Earnings Call Transcript - SII Q4 2025

Operator, Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Sprott Inc.'s 2025 Fourth Quarter Results Conference Call. As a reminder, this conference is being recorded today, February 19, 2026. On behalf of the speakers that follow, listeners are cautioned that today's presentation and the responses to questions may contain forward-looking information and forward-looking statements within the meaning of applicable Canadian and U.S. securities laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are implied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations or material factors or assumptions applied in making forward-looking statements, please consult the MD&A for the quarter and Sprott's other filings with the Canadian and U.S. securities regulators. I will now turn the conference over to Mr. Whitney George. Please go ahead, Mr. George.

Whitney George, CIO

Thank you, operator. Good morning, everyone, and thanks for joining us today. On the call with me today is our CFO, Kevin Hibbert; and John Ciampaglia, CEO of Sprott Asset Management. Our 2025 fourth quarter results were released this morning and are available on our website, where you can also find the financial statements and MD&A. I'll start on Slide 4. In short, it was a banner year for Sprott in 2025. Our core positioning in precious metals and critical materials investments allowed us to navigate volatile market conditions and deliver outstanding results for our clients and our shareholders. Our AUM increased by $10.5 billion during the fourth quarter and closed the year at $59.6 billion, up $28.1 billion from December 31, 2024. Subsequent to year-end, our AUM has continued to grow by another $10.5 billion to reach $70.1 billion as of February 13, 2026. Investor interest in multiple different metals contributed to strong net sales in 2025, primarily in our exchange-listed products. Our ETF business has been on a growth trajectory since 2021 and accounted for more than $4.6 billion of our total AUM as of year-end. This business is off to a strong start in 2026 with AUM now approaching $7 billion. Our Managed Equity and Private Strategies segments also delivered excellent results in 2025, generating more than $54 million in gross performance and carried interest fees. With that, I'll pass it over to Kevin for a look at our financial results.

Kevin Hibbert, CFO

Thank you, Whitney, and good morning, everyone. I'll start on Slide 5, which provides a summary of our historical AUM. To Whitney's point, AUM finished the year at $59.6 billion, up 21% from $49.1 billion as at September 30, 2025, and was up 89% from $31.5 billion as at December 31, 2024. On a 3- and 12-month ended basis, we benefited from market value appreciation across the majority of our fund products and positive net inflows to our exchange-listed products. Subsequent to year-end, as at February 13, our AUM stood at $70.1 billion, up 18% from our December 31 AUM. Our performance subsequent to year-end was the result of $7.7 billion of market value appreciation and the $2.8 billion of net inflows primarily in our exchange-listed products. Slide 6 provides a brief look at our 3- and 12-month earnings. Net income this quarter was $28.7 million, up $17 million from $11.7 million over the same 3-month period last year. On a full year basis, our net income was $67.3 million, up $18.1 million from $49.3 million last year. Our net income performance was primarily due to market value appreciation and inflows to our precious metals physical trusts and carried interest and performance fee crystallizations in our Managed Equities and Private Strategies segment. These increases were partially offset by a change in accounting requirements brought on by our new cash-settled stock plan that took effect this year. As we mentioned in previous quarters, cash-settled stock plans like the one we implemented this year require the use of mark-to-market and graded vest accounting under IFRS 2, which creates the dual impact of accelerating the amount of vesting that occurs each period, and adding market volatility to each vesting amount. In our case, this nearly doubled the amount of RSUs subject to the accounting expense methodology versus what will actually vest in the year. And at a time when our stock has appreciated 18% in the quarter and 132% on a full year basis. In contrast, in 2024, we had an equity-settled stock program that required each vest to be valued at the original grant date fair value on a constant basis over the amortization period. Moving forward, in 2026, there will be less amortization hitting our IFRS P&L relating to the 2025 3-year grants and less shares being added for our 2026 3-year grants. However, we do expect continued increases to our stock-based compensation expense on a comparative basis for at least the first half of 2026 since our stock did not begin the majority of its ascent until the summer of 2025. This means to the extent our stock price remains at current levels, the second half of 2026 should begin to produce lower period-over-period volatility as the trading range of SII in the second half of 2025 is a little closer to where we currently trade. Adjusted EBITDA, which excludes quarterly volatility from items like stock-based compensation and intermittent carried interest and performance fee crystallization, was $42 million for the quarter, up 88% from $22.4 million over the same 3-month period last year. And was $121 million on a full year basis, up 43% from $85.2 million earned last year. Adjusted EBITDA in the quarter and on a full year basis benefited from higher average AUM, on-market value appreciation I described previously and inflows to our precious metals physical trust and ETF. Finally, Slide 7 provides a few treasury and balance sheet management highlights. And as you can see, due to our improved earnings, our cash and liquidity profile strengthened this year and we raised our dividend by 33% in November. For more information on our revenues, expenses, net income, adjusted EBITDA and balance sheet metrics, you can refer to the supplemental information section of this presentation as well as our annual MD&A and financial statements filed earlier this morning. With that said, I'll pass things over to John.

John Ciampaglia, CEO of Sprott Asset Management

Thanks, Kevin, and good morning, everybody. Now just turning to Slide 8. Sprott has held a bullish thesis on most metals and miners for the past few years. Over the past 5 years, we've invested heavily in our team, made timely acquisitions, developed a broad suite of differentiated offerings that incorporate our knowledge and expertise and developed new partnerships to broaden our distribution reach. We think it's fair to say that the world is catching up with our view that we are in a new metals-driven commodity super cycle and capital is finally on the move. Investors are looking for new investment ideas where long-term fundamentals appear durable and compelling. In 2025, our physical trust fund suite generated significant growth with a 97% gain in AUM to $47 billion. Momentum continues with another $7 billion added year-to-date. As we've mentioned in the past, growing AUM and liquidity begets AUM and liquidity as ever larger institutions allocate to the sector. And price signals are bullish for the 6 metals we offer in physical form. Gold, silver, platinum, and copper have all recently reached all-time highs, while uranium touched a 2-year high. Moving to the next slide, which is net flows into our physical trusts. We saw a record sales year in 2025. Flows in Q4 were very strong, and they've continued into January. Our gold, silver, and uranium trusts accounted for the bulk of the flows, but I'd like to highlight an emerging contributor, which is our Physical Copper Trust. While sales in 2025 were modest at only $4 million, that Copper Trust has already generated $54 million year-to-date as copper, as I mentioned, recently hit a new high. We recently received approval by the SEC to cross-list the trust on the NYSE Arca Exchange and subject to unitholder approval, we expect the Copper Trust to begin trading there in early Q2. Once listed, this will be the first physical copper fund to trade in the United States. Investor interest in copper is growing as copper's strategic role in electrification is becoming better understood, along with our copper mining ETFs, assets in our copper suite of funds now stand at approximately $800 million and two years ago, our assets in the category were only $6 million. Moving to the next slide, which is our ETF suite. 2025 was a breakout year with a 94% gain in AUM. Assets have gained another astonishing 45% year-to-date as growing scale creates a flywheel effect. A few items to highlight over the past year to February 18, Sprott has 6 ETFs in the top 25 in performance out of over 4,000 U.S. listed non-levered ETFs. The Sprott Physical Silver miners and Physical Silver ETFs has been a huge win for our investors and shareholders. SLVR surpassed $1 billion in assets in its first year of trading. This has been our fastest-growing ETF launch to date and illustrates the value of our brand, expertise, and relationships. Flows into our copper mining ETFs are accelerating, driven by superior performance to our competitors. And finally, our relationship with HANetf, which is our European distribution partner, continues to grow and assets now stand at $650 million. Moving to Slide 11. Sales were solid in 2025 despite some outflows from our uranium mining ETFs in the second half of the year. Since the year-end, we've seen a sharp pickup in sales momentum with flows matching cumulative sales in all of 2022, '23, and '24. A number of our ETFs just achieved 3-year track records and highlight to investors that not all indexes are created equal. Our index construction focuses on pure-play companies and utilizes a dynamic universe approach to provide a differentiated offering that is translating into superior investment results. For example, our critical materials ETF ticker SETM and our copper mining ETFs have outperformed their closest competitors since their inception dates. I'll now pass it over to Whitney to talk about Managed Equities.

Whitney George, CIO

Thank you, John. Now let's turn to Slide 12 to review our Managed Equities segment. As I mentioned earlier, our managed equity strategies performed strongly in 2025, with assets under management increasing by 97% to $5.7 billion. Our flagship gold equity fund rose 18% in the fourth quarter and was up 148% for the entire year, with some of our private partnerships outperforming that. However, despite these strong results, these strategies experienced modest outflows in 2025. In the fourth quarter, the sub-advisory agreement of our Silver Equities Fund was terminated by our client, even though it was up 175% as of December 1. We continue to build on our strengths in our investment team with our newly launched actively managed ETFs. The Sprott Active Gold and Silver Miners ETF and the Sprott Active Metals and Miners ETF have both grown, reaching assets under management of $202 million and $105 million, respectively. Now I'll move to our Private Strategies on Slide 13. While there are limitations on what we can share about Private Strategies, we can confirm that we are actively monitoring and managing investments in our second lending fund, and we are looking for new opportunities as we invest in our third lending fund. We are also continuously monitoring portfolio investments in our streaming product, and we hope to discuss our next steps later this year. Moving on to Slide 14 for some closing remarks. In summary, our core strengths in precious metals and critical materials investments position us well for the current market conditions. For 2026, we anticipate more market volatility as we have seen recently. For instance, January saw a significant sell-off in precious metals after a strong rise in gold and silver prices. We believe this was a necessary technical correction spurred by speculative investors while the fundamental drivers for the rally stay strong, which presents a good opportunity for those who think they missed out to enter the market at a better point. Demand for critical materials investments is on the rise, with governments increasingly involved to secure supply and decrease reliance on foreign sources, a trend we expect to enhance in 2026, leading to greater investor interest in our critical materials strategies. We are very proud of our accomplishments in 2025 and are focused on leveraging upcoming growth opportunities. We will keep driving scale in our physical trust while exploring new ETF launches. We aim to announce at least one new ETF in the first half and expand our product offerings through our partners at HANetf in Europe. We foresee a continued rotation away from AI stocks and an increase in investor allocations to natural resource investments. Although it's still early, we are observing a noticeable uptick in interest in our Managed Equities funds and Private Strategies. We are hopeful this interest will convert into significant sales in 2026. That wraps up our remarks for today’s call. I will now hand it over to the operator for the Q&A session.

Operator, Operator

Your first question comes from the line of Etienne Ricard at BMO Capital Markets.

Etienne Ricard, Analyst

So the improvement in margins this quarter was a highlight for me. Given your ETF platform still represents a relatively small but growing percentage of your assets, how should we think about incremental margins on your ETFs relative to the trust?

John Ciampaglia, CEO of Sprott Asset Management

Yes, Etienne. It's John. Yes, the beauty of the ETF platform is obviously scale is really helpful in terms of putting funds on platforms and obviously raising larger amounts of capital. The way those funds work is they have unitary fees. Unitary fees are basically fixed fees that don't change for investors. So that's one of the benefits you have total predictability. The benefit for us is that as the assets scale we're able to capture additional margin because many of our service providers and partners have pricing arrangements with us that fall with assets. And it really helps the overall block of assets. But the other thing it really helps with is incremental new funds, which are very costly to launch. They are heavily subsidized, so to speak, with kind of our collective assets. So bringing new funds to market will become less and less expensive, and we're starting to see the benefit of that. Finally, I think we have almost every single fund in the lineup now above its breakeven AUM level, which is very important. It's very common to have to subsidize a fund in its early years until it hits those breakeven levels. And I think we've got all but one still below breakeven. So that was a really important milestone. So the fund lineup is growing very quickly, and we expect that to fall to the bottom line. And every basis point kind of counts in ETFs. So it's all working nicely together.

Kevin Hibbert, CFO

I'll add to that summary, John. Etienne, you're trying to connect the ETFs and the physical assets. Generally, ETFs offer higher margin opportunities than physical assets because their fixed cost structure is a bit lower than that of physical counterparts in the segment. Everything John mentioned is accurate, and it would actually contribute more positively to the bottom line if ETFs continue to represent a larger portion of the total assets under management in that segment, if that helps.

Etienne Ricard, Analyst

Interesting. And where would be the breakeven level for the ETF?

John Ciampaglia, CEO of Sprott Asset Management

So every ETF has a different breakeven level, but the primary driver is obviously, it's management fee. And then secondarily, you have to think a little bit about what market it's listed in, whether it's in the U.S. or Europe. Generally, our breakevens can range anywhere from about $25 million, upwards of $75 million. So that's kind of a wide range. But once you get through those breakeven AUMs, you start to actually generate net positive revenue. And that's why it's very important to get the ETFs up to breakeven to start and then scale from there.

Etienne Ricard, Analyst

Okay. That's fair. And then maybe one on the Private Strategies side. I know the portfolio has a lot of fixed income-like investments in it. But I'm surprised to see market value there, although only increased by about $5 million, just given how good the macro has been. So can you maybe dig into that a bit and help us understand if anything can drive value up other than net inflows in private?

Whitney George, CIO

Okay. Those are private credit funds. And what you're seeing is a function of a strong market where the credits get paid back because the mining companies can raise capital much cheaper than what they're paying. And so it's always a balance between deploying capital into new investments versus what you get back. As I mentioned, Lending Fund II is coming to the end of its life. So that's going to reduce AUM. But again, this is a long cycle. They're 10-year lockup products. And so this is a transition year, I'd say, for the Private Strategies.

Kevin Hibbert, CFO

And Matt, were you inquiring about the gains on investments in that segment?

Matthew Lee, Analyst

Yes, I'm considering that in terms of net inflows and market value chains. I think you addressed the net inflows question well. I'm also curious if there have been any changes in the market value of those funds.

Kevin Hibbert, CFO

Yes. As Whitney mentioned, these are loans, and we are required to use amortized cost accounting. Therefore, we wouldn't be marking them. Any increase you see is likely due to enhancements from equity kickers, for instance, offset by the gains realized when the loans are repaid.

Michael Kozak, Analyst

Congratulations on the record quarter. I have two questions. First, at a high level, Whitney mentioned this a bit; gold and silver prices set multiple new all-time highs in the quarter. They are consolidating now, which I believe is healthy, but they seem likely to reset at a much higher base. Given that context, how do you view the possibility of special dividends or perhaps a dividend linked to a basket of metal prices?

Whitney George, CIO

Okay. We have mixed investor opinions about special dividends. I've committed that we're not going to run a money market fund here. To the extent that we have nonrecurring sources of income, that's something we will consider. But I'd like to continue to grow the regular dividend along with our underlying growth. So dividends, buybacks, opportunistic buybacks. Obviously, our stock is very strong. And then ultimately, the special dividend if the first two don't get us where we want to be.

Michael Kozak, Analyst

Okay. And then second, maybe just given the extreme volatility in silver prices, both on the upside and the downside in January and February, I'd love if you could give me some color on what the physical market was like? Like where was it tight? Where were the metal flows jurisdictionally and how are these dynamics like now post correction versus, call it, a month ago during that parabolic move to the upside?

John Ciampaglia, CEO of Sprott Asset Management

That's a great question, Mike. It's John. We've certainly seen significant volatility in silver, unlike anything we've encountered before. The physical market has played a crucial role in these fluctuations, particularly with substantial silver purchases by investors in India during the fourth quarter, which have continued. We've also observed strong physical silver buying in China over the past few months. Until very recently, there were strong inflows into Western silver-based ETFs. So, the physical buying was driving the market. However, in the last three weeks, that dynamic has changed, and the paper markets, including options on ETFs and futures, have been pushing prices downward. There has been a clear tug of war between long-term physical buyers, who have been anticipating a re-rating of silver for years, and other forces attempting to lower prices. We are noticing unusual selling behaviors, with large amounts of silver being offloaded through paper products and derivatives during brief trading windows or when markets are closed. There seems to be some unusual activity. On the procurement side, we've purchased a significant amount of silver and found enough supply in North America, although silver is becoming scarcer in London, India, and China. Recently, China has imposed export restrictions on silver, which I believe will tighten the market further. The physical market currently shows a mismatch between demand and available supply. Furthermore, a major U.S.-listed silver ETF has seen outflows in the past few weeks, leading to high volatility. Silver is trying to establish stability, and the last few weeks have been largely influenced by paper transactions rather than physical transactions, although that is starting to balance out. Some regulators have intervened to control speculative practices, particularly in China, and the CME has increased margin requirements for silver futures contracts multiple times, which appears to be having an impact.

Whitney George, CIO

Yes. Ultimately, we think it will settle down. Ultimately, the inflation-adjusted all-time high for silver would be somewhere between $180 and $200 an ounce. It's a small market. It's been in supply deficit for 5 years, and it's critical. So I think what we're seeing now is a great opportunity somewhere in this neighborhood for new investors to get involved.

Graham Ryding, Analyst

Maybe you can just touch on those new ETF product launches. Will those be actively managed ETFs or passive strategies around your sort of proprietary indexes or a combination of both? How should we think about those?

John Ciampaglia, CEO of Sprott Asset Management

Yes. The ones that are in the hopper are both proprietary passive-based indexes. One is a clone of an existing fund that we'd like to bring to Europe. The other one is a brand-new fund that I don't think we're allowed to talk about because we're in a quiet period, but it's on EDGAR. So it is in the public domain. And yes, so we're being very selective. Obviously, we've been pretty aggressive the last few years building out the suite and filling in gaps. And right now, our #1 objective is to scale what we have because that represents the best opportunity to attract assets.

Graham Ryding, Analyst

Understood. And is there any commodity that you would call out right now that you sort of feel is positioned to break out? Or are you sort of equally constructive across your main commodities?

John Ciampaglia, CEO of Sprott Asset Management

Yes. Our response to that has evolved significantly because multiple metals have reached all-time highs simultaneously, which is quite unusual. We maintain a positive outlook on all of them. Currently, they are experiencing a slight pause and consolidating recent gains, but we believe we are still in the early stages. What underscores the value of these metals is governments actively discussing strategic stockpiles and price floors to shift supply chains away from China. It's challenging to predict how government policies will impact commodity prices. However, it seems clear that most investors have minimal exposure to commodities, and the sectors we are most optimistic about lie within the metal space rather than traditional energy and agriculture, which have notably underperformed.

Graham Ryding, Analyst

Okay. Great. Maybe just jumping to your sort of the cash on your balance sheet. It's obviously built up quarter-over-quarter, year-over-year in a fairly healthy way. You also have some compensation payable sitting on the liability side. What's the timing around that piece? Should we expect your sort of cash balance to be coming down in Q1 as you pay out some of that or most of that comp payable?

Kevin Hibbert, CFO

Well, basically, it wouldn't be the following month for the most part.

Graham Ryding, Analyst

Okay. And then regarding capital allocation, are there any clear plans for the increase in net cash? Or are you content to keep your cash reserves and maintain a strong balance sheet?

Whitney George, CIO

We're going to keep a strong balance sheet. That's one of our principles. What we're trying to do is deliver operating leverage without financial leverage to the parts of the world that we operate in. As I mentioned, we'd like to continue to grow the dividends, I'm the second largest shareholder, so I really appreciate that. And again, we will buy back stock depending and be opportunistic and depending on the value that we can get will depend on how much we can deploy there. And then we'll revisit where we are later this year.

Graham Ryding, Analyst

Okay. Great. And one more, if I could be greedy, just on the Private Strategies side. You talked about looking at doing some fundraising. Would that be to replace that LF2 fund? Or are you looking to add incremental AUM to that overall part of your business?

Whitney George, CIO

We aim to keep cycling through our lending products, while also exploring some exciting Private Strategies that are beginning to gain traction. One of these focuses on physical commodities not traded on any exchanges, managed by Ryan McIntyre. We've launched an evergreen version of our lending product, which is becoming popular in the private credit sector. Additionally, our special metals and mining fund has captured attention due to its performance over the past year and the last five years. There are numerous opportunities in the private segment of our business, and we are increasingly engaging with family offices and affluent investors. I should also highlight that our wealth management business more than doubled in assets last year, primarily due to performance. We've been receiving inquiries from high net worth investors that we haven't seen in many years. Consequently, this part of our business, which had previously been a minor component, is now experiencing significant growth.

Graham Ryding, Analyst

And then my last one, just on that Lending Fund II. You talked about sort of it's in a harvesting phase. Does that sort of imply that 2026 could generate some carried interest around that fund?

Whitney George, CIO

We are not allowed to say anything.

Bart Dziarski, Analyst

I wanted to ask around the net comp ratio. So it was about 45% last year, it's 40% this year, and it was lower than that in Q4. So just trying to get a sense of what run rate should we assume for that ratio going forward?

Kevin Hibbert, CFO

Bart, Kevin here. we don't provide forward-looking information, obviously, the kind of standard statement. But what I can say is the key drivers for us are, one, obviously, revenue growth, obviously, as the denominator, but also just keeping in mind that there's not an awful lot of torque to the cash comp side as it relates to our net revenue growth. And you can just see that when you look at the MD&A explanations that we give around compensation pre-stock based relative to the net revenue growth. So whatever you're seeing now, if you wanted to keep that and maybe kind of flat or a bit throughout the year and then maybe only toggle it down commensurate with any future net revenues we may or may not report then you're welcome to do that. And I can't imagine you'd be massively off, if you took that approach. But I can't actually specifically give you anything to rely on.

Bart Dziarski, Analyst

Okay. No, that's helpful, Kevin. And then John, in your prepared remarks, you talked about AUM and liquidity begets AUM and liquidity. And it's an interesting point that we probably underappreciate. So can you maybe elaborate a little bit on that? And then tying into that, you're saying on the back of it, you're seeing more and more institutions allocate. So just more color on what institutions, where, and the momentum you're seeing there?

John Ciampaglia, CEO of Sprott Asset Management

Yes, sure. Bart. So yes, I guess I would view it from two perspectives. One is from a product shelf placement perspective. So for example, some distributors won't turn your ETF tickers on until you hit a threshold of AUM, sometimes it's $25 million, sometimes it can be even as high as $100 million. So that's thing one. You need to hit those milestones for distributors to turn them on. And then secondarily, institutional investors obviously have some limitations in terms of their comfort level in terms of owning a percentage of a fund. So as these funds get bigger, they trade more and institutions feel more comfortable putting on positions of size. So it does create a bit of a flywheel effect. You also tend to see bid-ask spreads tighten, which helps the trading. And you just have to be patient because you could have a fund that's sitting there at $10 million for months and months and then all of a sudden, somebody is interested in it, and it will jump up to $100 million in no time. And we've recently seen that with our nickel miners ETF and our lithium miners ETFs as well. And I think where we see the real big flywheel effect is obviously in the multibillion dollar funds, and that's where institutions that we talk to, pension funds, family offices, hedge funds, et cetera. That's where they can get materially positioned with large positions. So those are the kind of the workhorse funds for us. The uranium trust is a good example that has the highest percentage of institutional ownership amongst the physical products. And as that fund gets bigger, you get to talk to bigger and bigger institutions that can allocate to it.

Operator, Operator

At this time, I will turn the call back to management for closing remarks.

Whitney George, CIO

Thank you, everyone, for participating in this call. We appreciate your interest in Sprott and look forward to speaking to you again after our first quarter results. Until then, we will remain contrarian, innovative and aligned. Have a good day.

Operator, Operator

Thank you. This does conclude today's conference call. We thank you for attending, and you may now disconnect your lines.