Contrarian.
Innovative.
Aligned.
2023 Annual Report
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Table of Contents
3.
Financial
Highlights
6.
Leadership
Team
10.
MD&A
4.
Business
Overview
8.
Board
of Directors
30.
Financial
Statements
& Notes
1.
Letter from
Our CEO
5.
Purpose &
Values
9.
ESG
Highlights
71.
Corporate
Information
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Letter From Our CEO
Dear Fellow Shareholders,
We are pleased to report that during 2023, Sprott’s Assets
Under Management (“AUM”) increased by $5.3 billion (23%)
to $28.7 billion. Much of this growth came late in the fourth
quarter and is already positively contributing to our 2024
performance.
Net income for the fourth quarter was $9.7 million ($0.38
per share), up 32% from $7.3 million ($0.29 per share) for
the quarter ended December 31, 2022. On a full-year basis,
net income was $41.8 million ($1.66 per share), up 137%
from $17.6 million ($0.70 per share) during the year ended
December 31, 2022. Net income in the quarter benefited
from higher average AUM across most of our exchange listed
products and private strategies.
Adjusted base EBITDA was $18.8 million ($0.75 per share)
in the quarter, up 4% from $18.1 million ($0.72 per share) for
the quarter ended December 31, 2022. On a full-year basis,
adjusted base EBITDA was $71.9 million ($2.85 per share), up
1 % from $71 million ($2.83 per share) in 2022.
While our fourth quarter results were up 4% year-over-
year, our full year results were relatively flat at 1% due to
management fee growth on higher average AUM being offset
by lower commission income due to the sale of our former
Canadian broker-dealer during the second quarter of the year
and lower at-the-market originations of our uranium trust
throughout 2023.
2023 Review
Our AUM growth in 2023 was mainly driven by strong uranium
prices and inflows to our related exchange listed products.
Since entering the uranium sector in 2021 with the launch
of the Sprott Physical Uranium Trust and the subsequent
addition of Sprott Uranium Miners ETF (URNM), the growth
of our uranium franchise has been a great success for
Sprott’s clients and shareholders. We have since expanded
this product suite by adding two additional uranium mining
equities ETFs listed in North America and Europe. With
uranium currently trading at 16-year highs, these strategies
now account for approximately 28% of our total AUM. Our
success in the uranium space has also had ancillary benefits.
It has introduced us to a new global client base and greatly
expanded our institutional client relationships. Our private
strategies segment also contributed to our AUM growth
during the year via two successful capital raises totaling
approximately $0.7 billion. In 2023, we launched seven
new ETFs in the U.S. and Europe. We also seeded a new
actively-managed physical commodities strategy. Going
forward, we will re-brand our Energy Transition offerings
Whitney George
Chief Executive Officer
“ We have a strong pipeline
of new products and a
growing reputation as
a trusted partner in our
areas of specialization.”
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2024 Outlook
Looking ahead, we expect 2024 to be a volatile year for
investors. Last year we witnessed the start of another
global conflict to add to the growing list. We are somewhat
surprised by the complacent response of the financial
markets thus far to rising geopolitical tensions. This will also
be an election year in which new leaders will be chosen in
64 countries, plus the European Union, that represent nearly
half of the world’s population. Despite, or perhaps because
of, these macroeconomic uncertainties, we are excited about
our prospects. We have a strong pipeline of new products
and a growing reputation as a trusted partner in our areas
of specialization. We are welcoming many new clients who
have just started to explore opportunities in critical materials
and are now joining our loyal clients invested in our precious
metals products. Finally, we have a focused team of employee
shareholders who are eager to demonstrate the potential of
our highly-scalable asset management platform.
Thank you for your continued support. We look forward to
reporting to you on our progress in the quarters ahead.
Sincerely,
Whitney George
Chief Executive Officer
Precious metals
physical trusts
& ETFs
as Critical Materials strategies. Given the demand growth
for electricity in the developed world to power innovations
like cloud computing, artificial intelligence and robotics, we
expect any transition away from fossil fuels to take longer
than expected to ensure clean, secure and affordable energy.
Further, in the developing world, the desire for the basic
appliances we take for granted will require decades of energy
growth to be fulfilled. We do not believe that the case for
critical materials will hinge on any one industry or geography.
Any disappointments that might surface around electric
vehicle adoption will have minimal impact on the demand for
increasingly scarce mined materials.
Precious metals markets were relatively quiet in 2023. Gold
ended the year 13% higher, performing its job as a safe haven
asset and currency despite two liquidity-induced corrections
in the spring and fall. Gold’s performance was notable given
high real interest rates, which are normally toxic for gold
prices. Tellingly, 20% of the global oil trade in 2023 was
conducted in currencies other than U.S. dollars – currencies
increasingly backed by gold. Central banks purchased 4,500
tonnes of gold in 2023, close to the all-time record of 4,899
tonnes in 2022. The silver price was flat in 2023, while the
Silver Institute reported higher demand and projected a third
year of supply deficit.
Precious metals equities continue to lag the underlying
metals, rendering them the cheapest they have ever been on
a relative basis.
As discussed in previous letters, during the year we exited
two non-core businesses to refocus the company to drive
sustainable growth in our core asset management business.
With this cleanup behind us, the Sprott team can now fully
direct its energy and resources to our key growth areas.
As our AUM, product offerings and global client base grow,
we remain committed to reinvesting in the business. In
2023, we added new sales, marketing and investment talent
and reorganized our client relations team to support our
continued growth.
Finally, during 2023, we paid down $30.2 million in debt and
bought back 126,353 shares. We continue to hold significant
co-investments in Sprott products and maintained our
dividend at $1 per share.
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Financial Highlights
Historical AUM Growth
in billions $
Adjusted Base EBITDA
(1 and 5 year performance)
28.7
23.4
CAGR:
30%
20.4
17.4
7.8
9.3
Dec 31,
2018
Dec 31,
2019
Dec 31,
2020
Dec 31,
2021
Dec 31,
2022
Dec 31,
2023
Exchange listed products
Managed equities
Private strategies
Non-core AUM
+1%
+148%
From December 31, 2022
From December 31, 2019
2023: $71.9 million
(operating margin 57%)
2022: $71 million
(operating margin 57%)
2023: $71.9 million
(operating margin 57%)
2019: $29 million
(operating margin 38%)
AUM Composition
Historical Operating Margin Growth
$28.7B
Precious metals
physical trusts
& ETFs
53%
$15.3B
28%
$7.9B
Critical materials
physical trust & ETFs
57%
10%
$2.9B
9%
$2.6B
Managed equities funds
Private strategies funds
38%
2019
2020
2021
2022
2023
Historical Annual Shareholder Return
Sprott Inc - Dividend Adjusted
S&P/TSX Composite Total Return
350
300
250
200
150
100
50
0
+103%
+71%
Dec 31,
Dec-31-2018
2018
Dec 31,
Dec-31-2019
2019
Dec 31,
Dec-31-2020
2020
Dec 31,
Dec-31-2021
2021
Dec 31,
Dec-31-2022
2022
Dec 31,
Dec-31-2023
2023
Sprott Inc.
S&P/TSX Composite Total Return
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Business Overview
Exchange Listed
Products
Private
Strategies
Managed
Equities
Our reportable operating segments are as follows:
Exchange Listed Products
• The Company’s closed-end physical trusts and exchange traded funds (“ETFs”).
Managed Equities
• The Company’s alternative investment strategies managed in-house and on a sub-advised basis.
Private Strategies
• The Company’s lending and streaming activities which occur through limited partnership vehicles
(“private strategies LPs”).
Corporate
• Provides the Company’s operating segments with capital, balance sheet management and other shared services.
All other segments
• Contains all non-reportable segments as per IFRS 8, Operating Segments (“IFRS 8”). Effective Q1 2023, the brokerage
segment no longer met the definition of a reportable segment. Consequently, this segment is now included as part of
“All other segments”. See Note 14 of the annual financial statements for further details.
For a detailed account of the underlying principal subsidiaries within our reportable operating segments, refer to the Company’s Annual Information Form and
note 2 of the annual financial statements.
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Purpose & Values
We aspire to be the leading global asset manager
focused on precious metals and critical materials.
Our Purpose:
As contrarian investors with a long-term
investment horizon, we remain both patient
and persistent. We will continue to innovate
to bring our clients the best possible
investment products. We remain aligned
(shareholders, clients,
with our partners
employees, and the communities wherein
we operate) as significant shareholders of
Sprott and meaningful co-investors in Sprott
products. We are committed to the support
and advancement of our people. We give
back to communities we operate in both with
our time and resources. At Sprott, we have
a strong plan, but the flexibility to adjust
where necessary. We share our success with
our partners.
Our Values:
• We believe in partnership with our
employees, clients, and our shareholders
• We are prepared to be contrarian
• We are innovative
• We are aligned
• We are patiently persistent
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Leadership Team
From left to right (first row) – Heather Macleod, Chief Marketing Officer, Sprott Inc.; John Ciampaglia, CEO,
Sprott Asset Management; Whitney George, CEO, Sprott Inc.
(second row) – Kevin Hibbert, CFO, Sprott Inc.; Ed Coyne, Head of Global Sales, Sprott Inc.; Arthur Einav,
General Counsel, Sprott Inc.; Greg Caione, Head of Private Strategies, Sprott Inc.
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Leadership Team continued
Samay Bhachech,
Managing Partner
Varinder Bhathal,
Managing Partner
Vishal Chhabra,
Managing Partner
Caroline Donally,
Managing Partner
Dan Elder,
Managing Partner
Douglas Groh,
Managing Partner
Jim Grosdanis,
Managing Partner
Michael Harrison,
Managing Partner
John Hathaway,
Managing Partner
Shree Kargutkar,
Managing Partner
Sarah-Jane Martin,
Managing Partner
Jason Mayer,
Managing Partner
Ryan McIntyre,
Managing Partner
Lara Misner,
Managing Partner
Narinder Nagra,
Managing Partner
Maria Smirnova,
Managing Partner
J’aime Spork,
Managing Partner
Andrew Stronach,
Managing Partner
Justin Tolman,
Managing Partner
Tom Ulrich,
Managing Partner
Robert Villaflor,
Managing Partner
Glen Williams,
Managing Partner
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Board of Directors
“ With our keen focus on precious metals and critical
materials investments, we believe Sprott is well
positioned to continue creating value for our
shareholders and clients and we look forward to the
year ahead.”
Ron Dewhurst, Chairman
Graham Birch
Graham Birch
Chair, Audit and Risk
Chair, Audit and Risk
Management Committee
Management Committee
Barbara Connolly Keady
Barbara Connolly Keady
Chair, Governance, Sustainability
Chair, Governance, Sustainability
and Nominating Committee
and Nominating Committee
Catherine Raw
Catherine Raw
Chair, Compensation Committee
Chair, Compensation Committee
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Judith W. O’Connell
Judith W. O’Connell
Independent Director
Independent Director
Whitney George
Whitney George
Chief Executive Officer
Chief Executive Officer
Non-independent Director
Non-independent Director
Image source: www.oceanhouseri.com
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Environmental, Social, Governance Highlights
Sprott is committed to implementing ESG and sustainability considerations into both our
investment management activities as well as our corporate operations. Our 2023 ESG
accomplishments are noted below. Please see “Environmental, social, and governance policy”
in the 2023 Annual Information Form for additional details regarding our commitment to ESG.
Environmental
Social
Governance
• We completed our annual assessment
of greenhouse gas emissions (GHG)
associated with our offices in Canada and
the United States and achieved carbon
neutrality under the Carbonzero program
after we sourced carbon offsets in the
equivalent amount of our 2022 Scope 1
and Scope 2 GHGs.
• We continue to grow our suite of
investment funds providing investors
with exposure to materials essential for
the generation, transmission and storage
of cleaner energy. Our critical materials
strategies now represent $7.9 billion or
28% of our total AUM as at December 31,
2023, up 12% from this time last year.
These include the Sprott Physical Uranium
Trust and Sprott Uranium Miners ETFs,
investment vehicles focused on a form
of energy generation that is one of the
cleanest energy generation sources based
on CO2 emissions(1), and a contributor to
global decarbonization goals.
• This year, we launched the Sprott
Copper Miners ESG Screened UCITS ETF,
providing investors with a differentiated
offering for the production of copper,
a raw material that is essential in the
transition to a less carbon-intensive
economy and critical for the energy
transition from fossil fuels to cleaner
energy sources and technologies.
• We continue to engage a leading,
independent Diversity, Equity and
Inclusion (“DEI”) specialist to further refine
and enhance our overall approach to DEI.
In this context, we have established a
multi-year DEI strategic plan to continue
to promote and enhance DEI at Sprott.
We have also formed a DEI Leadership
Committee led by our employees and
championed by senior leadership to
ensure DEI initiatives are developed,
monitored and maintained throughout the
organization.
• Along with our mandatory company-wide
training, in the current year, we completed
an inaugural DEI survey which established
a baseline of employee demographics
and inclusion sentiments amongst our
employees.
• In response to the Truth and Reconciliation
Commission Calls to Action, we are
proud to be the founding sponsor of
First Nations STEM Futures Academy
(“FNSFA”), which will expand the offerings
of Indigenous Futures in Engineering that
will be administered by a leading Canadian
university. The mission of FNSFA is to
extend and enrich STEM experiences
throughout high school, targeting
communities underrepresented in post-
secondary STEM programs, and First
Nations communities.
• Sprott continues to be a longstanding
supporter of the UHN Foundation, one
of the largest health care and medical
research organizations in North America,
and in 2023, our contributions supported
the advancement of equity in health and
wellness through research and education.
• Continued our support of various
organizations in the communities we
operate, that focus on the areas of health
and wellness, DEI, and sustainability in the
mining sector.
• We completed our second assessment
under the Principles for Responsible
Investment, continuing our incorporation
of ESG factors into our investment
ownership decisions.
• Added a new independent board member.
Now 83% of our board members are
independent and 50% of them are women.
• We continue to add depth to our
annual board of directors and executive
committee training program with
additional CPD-accredited mandatory
training modules, covering such topics
as DEI, cyber security, and the role of
effective committee chairs.
• We continue to comply with the terms
and conditions of our sustainability linked
credit facility which is based primarily on
ESG performance metrics.
• Successfully completed our annual
National Institute of Standards (“NIST”)
audit for 2023 and our cybersercurity
framework continues to be classified
as Tier 3, indicating that we have best
practices in place.
• Our compensation practices continue
to incorporate a mix of pay reflecting
the objectives of our shareholders
that management be compensated
more towards variable at-risk pay
(AIP) and long-term stock incentives
(LTIP). Performance evaluation when
determining compensation levels for
senior managing partners is achieved
via scorecards that not only incorporate
quantitative measures such as net
revenues, EBITDA and operating margins,
but also key qualitative measures
surrounding ESG, employee engagement,
risk management etc.
1) Based on Greenhouse gas emissions factors from the Intergovernmental Panel on Climate Change AR5 (2014) and Pehl et al. (2017) in Nature
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Management's Discussion and Analysis
Years ended December 31, 2023 and 2022
10
Forward looking statements
Certain statements in this Management's Discussion & Analysis ("MD&A"), and in particular the "Outlook" section, contain forward-looking information and forward-looking
statements (collectively referred to herein as the "Forward-Looking Statements") within the meaning of applicable Canadian and U.S. 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 MD&A contains Forward-Looking Statements pertaining to: (i) our strong pipeline of new
products and a growing reputation as a trusted partner in our areas of specialization; (ii) the potential of our highly-scalable asset management platform; (iii) our positioning to
benefit from a highly constructive operating environment for precious metals and critical materials in fiscal 2024; (iv) the eventual monetization of shares received on the
realization of a previously unrecorded contingent asset from a historical acquisition; (vi) the potential contingent consideration owing on last year's acquisition of assets relating
to the North Shore Global Uranium Mining ETF (“URNM”) acquisition; and (vii) the declaration, payment and designation of dividends and confidence that our business will
support the dividend level without impacting our ability to fund future growth initiatives.
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: (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; (iv) the impact of public health outbreaks; and (v) those assumptions disclosed herein under the heading "Critical Accounting Estimates and significant
judgments". 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 favorable
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 private strategies business; (xxvii) those risks described under the heading "Risk Factors" in the Company’s annual information form dated February 20, 2024; and
(xxviii) those risks described under the headings "Managing Financial Risk" and "Managing Non-Financial Risk" in this MD&A. 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 securities laws.
Management's discussion and analysis
This MD&A of financial condition and results of operations, dated February 20, 2024, presents an analysis of the consolidated
financial condition of the Company and its subsidiaries as at December 31, 2023, compared with December 31, 2022, and the
consolidated results of operations for the three and twelve months ended December 31, 2023, compared with the three and twelve
months ended December 31, 2022. The board of directors of the Company approved this MD&A on February 20, 2024. All note
references in this MD&A are to the notes to the Company's December 31, 2023 audited annual consolidated financial statements
("annual financial statements"), unless otherwise noted. The Company was incorporated under the Business Corporations Act
(Ontario) on February 13, 2008.
Presentation of financial information
The annual financial statements, including the required comparative information, have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). Financial results,
including related historical comparatives contained in this MD&A, unless otherwise specified herein, are based on the annual financial
statements. While the Company's source and presentation currency is the U.S. dollar, IFRS requires that the Company measure its
foreign exchange gains and losses through its consolidated statements of operations and comprehensive income using the Canadian
dollar as its functional currency. Accordingly, all dollar references in this MD&A are in U.S. dollars, however the translation gains and
losses were measured using the Canadian dollar as the functional currency. The use of the term "prior period" refers to the three and
twelve months ended December 31, 2022.
11
Key performance indicators and non-IFRS and other financial measures
The Company measures the success of its business using a number of key performance indicators that are not measurements in accordance with IFRS and
should not be considered as an alternative to net income (loss) or any other measure of performance under IFRS. Non-IFRS financial measures do not have a
standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Our key performance
indicators and non-IFRS and other financial measures are discussed below. For quantitative reconciliations of non-IFRS financial measures to their most
directly comparable IFRS financial measures, please see page 15 of this MD&A.
Assets under management
Assets under management ("AUM") refers to the total net assets managed by the Company through its various investment
product offerings and managed accounts. Prior to the exit of our non-core asset management business domiciled in Korea
("Korea"), we divided our total AUM into two distinct categories: Core and Non-core. Core AUM arose from our IFRS reportable
segments involved in asset management activities (exchange listed products segment, managed equities segment and the
private strategies segment) and non-core AUM arose from IFRS non-reportable segments (primarily Korea).
Net inflows
Net inflows result in changes to AUM, and as such, have a direct impact on the revenues and earnings of the Company.
They are described individually below:
At-the-market ("ATM") transactions and ETF unit creations
ATM transactions of our physical trusts and new 'creations' of ETF units are the primary manner in which inflows arise
in our exchange listed products segment.
Net sales
Fund sales (net of redemptions) are the primary manner in which inflows arise in our managed equities segment.
Net capital calls
Capital calls, net of capital distributions ("net capital calls") are the primary manner in which inflows arise in our
private strategies segment.
Other net inflows
Other net inflows include: (1) new AUM from fund launches; (2) fund acquisitions; and (3) lost AUM from fund closures. It
is possible for committed capital in our private strategies to earn a commitment fee despite being uncalled, in which case, it
will also be included in this category as AUM.
Net fees
Management fees, net of trailer, sub-advisor, fund expenses and direct payouts, and carried interest and performance fees, net
of carried interest and performance fee payouts (internal and external), are key revenue indicators as they represent the net
revenue contribution after directly associated costs that we generate from our AUM.
Net commissions
Commissions, net of commission expenses (internal and external), arise from purchases and sales of uranium in our exchange
listed products segment and transaction-based service offerings by our broker-dealers.
Net compensation
Net compensation excludes commission expenses paid to employees, other direct payouts to employees, carried interest and
performance fee payouts to employees, which are all presented net of their related revenues in this MD&A, and severance, new
hire accruals and other which are non-recurring.
Total shareholder return
Total shareholder return is the financial gain (loss) that results from a change in the Company's share price, plus any dividends
paid over the period.
12
EBITDA, adjusted EBITDA, adjusted base EBITDA and operating margin
EBITDA in its most basic form is defined as earnings before interest expense, income taxes, depreciation and amortization.
EBITDA (or adjustments thereto) is a measure commonly used in the investment industry by management, investors and
investment analysts in understanding and comparing results by factoring out the impact of different financing methods, capital
structures, amortization techniques and income tax rates between companies in the same industry. While other companies,
investors or investment analysts may not utilize the same method of calculating EBITDA (or adjustments thereto), the Company
believes its adjusted base EBITDA metric, in particular, results in a better comparison of the Company's underlying operations
against its peers and a better indicator of recurring results from operations as compared to other non-IFRS financial measures.
Operating margins are a key indicator of a company’s profitability on a per dollar of revenue basis, and as such, is commonly
used in the financial services sector by analysts, investors and management.
Neither EBITDA, adjusted EBITDA, adjusted base EBITDA, or operating margin have a standardized meaning under IFRS.
Consequently, they should not be considered in isolation, nor should they be used in substitute for measures of performance
prepared in accordance with IFRS.
The following table outlines how our EBITDA, adjusted EBITDA, adjusted base EBITDA and operating margin measures are
determined:
(in thousands $)
Net income for the period
Adjustments:
Interest expense
Provision for income taxes
Depreciation and amortization
EBITDA
Other adjustments:
(Gain) loss on investments (1)
Amortization of stock based compensation
Other (income) and expenses (2)
Adjusted EBITDA
Other adjustments:
Carried interest and performance fees
Carried interest and performance fee payouts - internal
Carried interest and performance fee payouts - external
Adjusted base EBITDA
Operating margin (3)
3 months ended
12 months ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
9,664
7,331
41,799
17,632
844
1,159
658
12,325
(2,808)
4,260
5,263
19,040
(503)
222
—
1,076
2,372
710
11,489
930
3,635
2,560
18,614
(1,219)
567
121
4,060
8,492
2,843
57,194
(1,375)
16,282
219
72,320
(891)
458
—
18,759
18,083
71,887
2,923
7,447
3,355
31,357
10,242
14,546
15,929
72,074
(3,265)
1,596
597
71,002
56 %
59 %
57 %
57 %
(1) This adjustment removes the income effects of certain gains or losses on short-term investments, co-investments, and digital gold strategies to ensure the reporting objectives
of our EBITDA metric as described above are met.
(2) In addition to the items outlined in Note 5 of the annual financial statements, this reconciliation line also includes $0.2 million severance, new hire accruals and other for the
three months ended December 31, 2023 (three months ended December 31, 2022 - $1.2 million) and $5.6 million for the year ended December 31, 2023 (year ended
December 31, 2022 - $5.2 million). This reconciliation line excludes income (loss) attributable to non-controlling interest of $0.1 million for the three months ended
December 31, 2023 (three months ended December 31, 2022 - $0.3 million) and ($0.9) million for the year ended December 31, 2023 (year ended December 31, 2022 -
($0.5) million).
(3) Calculated as adjusted base EBITDA inclusive of depreciation and amortization. This figure is then divided by revenues before gains (losses) on investments, net of direct costs
as applicable.
13
Business development & outlook
•
•
•
•
•
A key area of focus this year was the strategic exit of all remaining non-core businesses across the Company. This
initiative led to the third quarter exit of our legacy, non-core asset management business domiciled in Korea. In the
second quarter of the year, we exited our former Canadian broker-dealer.
During the year, the Company bought back 126,353 shares, or 0.49% of our January 1, 2023 float, for total proceeds
of $4.2 million.
In the third quarter, we completed a review of our current and near-term funding and borrowing needs and determined
that we no longer require a $120 million credit facility. Consequently, the Company lowered the maximum borrowing
capacity under its credit facility to $75 million. In addition, as part of the Company’s ongoing treasury and balance
sheet management program, we paid down $30.2 million on our line of credit to a December 31, 2023 outstanding
balance of $24.2 million (December 31, 2022: $54.4 million).
During the second quarter, we successfully closed our fund raising efforts on a new lending fund and a new streaming
fund in our private strategies segment. The capital raises led to $688 million of new AUM in the year.
In the first quarter of the year, we launched five new exchange listed products focused on providing investors with
pure-play exposure to critical materials essential to the generation, transmission and storage of cleaner energy. The five
funds were: Sprott Energy Transition Materials ETF (Nasdaq: SETM), Sprott Lithium Miners ETF (Nasdaq: LITP), Sprott
Junior Uranium Miners ETF (Nasdaq: URNJ), Sprott Junior Copper Miners ETF (Nasdaq: COPJ); and Sprott Nickel Miners
ETF (Nasdaq: NIKL).
With the exit of low operating margin, non-core businesses, a reduction in financial leverage and introduction of new critical
materials product offerings to our focused and scalable operating platform, the Company is well positioned to benefit from a
highly constructive operating environment for precious metals and critical materials in fiscal 2024. Subsequent to year-end, we
continue to benefit from our late 2023 asset growth as well as ongoing strength in uranium prices. As at February 16, 2024,
AUM was $29.2 billion, up 2% from $28.7 billion at December 31, 2023.
14
Results of operations
Summary financial information
(In thousands $)
Summary income statement
Management fees
Trailer, sub-advisor and fund expenses
Direct payouts
Carried interest and performance fees
Carried interest and performance fee payouts - internal
Carried interest and performance fee payouts - external (1)
Net fees
Commissions
Commission expense - internal
Commission expense - external (1)
Net commissions
Finance income
Gain (loss) on investments
Other income (2)
Total net revenues(3)
Q4
2023
Q3
2023
Q2
2023
Q1
2023
Q4
2022
Q3
2022
Q2
2022
Q1
2022
34,485
(1,968)
(1,283)
503
(222)
—
31,515
33,116
(1,557)
(1,472)
—
—
—
30,087
33,222
(1,635)
(1,342)
388
(236)
—
30,397
31,434
(1,554)
(1,187)
—
—
—
28,693
28,405
(1,204)
(1,114)
1,219
(567)
(121)
26,618
29,158
(1,278)
(1,121)
—
—
—
26,759
30,620
(1,258)
(1,272)
—
—
—
28,090
27,172
(853)
(1,384)
2,046
(1,029)
(476)
25,476
1,331
(161)
(441)
729
539
(88)
(92)
359
1,647
(494)
(27)
1,126
4,784
(1,727)
(642)
2,415
5,027
(1,579)
(585)
2,863
6,101
(2,385)
(476)
3,240
6,458
(2,034)
(978)
3,446
13,077
(3,134)
(3,310)
6,633
1,214
2,808
405
36,671
1,181
(1,441)
(73)
30,113
1,277
(1,950)
19,763
50,613
1,180
1,958
1,250
35,496
1,439
(930)
999
30,989
933
45
(227)
30,750
1,186
(7,884)
170
25,008
1,433
(1,473)
208
32,277
Compensation
Direct payouts
Carried interest and performance fee payouts - internal
Commission expense - internal
Severance, new hire accruals and other
Net compensation
16,675
(1,283)
(222)
(161)
(179)
14,830
16,825
(1,472)
—
(88)
(122)
15,143
21,610
(1,342)
(236)
(494)
(4,067)
15,471
19,103
(1,187)
—
(1,727)
(1,257)
14,932
17,030
(1,114)
(567)
(1,579)
(1,240)
12,530
18,934
(1,121)
—
(2,385)
(1,349)
14,079
19,364
(1,272)
—
(2,034)
(2,113)
13,945
21,789
(1,384)
(1,029)
(3,134)
(514)
15,728
Severance, new hire accruals and other (4)
Selling, general and administrative
Interest expense
Depreciation and amortization
Other expenses
Total expenses
Net income (5)
Net income per share (6)
Adjusted base EBITDA
Adjusted base EBITDA per share
Operating margin
Summary balance sheet
Total assets (7)
Total liabilities (8)
Total AUM
Average AUM
179
4,195
844
658
5,142
25,848
122
4,000
882
731
3,811
24,689
4,067
4,988
1,087
748
471
26,832
1,257
4,267
1,247
706
2,824
25,233
1,240
4,080
1,076
710
1,650
21,286
1,349
4,239
884
710
5,697
26,958
2,113
4,221
483
959
868
22,589
514
3,438
480
976
1,976
23,112
9,664
0.38
18,759
0.75
6,773
0.27
17,854
0.71
17,724
0.70
17,953
0.71
7,638
0.30
17,321
0.68
7,331
0.29
18,083
0.72
3,071
0.12
16,837
0.67
757
0.03
17,909
0.71
6,473
0.26
18,173
0.73
56 %
56 %
57 %
57 %
59 %
55 %
55 %
57 %
378,835
73,130
375,948
79,705
381,519
83,711
386,765
108,106
383,748
106,477
375,386
103,972
376,128
89,264
380,843
83,584
28,737,742 25,398,159 25,141,561 25,377,189 23,432,661 21,044,252 21,944,675 23,679,354
27,014,109 25,518,250 25,679,214 23,892,335 22,323,075 21,420,015 23,388,568 21,646,082
(1) These amounts are included in the "Trailer, sub-advisor and fund expenses" line on the consolidated statements of operations.
(2) The majority of the amount in Q2, 2023 relates to the receipt of shares on the realization of a previously unrecorded contingent asset from a historical acquisition.
(3) Total revenues for the year ended December 31, 2023 were $169,021 (December 31, 2022- $145,182; December 31, 2021- $164,645).
(4) The majority of the Q2, 2023 amount is accelerated compensation and other transition payments to the former CEO on the successful completion of the sale of Sprott Capital Partners ("SCP") during the second
quarter.
(5) Net income for the year ended December 31, 2023 was $41,799 (December 31, 2022 - $17,632; December 31, 2021- $33,185).
(6) Basic and diluted net income per share for the year ended December 31, 2023 was $1.66 and $1.60, respectively (December 31, 2022 - $0.70 and $0.67, respectively; December 31, 2021 - $1.33 and $1.28,
respectively).
(7) Total assets as at December 31, 2023 were $378,835 (December 31, 2022 - $383,748; December 31, 2021- $365,873).
(8) Total liabilities as at December 31, 2023 were $73,130 (December 31, 2022 - $106,477; December 31, 2021 - $74,654).
15
AUM summary
AUM was $28.7 billion as at December 31, 2023, up $3.3 billion (13%) from September 30, 2023 and up $5.3 billion (23%)
from December 31, 2022. On a three and twelve months ended basis, we benefited from strong uranium prices, as well as
inflows across the majority of our exchange listed products. We also benefited from capital raises in our private strategies funds.
3 months results
(In millions $)
Exchange listed products
- Physical trusts
- Physical Gold Trust
- Physical Uranium Trust
- Physical Gold and Silver Trust
- Physical Silver Trust
- Physical Platinum & Palladium Trust
- Exchange Traded Funds
- Critical Materials ETFs
- Precious Metals ETFs
Managed equities
- Precious metals strategies
- Other (3)
Private strategies
Core AUM
Non-core AUM
Total AUM (5)
12 months results
(In millions $)
AUM
Sep. 30, 2023
Net
inflows (1)
Market
value changes
Other
net inflows (1)
AUM
Dec. 31, 2023
Blended net
management fee rate (2)
5,866
4,611
3,916
3,826
114
1,680
316
20,329
1,432
1,023
2,455
2,614
25,398
—
25,398
(5)
55
(75)
(27)
5
429
(8)
374
(53)
212
159
(8)
525
—
525
671
1,107
389
271
(3)
34
31
2,500
187
73
260
39
2,799
—
2,799
—
—
—
—
—
—
—
—
—
16
16
—
16
—
16
6,532
5,773
4,230
4,070
116
2,143
339
23,203
1,566
1,324
2,890
2,645
28,738
—
28,738
0.35%
0.30%
0.40%
0.45%
0.50%
0.59%
0.31%
0.39%
0.86%
1.05%
0.94%
0.91%
0.50%
n/a
0.50%
AUM
Dec. 31, 2022
Net
inflows (1)
Market
value changes
Other
net inflows (1)
AUM
Dec. 31, 2023
Blended net
management fee rate (2)
Exchange listed products
- Physical trusts
- Physical Gold Trust
- Physical Uranium Trust
- Physical Gold and Silver Trust
- Physical Silver Trust
- Physical Platinum & Palladium Trust
- Exchange Traded Funds
- Critical Materials ETFs
- Precious Metals ETFs
Managed equities
- Precious metals strategies
- Other (3)
Private strategies
Core AUM
5,746
2,876
3,998
4,091
138
857
349
18,055
1,721
1,032
2,753
1,880
22,688
66
269
(75)
36
14
755
(14)
1,051
(147)
207
60
37
1,148
720
2,628
307
(57)
(36)
521
4
4,087
(8)
69
61
40
4,188
—
—
—
—
—
10
—
10
—
16
16
688
714
(702) (4)
6,532
5,773
4,230
4,070
116
2,143
339
23,203
1,566
1,324
2,890
2,645
28,738
0.35%
0.30%
0.40%
0.45%
0.50%
0.59%
0.31%
0.39%
0.86%
1.05%
0.94%
0.91%
0.50%
745
Non-core AUM
Total AUM (5)
(1) See "Net inflows" and "Other net inflows" in the key performance indicators and non-IFRS and other financial measures section of this MD&A. Full-year figures were reclassified to conform with current
presentation.
(2) Management fee rate represents the weighted average fees for all funds in the category, net of trailer, sub-advisor and fund expenses.
(3) Includes institutional managed accounts and high net worth discretionary managed accounts in the U.S.
(4) We exited our non-core asset management business domiciled in Korea. Historically, Korea was immaterial to our overall operations as it accounted for less than 1% of consolidated net income and adjusted
23,433
28,738
0.50%
4,171
1,122
(26)
(17)
n/a
—
12
base EBITDA.
(5) No performance fees are earned on exchange listed products. Performance fees are earned on certain precious metals strategies and are based on returns above relevant benchmarks. Other managed equities
strategies primarily earn performance fees on flow-through products. Private strategies LPs earn carried interest calculated as a predetermined net profit over a preferred return.
16
Key revenue lines
Key expense lines
Management, carried interest and performance fees
Compensation
Management fees were $34.5 million in the quarter, up $6.1
million (21%) from the quarter ended December 31, 2022
and $132.3 million on a full-year basis, up $16.9 million
(15%) from the year ended December 31, 2022. Carried
interest and performance fees were $0.5 million in the
quarter, down $0.7 million (59%) from the quarter ended
December 31, 2022 and $0.9 million on a full-year basis,
down $2.4 million (73%) from the year ended December 31,
2022. Net fees were $31.5 million in the quarter, up $4.9
million (18%) from the quarter ended December 31, 2022
and $120.7 million on a full-year basis, up $13.7 million
(13%) from the year ended December 31, 2022. Our revenue
performance was due to higher average AUM across most of
our exchange listed products and higher average AUM in our
private strategies funds as a result of two new fund
launches. On a full-year basis, these increases were partially
offset by lower average AUM in our managed equities
segment and lower carried interest crystallization in our
private strategies segment.
Commission revenues
Commission revenues were $1.3 million in the quarter, down
$3.7 million (74%) from the quarter ended December 31,
2022 and $8.3 million on a full-year basis, down $22.4
million (73%) from the year ended December 31, 2022. Net
commissions were $0.7 million in the quarter, down $2.1
million (75%) from the quarter ended December 31, 2022
and $4.6 million on a full-year basis, down $11.6 million
(71%) from the year ended December 31, 2022. Lower
commissions were due to lower ATM activity in our physical
uranium trust on a full-year basis and the sale of our former
Canadian broker-dealer in the second quarter.
Finance income
Finance income was $1.2 million in the quarter, down $0.2
million (16%) from the quarter ended December 31, 2022
and $4.9 million on a full-year basis, down $0.1 million (3%)
from the year ended December 31, 2022. Our results were
primarily driven by lower income generation in co-investment
positions we hold in LPs managed in our private strategies
segment.
Net compensation expense was $14.8 million in the quarter,
up $2.3 million (18%) from the quarter ended December 31,
2022 and $60.4 million on a full-year basis, up $4.1 million
(7%) from the year ended December 31, 2022. The increase
in the quarter and on a full-year basis was primarily due to
new hires and increased AIP accruals on higher net fee
generation.
Selling, general & administrative ("SG&A")
SG&A was $4.2 million in the quarter, up $0.1 million (3%)
from the quarter ended December 31, 2022 and $17.5
million on a full-year basis, up $1.5 million (9%) from the
year ended December 31, 2022. The increase in the quarter
and on a full-year basis was due to higher marketing and
technology costs.
Earnings
Net income was $9.7 million ($0.38 per share) in the
quarter, up 32% from $7.3 million ($0.29 per share) for the
quarter ended December 31, 2022. On a full-year basis, net
income was $41.8 million ($1.66 per share), up 137% from
$17.6 million ($0.70 per share) for the year ended December
31, 2022. Net income in the quarter benefited from higher
average AUM across most of our exchange listed products
and private strategies. On a full-year basis we benefited from
higher average AUM as noted previously, but also from the
second quarter realization of an unrecorded contingent asset
relating to a prior period acquisition.
Adjusted base EBITDA was $18.8 million ($0.75 per share) in
the quarter, up 4% from $18.1 million ($0.72 per share) for
the quarter ended December 31, 2022. On a full-year basis,
adjusted base EBITDA was $71.9 million ($2.85 per share),
up 1% from $71 million ($2.83 per share) for the year ended
December 31, 2022. The
increased management fees
generated from higher average AUM on a full-year basis
were largely offset by lower commission income due to the
sale of our former Canadian broker-dealer during the second
quarter of the year.
17
Additional revenues and expenses
Balance sheet
Total assets were $378.8 million, down $4.9 million from
December 31, 2022. The decrease was due to a reduction in
cash on the partial repayment of our loan facility, which
more than offset the increase in co-investments held by the
Company. Total liabilities were $73.1 million, down $33.3
million from December 31, 2022. The decrease was due to
the partial pay down of the loan facility mentioned above.
Total shareholder's equity was $305.7 million, up $28.4
million from December 31, 2022.
Investment gains in the quarter and on a full-year basis were
from market value appreciation in our co-investments and
equity holdings.
Other income was lower in the quarter and higher on a full-
year basis. The decrease in the quarter was due to lower
miscellaneous income and the increase on a full-year basis was
due to the realization of an unrecorded contingent asset in the
second quarter.
Other expenses were higher on a full-year basis due to costs
related to the exit of our non-core businesses (Korea and our
former Canadian broker-dealer). See Note 5 of the annual
financial statements for further details.
Depreciation of property and equipment was lower in the
quarter and on a full-year basis due to a decrease in
depreciation expense related to cancelled lease agreements on
the sale of Korea.
18
Reportable operating segments
Exchange listed products
(In thousands $)
Summary income statement
Management fees
Trailer, sub-advisory and fund expenses
Net fees
Commissions
Commission expense - internal
Commission expense - external
Net commissions
Gain (loss) on investments
Other income
Total net revenues
Net compensation
Severance, new hire accruals and other
Selling, general and administrative
Interest expense
Depreciation and amortization
Other expenses
Total expenses
Income before income taxes
Adjusted base EBITDA
Operating margin
Total AUM
Average AUM
3 and 12 months ended
3 months ended
12 months ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
22,744
(1,580)
21,164
947
(66)
(441)
440
317
65
21,986
3,518
56
1,565
476
46
2,732
8,393
13,593
17,401
17,544
(826)
16,718
359
(26)
(187)
146
634
52
17,550
2,987
164
947
527
27
(56)
4,596
12,954
13,800
81,417
(5,058)
76,359
2,390
(171)
(1,186)
1,033
(359)
19,853
96,886
13,422
89
5,831
2,376
161
1,012
22,891
73,995
62,303
67,609
(2,840)
64,769
9,119
(682)
(4,588)
3,849
3
88
68,709
12,016
591
3,004
1,315
104
2,081
19,111
49,598
56,948
80 %
81 %
80 %
83 %
23,202,564
21,675,252
18,055,140
17,085,679
23,202,564
19,689,463
18,055,140
16,724,098
Income before income taxes was $13.6 million in the quarter, up $0.6 million (5%) from the quarter ended December 31, 2022
and was $74 million on a full-year basis, up $24.4 million (49%) from the year ended December 31, 2022. Adjusted base
EBITDA was $17.4 million in the quarter, up $3.6 million (26%) from the quarter ended December 31, 2022 and was $62.3
million on a full-year basis, up $5.4 million (9%) from the year ended December 31, 2022. Our three and twelve months ended
results benefited from higher average AUM across most of our exchange listed products. Income before income taxes on a full-
year basis also benefited from the receipt of shares on the realization of an unrecorded contingent asset from a historical
acquisition in the second quarter of the year.
19
Managed equities
(In thousands $)
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
3 months ended
12 months ended
Summary income statement
Management fees
Trailer, sub-advisor and fund expenses
Direct payouts
Carried interest and performance fees
Carried interest and performance fee payouts - internal
Net fees
Gain (loss) on investments
Other income
Total net revenues
Net compensation
Severance, new hire accruals and other
Selling, general and administrative
Interest expense
Depreciation and amortization
Other expenses
Total expenses
Income before income taxes
Adjusted base EBITDA
Operating margin
Total AUM
Average AUM
3 and 12 months ended
6,606
(350)
(824)
253
(108)
5,577
2,359
60
7,996
3,139
95
1,272
333
139
122
5,100
6,386
(355)
(694)
559
(240)
5,656
2,851
328
8,835
2,579
74
1,447
507
80
(26)
4,661
28,128
(1,481)
(3,520)
641
(344)
23,424
907
504
24,835
12,976
607
4,950
1,470
483
391
20,877
30,577
(1,658)
(3,768)
578
(254)
25,475
(2,246)
801
24,030
11,483
288
5,377
1,467
311
1,028
19,954
2,896
1,601
29 %
4,174
1,845
33 %
3,958
7,756
34 %
4,076
9,932
39 %
2,890,060
2,717,386
2,752,700
2,634,818
2,890,060
2,801,864
2,752,700
2,940,192
Income before income taxes was $2.9 million in the quarter, down $1.3 million (31%) from the quarter ended December 31,
2022 and was $4 million on a full-year basis, down $0.1 million (3%) from the year ended December 31, 2022. Adjusted base
EBITDA was $1.6 million in the quarter, down $0.2 million (13%) from the quarter ended December 31, 2022 and was $7.8
million on a full-year basis, down $2.2 million (22%) from the year ended December 31, 2022. Our three and twelve months
ended results were impacted by market value pressures and modest redemption activities on our managed equities products,
coupled with higher compensation expense relating to new hires.
20
Private strategies
(In thousands $)
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
3 months ended
12 months ended
Summary income statement
Management fees
Trailer, sub-advisor and fund expenses
Direct payouts
Carried interest and performance fees
Carried interest and performance fee payouts - internal
Carried interest and performance fee payouts - external
Net fees
Finance income
Gain (loss) on investments
Other income
Total net revenues
Net compensation
Severance, new hire accruals and other
Selling, general and administrative
Interest expense
Depreciation and amortization
Other expenses
Total expenses
Income (loss) before income taxes
Adjusted base EBITDA
Operating margin
Total AUM
Average AUM
3 and 12 months ended
5,304
(35)
(459)
250
(114)
—
4,946
1,133
212
4
6,295
2,500
—
356
2
7
1,661
4,526
3,599
(23)
(420)
660
(327)
(121)
3,368
1,319
(4,672)
9
24
1,431
103
264
—
—
131
1,929
21,290
(172)
(1,764)
250
(114)
—
19,490
4,442
2,142
59
26,133
9,917
54
1,576
6
25
1,976
13,554
13,442
(95)
(1,123)
2,687
(1,342)
(597)
12,972
4,794
(4,007)
68
13,827
6,842
416
1,064
—
—
921
9,243
1,769
3,090
52 %
(1,905)
2,796
62 %
12,579
12,361
52 %
4,584
9,207
54 %
2,645,118
2,621,471
1,879,840
1,882,378
2,645,118
2,407,990
1,879,840
1,636,178
Income before income taxes was $1.8 million in the quarter, up $3.7 million from the quarter ended December 31, 2022 and
was $12.6 million on a full-year basis, up $8 million from the year ended December 31, 2022. Adjusted base EBITDA was $3.1
million in the quarter, up $0.3 million (11%) from the quarter ended December 31, 2022 and was $12.4 million on a full-year
basis, up $3.2 million (34%) from the year ended December 31, 2022. Our three and twelve months ended results benefited
from a combination of new fund launches and increased capital calls. Our income before income taxes also benefited from
market value appreciation of our co-investments.
21
Corporate
This segment is a cost center that provides capital, balance sheet management and shared services to the Company's subsidiaries.
(In thousands $)
Summary income statement
Gain (loss) on investments
Other income
Total revenues
Net compensation
Severance, new hire accruals and other
Selling, general and administrative
Interest expense
Depreciation and amortization
Other expenses
Total expenses
Income (loss) before income taxes
Adjusted base EBITDA
3 and 12 months ended
3 months ended
12 months ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
(296)
39
(257)
5,260
23
659
33
462
765
7,202
118
47
165
4,255
632
491
29
439
502
(321)
123
(198)
20,104
4,746
2,486
127
1,759
4,554
(3,388)
100
(3,288)
18,547
3,329
2,390
125
1,808
5,047
6,348
33,776
31,246
(7,459)
(2,954)
(6,183)
(2,119)
(33,974)
(11,047)
(34,534)
(10,518)
•
Investment losses were experienced from market value depreciation of certain equity holdings.
• Net compensation was higher due to salary increases and new hires.
•
Severance on a full-year basis includes a 3-year LTIP transition payment made to the former CEO that was accelerated
upon successful completion of the SCP sale during the second quarter of the year.
• Other expenses were higher in the quarter and lower on a full-year basis primarily due to FX translation movements.
22
Dividends
The following dividends were declared by the Company during the last three years:
Record date
Payment date
Cash dividend
per share
Total dividend amount
(in thousands $)
November 13, 2023 - Regular dividend Q3 2023
November 28, 2023
August 21, 2023 - Regular dividend Q2 2023
September 5, 2023
May 15, 2023 - Regular dividend Q1 2023
March 6, 2023 - Regular dividend Q4 2022
Dividends declared in 2023 (1)
May 30, 2023
March 21, 2023
November 14, 2022 - Regular dividend Q3 2022
November 29, 2022
August 12, 2022 - Regular dividend Q2 2022
May 16, 2022 - Regular dividend Q1 2022
March 7, 2022 - Regular dividend Q4 2021
Dividends declared in 2022
August 29, 2022
May 31, 2022
March 22, 2022
November 15, 2021 - Regular dividend Q3 2021
November 30, 2021
August 16, 2021 - Regular dividend Q2 2021
May 17, 2021 - Regular dividend Q1 2021
March 8, 2021 - Regular dividend Q4 2020
Dividends declared in 2021
August 31, 2021
June 1, 2021
March 23, 2021
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
6,458
6,467
6,482
6,489
25,896
6,480
6,484
6,500
6,467
25,931
6,429
6,426
6,426
6,426
25,707
(1) Subsequent to year end, on February 20, 2024, a regular dividend of $0.25 per common share was declared for the quarter ended December 31, 2023.
This dividend is payable on March 19, 2024 to shareholders of record at the close of business on March 4, 2024.
Capital stock
Including the 0.5 million unvested common shares currently held in the EPSP Trust (December 31, 2022 - 0.6 million), total
capital stock issued and outstanding was 25.9 million (December 31, 2022 - 26 million). The decrease in the period was due to
the repurchase and cancellation of 126,353 shares through the normal course issuer bid.
Earnings per share for the current and prior periods have been calculated using the weighted average number of shares
outstanding during the respective periods. Basic earnings per share was $0.38 for the quarter and $1.66 on a full-year basis,
compared to $0.29 and $0.70 in the prior periods, respectively. Diluted earnings per share was $0.37 in the quarter and $1.60
on a full-year basis compared to $0.28 and $0.67 in the prior periods, respectively. Diluted earnings per share reflects the
dilutive effect of in-the-money stock options, unvested shares held in the EPSP Trust and outstanding restricted stock units.
A total of 12,500 stock options are outstanding pursuant to our stock option plan, all of which are exercisable.
23
Liquidity and capital resources
As at December 31, 2023, the Company had $24.2 million (December 31, 2022 - $54.4 million) outstanding on its credit
facility, all of which is due on August 8, 2028. The decrease in the year was due to the repayment of $30.2 million of our loan
facility. As at December 31, 2023, the Company was in compliance with all covenants, terms and conditions under the credit
facility.
The Company has access to a credit facility of $75 million with a major Canadian schedule I chartered bank. Amounts under the
facility may be borrowed through prime rate loans or bankers’ acceptances. Amounts may also be borrowed in U.S. dollars
through base rate loans.
Key terms under the current credit facility are noted below:
Structure
•
5-year, $75 million revolver with "bullet maturity" August 8, 2028
Interest rate
•
•
U.S. prime rate + 105 bps; or
Canadian prime rate + 55 bps;
Covenant terms
•
•
•
Minimum AUM: CAD$15.4 billion;
Debt to EBITDA less than or equal to 2.5:1; and
EBITDA to interest expense more than or equal to 2.5:1
Commitments
The Company has commitments to make co-investments in private strategies LPs or commitments to make co-investments in
fund strategies in the Company's other segments. As at December 31, 2023, the Company had $4 million in co-investment
commitments in private strategies LPs due within one year (December 31, 2022 - $5.7 million) and $1.9 million due after 12
months (December 31, 2022 - $0.4 million). During the year, the Company signed a new lease for its existing Toronto office
location that is set to commence on January 1, 2024.
The following are the remaining contractual maturities of financial liabilities as at December 31, 2023 (in thousands $):
Contractual obligations
Operating accounts payable
Compensation payable
Contingent consideration on URNM acquisition
Lease obligation
Loan facility
Total contractual obligations
Carrying
Amount
11,749
7,822
4,470
2,096
24,237
50,374
Less
than
1 year
11,749
7,822
4,470
765
—
24,806
1-3
years
—
—
—
1,244
—
1,244
4-5
years
—
—
—
87
24,237
24,324
More
than
5 years
—
—
—
—
—
—
24
Critical accounting estimates and significant judgments
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are described below. The
Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing
circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond
the control of the Company. Such changes are reflected in the assumptions and estimates as they occur. The Company’s
material accounting policy information are described in Note 2 of the December 31, 2023 audited annual financial statements.
Certain of these accounting policies require management to make key assumptions concerning the future and consider other
sources of estimation uncertainty at the reporting date. These accounting estimates are considered critical because they require
subjective and/or complex judgments that may have a material impact on the value of our assets, liabilities, revenues and
expenses.
Critical accounting estimates
Impairment of goodwill and intangible assets
All indefinite life intangible assets and goodwill are assessed for impairment annually, however, finite life intangibles are only
tested for impairment to the extent indicators of impairment exist at the time of a quarterly assessment. In the case of goodwill
and indefinite life intangibles, this annual test for impairment augments the quarterly impairment indicator assessments. Values
associated with goodwill and intangibles involve estimates and assumptions, including those with respect to future cash inflows
and outflows, discount rates, AUM and asset lives. These estimates require significant judgment regarding market growth rates,
fund flow assumptions, expected margins and costs, which could affect the Company's future results if estimates of future
performance and fair value change.
Fair value of financial instruments
When the fair value of financial assets and financial liabilities recorded in the consolidated balance sheets cannot be derived
from active markets, they are determined using valuation techniques and models. Model inputs are taken from observable
markets where possible, but where this is not feasible, unobservable inputs may be used. These unobservable inputs include,
but are not limited to, projected cash flows, discount rates, comparable recent transactions, volatility of underlying securities in
warrant valuations and extraction recovery rates of mining projects. The use of unobservable inputs can involve significant
judgment and materially affect the reported fair value of financial instruments.
Contingent consideration
The acquisition of the Sprott Uranium Miners ETF in 2022 necessitated the recognition of a contingent consideration for the
amounts payable in cash under the terms of the purchase agreement. The consideration is subject to certain financial
performance conditions based on the average AUM of the fund over the two-year period from closing of the transaction. The
key judgments utilized in the estimation of the contingent consideration were fund flow and market value assumptions.
Significant judgments
Investments in other entities
IFRS 10 Consolidated Financial Statements ("IFRS 10") and IAS 28 Investments in Associates and Joint Ventures ("IAS 28")
provide for the use of judgment in determining whether an investee should be included within the consolidated financial
statements of the Company and on what basis (subsidiary, joint venture, financial instrument or associate). Significant judgment
is applied in evaluating facts and circumstances relevant to the Company and investee, including: (1) the extent of the
Company's direct and indirect interest in the investee; (2) the level of compensation to be received from the investee for
management and other services provided to it; (3) "kick out rights" available to other investors in the investee; and (4) other
indicators of the extent of power that the Company has over the investee.
25
Managing financial risks
Market risk
The Company separates market risk into three categories: price risk, interest rate risk and foreign currency risk.
Price risk
Price risk arises from the possibility that changes in the price of the Company's on and off-balance sheet assets and liabilities
will result in changes in carrying value or recoverable amounts. The Company's revenues are also exposed to price risk since
management fees, carried interest and performance fees are correlated with AUM, which fluctuates with changes in the market
values of the assets in the funds and managed accounts managed by the Company.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will adversely affect the value of, or cash flows from,
financial assets and liabilities. The Company’s earnings, particularly through its private strategies segment, are exposed to
volatility as a result of sudden changes in interest rates. Management takes into account a number of factors and is committed
to several processes to ensure that this risk is appropriately managed.
Foreign currency risk
The Company enters into transactions that are denominated primarily in U.S. and Canadian dollars. Foreign currency risk arises
from foreign exchange rate movements that could negatively impact either the carrying value of financial assets and liabilities or
the related cash flows which are denominated in currencies other than the functional currency of the Company and its
subsidiaries. The Company may employ certain hedging strategies to mitigate foreign currency risk.
Credit risk
Credit risk is the risk that a borrower will not honor its commitments and a loss to the Company may result. Credit risk generally
arises in the Company's investments portfolio.
Investments
The Company incurs credit risk when entering into, settling and financing transactions with counterparties. Management takes
into account a number of factors and is committed to several processes to ensure that this risk is appropriately managed.
Other
The majority of receivables relate to management fees, carried interest and performance fees receivable from the funds and
managed accounts managed by the Company. These receivables are short-term in nature and any credit risk associated with
them is managed by dealing with counterparties that the Company believes to be creditworthy and by actively monitoring credit
exposure and the financial health of the counterparties.
Liquidity risk
Liquidity risk is the risk that the Company cannot meet a demand for cash or fund its obligations as they come due. The
Company's exposure to liquidity risk is minimal as it maintains sufficient levels of liquid assets to meet its obligations as they
come due. Additionally, the Company has access to a $75 million committed line of credit with a major Canadian schedule I
chartered bank.
26
The Company's exposure to liquidity risk as it relates to our co-investments in private strategies LPs arises from fluctuations in
cash flows from making capital calls and receiving capital distributions. The Company manages its co-investment liquidity risk
through the ongoing monitoring of scheduled capital calls and distributions ("match funding") and through its broader treasury
risk management program and enterprise capital budgeting.
Financial liabilities, including accounts payable and accrued liabilities and compensation payable, are short-term in nature and
are generally due within a year.
The Company's management team is responsible for reviewing resources to ensure funds are readily available to meet its
financial obligations as they come due and ensuring adequate funds exist to support business strategies and operations growth.
The Company manages liquidity risk by monitoring cash balances on a daily basis and through its broader treasury risk
management program. To meet any liquidity shortfalls, actions taken by the Company could include: drawing on the line of
credit; slowing its co-investment activities; liquidating investments; adjusting or otherwise temporarily suspending AIPs; cutting
or temporarily suspending its dividend; and/or issuing common shares.
Concentration risk
A significant portion of the Company's AUM and its investments are focused on the natural resource sector, and in particular,
precious metals and critical materials related investments and transactions. In addition, from time-to-time, certain investments
may be concentrated to a material degree in a single position or group of positions. Management takes into account a number
of factors and is committed to several processes to ensure that this risk is appropriately managed.
Disclosure controls and procedures ("DC&P") and internal control over financial
reporting ("ICFR")
Management is responsible for the design and operational effectiveness of DC&P and ICFR in order to provide reasonable
assurance regarding the disclosure of material information relating to the Company. This includes information required to be
disclosed in the Company's annual filings, interim filings and other reports filed under securities legislation, as well as
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
Our chief executive officer and chief financial officer, after evaluating the effectiveness of our DC&P and ICFR (as defined in the
applicable U.S. and Canadian securities laws), concluded that the Company's DC&P and ICFR were properly designed and were
operating effectively as at December 31, 2023. In addition, there were no material changes to ICFR during the year.
Managing non-financial risks
Confidentiality of information
Confidentiality is essential to the success of the Company's business, and it strives to consistently maintain the highest
standards of trust, integrity and professionalism. Account information is kept under strict control in compliance with all
applicable laws, and physical, procedural, and electronic safeguards are maintained in order to protect this information from
access by unauthorized parties. The Company keeps the affairs of its clients confidential and does not disclose the identities of
clients (absent expressed client consent to do so). If a prospective client requests a reference, the Company will not provide the
name of an existing client before receiving permission from that client to do so.
Conflicts of interest
The Company established a number of policies with respect to employee personal trading. Employees may not trade any of the
securities held or being considered for investment by any of the Company's funds without prior approval. In addition, employees
must receive prior approval before they are permitted to buy or sell securities. Speculative trading is strongly discouraged. All
employees must comply with the Company's Code of Ethics. The code establishes strict rules for professional conduct including
the management of conflicts of interest.
27
Independent review committee
National Instrument 81-107 - Independent Review Committee for Investment Funds (“NI 81-107”) requires all publicly offered
investment funds in Canada to establish an independent review committee ("IRC") to whom all conflicts of interest matters
must be referred for review and approval. The Company established an IRC for its Canadian public funds. As required by NI
81-107, the Company established written policies and procedures for dealing with conflict of interest matters and maintains
records in respect of these matters and provides assistance to the IRC in carrying out its functions. The IRC is comprised of three
independent members, and is subject to requirements to conduct regular assessments and provide reports to the Company and
to the holders of interests in public funds in respect of its functions.
Insurance
The Company maintains appropriate insurance coverage for general business and liability risks as well as insurance coverage
required by regulation. Insurance coverage is reviewed periodically to ensure continued adequacy.
Internal controls and procedures
Several of the Company's subsidiaries operate in regulated environments and are subject to business conduct rules and other
rules and regulations. The Company has internal control policies related to business conduct. They include controls required to
ensure compliance with the rules and regulations of relevant regulatory bodies including the OSC, the Canadian Investment
Regulatory Organization, FINRA and the U.S. Securities and Exchange Commission ("SEC").
Enterprise risk management
The starting point to any enterprise risk management program (“ERM”) is the articulation of a risk appetite, which is the
amount and types of risk we are willing to accept in our pursuit of business objectives. A company’s risk appetite is the bedrock
upon which an ERM framework is established.
Our risk appetite is primarily based on specific regulatory and legal environment considerations; general environmental, social
and governance responsibilities; the need for sound capital adequacy and treasury management processes; the preservation of
our positive reputation among current and future stakeholders; the natural expectation of our shareholders that we take
appropriate and reasonable levels of risk in our various business segments to maximize shareholder returns; and our overall
desire to be good corporate citizens as part of our organizational culture and core values. The aforementioned considerations
formed the basis for our risk appetite statements noted below:
•
Regardless of loss probability, we will only accept inherent or residual risks that we have a proven, demonstrable ability
to understand, diligently manage on an ongoing basis and thoroughly consider and balance relative to the outcomes;
and
• Our risk appetite is low around any actions or inactions that could materially jeopardize the Company’s reputation, core
values or commitment to its stakeholders. Furthermore, at no point would we ever accept existential inherent or
residual risks, regardless of loss probability.
The ERM process involves a comprehensive drill down through the organization to its constituent parts to identify all salient risks
and evaluate them through the lens of our risk appetite. The following is a summary of the ERM steps used to filter
organizational risks through our risk appetite:
•
•
Identify all major processes within each business segment (and enterprise shared services function supporting them);
Identify materially relevant inherent risks (both quantitative and qualitative), that may arise in each major process area;
28
•
•
•
•
•
Rate each inherent risk (in the absence of internal controls) based on the degree of event probability and impact to the
organization;
Determine our risk tolerance for each inherent risk previously identified and rated;
Identify internal controls in place (or needed) to mitigate the inherent risks down to the appropriate “residual
level” (i.e. determine the post-controls risk rating and compare it to our predetermined risk tolerance level). NOTE: we
stratify our internal controls universe using the “three lines of defense” approach recommended by the Institute of
Internal Auditors prior to evaluating the effectiveness of internal controls;
Compare all residual risk ratings to their corresponding risk tolerance level to ensure the risk is being appropriately
managed (i.e. there are a sufficient number of, and appropriate types of, internal controls in place to manage the risk
in light of our risk tolerance), and if not, take further action; and
Test, document and report on the effectiveness of the ERM program in managing risks within the boundaries of our risk
appetite.
Additional information relating to the Company, including the Company's Annual Information Form is available on EDGAR at www.sec.gov and SEDAR+ at
www.sedarplus.com.
29
Consolidated Financial Statements
Years ended December 31, 2023 and 2022
Management's responsibility for financial reporting
The accompanying consolidated financial statements, which consolidate the financial results of Sprott Inc. (the "Company"),
were prepared by management, who are responsible for the integrity and fairness of all information presented in the
consolidated financial statements and management's discussion and analysis ("MD&A") for the years ended December 31,
2023 and 2022. The consolidated financial statements were prepared by management in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board. Financial information presented in the
MD&A is consistent with that in the consolidated financial statements.
In management's opinion, the consolidated financial statements have been properly prepared within reasonable limits of
materiality and within the framework of the material accounting policy information summarized in Note 2 of the consolidated
financial statements. Management maintains a system of internal controls to meet its responsibilities for the integrity of the
consolidated financial statements.
The board of directors of the Company appoints the Company's audit and risk management committee annually. Among other
things, the mandate of the audit & risk committee includes the review of the consolidated financial statements of the Company
on a quarterly basis and the recommendation to the board of directors for approval. The audit & risk committee has access to
management and the auditors to review their activities and to discuss the external audit program, internal controls, accounting
policies and financial reporting matters.
KPMG LLP performed an independent audit of the consolidated financial statements, as outlined in the auditors' report
contained herein. KPMG LLP had, and has, full and unrestricted access to management of the Company, the audit & risk
committee and the board of directors to discuss their audit and related findings and have the right to request a meeting in the
absence of management at any time.
Whitney George
Chief Executive Officer
February 20, 2024
Kevin Hibbert, FCPA, FCA
Chief Financial Officer and Senior Managing Partner
31
Management's responsibility for financial controls
The management of Sprott Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over
financial reporting, and has designed such internal control over financial reporting to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board.
Management has used the Internal Control – Integrated Framework (2013) to evaluate the effectiveness of internal control over
financial reporting, which is a recognized and suitable framework developed by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has evaluated the design and operation of the Company's internal control over financial reporting as of December
31, 2023, and has concluded that such internal control over financial reporting is effective. There are no material weaknesses
that have been identified by management in this regard.
KPMG LLP, the independent auditors appointed by the shareholders of the Company, who have audited the consolidated
financial statements, have also audited internal control over financial reporting and have issued their report below.
Whitney George
Chief Executive Officer
February 20, 2024
Kevin Hibbert, FCPA, FCA
Chief Financial Officer and Senior Managing Partner
32
KPMG LLP
Bay Adelaide Centre
333 Bay Street, Suite 4600
Toronto, ON M5H 2S5
Canada
Tel 416-777-8500
Fax 416-777-8818
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Sprott Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Sprott Inc. and its subsidiaries
(the Company) as of December 31, 2023 and 2022, the related consolidated statements of
operations and comprehensive income, changes in shareholders’ equity, and cash flows for the
years then ended, and the related notes (collectively, the consolidated financial statements). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2023 and 2022, and its financial performance and its
cash flows for the years then ended, in conformity with International Financial Reporting Standards
as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting
as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and
our report dated February 20, 2024 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our
audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
© 2024 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms
affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
33
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the
audit and risk management committee and that: (1) relates to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of a critical audit matter does not alter in any
way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which they relate.
Valuation of indefinite life fund management contracts
As discussed in note 2 to the consolidated financial statements, an annual test for impairment
augments the quarterly impairment indicator assessment of impairment for indefinite life intangibles.
The recoverable amounts associated with intangibles involve estimates and assumptions, including
those with respect to future cash inflows and outflows, discount rates and asset lives, and are
determined using the value-in-use method. These estimates require significant judgment regarding
market growth rates, discount rates, fund flow assumptions, expected margins and costs which
could affect the Company’s future results. As discussed in note 7 to the consolidated financial
statements, the Company’s indefinite life fund management contracts totaled $182,902 thousand as
of December 31, 2023.
We identified the assessment of the recoverable amount of the indefinite-life fund management
contracts as a critical audit matter. A higher degree of auditor judgment was required to evaluate the
significant assumptions, which were determined to be fund flow assumptions and discount rates,
used in determining the recoverable amount. The sensitivity of reasonably possible changes to
those assumptions could have had a significant impact on the determination of the recoverable
amount of the indefinite-life fund management contracts.
34
The following are the primary procedures we performed to address this critical audit matter. We
evaluated the design and tested the operating effectiveness of certain internal controls related to
the Company’s impairment testing process, including controls over the development of the
significant assumptions. We evaluated the Company’s ability to forecast fund flows by comparing
historical forecasts to actual results. We evaluated the forecasted fund flows by considering
external market and industry outlook data. We performed a sensitivity analysis over the forecasted
fund flows and discount rates to assess the impact to the Company’s determination that the
recoverable amount of the indefinite-life fund management contracts exceeded the carrying
amount.
We involved valuation professionals with specialized skills and knowledge, who assisted in:
–
–
assessing the discount rates used by management by comparing against discount rate ranges
that were developed using publicly available market data and independently developed
assumptions; and
assessing the recoverable amounts determined by management using the forecasted fund
flows and discount rates by comparing the implied assets under management (“AUM”) multiple
against publicly available AUM multiples multiples for comparable companies.
We have served as the Company’s auditor since 2016.
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Canada
February 20, 2024
35
KPMG LLP
Bay Adelaide Centre
333 Bay Street, Suite 4600
Toronto, ON M5H 2S5
Canada
Tel 416-777-8500
Fax 416-777-8818
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors Sprott Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Sprott Inc. and its subsidiaries’ (the Company) internal control over financial
reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2023, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of
December 31, 2023 and 2022, the related consolidated statements of operations and
comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the
related notes (collectively, the consolidated financial statements), and our report dated February 20,
2024 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Responsibility for Internal Controls. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
© 2024 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms
affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
36
We conducted our audit in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit of internal control
over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Canada
February 20, 2024
37
Consolidated balance sheets
As at
(In thousands of U.S. dollars)
Assets
Current
Cash and cash equivalents
Fees receivable
Short-term investments
Other assets
Income taxes recoverable
Total current assets
Co-investments
Other assets
Property and equipment, net
Intangible assets
Goodwill
Deferred income taxes
Total assets
Liabilities and shareholders' equity
Current
Accounts payable and accrued liabilities
Compensation payable
Income taxes payable
Total current liabilities
Other accrued liabilities
Loan facility
Deferred income taxes
Total liabilities
Shareholders' equity
Capital stock
Contributed surplus
Deficit
Accumulated other comprehensive loss
Total shareholders' equity
Total liabilities and shareholders' equity
Commitments and provisions
The accompanying notes form part of the consolidated financial statements
"Ron Dewhurst"
Director
"Graham Birch"
Director
Dec. 31
2023
Dec. 31
2022
20,658
7,481
2,232
13,496
1,189
45,056
93,528
24,291
10,856
182,902
19,149
3,053
333,779
378,835
12,647
7,822
980
21,449
16,637
24,237
10,807
73,130
51,678
10,967
3,348
8,723
2,247
76,963
73,573
21,271
12,496
178,613
19,149
1,683
306,785
383,748
10,703
12,342
2,707
25,752
18,061
54,437
8,227
106,477
434,764
35,281
(89,402)
(74,938)
305,705
378,835
428,475
33,716
(105,305)
(79,615)
277,271
383,748
(Notes 3 & 10)
(Note 5)
(Notes 4 & 10)
(Notes 5 & 10)
(Note 6)
(Note 7)
(Note 7)
(Note 9)
(Note 15)
(Note 9)
(Note 8)
(Note 8)
(Note 16)
38
Consolidated statements of operations and comprehensive income
(In thousands of U.S. dollars, except for per share amounts)
Revenues
Management fees
Carried interest and performance fees
Commissions
Finance income
Gain (loss) on investments
Other income
Total revenues
Expenses
Compensation
Trailer, sub-advisor and fund expenses
Selling, general and administrative
Interest expense
Depreciation of property and equipment
Other expenses
Total expenses
Income before income taxes for the year
Provision for income taxes
Net income for the year
Net income per share:
Basic
Diluted
Net income for the year
Other comprehensive income (loss)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation gain (loss) (taxes of $Nil)
Total other comprehensive income (loss)
Comprehensive income (loss)
The accompanying notes form part of the consolidated financial statements
For the years ended
Dec. 31
2023
Dec. 31
2022
132,257
891
8,301
4,852
1,375
21,345
169,021
115,355
3,265
30,663
4,991
(10,242)
1,150
145,182
(Notes 3, 4 and 5)
(Note 5)
(Note 8)
(Note 6)
(Note 5)
(Note 9)
74,213
7,916
17,450
4,060
2,843
12,248
118,730
77,117
10,539
15,978
2,923
3,355
10,191
120,103
50,291
8,492
41,799
25,079
7,447
17,632
(Note 8)
(Note 8)
1.66
1.60
0.70
0.67
41,799
17,632
4,677
4,677
46,476
(15,058)
(15,058)
2,574
39
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(In thousands of U.S. dollars)
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Net income for the year
Add (deduct) non-cash items:
(Gain) loss on investments
Stock-based compensation
Depreciation of property and equipment
Deferred income tax expense
Current income tax expense
Other items
Shares received on recognition of a previously unrecorded contingent asset
Income taxes paid
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Fees receivable
Other assets
Accounts payable, accrued liabilities and compensation payable
Cash provided by (used in) operating activities
Investing activities
Purchase of investments
Sale of investments
Purchase of property and equipment
Proceeds received on exit of non-core businesses
Management contract consideration
Cash provided by (used in) investing activities
Financing activities
Acquisition of common shares for equity incentive plan
Acquisition of common shares under normal course issuer bid
Cash received on exercise of stock options
Repayment of lease liabilities
Contributions from non-controlling interest
Net advances (repayments) from loan facility
Dividends paid
Cash provided by (used in) financing activities
Effect of foreign exchange on cash balances
Net increase (decrease) in cash and cash equivalents during the year
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
Cash and cash equivalents:
Cash
Short-term deposits
The accompanying notes form part of the consolidated financial statements
For the years ended
Dec. 31
2023
Dec. 31
2022
41,799
17,632
(1,375)
20,411
2,843
1,002
7,490
(6,961)
(18,588)
(8,133)
884
(5,144)
(4,367)
29,861
(25,474)
27,033
(1,535)
4,583
—
4,607
(5,252)
(4,157)
—
(2,224)
4,216
(30,200)
(25,847)
(63,464)
(2,024)
(31,020)
51,678
20,658
10,242
17,041
3,355
—
7,447
(542)
—
(8,070)
2,216
(7,438)
(9,387)
32,496
(25,771)
12,907
(128)
—
(10,500)
(23,492)
(6,948)
(3,036)
1,127
(2,329)
7,320
25,750
(25,781)
(3,897)
(3,234)
1,873
49,805
51,678
20,658
—
20,658
51,494
184
51,678
41
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
1 Corporate information
Sprott Inc. (the "Company") was incorporated under the Business Corporations Act (Ontario) on February 13, 2008. Its
registered office is at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2600, Toronto, Ontario M5J 2J1.
2 Summary of material accounting policy information
Statement of compliance
These annual audited consolidated financial statements for the years ended December 31, 2023 and 2022 ("financial
statements") have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by
the International Accounting Standards Board ("IASB").
They have been authorized for issue by a resolution of the board of directors of the Company on February 20, 2024 and
include all subsequent events up to that date.
Basis of presentation
These financial statements have been prepared on a going concern basis and on a historical cost basis, except for
certain financial instruments classified as fair value through profit or loss ("FVTPL") and which are measured at fair
value to the extent required or permitted under IFRS and as set out in the relevant accounting policies. The financial
statements are presented in U.S. dollars and all values are rounded to the nearest thousand ($000), except when
indicated otherwise.
Principles of consolidation
These financial statements of the Company are prepared on a consolidated basis so as to include the accounts of all
limited partnerships and corporations the Company is deemed to control under IFRS. Controlled limited partnerships and
corporations ("subsidiaries") are consolidated from the date the Company obtains control. All intercompany balances
with subsidiaries are eliminated upon consolidation. Subsidiary financial statements are prepared for the same reporting
period as the Company and are based on accounting policies consistent with that of the Company.
The Company records third-party interest in the funds which do not qualify to be equity due to redeemable or limited life
features, as non-controlling interest liabilities. Such interests are initially recognized at fair value, with any changes
recorded in the Other expenses line of the consolidated statements of operations and comprehensive income.
Control exists if the Company has power over the entity, exposure or rights to variable returns from its involvement with
the entity and the ability to use its power over the entity to affect the amount of returns the Company receives. In many,
but not all instances, control will exist when the Company owns more than one half of the voting rights of a
corporation, or is the sole limited and general partner of a limited partnership.
42
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
The Company currently controls the following principal subsidiaries:
•
•
•
•
•
Sprott Asset Management LP ("SAM");
Sprott U.S. Holdings Inc. ("SUSHI"), parent of: (1) SGRIL Holdings Inc. ("SGRIL Holdings"); (2) Sprott Global
Resource Investments Ltd. ("SGRIL"); (3) Sprott Asset Management USA Inc. ("SAM US"); and (4) Resource
Capital Investment Corporation ("RCIC"). Collectively, the interests of SUSHI are referred to as "US entities"
in these financial statements;
Sprott Resource Streaming and Royalty Corporation and Sprott Private Resource Streaming and Royalty
(Management) Corp. ("SRSR");
Sprott Resource Lending Corp. ("SRLC"); and
Sprott Inc. 2011 Employee Profit Sharing Plan Trust (the "Trust").
During the year, the Company exited its non-core Canadian broker-dealer (Sprott Capital Partners) and non-core asset
management business domiciled in Korea ("Korea"). Details of the transactions can be found in Note 5.
Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit with banks and with carrying brokers, which are not subject to
restrictions, and short-term interest bearing notes and treasury bills with a term to maturity of less than three months
from the date of purchase.
Investments
Investments include equity kickers received as consideration during private strategies, managed equities and broker-
dealer activities as well as investments in private companies and are measured at FVTPL.
Co-investments
Co-investments are investments the Company makes alongside clients of the various fund strategies it manages to
demonstrate the commitment and confidence the Company has in investment strategies that they promote and operate.
Included in co-investments are the Company's investment in the fund products previously managed by its non-core asset
management business domiciled in Korea.
Financial instruments
Classification and measurement of financial assets
Financial assets are measured on initial recognition at fair value, and are classified and subsequently measured at
FVTPL, amortized cost or fair value through other comprehensive income ("FVOCI").
Financial assets are measured at amortized cost if the contractual terms of the instrument give rise to cash flows that
are solely payments of principal and interest on the principal amount outstanding and it is held within a business model
whose objective is to hold assets to collect contractual cash flows.
Financial assets are measured at FVOCI if the contractual terms of the instrument give rise to cash flows that are solely
for payments of principal and interest on the principal amount outstanding and it is held within a business model whose
objective is both to hold assets to collect contractual cash flow and to sell financial assets. For equity instruments that
are not held for trading, the Company may also elect to irrevocably elect, on an investment by investment basis, to
present changes in the fair value of an investment through other comprehensive income.
All financial assets that are not measured at amortized cost or FVOCI are measured at FVTPL. This includes all derivative
financial assets the Company may hold.
43
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Valuation of investments
Investments include public equities, share purchase warrants, fixed income securities, mutual funds, private companies
(including digital gold strategies) and alternative investment strategies, while co-investments are investments held in the
funds managed or previously managed by the Company. Public equities, share purchase warrants and fixed income
securities are measured at fair value and are accounted for on a trade-date basis. Mutual fund and alternative
investment strategy investments are valued using the net asset value per unit of the fund, which represents the
underlying net assets at fair values determined using closing market prices. These investments are generally made in the
process of launching a new fund and are redeemed (if open-end) or sold (if closed-end) as third party investors
subscribe. The balance represents the Company's maximum exposure to loss associated with the investments. Private
holdings include private company investments which are classified as FVTPL and carried at fair value based on the value
of the Company's interests from financial information provided by management of the private companies, which may
include operating results, subsequent rounds of financing and other appropriate information. Any change in fair value is
recognized in gain (loss) on investments on the consolidated statements of operations and comprehensive income.
Fair value hierarchy
All financial instruments recognized at fair value in the consolidated balance sheets are classified into three fair value
hierarchy levels as follows:
•
•
Level 1: valuation based on quoted prices (unadjusted) observed in active markets for identical assets or
liabilities;
Level 2: valuation techniques based on inputs that are quoted prices of similar instruments in active markets;
quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted
prices used in a valuation model that are observable for that instrument; and inputs that are derived from or
corroborated by observable market data by correlation or other means; and
•
Level 3: valuation techniques with significant unobservable market inputs.
The Company will transfer financial instruments into or out of levels in the fair value hierarchy on the reporting date to
the extent the instrument no longer satisfies the criteria for inclusion in the category in question. Level 3 valuations are
prepared by the Company and reviewed and approved by management at each reporting date. Valuation results,
including the appropriateness of model inputs, are compared to actual market transactions to the extent readily
available. Valuations of level 3 assets are also discussed with the Audit and Risk Management Committee as deemed
necessary by the Company.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported on the consolidated balance sheets if,
and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to
settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
Impairment of financial assets
Expected credit losses are a probability-weighted estimate of future credit losses. Credit losses are measured as the
present value of the difference between the cash flows due to the Company in accordance with the contract and the
cash flows the Company expects to receive.
44
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Recognition of income and related expenses
The Company receives variable consideration in the form of management fees, which are allocated to distinct time
periods in which the management services are being provided. Management fees are recognized when they are no
longer susceptible to market factors and no longer subject to a significant reversal in revenue.
The Company may also earn variable consideration in the form of carried interest and performance fees. These fees are
recognized when they are no longer susceptible to market factors or subject to significant reversal in revenue, which is
determined subject to agreements with the underlying funds.
Commission income is recognized when the related services are rendered and no longer subject to a significant reversal
in revenue.
Finance income, which includes co-investment income from private strategies LP units and interest income from
brokerage client accounts, is recognized on an accrual basis using the effective interest method. Under the effective
interest method, the interest rate realized is not necessarily the same as the stated rate in the loan or debenture
documents. The effective interest rate is the rate required to discount the future value of all loan or debenture cash
flows to their present value and is adjusted for the receipt of cash and non-cash items in connection with the loan.
Costs related to obtaining a contract with clients ("placement fees") are amortized on a systematic basis related to the
transfer of services to those clients.
Property and equipment
Property and equipment are recorded at cost and are amortized on a declining balance basis over the expected useful
life which ranges from 1 to 5 years. Leasehold improvements are amortized on a straight-line basis over the term of the
lease. Artwork is not amortized since it does not have a determinable useful life. The residual values, useful life and
methods of amortization for property and equipment are reviewed at each reporting date and adjusted prospectively, if
necessary. Any loss resulting from the impairment of property and equipment is expensed in the period the impairment
is identified.
Intangible assets
The useful life of an intangible asset is either finite or indefinite. Intangible assets other than goodwill are recognized
when they are separable or arise from contractual or other legal rights, and have fair values that can be reliably
measured.
Intangible assets that are purchased are measured at the acquisition date and include the fair value of considerations
transferred, and include an estimate for contingent consideration where applicable.
Intangible assets with finite lives are amortized over their useful economic life and assessed for impairment indicators at
each reporting date, or more frequently if changes in circumstances indicate that the carrying value is greater than its
recoverable amount. Intangible assets with finite lives are only tested for impairment if indicators of impairment exist at
the time of an impairment assessment. The amortization period and the amortization method for an intangible asset
with a finite useful life is reviewed at each reporting date. Changes in the expected useful life or the expected pattern of
consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or
method, as appropriate, and are treated as changes in accounting estimates. The amortization expense and any
impairment losses on intangible assets with finite lives are recognized in the consolidated statements of operations.
Intangible assets with indefinite useful lives are not amortized, but are assessed for impairment indicators at each
reporting date, or more frequently if changes in circumstances indicate that the carrying value is greater than its
recoverable amount. In addition to impairment indicator assessments, indefinite life intangibles must be tested annually
for impairment. The indefinite life of an intangible asset is reviewed annually to determine whether the indefinite life
continues to be supportable. If no longer supportable, changes in useful life from indefinite to finite are made
prospectively.
45
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Any loss resulting from the impairment of intangible assets is expensed in the period the impairment is identified. Any
gain resulting from an impairment reversal of intangible assets is recognized in the period the impairment reversal is
identified but cannot exceed the carrying amount that would have been determined (net of amortization and
impairment) had no impairment loss been recognized for the intangible asset in prior periods.
Business combinations and goodwill
The purchase price of an acquisition accounted for under the acquisition method is allocated based on the fair values of
the net identifiable assets acquired. The excess of the purchase price over the fair values of such identifiable net assets is
recorded as goodwill.
Goodwill, which is measured at cost less any accumulated impairment losses, is not amortized, but rather, is assessed
for impairment indicators at each reporting date, or more frequently if changes in circumstances indicate that the
carrying value may be impaired. In addition to quarterly impairment indicator assessments, goodwill must be tested
annually for impairment. For the purpose of impairment testing, goodwill is allocated to each of the Company's cash
generating units ("CGUs") that are expected to benefit from the acquisition. The recoverable amount of a CGU is
compared to its carrying value plus any goodwill allocated to the CGU. If the recoverable amount of a CGU is less than
its carrying value plus allocated goodwill, an impairment charge is recognized, first against the carrying value of the
goodwill, with any remaining difference being applied against the carrying value of assets contained in the impacted
CGUs. Impairment losses on goodwill are recorded in the consolidated statements of operations and comprehensive
income and cannot be subsequently reversed.
Income taxes
Income tax is comprised of current and deferred tax.
Income tax is recognized in the consolidated statements of operations and comprehensive income except to the extent
that it relates to items recognized directly in other comprehensive income or elsewhere in equity, in which case, the
related taxes are also recognized in other comprehensive income (loss) or elsewhere in equity.
Deferred taxes are recognized using the liability method for temporary differences that exist between the carrying
amounts of assets and liabilities in the consolidated balance sheets and the amounts attributed to such assets and
liabilities for tax purposes. Deferred tax assets and liabilities are determined based on the enacted or substantively
enacted tax rates that are expected to apply when the differences related to the assets or liabilities reported for tax
purposes are expected to reverse in the future. Deferred tax assets are recognized only when it is probable that sufficient
taxable profits will be available or taxable temporary differences reversing in future periods against which deductible
temporary differences may be utilized.
Deferred taxes liabilities are not recognized on the following temporary differences:
• Temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss;
• Taxable temporary differences related to investments in subsidiaries, associates or joint ventures or joint
operations to the extent they are controlled by the Company and they will not reverse in the foreseeable
future; and
• Taxable temporary differences arising on the initial recognition of goodwill.
The Company records a provision for uncertain tax positions if it is probable that the Company will have to make a
payment to tax authorities upon their examination of a tax position. This provision is measured at the Company's best
estimate of the amount expected to be paid. Provisions are reversed to income in the period in which management
assesses they are no longer required or determined by statute.
46
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
The measurement of tax assets and liabilities requires an assessment of the potential tax consequences of items that can
only be resolved through agreement with the tax authorities. While the ultimate outcome of such tax audits and
discussions cannot be determined with certainty, management estimates the level of provisions required for both current
and deferred taxes.
Share-based payments
The Company uses the fair value method to account for equity settled share-based payments with employees and
directors. Compensation expense is determined using the Black-Scholes option valuation model for stock options.
Compensation expense for the share incentive program is determined based on the fair value of the benefit conferred on
the employee. Compensation expense for deferred stock units ("DSU") is determined based on the value of the
Company's common shares at the time of grant. Compensation expense for earn-out shares is determined using
appropriate valuation models. Compensation expense related to the Company's Employee Profit Sharing Plan is
determined based on the value of the Company's common shares purchased by the Trust as of the grant date.
Compensation expense is recognized over the vesting period with a corresponding increase to contributed surplus other
than for the Company's DSUs where the corresponding increase is to liabilities. Stock options and common shares held
by the Trust vest in installments which may require a graded vesting methodology to account for these share-based
awards. On the exercise of stock options for shares, the contributed surplus previously recorded with respect to the
exercised options and the consideration paid is credited to capital stock. On the issuance of the earn-out shares, the
contributed surplus previously recorded with respect to the issued earn-out shares is credited to capital stock. On the
vesting of common shares in the Trust, the contributed surplus previously recorded is credited to capital stock. On the
exercise of DSUs, the liability previously recorded is credited to cash.
Earnings per share
Basic earnings per share are computed by dividing net income by the weighted average number of common shares
outstanding during the period.
Diluted earnings per share is computed by dividing net income by the weighted average number of common shares
outstanding during the period, after applying the treasury stock method to determine the dilutive impact, if any, of stock
options and unvested shares purchased for the Trust. The treasury stock method determines the number of incremental
common shares by assuming that the number of dilutive securities the Company has granted to employees have been
issued.
Lease commitments
The Company recognizes a right-of-use asset and a lease liability as at the lease commencement date. The right-of-use
asset is initially measured at cost and subsequently at cost less any accumulated depreciation and impairment. The lease
liability is initially measured at the present value of future lease payments over the anticipated lease term, discounted
using the Company's incremental borrowing rate. The right-of-use asset is presented in the property and equipment line
of the consolidated balance sheets and the short and long-term portions of the lease liability are presented in the
accounts payable and accrued liabilities line and other accrued liabilities line, respectively, of the consolidated balance
sheets. The Company used the practical expedient when applying IFRS 16, Leases for short-term leases under 12 months
and low-value assets such as IT equipment, with lease payments being expensed as they are incurred.
Reportable segments
Effective in the first quarter of this year, the brokerage segment no longer met the definition of a reportable segment
under IFRS 8, Operating Segments ("IFRS 8"). Consequently, this segment was retroactively included as part of "All
other segments" and all comparative balances have been restated. Please refer to Note 14 for segment information.
47
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Contingent consideration
The acquisition of the management contracts of the North Shore Global Uranium Mining ETF ("URNM acquisition") in
2022 necessitated the recognition of contingent consideration payable for the amount payable in the future under the
terms of the purchase agreement. The consideration is subject to certain financial performance conditions based on the
average AUM of the fund over the two-year period from closing of the transaction. The key judgements utilized in the
estimation of the contingent consideration were fund flow assumptions. The contingent consideration liability is carried
at fair value and included in other accrued liabilities. The contingent consideration estimate as at the acquisition date
has been included in the cost of the indefinite life intangible (see Note 7).
Foreign currency translation
Accounts in the financial statements of the Company's subsidiaries are measured using their functional currency, being
the currency of the primary economic environment in which the entity operates. The Company's performance is
evaluated and its liquidity is managed in Canadian dollars. Therefore, the Canadian dollar is the functional currency of
the Company. The Canadian dollar is also the functional currency of all its subsidiaries, with the exception of U.S.
entities, which uses the U.S. dollar as their functional currency. Accordingly, the assets and liabilities of U.S. entities are
translated into Canadian dollars using the rate in effect on the date of the consolidated balance sheets. Revenue and
expenses are translated at the average rate over the reporting period. Foreign currency translation gains and losses
arising from the Company's translation of its net investment in U.S. entities companies, including goodwill and the
identified intangible assets, are included in accumulated other comprehensive income or loss as a separate component
within shareholders' equity until there has been a realized reduction in the value of the underlying investment. The
Company's presentation currency is the U.S. dollar, and as such, all assets and liabilities are translated using the
exchange rate as at the reporting date, while equity transactions are translated at the historical exchange rate at the
date of the transaction. The statement of operations has been translated at the average exchange rate of the reporting
period. Exchange differences arising on translation are presented in the accumulated other comprehensive loss line in
shareholders' equity on the balance sheet.
Significant accounting judgments and estimates
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are described below. The Company based its assumptions and estimates on parameters available when
these financial statements were prepared. Existing circumstances and assumptions about future developments may
change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected
in the assumptions and estimates as they occur.
Fair value of financial instruments
When the fair value of financial assets and financial liabilities recorded in the consolidated balance sheets cannot be
derived from active markets, they are determined using valuation techniques and models. Model inputs are taken from
observable markets where possible, but where this is not feasible, unobservable inputs may be used. These
unobservable inputs include, but are not limited to, projected cash flows, discount rates, comparable recent
transactions, volatility of underlying securities in warrant valuations and extraction recovery rates of mining projects. The
use of unobservable inputs can involve significant judgment and materially affect the reported fair value of financial
instruments.
48
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Investments in other entities
IFRS 10 Consolidated Financial Statements ("IFRS 10") and IAS 28 Investments in Associates and Joint Ventures ("IAS
28") provide for the use of judgment in determining whether an investee should be included within the consolidated
financial statements of the Company and on what basis (subsidiary, joint venture or associate). Significant judgment is
applied in evaluating facts and circumstances relevant to the Company and investee, including: (1) the extent of the
Company's direct and indirect interests in the investee; (2) the level of compensation to be received from the investee for
management and other services provided to it; (3) "kick out rights" available to other investors in the investee; and (4)
other indicators of the extent of power that the Company has over the investee.
Impairment of goodwill and intangible assets
All indefinite life intangible assets and goodwill are assessed for impairment, however, finite life intangibles are only
tested for impairment to the extent indications of impairment exist at time of a quarterly assessment. In the case of
goodwill and indefinite life intangibles, an annual test for impairment augments the quarterly impairment indicator
assessments. The recoverable amounts associated with goodwill and intangibles involve estimates and assumptions,
including those with respect to future cash inflows and outflows, discount rates and asset lives, and are determined
using the value-in-use method. These estimates require significant judgment regarding market growth rates, discount
rates, fund flow assumptions, expected margins and costs which could affect the Company's future results if estimates
of future performance and fair value change.
Contingent consideration
The acquisition of the Sprott Uranium Miners ETF in 2022 necessitated the recognition of contingent consideration for
the amounts payable in cash under the terms of the purchase agreement. The consideration is subject to certain
financial performance conditions based on the average AUM of the fund over the two-year period from closing of the
transaction. The key judgments utilized in the estimation of the contingent consideration were fund flow and market
value assumptions.
49
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
3 Short-term investments
Primarily consist of equity investments in public and private entities the Company receives as consideration during
private strategies, managed equities and broker-dealer activities (in thousands $):
Classification and
measurement criteria
Dec. 31, 2023
Dec. 31, 2022
Public equities and share purchase warrants
Private holdings
Total short-term investments
FVTPL
FVTPL
754
1,478
2,232
1,863
1,485
3,348
Gains and losses on financial assets and liabilities classified at FVTPL are included in the gain (loss) on investments line
in the consolidated statements of operations and comprehensive income.
4 Co-investments
Consists of the following (in thousands $):
Co-investments in funds (1)
Total co-investments
(1) Includes investments in funds managed and previously managed by the Company
Classification and
measurement criteria
Dec. 31, 2023
Dec. 31, 2022
FVTPL
93,528
93,528
73,573
73,573
Gains and losses on co-investments are included in the gain (loss) on investments line in the consolidated statements of
operations and comprehensive income.
50
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
5 Other assets, income, expenses and non-controlling interest
Other assets
Consist of the following (in thousands $):
Assets attributable to non-controlling interest
Fund recoveries and investment receivables
Advance on unrealized carried interest
Prepaid expenses
Other(1)
Digital gold strategies(2)
Total other assets
(1) Includes miscellaneous third-party receivables.
Dec. 31, 2023
Dec. 31, 2022
15,439
6,658
4,517
4,017
3,744
3,412
37,787
11,301
4,617
4,454
3,741
2,103
3,778
29,994
(2) Digital gold strategies are financial instruments classified at FVTPL. Gains and losses are included in the gain (loss) on investments line in the consolidated
statements of operations and comprehensive income.
Other income
Consist of the following (in thousands $):
Realization of a previously unrecorded contingent asset (1)
Investment income (2)
Income attributable to non-controlling interest
Total other income
For the years ended
Dec. 31, 2023 Dec. 31, 2022
18,588
3,691
(934)
21,345
—
1,672
(522)
1,150
(1) In the second quarter, the Company received shares on the realization of an unrecorded contingent asset from a historical acquisition. The Company has no further
obligation with respect to these shares.
(2) Primarily includes miscellaneous investment fund income, syndication and trailer fee income.
Other expenses
Consist of the following (in thousands $):
Costs related to the exit of non-core businesses (1)
Other (2)
Foreign exchange (gain) loss
Total other expenses
For the years ended
Dec. 31, 2023 Dec. 31, 2022
5,142
3,894
3,212
12,248
—
5,537
4,654
10,191
(1) During the year, the Company exited its Canadian broker-dealer and its non-core asset management business that was domiciled in Korea.
(2) Includes net income (loss) attributable to non-controlling interest of ($0.9) million for the year ended December 31, 2023 (year ended December 31, 2022 - ($0.5)
million) as well as non-recurring professional fees and new fund start-up costs.
51
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Non-controlling interest assets and liabilities
Non-controlling interest consists of third-party interest in the Company's co-investments. The following table provides a
summary of amounts attributable to this non-controlling interest (in thousands $):
Assets
Liabilities - current(1)
Liabilities - long-term(1)
Dec. 31, 2023
Dec. 31, 2022
15,439
(133)
(15,306)
11,301
(211)
(11,090)
(1) Current and long-term liabilities attributable to non-controlling interest are included in accounts payable and accrued liabilities and other accrued liabilities,
respectively.
52
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
6 Property and equipment
Consist of the following (in thousands $):
Cost
At Dec. 31, 2021
Additions
Net exchange differences
At Dec. 31, 2022
Additions
Disposals
Net exchange differences
At Dec. 31, 2023
Accumulated depreciation
At Dec. 31, 2021
Depreciation charge for the year
Net exchange differences
At Dec. 31, 2022
Depreciation charge for the year
Disposals
Net exchange differences
At Dec. 31, 2023
Net book value at:
Dec. 31, 2022
Dec. 31, 2023
Artwork
Furniture
and fixtures
Computer
hardware
and software
Leasehold
improvements
Right of use
assets
Total
7,573
—
(484)
7,089
—
—
170
7,259
—
—
—
—
—
—
—
—
2,981
2
(160)
2,823
154
(591)
404
2,790
(2,579)
(98)
164
(2,513)
(141)
399
(251)
(2,506)
3,036
126
(160)
3,002
224
(189)
59
3,096
(2,882)
(93)
153
(2,822)
(68)
181
(116)
(2,825)
6,026
—
(372)
5,654
1,157
(413)
123
6,521
(4,570)
(522)
278
(4,814)
(521)
201
(134)
(5,268)
12,890
—
(531)
12,359
1,574
(2,684)
86
11,335
(5,996)
(2,642)
356
(8,282)
(2,113)
994
(145)
(9,546)
32,506
128
(1,707)
30,927
3,109
(3,877)
842
31,001
(16,027)
(3,355)
951
(18,431)
(2,843)
1,775
(646)
(20,145)
7,089
7,259
310
284
180
271
840
1,253
4,077
1,789
12,496
10,856
53
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
7 Goodwill and intangible assets
Consist of the following (in thousands $):
Cost
At Dec. 31, 2021
Additions
Transfers
Net exchange differences
At Dec. 31, 2022
Net exchange differences
At Dec. 31, 2023
Accumulated amortization
At Dec. 31, 2021
Amortization charge for the year
At Dec. 31, 2022
Amortization charge for the year
At Dec. 31, 2023
Net book value at:
At Dec. 31, 2022
At Dec. 31, 2023
Fund
management
contracts
(indefinite life)
Fund
management
contracts
(finite life)
Total
Goodwill
132,251
—
—
—
132,251
—
132,251
(113,102)
—
(113,102)
—
(113,102)
160,973
20,410
9,088
(11,858)
178,613
4,289
182,902
—
—
—
—
—
36,587
—
(9,088)
—
27,499
—
27,499
(27,499)
—
(27,499)
—
(27,499)
329,811
20,410
—
(11,858)
338,363
4,289
342,652
(140,601)
—
(140,601)
—
(140,601)
19,149
19,149
178,613
182,902
—
—
197,762
202,051
54
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Goodwill
The Company has identified 5 cash generating units ("CGU") as follows:
•
•
•
•
•
Exchange listed products
Managed equities
Private strategies
Brokerage
Corporate
As at December 31, 2023, the Company had allocated $19.1 million (December 31, 2022 - $19.1 million) of goodwill
between the exchange listed products CGU ($17.9 million) and the managed equities CGU ($1.2 million). Goodwill was
allocated on a relative value approach basis.
Indefinite life fund management contracts
As at December 31, 2023, the Company had indefinite life intangibles related to fund management contracts of $182.9
million (December 31, 2022 - $178.6 million). These contracts are held within the exchange listed products and
managed equities CGUs.
Impairment assessment of goodwill and indefinite life fund management contracts
In the normal course, goodwill and indefinite life fund management contracts are tested for impairment once per
annum, which for the Company is during the fourth quarter of each year or earlier if there are indicators of impairment.
As part of the Company’s annual impairment testing process, the recoverable amounts associated with goodwill and
indefinite life fund management contracts are calculated based on a five year value-in-use model with a terminal
multiple. The value-in-use model estimates future earnings based on: (1) external pricing estimates for commodities
(gold, silver and uranium), (2) analyst price forecasts for the underlying equity indices; and (3) fund flow assumptions
based on historical experience. These inputs are used to estimate future cash flows which are discounted at 9.25% and
compared to the CGUs and the intangible assets carrying value. During the annual impairment testing process, there
was no impairment in either the exchange listed products or the managed equities CGUs.
55
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
8 Shareholders' equity
Capital stock and contributed surplus
The authorized and issued share capital of the Company consists of an unlimited number of common shares, without
par value.
At Dec. 31, 2021
Shares acquired for equity incentive plan
Shares issued on exercise of stock options
Shares released on vesting of equity incentive plan
Shares issued on vesting of RSUs
Shares issued to purchase management contracts
Shares acquired and canceled under normal course issuer bid
Shares issued under dividend reinvestment program
At Dec. 31, 2022
Shares acquired for equity incentive plan
Shares released on vesting of equity incentive plan
Shares acquired and canceled under normal course issuer bid
Shares issued on vesting of RSUs
Shares issued under dividend reinvestment program
At Dec. 31, 2023
Number
of shares
Stated value
(in thousands $)
24,991,620
(180,594)
115,102
324,568
80,345
72,464
(81,538)
3,927
25,325,894
(154,131)
331,672
(126,353)
31,680
1,389
25,410,151
417,425
(6,948)
1,807
12,867
2,210
4,000
(3,036)
150
428,475
(5,252)
14,247
(4,157)
1,402
49
434,764
Contributed surplus consists of stock option expense, earn-out shares expense, equity incentive plans' expense, and
additional purchase consideration.
At Dec. 31, 2021
Shares issued on exercise of stock options
Shares released on vesting of equity incentive plan
Stock-based compensation
Released on vesting of RSUs
At Dec. 31, 2022
Shares released on vesting of equity incentive plan
Released on vesting of RSUs
Stock-based compensation
At Dec. 31, 2023
Stated value
(in thousands $)
35,357
(680)
(12,867)
17,041
(5,135)
33,716
(14,247)
(4,599)
20,411
35,281
56
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Stock option plan
The Company has an option plan (the "Plan") intended to provide incentives to directors, officers and employees of the
Company and its wholly owned subsidiaries. The aggregate number of shares issuable upon the exercise of all options
granted under the Plan and under all other stock-based compensation arrangements including the Trust and Equity
Incentive Plan ("EIP") cannot exceed 10% of the issued and outstanding shares of the Company as at the date of grant.
The options may be granted at a price that is not less than the market price of the Company's common shares at the
time of grant. The options typically vest annually over a three-year period and may be exercised during a period not to
exceed 10 years from the date of grant.
There were no stock options issued during the year ended December 31, 2023 (year ended December 31, 2022 - Nil).
There were no stock options exercised during the year ended December 31, 2023 (year ended December 31, 2022 -
150,000).
For valuing share option grants, the fair value method of accounting is used. The fair value of option grants is
determined using the Black-Scholes option-pricing model, which takes into account the exercise price of the option, the
current share price, the risk-free interest rate, the expected volatility of the share price over the life of the option and
other relevant factors. Compensation cost is recognized over the vesting period, assuming an estimated forfeiture rate,
with an offset to contributed surplus. When exercised, amounts originally recorded against contributed surplus as well
as any consideration paid by the option holder is credited to capital stock.
As at December 31, 2023, there are 12,500 options outstanding (December 31, 2022 - 12,500) with a weighted
average exercise price of CAD$27.30 and 2.4 years remaining on their contractual life.
Equity incentive plan
For employees in Canada, the Trust has been established and the Company will fund the Trust with cash, which will be
used by the trustee to purchase: (1) on the open market, common shares of the Company that will be held in the Trust
until the awards vest and are distributed to eligible members; and (2) from treasury, common shares of the Company
that will be held in the Trust until the awards vest and are distributed to eligible employees. For employees in the U.S.
under the EIP plan, the Company will allot common shares of the Company as either: (1) restricted stock; (2)
unrestricted stock; or (3) restricted stock units ("RSUs"), the resulting common shares of which will be issued from
treasury.
There were 63,128 RSUs granted during the year ended December 31, 2023 (year ended December 31, 2022 -
372,000).
Unvested common shares held by the Trust, Dec. 31, 2021
Acquired
Released on vesting
Unvested common shares held by the Trust, Dec. 31, 2022
Acquired
Released on vesting
Unvested common shares held by the Trust, Dec. 31, 2023
Number of
common shares
774,405
180,594
(324,568)
630,431
154,131
(331,672)
452,890
Included in the compensation line of the consolidated statements of operations and comprehensive income is
$20.4 million of stock-based compensation for the year ended December 31, 2023 (year ended December 31, 2022 -
$17 million).
57
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Basic and diluted earnings per share
The following table presents the calculation of basic and diluted earnings per common share:
Numerator (in thousands $):
Net income - basic and diluted
Denominator (number of shares in thousands):
Weighted average number of common shares
Weighted average number of unvested shares purchased by the Trust
Weighted average number of common shares - basic
Weighted average number of dilutive stock options
Weighted average number of unvested shares under EIP
Weighted average number of common shares - diluted
Net income per common share
Basic
Diluted
Capital management
The Company's objectives when managing capital are:
For the years ended
Dec. 31, 2023 Dec. 31, 2022
41,799
17,632
25,892
(662)
25,230
13
827
26,070
25,923
(857)
25,066
13
1,107
26,186
1.66
1.60
0.70
0.67
•
•
•
•
•
to meet regulatory requirements and other contractual obligations;
to safeguard the Company's ability to continue as a going concern so that it can continue to provide returns
to shareholders;
to provide financial flexibility to fund possible acquisitions;
to provide adequate seed capital for the Company's new product offerings; and
to provide an adequate return to shareholders through growth in assets under management, growth in
management fees, carried interest and performance fees and return on the Company's invested capital that
will result in dividend payments to shareholders.
The Company's capital is comprised of equity, including capital stock, contributed surplus, retained earnings (deficit)
and accumulated other comprehensive income (loss). SAM is a registrant of the Ontario Securities Commission ("OSC")
and the U.S. Securities and Exchange Commission ("SEC") and SGRIL is a member of the Financial Industry Regulatory
Authority ("FINRA"). As a result, all of these entities are required to maintain a minimum level of regulatory capital. To
ensure compliance, management monitors regulatory and working capital on a regular basis. SAM US and RCIC are
also registered with the SEC. As at December 31, 2023 and 2022, all entities were in compliance with their respective
capital requirements.
58
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
9
Income taxes
The major components of income tax expense are as follows (in thousands $):
Current income tax expense
Based on taxable income of the current period
Adjustments in respect to previous years
Total current income tax expense
Deferred income tax expense (recovery)
Origination and reversal of temporary differences
Adjustments in respect to previous years
Total deferred income tax expense (recovery)
Income tax expense reported in the consolidated statements of operations
For the years ended
Dec. 31, 2023
Dec. 31, 2022
8,060
(570)
7,490
1,148
(146)
1,002
8,492
8,096
(649)
7,447
(187)
187
—
7,447
Taxes calculated on the Company's earnings differs from the theoretical amount that would arise using the weighted
average tax rate applicable to earnings of the Company as follows (in thousands $):
Income before income taxes
Tax calculated at domestic tax rates applicable to profits in the respective countries
Tax effects of:
Non-deductible stock-based compensation
Non-taxable capital (gains) and losses
Adjustments in respect to previous years
Temporary differences not currently utilized and (not benefited previously)
Rate differences and other
Tax charge
For the years ended
Dec. 31, 2023
Dec. 31, 2022
50,291
25,079
13,408
6,679
71
(3,377)
(716)
(981)
87
8,492
(21)
884
(462)
318
49
7,447
The weighted average statutory tax rate was 26.7% (December 31, 2022 - 26.6%). The Company has $1.8 million (December 31, 2022 -
$1.1 million) of capital losses from prior years that will begin to expire in 2024. The benefit of these capital losses has not been recognized.
59
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are
recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable
profits is probable. The ability to realize the tax benefits of these losses is dependent upon a number of factors,
including the future profitability of operations in the jurisdictions in which the tax losses arose. The movement in
significant components of the Company's deferred income tax assets and liabilities is as follows (in thousands $):
For the year ended December 31, 2023
Deferred income tax assets
Stock-based compensation
Non-capital and capital losses
Other
Total deferred income tax assets
Deferred income tax liabilities
Fund management contracts
Unrealized gains (losses)
Advance on unrealized carried interest
Fixed assets and other
Total deferred income tax liabilities
Net deferred income tax assets (liabilities) (1)
For the year ended December 31, 2022
Deferred income tax assets
Stock-based compensation
Non-capital and capital losses
Other
Total deferred income tax assets
Deferred income tax liabilities
Fund management contracts
Unrealized gains (losses)
Advance on unrealized carried interest
Fixed assets and other
Total deferred income tax liabilities
Net deferred income tax assets (liabilities) (1)
Dec. 31, 2022
Recognized in
income
Exchange rate
differences
Dec. 31, 2023
5,768
1,324
614
7,706
14,796
(2,249)
1,180
523
14,250
(6,544)
1,090
2,742
(27)
3,805
1,445
3,197
(12)
177
4,807
(1,002)
160
113
4
277
598
10
28
(151)
485
(208)
7,018
4,179
591
11,788
16,839
958
1,196
549
19,542
(7,754)
Dec. 31, 2021
Recognized in
income
Exchange rate
differences
Dec. 31, 2022
4,177
1,061
1,007
6,245
13,732
(978)
—
519
13,273
(7,028)
1,928
344
(635)
1,637
2,231
(1,337)
1,231
(488)
1,637
—
(337)
(81)
242
(176)
(1,167)
66
(51)
492
(660)
484
5,768
1,324
614
7,706
14,796
(2,249)
1,180
523
14,250
(6,544)
(1) Deferred tax assets of $3.1 million (December 31, 2022 - $1.7 million) and deferred tax liabilities of $10.8 million (December 31, 2022- $8.2 million) are presented on the balance
sheet net by legal jurisdiction.
60
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
10 Fair value measurements
The following tables present the Company's recurring fair value measurements within the fair value hierarchy. The
Company did not have non-recurring fair value measurements as at December 31, 2023 and December 31, 2022 (in
thousands $).
Short-term investments
Dec. 31, 2023
Level 1
Level 2
Level 3
Total
Public equities and share purchase warrants
Private holdings
Total recurring fair value measurements
708
—
708
44
—
44
2
1,478
1,480
754
1,478
2,232
Dec. 31, 2022
Level 1
Level 2
Level 3
Total
Public equities and share purchase warrants
Private holdings
Total recurring fair value measurements
1,012
—
1,012
804
—
804
47
1,485
1,532
1,863
1,485
3,348
Co-investments
Dec. 31, 2023
Level 1
Level 2
Level 3
Total
Co-investments (1)
Total recurring fair value measurements
15,357
15,357
78,171
78,171
—
—
93,528
93,528
Dec. 31, 2022
Level 1
Level 2
Level 3
Total
Co-investments (1)
Total recurring fair value measurements
10,279
10,279
63,294
63,294
—
—
73,573
73,573
(1) Co-investments also include investments made in funds which the Company consolidates that directly hold publicly traded equities or precious
metals.
61
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Other assets
Dec. 31, 2023
Digital gold strategies
Assets attributable to non-controlling interest
Total recurring fair value measurements
Level 1
Level 2
Level 3
Total
—
1,706
1,706
—
13,733
13,733
3,412
—
3,412
3,412
15,439
18,851
Dec. 31, 2022
Level 1
Level 2
Level 3
Total
Digital gold strategies
Assets attributable to non-controlling interest
Total recurring fair value measurements
—
3,248
3,248
—
8,053
8,053
3,778
—
3,778
3,778
11,301
15,079
The following tables provides a summary of changes in the fair value of Level 3 financial assets (in thousands $):
Short-term investments
Changes in the fair value of Level 3 measurements - Dec. 31, 2023
Share purchase warrants
Private holdings
Total
Dec. 31,
2022
47
1,485
1,532
Purchases and
reclassifications
48
—
48
Sales
(37)
—
(37)
Net unrealized
gains (losses)
included in net
income
(56)
(7)
(63)
Dec. 31,
2023
2
1,478
1,480
Changes in the fair value of Level 3 measurements - Dec. 31, 2022
Dec. 31,
2021
Purchases and
reclassifications
Share purchase warrants
Private holdings
Total
135
2,020
2,155
(44)
—
(44)
Net unrealized
gains (losses)
included in net
income
(44)
(535)
(579)
Dec. 31,
2022
47
1,485
1,532
Sales
—
—
—
62
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Other assets
Changes in the fair value of Level 3 measurements - Dec. 31, 2023
Dec. 31,
2022
Purchases and
reclassifications
Digital gold strategies
Total
3,778
3,778
—
—
Net unrealized
gains (losses)
included in net
income
(366)
(366)
Dec. 31,
2023
3,412
3,412
Sales
—
—
Changes in the fair value of Level 3 measurements - Dec. 31, 2022
Dec. 31,
2021
Purchases and
reclassifications
Digital gold strategies
Total
7,060
7,060
—
—
Net unrealized
gains (losses)
included in net
income
(3,282)
(3,282)
Dec. 31,
2022
3,778
3,778
Sales
—
—
During the year ended December 31, 2023, the Company transferred public equities of $0.1 million (December 31, 2022
- $0.8 million) from Level 2 to Level 1 within the fair value hierarchy.
The following table presents the valuation techniques used by the Company in measuring fair values:
Type
Public equities, precious metals
and share purchase warrants
Alternative funds and private
equity funds
Fixed income securities
Private holdings (including
digital gold strategies)
Valuation technique
Fair values are determined using publicly available prices or pricing models which incorporate all
available market-observable inputs.
Fair values are based on the last available net asset value.
Fair values are based on independent market data providers or third-party broker quotes.
Fair values based on variety of valuation techniques, including discounted cash flows,
comparable recent transactions and other techniques used by market participants.
The Company’s Level 3 securities consist of private holdings and share purchase warrants. The significant unobservable
inputs used in these valuation techniques can vary considerably over time, and include gray market financing prices,
volatility and discount rates. A significant change in any of these inputs in isolation would result in a material impact in
fair value measurement. The potential impact of a 5% change in the significant unobservable inputs on profit or loss
would be approximately $0.2 million (December 31, 2022 - $0.3 million).
Financial instruments not carried at fair value
The carrying amounts of fees receivable, other assets, accounts payable and accrued liabilities and compensation
payable represent a reasonable approximation of fair value.
63
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
11 Related party transactions
The remuneration of directors and other key management personnel of the Company for employment services rendered
are as follows (in thousands $):
Fixed salaries and benefits
Variable incentive-based compensation
Share-based compensation
For the years ended
Dec. 31, 2023
Dec. 31, 2022
4,655
6,139
9,915
20,709
4,998
7,913
11,881
24,792
The DSU plan for independent directors of the Company vests annually over a three-year period and may only be settled
in cash upon retirement. DSUs issued in lieu of directors' fees and dividends vest immediately. There were 15,782 DSUs
issued during the year (December 31, 2022 - 16,820).
In the second quarter of the year, the Company completed the sale of its Canadian broker-dealer to its former
management team. The net assets of the Canadian broker-dealer at the time of the transaction were $6.3 million. In the
third quarter, the Company completed the sale of its non-core asset management business in Korea to its management
teams. The total charge taken on the exit of Korea was $3.6 million, the majority of which pertains to its historical book
value. Details of the transactions can be found in Note 5.
12 Dividends
The following dividends were declared by the Company during the year ended December 31, 2023:
Record date
November 13, 2023 - Regular dividend Q3 2023
August 21, 2023 - Regular dividend Q2 2023
May 15, 2023 - Regular dividend Q1 2023
March 6, 2023 - Regular dividend Q4 2022
Dividends declared in 2023 (1)
Payment date
November 28, 2023
September 5, 2023
May 30, 2023
March 21, 2023
Cash dividend
per share
Total dividend amount
(in thousands $)
$0.25
$0.25
$0.25
$0.25
6,458
6,467
6,482
6,489
25,896
(1) Subsequent to year end, on February 20, 2024, a regular dividend of $0.25 per common share was declared for the quarter ended December
31, 2023. This dividend is payable on March 19, 2024 to shareholders of record at the close of business on March 4, 2024.
64
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
13 Risk management activities
The Company's exposure to market, credit, liquidity and concentration are described below:
Market risk
Market risk refers to the risk that a change in the level of one or more of market prices, interest rates, foreign exchange
rates, indices, volatilities, correlations or other market factors, such as liquidity, will result in a change in the fair value of
an asset. The Company's financial instruments are classified as FVTPL. Therefore, certain changes in fair value or
permanent impairment, if any, affect reported earnings as they occur. The maximum risk resulting from financial
instruments is determined by the fair value of the financial instruments. The Company manages market risk through
regular monitoring of its investments and co-investments. The Company separates market risk into three categories:
price risk, interest rate risk and foreign currency risk.
Price risk
Price risk arises from the possibility that changes in the price of the Company's investments and co-investments will
result in changes in carrying value. If the market values of investments and co-investments classified as FVTPL increased
or decreased by 5%, with all other variables held constant, this would have resulted in an increase or decrease in net
income before tax of approximately $5 million for the year (December 31, 2022 - $4 million). For more details about the
Company's investments and co-investments, refer to Note 3, Note 4 and Note 5.
The Company's revenues are also exposed to price risk since management fees, carried interest and performance fees
are all correlated with assets under management, which fluctuates with changes in the market values of the assets in
the funds and managed accounts managed by SAM, SRLC, SRSR, SAM US and RCIC.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will adversely affect the value of, or cash flows
from, financial assets and liabilities. The Company’s earnings, particularly through its co-investment in private strategies
LPs and outstanding balance on the Company's line of credit, are exposed to volatility as a result of sudden changes in
interest rates.
As at December 31, 2023, the Company had no fixed income securities (December 31, 2022 - $Nil).
Foreign currency risk
Foreign currency risk arises from foreign exchange rate movements that could negatively impact either the carrying value
of financial assets and liabilities or the related cash flows when translating those balances into the Company's
functional currency, Canadian dollars. The Company's primary foreign currency is the U.S. dollar. The Company may
employ certain hedging strategies to mitigate foreign currency risk.
The US entities assets are all denominated in U.S. dollars with their translation impact being reported as part of other
comprehensive income in the financial statements. Excluding the impact of the US entities, as at December 31, 2023,
approximately $73.2 million (December 31, 2022 - $55.2 million) of total Canadian assets were invested in proprietary
investments priced in U.S. dollars. A total of $9.7 million (December 31, 2022 - $12.9 million) of cash, $6.8 million
(December 31, 2022 -$4 million) of accounts receivable and $8.2 million (December 31, 2022 - $5.4 million) of other
assets were denominated in USD. As at December 31, 2023, if the exchange rate between the U.S. dollar and the
Canadian dollar increased or decreased by 5%, with all other variables held constant, the increase or decrease in net
income would have been approximately $4.9 million for the year (December 31, 2022 - $3.9 million).
65
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Credit risk
Credit risk is the risk that a borrower will not honor its commitments and a loss to the Company may result.
Loans receivable
The Company incurs credit risk indirectly through co-investments made in the private strategies LPs managed by SRLC
and SRSR. During the loan origination process, management takes into account a number of factors and is committed
to several processes to ensure that this risk is appropriately mitigated. These include:
• emphasis on first priority and/or secured financings;
• the investigation of the creditworthiness of borrowers;
• the employment of qualified and experienced loan professionals;
• a review of the sufficiency of the borrower’s business plans including plans that will enhance the value of the
underlying security;
• frequent and documented status updates provided on business plans;
• engagement of qualified independent advisors (e.g. lawyers, engineers and geologists) to protect the
Company's interests; and
• legal reviews that are performed to ensure that all due diligence requirements are met prior to funding.
The Company may syndicate loans in certain circumstances if it wishes to reduce its exposure to a borrower or comply
with loan exposure maximums. The Company reviews its policies regarding its lending limits on an ongoing basis.
Investments
The Company incurs credit risk when entering into, settling and financing various proprietary transactions. As at
December 31, 2023 and 2022, the Company's most significant proprietary investments counterparty was Royal Bank of
Canada ("RBC") which acts as a custodian for most of the Company's proprietary investments. RBC is registered as an
investment dealer subject to regulation by the Canadian Investment Regulatory Organization; and as a result, it is
required to maintain minimum levels of regulatory capital at all times.
Other
The majority of accounts receivable relate to management, carried interest and performance fees receivable from the
funds and managed accounts managed by the Company. Credit risk is managed in this regard by dealing with
counterparties that the Company believes to be creditworthy and by actively monitoring credit exposure and the
financial health of the counterparties.
The US entities incur credit risk when entering into, settling and financing various proprietary transactions. As at
December 31, 2023 and 2022, the US entities' most significant counterparty was RBC Capital Markets, LLC ("RBCCM"),
the carrying broker of SGRIL and custodian of the net assets of the funds managed by RCIC and SAM US. RBCCM is
registered as a broker-dealer and registered investment advisor subject to regulation by FINRA and the SEC; as a result,
it is required to maintain minimal levels of regulatory capital at all times.
66
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
Liquidity risk
Liquidity risk is the risk that the Company cannot meet a demand for cash or fund its obligations as they come due.
The Company's exposure to liquidity risk is minimal as it maintains sufficient levels of liquid assets to meet its
obligations as they come due. Additionally, the Company has access to a $75 million committed line of credit with a
major Canadian Schedule I bank. As at December 31, 2023, the Company had $20.7 million or 5% (December 31,
2022 - $51.7 million or 13%) of its total assets in cash and cash equivalents. In addition, approximately $39.7 million
or 40% (December 31, 2022 - $32 million or 40%) of proprietary investments held by the Company are readily
marketable and are recorded at their fair value.
The Company's exposure to liquidity risk as it relates to its' co-investments in private strategies LPs arises from
fluctuations in cash flows from making capital calls and receiving capital distributions. The Company manages its co-
investment liquidity risk through the ongoing monitoring of scheduled capital calls and distributions ("match funding")
and through its broader treasury risk management program and enterprise capital budgeting. As at December 31, 2023,
the Company had $5.9 million in co-investment commitments from the private strategies segment (December 31, 2022 -
$6.1 million). Financial liabilities, including accounts payable and accrued liabilities and compensation and employee
bonuses payable, are short-term in nature and are generally due within a year.
The following are the remaining contractual maturities of financial liabilities as at December 31, 2023 (in thousands $):
Contractual obligations
Operating accounts payable
Compensation payable
Contingent consideration on URNM acquisition
Lease obligation
Loan facility
Total contractual obligations
Carrying
Amount
11,749
7,822
4,470
2,096
24,237
50,374
Less
than
1 year
11,749
7,822
4,470
765
—
24,806
1-3
years
—
—
—
1,244
—
1,244
4-5
years
—
—
—
87
24,237
24,324
More
than
5 years
—
—
—
—
—
—
The Company's management team is responsible for reviewing resources to ensure funds are readily available to meet
its financial obligations as they come due, as well as ensuring adequate funds exist to support business strategies and
operations growth. The Company manages liquidity risk by monitoring cash balances on a daily basis. To meet any
liquidity shortfalls, actions taken by the Company could include: drawing on the line of credit; liquidating investments
and co-investments and/or issuing common shares.
Concentration risk
The majority of the Company's AUM, as well as its investments and co-investments are focused on the natural resource
sector, and in particular, precious metals and critical materials.
67
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
14 Segmented information
For management purposes, the Company is organized into business units based on its products, services and
geographical locations and has four reportable segments as follows:
• Exchange listed products (reportable), which provides management services to the Company's closed-end
physical trusts and exchange traded funds ("ETFs"), both of which are actively traded on public securities
exchanges;
• Managed equities (reportable), which provides management services to the Company's alternative
investment strategies managed in-house and on a sub-advisory basis;
• Private strategies (reportable), which provides lending and streaming activities through limited partnership
vehicles;
• Corporate (reportable), which provides capital, balance sheet management and enterprise shared services to
the Company's subsidiaries; and
• All other segments (non-reportable), which do not meet the definition of reportable segments per IFRS 8.
Effective in the first quarter of this year, the brokerage segment no longer met the definition of a reportable segment.
Consequently, this segment was retroactively included as part of "All other segments".
Management monitors the operating results of its business units separately for the purpose of making decisions about
resource allocation and performance assessment. Segment performance is evaluated based on earnings before interest
expense, income taxes, amortization and impairment of intangible assets and goodwill, gains and losses on investments
(as if such gains and losses had not occurred), other (income) and expenses, amortization of stock-based compensation,
carried interest and performance fees and carried interest and performance fee payouts (adjusted base EBITDA).
Adjusted base EBITDA is not a measurement in accordance with IFRS and should not be considered as an alternative to
net income or any other measure of performance under IFRS.
Transfer pricing between operating segments is performed on an arm's length basis in a manner similar to transactions
with third parties.
The following tables present the operations of the Company's segments (in thousands $):
For the year ended December 31, 2023
Total revenue
Total expenses
Income (loss) before income taxes
Adjusted base EBITDA
Exchange
listed
products
103,301
29,306
73,995
62,303
Managed
equities
Private
strategies
30,180
26,222
3,958
7,756
28,183
15,604
12,579
12,361
Corporate
(198)
33,776
(33,974)
(11,047)
Consolidation,
elimination
and all other
segments
7,555
13,822
(6,267)
514
Consolidated
169,021
118,730
50,291
71,887
68
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
For the year ended December 31, 2022
Total revenue
Total expenses
Income (loss) before income taxes
Adjusted base EBITDA
Exchange
listed
products
76,819
27,221
49,598
56,948
Managed
equities
Private
strategies
29,710
25,634
4,076
9,932
16,984
12,400
4,584
9,207
Corporate
(3,288)
31,246
(34,534)
(10,518)
Consolidation,
elimination
and all other
segments
24,957
23,602
1,355
5,433
Consolidated
145,182
120,103
25,079
71,002
For geographic reporting purposes, transactions are primarily recorded in the location that corresponds with the
underlying subsidiary's country of domicile that generates the revenue. The following table presents the revenue of the
Company by geographic location (in thousands $):
Canada
United States
15 Loan facility
For the years ended
Dec. 31, 2023
Dec. 31, 2022
154,941
14,080
169,021
130,397
14,785
145,182
As at December 31, 2023, the Company had $24.2 million (December 31, 2022 - $54.4 million) outstanding on its
credit facility, all of which is due on August 8, 2028. The decrease in the year was due to the repayment of
$30.2 million of the loan facility. As at December 31, 2023, the Company was in compliance with all covenants, terms
and conditions under the credit facility.
The Company has access to a credit facility of $75 million with a major Canadian schedule I chartered bank. Amounts
under the facility may be borrowed through prime rate loans or bankers’ acceptances. Amounts may also be borrowed
in U.S. dollars through base rate loans.
Key terms under the current credit facility are noted below:
Structure
•
5-year, $75 million revolver with "bullet maturity" August 8, 2028
Interest rate
•
•
U.S. prime rate + 105 bps; or
Canadian prime rate + 55 bps;
Covenant terms
•
•
•
Minimum AUM: CAD$15.4 billion;
Debt to EBITDA less than or equal to 2.5:1; and
EBITDA to interest expense more than or equal to 2.5:1
69
SPROTT INC.
Notes to the consolidated financial statements
For the years ended December 31, 2023 and 2022
16 Commitments and provisions
The Company has commitments to make co-investments in private strategies LPs or commitments to make co-
investments in fund strategies in the Company's other segments. As at December 31, 2023, the Company had $4
million in co-investment commitments in private strategies LPs due within one year (December 31, 2022 - $5.7 million),
and $1.9 million due after 12 months (December 31, 2022 - $0.4 million). During the year, the Company signed a new
lease for its existing Toronto office location that is set to commence on January 1, 2024.
.
70
Corporate Information
Head Office
Sprott Inc.
Royal Bank Plaza, South Tower
200 Bay Street, Suite 2600
Toronto, Ontario M5J 2J1, Canada
T: 416.943.8099
1.855.943.8099
Directors & Officers
Ronald Dewhurst, Chairman
Graham Birch, Director
Barbara Connolly Keady, Director
Catherine Raw, Director
Judith W. O’Connell, Director
Whitney George, Chief Executive Officer and Director
Kevin Hibbert, FCPA, FCA, Chief Financial Officer
Arthur Einav, Corporate Secretary
US Transfer Agent and Registrar
Continental Stock Transfer & Trust Company
1 State Street 30th Floor
New York, NY 10004-1561
212.509.4000
continentalstock.com
Canadian Transfer Agent and Registrar
TMX Equity Transfer Services
200 University Avenue, Suite 300
Toronto, Ontario M5H 4H1
Toll Free: 1.866.393.4891
www.tmxequitytransferservices.com
Legal Counsel
Stikeman Elliot LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9
Auditors
KPMG LLP
Bay Adelaide Centre
333 Bay Street, Suite 4600
Toronto, Ontario M5H 2S5
Investor Relations
Shareholder requests may be directed to
Investor Relations by e-mail at ir@sprott.com
or via telephone at 416.943.8099
or toll free at 1.855.943.8099
Stock Information
Sprott Inc. common shares are traded on
the New York Stock Exchange and
Toronto Stock Exchange under the symbol “SII”
Annual General Meeting
Wednesday, May 8, 2024 at 12pm
71
sprott.com