Sprott Inc. 2026 Q2 Earnings Call

Thank you, operator. Good morning, everyone, and thanks for joining us today. On the call with me today is our CFO and Co-COO, Kevin Hibbert, and John Ciampaglia, CEO of Sprott Asset Management. Our 2026 second quarter results were released this morning and are available on our website, where you can also find the financial statements and MD&A. I'll start on slide four with some second quarter highlights, or maybe you might call them lowlights. The second quarter was a challenging quarter for precious metals, with significant volatility across commodity, currency, and interest rate markets. Spot gold declined 14.1% as investors adjusted rapidly to changing geopolitical and monetary policy expectations. Silver fell more, dropping 22%. Rising oil prices strengthened the dollar during the quarter, which tightened global liquidity and created a challenging environment for gold.

While the metal's second quarter correction was severe, we believe it was driven primarily by cyclical factors rather than any deterioration in its long-term fundamentals. Many of the forces that have supported gold over the past several years remain firmly in place. Rising government debt burdens, persistent fiscal deficits, ongoing monetary debasement, and a growing demand for reserve assets outside the traditional sovereign debt system. Our AUM decreased CAD 9.5 billion in the second quarter to CAD 55.6 billion, and we reported CAD 400 million, or CAD 0.4 billion in net redemptions, primarily from our precious metals physical trust. Our critical materials ETFs were a bright spot, delivering net sales despite a tough environment. Our most recent ETF launches have continued to scale nicely, hitting AUM and liquidity targets more quickly than our previous launches and expanding our audience in both the broker-dealer and institutional channels.

With that, I'll pass it over to Kevin for a review of our financial results.

Thank you, Whitney, and good morning, everyone. I'll start on slide five, which provides a summary of our historical AUM. AUM finished the quarter at CAD 55.6 billion, down 15% from CAD 65.1 billion as at March 31st, 2026, and down 7% from CAD 59.6 billion as at December 31st, 2025. On a three and six-month ended basis, our AUM was negatively impacted, to Whitney's point, by market value depreciation and net outflows from our precious metals products, partially offset by net inflows to our critical materials products. Conversely, average AUM was CAD 63.9 billion for the quarter, up CAD 26.3 billion, or 70%, from CAD 37.6 billion this time last year, and CAD 66.6 billion on a year-to-date basis, up CAD 31.2 billion, or 88%, from CAD 35.4 billion this time last year.

Our average AUM was positively impacted by a combination of net inflows and market value appreciation across the majority of our fund products since the second quarter of last year, which more than offset the impact of the June pullback in precious metals valuation. Slide six provides a brief look at our three and six-month earnings. Net income this quarter was CAD 34.3 million, up CAD 20.8 million from CAD 13.5 million over the same three-month period last year. On a year-to-date basis, net income was CAD 63.5 million, up CAD 38 million from CAD 25.5 million this time last year. Our three and six-month ended results were primarily due to higher average AUM in our exchange-listed products and managed equity segments, with our six-month ended results, in particular, also benefiting from carried interest crystallization in our private strategy segment in the first quarter of the year.

Adjusted EBITDA, which excludes quarterly volatility from items like stock-based compensation and intermittent carried interest and performance fee crystallizations was CAD 50.8 million for the quarter, up CAD 25.3 million from CAD 25.5 million over the same three-month period last year. It was CAD 108.7 million on a year-to-date basis, up CAD 61.3 million from CAD 47.4 million this time last year. Adjusted EBITDA doubled in the quarter and on a six-month-ended basis due to an increase in average AUM attributable to the combination of net inflows and market value appreciation across the majority of our fund products since the second quarter of last year, as I just mentioned, which more than offset the impact of that June pullback in precious metals valuations. Slide seven provides a few treasury and balance sheet management highlights. As you can see, our cash and liquidity profile remains strong, and we continue to repurchase shares opportunistically.

For more information on our revenues, expenses, net income, adjusted EBITDA, and balance sheet metrics, you can refer to the supplemental information section of this presentation, as well as our quarterly MD&A and financial statements filed earlier this morning. With that said, I'll pass things over to John.

Thanks, Kevin, and good morning, everybody. As Whitney mentioned in his opening comments, we experienced a sharp correction in precious metals in the second quarter. This resulted in a CAD 8.2 billion or 16% decline in our AUM in the physical trusts. Prices stabilized. Despite the correction, our AUM is still up over 40% over the past year. Critical materials fared better in the quarter. The uranium price remains resilient, supported by a structural supply deficit. While the copper price is near an all-time high due to tightness in the physical market and speculation the U.S. could impose tariffs on a broader range of copper forms in the new year. Turning to slide nine. After eight consecutive quarters of inflows, we experienced outflows in the second quarter. Profit-taking in precious metals drove the redemption activity. Our Uranium Trust bucked the trends, with positive sales reported in the quarter.

A quick look at slide 10. Our ETF product suite fared better in the quarter with an AUM decline of 10%. AUM was helped by positive gains in copper stocks in the quarter. Moving over to slide 11. Despite the challenging market conditions, net flows were positive in the quarter, reflecting broadening interest in uranium, critical materials, and rare earths. Over the past couple of years, we have seen interest evolve from specialists to generalist investors who are looking to capitalize on several trends, including electrification, growing electricity requirements from AI data centers, energy securities, and defense technologies. Investors are increasingly recognizing the role critical commodities like copper, uranium, and rare earths play. Finally, on slide 12, over the past four years, our team has been focused on growing our product suite organically to capitalize on the secular trends mentioned earlier.

As we grow our product suite and investor base, we are experiencing the benefits of scale. On this graph, we have plotted the number of days it took each of our ETFs to reach CAD 50 million in assets. As you can see, the timelines continue to decline, helping us to reach profitability faster and meet product approval thresholds with distributors. Our latest ETF, the Sprott Rare Earths ETF Ex-China, symbol REXC, took just 32 trading days to reach this CAD 50 million mark. I will now pass it over to Whitney to update you on our managed equity segment.

Thank you, John. I'm on slide 13. Our managed equities AUM contracted by approximately CAD 0.7 billion during the quarter as lower precious metal prices weighed on mining equities. On slide 14, you can see we reported modest net redemptions during the quarter. We did see positive flows in our Sprott U.S. business as we completed the final phases of converting legacy brokerage client accounts to AUM. I'll turn now to slide 15 on our private strategies. Private strategies AUM was CAD 2 billion as of June 30th, 2026. We remain committed to growing our private strategies segment and are evaluating new strategies and extensions of existing offerings. Fundraising for our fourth private lending fund is underway. We expect to close that fund sometime in 2027. Slide 16 is a reasonably new slide.

Before I get to my closing remarks, I'd like to just point out that the reason I love this business so much is that we can deliver operating leverage without financial leverage. Our adjusted EBITDA margin is 71%, creating significant leverage. As a result, we are now debt-free and generating significant free cash flow. This is the power of our business model, the ability to deliver on the promises we made half a decade ago. I'll move to slide 17 for a quick recap. Despite the pullback in precious metal prices, as of June 30th, our average AUM was up 70% from the same period last year, demonstrating the resilience of our business model. Current geopolitical and trade disruptions have put short-term pressures on prices. The structural elements of the precious metals bull market are intact despite recent volatility.