Sprott, Inc. Q1 FY2024 earnings call

• AUM reached record highs driven by gold and silver price rally, though there was short-term weakness in uranium. Net redemptions in Q1 reversed early in Q2.
• Expanded critical materials offerings with the launch of the Sprott Copper Miners ETF and Sprott Junior uranium miners usage ETF in Europe.
• Actively managed precious metals equity strategies performed well in Q1 and year-to-date.
• Completed multiyear exit of noncore businesses, clearing out the 'other' category in financial statement notes.
• Geopolitical risks highlighted the strategic importance of nuclear energy and secure uranium sources; momentum shifted in the uranium sector with Sprott trading at a premium to NAV and raising ~$180 million YTD.
• Central banks continued diversifying into gold, with Western physical gold ETFs seeing withdrawals while Asian investors increased gold investment; China retail investors had few alternatives, leading to gold flow from West to East.
• Critical materials investments now account for 27% of total AUM, with interest surging due to rising electricity demand.
• Secured placements for exchange-listed products on large wire house platforms; the marketing team produced a high volume of thought leadership materials.

AUM: As of March 31, 2024, AUM was $29.4 billion, up 2% from $28.7 billion in Q4 2023. Subsequent to quarter end, AUM increased to $31.2 billion as of May 6, 2024. Net redemptions of $284 million were reported during Q1, but the trend reversed early in Q2. Managed Equities: Actively managed precious metals equity strategies performed well in Q1 and year-to-date. The flagship Sprott Gold equities fund returned 7.3% in Q1 and 11.2% YTD; $70 million outflows occurred in Q1 due to closing of legacy European sub-advised accounts. Private Strategies: Combined lending and streaming strategies AUM was $2.6 billion as of March 31, 2024. The team is monitoring and harvesting investments in the second private lending fund, assessing new opportunities for Lending Fund III, and advancing the activity-managed physical commodity strategy launched in Nov 2023. ETFs: Launched the Sprott Copper Miners ETF and Sprott Junior uranium miners usage ETF in Europe. Sales in Q1 softened from Q4 due to uranium market pullback, but strong net flow rebound occurred since quarter end; the uranium mining ETF was approved at large wire houses like Morgan Stanley, Merrill Lynch, and UBS.

• The trend of net redemptions in Q1 reversed early in Q2.
• Expect institutions and individuals in the Western world to bring gold allocations back to historic norms.
• Confident core investment teams poised to continue delivering attractive returns.
• Anticipate continued AUM growth as themes like nuclear energy and critical materials gain traction.

• Short-term weakness in uranium and related equities.
• Precious metals trusts trading at wider discounts to NAV leading to net redemptions in Q1.
• Dependence on market conditions and investor sentiment for AUM growth.
• Regulatory and geopolitical risks affecting commodity markets, especially uranium.

Q: Could you explain the dynamics of securing placements on wire house platforms for exchange-listed products?

A: John Ciampaglia explained it's a process involving size, liquidity, fees, and bid-ask spread; it's not instant access just because of free trading. For example, the uranium mining ETF, which has been around since end-2019, was approved at large wire houses like Morgan Stanley, Merrill Lynch, and UBS after going through the process.

Q: Is current infrastructure and headcount sufficient to sustain higher AUM growth?

A: Whitney George stated exchange-listed products have operating leverage and capacity. They've invested in sales and marketing, created an institutional team last year, added executives, and beefed up the marketing team to produce thought leadership content for attracting new investors.

Q: Explanation on stock-based compensation reclassification?

A: Kevin Hibbert explained that as part of cleaning up the 'other' category in financial statements, DSUs paid to the Board fit under IFRS 2 as stock-based comp, which was part of the reclassification leading to the change in stock-based compensation numbers.