Mr. Whitney George reports

SPROTT ANNOUNCES SECOND QUARTER 2023 RESULTS

Sprott Inc. has released its financial results for the three and six months ended June 30, 2023.

Management commentary

"Sprott's assets under management (AUM) declined slightly during the second quarter, as precious metal prices pulled back following strong performance in April," said Whitney George, chief executive officer of Sprott. "Despite the challenging market conditions, we continued to record strong sales in our exchange-listed products and private strategies segments, with $199-million in net sales and new fee-earning committed capital during the second quarter and $1.1-billion in net sales and new fee-earning committed capital during the first half of 2023. Our private lending team closed the third vintage of Sprott's private resource lending strategy during the second quarter and our streaming and royalty team closed a new partnership in July, subsequent to quarter-end.

"The outlook for precious metals and energy transition investments continues to improve and we expect our positioning in these core areas to be rewarded in the second half of 2023," added Mr. George. "Our product pipeline is robust and we intend to launch new public and private strategies before the end of the year."

Key assets under management (AUM) highlights:

• AUM was $25.1-billion as at June 30, 2023, down $200-million (1 per cent) from March 31, 2023, and up $1.7-billion (7 per cent) from Dec. 31, 2022. On a three months ended basis, Sprott was impacted by market value depreciation across the majority of its fund products, partially offset by inflows to its exchange-listed products and new fee-earning capital commitments into its private strategies funds. On a six months ended basis, Sprott benefited from new capital raises and net capital calls to its private strategies funds and strong inflows to its exchange-listed products, as well as market value appreciation across the majority of its fund products.

Key revenue highlights:

• Management fees were $33.2-million in the quarter, up $2.6-million (8 per cent) from the quarter ended June 30, 2022, and $64.7-million on a year-to-date basis, up $6.9-million (12 per cent) from the six months ended June 30, 2022. Carried interest and performance fees were $400,000 in the quarter and, on a year-to-date basis, up $400,000 from the quarter ended June 30, 2022, and down $1.7-million (81 per cent) from the six months ended June 30, 2022. Net fees were $30.4-million in the quarter, up $2.3-million (8 per cent) from the quarter ended June 30, 2022, and $59.1-million on a year-to-date basis, up $5.5-million (10 per cent) from the six months ended June 30, 2022. Sprott's revenue performance was due to higher average AUM in its exchange-listed products (primarily its uranium, gold and silver trusts) and private strategies segments. These increases were partially offset by lower average AUM in the company's managed equities segment and lower carried interest crystallization in its private strategies segment on a year-to-date basis.
• Commission revenues were $1.6-million in the quarter, down $4.8-million (74 per cent) from the quarter ended June 30, 2022, and $6.4-million on a year-to-date basis, down $13.1-million (67 per cent) from the six months ended June 30, 2022. Net commissions were $1.1-million in the quarter, down $2.3-million (67 per cent) from the quarter ended June 30, 2022, and $3.5-million on a year-to-date basis, down $6.5-million (65 per cent) from the six months ended June 30, 2022. Lower commissions were due to the sale of Sprott's former Canadian broker-dealer and slower at-the-market (ATM) activity in its physical uranium trust.
• Finance income was $1.3-million in the quarter, up $100,000 (8 per cent) from the quarter ended June 30, 2022, and $2.5-million on a year-to-date basis, down $200,000 (6 per cent) from the six months ended June 30, 2022. Sprott's quarterly and year-to-date results were driven by income generation in co-investment positions it holds in licensed producers managed in its private strategies segment.

Key expense highlights:

• Net compensation expense was $15.5-million in the quarter, up $1.5-million (11 per cent) from the quarter ended June 30, 2022, and $30.4-million on a year-to-date basis, up $700,000 (2 per cent) from the six months ended June 30, 2022. The increase in the quarter and on a year-to-date basis was due to the reversal of salary, AIP (annual incentive compensation) and LTIP (long-term incentive plan) entitlements of the former CEO out of net compensation in the second quarter of 2022 on the successful completion of the former CEO's transition agreement. The transition agreement exchanged the former CEO's salary, AIP and LTIP entitlements for a three-year LTIP transition payment. The three-year LTIP transition payment is reported on the severance line and was accelerated upon successful completion of the SCP sale during the second quarter of the year. The company also saw a general increase in base salaries in the current quarter relating to new hires.
• Selling, general and administrative was $5-million in the quarter, up $800,000 (18 per cent) from the quarter ended June 30, 2022, and $9.3-million on a year-to-date basis, up $1.6-million (21 per cent) from the six months ended June 30, 2022. The increase was due to higher technology and marketing costs.

Earnings summary:

• Net income was $17.7-million (70 cents per share) in the quarter, up $17-million (67 cents per share) from the quarter ended June 30, 2022, and $25.4-million on a year-to-date basis ($1 per share), up $18.1-million (71 cents per share) from the six months ended June 30, 2022. Net income on both a three and six months ended basis benefited from the receipt of shares on the realization of a previously unrecorded contingent asset from a historical acquisition. Sprott also benefited from higher net fees on improved average AUM in its exchange-listed and private strategies segments.
• Adjusted base EBITDA (earnings before interest, taxes, depreciation and amortization) was $18-million (71 cents per share) in the quarter, up slightly from the same three-month period ended last year. The increase in the quarter was due to higher average AUM in the company's exchange-listed products and private strategies segments more than offsetting lower commission income in the quarter due to the sale of its former Canadian broker-dealer.
• Adjusted base EBITDA was $35.3-million ($1.40 per share) on a year-to-date basis, down 2 per cent or $800,000 (four cents per share) from the six months ended June 30, 2022. The decrease on a year-to-date basis was due to lower commission income on the sale of its former Canadian broker-dealer and slower ATM activity in its uranium trust. The lower commission income on a year-to-date basis was nearly offset by growth in net fees on improved AUM. Sprott expects net fee levels to increase even further in the second half of the year, leading to the eventual replacement of low-margin commission income from its former Canadian broker-dealer with higher-margin fees from its exchange-listed products and private strategies segments.

Subsequent events:

• During the quarter, the company paid down $20-million, or 37 per cent of its outstanding debt facility. Subsequent to quarter-end, the company completed a review of its current and near-term financing and borrowing needs and determined that it no longer requires a $120-million credit facility. Consequently, management decided to lower the maximum borrowing capacity under the credit facility by $45-million to $75-million. Offsetting the reduction in borrowing capacity is the release of capital restrictions on the sale of Sprott's former Canadian broker-dealer that closed earlier this quarter and the eventual monetization of shares received on the realization of a previously unrecorded contingent asset from a historical acquisition.
• On Aug. 8, 2023, the Sprott board of directors announced a quarterly dividend of 25 cents per share.

Supplemental financial information

Please refer to the June 30, 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 June 30, 2023, and the company's financial performance for the three and six months ended June 30, 2023.

Conference call and webcast

A webcast will be held today, Aug. 9, 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. It is a specialist. Sprott's in-depth knowledge, experience and relationships separate it from the generalists. The company's investment strategies include exchange-listed products, managed equities and private strategies. Sprott has offices in Toronto, New York and Connecticut and the company's common shares are listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbol SII.

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