Sprott Inc. (SII:CA) Q1 2026 Earnings Call Transcript

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Overview

The earnings call highlights strong financial performance with 12% growth in Managed Equities AUM and significant net inflows. The company has a strategic focus on innovative ETF products and new market opportunities, such as the Copper Trust listing on NYSE. The Q&A section reveals positive sentiment towards capital allocation strategies, with ongoing dividends and share buybacks. Despite some unclear responses, the overall outlook is optimistic, especially with strong client interest in new funds. Given the small-cap nature of the company, the positive factors are likely to lead to a stock price increase of 2% to 8%.

Key Financial Performance

Assets Under Management (AUM) Increased by $5.5 billion to $65.1 billion, up 9% from $59.6 billion as of December 31, 2025. The increase was driven by market value appreciation across fund products and positive net inflows to exchange-listed products.

Net Income $29.2 million, up $17.3 million from $12 million over the same 3-month period last year. The increase was primarily due to higher average AUM in exchange-listed products, managed equities, and carried interest crystallization in private strategies. Partially offset by higher stock-based compensation expense due to a 46% stock price appreciation.

Adjusted EBITDA $57.9 million, up $36 million from $21.9 million over the same 3-month period last year. The increase was attributed to higher average AUM on market value appreciation and inflows to physical trusts and ETFs, as well as higher average AUM in managed equities products.

Performance Fees and Carried Interest Recorded $52 million in performance fees and carried interest in private strategies.

Physical Trust AUM Increased by $3.5 billion or 7.4% in the quarter. Growth was attributed to robust fundamentals for metals and geopolitical events reinforcing their strategic importance.

ETF Flows Reached a record $1.1 billion in the quarter, with most ETFs experiencing inflows. Momentum post-quarter remained strong with an additional $184 million in net flows.

Managed Equities AUM Grew 12% during the first quarter to $6.3 billion despite market turbulence.

Private Strategies AUM Stood at $2 billion at the end of March 2026. The segment is in a transition phase, with plans to market Lending Fund IV midyear.

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Operating Highlights

Sprott Rare Earths Ex-China ETF (REXC): Launched on April 15, 2026, and has already exceeded $30 million in assets, making it the most successful ETF launch to date.

Sprott Physical Copper Trust: Cross-listed on the New York Stock Exchange under the ticker SCOP, representing the first physical copper vehicle listed in the U.S.

UCITS version of Sprott Silver Miners and Physical Silver ETF: Launched for distribution in the U.K. and Europe on April 16, 2026.

ETF Flows: ETF flows reached a record $1.1 billion in the quarter, with momentum remaining strong post-quarter with an additional $184 million in net flows.

Critical Materials Segment: 96% of $1.7 billion in net sales came from this segment, with assets under management increasing by $5.5 billion to $65.1 billion.

Assets Under Management (AUM): Increased by 9% to $65.1 billion from $59.6 billion as of December 31, 2025.

Net Income: Increased to $29.2 million, up $17.3 million from the same period last year.

Adjusted EBITDA: Increased to $57.9 million, up $36 million from the same period last year.

Expansion of ETF Product Suite: Broadened to include mining ETFs covering precious metals, critical materials, copper, battery metals, and rare earths, positioning Sprott as a leader in metals and mining funds.

Focus on Critical Materials: Aggressively developed product suite to capitalize on the bull market in metals and mining, including rare earths and copper.

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Risk or Challenges

Volatility in Precious Metals Market: The first quarter of 2026 experienced extreme volatility in precious metals, with gold and silver experiencing significant price fluctuations. This volatility, driven by geopolitical events and liquidity-driven deleveraging, poses risks to investor confidence and market stability.

Geopolitical Conflicts: The escalation of the conflict in the Middle East, including the U.S.-Israel strike on Iran and the closure of the Strait of Hormuz, disrupted global liquidity and impacted demand for precious metals, creating uncertainty in the market.

Supply Chain Disruptions: Disruptions in oil revenue and reserve flows, particularly from Gulf states, temporarily stalled central bank and sovereign demand for gold, affecting market dynamics.

Structural Supply Deficit in Silver: Silver is entering its sixth year of structural supply deficit, which could impact its availability and pricing, posing challenges for industries reliant on this critical material.

Investor Hesitancy: Many investors are currently sitting on the sidelines due to market uncertainty and the inability to model risks related to ongoing geopolitical conflicts, potentially impacting fund inflows.

Private Strategies Growth Challenges: The private strategies segment has failed to keep pace with the rapid growth in other areas of the business, and fundraising for new lending funds is expected to take 12 to 18 months, delaying potential revenue growth.

Dependence on Critical Materials: The company's focus on critical materials, while a growth area, is subject to risks such as geopolitical tensions and supply chain vulnerabilities, particularly in rare earth metals dominated by China.

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Guidance & Outlook

Precious Metals Market Outlook: The structural foundation of gold's bull market remains intact despite recent volatility. Silver is expected to have long-term growth prospects due to its structural supply deficit and its role as both a precious metal and a critical material.

Critical Materials Strategies: Sprott anticipates continued growth in its critical materials strategies, with 96% of net sales in the first quarter attributed to this segment. The company recently launched the Sprott Rare Earths Ex-China ETF, which has already exceeded $30 million in assets.

ETF Product Suite Expansion: Sprott plans to continue expanding its ETF product suite, focusing on metals and mining funds. The company recently launched the Sprott Rare Earths Ex-China ETF and cross-listed the Sprott Physical Copper Trust on the NYSE. These initiatives aim to capitalize on the growing demand for critical materials and metals.

Private Strategies Growth: Sprott is optimistic about growing its private strategies segment, with plans to market Lending Fund IV in mid-2026. The fundraising period is expected to last 12 to 18 months.

Market Trends and Investor Behavior: The company expects a rotation into metals and mining investments as commodity cycles continue to run longer than business cycles. Sprott believes the fundamentals for metals are constructive, with geopolitical events reinforcing their strategic importance.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What has worked well for Sprott from a distribution standpoint, and can you provide a refresher on your ETF strategy for new launches?

A:Sprott's strategy involves creating thoughtful, passively managed ETF products with unique index methodologies developed in partnership with NASDAQ. Their Silver Miners ETF, for example, has 2x the exposure to silver compared to competitors, leading to better performance. Sprott focuses on differentiated products, leveraging their brand and expertise in metals and mining, and emphasizes investor education globally. Their Rare Earth Ex-China ETF is an example of a well-timed product launch.

Q:How meaningful could the Copper Trust listing on the NYSE be in terms of raising new capital, and how do you think about redemption risk for this trust relative to gold or silver?

A:The NYSE listing is significant as it provides broader access to retail, advisers, and institutional investors. Enhancements like monthly physical redemption with no cap incentivize arbitrage, helping the trust trade closer to its NAV. Redemption risk is limited to entities with high minimum dollar amounts and storage arrangements, typically traders and hedge funds. These features are expected to accelerate growth in the Copper Trust, emphasizing the importance of physical copper over futures.

Q:Could you update us on capital allocation and whether continued performance could result in capital returns to shareholders?

A:Sprott has a history of paying dividends, which remains a priority. They also have a share buyback program and are open to acquisitions aligned with their strategy. New private strategies requiring co-investment are also part of their capital allocation plans.

Q:Could you provide details on the investor mix and geographic mix for the upcoming private strategies fundraise (LF-IV)?

A:Fundraising for LF-IV is expected to begin after Q2 and into Q3. The investor mix includes large institutions, predominantly in the U.S., with prospects in Canada and the Middle East. Co-investment is expected to be around 2%, reflecting Sprott's long record and institutional interest.

Q:Can you provide details on the $52 million of carried interest in the quarter and any unrealized carry in private strategies?

A:The $52 million carried interest is unrelated to capital distribution and pertains to legacy funds. Unrealized carry details cannot be provided due to accounting rules. The carried interest is recognized once earned and paid out, following cash accounting principles.

Q:What is the size of Lending Fund II, and what is the target size for Lending Fund IV?

A:Lending Fund II had a peak committed capital of $900 million and currently has $27 million left. Sprott aims for Lending Fund IV to be twice as large as Lending Fund II, reflecting strong client interest and performance.

Q:What are the expectations for precious metals if the Middle East conflict resolves?

A:Sprott expects the long-term bull market for precious metals to continue, driven by fiscal situations in developed countries and currency devaluation. Hard assets, including mining companies, are expected to perform well due to strong fundamentals.

Q:Are you seeing any meaningful pickup in retail or other channels, and is this changing your distribution strategy?

A:Sprott is seeing broadening interest, with institutional investors increasingly engaging in metals and mining. Retail interest remains strong, particularly in ETFs like the Silver ETF. The adviser channel is also growing, with larger platforms adopting Sprott's products. Distribution strategies now include solutions for broad exposure to critical materials.

Q:Where did the net inflows to critical materials ETFs in Q1 come from geographically and in terms of retail versus institutional investors?

A:Net inflows to critical materials ETFs in Q1 were primarily institutional, with uranium and copper attracting significant interest globally. Retail interest is more focused on volatile and niche products like junior copper mining ETFs. The adviser channel also plays a key role in distribution.

Q:What was the total consolidated AUM in late January when gold and silver prices were high?

A:The total consolidated AUM in late January was approximately $85 billion.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on unrealized carried interest in private strategies, citing accounting rules that preclude them from offering estimates or outlooks unless there is virtual certainty. This response lacked clarity and detail.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

SII Transcript

Sprott Inc. (SII:CA) Q1 2026 Earnings Call Transcript

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Sprott Inc. (SII:CA) Q4 2025 Earnings Call Transcript

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The earnings call reflects strong growth in ETF and managed equities AUM, with positive outlooks on precious metals and uranium. The Q&A highlighted competitive advantages and strategic capital allocation plans, although management was vague on some future performance fees. The company's focus on dividends and buybacks, coupled with strong ETF performance and growth prospects, suggests a positive outlook. Given the company's small-cap status, the stock price is likely to react positively within the 2% to 8% range over the next two weeks.

Sprott Inc. (SII:CA) Q3 2025 Earnings Call Transcript

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The earnings call summary and Q&A indicate strong financial performance, with significant growth in assets and ETFs, and robust equity fund returns. The Q&A reveals efficient uranium sourcing, strong institutional demand, and strategic leadership planning. Despite some uncertainties in tokenization and private strategies, the overall sentiment is positive, supported by market trends and increased dividends. With a market cap of approximately $1.05 billion, the stock is likely to experience a positive price movement of 2% to 8% over the next two weeks.

Sprott Inc. (SII) Q2 2025 Earnings Call Transcript

Positive8-6

The earnings call reflects strong financial performance with a significant increase in AUM and ETF assets. The company's strategic positioning in metals and mining, coupled with positive market outlooks for gold, silver, uranium, and copper, enhances investor confidence. While there are concerns about redemptions and unpredictability in carried interest, the overall sentiment remains positive due to robust growth metrics and strategic initiatives like potential NYSE listing for the Copper Trust. The company's market cap suggests a moderate reaction, leading to a positive stock price movement prediction.

SII Report

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