Ms. Whitney George reports

SPROTT ANNOUNCES FIRST QUARTER 2023 RESULTS

Sprott Inc. has released its financial results for the quarter ended March 31, 2023.

Management commentary

"Sprott's assets under management closed at a record high of $25.4-billion as of March 31, 2023," said Whitney George, chief executive officer of Sprott. "During the quarter, we benefited from approximately $1-billion in net sales in our private strategies and exchange-listed products, as well as strong market value appreciation across the majority of our fund products. Looking ahead, we are confident that our positioning in precious metals and energy transition investments will continue to serve our clients and shareholders well as a global realignment of supply chains and critical mineral production unfolds over the coming years."

Financial highlights

Key assets under management (AUM) highlights:

• AUM was $25.4-billion as at March 31, 2023, up $1.9-billion (8 per cent) from Dec. 31, 2022. On a three-month-ended basis, the company benefited from strong market value appreciation across the majority of its fund products and strong inflows to its private strategies and exchange-listed products.

Key revenue highlights:

• Management fees were $31.4-million in the quarter, up $4.3-million (16 per cent) from the quarter ended March 31, 2022. Carried interest and performance fees were nil in the quarter, down $2-million from the quarter ended March 31, 2022. Net fees were $28.7-million in the quarter, up $3.2-million (13 per cent) from the quarter ended March 31, 2022. Its revenue performance was primarily due to higher average AUM given market value appreciation and inflows in its exchange-listed products and private strategies segments. These increases were partially offset by lower average AUM in its managed equities segment and the lack of carried interest crystallization in its private strategies segment.
• Commission revenues were $4.8-million in the quarter, down $8.3-million (63 per cent) from the quarter ended March 31, 2022. Net commissions were $2.4-million in the quarter, down $4.2-million (64 per cent) from the quarter ended March 31, 2022. Lower commissions were due to weaker mining equity origination activity in its former brokerage segment and slower at-the-market (ATM) activity in its physical uranium trust.
• Finance income was $1.2-million in the quarter, down $300,000 (18 per cent) from the quarter ended March 31, 2022. The company experienced lower income generation in co-investment positions it holds in LPs (limited partnerships) managed in its private strategies segment.

Key expense highlights:

• Net compensation expense was $14.9-million in the quarter, down $800,000 (5 per cent) from the quarter ended March 31, 2022. The decrease was due to lower long-term incentive plan (LTIP) amortization, lower salaries and lower incentive compensation.
• SG&A (selling, general and administrative) was $4.3-million in the quarter, up $800,000 (24 per cent) from the quarter ended March 31, 2022. The increase was mainly due to higher technology and marketing costs.

Earnings summary:

• Net income was $7.6-million (30 cents per share) in the quarter, up 18 per cent, or $1.2-million (four cents per share), from the quarter ended March 31, 2022. Net income benefited from higher net management fees on improved average AUM of exchange-listed and private strategies products and good market value appreciation of the company's co-investments.
• Adjusted base EBITDA (earnings before interest, taxes, depreciation and amortization) was $17.3-million (68 cents per share) in the quarter, down 5 per cent, or $900,000 (five cents per share), from the quarter ended March 31, 2022. First quarter adjusted base EBITDA was negatively impacted by lower commission income on a combination of weaker mining equity origination activity in its former brokerage segment and slower ATM activity in its physical uranium trust. However, net fee growth from its core AUM was strong during the quarter. The company anticipates this trend continuing throughout the remainder of the year, eventually leading to net fee growth more than offsetting the loss of transaction-based income from its former brokerage segment.

Subsequent events:

• On May 4, 2023, the Sprott board of directors announced a quarterly dividend of 25 cents per share.
• Subsequent to quarter-end, on April 28, 2023, it completed the sale of its Canadian broker-dealer operations to its management team as it continues to focus on its core asset management businesses (however, it will migrate its charity flow-through operations into its managed equities segment). The impact of this change will be immaterial to its future earnings and cash flows but moderately positive to its consolidated operating margin as a greater proportion of its consolidated earnings will now arise from its core precious metals and energy transition materials product and service offerings. These core offerings have materially larger and more predictable revenue streams and also yield higher operating margins than its Canadian broker-dealer. In 2022, the Canadian broker-dealer contributed less than 5 per cent and 4 per cent to the company's consolidated net income and adjusted base EBITDA, respectively, and yielded an operating margin of less than 39 per cent compared with its consolidated total operating margin of 57 per cent over the same time period. The transition away from transaction-based businesses will also free up more capital to reinvest into its core precious metals and energy transition materials product and service offerings.

Supplemental financial information

Please refer to the March 31, 2023, interim financial statements of the company and the related management discussion and analysis filed earlier this morning for further details into the company's financial position as at March 31, 2023, and the company's financial performance for the three months ended March 31, 2023.

Termination of dividend reinvestment plan

The corporation also announced today that its board of directors has authorized the termination of the corporation's dividend reinvestment plan (DRIP), effective June 1, 2023, being the day following the payment date of the corporation's first quarter 2023 dividend, as a result of nominal DRIP participation over the last number of years. The administrator of the DRIP will forward a notice and related documentation to all current DRIP participants in the coming days. As a result of its termination, the DRIP will not be available in connection with any dividend payable after May 31, 2023. All participants will be issued a share certificate or DRS advice for any whole common shares held for a participant's account under the DRIP and a payment by cheque for any fraction of a common share (based on the closing price per common share on the Toronto Stock Exchange), all in accordance with the terms of the DRIP.

Conference call and webcast

A webcast will be held today, May 5, 2023, at 10 a.m. ET to discuss the company's financial results. To listen to the webcast, please register on-line.

About Sprott Inc.

Sprott is a global leader in precious metal and energy transition investments. Its in-depth knowledge, experience and relationships separate it from the generalists. Its investment strategies include exchange-listed products, managed equities and private strategies.

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