Sprott Announces 2019 Third Quarter Results
Sprott Inc. (TSX:SII.TO) ("Sprott" or the "Company") today announced its financial results for the three months ended September 30, 2019.
Financial Overview (3 months results)
-- Assets Under Management ("AUM") were $11.3 billion as at September 30, 2019, up $0.7 billion (6%) from June 30, 2019
-- Total net revenues (net of commission expenses, trailer fees and sub-advisor fees, carried interest and performance fee payouts) were $23.2 million, reflecting an increase of $7.7 million (50%) from the quarter ended September 30, 2018.
-- Total expenses (excluding commission expenses, trailer fees and sub-advisor fees, carried interest and performance fee payouts) were $15.5 million, reflecting an increase of $2.1 million (15%) from the quarter ended September 30, 2018.
-- Net income was $5.7 million ($0.02 per share), reflecting an increase of $3.7 million from the quarter ended September 30, 2018.
-- Adjusted Base EBITDA was $10.0 million ($0.04 per share), an increase of $0.3 million (4%) from the quarter ended September 30, 2018
-- Sprott and Tocqueville Asset Management entered into a definitive agreement regarding the sale of Tocqueville's gold strategy assets to Sprott Asset Management
-- The acquisition is expected to close in January 2020 and will add approximately $2.2 billion to Sprott's AUM
-- Lead Portfolio Manager John Hathaway and Portfolio Managers Douglas Groh and Ryan McIntyre will join Sprott upon closing of the transaction
"Strong precious metals prices and improved investor sentiment contributed to increases in our AUM and Adjusted Base EBITDA during the third quarter of 2019," said Peter Grosskopf, CEO of Sprott. "In the current climate of artificially low interest rates and accommodative monetary policy, we believe precious metals have become a mandatory portfolio diversification asset. The acquisition of the Tocqueville gold strategies will add meaningful scale to Sprott's managed equities segment and provide additional operating leverage to the gold price going forward."
Assets Under Management (3 months results)
(In millions $) AUM Net Market Other AUM Jun. 30, 2019 Inflows Value Sep. 30, 2019 Changes Exchange Listed Products - Physical Trusts 7,714 92 570 -- 8,376 - ETFs 301 4 9 -- 314 8,015 96 579 -- 8,690 Lending 646 53 12 (125) 586 Managed Equities - In-house 586 2 4 -- 592 - Sub-advised 511 (10) 34 -- 535 1,097 (8) 38 -- 1,127 Other 913 -- 11 -- 924 Total 10,671 141 640 (125) 11,327 See 'Net Inflows' in the key performance indicators (non-IFRS financial measures) section of the MD&A Includes new AUM from fund acquisitions and lost AUM from fund divestitures and capital distributions of our lending LPs. $1,311 million (US$990 million) of committed capital remains uncalled, of which $277 million (US$209 million) earns a commitment fee (AUM), and $1,034 million (US$781 million) does not (future AUM).
On November 7, 2019, a dividend of $0.03 per common share was declared for the quarter ended September 30, 2019.
Normal Course Issuer Bid
Sprott Inc. (TSX:SII.TO) ("Sprott") is pleased to announce that the Toronto Stock Exchange ("TSX") has approved the notice of its intention to make a normal course issuer bid ("NCIB"). Pursuant to the terms of the NCIB, Sprott may purchase its own common shares (the "Shares") for cancellation through the facilities of the TSX at the prevailing market price of the Shares. It is expected that the maximum number of Shares which may be purchased by Sprott during the NCIB will not exceed 6,345,112 being approximately 2.5% of 253,804,511 (representing the number of issued and outstanding Shares as of October 31, 2019). The average daily trading volume (the "ADTV") of the Shares on the TSX for the six-month period ended October 31, 2019 was 281,130. Under the rules of the TSX, Sprott is entitled to repurchase during the same trading day on the TSX up to 25% of the ADTV of the Shares, being 70,282 Shares, except where such purchases are made in accordance with the "block purchase" exemption under applicable TSX policy. Sprott will effect purchases at varying times commencing on November 15, 2019 and ending on November 14, 2020.
In addition to providing shareholders liquidity, Sprott believes that the Shares have been trading in a price range which does not adequately reflect the value of such shares in relation to Sprott's business and its future prospects.
Under its prior NCIB that commenced on November 15, 2018 and was suspended in November 2019, Sprott previously sought and received approval from the TSX to repurchase up to 12,633,752 Shares. Sprott did not purchase any Shares pursuant to its previously authorized NCIB.
Conference Call and Webcast
A conference call and webcast will be held today, November 8, 2019 at 9:00 am ET to discuss the Company's financial results for the third quarter of 2019. To participate in the call, please dial (855) 458-4215 ten minutes prior to the scheduled start of the call and provide conference ID3763979. A taped replay of the conference call will be available until Friday, November 15, 2019 by calling (855) 859-2056, reference number 3763979. The conference call will be webcast live at www.sprott.com and https://edge.media-server.com/mmc/p/x5a4k34g
*Non-IFRS Financial Measures
This press release includes financial terms (including AUM, investable capital, net revenues, expenses, adjusted base EBITDA and net sales) that the Company utilizes to assess the financial performance of its business that are not measures recognized under International Financial Reporting Standards ("IFRS"). These non-IFRS measures should not be considered alternatives to performance measures determined in accordance with IFRS and may not be comparable to similar measures presented by other issuers. For additional information regarding the Company's use of non-IFRS measures, including the calculation of these measures, please refer to the "Non-IFRS Financial Measures" section of the Company's Management's Discussion and Analysis and its financial statements available on the Company's website at www.sprottinc.com and on SEDAR at www.sedar.com.
A reconciliation from net income to adjusted base EBITDA is shown below:
3 months ended (in thousands $) Sept. 30, 2019 Sept. 30, 2018 Net income (loss) for the periods 5,723 1,975 Adjustments: Interest expense 393 26 Provision (recovery) for income taxes 1,945 35 Depreciation and amortization 1,180 457 EBITDA 9,241 2,493 Other adjustments: (Gains) losses on net investments (791 ) 4,765 (Gains) losses on foreign exchange (426 ) 809 Non-cash stock-based compensation 1,597 1,025 Unamortized placement fees -- (273 ) Other expenses 428 888 Adjusted EBITDA 10,049 9,707 Other adjustments: Carried interest and performance fees -- -- Carried interest and performance fee related expenses -- -- Adjusted base EBITDA 10,049 9,707
This adjustment removes the income effects of certain gains or losses on proprietary and long-term investments to ensure the reporting objectives of our EBITDA metric are met.
The prior period comparative figures contained a placement fee amortization adjustment to ensure the 2018 results were comparable to 2017 in light of the 2018 adoption of IFRS 15.
See Other expenses in Note 6 of the interim financial statements. In addition to the items outlined in Note 6, Other expenses also includes severance and new hire accruals of $0.2 million for the 3 months ended (3 months ended September 30, 2018 - $0.4 million).
Forward Looking Statements
Certain statements in this press release contain forward-looking information (collectively referred to herein as the "Forward-Looking Statements") within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify Forward-Looking Statements. In particular, but without limiting the forgoing, this press release contains Forward-Looking Statements pertaining to: (i) market outlook and future metal prices; (ii) precious metals becoming a mandatory portfolio diversification asset; (iii) the acquisition of the Tocqueville gold strategies asset management business, including that the acquisition will be completed and the timing thereof, the AUM to be added as a result of the acquisition, certain portfolio managers joining Sprott upon the completion of the acquisition and the ability of the acquisition to add meaningful scale to Sprott's managed equities segment and provide additional operating leverage to the gold price going forward; (iv) future purchases by Sprott of the Shares pursuant to the NCIB; and (v) the declaration, payment and designation of dividends.
Although the Company believes that the Forward-Looking Statements are reasonable, they are not guarantees of future results, performance or achievements. A number of factors or assumptions have been used to develop the Forward-Looking Statements, including, without limitation: (i) the impact of increasing competition in each business in which the Company operates will not be material; (ii) quality management will be available; (iii) the effects of regulation and tax laws of governmental agencies will be consistent with the current environment; and (iv) those assumptions disclosed under the heading "Significant Accounting Judgments, Estimates and Changes in Accounting Policies" in the Company's MD&A for the period ended September 30, 2019. Actual results, performance or achievements could vary materially from those expressed or implied by the Forward-Looking Statements should assumptions underlying the Forward-Looking Statements prove incorrect or should one or more risks or other factors materialize, including: (i) difficult market conditions; (ii) poor investment performance; (iii) failure to continue to retain and attract quality staff; (iv) employee errors or misconduct resulting in regulatory sanctions or reputational harm; (v) performance fee fluctuations; (vi) a business segment or another counterparty failing to pay its financial obligation; (vii) failure of the Company to meet its demand for cash or fund obligations as they come due; (viii) changes in the investment management industry; (ix) failure to implement effective information security policies, procedures and capabilities; (x) lack of investment opportunities; (xi) risks related to regulatory compliance; (xii) failure to manage risks appropriately; (xiii) failure to deal appropriately with conflicts of interest; (xiv) competitive pressures; (xv) corporate growth which may be difficult to sustain and may place significant demands on existing administrative, operational and financial resources; (xvi) failure to comply with privacy laws; (xvii) failure to successfully implement succession planning; (xviii) foreign exchange risk relating to the relative value of the U.S. dollar; (xix) litigation risk; (xx) failure to develop effective business resiliency plans; (xxi) failure to obtain or maintain sufficient insurance coverage on favourable economic terms; (xxii) historical financial information being not necessarily indicative of future performance; (xxiii) the market price of common shares of the Company may fluctuate widely and rapidly; (xxiv) risks relating to the Company's investment products; (xxv) risks relating to the Company's proprietary investments; (xxvi) risks relating to the Company's lending business; (xxvii) risks relating to the Company's merchant bank and advisory business; (xxviii) those risks described under the heading "Risk Factors" in the Company's annual information form dated February 27, 2019; and (xxix) those risks described under the headings "Managing Risk: Financial" and "Managing Risk: Non-Financial" in the Company's MD&A for the period ended September 30, 2019. There are also risks that are inherent in the nature of a transaction such as the acquisition of the Tocqueville gold strategies asset management business, including: failure to realize anticipated synergies; risks regarding integration; incorrect assessments of the values of the acquired assets; and failure to obtain any required security holder, regulatory, stock exchange and other approvals (or to do so in a timely manner). The anticipated timeline for completion of the acquisition of the Tocqueville gold strategies asset management business may change for a number of reasons, including the inability to secure necessary security holder, regulatory, stock exchange and other approvals in the time assumed or the need for additional time to satisfy the conditions to the completion of the acquisition. As a result of the foregoing, readers should not place undue reliance on the forward-looking statements contained in this press release concerning the completion of the acquisition or the timing thereof. In addition, the payment of dividends is not guaranteed and the amount and timing of any dividends payable by the Company will be at the discretion of the Board of Directors of the Company and will be established on the basis of the Company's earnings, the satisfaction of solvency tests imposed by applicable corporate law for the declaration and payment of dividends, and other relevant factors. The Forward-Looking Statements speak only as of the date hereof, unless otherwise specifically noted, and the Company does not assume any obligation to publicly update any Forward-Looking Statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable Canadian securities laws.
Sprott is an alternative asset manager and a global leader in precious metal and real asset investments. Through its subsidiaries in Canada, the US and Asia, the Corporation is dedicated to providing investors with best-in-class investment strategies that include Exchange Listed Products, Lending, Managed Equities and Brokerage. Sprott is based in Toronto with offices in New York, Carlsbad and Vancouver and its common shares are listed on the Toronto Stock Exchange under the symbol (TSX:SII.TO). For more information, please visit www.sprott.com.
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