Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Sprott Inc.'s 2022 third quarter results conference call. At this time, all participants are on a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. As a reminder, this conference is being recorded today, November 4th, 2022. On behalf of the speakers that follow, we caution that today's presentation and the responses to questions may contain forward-looking statements within the meaning of the safe harbor provisions of the Canadian Provincial Securities Law. Forward-looking statements involve risk and uncertainties, and undue reliance should not be placed on such statements.
Certain material factors or assumptions are implied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements, please consult the MD&A for the quarter and Sprott's other filings with the Canadian and U.S. securities regulators. I'll now turn the conference over to Mr. Whitney George. Please go ahead, Mr. George.
Thank you. Good morning, everyone, and thank you for joining us today. On the call with me today is our CFO, Kevin Hibbert, and John Ciampaglia, the CEO of Sprott Asset Management. Our 2022 third 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 with slide four. We delivered solid results in the third quarter during very volatile period in the markets. We recorded our 13th consecutive quarter of positive net sales, driven by strong contributions from private strategies and our physical trust. We expanded our ETF product suite with the launch of Sprott ESG Gold ETF, and we listed Sprott Uranium Miners UCITS ETF in multiple European markets.
We're developing new products and capabilities in the energy transition space, where we're using our expertise and talent in understanding mining to apply to a much larger and bigger opportunity than our core precious metals franchise. With that, I'll turn it over to Kevin for a look at our financial results for the quarter.
Thanks, Whitney, and good morning, everyone. I'll start on slide five, which provides a summary of our historical AUM. AUM was $21 billion as at September 30th of this year, down $901 million or 4% from June 30th, but up $601 million or 3% from December 31st, 2021. Our quarter-over-quarter AUM was negatively impacted by market value depreciation across our fund products. On a nine-month ended year-over-year basis, our cumulative market value declines were more than offset by strong inflows to our physical trusts, in particular our uranium and gold trusts, the onboarding of new commitment fee, generating private strategy LPs, and $1 billion of AUM onboarding from the URNM acquisition. Slide 6 provides a brief look into our three-month and nine-month earnings.
Adjusted base EBITDA was $16.8 million, up $124,000 or 1% from this time last year. On a year-to-date basis, adjusted base EBITDA was $52.9 million, up $6.6 million or 14% over the same nine-month period last year. Adjusted base EBITDA benefited from strong net inflows into our physical trusts, primarily our physical uranium and gold trusts, as I mentioned earlier, as well as the URNM acquisition and inflows to our private strategy LPs. These increases were only partially offset by weaker mining equity origination activity in our brokerage segment and lower average AUM in our managed equity segment. Moving on now to slide seven.
Despite the ongoing challenges encountered across most global markets and asset classes, our balance sheet, cash flow, and liquidity metrics remain strong at the nine months ended mark of the year, and we expect to see this strength continue throughout the remainder of 2022. For more information on our revenues, expenses, EBITDA, and balance sheet metrics, you can refer to the supplemental information section of this presentation, as well as our third quarter MD&A filed earlier this morning. With that said, I'll turn things over to John.
Great. Thanks, Kevin, and good morning, everybody. Obviously, the third quarter was very challenging in terms of macro market conditions. Despite the headwinds that we faced in the quarter, we still managed to deliver $113 million in net sales across the physical trusts product suite, which was primarily the uranium and the silver trust over that period. Year to date, we're at a very healthy $2 billion net sales mark to the end of the third quarter.
I think it's fair to say that the precious metal suite fared very well on a relative basis to many of our competitors around the world, and we had very few redemptions over the quarter, which helps keep our asset base very sticky and contributed to more recurring revenue for us. For example, year to date, the Sprott Physical Silver Trust has been the number one selling silver ETF in the world, which I think is a great testament to the support we have from our shareholder base. Just shifting to uranium, it's been a very important growing category for our franchise. Over the last 16 months, I think it's fair to say that Sprott is now the largest manager of uranium-related investments in the world at approximately $4 billion.
The price of uranium is up about 25% year to date, which has been very helpful for our overall earnings and revenue. It's really being supported by three long-term factors that we think are in play for nuclear energy, and that is growing acknowledgment that nuclear energy provides reliable and affordable base load power and is the ideal complement to offset the intermittency of renewable energy. Second of all, energy transition. As we come up to COP27 in Egypt next week, governments around the world remain very focused on achieving their net zero goals. There's growing acknowledgment from governments around the world that nuclear energy has to be part of the energy mix in order to meet any of their net zero targets.
We've seen governments in South Korea, State of California, and more recently Japan, make very large announcements about restarts, life extensions, and new builds related to nuclear power. Finally, the most powerful shorter-term catalyst has been energy security, and we think that nuclear energy is going to play a key role here as energy policy shifts over the next couple of decades. Much like it did in the late seventies and in response to the oil crisis, we believe that governments are going to increasingly focus on nuclear energy to provide energy security. It really comes down to the density, the energy density of uranium, which helps insulate utilities as well as countries from the price and supply risks that we see in other fuels such as natural gas and coal. This is a very powerful driver that we think is just starting.
We feel very good about our product suite. We continue to look at other categories. We've clearly seen a broad expansion of our client base, both by client type and most definitely on a global basis. We're seeing much more institutional interest in our product suite come in, it's also coming from more points around the globe. With that, I'll turn it to Whitney.
Thank you, John. Turning to slide nine, managed equities. Our active gold strategies declined by 10% during the quarter, slightly lagging behind their benchmark, mostly in part due to the fact that we owned some smaller companies that have been particularly hard hit this year with the market volatility. We had modest net redemptions, despite the environment, and we recently formed an energy transition team, to manage new active strategies, in upstream materials that are required for carbon reduction. Slide 10, private strategies. Combined lending and streaming strategies AUM at the end of the quarter was $1.9 billion. Lending Fund II is in the process of making final deployments.
In portfolio management phase, our team is adding a new fund, new fund vintages, pursuing time-tested strategies as well as some strategy extensions, and our streaming royalty fund is actively deploying capital. Slide 11. To sum up, we are continuing to deliver strong financial results despite the market conditions, and it's particularly noteworthy given the performance in the precious metals year to date. Our marketing efforts are paying off, and we are capturing market share in core strategies. We are building new growth drivers in energy transition. Our precious metal asset franchise is well positioned to rebound, when and if the Fed ever decides to pause. Just as a side note, you know, gold prices in dollar terms are down now seven months in a row. That's almost unprecedented. I think you have to go back to the 1960s.
Yet, the price of gold achieved new highs in other important currencies in the world. Central banks during the third quarter accumulated 400 tons of additional gold reserves, which is the fastest pace this century. We're very optimistic that, you know, when wind conditions change, we're gonna be extraordinarily well positioned. With that, thank you very much. I'll turn it over to the operator for some Q&A.
Thank you, sir. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Graham Ryding from TD Securities. Please go ahead.
Hi. Good morning. Maybe I'll start with just your private strategies. Can you remind us, you know, where you're at in terms of your different vintages and what would be sort of the outlook or the timing for potentially realizing some carried interest from some of those more mature vintages?
Hi, Graham, it's Kevin here. From a carry perspective, it's tough to say. Generally speaking, as we've mentioned in the past, the carry tends to be triggered closer to the end of those funds' lives. At any given point in time leading up to that, it could be somewhat in the money or not, but we wouldn't be in a position to be able to speak to it, let alone disclose it or accrue it in our financials.
When is the end of the fund life for your more mature strategies?
It depends on the specific fund. I can't get into too much detail on that.
I guess just there was quite a big differential this quarter between EBITDA and base EBITDA. You know, maybe you could walk through what were some of those primary adjustments that you would call out this quarter?
Sure. There's a few to your point. One of the bigger ones would be the LTIP amortization, and that's coming really from two things, Graham. The first is, we came off last year, the final year of the five-year grant under the 2017 LTIP. As you know, when you mark the stock-based comp immediately before you start amortizing it, you have to mark it at the fair value of the grant date. Obviously, the fair value of the stock in 2017 was very different from where it is now, even before the current market dislocation we're seeing. Well, particularly before the current market dislocation we're seeing.
The absolute amount that would've been amortized is a lot smaller than the new grant that we have now, primarily because of the price. There's another reason, which is that 2017 program was amortized over a five-year period, whereas the board made the decision to have our current program amortized over a three-year period. I guess the other overarching factor besides the price being a lot lower on the base that was amortized in the past and the amortization period being shorter is also the fact that the amortization method that was used from 2017 through to 2021 under IFRS 2 was called the graded vesting method, which takes bigger amortization amounts in the early years of the program and very small ones in the latter years.
The numbers that you're seeing in 2021 would've been towards the tail end of that method, whereas now we're at the early years, and it's gonna be straight lined. We also have other items like FX. The FX losses that we've encountered on our conversion of our monetary assets was a lot bigger now than it was back then. That's also part of the other expenses variation that you're seeing here. I guess one other thing would be the settlement of a legal claim on a legacy employee from many moons ago. All of those things are what are driving the deltas you're seeing on the amortization and the other expenses line between EBITDA and adjusted EBITDA.
Okay. There was some severance in there. How long does that persist for?
We're looking at about three years if we went full term on that, and you'll see that in the little footnote on page 10, footnote number two.
It was $1.3 million this quarter. Should we expect a $1.3 million adjustment for three years, or am I not interpreting that correctly?
No, no. The part of the transition payments would be stock related, so that part would be amortized on a pretty consistent basis. On a full year basis, if it went through the full three years, you're probably looking at about $2 million for the year. The rest were just transition payments that were just 2022 relevant in the quarter that it occurred. I'd expect next year you would see these numbers drop off materially.
Okay. My last one, if I could, just the comp ratio. I think it was 47% this quarter, 44% last 12 month. I think your guidance is less than 50%. Is that still the right way to think about this?
Yeah. I think that's still fair. A big one of the things that you'll notice is, as much as the LTIP amortization has gone up period- over- period, the annual incentives or the cash bonuses have gone down by a fairly significant amount, as we essentially traded off cash incentive for more equity, which was an important consideration for us and our board in ensuring that we are even more tightly aligned with the interest of our shareholders. With that in mind, the LTIP number should be offset by a good amount by the AIP, leaving the overall ratio relatively stable.
Yeah. Great. That's it for me. Thank you.
Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Our next question comes from the line of Geoff Kwan from RBC Capital Markets. Please go ahead.
Hi, good morning. I know you kind of talked about a little bit here and there with your various product lines, but just in the context of, I guess, the past couple of quarters, the way the markets have been, have you seen much in terms of, you know, how your clients, the level of interest and behavior around the various strategies that you have?
Yes. Hi, it's Whitney George. We've had record engagement with our clients in part because of our new uranium franchise, both the physical trust and the ETF, equity ETF. It's you know actually a younger and different audience that is really interested in energy transition and decarbonization. We expect that we'll be able to continue to engage that new audience in you know in other products that we have in the planning. Clearly, what's happened, the tragedy in the Ukraine and the disruptions that have occurred have really brought forward the notion that if you don't hold it, you may not own it.
Our physical trusts are, you know, really well positioned to, you know, kind of address, you know, those kinds of issues and opportunities.
Yeah, Jeff. This is John. Just to build on that, I think, you know, from talking to countless institutions around the world, you know, uranium has been one of the few things that's worked in their portfolio this year, in addition to some other energy-related investments they may or may not have had. Many of our clients have told us that they remain very bullish on the thesis. They are holding tight, and it's kind of like one of the last few things they would like to sell. I think that's clearly helping us in terms of keeping the asset base intact. On the precious metal side, I mean, our clients are not traders. They're more buy and hold investors.
I think if you look at our chart, it reinforces that. We don't see big redemptions like you do out of a number of the competitors around the world, which really have vehicles that act as liquidity and trading tools as opposed to buy and hold vehicles. You know, I think we've been very well insulated from that. I think we've been benefiting from cross-selling because as we add new categories to our suite of funds, we're naturally finding some interested parties across the suite. I think, you know, our belief is that as we add some more strategies to our offerings, there's definitely going to be more cross-selling opportunities for us.
Okay. I was just also wondering too, was just on the gold active equity side, you know, I thought you were trying to or had a thought that there would be, you know, more institutional investor interest in those types of strategies as opposed to, you know, getting gold exposure through the physical. Just wondering if there's kind of an update there in terms of that progress.
Sure. Well, given gold's relatively good performance but poor absolute performance, you know, despite you know the high inflation environment, we haven't really seen the managed equity side attract much interest. It's more of a tactical trade. It's a more leveraged way to participate. My expectation is that, you know, the two will go in tandem, but you're probably going to see at least, you know, in North America, you're gonna need to see, you know, a resumption of the bull market in gold to really get people excited about the equity side.
Okay. Just last question was just on the lending and the royalty funds, if there's any sort of outlook you have, even near term, on some of the deployment, on the flow outlook.
Market conditions are certainly improving for those who have cash to deploy. You know, everything that we all see and read about in energy transition is gonna create, you know, large investment opportunities. We're very excited about the way they're positioned looking forward.
Okay. Thank you.
Thank you. I show no further questions in the queue. That concludes our Q&A session. At this time, I'd like to turn the call back over to Mr. Whitney George for closing remarks.
Okay. Well, I think we pretty much covered everything. Of course, we're always available for calls. I really appreciate your attention this morning. We're very excited about our future as co-shareholders with you. You know, we welcome any kind of engagement that you know people would like. With that, thank you very much for tuning in, and we'll talk to you in a quarter.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.