETF flows, historically a good barometer of investor interest, turned positive after an extended period of outflows.
Silver also appears to have recently broken out and is now up 36.5% on the year (as of November 1, 2024). Silver is still trading well below the all-time highs established in 1980 and matched in 2011 at approximately $50 per ounce. Silver differs from gold in that it serves a dual role as both a precious metal and an industrial metal. While it is impacted by many of the same macro-economic factors as gold, it also benefits from rising industrial demand, particularly in clean energy technologies. With approximately $8 billion in physical silver AUM, Sprott is well positioned to benefit from the compelling outlook for the metal.
Sprott’s actively managed equity strategies have performed well this year. Our flagship Sprott Gold Equity Fund was up 21.41% during the quarter and 36.34% on a year-to-date basis (as of November 1, 2024). Notwithstanding the strong results, investors have been slow to allocate capital to the sector. We remain patient and believe the flows will return as the opportunities in gold and silver mining equities become impossible to ignore.
Critical Materials
Critical materials prices were generally softer during the third quarter after a strong start to the year. China’s well-documented struggles and the perceived slowing in the U.S. economy pressured most industrial commodity prices during the quarter. Uranium prices have been subdued, as the metal consolidated in the low $80 per pound range. Uranium equities sold off during much of the third quarter before reversing course in early September. After the seasonally weak summer period, the sector has been bolstered by both the Federal Reserve’s rate cut and seemingly daily news stories about big tech companies embracing nuclear power. Uranium mining equities gained 4.85% in October, while the spot price for physical uranium has yet to respond. We believe the news that “hyper scalers” including Microsoft, Google, Meta and Amazon are turning to nuclear power as a way to meet their electricity needs supports a key element of our critical materials thesis: that the world needs more electricity from all sources.
After hitting a high of $10,899/mt in May, copper prices fell by 18% over the summer. Prices recovered in September on hopes that stimulus from China’s central bank would stoke an economic recovery in China, the world’s largest consumer of copper. We maintain our constructive view on copper due to its essential role in all forms of electrification and a looming supply deficit. Permitting a copper mine has never been more difficult and miners are now focused on lower grade deposits in increasingly difficult locations. At the same time, the largest producers appear focused on growing their copper assets by acquiring their competitors, rather than increasing supply through new mine developments. We expect investor appetite for copper to improve through the end of 2024 and into 2025.
Outlook
Our constructive outlook is largely unchanged from what we have articulated in prior quarters, although with the expectation of greater volatility in the months ahead. The geopolitical situation remains fraught as two wars continue unabated. As of this writing, the outcome of the U.S. Presidential election is highly uncertain and may remain so long after the polls close. We don’t believe inflation is behind us, rather it’s just resting a bit. Which means that interest rates are unlikely to fall to levels that are expected in the longer run. We believe the mini market crisis caused by the recent unwind of the Yen carry trade in August is likely a warning of things to come, and not a one-off event.
The root cause for our concern about volatility is the structure and functioning of the U.S. Treasury markets, by far the largest and most liquid in the world. It is not the size of the U.S. national debt or the rate that it is increasing ($2 trillion per year), it’s the way it’s structured that worries us. Luke Gromen, one of our favorite strategists, has been writing about this for some time in his weekly letter The Forest for the Trees. He shows that while the U.S. debt has more than doubled in the last 10 years, central banks have not added to their net ownership.
This has required a new source of demand from buyers such as pension funds, insurance companies, money market funds and now hedge funds. Two of the top five creditor nations are homes to these hedge funds, including the Cayman Islands (population 68,000) at number four.
These funds are mostly interested in shorter Treasury bills so the structure of the Treasury market has dramatically shifted toward shorter durations as it has grown. Currently the U.S. Treasury must “roll” (gross issuance volume) $500 billion per week, up from $200 billion in 2018 and $100 billion in 2013. An unexpected event in any market or location can cause these highly-levered macro funds to liquidate on a moment’s notice. We think going forward, the Federal Reserve will be spending much more time dealing with the stability of the U.S. Treasury market rather than worrying about inflation or employment. We believe this explains the strong recent performance of precious metals and don’t expect it to end anytime soon.
As new military and trade alliances are drawn globally, the onshoring trend will continue to accelerate. New technologies will drive increased electricity demand in the developed world and an emerging middle class in the world’s most populous nations will consume steadily increasing volumes of raw materials. A reluctance to rely on foreign suppliers will support domestic mine development for the production of these metals. With our positioning in precious metals and critical materials, we believe we are well positioned to benefit from these powerful global trends and create value for our clients and shareholders.
Thank you for your continued support. We look forward to reporting to you on our progress in the quarters ahead.
Sincerely,
Whitney George
Chief Executive Officer
Management's Discussion and Analysis
Three and nine months ended September 30, 2024
Forward looking statements
Certain statements in this Management's Discussion & Analysis ("MD&A"), and in particular the "Outlook" section, 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 MD&A contains Forward-Looking Statements pertaining to: (i) our expectation to repay the balance of our line of credit by the end of this month, resulting in a debt-free balance sheet at that time; (ii) our positioning will benefit from a highly constructive operating environment for precious metals, critical materials and their related equities; 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: (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 herein under the heading "Critical Accounting Estimates and significant judgments". 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 private strategies business; (xxvii) those risks described under the heading "Risk Factors" in the Company’s annual information form dated February 20, 2024; and (xxviii) those risks described under the headings "Managing Financial Risk" and "Managing Non-Financial Risk" in this MD&A. 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.
Management's discussion and analysis
This MD&A of financial condition and results of operations, dated November 5, 2024, presents an analysis of the consolidated financial condition of the Company and its subsidiaries as at September 30, 2024, compared with December 31, 2023, and the consolidated results of operations for the three and nine months ended September 30, 2024, compared with the three and nine months ended September 30, 2023. The board of directors of the Company approved this MD&A on November 5, 2024. All note references in this MD&A are to the notes to the Company's September 30, 2024 interim condensed consolidated financial statements ("interim financial statements"), unless otherwise noted. The Company was incorporated under the Business Corporations Act (Ontario) on February 13, 2008.
Presentation of financial information
The interim financial statements, including the required comparative information, have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB") in effect as at September 30, 2024, specifically, IAS 34 Interim Financial Reporting. Financial results, including related historical comparatives contained in this MD&A, unless otherwise specified herein, are based on the interim financial statements. While the Company's source and presentation currency is the U.S. dollar, IFRS requires that the Company measure its foreign exchange gains and losses through its consolidated statements of operations and comprehensive income using the Canadian dollar as its functional currency. Accordingly, all dollar references in this MD&A are in U.S. dollars, however the translation gains and losses were measured using the Canadian dollar as the functional currency. The use of the term "prior period" refers to the three and nine months ended September 30, 2023.
Key performance indicators and non-IFRS and other financial measures
The Company measures the success of its business using a number of key performance indicators that are not measurements in accordance with IFRS and should not be considered as an alternative to net income (loss) or any other measure of performance under IFRS. 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 page 11 of this MD&A.
Assets under management
Assets under management ("AUM") refers to the total net assets managed by the Company through its various investment product offerings and managed accounts.
Net inflows
Net inflows result in changes to AUM, and as such, have a direct impact on the revenues and earnings of the Company. They are described individually below:
At-the-market ("ATM") transactions and ETF unit creations
ATM transactions of our physical trusts and new 'creations' of ETF units are the primary manner in which inflows arise in our exchange listed products segment.
Net sales
Fund sales (net of redemptions) are the primary manner in which inflows arise in our managed equities segment.
Net capital calls
Capital calls, net of capital distributions ("net capital calls") are the primary manner in which inflows arise in our private strategies segment.
Other net inflows
Other net inflows include: (1) fund acquisitions, (2) new AUM from fund launches; and (3) lost AUM from fund closures. It is possible for committed capital in our private strategies to earn a commitment fee despite being uncalled, in which case, it will also be included in this category as AUM.
Net fees
Management fees, net of fund expenses, 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 from purchases and sales of critical materials in our exchange listed products segment and transaction-based service offerings by our broker-dealer.
Net compensation & net compensation ratio
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, new hire accruals and other which are non-recurring. Net compensation ratio is calculated as net compensation divided by net revenues (see page 8 for net revenue calculation).
Total shareholder return
Total shareholder return is the financial gain (loss) that results from a change in the Company's share price, plus any dividends paid over the period.
Liquid co-investments
Liquid co-investments are the Company's co-investments that can be monetized in less than 90 days.
EBITDA, adjusted base EBITDA and adjusted base EBITDA margin
EBITDA in its most basic form is defined as earnings before interest expense, income taxes, depreciation and amortization. Adjusted base EBITDA further adjusts for items noted in the below reconciliation table. Adjusted base EBITDA margin is calculated as adjusted base EBITDA from reportable segments divided by net revenues. Net revenues are calculated as total net revenues before: (1) gains (losses) on investments, (2) revenues from non-reportable segments; and (3) carried interest and performance fees, net of carried interest and performance fee payouts (internal and external).
EBITDA, adjusted base EBITDA and adjusted base EBITDA margin are measures 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 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. Adjusted base EBITDA 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.
Neither EBITDA, adjusted base EBITDA, or adjusted base EBITDA margin have a standardized meaning under IFRS. Consequently, they should not be considered in isolation, nor should they be used in substitute for measures of performance prepared in accordance with IFRS.
The following table outlines how our EBITDA, adjusted base EBITDA and adjusted base EBITDA margin measures are determined:
| 3 months ended | 9 months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands $) | Sep. 30, 2024 | Sep. 30, 2023 | Sep. 30, 2024 | Sep. 30, 2023 | ||||
| Net income for the period | 12,697 | 6,773 | 37,614 | 32,135 | ||||
| Net income margin (1) | 27 | % | 20 | % | 28 | % | 29 | % |
| Adjustments: | ||||||||
| Interest expense | 933 | 882 | 2,478 | 3,216 | ||||
| Provision for income taxes | 5,698 | (1,349) | 14,899 | 7,333 | ||||
| Depreciation and amortization | 502 | 731 | 1,621 | 2,185 | ||||
| EBITDA | 19,830 | 7,037 | 56,612 | 44,869 | ||||
| Adjustments: | ||||||||
| (Gain) loss on investments (2) | (937) | 1,441 | (3,879) | 1,433 | ||||
| Stock-based compensation (3) | 4,806 | 4,408 | 13,829 | 12,447 | ||||
| Foreign exchange (gain) loss (4) | 1,028 | 37 | 1,318 | 1,917 | ||||
| Severance, new hire accruals and other (4) | 58 | 122 | 58 | 5,446 | ||||
| Revaluation of contingent consideration (4) | — | — | (580) | (2,254) | ||||
| Costs relating to exit of non-core business (4) | — | 3,615 | — | 4,987 | ||||
| Non-recurring regulatory, professional fees and other (4) | — | 1,194 | — | 3,023 | ||||
| Shares received on recognition of contingent asset (4) | — | — | — | (18,588) | ||||
| Carried interest and performance fees | (4,110) | — | (4,808) | (388) | ||||
| Carried interest and performance fee payouts - internal | — | — | 251 | 236 | ||||
| Carried interest and performance fee payouts - external | — | — | — | — | ||||
| Adjusted base EBITDA | 20,675 | 17,854 | 62,801 | 53,128 | ||||
| Adjusted base EBITDA margin (5) | 58 | % | 56 | % | 58 | % | 57 | % |
(1) Calculated as IFRS net income divided by IFRS total revenue.
(2) 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.
(3) In prior years, the mark-to-market expense of DSU issuances were included with "other (income) and expenses". In the current period, these costs are included as part of "stock-based compensation". Prior year figures have been reclassified to conform with current presentation.
(4) Foreign exchange (gain) and loss; severance, new hire accruals and other; revaluation of contingent consideration; costs relating to exit of non-core business; non-recurring regulatory, professional fees and other; and shares received on recognition of contingent asset were previously included with "other (income) and expenses" and are now shown separately in the reconciliation of adjusted base EBITDA above. Prior year figures have been reclassified to conform with current presentation.
(5) Prior year figures have been revised to remove the adjustment of depreciation and amortization.
Business overview
Our reportable operating segments are as follows:
Exchange listed products
•The Company's closed-end physical trusts and exchange traded funds ("ETFs").
Managed equities
•The Company's alternative investment strategies managed in-house and on a sub-advised basis.
Private strategies
•The Company's lending and streaming activities which occur through limited partnership vehicles ("private strategies LPs").
Corporate
•Provides the Company's operating segments with capital, balance sheet management and other shared services.
All other segments
•Contains all non-reportable segments as per IFRS 8, Operating Segments ("IFRS 8").
For a detailed account of the underlying principal subsidiaries within our reportable operating segments, refer to the Company's Annual Information Form and Note 2 of the audited annual financial statements.
Business development and outlook
Our constructive outlook on precious metals and critical materials and their related equities is largely unchanged from what we have articulated in prior quarters, although with the expectation of greater volatility in the months ahead. For more insight into our outlook, please refer to our letter to shareholders.
Subsequent to quarter-end, as at November 1, 2024, AUM was $34.2 billion, up 2% from $33.4 billion at September 30, 2024.
Results of operations
Summary financial information
| (In thousands $) | Q3 <br>2024 | Q2 <br>2024 | Q1 <br>2024 | Q4<br>2023 | Q3<br>2023 | Q2<br>2023 | Q1<br>2023 | Q4<br>2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Summary income statement | ||||||||||||||||
| Management fees (1) | 38,693 | 38,065 | 36,372 | 34,244 | 32,867 | 32,940 | 31,170 | 28,152 | ||||||||
| Fund expenses (2), (3) | (2,385) | (2,657) | (2,234) | (2,200) | (1,740) | (1,871) | (1,795) | (1,470) | ||||||||
| Direct payouts | (1,483) | (1,408) | (1,461) | (1,283) | (1,472) | (1,342) | (1,187) | (1,114) | ||||||||
| Carried interest and performance fees | 4,110 | 698 | — | 503 | — | 388 | — | 1,219 | ||||||||
| Carried interest and performance fee payouts - internal | — | (251) | — | (222) | — | (236) | — | (567) | ||||||||
| Carried interest and performance fee payouts - external (3) | — | — | — | — | — | — | — | (121) | ||||||||
| Net fees | 38,935 | 34,447 | 32,677 | 31,042 | 29,655 | 29,879 | 28,188 | 26,099 | ||||||||
| Commissions | 498 | 3,332 | 1,047 | 1,331 | 539 | 1,647 | 4,784 | 5,027 | ||||||||
| Commission expense - internal | (147) | (380) | (217) | (161) | (88) | (494) | (1,727) | (1,579) | ||||||||
| Commission expense - external (3) | (103) | (1,443) | (312) | (441) | (92) | (27) | (642) | (585) | ||||||||
| Net commissions | 248 | 1,509 | 518 | 729 | 359 | 1,126 | 2,415 | 2,863 | ||||||||
| Finance income (2) | 1,574 | 4,084 | 1,810 | 1,391 | 1,795 | 1,650 | 1,655 | 1,738 | ||||||||
| Gain (loss) on investments | 937 | 1,133 | 1,809 | 2,808 | (1,441) | (1,950) | 1,958 | (930) | ||||||||
| Co-investment income (2) | 418 | 416 | 274 | 170 | 462 | 1,327 | 93 | 370 | ||||||||
| Total net revenues (2) | 42,112 | 41,589 | 37,088 | 36,140 | 30,830 | 32,032 | 34,309 | 30,140 | ||||||||
| Compensation (2) | 18,547 | 19,225 | 17,955 | 17,096 | 16,939 | 21,468 | 19,556 | 17,148 | ||||||||
| Direct payouts | (1,483) | (1,408) | (1,461) | (1,283) | (1,472) | (1,342) | (1,187) | (1,114) | ||||||||
| Carried interest and performance fee payouts - internal | — | (251) | — | (222) | — | (236) | — | (567) | ||||||||
| Commission expense - internal | (147) | (380) | (217) | (161) | (88) | (494) | (1,727) | (1,579) | ||||||||
| Severance, new hire accruals and other | (58) | — | — | (179) | (122) | (4,067) | (1,257) | (1,240) | ||||||||
| Net compensation | 16,859 | 17,186 | 16,277 | 15,251 | 15,257 | 15,329 | 15,385 | 12,648 | ||||||||
| Net compensation ratio | 46 | % | 44 | % | 47 | % | 47 | % | 50 | % | 48 | % | 52 | % | 44 | % |
| Severance, new hire accruals and other | 58 | — | — | 179 | 122 | 4,067 | 1,257 | 1,240 | ||||||||
| Selling, general and administrative ("SG&A") (2) | 4,612 | 5,040 | 4,173 | 3,963 | 3,817 | 4,752 | 4,026 | 3,814 | ||||||||
| SG&A recoveries from funds (1) | (275) | (260) | (231) | (241) | (249) | (282) | (264) | (253) | ||||||||
| Interest expense | 933 | 715 | 830 | 844 | 882 | 1,087 | 1,247 | 1,076 | ||||||||
| Depreciation and amortization | 502 | 568 | 551 | 658 | 731 | 748 | 706 | 710 | ||||||||
| Foreign exchange (gain) loss (2) | 1,028 | 122 | 168 | 1,295 | 37 | 1,440 | 440 | (484) | ||||||||
| Other (income) and expenses (2) | — | (580) | — | 3,368 | 4,809 | (18,890) | 1,249 | 1,686 | ||||||||
| Total expenses | 23,717 | 22,791 | 21,768 | 25,317 | 25,406 | 8,251 | 24,046 | 20,437 | ||||||||
| Net income | 12,697 | 13,360 | 11,557 | 9,664 | 6,773 | 17,724 | 7,638 | 7,331 | ||||||||
| Net income per share | 0.50 | 0.53 | 0.45 | 0.38 | 0.27 | 0.70 | 0.30 | 0.29 | ||||||||
| Adjusted base EBITDA | 20,675 | 22,375 | 19,751 | 18,759 | 17,854 | 17,953 | 17,321 | 18,083 | ||||||||
| Adjusted base EBITDA per share | 0.81 | 0.88 | 0.78 | 0.75 | 0.71 | 0.71 | 0.68 | 0.72 | ||||||||
| Summary balance sheet | ||||||||||||||||
| Total assets | 412,477 | 406,265 | 389,784 | 378,835 | 375,948 | 381,519 | 386,765 | 383,748 | ||||||||
| Total liabilities | 82,198 | 90,442 | 82,365 | 73,130 | 79,705 | 83,711 | 108,106 | 106,477 | ||||||||
| Total AUM | 33,439,221 | 31,053,136 | 29,369,191 | 28,737,742 | 25,398,159 | 25,141,561 | 25,377,189 | 23,432,661 | ||||||||
| Average AUM | 31,788,412 | 31,378,343 | 29,035,667 | 27,014,109 | 25,518,250 | 25,679,214 | 23,892,335 | 22,323,075 |
(1) Previously, management fees within the above summary financial information table included SG&A recoveries from funds consistent with IFRS 15. For management reporting purposes, these recoveries are now shown next to their associated expense as management believes this will enable readers to transparently identify the net economics of these recoveries. However, SG&A recoveries from funds are still shown within the "Management fees" line on the consolidated statement of operations. Prior year figures have been reclassified to conform with current presentation.
(2) Current and prior period figures on the consolidated statements of operations include the following adjustments: (1) trading costs incurred in managed accounts are now included within "Fund expenses" (previously included within "SG&A"); (2) interest income earned on cash deposits are now included within "Finance income" (previously included within "Other income"); (3) co-investment income and income attributable to non-controlling interest are now included as part of "Co-investment income" (previously included within "Other income"); (4) expenses attributable to non-controlling interest is now included within "Co-investment income" (previously included within "Other expenses"); (5) the mark-to-market expense of DSU issuances are now included within "Compensation" (previously included within "Other expenses"); (6) foreign exchange (gain) loss is now shown separately (previously included within "Other expenses"); and (7) shares received on a previously unrecorded contingent asset in Q2 2023 are now included within "Other (income) and expenses" (previously included within "Other income"). Prior year figures have been reclassified to conform with current presentation.
(3) These amounts are included in the "Fund expenses" line on the consolidated statements of operations.
AUM summary
AUM was $33.4 billion as at September 30, 2024, up 8% from $31.1 billion as at June 30, 2024 and up 16% from $28.7 billion as at December 31, 2023. On a three and nine months ended basis, we primarily benefited from strong market value appreciation in our precious metals physical trusts. We also benefited from net inflows to our exchange listed products and the launch of our Physical Copper Trust in the second quarter. Subsequent to quarter-end, as at November 1, 2024, AUM was $34.2 billion, up 2% from $33.4 billion at September 30, 2024.
| 3 months results | ||||||
|---|---|---|---|---|---|---|
| (In millions $) | AUM<br>Jun. 30, 2024 | Net <br> inflows (1) | Market <br>value changes | Other<br><br>net inflows (1) | AUM<br><br>Sep. 30, 2024 | Net management<br><br>fee rate (2) |
| Exchange listed products | ||||||
| - Precious metals physical trusts and ETFs | ||||||
| - Physical Gold Trust | 7,283 | 361 | 973 | — | 8,617 | 0.35% |
| - Physical Silver Trust | 4,994 | 224 | 348 | — | 5,566 | 0.45% |
| - Physical Gold and Silver Trust | 4,710 | — | 515 | — | 5,225 | 0.40% |
| - Precious Metals ETFs | 355 | (11) | 60 | — | 404 | 0.33% |
| - Physical Platinum & Palladium Trust | 143 | 7 | 1 | — | 151 | 0.50% |
| 17,485 | 581 | 1,897 | — | 19,963 | 0.39% | |
| - Critical materials physical trusts and ETFs | ||||||
| - Physical Uranium Trust | 5,615 | 23 | (230) | — | 5,408 | 0.32% |
| - Critical Materials ETFs | 2,408 | 56 | (157) | — | 2,307 | 0.55% |
| - Physical Copper Trust | 98 | 2 | 3 | — | 103 | 0.32% |
| 8,121 | 81 | (384) | — | 7,818 | 0.38% | |
| Total exchange listed products | 25,606 | 662 | 1,513 | — | 27,781 | 0.39% |
| Managed equities (3)(4) | 2,962 | (55) | 369 | — | 3,276 | 0.90% |
| Private strategies (4) | 2,485 | (18) | (85) | — | 2,382 | 0.80% |
| Total AUM (5) | 31,053 | 589 | 1,797 | — | 33,439 | 0.47% |
| 9 months results | ||||||
| (In millions $) | AUM<br>Dec. 31, 2023 | Net <br> inflows (1) | Market <br>value changes | Other<br><br>net inflows (1) | AUM<br><br>Sep. 30, 2024 | Net management<br><br>fee rate (2) |
| Exchange listed products | ||||||
| - Precious metals physical trusts and ETFs | ||||||
| - Physical Gold Trust | 6,532 | 316 | 1,769 | — | 8,617 | 0.35% |
| - Physical Silver Trust | 4,070 | 256 | 1,240 | — | 5,566 | 0.45% |
| - Physical Gold and Silver Trust | 4,230 | (161) | 1,156 | — | 5,225 | 0.40% |
| - Precious Metals ETFs | 339 | (14) | 79 | — | 404 | 0.33% |
| - Physical Platinum & Palladium Trust | 116 | 42 | (7) | — | 151 | 0.50% |
| 15,287 | 439 | 4,237 | — | 19,963 | 0.39% | |
| - Critical materials physical trusts and ETFs | ||||||
| - Physical Uranium Trust | 5,773 | 266 | (631) | — | 5,408 | 0.32% |
| - Critical materials ETFs | 2,143 | 294 | (130) | — | 2,307 | 0.55% |
| - Physical Copper Trust | — | 2 | (9) | 110 | 103 | 0.32% |
| 7,916 | 562 | (770) | 110 | 7,818 | 0.38% | |
| Total exchange listed products | 23,203 | 1,001 | 3,467 | 110 | 27,781 | 0.39% |
| Managed equities (3)(4) | 2,874 | (167) | 569 | — | 3,276 | 0.90% |
| Private strategies (4) | 2,661 | (172) | (107) | — | 2,382 | 0.80% |
| Total AUM (5) | 28,738 | 662 | 3,929 | 110 | 33,439 | 0.47% |
| (1) See "Net inflows" and "Other net inflows" in the key performance indicators and non-IFRS and other financial measures section of this MD&A. | ||||||
| (2) Management fee rate represents the weighted average fees for all funds in the category, net of fund expenses. | ||||||
| (3) Managed equities is made up of primarily precious metal strategies (57%), high net worth managed accounts (35%) and U.S. value strategies (8%). | ||||||
| (4) Prior period figures have been reclassified to conform with current presentation. | ||||||
| (5) No performance fees are earned on exchange listed products. Performance fees are earned on certain of our managed equities products and are based on returns above relevant benchmarks. Private strategies<br><br>LPs primarily earn carried interest calculated as a predetermined net profit over a preferred return. |
Key revenue lines
Management, carried interest and performance fees
Management fees were $38.7 million in the quarter, up 18% from $32.9 million for the quarter ended September 30, 2023 and $113.1 million on a year-to-date basis, up 17% from $97 million for the nine months ended September 30, 2023. Carried interest and performance fees were $4.1 million in the quarter, up from $nil for the quarter ended September 30, 2023 and $4.8 million on a year-to-date basis, up from $0.4 million for the nine months ended September 30, 2023. Net fees were $38.9 million in the quarter, up 31% from $29.7 million for the quarter ended September 30, 2023 and $106.1 million on a year-to-date basis, up 21% from $87.7 million for the nine months ended September 30, 2023. Our revenue performance on both a three and nine months ended basis was primarily due to higher average AUM on strong market value appreciation in our precious metals physical trusts and continuous inflows to the majority of our exchange listed products. We also benefited from carried interest crystallization in a legacy fixed-term exploration LP in our managed equities segment.
Commission revenues
Commission revenues were $0.5 million in the quarter, down 8% from the quarter ended September 30, 2023 and $4.9 million on a year-to-date basis, down 30% from $7 million for the nine months ended September 30, 2023. Net commissions were $0.2 million in the quarter, down 31% from $0.4 million for the quarter ended September 30, 2023 and $2.3 million on a year-to-date basis, down 42% from $3.9 million for the nine months ended September 30, 2023. Commission revenue was lower in the quarter due to modest ATM activity in our critical materials physical trusts. On a year-to-date basis, the decline in commission revenue was due to the sale of our former Canadian broker-dealer in the second quarter of last year.
Finance income
Finance income was $1.6 million in the quarter, down 12% from $1.8 million for the quarter ended September 30, 2023 and $7.5 million on a year-to-date basis, up 46% from $5.1 million for the nine months ended September 30, 2023. The decrease in the quarter was due to lower income generation in co-investment positions we hold in our LPs managed in our private strategies segment. The increase on a year-to-date basis was due to higher income earned on streaming syndication activity in the second quarter.
Key expense lines
Compensation
Net compensation expense was $16.9 million in the quarter, up 11% from $15.3 million for the quarter ended September 30, 2023 and $50.3 million on a year-to-date basis, up 9% from $46 million for the nine months ended September 30, 2023. The increase in the quarter and on a year-to-date basis was primarily due to increased AIP accruals on higher net fee generation. Our net compensation ratio was 46% in the quarter (September 30, 2023 - 50%) and 45% on a year-to-date basis (September 30, 2023 - 50%).
SG&A
SG&A expense was $4.6 million in the quarter, up 21% from $3.8 million for the quarter ended September 30, 2023 and $13.8 million on a year-to-date basis, up 10% from $12.6 million for the nine months ended September 30, 2023. The increase in the quarter and on a year-to-date basis was due to higher technology and professional services costs.
Earnings
Net income for the quarter was $12.7 million ($0.50 per share), up 87% from $6.8 million ($0.27 per share) for the quarter ended September 30, 2023 and was $37.6 million ($1.48 per share) on a year-to-date basis, up 17% from $32.1 million ($1.27 per share) for the nine months ended September 30, 2023. Our earnings benefited from higher management fees on strong market valuations of our precious metals physical trusts and good inflows to our exchange listed products. We also benefited from carried interest crystallization in our managed equities funds and market value appreciation of our co-investments.
Adjusted base EBITDA was $20.7 million ($0.81 per share) in the quarter, up 16% from $17.9 million ($0.71 per share) for the quarter ended September 30, 2023 and $62.8 million ($2.47 per share) on a year-to-date basis, up 18% from $53.1 million ($2.10 per share) for the nine months ended September 30, 2023. Adjusted base EBITDA on both a three and nine months ended basis benefited from higher management fees on strong market valuations of our precious metals physical trusts and good inflows to our exchange listed products.
Additional revenues and expenses
Investment gains on both a three and nine months ended basis benefited from market value appreciation in our co-investments.
Depreciation of property and equipment was lower in the quarter and on a year-to-date basis due to a decrease in depreciation expense related to cancelled lease agreements on the sale of our legacy non-core asset management business domiciled in Korea in the third quarter of last year.
Other (income) and expenses were $nil in the quarter and lower on a year-to-date basis due to the recognition of income on the recording of a non-recurring contingent asset in the second quarter of last year.
Balance sheet
Total assets were $412.5 million, up 9% from $378.8 million as at December 31, 2023. The increase was mainly due to the setup of a lease asset on the renewal of an existing lease, higher cash balances on increased earnings and higher other assets attributable to non-controlling interest on the funds we consolidate. Total liabilities were $82.2 million, up 12% from $73.1 million as at December 31, 2023. The increase was related to the office lease asset mentioned above (i.e. under IFRS 16, the $9.3 million lease asset must be accompanied by a corresponding $9.6 million accrued lease liability) and higher liabilities related to non-controlling interest on the funds we consolidate, which more than offset the partial repayment of our line of credit. Total shareholder's equity was $330.3 million, up 8% from $305.7 million as at December 31, 2023.
Reportable operating segments
Exchange listed products
| 3 months ended | 9 months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands $) | Sep. 30, 2024 | Sep. 30, 2023 | Sep. 30, 2024 | Sep. 30, 2023 | ||||
| Summary income statement | ||||||||
| Management fees | 27,268 | 20,378 | 78,813 | 58,673 | ||||
| Fund expenses | (1,955) | (1,165) | (5,819) | (3,478) | ||||
| Net fees | 25,313 | 19,213 | 72,994 | 55,195 | ||||
| Commissions | 100 | 183 | 3,542 | 1,443 | ||||
| Commission expense - internal | (8) | (14) | (286) | (105) | ||||
| Commission expense - external | (50) | (92) | (1,694) | (745) | ||||
| Net commissions | 42 | 77 | 1,562 | 593 | ||||
| Gain (loss) on investments | 395 | (641) | 2,692 | (676) | ||||
| Co-investment income | — | — | 29 | 1,014 | ||||
| Finance income (1) | 116 | 71 | 313 | 186 | ||||
| Total net revenues | 25,866 | 18,720 | 77,590 | 56,312 | ||||
| Net compensation | 4,414 | 3,537 | 12,852 | 9,904 | ||||
| Severance, new hire accruals and other | — | 30 | — | 33 | ||||
| SG&A | 1,698 | 1,618 | 4,936 | 4,266 | ||||
| Interest expense | 332 | 568 | 1,058 | 1,900 | ||||
| Depreciation and amortization | 34 | 46 | 98 | 115 | ||||
| Foreign exchange (gain) loss (1) | 480 | (414) | 139 | (103) | ||||
| Other (income) and expenses (1) | — | 338 | (580) | (20,205) | ||||
| Total expenses | 6,958 | 5,723 | 18,503 | (4,090) | ||||
| Income before income taxes | 18,908 | 12,997 | 59,087 | 60,402 | ||||
| Adjusted base EBITDA | 20,021 | 15,022 | 59,245 | 44,902 | ||||
| Adjusted base EBITDA margin (2) | 79 | % | 78 | % | 79 | % | 80 | % |
| Total AUM | 27,780,581 | 20,328,574 | 27,780,581 | 20,328,574 | ||||
| Average AUM | 26,202,349 | 19,724,530 | 25,204,327 | 19,093,726 |
(1) See footnote 2 of the summary financial information table on page 11 of the MD&A.
(2) Prior year figures have been revised to remove the adjustment of depreciation and amortization.
3 and 9 months ended
Income before income taxes was $18.9 million in the quarter, up 45% from $13 million for the quarter ended September 30, 2023. Our earnings benefited from higher management fees on strong market valuations of our precious metals physical trusts and good inflows to the majority of our exchange listed products. On a year-to-date basis, income before income taxes was $59.1 million, down 2% from $60.4 million for the nine months ended September 30, 2023. The decline in our year-to-date earnings from this time last year was mainly due to the recording of a non-recurring contingent asset in the second quarter of last year that more than offset the increased revenue in the current period from higher management fees.
Adjusted base EBITDA was $20 million in the quarter, up 33% from $15 million for the quarter ended September 30, 2023 and was $59.2 million on a year-to-date basis, up 32% from $44.9 million for the nine months ended September 30, 2023. Our three and nine months ended results benefited from higher management fees on strong market valuations of our precious metals physical trusts and inflows to the majority of our exchange listed products.
Managed equities
| 3 months ended | 9 months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands $) | Sep. 30, 2024 | Sep. 30, 2023 | Sep. 30, 2024 | Sep. 30, 2023 | ||||
| Summary income statement | ||||||||
| Management fees (1) | 7,160 | 6,841 | 20,515 | 20,727 | ||||
| Fund expenses (2) | (383) | (456) | (1,305) | (1,515) | ||||
| Direct payouts | (1,041) | (891) | (2,992) | (2,696) | ||||
| Carried interest and performance fees | 4,110 | — | 4,808 | 388 | ||||
| Carried interest and performance fee payouts - internal | — | — | (251) | (236) | ||||
| Net fees | 9,846 | 5,494 | 20,775 | 16,668 | ||||
| Gain (loss) on investments | 1,218 | (1,219) | 3,135 | (1,452) | ||||
| Co-investment income | 56 | — | 93 | 281 | ||||
| Finance income (2) | 142 | 30 | 222 | 163 | ||||
| Total net revenues | 11,262 | 4,305 | 24,225 | 15,660 | ||||
| Net compensation | 3,617 | 3,087 | 10,251 | 9,837 | ||||
| Severance, new hire accruals and other | 58 | 30 | 58 | 512 | ||||
| SG&A (2) | 1,078 | 1,002 | 3,598 | 3,294 | ||||
| SG&A recoveries from funds (1) | (275) | (249) | (766) | (795) | ||||
| Interest expense | 411 | 230 | 839 | 1,137 | ||||
| Depreciation and amortization | 95 | 138 | 282 | 344 | ||||
| Foreign exchange (gain) loss (2) | 160 | (138) | 46 | (45) | ||||
| Other (income) and expenses (2) | — | 135 | — | 314 | ||||
| Total expenses | 5,144 | 4,235 | 14,308 | 14,598 | ||||
| Income (loss) before income taxes | 6,118 | 70 | 9,917 | 1,062 | ||||
| Adjusted base EBITDA | 2,157 | 2,132 | 5,227 | 6,155 | ||||
| Adjusted base EBITDA margin (3) | 36 | % | 39 | % | 32 | % | 36 | % |
| Total AUM | 3,276,153 | 2,455,086 | 3,276,153 | 2,455,086 | ||||
| Average AUM | 3,131,978 | 2,676,780 | 2,969,909 | 2,800,978 |
(1) See footnote 1 of the summary financial information table on page 11 of the MD&A.
(2) See footnote 2 of the summary financial information table on page 11 of the MD&A.
(3) Prior year figures have been revised to remove the adjustment of depreciation and amortization.
3 and 9 months ended
Income before income taxes was $6.1 million in the quarter, up from $0.1 million for the quarter ended September 30, 2023 and was $9.9 million on a year-to-date basis, up from $1.1 million for the nine months ended September 30, 2023. Income before income taxes on both a three and nine months ended basis benefited from carried interest crystallization in a legacy fixed-term exploration LP and market value appreciation of our co-investments.
Adjusted base EBITDA was $2.2 million in the quarter, up 1% from $2.1 million for the quarter ended September 30, 2023 and was $5.2 million on a year-to-date basis, down 15% from $6.2 million for the nine months ended September 30, 2023. Our three months ended results benefited from improved market valuations across our fund products. Our year-to-date results were partially impacted by lower net management fees and higher SG&A from increased technology costs.
Private strategies
| 3 months ended | 9 months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands $) | Sep. 30, 2024 | Sep. 30, 2023 | Sep. 30, 2024 | Sep. 30, 2023 | ||||
| Summary income statement | ||||||||
| Management fees | 4,627 | 5,516 | 14,785 | 15,986 | ||||
| Fund expenses | (47) | (36) | (152) | (137) | ||||
| Direct payouts | (442) | (581) | (1,360) | (1,305) | ||||
| Net fees | 4,138 | 4,899 | 13,273 | 14,544 | ||||
| Finance income (1) | 1,195 | 1,110 | 6,601 | 3,364 | ||||
| Gain (loss) on investments | (767) | 1,275 | 56 | 1,930 | ||||
| Total net revenues | 4,566 | 7,284 | 19,930 | 19,838 | ||||
| Net compensation | 2,394 | 2,739 | 8,353 | 7,417 | ||||
| Severance, new hire accruals and other | — | — | — | 54 | ||||
| SG&A | 663 | 388 | 1,555 | 1,220 | ||||
| Interest expense | 2 | 2 | 6 | 4 | ||||
| Depreciation and amortization | 7 | 7 | 21 | 18 | ||||
| Foreign exchange (gain) loss (1) | 652 | (828) | (697) | 75 | ||||
| Other (income) and expenses (1) | — | 56 | — | 240 | ||||
| Total expenses | 3,718 | 2,364 | 9,238 | 9,028 | ||||
| Income before income taxes | 848 | 4,920 | 10,692 | 10,810 | ||||
| Adjusted base EBITDA | 2,276 | 2,882 | 9,967 | 9,271 | ||||
| Adjusted base EBITDA margin (2) | 43 | % | 48 | % | 50 | % | 52 | % |
| Total AUM | 2,382,487 | 2,614,499 | 2,382,487 | 2,614,499 | ||||
| Average AUM | 2,454,085 | 2,585,922 | 2,564,701 | 2,343,000 |
(1) See footnote 2 of the summary financial information table on page 11 of the MD&A.
(2) Prior year figures have been revised to remove the adjustment of depreciation and amortization.
3 and 9 months ended
Income before income taxes was $0.8 million in the quarter, down 83% from $4.9 million for the quarter ended September 30, 2023 and was $10.7 million on a year-to-date basis, down 1% from $10.8 million for the nine months ended September 30, 2023. Our three months ended results were impacted by market value depreciation of our co-investments and lower management fees due to a combination of net capital distributions and lower commitment fee earning assets. Our nine months ended results were impacted by market value depreciation of our co-investments and lower management fees mentioned above, partially offset by income earned on streaming syndication activity in the second quarter.
Adjusted base EBITDA was $2.3 million in the quarter, down 21% from $2.9 million for the quarter ended September 30, 2023 and was $10 million on a year-to-date basis, up 8% from $9.3 million for the nine months ended September 30, 2023. Our three months ended results were impacted by lower management fees due to a combination of net capital distributions and lower commitment fee earning assets. Our year-to-date results benefited from higher finance income earned on streaming syndication activity.
Corporate
This segment is a cost center that provides capital, balance sheet management and shared services to the Company's subsidiaries.
| 3 months ended | 9 months ended | |||
|---|---|---|---|---|
| (In thousands $) | Sep. 30, 2024 | Sep. 30, 2023 | Sep. 30, 2024 | Sep. 30, 2023 |
| Summary income statement | ||||
| Gain (loss) on investments | 67 | (239) | (236) | (25) |
| Finance income (1) | 22 | 17 | 58 | 84 |
| Total revenues | 89 | (222) | (178) | 59 |
| Net compensation (1) | 6,037 | 5,110 | 17,589 | 15,269 |
| Severance, new hire accruals and other | — | 53 | — | 4,723 |
| SG&A | 906 | 451 | 2,930 | 1,827 |
| Interest expense | 188 | 35 | 575 | 94 |
| Depreciation and amortization | 363 | 441 | 1,210 | 1,297 |
| Foreign exchange (gain) loss (1) | (318) | 1,423 | 1,673 | 1,918 |
| Other (income) and expenses (1) | — | 691 | — | 1,446 |
| Total expenses | 7,176 | 8,204 | 23,977 | 26,574 |
| Income (loss) before income taxes | (7,087) | (8,426) | (24,155) | (26,515) |
| Adjusted base EBITDA | (3,420) | (2,400) | (10,544) | (8,093) |
(1) See footnote 2 of the summary financial information table on page 11 of the MD&A.
3 and 9 months ended
•Net compensation was higher primarily due to increased AIP accruals on higher net fee generation.
•Severance and other expenses were $nil compared to the prior period.
•SG&A was higher primarily due to increased technology and professional services costs.
Dividends
The following dividends were declared by the Company during the nine months ended September 30, 2024:
| Record date | Payment date | Cash dividend <br> per share | Total dividend amount (in thousands $) |
|---|---|---|---|
| March 4, 2024 - Regular dividend Q4 2023 | March 19, 2024 | $0.25 | 6,466 |
| May 21, 2024 - Regular dividend Q1 2024 | June 5, 2024 | $0.25 | 6,466 |
| August 19, 2024 - Regular dividend Q2 2024 | September 3, 2024 | $0.25 | 6,466 |
| Dividends declared in 2024 (1) | 19,398 |
(1) Subsequent to quarter end, on November 5, 2024, a regular dividend of $0.30 per common share was declared for the quarter ended September 30, 2024. This dividend is payable on December 3, 2024 to shareholders of record at the close of business on November 18, 2024.
Capital stock
Including the 0.5 million unvested common shares currently held in the EPSP Trust (December 31, 2023 - 0.5 million), total capital stock issued and outstanding was 25.9 million (December 31, 2023 - 25.9 million).
Earnings per share for the current and prior period have been calculated using the weighted average number of shares outstanding during the respective periods. Basic earnings per share was $0.50 for the quarter and $1.48 on a year-to-date basis compared to $0.27 and $1.27 in the prior periods, respectively. Diluted earnings per share was $0.49 in the quarter and $1.44 on a year-to-date basis compared to $0.26 and $1.23 in the prior periods, respectively. Diluted earnings per share reflects the dilutive effect of in-the-money stock options, unvested shares held in the EPSP Trust and outstanding restricted stock units.
A total of 12,500 stock options are outstanding pursuant to our stock option plan, all of which are exercisable.
Liquidity and capital resources
As at September 30, 2024, the Company had $43.5 million (December 31, 2023 - $20.7 million) of cash and cash equivalents. In addition, the Company had $89.4 million of co-investments (December 31, 2023 - $93.5 million) of which $40 million (December 31, 2023 - $39.5 million) can be monetized in less than 90 days (liquid co-investments).
As at September 30, 2024, the Company had $18.7 million (December 31, 2023 - $24.2 million) outstanding on its credit facility, all of which is due on August 8, 2028. As at September 30, 2024, the Company was in compliance with all covenants, terms and conditions under the credit facility.
The Company has access to a credit facility of $75 million with a major Canadian schedule I chartered bank. Amounts under the facility may be borrowed in U.S. dollars through SOFR or base rate loans. Amounts may also be borrowed in Canadian dollars through prime rate loans or CORRA loans.
Key terms under the current credit facility are noted below:
Structure
•5-year, $75 million revolver with "bullet maturity" August 8, 2028
Interest rate
•SOFR + 2.33%
Covenant terms
•Minimum AUM: CAD$15.4 billion;
•Debt to EBITDA less than or equal to 2.5:1; and
•EBITDA to interest expense more than or equal to 2.5:1
Commitments
The Company has commitments to make co-investments in private strategies LPs or commitments to make co-investments in fund strategies in the Company's other segments. As at September 30, 2024, the Company had $2.1 million in co-investment commitments in private strategies LPs due within one year (December 31, 2023 - $4 million) and $nil due after 12 months (December 31, 2023 - $1.9 million).
Critical accounting estimates and significant judgments
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions and estimates as they occur. The Company’s material accounting policy information are described in Note 2 of the December 31, 2023 audited annual financial statements. Certain of these accounting policies require management to make key assumptions concerning the future and consider other sources of estimation uncertainty at the reporting date. These accounting estimates are considered critical because they require subjective and/or complex judgments that may have a material impact on the value of our assets, liabilities, revenues and expenses.
Critical accounting estimates
Impairment of goodwill and intangible assets
All indefinite life intangible assets and goodwill are assessed for impairment annually, however, finite life intangibles are only tested for impairment to the extent indicators of impairment exist at the time of a quarterly assessment. In the case of goodwill and indefinite life intangibles, this annual test for impairment augments the quarterly impairment indicator assessments. Values associated with goodwill and intangibles involve estimates and assumptions, including those with respect to future cash inflows and outflows, discount rates, AUM and asset lives. These estimates require significant judgment regarding market growth rates, fund flow assumptions, expected margins and costs, which could affect the Company's future results if estimates of future performance and fair value change.
Fair value of financial instruments
When the fair value of financial assets and financial liabilities recorded in the consolidated balance sheets cannot be derived from active markets, they are determined using valuation techniques and models. Model inputs are taken from observable markets where possible, but where this is not feasible, unobservable inputs may be used. These unobservable inputs include, but are not limited to, projected cash flows, discount rates, comparable recent transactions and volatility of underlying securities in warrant valuations. The use of unobservable inputs can involve significant judgment and materially affect the reported fair value of financial instruments.
Significant judgments
Investments in other entities
IFRS 10 Consolidated Financial Statements ("IFRS 10") and IAS 28 Investments in Associates and Joint Ventures ("IAS 28") provide for the use of judgment in determining whether an investee should be included within the consolidated financial statements of the Company and on what basis (subsidiary, joint venture, financial instrument or associate). Significant judgment is applied in evaluating facts and circumstances relevant to the Company and investee, including: (1) the extent of the Company's direct and indirect interest in the investee; (2) the level of compensation to be received from the investee for management and other services provided to it; (3) "kick out rights" available to other investors in the investee; and (4) other indicators of the extent of power that the Company has over the investee.
Managing financial risks
Market risk
The Company separates market risk into three categories: price risk, interest rate risk and foreign currency risk.
Price risk
Price risk arises from the possibility that changes in the price of the Company's on and off-balance sheet assets and liabilities will result in changes in carrying value or recoverable amounts. The Company's revenues are also exposed to price risk since management fees, carried interest and performance fees are correlated with AUM, which fluctuates with changes in the market values of the assets in the funds and managed accounts managed by the Company.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will adversely affect the value of, or cash flows from, financial assets and liabilities. The Company’s earnings, particularly through its private strategies segment, are exposed to volatility as a result of sudden changes in interest rates. Management takes into account a number of factors and is committed to several processes to ensure that this risk is appropriately managed.
Foreign currency risk
The Company enters into transactions that are denominated primarily in U.S. and Canadian dollars. Foreign currency risk arises from foreign exchange rate movements that could negatively impact either the carrying value of financial assets and liabilities or the related cash flows which are denominated in currencies other than the functional currency of the Company and its subsidiaries. The Company may employ certain hedging strategies to mitigate foreign currency risk.
Credit risk
Credit risk is the risk that a borrower will not honor its commitments and a loss to the Company may result. Credit risk generally arises in the Company's investments portfolio.
Investments
The Company incurs credit risk when entering into, settling and financing transactions with counterparties. Management takes into account a number of factors and is committed to several processes to ensure that this risk is appropriately managed.
Other
The majority of receivables relate to management fees, carried interest and performance fees receivable from the funds and managed accounts managed by the Company. These receivables are short-term in nature and any credit risk associated with them is managed by dealing with counterparties that the Company believes to be creditworthy and by actively monitoring credit exposure and the financial health of the counterparties.
Liquidity risk
Liquidity risk is the risk that the Company cannot meet a demand for cash or fund its obligations as they come due. The Company's exposure to liquidity risk is minimal as it maintains sufficient levels of liquid assets to meet its obligations as they come due. The Company has $43.5 million (December 31, 2023 - $20.7 million) of cash and cash equivalents. In addition, the Company has $89.4 million of co-investments (December 31, 2023 - $93.5 million), of which $40 million (December 31, 2023 - $39.5 million) can be monetized in less than 90 days (liquid co-investments). The Company also has access to a credit facility of $75 million with a major Canadian schedule I chartered bank.
The Company's exposure to liquidity risk as it relates to our co-investments in private strategies LPs arises from fluctuations in cash flows from making capital calls and receiving capital distributions. The Company manages its co-investment liquidity risk through the ongoing monitoring of scheduled capital calls and distributions ("match funding") and through its broader treasury risk management program and enterprise capital budgeting.
Financial liabilities, including accounts payable and accrued liabilities and compensation payable, are short-term in nature and are generally due within a year.
The Company's management team is responsible for reviewing resources to ensure funds are readily available to meet its financial obligations as they come due and ensuring adequate funds exist to support business strategies and operations growth. The Company manages liquidity risk by monitoring cash balances on a daily basis and through its broader treasury risk management program. To meet any liquidity shortfalls, actions taken by the Company could include but are not limited to: drawing on the line of credit; slowing its co-investment activities; liquidating investments; and adjusting or otherwise temporarily suspending AIPs.
Concentration risk
A significant portion of the Company's AUM and its investments are focused on the natural resource sector, and in particular, precious metals and critical materials related investments and transactions. In addition, from time-to-time, certain investments may be concentrated to a material degree in a single position or group of positions. Management takes into account a number of factors and is committed to several processes to ensure that this risk is appropriately managed.
Disclosure controls and procedures ("DC&P") and internal control over financial reporting ("ICFR")
Management is responsible for the design and operational effectiveness of DC&P and ICFR in order to provide reasonable assurance regarding the disclosure of material information relating to the Company. This includes information required to be disclosed in the Company's annual filings, interim filings and other reports filed under securities legislation, as well as the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
Our chief executive officer and chief financial officer, after evaluating the effectiveness of our DC&P and ICFR (as defined in the applicable U.S. and Canadian securities laws), concluded that the Company's DC&P and ICFR were properly designed and were operating effectively as at September 30, 2024. In addition, there were no material changes to ICFR during the quarter.
Managing non-financial risks
For details around other risks managed by the Company (e.g. confidentiality of information, conflicts of interest, etc.) refer to the Company's annual report as well as the Annual Information Form available on EDGAR at www.sec.gov and SEDAR+ at www.sedarplus.com.
Additional information relating to the Company, including the Company's Annual Information Form is available on EDGAR at www.sec.gov and SEDAR+ at www.sedarplus.com.
Consolidated Financial Statements
Three and nine months ended September 30, 2024
Interim condensed consolidated balance sheets (unaudited)
| As at | Sep. 30 | Dec. 31 | |
|---|---|---|---|
| (In thousands of U.S. dollars) | 2024 | 2023 | |
| Assets | |||
| Current | |||
| Cash and cash equivalents | 43,548 | 20,658 | |
| Fees receivable | 4,749 | 7,481 | |
| Short-term investments | (Notes 3 & 10) | 1,768 | 2,232 |
| Other assets | (Note 5) | 17,400 | 13,496 |
| Income taxes recoverable | 1,716 | 1,189 | |
| Total current assets | 69,181 | 45,056 | |
| Co-investments | (Notes 4 & 10) | 89,437 | 93,528 |
| Other assets | (Notes 5 & 10) | 31,739 | 24,291 |
| Property and equipment, net | 20,532 | 10,856 | |
| Intangible assets | (Note 8) | 179,208 | 182,902 |
| Goodwill | (Note 8) | 19,149 | 19,149 |
| Deferred income taxes | 3,231 | 3,053 | |
| 343,296 | 333,779 | ||
| Total assets | 412,477 | 378,835 | |
| Liabilities and shareholders' equity | |||
| Current | |||
| Accounts payable and accrued liabilities | 7,430 | 12,647 | |
| Compensation payable | 6,933 | 7,822 | |
| Income taxes payable | 6,572 | 980 | |
| Total current liabilities | 20,935 | 21,449 | |
| Other accrued liabilities | 29,227 | 16,637 | |
| Loan facility | (Note 13) | 18,677 | 24,237 |
| Deferred income taxes | 13,359 | 10,807 | |
| Total liabilities | 82,198 | 73,130 | |
| Shareholders' equity | |||
| Capital stock | (Note 9) | 434,927 | 434,764 |
| Contributed surplus | (Note 9) | 46,178 | 35,281 |
| Deficit | (71,186) | (89,402) | |
| Accumulated other comprehensive loss | (79,640) | (74,938) | |
| Total shareholders' equity | 330,279 | 305,705 | |
| Total liabilities and shareholders' equity | 412,477 | 378,835 | |
| Commitments and provisions | (Note 14) | ||
| The accompanying notes form part of the unaudited interim condensed consolidated financial statements |
"Ron Dewhurst" "Graham Birch"
Director Director
Interim condensed consolidated statements of operations and comprehensive income (unaudited)
| For the three months ended | For the nine months ended | |||
|---|---|---|---|---|
| Sep. 30 | Sep. 30 | Sep. 30 | Sep. 30 | |
| (In thousands of U.S. dollars, except for per share amounts) | 2024 | 2023 | 2024 | 2023 |
| Revenues | ||||
| Management fees | 38,968 | 33,116 | 113,896 | 97,772 |
| Carried interest and performance fees | 4,110 | — | 4,808 | 388 |
| Commissions | 498 | 539 | 4,877 | 6,970 |
| Finance income (1) | 1,574 | 1,795 | 7,468 | 5,100 |
| Gain (loss) on investments | 937 | (1,441) | 3,879 | (1,433) |
| Co-investment income (1) | 418 | 462 | 1,108 | 1,882 |
| Total revenues | 46,505 | 34,471 | 136,036 | 110,679 |
| Expenses | ||||
| Compensation (1) | 18,547 | 16,939 | 55,727 | 57,963 |
| Fund expenses (1) | 2,488 | 1,832 | 9,134 | 6,167 |
| Selling, general and administrative (1) | 4,612 | 3,817 | 13,825 | 12,595 |
| Interest expense | 933 | 882 | 2,478 | 3,216 |
| Depreciation of property and equipment | 502 | 731 | 1,621 | 2,185 |
| Foreign exchange (gain) loss (1) | 1,028 | 37 | 1,318 | 1,917 |
| Other (income) and expenses (1) | — | 4,809 | (580) | (12,832) |
| Total expenses | 28,110 | 29,047 | 83,523 | 71,211 |
| Income before income taxes for the period | 18,395 | 5,424 | 52,513 | 39,468 |
| Provision for income taxes | 5,698 | (1,349) | 14,899 | 7,333 |
| Net income for the period | 12,697 | 6,773 | 37,614 | 32,135 |
| Net income per share: | ||||
| Basic | 0.50 | 0.27 | 1.48 | 1.27 |
| Diluted | 0.49 | 0.26 | 1.44 | 1.23 |
| Net income for the period | 12,697 | 6,773 | 37,614 | 32,135 |
| Other comprehensive income (loss) | ||||
| Items that may be reclassified subsequently to profit or loss | ||||
| Foreign currency translation gain (loss) (taxes of Nil) | 3,609 | (5,301) | (4,702) | (792) |
| Total other comprehensive income (loss) | 3,609 | (5,301) | (4,702) | (792) |
| Comprehensive income (loss) | 16,306 | 1,472 | 32,912 | 31,343 |
| (1) Prior period figures have been reclassified to conform with current presentation | ||||
| The accompanying notes form part of the unaudited interim condensed consolidated financial statements |
All values are in US Dollars.
Interim condensed consolidated statements of changes in shareholders' equity (unaudited)
| (In thousands of U.S. dollars, other than number of shares) | Number of shares <br> outstanding | Capital stock | Contributed surplus | Deficit | Accumulated other comprehensive income (loss) | Total<br> equity | |
|---|---|---|---|---|---|---|---|
| At Dec. 31, 2023 | 25,410,151 | 434,764 | 35,281 | (89,402) | (74,938) | 305,705 | |
| Shares acquired for equity incentive plan | (Note 9) | (26,321) | (963) | — | — | — | (963) |
| Shares issued and released on equity incentive plans | (Note 9) | 28,379 | 1,126 | (2,042) | — | — | (916) |
| Foreign currency translation gain (loss) | — | — | — | — | (4,702) | (4,702) | |
| Stock-based compensation | (Note 9) | — | — | 12,939 | — | — | 12,939 |
| Dividends declared | (Note 11) | — | — | — | (19,398) | — | (19,398) |
| Net income | — | — | — | 37,614 | — | 37,614 | |
| Balance, Sep. 30, 2024 | 25,412,209 | 434,927 | 46,178 | (71,186) | (79,640) | 330,279 | |
| At Dec. 31, 2022 | 25,325,894 | 428,475 | 33,716 | (105,305) | (79,615) | 277,271 | |
| Shares acquired for equity incentive plan | (Note 9) | (154,131) | (5,252) | — | — | — | (5,252) |
| Shares issued and released on equity incentive plans | (Note 9) | 111,996 | 4,736 | (4,736) | — | — | — |
| Shares acquired and canceled under normal course issuer bid | (Note 9) | (117,375) | (3,881) | — | — | — | (3,881) |
| Foreign currency translation gain (loss) | — | — | — | — | (792) | (792) | |
| Stock-based compensation | (Note 9) | — | — | 16,151 | — | — | 16,151 |
| Dividends declared | (Note 11) | 1,389 | 49 | — | (19,438) | — | (19,389) |
| Net income | — | — | — | 32,135 | — | 32,135 | |
| Balance, Sep. 30, 2023 | 25,167,773 | 424,127 | 45,131 | (92,608) | (80,407) | 296,243 | |
| The accompanying notes form part of the unaudited interim condensed consolidated financial statements |
Interim condensed consolidated statements of cash flows (unaudited)
| For the nine months ended | ||
|---|---|---|
| Sep. 30 | Sep. 30 | |
| (In thousands of U.S. dollars) | 2024 | 2023 |
| Operating activities | ||
| Net income for the period | 37,614 | 32,135 |
| Add (deduct) non-cash items: | ||
| (Gain) loss on investments | (3,879) | 1,433 |
| Stock-based compensation | 12,939 | 16,151 |
| Depreciation of property and equipment | 1,621 | 2,185 |
| Deferred income tax expense | 2,520 | 2,772 |
| Current income tax expense | 12,379 | 4,561 |
| Other items | (2,578) | (6,961) |
| Shares received on recognition of a previously unrecorded contingent asset | — | (18,588) |
| Income taxes paid | (6,887) | (6,523) |
| Changes in: | ||
| Fees receivable | 2,732 | 2,870 |
| Other assets | (7,725) | (4,898) |
| Accounts payable, accrued liabilities and compensation payable | (6,494) | (6,882) |
| Cash provided by (used in) operating activities | 42,242 | 18,255 |
| Investing activities | ||
| Purchase of investments | (12,256) | (17,633) |
| Sale of investments | 22,626 | 14,532 |
| Purchase of property and equipment | (1,458) | (1,033) |
| Proceeds received on exit of non-core businesses | — | 4,583 |
| Management contract consideration | (3,906) | — |
| Cash provided by (used in) investing activities | 5,006 | 449 |
| Financing activities | ||
| Acquisition of common shares for equity incentive plan | (963) | (5,252) |
| Acquisition of common shares under normal course issuer bid | — | (3,881) |
| Repayment of lease liabilities | (1,004) | (1,846) |
| Contributions from non-controlling interest | 4,060 | 3,226 |
| Net advances (repayments) from loan facility | (5,560) | (20,000) |
| Dividends paid | (19,398) | (19,389) |
| Cash provided by (used in) financing activities | (22,865) | (47,142) |
| Effect of foreign exchange on cash balances | (1,493) | 620 |
| Net increase (decrease) in cash and cash equivalents during the period | 22,890 | (27,818) |
| Cash and cash equivalents, beginning of the period | 20,658 | 51,678 |
| Cash and cash equivalents, end of the period | 43,548 | 23,860 |
| Cash and cash equivalents: | ||
| Cash | 40,070 | 23,860 |
| Short-term deposits | 3,478 | — |
| 43,548 | 23,860 | |
| The accompanying notes form part of the unaudited interim condensed consolidated financial statements |
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
1 Corporate information
Sprott Inc. (the "Company") was incorporated under the Business Corporations Act (Ontario) on February 13, 2008. Its registered office is at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2600, Toronto, Ontario M5J 2J1.
2 Summary of material accounting policy information
Statement of compliance
These unaudited interim condensed consolidated financial statements ("interim financial statements") have been prepared in accordance with International Financial Reporting Standards ("IFRS") in effect as at September 30, 2024, specifically, IAS 34 Interim Financial Reporting.
Compliance with IFRS requires the Company to exercise judgment and make estimates and assumptions that effect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may vary. Except as otherwise noted, significant accounting judgments and estimates are described in Note 2 of the December 31, 2023 annual audited consolidated financial statements and have been applied consistently to the interim financial statements as at and for the three and nine months ended September 30, 2024.
The interim financial statements have been authorized for issue by a resolution of the board of directors of the Company on November 5, 2024 and include all subsequent events up to that date.
Basis of presentation
These interim financial statements have been prepared on a going concern basis and on a historical cost basis, except for certain financial instruments classified as fair value through profit or loss ("FVTPL") and which are measured at fair value to the extent required or permitted under IFRS and as set out in the relevant accounting policies. The interim financial statements are presented in U.S. dollars and all values are rounded to the nearest thousand ($000), except when indicated otherwise.
Principles of consolidation
These interim financial statements of the Company are prepared on a consolidated basis so as to include the accounts of all limited partnerships and corporations the Company is deemed to control under IFRS. Controlled limited partnerships and corporations ("subsidiaries") are consolidated from the date the Company obtains control. All intercompany balances with subsidiaries are eliminated upon consolidation. Subsidiary financial statements are prepared for the same reporting period as the Company and are based on accounting policies consistent with that of the Company.
The Company records third-party interest in the funds which do not qualify to be equity due to redeemable or limited life features, as non-controlling interest liabilities. Such interests are initially recognized at fair value, with any changes recorded in the co-investment income line of the consolidated statements of operations and comprehensive income.
Control exists if the Company has power over the entity, exposure or rights to variable returns from its involvement with the entity and the ability to use its power over the entity to affect the amount of returns the Company receives. In many, but not all instances, control will exist when the Company owns more than one half of the voting rights of a corporation, or is the sole limited and general partner of a limited partnership.
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
The Company currently controls the following principal subsidiaries:
•Sprott Asset Management LP ("SAM");
•Sprott U.S. Holdings Inc. ("SUSHI"), parent of: (1) SGRIL Holdings Inc. ("SGRIL Holdings"); (2) Sprott Global Resource Investments Ltd. ("SGRIL"); (3) Sprott Asset Management USA Inc. ("SAM US"); and (4) Resource Capital Investment Corporation ("RCIC"). Collectively, the interests of SUSHI are referred to as "US entities" in these financial statements;
•Sprott Resource Streaming and Royalty Corporation and Sprott Private Resource Streaming and Royalty (Management) Corp. ("SRSR");
•Sprott Resource Lending Corp. ("SRLC"); and
•Sprott Inc. 2011 Employee Profit Sharing Plan Trust (the "Trust").
Other accounting policies
All accounting policies, judgments, and estimates described in the December 31, 2023 annual audited consolidated financial statements have been applied consistently to the interim financial statements unless otherwise noted.
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
3 Short-term investments
Primarily consist of equity investments in public and private entities the Company receives as consideration during private strategies, managed equities and broker-dealer activities (in thousands $):
| Classification and measurement criteria | Sep. 30, 2024 | Dec. 31, 2023 | |
|---|---|---|---|
| Public equities and share purchase warrants | FVTPL | 290 | 754 |
| Private holdings | FVTPL | 1,478 | 1,478 |
| Total short-term investments | 1,768 | 2,232 |
Gains and losses on financial assets and liabilities classified at FVTPL are included in the gain (loss) on investments line in the consolidated statements of operations and comprehensive income.
4 Co-investments
Consists of the following (in thousands $):
| Classification and measurement criteria | Sep. 30, 2024 | Dec. 31, 2023 | |
|---|---|---|---|
| Co-investments in funds (1) | FVTPL | 89,437 | 93,528 |
| Total co-investments | 89,437 | 93,528 |
(1) Includes investments in funds managed and previously managed by the Company.
Gains and losses on co-investments are included in the gain (loss) on investments line in the consolidated statements of operations and comprehensive income.
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
5 Other assets and non-controlling interest
Other assets
Consist of the following (in thousands $):
| Sep. 30, 2024 | Dec. 31, 2023 | |
|---|---|---|
| Assets attributable to non-controlling interest | 19,428 | 15,439 |
| Fund recoveries and investment receivables | 10,144 | 6,658 |
| Advance on unrealized carried interest | 8,063 | 4,517 |
| Prepaid expenses | 4,565 | 4,017 |
| Other (1) | 3,596 | 3,744 |
| Digital gold strategies (2) | 3,343 | 3,412 |
| Total other assets | 49,139 | 37,787 |
(1) Includes miscellaneous third-party receivables.
(2) Digital gold strategies are financial instruments classified at FVTPL. Gains and losses are included in the gain (loss) on investments line in the consolidated statements of operations and comprehensive income.
Non-controlling interest assets and liabilities
Non-controlling interest consists of third-party interest in the Company's co-investments. The following table provides a summary of amounts attributable to this non-controlling interest (in thousands $):
| Sep. 30, 2024 | Dec. 31, 2023 | |
|---|---|---|
| Assets | 19,428 | 15,439 |
| Liabilities - current (1) | (62) | (133) |
| Liabilities - long-term (1) | (19,366) | (15,306) |
(1) Current and long-term liabilities attributable to non-controlling interest are included in accounts payable and accrued liabilities and other accrued liabilities, respectively.
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
6 Co-investment income
| For the three months ended | For the nine months ended | |||
|---|---|---|---|---|
| Sep. 30, 2024 | Sep. 30, 2023 | Sep. 30, 2024 | Sep. 30, 2023 | |
| Co-investment income | 418 | 462 | 1,108 | 1,882 |
| Income attributable to non-controlling interest | 520 | (1,149) | 856 | (992) |
| Expense attributable to non-controlling interest | (520) | 1,149 | (856) | 992 |
| Total co-investment income | 418 | 462 | 1,108 | 1,882 |
7 Other (income) and expenses
| For the three months ended | For the nine months ended | |||
|---|---|---|---|---|
| Sep. 30, 2024 | Sep. 30, 2023 | Sep. 30, 2024 | Sep. 30, 2023 | |
| Shares received on recognition of contingent asset | — | — | — | (18,588) |
| Revaluation of contingent consideration | — | — | (580) | (2,254) |
| Costs related to exit of non-core business | — | 3,615 | — | 4,987 |
| Non-recurring regulatory, professional fees and other | — | 1,194 | — | 3,023 |
| Total other (income) and expenses | — | 4,809 | (580) | (12,832) |
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
8 Goodwill and intangible assets
Consist of the following (in thousands $):
| Goodwill | Fund <br>management <br>contracts <br>(indefinite life) | Total | |
|---|---|---|---|
| Cost | |||
| At Dec. 31, 2022 | 132,251 | 178,613 | 310,864 |
| Net exchange differences | — | 4,289 | 4,289 |
| At Dec. 31, 2023 | 132,251 | 182,902 | 315,153 |
| Net exchange differences | — | (3,694) | (3,694) |
| At Sep. 30, 2024 | 132,251 | 179,208 | 311,459 |
| Accumulated amortization/impairment | |||
| At Dec. 31, 2022 | (113,102) | — | (113,102) |
| Amortization charge for the year | — | — | — |
| At Dec. 31, 2023 | (113,102) | — | (113,102) |
| Amortization charge for the period | — | — | — |
| At Sep. 30, 2024 | (113,102) | — | (113,102) |
| Net book value at: | |||
| At Dec. 31, 2023 | 19,149 | 182,902 | 202,051 |
| At Sep. 30, 2024 | 19,149 | 179,208 | 198,357 |
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
Goodwill
The Company has identified 5 cash generating units ("CGU") as follows:
•Exchange listed products
•Managed equities
•Private strategies
•Brokerage
•Corporate
As at September 30, 2024, the Company had allocated $19.1 million (December 31, 2023 - $19.1 million) of goodwill between the exchange listed products CGU ($17.9 million) and the managed equities CGU ($1.2 million). Goodwill was allocated on a relative value approach basis.
Indefinite life fund management contracts
As at September 30, 2024, the Company had indefinite life intangibles related to fund management contracts of $179.2 million (December 31, 2023 - $182.9 million). These contracts are held within the exchange listed products and managed equities CGUs.
Impairment assessment of goodwill and indefinite life fund management contracts
In the normal course, goodwill and indefinite life fund management contracts are tested for impairment once per annum, which for the Company is during the fourth quarter of each year or earlier if there are indicators of impairment. There were no indicators of impairment in either the exchange listed products or the managed equities CGUs as at September 30, 2024.
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
9 Shareholders' equity
Capital stock and contributed surplus
The authorized and issued share capital of the Company consists of an unlimited number of common shares, without par value.
| Number <br>of shares | Stated value<br> (in thousands $) | |
|---|---|---|
| At Dec. 31, 2022 | 25,325,894 | 428,475 |
| Shares acquired for equity incentive plan | (154,131) | (5,252) |
| Shares issued and released on equity incentive plans | 363,352 | 15,649 |
| Shares acquired and canceled under normal course issuer bid | (126,353) | (4,157) |
| Shares issued under dividend reinvestment program | 1,389 | 49 |
| At Dec. 31, 2023 | 25,410,151 | 434,764 |
| Shares acquired for equity incentive plan | (26,321) | (963) |
| Shares issued and released on equity incentive plans | 28,379 | 1,126 |
| At Sep. 30, 2024 | 25,412,209 | 434,927 |
Contributed surplus consists of stock option expense, earn-out shares expense, equity incentive plans' expense, and additional purchase consideration.
| Stated value<br>(in thousands $) | |
|---|---|
| At Dec. 31, 2022 | 33,716 |
| Released on equity incentive plans | (18,846) |
| Stock-based compensation | 20,411 |
| At Dec. 31, 2023 | 35,281 |
| Released on equity incentive plans | (2,042) |
| Stock-based compensation | 12,939 |
| At Sep. 30, 2024 | 46,178 |
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
Stock option plan
The Company has an option plan (the "Plan") intended to provide incentives to directors, officers and employees of the Company and its wholly owned subsidiaries. The aggregate number of shares issuable upon the exercise of all options granted under the Plan and under all other stock-based compensation arrangements including the Trust and Equity Incentive Plan ("EIP") cannot exceed 10% of the issued and outstanding shares of the Company as at the date of grant. The options may be granted at a price that is not less than the market price of the Company's common shares at the time of grant. The options typically vest annually over a three-year period and may be exercised during a period not to exceed 10 years from the date of grant.
There were no stock options issued or exercised during the three and nine months ended September 30, 2024 (three and nine months ended September 30, 2023 - Nil).
For valuing share option grants, the fair value method of accounting is used. The fair value of option grants is determined using the Black-Scholes option-pricing model, which takes into account the exercise price of the option, the current share price, the risk-free interest rate, the expected volatility of the share price over the life of the option and other relevant factors. Compensation cost is recognized over the vesting period, assuming an estimated forfeiture rate, with an offset to contributed surplus. When exercised, amounts originally recorded against contributed surplus as well as any consideration paid by the option holder is credited to capital stock.
As at September 30, 2024, there are 12,500 options outstanding (December 31, 2023 - 12,500) with a weighted average exercise price of CAD$27.30 and 1.5 years remaining on their contractual life.
Equity incentive plan
For employees in Canada, the Trust has been established and the Company will fund the Trust with cash, which will be used by the trustee to purchase: (1) on the open market, common shares of the Company that will be held in the Trust until the awards vest and are distributed to eligible members; and (2) from treasury, common shares of the Company that will be held in the Trust until the awards vest and are distributed to eligible employees. For employees in the U.S. under the EIP plan, the Company will allot common shares of the Company as either: (1) restricted stock; (2) unrestricted stock; or (3) restricted stock units ("RSUs"), the resulting common shares of which will be issued from treasury.
There were no RSUs granted during the three months ended September 30, 2024 (three months ended September 30, 2023 - Nil) and no RSUs granted during the nine months ended September 30, 2024 (nine months ended September 30, 2023 - 50,000).
| Number of <br>common shares | |
|---|---|
| Unvested common shares held by the Trust, Dec. 31, 2022 | 630,431 |
| Acquired | 154,131 |
| Released | (331,672) |
| Unvested common shares held by the Trust, Dec. 31, 2023 | 452,890 |
| Acquired | 26,321 |
| Released | (28,379) |
| Unvested common shares held by the Trust, Sep. 30, 2024 | 450,832 |
Included in the compensation line of the consolidated statements of operations and comprehensive income is $12.9 million of stock-based compensation for the nine months ended September 30, 2024 (nine months ended September 30, 2023 - $16.2 million).
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
Basic and diluted earnings per share
The following table presents the calculation of basic and diluted earnings per common share:
| For the nine months ended | ||||
|---|---|---|---|---|
| Sep. 30, 2024 | Sep. 30, 2023 | Sep. 30, 2024 | Sep. 30, 2023 | |
| Numerator (in thousands ): | ||||
| Net income - basic and diluted | 12,697 | 6,773 | 37,614 | 32,135 |
| Denominator (number of shares in thousands): | ||||
| Weighted average number of common shares | 25,863 | 25,866 | 25,863 | 25,911 |
| Weighted average number of unvested shares purchased by the Trust | (458) | (679) | (460) | (661) |
| Weighted average number of common shares - basic | 25,405 | 25,187 | 25,403 | 25,250 |
| Weighted average number of dilutive stock options | 13 | 13 | 13 | 13 |
| Weighted average number of unvested shares under EIP | 622 | 979 | 624 | 959 |
| Weighted average number of common shares - diluted | 26,040 | 26,179 | 26,040 | 26,222 |
| Net income per common share | ||||
| Basic | 0.50 | 0.27 | 1.48 | 1.27 |
| Diluted | 0.49 | 0.26 | 1.44 | 1.23 |
All values are in US Dollars.
Capital management
The Company's objectives when managing capital are:
•to meet regulatory requirements and other contractual obligations;
•to safeguard the Company's ability to continue as a going concern so that it can continue to provide returns to shareholders;
•to provide financial flexibility to fund possible acquisitions;
•to provide adequate seed capital for the Company's new product offerings; and
•to provide an adequate return to shareholders through growth in assets under management, growth in management fees, carried interest and performance fees and return on the Company's invested capital that will result in dividend payments to shareholders.
The Company's capital is comprised of equity, including capital stock, contributed surplus, retained earnings (deficit) and accumulated other comprehensive income (loss). SAM is a registrant of the Ontario Securities Commission ("OSC") and the U.S. Securities and Exchange Commission ("SEC") and SGRIL is a member of the Financial Industry Regulatory Authority ("FINRA"). As a result, all of these entities are required to maintain a minimum level of regulatory capital. To ensure compliance, management monitors regulatory and working capital on a regular basis. SAM US and RCIC are also registered with the SEC. As at September 30, 2024 and 2023, all entities were in compliance with their respective capital requirements.
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
10 Fair value measurements
The following tables present the Company's recurring fair value measurements within the fair value hierarchy. The Company did not have non-recurring fair value measurements as at September 30, 2024 and December 31, 2023 (in thousands $).
Short-term investments
| Sep. 30, 2024 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Public equities and share purchase warrants | 215 | 66 | 9 | 290 |
| Private holdings | — | — | 1,478 | 1,478 |
| Total recurring fair value measurements | 215 | 66 | 1,487 | 1,768 |
| Dec. 31, 2023 | Level 1 | Level 2 | Level 3 | Total |
| Public equities and share purchase warrants | 708 | 44 | 2 | 754 |
| Private holdings | — | — | 1,478 | 1,478 |
| Total recurring fair value measurements | 708 | 44 | 1,480 | 2,232 |
Co-investments
| Sep. 30, 2024 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Co-investments (1) | 11,021 | 78,416 | — | 89,437 |
| Total recurring fair value measurements | 11,021 | 78,416 | — | 89,437 |
| Dec. 31, 2023 | Level 1 | Level 2 | Level 3 | Total |
| Co-investments (1) | 15,357 | 78,171 | — | 93,528 |
| Total recurring fair value measurements | 15,357 | 78,171 | — | 93,528 |
(1) Co-investments also include investments made in funds which the Company consolidates that directly hold publicly traded equities or precious metals.
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
Other assets
| Sep. 30, 2024 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Digital gold strategies | — | — | 3,343 | 3,343 |
| Assets attributable to non-controlling interest | 3,104 | 16,324 | — | 19,428 |
| Total recurring fair value measurements | 3,104 | 16,324 | 3,343 | 22,771 |
| Dec. 31, 2023 | Level 1 | Level 2 | Level 3 | Total |
| Digital gold strategies | — | — | 3,412 | 3,412 |
| Assets attributable to non-controlling interest | 1,706 | 13,733 | — | 15,439 |
| Total recurring fair value measurements | 1,706 | 13,733 | 3,412 | 18,851 |
The following tables provides a summary of changes in the fair value of Level 3 financial assets (in thousands $):
Short-term investments
| Changes in the fair value of Level 3 measurements - Sep. 30, 2024 | |||||
|---|---|---|---|---|---|
| Dec. 31, 2023 | Purchases and reclassifications | Sales | Net unrealized gains (losses) included in net income | Sep. 30, 2024 | |
| Share purchase warrants | 2 | 25 | — | (18) | 9 |
| Private holdings | 1,478 | — | — | — | 1,478 |
| Total | 1,480 | 25 | — | (18) | 1,487 |
| Changes in the fair value of Level 3 measurements - Dec. 31, 2023 | |||||
| --- | --- | --- | --- | --- | --- |
| Dec. 31, 2022 | Purchases and reclassifications | Sales | Net unrealized gains (losses) included in net income | Dec. 31, 2023 | |
| Share purchase warrants | 47 | 48 | (37) | (56) | 2 |
| Private holdings | 1,485 | — | — | (7) | 1,478 |
| Total | 1,532 | 48 | (37) | (63) | 1,480 |
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
Other assets
| Changes in the fair value of Level 3 measurements - Sep. 30, 2024 | |||||
|---|---|---|---|---|---|
| Dec. 31, 2023 | Purchases and reclassifications | Sales | Net unrealized gains (losses) included in net income | Sep. 30, 2024 | |
| Digital gold strategies | 3,412 | — | — | (69) | 3,343 |
| Total | 3,412 | — | — | (69) | 3,343 |
| Changes in the fair value of Level 3 measurements - Dec. 31, 2023 | |||||
| --- | --- | --- | --- | --- | --- |
| Dec. 31, 2022 | Purchases and reclassifications | Sales | Net unrealized gains (losses) included in net income | Dec. 31, 2023 | |
| Digital gold strategies | 3,778 | — | — | (366) | 3,412 |
| Total | 3,778 | — | — | (366) | 3,412 |
During the nine months ended September 30, 2024, the Company transferred public equities of $nil (December 31, 2023 - $0.1 million) from Level 2 to Level 1 within the fair value hierarchy.
The following table presents the valuation techniques used by the Company in measuring fair values:
| Type | Valuation technique |
|---|---|
| Public equities, precious metals and share purchase warrants | Fair values are determined using publicly available prices or pricing models which incorporate all available market-observable inputs. |
| Alternative funds and private equity funds | Fair values are based on the last available net asset value. |
| Fixed income securities | Fair values are based on independent market data providers or third-party broker quotes. |
| Private holdings (including digital gold strategies) | Fair values based on variety of valuation techniques, including discounted cash flows, comparable recent transactions and other techniques used by market participants. |
The Company’s Level 3 securities consist of private holdings and share purchase warrants. The significant unobservable inputs used in these valuation techniques can vary considerably over time, and include gray market financing prices, volatility and discount rates. A significant change in any of these inputs in isolation would result in a material impact in fair value measurement. The potential impact of a 5% change in the significant unobservable inputs on profit or loss would be approximately $0.2 million (December 31, 2023 - $0.2 million).
Financial instruments not carried at fair value
The carrying amounts of fees receivable, other assets, accounts payable and accrued liabilities, compensation payable and loan facility represent a reasonable approximation of fair value.
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
11 Dividends
The following dividends were declared by the Company during the nine months ended September 30, 2024:
| Record date | Payment date | Cash dividend <br>per share | Total dividend amount (in thousands $) |
|---|---|---|---|
| March 4, 2024 - Regular dividend Q4 2023 | March 19, 2024 | $0.25 | 6,466 |
| May 21, 2024 - Regular dividend Q1 2024 | June 5, 2024 | $0.25 | 6,466 |
| August 19, 2024 - Regular dividend Q2 2024 | September 3, 2024 | $0.25 | 6,466 |
| Dividends declared in 2024 (1) | 19,398 |
(1) Subsequent to quarter end, on November 5, 2024, a regular dividend of $0.30 per common share was declared for the quarter ended September 30, 2024. This dividend is payable on December 3, 2024 to shareholders of record at the close of business on November 18, 2024.
12 Segmented information
For management purposes, the Company is organized into business units based on its products, services and geographical locations and has four reportable segments as follows:
•Exchange listed products (reportable), which provides management services to the Company's closed-end physical trusts and exchange traded funds ("ETFs"), both of which are actively traded on public securities exchanges;
•Managed equities (reportable), which provides management services to the Company's alternative investment strategies managed in-house and on a sub-advisory basis;
•Private strategies (reportable), which provides lending and streaming activities through limited partnership vehicles;
•Corporate (reportable), which provides capital, balance sheet management and enterprise shared services to the Company's subsidiaries; and
•All other segments (non-reportable), which do not meet the definition of reportable segments per IFRS 8.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on earnings before interest expense, income taxes, amortization and impairment of intangible assets and goodwill, gains and losses on investments (as if such gains and losses had not occurred), stock-based compensation, severance, new hire accruals and other, foreign exchange (gain) loss, costs relating to the exit of non-core businesses, revaluation of contingent considerations, non-recurring regulatory, professional fees and other, shares received on recognition of contingent consideration, carried interest and performance fees and carried interest and performance fee payouts (adjusted base EBITDA).
Adjusted base EBITDA is not a measurement in accordance with IFRS and should not be considered as an alternative to net income or any other measure of performance under IFRS.
Transfer pricing between operating segments is performed on an arm's length basis in a manner similar to transactions with third parties.
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
The following tables present the operations of the Company's segments (in thousands $):
For the three months ended September 30, 2024
| Exchange listed products | Managed <br>equities | Private strategies | Corporate | Consolidation, elimination and all other segments (1) | Consolidated | |
|---|---|---|---|---|---|---|
| Total revenue | 27,879 | 12,961 | 5,055 | 89 | 521 | 46,505 |
| Total expenses | 8,971 | 6,843 | 4,207 | 7,176 | 913 | 28,110 |
| Income (loss) before income taxes | 18,908 | 6,118 | 848 | (7,087) | (392) | 18,395 |
| Adjusted base EBITDA | 20,021 | 2,157 | 2,276 | (3,420) | (359) | 20,675 |
(1) Total revenue includes revenues from non-reportable segments of $497, plus investment gains of $24
For the three months ended September 30, 2023 (1)
| Exchange listed products | Managed <br>equities | Private strategies | Corporate | Consolidation, elimination and all other segments (2) | Consolidated | |
|---|---|---|---|---|---|---|
| Total revenue | 19,991 | 5,901 | 7,901 | (222) | 900 | 34,471 |
| Total expenses | 6,994 | 5,831 | 2,981 | 8,204 | 5,037 | 29,047 |
| Income (loss) before income taxes | 12,997 | 70 | 4,920 | (8,426) | (4,137) | 5,424 |
| Adjusted base EBITDA | 15,022 | 2,132 | 2,882 | (2,400) | 218 | 17,854 |
(1) Prior period figures have been updated to conform with current presentation
(2) Total revenue includes revenues from non-reportable segments of $1,517, net of investment losses of $617
For the nine months ended September 30, 2024
| Exchange listed products | Managed <br>equities | Private strategies | Corporate | Consolidation, elimination and all other segments (1) | Consolidated | |
|---|---|---|---|---|---|---|
| Total revenue | 85,389 | 29,539 | 21,442 | (178) | (156) | 136,036 |
| Total expenses | 26,302 | 19,622 | 10,750 | 23,977 | 2,872 | 83,523 |
| Income (loss) before income taxes | 59,087 | 9,917 | 10,692 | (24,155) | (3,028) | 52,513 |
| Adjusted base EBITDA | 59,245 | 5,227 | 9,967 | (10,544) | (1,094) | 62,801 |
(1) Total revenue includes revenues from non-reportable segments of $1,612, net of investment losses of $1,768
For the nine months ended September 30, 2023 (1)
| Exchange listed products | Managed <br>equities | Private strategies | Corporate | Consolidation, elimination and all other segments (2) | Consolidated | |
|---|---|---|---|---|---|---|
| Total revenue | 60,640 | 20,902 | 21,280 | 59 | 7,798 | 110,679 |
| Total expenses | 238 | 19,840 | 10,470 | 26,574 | 14,089 | 71,211 |
| Income (loss) before income taxes | 60,402 | 1,062 | 10,810 | (26,515) | (6,291) | 39,468 |
| Adjusted base EBITDA | 44,902 | 6,155 | 9,271 | (8,093) | 893 | 53,128 |
(1) Prior period figures have been updated to conform with current presentation
(2) Total revenue includes revenues from non-reportable segments of $9,008, net of investment losses of $1,210
SPROTT INC.
Notes to the interim condensed consolidated financial statements (unaudited)
For the three and nine months ended September 30, 2024 and 2023
For geographic reporting purposes, transactions are primarily recorded in the location that corresponds with the underlying subsidiary's country of domicile that generates the revenue. The following table presents the revenue of the Company by geographic location (in thousands $):
| For the three months ended | For the nine months ended | |||
|---|---|---|---|---|
| Sep. 30, 2024 | Sep. 30, 2023 | Sep. 30, 2024 | Sep. 30, 2023 | |
| Canada | 37,594 | 31,341 | 117,912 | 100,027 |
| United States | 8,911 | 3,130 | 18,124 | 10,652 |
| 46,505 | 34,471 | 136,036 | 110,679 |
13 Loan facility
As at September 30, 2024, the Company had $18.7 million (December 31, 2023 - $24.2 million) outstanding on its credit facility, all of which is due on August 8, 2028. As at September 30, 2024, the Company was in compliance with all covenants, terms and conditions under the credit facility.
The Company has access to a credit facility of $75 million with a major Canadian schedule I chartered bank. Amounts under the facility may be borrowed in U.S. dollars through SOFR or base rate loans. Amounts may also be borrowed in Canadian dollars through prime rate loans or CORRA loans.
Key terms under the current credit facility are noted below:
Structure
•5-year, $75 million revolver with "bullet maturity" August 8, 2028
Interest rate
•SOFR + 2.33%
Covenant terms
•Minimum AUM: CAD$15.4 billion;
•Debt to EBITDA less than or equal to 2.5:1; and
•EBITDA to interest expense more than or equal to 2.5:1
14 Commitments and provisions
The Company has commitments to make co-investments in private strategies LPs or commitments to make co-investments in fund strategies in the Company's other segments. As at September 30, 2024, the Company had $2.1 million in co-investment commitments in private strategies LPs due within one year (December 31, 2023 - $4 million) and $nil due after 12 months (December 31, 2023 - $1.9 million). On January 1, 2024, the lease for the Company's existing Toronto office was renewed and as a result, a right-of-use asset and corresponding lease liability was setup on the consolidated balance sheets.
| 44 |
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Document
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Whitney George, Chief Executive Officer of Sprott Inc., certify the following:
1.Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Sprott Inc. (the “issuer”) for the interim period ended September 30, 2024.
2.No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a)designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i)material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii)information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b)designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the COSO (Committee of Sponsoring Organizations of the Treadway Commission) internal control framework.
5.2 ICFR – material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6.Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2024 and ended on September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: November 6, 2024
_”Whitney George”
Whitney George
Chief Executive Officer
Document
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Kevin Hibbert, Chief Financial Officer of Sprott Inc., certify the following:
1.Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Sprott Inc. (the “issuer”) for the interim period ended September 30, 2024.
2.No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a)designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i)material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii)information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b)designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the COSO (Committee of Sponsoring Organizations of the Treadway Commission) internal control framework.
5.2 ICFR – material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6.Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2024 and ended on September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: November 6, 2024
_”Kevin Hibbert”
Kevin Hibbert
Chief Financial Officer
Document
SPROTT ANNOUNCES THIRD QUARTER 2024 RESULTS
TORONTO, ON - November 6, 2024 - Sprott Inc. (NYSE/TSX: SII) (“Sprott” or the “Company”) today announced its financial results for the three and nine months ended September 30, 2024.
Management commentary “Sprott’s Assets Under Management (“AUM”) was $33.4 billion as at September 30, 2024, up 8% from June 30, 2024 and up 16% from December 31, 2023," said Whitney George, CEO of Sprott. "This is our third consecutive quarter of record high AUM, driven by strong gold and silver prices, as well as $589 million in net sales during the period. Given the strength of these results and our confidence in Sprott’s future, our Board has declared a third quarter dividend of $0.30 per share, an increase of 20%. Further, we now expect to repay the balance of our line of credit by the end of this month, resulting in a debt-free balance sheet."
"With Sprott's core positioning in precious metals and critical materials, we retain our constructive outlook and believe we are well positioned to navigate volatile market conditions and continue creating value for our clients and shareholders," continued Mr. George.
Key AUM highlights1
•AUM was $33.4 billion as at September 30, 2024, up 8% from $31.1 billion as at June 30, 2024 and up 16% from $28.7 billion as at December 31, 2023. On a three and nine months ended basis, we primarily benefited from strong market value appreciation in our precious metals physical trusts. We also benefited from net inflows to our exchange listed products and the launch of our Physical Copper Trust in the second quarter.
Key revenue highlights
•Management fees were $38.7 million in the quarter, up 18% from $32.9 million for the quarter ended September 30, 2023 and $113.1 million on a year-to-date basis, up 17% from $97 million for the nine months ended September 30, 2023. Carried interest and performance fees were $4.1 million in the quarter, up from $nil for the quarter ended September 30, 2023 and $4.8 million on a year-to-date basis, up from $0.4 million for the nine months ended September 30, 2023. Net fees were $38.9 million in the quarter, up 31% from $29.7 million for the quarter ended September 30, 2023 and $106.1 million on a year-to-date basis, up 21% from $87.7 million for the nine months ended September 30, 2023. Our revenue performance on both a three and nine months ended basis was primarily due to higher average AUM on strong market value appreciation in our precious metals physical trusts and continuous inflows to the majority of our exchange listed products. We also benefited from carried interest crystallization in a legacy fixed-term exploration LP in our managed equities segment.
•Commission revenues were $0.5 million in the quarter, down 8% from the quarter ended September 30, 2023 and $4.9 million on a year-to-date basis, down 30% from $7 million for the nine months ended September 30, 2023. Net commissions were $0.2 million in the quarter, down 31% from $0.4 million for the quarter ended September 30, 2023 and $2.3 million on a year-to-date basis, down 42% from $3.9 million for the nine months ended September 30, 2023. Commission revenue was lower in the quarter due to modest ATM activity in our critical materials physical trusts. On a year-to-date basis, the decline in commission revenue was due to the sale of our former Canadian broker-dealer in the second quarter of last year.
•Finance income was $1.6 million in the quarter, down 12% from $1.8 million for the quarter ended September 30, 2023 and $7.5 million on a year-to-date basis, up 46% from $5.1 million for the nine months ended September 30, 2023. The decrease in the quarter was due to lower income generation in co-investment positions we hold in our LPs managed in our private strategies segment. The increase on a year-to-date basis was due to higher income earned on streaming syndication activity in the second quarter.
Key expense highlights
•Net compensation expense was $16.9 million in the quarter, up 11% from $15.3 million for the quarter ended September 30, 2023 and $50.3 million on a year-to-date basis, up 9% from $46 million for the nine months ended September 30, 2023. The increase in the quarter and on a year-to-date basis was primarily due to increased AIP accruals on higher net fee generation. Our net compensation ratio was 46% in the quarter (September 30, 2023 - 50%) and 45% on a year-to-date basis (September 30, 2023 - 50%).
•SG&A expense was $4.6 million in the quarter, up 21% from $3.8 million for the quarter ended September 30, 2023 and $13.8 million on a year-to-date basis, up 10% from $12.6 million for the nine months ended September 30, 2023. The increase in the quarter and on a year-to-date basis was due to higher technology and professional services costs.
Earnings summary
•Net income for the quarter was $12.7 million ($0.50 per share), up 87% from $6.8 million ($0.27 per share) for the quarter ended September 30, 2023 and was $37.6 million ($1.48 per share) on a year-to-date basis, up 17% from $32.1 million ($1.27 per share) for the nine months ended September 30, 2023. Our earnings benefited from higher management fees on strong market valuations of our precious metals physical trusts and good inflows to our exchange listed products. We also benefited from carried interest crystallization in our managed equities funds and market value appreciation of our co-investments.
•Adjusted base EBITDA was $20.7 million ($0.81 per share) in the quarter, up 16% from $17.9 million ($0.71 per share) for the quarter ended September 30, 2023 and $62.8 million ($2.47 per share) on a year-to-date basis, up 18% from $53.1 million ($2.10 per share) for the nine months ended September 30, 2023. Adjusted base EBITDA on both a three and nine months ended basis benefited from higher management fees on strong market valuations of our precious metals physical trusts and good inflows to our exchange listed products.
1 See “non-IFRS financial measures” section in this press release and schedule 2 and 3 of "Supplemental financial information"
Subsequent events
•Subsequent to quarter-end, on November 1, 2024, AUM was $34.2 billion, up 2% from $33.4 billion at September 30, 2024.
•On November 5, 2024, the Sprott Board of Directors announced a quarterly dividend of $0.30 per share.
Supplemental financial information
Please refer to the September 30, 2024 quarterly 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 September 30, 2024 and the Company's financial performance for the three and nine months ended September 30, 2024.
Schedule 1 - AUM continuity
| 3 months results | ||||||
|---|---|---|---|---|---|---|
| (In millions $) | AUM<br>Jun. 30, 2024 | Net <br> inflows (1) | Market <br>value changes | Other<br><br>net inflows (1) | AUM<br><br>Sep. 30, 2024 | Net management<br><br>fee rate (2) |
| Exchange listed products | ||||||
| - Precious metals physical trusts and ETFs | ||||||
| - Physical Gold Trust | 7,283 | 361 | 973 | — | 8,617 | 0.35% |
| - Physical Silver Trust | 4,994 | 224 | 348 | — | 5,566 | 0.45% |
| - Physical Gold and Silver Trust | 4,710 | — | 515 | — | 5,225 | 0.40% |
| - Precious Metals ETFs | 355 | (11) | 60 | — | 404 | 0.33% |
| - Physical Platinum & Palladium Trust | 143 | 7 | 1 | — | 151 | 0.50% |
| 17,485 | 581 | 1,897 | — | 19,963 | 0.39% | |
| - Critical materials physical trusts and ETFs | ||||||
| - Physical Uranium Trust | 5,615 | 23 | (230) | — | 5,408 | 0.32% |
| - Critical Materials ETFs | 2,408 | 56 | (157) | — | 2,307 | 0.55% |
| - Physical Copper Trust | 98 | 2 | 3 | — | 103 | 0.32% |
| 8,121 | 81 | (384) | — | 7,818 | 0.38% | |
| Total exchange listed products | 25,606 | 662 | 1,513 | — | 27,781 | 0.39% |
| Managed equities (3)(4) | 2,962 | (55) | 369 | — | 3,276 | 0.90% |
| Private strategies (4) | 2,485 | (18) | (85) | — | 2,382 | 0.80% |
| Total AUM (5) | 31,053 | 589 | 1,797 | — | 33,439 | 0.47% |
| 9 months results | ||||||
| (In millions $) | AUM<br>Dec. 31, 2023 | Net <br> inflows (1) | Market <br>value changes | Other<br><br>net inflows (1) | AUM<br><br>Sep. 30, 2024 | Net management<br><br>fee rate (2) |
| Exchange listed products | ||||||
| - Precious metals physical trusts and ETFs | ||||||
| - Physical Gold Trust | 6,532 | 316 | 1,769 | — | 8,617 | 0.35% |
| - Physical Silver Trust | 4,070 | 256 | 1,240 | — | 5,566 | 0.45% |
| - Physical Gold and Silver Trust | 4,230 | (161) | 1,156 | — | 5,225 | 0.40% |
| - Precious Metals ETFs | 339 | (14) | 79 | — | 404 | 0.33% |
| - Physical Platinum & Palladium Trust | 116 | 42 | (7) | — | 151 | 0.50% |
| 15,287 | 439 | 4,237 | — | 19,963 | 0.39% | |
| - Critical materials physical trusts and ETFs | ||||||
| - Physical Uranium Trust | 5,773 | 266 | (631) | — | 5,408 | 0.32% |
| - Critical materials ETFs | 2,143 | 294 | (130) | — | 2,307 | 0.55% |
| - Physical Copper Trust | — | 2 | (9) | 110 | 103 | 0.32% |
| 7,916 | 562 | (770) | 110 | 7,818 | 0.38% | |
| Total exchange listed products | 23,203 | 1,001 | 3,467 | 110 | 27,781 | 0.39% |
| Managed equities (3)(4) | 2,874 | (167) | 569 | — | 3,276 | 0.90% |
| Private strategies (4) | 2,661 | (172) | (107) | — | 2,382 | 0.80% |
| Total AUM (5) | 28,738 | 662 | 3,929 | 110 | 33,439 | 0.47% |
| (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. | ||||||
| (2) Management fee rate represents the weighted average fees for all funds in the category, net of fund expenses. | ||||||
| (3) Managed equities is made up of primarily precious metal strategies (57%), high net worth managed accounts (35%) and U.S. value strategies (8%). | ||||||
| (4) Prior period figures have been reclassified to conform with current presentation. | ||||||
| (5) No performance fees are earned on exchange listed products. Performance fees are earned on certain of our managed equities products and are based on returns above relevant benchmarks. Private strategies<br><br>LPs primarily earn carried interest calculated as a predetermined net profit over a preferred return. |
Schedule 2 - Summary financial information
| (In thousands $) | Q3 <br>2024 | Q2 <br>2024 | Q1 <br>2024 | Q4<br>2023 | Q3<br>2023 | Q2<br>2023 | Q1<br>2023 | Q4<br>2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Summary income statement | ||||||||||||||||
| Management fees (1) | 38,693 | 38,065 | 36,372 | 34,244 | 32,867 | 32,940 | 31,170 | 28,152 | ||||||||
| Fund expenses (2), (3) | (2,385) | (2,657) | (2,234) | (2,200) | (1,740) | (1,871) | (1,795) | (1,470) | ||||||||
| Direct payouts | (1,483) | (1,408) | (1,461) | (1,283) | (1,472) | (1,342) | (1,187) | (1,114) | ||||||||
| Carried interest and performance fees | 4,110 | 698 | — | 503 | — | 388 | — | 1,219 | ||||||||
| Carried interest and performance fee payouts - internal | — | (251) | — | (222) | — | (236) | — | (567) | ||||||||
| Carried interest and performance fee payouts - external (3) | — | — | — | — | — | — | — | (121) | ||||||||
| Net fees | 38,935 | 34,447 | 32,677 | 31,042 | 29,655 | 29,879 | 28,188 | 26,099 | ||||||||
| Commissions | 498 | 3,332 | 1,047 | 1,331 | 539 | 1,647 | 4,784 | 5,027 | ||||||||
| Commission expense - internal | (147) | (380) | (217) | (161) | (88) | (494) | (1,727) | (1,579) | ||||||||
| Commission expense - external (3) | (103) | (1,443) | (312) | (441) | (92) | (27) | (642) | (585) | ||||||||
| Net commissions | 248 | 1,509 | 518 | 729 | 359 | 1,126 | 2,415 | 2,863 | ||||||||
| Finance income (2) | 1,574 | 4,084 | 1,810 | 1,391 | 1,795 | 1,650 | 1,655 | 1,738 | ||||||||
| Gain (loss) on investments | 937 | 1,133 | 1,809 | 2,808 | (1,441) | (1,950) | 1,958 | (930) | ||||||||
| Co-investment income (2) | 418 | 416 | 274 | 170 | 462 | 1,327 | 93 | 370 | ||||||||
| Total net revenues (2) | 42,112 | 41,589 | 37,088 | 36,140 | 30,830 | 32,032 | 34,309 | 30,140 | ||||||||
| Compensation (2) | 18,547 | 19,225 | 17,955 | 17,096 | 16,939 | 21,468 | 19,556 | 17,148 | ||||||||
| Direct payouts | (1,483) | (1,408) | (1,461) | (1,283) | (1,472) | (1,342) | (1,187) | (1,114) | ||||||||
| Carried interest and performance fee payouts - internal | — | (251) | — | (222) | — | (236) | — | (567) | ||||||||
| Commission expense - internal | (147) | (380) | (217) | (161) | (88) | (494) | (1,727) | (1,579) | ||||||||
| Severance, new hire accruals and other | (58) | — | — | (179) | (122) | (4,067) | (1,257) | (1,240) | ||||||||
| Net compensation | 16,859 | 17,186 | 16,277 | 15,251 | 15,257 | 15,329 | 15,385 | 12,648 | ||||||||
| Net compensation ratio | 46 | % | 44 | % | 47 | % | 47 | % | 50 | % | 48 | % | 52 | % | 44 | % |
| Severance, new hire accruals and other | 58 | — | — | 179 | 122 | 4,067 | 1,257 | 1,240 | ||||||||
| Selling, general and administrative ("SG&A") (2) | 4,612 | 5,040 | 4,173 | 3,963 | 3,817 | 4,752 | 4,026 | 3,814 | ||||||||
| SG&A recoveries from funds (1) | (275) | (260) | (231) | (241) | (249) | (282) | (264) | (253) | ||||||||
| Interest expense | 933 | 715 | 830 | 844 | 882 | 1,087 | 1,247 | 1,076 | ||||||||
| Depreciation and amortization | 502 | 568 | 551 | 658 | 731 | 748 | 706 | 710 | ||||||||
| Foreign exchange (gain) loss (2) | 1,028 | 122 | 168 | 1,295 | 37 | 1,440 | 440 | (484) | ||||||||
| Other (income) and expenses (2) | — | (580) | — | 3,368 | 4,809 | (18,890) | 1,249 | 1,686 | ||||||||
| Total expenses | 23,717 | 22,791 | 21,768 | 25,317 | 25,406 | 8,251 | 24,046 | 20,437 | ||||||||
| Net income | 12,697 | 13,360 | 11,557 | 9,664 | 6,773 | 17,724 | 7,638 | 7,331 | ||||||||
| Net income per share | 0.50 | 0.53 | 0.45 | 0.38 | 0.27 | 0.70 | 0.30 | 0.29 | ||||||||
| Adjusted base EBITDA | 20,675 | 22,375 | 19,751 | 18,759 | 17,854 | 17,953 | 17,321 | 18,083 | ||||||||
| Adjusted base EBITDA per share | 0.81 | 0.88 | 0.78 | 0.75 | 0.71 | 0.71 | 0.68 | 0.72 | ||||||||
| Summary balance sheet | ||||||||||||||||
| Total assets | 412,477 | 406,265 | 389,784 | 378,835 | 375,948 | 381,519 | 386,765 | 383,748 | ||||||||
| Total liabilities | 82,198 | 90,442 | 82,365 | 73,130 | 79,705 | 83,711 | 108,106 | 106,477 | ||||||||
| Total AUM | 33,439,221 | 31,053,136 | 29,369,191 | 28,737,742 | 25,398,159 | 25,141,561 | 25,377,189 | 23,432,661 | ||||||||
| Average AUM | 31,788,412 | 31,378,343 | 29,035,667 | 27,014,109 | 25,518,250 | 25,679,214 | 23,892,335 | 22,323,075 |
(1) Previously, management fees within the above summary financial information table included SG&A recoveries from funds consistent with IFRS 15. For management reporting purposes, these recoveries are now shown next to their associated expense as management believes this will enable readers to transparently identify the net economics of these recoveries. However, SG&A recoveries from funds are still shown within the "Management fees" line on the consolidated statement of operations. Prior year figures have been reclassified to conform with current presentation.
(2) Current and prior period figures on the consolidated statements of operations include the following adjustments: (1) trading costs incurred in managed accounts are now included within "Fund expenses" (previously included within "SG&A"); (2) interest income earned on cash deposits are now included within "Finance income" (previously included within "Other income"); (3) co-investment income and income attributable to non-controlling interest are now included as part of "Co-investment income" (previously included within "Other income"); (4) expenses attributable to non-controlling interest is now included within "Co-investment income" (previously included within "Other expenses"); (5) the mark-to-market expense of DSU issuances are now included within "Compensation" (previously included within "Other expenses"); (6) foreign exchange (gain) loss is now shown separately (previously included within "Other expenses"); and (7) shares received on a previously unrecorded contingent asset in Q2 2023 are now included within "Other (income) and expenses" (previously included within "Other income"). Prior year figures have been reclassified to conform with current presentation.
(3) These amounts are included in the "Fund expenses" line on the consolidated statements of operations.
Schedule 3 - EBITDA reconciliation
| 3 months ended | 9 months ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands $) | Sep. 30, 2024 | Sep. 30, 2023 | Sep. 30, 2024 | Sep. 30, 2023 | ||||
| Net income for the period | 12,697 | 6,773 | 37,614 | 32,135 | ||||
| Net income margin (1) | 27 | % | 20 | % | 28 | % | 29 | % |
| Adjustments: | ||||||||
| Interest expense | 933 | 882 | 2,478 | 3,216 | ||||
| Provision for income taxes | 5,698 | (1,349) | 14,899 | 7,333 | ||||
| Depreciation and amortization | 502 | 731 | 1,621 | 2,185 | ||||
| EBITDA | 19,830 | 7,037 | 56,612 | 44,869 | ||||
| Adjustments: | ||||||||
| (Gain) loss on investments (2) | (937) | 1,441 | (3,879) | 1,433 | ||||
| Stock-based compensation (3) | 4,806 | 4,408 | 13,829 | 12,447 | ||||
| Foreign exchange (gain) loss (4) | 1,028 | 37 | 1,318 | 1,917 | ||||
| Severance, new hire accruals and other (4) | 58 | 122 | 58 | 5,446 | ||||
| Revaluation of contingent consideration (4) | — | — | (580) | (2,254) | ||||
| Costs relating to exit of non-core business (4) | — | 3,615 | — | 4,987 | ||||
| Non-recurring regulatory, professional fees and other (4) | — | 1,194 | — | 3,023 | ||||
| Shares received on recognition of contingent asset (4) | — | — | — | (18,588) | ||||
| Carried interest and performance fees | (4,110) | — | (4,808) | (388) | ||||
| Carried interest and performance fee payouts - internal | — | — | 251 | 236 | ||||
| Carried interest and performance fee payouts - external | — | — | — | — | ||||
| Adjusted base EBITDA | 20,675 | 17,854 | 62,801 | 53,128 | ||||
| Adjusted base EBITDA margin (5) | 58 | % | 56 | % | 58 | % | 57 | % |
(1) Calculated as IFRS net income divided by IFRS total revenue.
(2) 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.
(3) In prior years, the mark-to-market expense of DSU issuances were included with "other (income) and expenses". In the current period, these costs are included as part of "stock based compensation". Prior year figures have been reclassified to conform with current presentation.
(4) Foreign exchange (gain) and loss, severance, new hire accruals and other; revaluation of contingent consideration; costs relating to exit of non-core business; non-recurring regulatory, professional fees and other; and shares received on recognition of contingent asset were previously included with "other (income) and expenses" and are now shown separately in the reconciliation of adjusted base EBITDA above. Prior year figures have been reclassified to conform with current presentation.
(5) Prior year figures have been restated to remove the adjustment of depreciation and amortization.
Conference Call and Webcast
A webcast will be held today, November 6, 2024 at 10:00 am ET to discuss the Company's financial results.
To listen to the webcast, please register at: https://edge.media-server.com/mmc/p/7nbc4pms
Please note, analysts who cover the Company should register at: https://register.vevent.com/register/BIecf4c3c925374bf19a6ce5051f64dd6d
This press release includes financial terms (including AUM, net commissions, net fees, expenses, adjusted base EBITDA, adjusted base EBITDA margin 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 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 critical materials in our exchange listed products segment and transaction-based service offerings by our broker dealers.
Net compensation & net compensation ratio
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, new hire accruals and other which are non-recurring. Net compensation ratio is calculated as net compensation divided by net revenues.
EBITDA, adjusted base EBITDA and adjusted base EBITDA margin
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 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. Adjusted base EBITDA 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 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 constructive outlook in precious metals and critical materials; (ii) our expectation to repay the balance of our line of credit by the end of this month, resulting in a debt-free balance sheet at that time; 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: (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 September 30, 2024. 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 private strategies business; (xxvii) those risks described under the heading "Risk Factors" in the Company’s annual information form dated February 20, 2024; and (xxviii) those risks described under the headings "Managing Financial Risks" and "Managing Non-Financial Risks" in the Company’s MD&A for the period ended September 30, 2024. 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 Sprott
Sprott is a global asset manager focused on precious metals and critical materials investments. We are specialists. We believe our in-depth knowledge, experience and relationships separate us from the generalists. Our investment strategies include Exchange Listed Products, Managed Equities and Private Strategies. Sprott has offices in Toronto, New York, Connecticut and California and the company’s common shares are listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbol (SII). For more information, please visit www.sprott.com.
Investor contact information:
Glen Williams
Managing Partner
Investor and Institutional Client Relations
(416) 943-4394