Sprott(SII) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year 2019, adjusted base EBITDA was $38.5 million, down $2 million or 5% from 2018 [14] - Assets under management (AUM) reached a historic high of $15.4 billion as of February 27, 2020, up from $12.1 billion at the end of 2019 [13][10] - The company experienced a strong performance in precious metals, contributing to increased AUM and market value appreciation [14][9] Business Line Data and Key Metrics Changes - The managed equities business saw significant scale added through the acquisition of Tocqueville gold strategies, contributing $2.3 billion to AUM [9][10] - The lending segment faced lower finance income due to legacy loans being repaid, but management fees increased [16][28] - The physical bullion trust products experienced renewed interest, with significant sales activity noted [20][21] Market Data and Key Metrics Changes - Gold prices surpassed $1,650, driven by market fears related to the coronavirus and central bank policies [7][8] - The company noted a shift in market psychology, with increased interest in precious metals as safe-haven assets [18][20] - Institutional interest in precious metals is growing, with more block trading observed [21] Company Strategy and Development Direction - The company plans to transition to U.S. dollar reporting starting Q1 2020 to better reflect its financial position and align with its U.S.-based clients [11][17] - The strategy includes focusing on the integration of the Tocqueville acquisition and expanding its lending strategies [23][28] - The company aims to capitalize on the current macro environment, positioning itself for growth in the precious metals sector [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the upcoming 2020 reporting season, anticipating a constructive operating environment for precious metals investors [16][30] - The company believes that the current financial market conditions are favorable for gold as a store of value [30] - Management highlighted the potential for earnings surprises in the precious metals sector as companies benefit from higher metal prices [25] Other Important Information - The company has raised nearly $800 million for its second lending fund and is actively deploying capital [28] - The transition to a more performance-driven fee structure is expected to enhance profitability [28][56] Q&A Session Summary Question: Early redemptions related to Tocqueville acquisition - Management indicated that early redemptions were modest and typical for the industry, with the transaction linked to AUM retention [33] Question: Performance fees and specific strategies - Performance fees of $2.4 million were largely attributed to one fund strategy, specifically the Hathaway joint venture [54][55] Question: New royalty and streaming strategy - The company is actively seeking deals and expects to leverage its lending strategy for project-type loans [37] Question: Capital deployment outlook - Management expects to deploy $400 million to $500 million per year, with net capital deployment projected between $100 million to $200 million [39][59] Question: Change in management fees - The decrease in management fees in the lending fund was due to a larger portion of AUM being committed capital earning commitment fees [40][42] Question: Sensitivity to precious metal prices - For every $100 change in the average price of gold, the company expects at least $2 million of additional EBITDA in its exchange-listed products business [44] Question: Historical numbers in U.S. dollars - Historical numbers will be restated in U.S. dollars when filing Q1 reports, with a focus on presentation currency [46] Question: New product offerings - The company is focused on existing products and the integration of the Tocqueville Gold Fund, with ongoing consideration for new product lines [52]