Earnings Call Transcript - SII Q3 2025

Operator, Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Sprott Inc.'s 2025 Third Quarter Results Conference Call. As a reminder, this conference is being recorded today, November 5, 2025. 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 and about 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, Executive Chairman

Thank you, operator, and good morning, everyone. I'll start on Slide 3. Thanks for joining us today. On the call with me is our CFO, Kevin Hibbert; and John Ciampaglia, CEO of Sprott Asset Management. Our 2025 third quarter results were released this morning and are available on our website where you can also find the financial statements and MD&A. On Slide 4, I'd like to review our third quarter and year-to-date highlights. Our assets under management increased by $9 billion during the quarter, driven by surging gold and silver prices. In October, subsequent to the quarter end, our AUM surpassed $50 billion for the first time. We reported strong sales during the third quarter, driven by interest in both precious metals and critical materials. Our managed equities business has delivered outstanding performance, both during the quarter and on a year-to-date basis with some strategies up more than 100% as of October 31. The active ETFs we launched earlier this year to leverage our investment team's strength have been among our most successful ETF launches to date. Since we acquired the Sprott Uranium Miners ETF in 2022, our ETF business has grown from under $400 million in assets to more than $4.4 billion today. Given the strength of our financial results and our confidence in Sprott's future, yesterday, our Board declared a third quarter dividend of $0.40 per share, an increase of 33%. And finally, today, we announced that we have strengthened our executive team with the appointments of Ryan McIntyre as President, and Kevin Hibbert and Arthur Einav as co-COOs of Sprott, while retaining their current positions as Chief Counsel and CFO, respectively. On behalf of our Board and the entire Sprott team, I'd like to congratulate Ryan, Kevin, and Arthur on these appointments. And 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. AUM finished the quarter at $49.1 billion, up 23% from $40 billion at June 30 and up 56% from $31.5 billion as of December 31, 2024. On a 3- and 9-month ended basis, we benefited from strong market value appreciation across our fund products and positive net inflows to our physical trusts. As Whitney noted, subsequent to quarter end, on October 31, our AUM was $51 billion, up 4% from our September 30 AUM level. Our performance subsequent to the quarter end was the result of $1.2 billion of market value appreciation and $793 million in net inflows to our physical trusts. Slide 6 provides a brief look at our 3- and 9-month earnings. Net income this quarter was $13.2 million, up 4% from $12.7 million over the same 3-month period last year. On a year-to-date basis, net income was $38.6 million, up 3% from $37.6 million this time last year. Our net income performance was primarily due to a change in accounting requirements brought on by our new cash-settled stock plan that took effect this year, largely offsetting much of the net income we otherwise generated on market value appreciation and inflows into our precious metals physical trusts and carried interest and performance fee crystallizations in our managed equities segment. As we discussed last quarter, 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 created transitional accounting noise for us in the form of accelerated vesting that occurs in the early years of the program, i.e., we have to expense 60% of the total cash settled RSUs under our 3-year program in 2025 alone and then 30% in 2026 and the final 10% in 2027. This compares to only 1/3 increments annually under our former equity settled program. And the second way in which this transition accounting noise impacts our net income is by adding market volatility to each accelerated vested amount and at a time when our stock has appreciated 97% on a year-to-date basis. So suffice it to say that our actual after-tax settlement obligation will be a fraction of these IFRS 2 derived amounts. Adjusted EBITDA, on the other hand, which excludes quarterly volatility from items like stock-based compensation and carried interest and performance fee crystallizations was $31.9 million in the quarter, up 54% from $20 million over the same 3-month period last year and was $79.3 million on a year-to-date basis, up 26% from $62.8 million this time last year. Adjusted EBITDA in the quarter and on a year-to-date basis from higher average AUM on market value appreciation and substantial inflows to our Precious Metals physical Trust. Finally, Slide 7 provides a few treasury and balance sheet management highlights. Our cash and liquidity profile remains quite strong. And to Whitney's point, given the strength of our earnings, free cash flow, and overall outlook, our Board has declared a third quarter dividend of $0.40 per share, which is a 33% increase from the second quarter level. 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 quarterly MD&A and financial statements filed earlier this morning. So with that said, I'll pass things over to John.

John Ciampaglia, CEO of Sprott Asset Management

Thanks, Kevin, and good morning, everybody. Just turning to Slide 8. Our physical trusts finished October at $39.4 billion and now represent 76% of our overall AUM. Year-to-date, the growth has been tremendous at an increase of $15.4 billion or 64% with strong gains across the metals complex. As I've mentioned on previous calls, scale and liquidity are critical to attract institutional investors into our funds, and we believe we are still in the early phase of institutional investors allocating to metals. We are also seeing some new use cases for our trusts. For example, our Silver Trust, PSLV, has experienced very high trading volumes of late as silver and ETF market participants are now using PSLV as a short-term trading and hedging instrument. In early September, the Uranium Gold and Silver Trust became the first closed-end funds in Canada to have listed options on them. This is most significant for Sprott as it's now the only listed uranium investment vehicle in the world with options and open interest continues to grow. The scale and liquidity effect not only make the funds more investable to ever-larger institutions, but it also provides very valuable operating leverage, and we're starting to see the benefits with our margins being enhanced. Turning to Slide 9. We've often spoken about the ideal environment for our business, which is to have multiple metals working at the same time. Currently, we are experiencing an environment where just about all metals are benefiting from two powerful macro trends. The first trend is related to the geopolitical fractures being created as the global trading system is being reordered; precious metals as well as critical metals are the primary beneficiaries. The second trend is related to the AI infrastructure build-out, which will require significantly more energy, namely electricity. The generation, transmission, and storage of electricity will be very mineral-intensive, benefiting a wide range of metals and mining companies. These macro drivers are unlikely to be transitory as they represent pivotal shifts in energy and industrial policies. They also highlight the strategic importance of critical material supply chains, energy security, national security, and the shift to dedollarized foreign exchange reserves by central banks. So far in 2025, we have already achieved higher net flows than our previous full year record, which was achieved in 2021. I'd like to highlight our net flows in the month of September, where we recorded our highest ever monthly sales number. What’s more impressive is that we achieved this with 18 different funds contributing with positive sales. Our previous record in February 2021 was achieved largely from one fund, the Silver Trust. Our sales results reflect broad and growing interest in our funds and confirms the benefits of making the strategic decision in 2021 to extend our suite of funds to a broader range of metals and listing ETFs across multiple jurisdictions. Turning to Slide 10, our ETF product suite has seen very sharp AUM growth this year, up 83%. Most of our ETFs now exceed breakeven AUM levels, which is very important for profitability. We are also experiencing the same scale and liquidity effect; as the funds grow in size, they are gaining access to ever more distribution platforms. Most of our ETFs have unitary or fixed fees, so scale helps to improve our profitability as many of our operating expenses scale down with size. And then finally, turning to Slide 11. Q3 represented the 16th consecutive quarter of positive flows. One ETF I'd like to highlight is the Sprott Silver Miners and Physical Silver ETF, ticker SLVR on the NASDAQ. We launched SLVR in January, and the ETF is already having very good success in taking market share from long-standing incumbents. AUM is currently $350 million and represents one of our fastest-growing new ETF launches. We continue to experience some redemptions from our uranium mining ETFs as investors have been chasing some high-flying stocks in the downstream segment of the nuclear fuel supply chain. We believe that uranium mining stocks are well positioned to benefit from the ever-growing supply deficit, which doesn't seem to be solvable anytime soon. And with that, I'll turn it over to Whitney.

Whitney George, Executive Chairman

Thanks, John. We'll move now to Slide 12 for a look at our managed equity segment. As I mentioned in my opening remarks, our managed equity strategies have performed well this year. Our flagship gold equity fund was up 44% during the quarter and has gained 105% year-to-date. We are pleased with the early response to our two active ETF launches. In recent years, investors have demonstrated a clear preference for ETFs over traditional mutual funds. Actively managed ETFs offer an excellent way for us to leverage the strength of our investment team in an ETF format. Investing in mining comes with a number of risks, and we think they're best mitigated through active management, and we'll continue to look for new ways to showcase that expertise. I'll now turn to private strategies on Slide 13. Private Strategies AUM was $2.1 billion, unchanged from June 30. The team continues to assess new investment opportunities for Lending Fund III and is actively monitoring our streaming and royalty portfolio investments. Slide 14, for some closing remarks. To recap, we are pleased with what we have accomplished so far this year. AUM has increased by nearly $20 billion, driven by rising precious metals prices and more than $3.5 billion in net sales. The rise in gold and silver prices has been dramatic and the recent technical correction was not unexpected. However, our view is while gold may be technically overbought, it is chronically under-owned. Despite recent inflows into physically backed gold ETFs, most U.S. investors are still significantly underweight gold in their portfolios. Just a slight increase in this allocation could have a dramatic impact on the price. At the same time, price insensitive buying from central banks is likely to persist as it is driven by ongoing restructuring of global trade and military alliances. The appeal of precious metals increases in uncertain times, and we expect the reshaping of the current world order to continue for some time with the ultimate outcome unknown. The outlook for critical materials is equally compelling. The U.S. government has ramped up its intervention in critical materials markets throughout 2025, implementing a multipronged strategy to secure supply and reduce reliance on foreign sources, particularly China. The administration is moving aggressively on this track, even taking equity positions in critical material miners. Not to be outdone, the big banks are also getting in on the act. A major bank recently launched a $1.5 trillion security and resiliency initiative aimed at bolstering U.S. national security through strategic investments in critical industries. In closing, we are pleased to be delivering steadily improving results and investment performance. With our core positioning in precious metals and critical materials, we believe we are well positioned to benefit from the powerful global trends outlined above. That concludes our remarks for today's call, and I'll now turn it over to the operator for some Q&A.

Operator, Operator

Your first question comes from the line of Matt Lee at CGF.

Matthew Lee, Analyst

Just one from me. Over the quarter, it seems like the spot price of uranium has ticked up and you've been pretty active in terms of picking up volumes. I just have a logistical question. Can you just talk about how challenging it's been to source material, particularly when the market is tight like it is today?

John Ciampaglia, CEO of Sprott Asset Management

Matt, it's John. Yes, I mean, it's been pretty amazing because, obviously, the trust wasn't trading well for the first few months of the year, falling out from the liberation day and uncertainty. Since late June, I think we've purchased about 7 million pounds of uranium in the spot market. So we've been very active. We're very focused on filling our allocation before the year-end, which is 9 million pounds under the current prospectus. There's always material in the spot market. It's lumpy. It's hard to find at times, but there's material. And I think what has influenced the availability of material so far this year is we don't see producers coming into the spot market in a meaningful way to buy. We don't see utilities coming into the spot market with the exception of one or two in a meaningful way. So we've been able to kind of soak up the pounds, which is fine with us because at current levels, we find it incredibly attractive to be buying uranium at $80. The term price is now at a multiyear high. It's ticked up to $86. I think that's a very good sign. And we're seeing a lot of utilities come back to market after largely standing on the sidelines as they're waiting for some clarity from the administration on just about everything. So we're very constructive. We've raised about $700 million in the uranium trust since May. And I think that is a very strong vote of confidence in the market as well as the vehicle.

Operator, Operator

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

Etienne Ricard, Analyst

So it's great to see the growth to your ETF franchise. Historically, physical trusts accounted for the vast majority of your AUM. Now to the extent ETFs become more meaningful as a percentage of the mix, how do you expect this to impact the volatility of net flows through the cycle?

Whitney George, Executive Chairman

Can you take that one?

John Ciampaglia, CEO of Sprott Asset Management

I can take that one. Yes, Etienne, it's John here again. Yes, look, I mean, obviously, we've got two different dynamics. The physical trusts are physically metals, and they obviously are not as volatile day-to-day and year-to-year as the underlying mining stocks, which represent the vast majority of the ETF exposure. What we obviously are seeing is a staged approach where institutions put their toe in the water typically with an allocation to the physical because they've got a constructive view on the commodity itself. Then what we see them doing typically is to transition into some allocation into the equities. They're starting to do that. Obviously, there's a lot of capital flowing into the mining sector after a multiyear drought. And as Whitney mentioned, you've got governments now taking equity stakes in exchange for offtake agreements, loans, and whatnot. So we haven't seen this dynamic in the mining sector, and we would expect the mining stocks to be bigger beneficiaries going forward here with renewed capital flows into the sector, and obviously, governments are sending some very strong signals. Equity flows, they're more volatile for sure, but it comes with the territory. So it's nice to have a diversified suite between physical and mining across multiple metals and jurisdictions. That's one way we can help to dampen the volatility.

Etienne Ricard, Analyst

Okay. I appreciate the details. And just to circle back on this morning's executive appointments, Whitney. Why was this the right time to make this announcement? And how do you think about leadership planning as part of the regular risk management procedures?

Whitney George, Executive Chairman

I believe the Board decided that the best moment to consider the long-term future of our leadership is when things are progressing positively rather than during challenging times. This year has been quite successful, prompting them to hire an outside consultant for a comprehensive evaluation of our current leadership. The results were very positive, and I am pleased with my partners. We wanted to emphasize to the market the significant contributions of Kevin and Arthur over the years, noting that they have been functioning as co-Chief Operating Officers for some time, beyond their initial titles of Chief Financial Officer and Head of Legal. Ryan, a relatively new member of the team with substantial investment experience and prior leadership of a public company, is also a valuable asset, and we want to acknowledge his contributions to our investors.

Operator, Operator

Your next question comes from the line of Graham Ryding at TD Securities.

Graham Ryding, Analyst

Can you provide an overview of the flows in the quarter and up to October, specifically regarding the mix between retail and institutional? Also, could you emphasize why you believe institutional demand is set to increase?

John Ciampaglia, CEO of Sprott Asset Management

Yes, Graham, John again. Yes, I mean, obviously, September was a record high for us. We've continued that momentum through most of October. Obviously, we hit a bit of an air pocket with a number of different categories on the back of escalating trade tensions with China and some profit-taking. We were quite extended technically. But I think it's important to note that the interest is growing. It's very broad. We're getting inbounds from everyone from family offices to institutions to registered investment advisers in the United States. We're seeing much more institutional allocation to the space. To be candid, a lot of these institutions have had little to no exposure to these categories for the last 10 years. So it's been a long time in the making, and we are working very actively to ensure we get our fair share of those flows. And we're very pleased with the result. The team has been incredibly busy talking to investors around the world. We would expect institutions to continue to be the bulk of the allocations, but we're obviously seeing capital coming from advice channels and also individual investors, which you can't discount because there are a very large group of them out there that are more self-directed.

Graham Ryding, Analyst

So sorry, the flows in Q3 and Q4 to date have been largely institutional driven or you're saying it's a mix?

John Ciampaglia, CEO of Sprott Asset Management

It's a mix for sure. I mean we don't have total transparency, obviously, with exchange-traded funds. So we have to self-identify, and we're obviously engaging with institutions and advice channel participants day-to-day. But it's a good mix. And I think it's been more skewed to institutional and advice channels thus far.

Graham Ryding, Analyst

Okay. That's helpful. Tokenization of sort of real assets seems to be a theme that's gathering momentum. Is that something you've looked at all like the idea of token backed by physical bullion, could that potentially open up a portion of the retail market that's maybe focused on digital assets, but not so much on precious metals or critical minerals? Have you looked at that?

Whitney George, Executive Chairman

My predecessor made several investments in digital gold, but they were somewhat premature and did not pan out. I have been closely monitoring this area for the past 10 years. To support these new stablecoins, physical metal is essential. We are paying close attention to this trend, as it may introduce a new demographic of gold buyers, in addition to institutions and central banks that already support it. If people show interest in gold-backed stablecoins, our products will benefit. We are aware of our strong brand presence and technical expertise in purchasing and storage, but we lack some technological elements necessary to engage in various cryptocurrencies. Currently, there appears to be a merging of Bitcoin and physical gold in terms of investment preferences. Even now, stablecoins are becoming more aligned, with each potentially enhancing the other instead of presenting competing methods for moving money beyond central banks' control.

Graham Ryding, Analyst

Okay. Interesting. And then private strategies, any update there on expected fundraising? Should we expect you to just maintain and harvest the AUM at these levels? How should we think about that part of your business?

Whitney George, Executive Chairman

Well, Fund II is very mature and probably in wind-down. Fund III is still in the investment phase. Once we make more progress on that, we can consider another product. We're committed to that business. It’s sort of lagged the rest of our business and may have an opportunity for a little focus in the next year to catch back up again.

Graham Ryding, Analyst

Great. And if I could get one more, just to be a little greedy. You've got $80 million of cash on your balance sheet. You've got some other liquidity that you flagged. What's your plan there? Are you happy to sit with elevated liquidity or do you have a plan for allocating that?

Whitney George, Executive Chairman

I'm committed to not building a money market fund. I think the dividend increase is a pretty strong indicator of how we view cash. Again, dividends are hopeful, and one day there might be another acquisition or two out there. We hope to grow the private business, which requires some co-investment, and we will continue to be buyers of our shares opportunistically.

Operator, Operator

Your next question comes from the line of Mike Kozak from Cantor Fitzgerald.

Michael Kozak, Analyst

GBP 9 million of purchases you can make in any given year. My question was, and this actually came in from an account the other day. Does that GBP 9 million, does that reset on January 1 of every calendar year? Or is it like a rolling 12-month number? Because I think you’re already at GBP 7.5 million for this calendar year or thereabouts. So you’re bumping up against it.

John Ciampaglia, CEO of Sprott Asset Management

Yes, Mike, it’s John. Yes, that basically covers calendar years and the base shelf prospectus will expire at the end of January next year. In the coming weeks, we will be starting the process to file a new prospectus. Our expectation is we will be able to roll that amount forward, but we haven’t started that engagement yet. We still have runway to continue to buy between now and the end of the prospectus. So it's business as usual.

Michael Kozak, Analyst

Okay. That's helpful. My second question is about the amount of uranium trust inventory held at ConverDyn. Additionally, what percentage of that inventory would you estimate is of U.S. origin? I'm asking because there is increasing discussion about the government's involvement in critical minerals, and there is a real possibility of a bifurcated pricing system for uranium, where U.S. origin or U.S. domiciled material might receive fixed premium pricing set by a government agency, similar to what we observed with NDPR. I would like to understand the inventory situation at ConverDyn and the approximate percentage that is of U.S. origin, if possible.

John Ciampaglia, CEO of Sprott Asset Management

Yes. Okay. Interesting questions for sure. So out of our 72 million-odd pounds that we're holding, there’s very little U.S. origin. The reason is simple. There were obviously multiple years of no uranium mining in the United States. Even this year, it's going to be quite minimal relative to annual requirements. Now let’s take a step back. In the Biden administration, the Department of Energy undertook the first step towards building a strategic uranium reserve. They had a grand total of $75 million to procure uranium. They went out and bought 1 million pounds, overpaying at spot for U.S. origins that were historically mined material sitting above ground. More interestingly, in September at the IAEA, Chris Wright, the Secretary of the Department of Energy stated again the need for a strategic uranium reserve, which is fanning a lot of speculation. The U.S. is trying to reshore the entire supply chain, focusing on enrichment and conversion, with a huge announcement last week around the Westinghouse new build. They’re trying to resuscitate U.S. mining as well. We could see a two-tiered pricing environment where if the U.S. government is willing to pay a premium for U.S. origin, that is entirely possible. We have seen in the past bifurcated markets, mostly decades ago during the Cold War. The U.S. is clearly focused on the reality that they are largely sourcing uranium from outside the country, and with recent announcements about their aspirations to build even more reactors, this reality is compounding. It will be determined whether funds are procured to start building a strategic uranium reserve. As for storage, we have to store in the three Western licensed conversion facilities: the Cameco facility, the Orano facility in France, and the ConverDyn facility in the United States. If memory serves me correctly, we have about 20% at ConverDyn, while the bulk is in Canada at this point. The main point to note is that the U.S. is very focused on building its supply chain by building capacity locally. We're seeing them make investments in enrichment facilities with Orano, with Urenco, with Westinghouse. They want to resuscitate mining. They're fast-tracking mining permitting, and they clearly see the need.

Michael Kozak, Analyst

Okay. That’s helpful. And then one more, if I could, switching gears on silver. I’d love if you could give me some color on the tightness in the physical silver market from last month. There were all kinds of articles about the potential squeeze on the physical metal. I think that the silver futures curve was in backwardation for a few days. There were reports about traders chartering private planes to take physical silver from London to New York. PSLV was issuing and buying in the market over that period. So any color you could give me on the physical silver market would be appreciated.

John Ciampaglia, CEO of Sprott Asset Management

Yes. I think we’re probably one of the largest buyers of physical silver in the world over the last five years. So we obviously have a lot of insights into what's going on there. A few weeks ago, there was clearly a dislocation, but the dislocation was driven by a mismatch of inventories in different jurisdictions. There was a shortage of metal in London, which is the primary market, and a surplus of metal in the COMEX markets, which is U.S. based. At one point, the pricing differential between those two markets incentivized putting metal on ships, which is the primary way to move silver, not airplanes like gold and moving across the pond to capture the arbitrage. That is obviously happening. There have been at least 30 million ounces of silver that have left COMEX vaults in the last few weeks. The situation is starting to abate in terms of that dislocation. However, too much metal left London when there was concern about tariffs, which ultimately did not transpire. Now that metal is stuck and needs to go back. We've actually been big beneficiaries of that dislocation because as we've been raising money, we've been able to buy inventory that is stuck in the U.S. that people want to get rid of. So we've had no issues sourcing metal, and a lot of the London metal is moving on to India where demand right now seems relentless. It is abating, but I'd say it was actually a big help to us.

Operator, Operator

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

Whitney George, Executive Chairman

Thank you, everyone, for participating in this call. We appreciate your interest in Sprott. We remain contrarian, innovative and aligned, and look forward to speaking to you again after our fourth quarter results.

Operator, Operator

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