Mr. Peter Grosskopf reports

SPROTT ANNOUNCES THIRD QUARTER 2021 RESULTS

Sprott Inc. has released its financial results for the three and nine months ended Sept. 30, 2021.

Management commentary

"During the third quarter of 2021, Sprott demonstrated the strength of our strategy and continued to deliver strong financial results despite precious metals trading sideways for most of the period," said Peter Grosskopf, chief executive officer of Sprott. "Subsequent to quarter-end, we surpassed $20-billion in AUM [assets under management], a new historic high for Sprott, reached in large part due to the efforts of our employee team.

"In July, we completed the acquisition of Uranium Participation Corp. and launched the Sprott Physical Uranium Trust (SPUT), which has grown to $1.6-billion in assets," added Mr. Grosskopf. "In November, subsequent to the end of the third quarter, we announced that we are further expanding our uranium franchise with an agreement to acquire exclusive licensing rights to the index tracked by the North Shore Global Uranium ETF (URNM), which has the potential to result in a transaction that could add approximately $900-million in AUM. We believe URNM is a perfect complement to SPUT, which has quickly become the largest and most in-demand physical uranium vehicle in the world."

Financial highlights

Key assets under management highlights

AUM was $19-billion as at Sept. 30, 2021, up $500-million (3 per cent) from June 30, 2021, and up $1.6-billion (9 per cent) from Dec. 31, 2020. On a three months and nine months ended basis, the company benefited from the Uranium Participation (UPC) transaction, adding $630-million to its physical trusts. The company also benefited from strong inflows to its physical trusts and lending strategies. These increases were partially offset by market value depreciation across most of the company's fund products. Subsequent to quarter-end, AUM surpassed $20-billion -- a new high for the company.

Key revenue highlights

Management fees were $28.6-million in the quarter, up $8.7-million (44 per cent) from the three months ended Sept. 30, 2020, and $76.1-million on a year-to-date basis, up $25.2-million (50 per cent) from the nine months ended Sept. 30, 2020. Carried interest and performance fees were nil in the quarter and $7.9-million on a year-to-date basis, up $7.9-million from the nine months ended Sept. 30, 2020. Net fees were $26.1-million in the quarter, up $7.2-million (38 per cent) from the three months ended Sept. 30, 2020, and $73-million on a year-to-date basis, up $25.2-million (53 per cent) from the nine months ended Sept. 30, 2020. The revenue increases were primarily due to the UPC transaction and higher average AUM from strong net inflows in the company's exchange-listed products segment. Sprott also benefited from strong inflows in our lending and brokerage segments. Additionally, Sprott experienced carried interest crystallization in the first quarter of the year in its lending segment.

Commission revenues were $11.3-million in the quarter, up $1.9-million (20 per cent) from the three months ended Sept. 30, 2020, and $31.1-million on a year-to-date basis, up $10.4-million (50 per cent) from the nine months ended Sept. 30, 2020. Net commissions were $5.8-million in the quarter, up $100,000 (1 per cent) from the three months ended Sept. 30, 2020, and $17-million on a year-to-date basis, up $3.3-million (24 per cent) from the nine months ended Sept. 30, 2020. Despite relatively flat net commissions on a three months ended basis, net commissions were strong on a year-to-date basis due to a combination of commissions earned on strong mining equity origination in Sprott's brokerage segment earlier in the year and commissions earned on the purchase of uranium in Sprott's exchange-listed products segment this quarter.

Finance income was $600,000 in the quarter, down $200,000 (25 per cent) from the three months ended Sept. 30, 2020, and $2.7-million on a year-to-date basis, up $400,000 (18 per cent) from the nine months ended Sept. 30, 2020. Sprott's quarterly and year-to-date results are primarily driven by income generation in co-investment positions the company holds in limited partnerships managed in Sprott's lending segment.

Gains on investments were $300,000 this quarter, down $4.1-million (93 per cent) from the three months ended Sept. 30, 2020, and losses were $1.8-million on a year-to-date basis, compared with gains of $8.2-million in the nine months ended Sept. 30, 2020. Investment gains were realized in the quarter on the monetization of certain digital gold strategies. This was partially offset by unrealized losses on certain co-investments and equityholdings.

Key expense highlights

Net compensation was $12.8-million in the quarter, up $500,000 (4 per cent) from the three months ended Sept. 30, 2020. This compares with net fees and adjusted base EBITDA (earnings before interest, taxes, depreciation and amortization) growth of 38 per cent and 39 per cent, respectively, over the same time period. Net compensation on a year-to-date basis was $35.4-million, up $7.3-million (26 per cent) from the nine months ended Sept. 30, 2020. This compares with net fees and adjusted base EBITDA growth of 53 per cent and 58 per cent, respectively, over the same time period. Net revenues, adjusted base EBITDA and operating margins are key drivers of the company's compensation program. The company's compensation ratio (net compensation divided by net fees and net commissions) on a year-to-date basis was 39 per cent, down from 46 per cent in the prior period.

SG&A (selling, general and administrative expenses) was $3.7-million in the quarter, up $1.2-million (49 per cent) from the three months ended Sept. 30, 2020, and $10.5-million on a year-to-date basis, up $1.7-million (20 per cent) from the nine months ended Sept. 30, 2020. The increase was mainly due to higher insurance, regulatory and technology costs.

Earnings summary

Net income was $8.7-million (35 cents per share) in the quarter, largely unchanged from the three months ended Sept. 30, 2020, and $23-million (92 cents per share) on a year-to-date basis, up 14 per cent, or $2.8-million (nine cents per share) from the nine months ended Sept. 30, 2020.

Adjusted base EBITDA was $16.7-million (67 cents per share) in the quarter, up 39 per cent, or $4.7-million (18 cents per share) from the three months ended Sept. 30, 2020, and $46.4-million ($1.86 per share) on a year-to-date basis, up 58 per cent, or $17-million (66 cents per share) from the nine months ended Sept. 30, 2020.

On a quarter and year-to-date basis, Sprott benefited from the acquisition of UPC and the subsequent market value appreciation and inflows into those assets. Sprott also benefited from strong inflows into the company's lending products this quarter and into its physical silver trust earlier in the year. Finally, Sprott saw very robust mining equity origination activity in the first half of the year, coupled with strong continuing AUM development in the company's brokerage segment.

Subsequent events

On Nov. 4, 2021, the Sprott board of directors announced a quarterly dividend of 25 cents per share.

Supplemental financial information

Please refer to the Sept. 30, 2021, 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 Sept. 30, 2021, and the company's financial performance for the three and nine months ended Sept. 30, 2021.

Conference call and webcast

A conference call and webcast will be held on Nov. 5, 2021, at 10 a.m. ET to discuss the company's financial results. To participate in the call, please dial 855-458-4215 10 minutes prior to the scheduled start of the call and provide conference ID 3490247. A taped replay of the conference call will be available until Friday, Nov. 12, 2021, by calling 855-859-2056, reference No. 3490247. The conference call will be webcast live on Sprott's website.

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