• Assets Under Management (AUM): Increased by $2.3 billion to $33.4 billion, reaching a record high; further increased to $34.2 billion as of November 1.
• Net Income: $12.7 million for the quarter, up 87% from $6.8 million in the same period last year; $37.6 million year-to-date, up 17% from $32.1 million last year.
• Adjusted Base EBITDA: $20.7 million for the quarter, up 16% from $17.9 million last year; $62.8 million year-to-date, up 18% from $53.1 million last year.
• Net Sales: $589 million in the quarter, primarily in physical gold and silver funds; year-to-date net sales just below $1 billion.
• Dividend Increase: 20% increase in quarterly dividend.
• Debt Status: Expect to be debt-free by the end of November.
• Gold and Silver Trust Performance: PHYS units grew by 109%, PSLV units grew by 219% over the last five years.
• Flagship Gold Equity Fund Performance: Gained 21.4% in the third quarter and 36.3% year-to-date.
• Private Strategies AUM: $2.4 billion as of September 30, 2024.

• Warning! GuruFocus has detected 6 Warning Sign with SII.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sprott Inc (NYSE:SII) reported a record high in assets under management (AUM), increasing by $2.3 billion to $33.4 billion, with further growth to $34.2 billion as of November 1.
• The company experienced strong net sales of $589 million during the quarter, primarily in physical gold and silver funds.
• Net income for the quarter was $12.7 million, up 87% from the same period last year, and year-to-date net income increased by 17%.
• Sprott Inc (NYSE:SII) announced a 20% increase in its quarterly dividend, supported by strong earnings and a robust cash and liquidity profile.
• The company is developing two new precious metals ETFs, expected to launch in the first quarter of 2025, indicating future growth potential.

Negative Points

• Despite strong performance in precious metals, Sprott Inc (NYSE:SII) faced $54.6 million in net reductions in its managed equity segment during the quarter.
• The company experienced redemptions of $167 million in the managed equity segment over the first nine months of the year.
• Market weakness in critical materials led to muted sales of $56 million in the equity ETFs segment.
• The company is still dealing with the impact of geopolitical uncertainties, such as potential trade tensions with China under the Trump presidency.
• Sprott Inc (NYSE:SII) has not been immune to redemptions in its precious metals segment, although it fared better than competitors.

Q & A Highlights

Q: You mentioned potential impacts on precious metals demand from a Trump presidency. Could you elaborate on any other implications for your business? A: Whitney George, President and CEO, explained that regardless of the election outcome, Sprott's long-term outlook remains unchanged. Both candidates were expected to continue growing deficits, which could pressure interest rates and inflation. John Ciampaglia, CEO of Sprott Asset Management, added that bipartisan support for nuclear energy and critical materials like uranium is expected to continue, benefiting from re-shoring trends and national security concerns.

Q: Why have your physical gold and silver trusts outperformed your largest ETF competitors? A: John Ciampaglia attributed the outperformance to investor trust in Sprott's physical holdings, the safe custody with the Royal Canadian Mint, and potential tax advantages for U.S. investors. He noted that these differentiators provide real value, allowing Sprott to maintain premium pricing despite industry price wars.

Q: Can you provide insights on the future of Lending Fund III and its impact on private strategies AUM? A: Whitney George explained that the lending business is cyclical, with new loans being made and repaid continuously. While it's not as scalable as exchange-listed products, it remains a high-quality business with a strong track record, contributing to Sprott's overall domain knowledge.

Q: Could you discuss the carried interest realized this quarter and any future potential? A: Kevin Hibbert, CFO, noted that the carried interest realized was a one-off from legacy exploration LPs. Future carried interest will primarily come from private strategies funds. Whitney George added that Lending Fund II needs to mature for further carried interest, and some managed equity products with performance fees might also contribute if conditions hold.

Q: What is the timeline for Lending Fund II to mature and the potential size of AUM for performance fees on the managed equity side? A: Whitney George stated that the maturity of Lending Fund II is unpredictable as it depends on loan repayments, which are typically 10-year lockup funds. The managed equity side has approximately $100 million in AUM that could drive performance fees.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.