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Press Release

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Apr 27, 2018

WisdomTree Announces First Quarter 2018 Results

  $9.4 million net income, or $11.3 million as adjusted

$0.07 diluted EPS for the quarter, or $0.08 as adjusted

Declares $0.03 quarterly dividend

NEW YORK, April 27, 2018 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (NASDAQ:WETF), an exchange-traded fund ("ETF") and exchange-traded product ("ETP") sponsor and asset manager today reported net income of $9.4 million or $0.07 diluted EPS in the first quarter.  Excluding acquisition-related costs, adjusted net income (a non-GAAP measure1) was $11.3 million1 or $0.08 diluted EPS1.  This compares to net income of $6.9 million or $0.05 diluted EPS in the first quarter of last year and net income of $0.2 million or $0.00 diluted EPS (as adjusted, $5.2 million1 or $0.04 diluted EPS1) in the fourth quarter of 2017.  

WisdomTree CEO and President Jonathan Steinberg said, "There are several things I am excited about, despite the weakness of the U.S. dollar pressuring our largest exposures.  First, we continue to see material improvement in our net flow breadth and depth, with diversified inflows into a record number of our U.S. funds.  Second, WisdomTree is continuing to work with more advisors than ever before — providing more solutions options to help them grow their businesses. This includes our innovative product offering and performance track records, our expanded distribution reach on multiple platforms, our ongoing refinement to our portfolio construction tool (DPD) and our continued laser focus on technology-driven initiatives.  And lastly, after the closing of the ETF Securities acquisition, I have never been more confident in WisdomTree's competitive positioning in Europe, the second largest ETF market, and our strong growth outlook overall."


    
 Summary Operating and Financial HighlightsThree Months Ended   Change From
  Mar. 31,
2018
   Dec. 31,
2017
   Mar. 31,
2017
  Dec. 31,
2017
   Mar. 31,
2017
 
Operating Highlights                  
U.S. listed ETFs ($, in billions):                  
AUM $  42.9  $  46.8  $  41.9    (8.4%)    2.3%
Net inflows/(outflows) $  (2.2) $  0.3  $  (0.1)  n/a    n/a 
Average AUM $  45.6  $  46.0  $  41.3    (0.9%)    10.5%
Average advisory fee    0.49%    0.50%    0.50%   (0.01)    (0.01)
Market share of industry inflows  n/a     0.2%   n/a   n/a    n/a 
      
European listed ETPs ($, in millions):     
AUM $  1,737.5  $  1,804.2  $  1,351.0    (3.7%)    28.6%
Net inflows/(outflows) $  (98.7) $  (65.7) $  320.1    50.1%   n/a 
Average AUM $  1,781.0  $  1,764.6  $  1,209.1    0.9%    47.3%
Average advisory fee    0.60%    0.61%    0.64%   (0.01)      (0.04)
      
Canadian listed ETFs ($, in millions):     
AUM $  337.6  $  305.5  $  72.9    10.5%    363.0%
Net inflows/(outflows) $  50.8  $  15.0  $  —    237.7%   n/a 
Average AUM $  325.0  $  270.9  $  71.2    20.0%    356.2%
Average advisory fee    0.39%    0.30%    0.46%   0.09       (0.07)
      
Financial Highlights ($, in millions, except per share amounts):     
Consolidated Results     
Advisory fees $  58.8  $  60.8  $  53.3    -3.4%    10.3%
Net income $  9.4  $  0.2  $  6.9   n/a     37.0%
Diluted earnings per share $  0.07  $  0.00  $  0.05 $  0.07  $  0.02 
Pre-tax margin    23.4%  9.2%    27.1%   14.2     -3.7 
Non-GAAP1:     
Net income, as adjusted $  11.3  $  5.2  $  —     117.3%   n/a 
Diluted earnings per share, as adjusted $  0.08  $  0.04  $  —  $  0.04   n/a 
Pre-tax margin, as adjusted    26.8%     17.1%    —     9.7     n/a 
      
U.S. Business segment     
Gross margin1     83.8%2   83.9%2   83.7%2   -0.1     0.1 
Pre-tax margin    30.8%    15.2%    34.2%   15.6     -3.4 
Pre-tax margin, as adjusted1    32.9%    23.5%    —     9.4     n/a 
                   

Recent Business Developments

Company News

  • In February 2018, the Company announced that it entered into an agreement with Premia Partners, a Hong Kong-based investment firm that focuses on ETFs and smart beta solutions to bolster ETF presence among institutional investors.
  • In March 2018, the Company announced that WisdomTree's Head of Europe David Abner received ETF.com's Lifetime Achievement Award and the WisdomTree Balanced Income Fund (WBAL) was named Best New Asset Allocation ETF.
  • In April 2018, the Company announced that it completed the acquisition of the European exchange-traded commodity, currency and short-and-leveraged business ("ETFS") of ETF Securities Limited, with approximately $18 billion in assets under management; the Company announced that WisdomTree's Advisor Solutions platform was named Fund Innovation of the Year and the WisdomTree Dynamic Long/Short U.S. Equity Fund (DYLS) was named Alternative ETF of the Year at the 2018 Mutual Fund Industry Awards; and the Company announced that industry veteran Brian T. Shea was appointed to the Company's Board of Directors.    

U.S. Listed Product News

  • In February 2018, the Company announced the closing and liquidation of nine WisdomTree ETFs.

European Listed Product News

  • In February 2018, the Company announced a collaboration with Directa SIM, a leading Italian financial brokerage company.

Canadian Listed Product News

  • In April 2018, the Company announced the continued promotion of its first 2018 Canadian ETF Industry Outlook and Quarterly Report.

Assets Under Management and Net Inflows

U.S. listed ETF assets under management ("AUM") was $42.9 billion at March 31, 2018, down 8.4% from December 31, 2017 due to net outflows and market depreciation. European listed ETPs' AUM was $1.7 billion at March 31, 2018, down 3.7% from December 31, 2017 due to net outflows and partly offset by market appreciation. Canadian listed ETF's AUM was $337.6 million at March 31, 2018, up 10.5% from December 31, 2017 due to net inflows and partly offset by market depreciation.

Performance

In evaluating the performance of our U.S. listed equity, fixed income and alternative ETFs against actively managed and index based mutual funds and ETFs, 74.7% of the $42.5 billion invested in our ETFs and 60.0% (42 of 70) of our ETFs covered by Morningstar outperformed their comparable Morningstar average since inception as of March 31, 2018.

For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.

First Quarter Financial Discussion

Revenues

Advisory Fees

Advisory fees of $58.8 million increased 10.3% from the first quarter of 2017 due to an increase in our average global AUM partly offset by lower average U.S. advisory fees due to a change in product mix. Our average global AUM increased primarily due to market appreciation and net inflows into certain of our ETFs partly offset by outflows from our two largest U.S. listed ETFs. 

Advisory fees decreased 3.4% from the fourth quarter of 2017 primarily due to a decrease in our average global AUM.  Our average global AUM decreased primarily due to market depreciation and net outflows from our two largest U.S. listed ETFs.   

Our average U.S. advisory fee decreased to 0.49% from 0.50% during the first and fourth quarter of 2017. 

Other Income

Other income decreased 36.5% from the first quarter of 2017 to $0.8 million.  The decrease was primarily a result of the realization of losses previously recognized within accumulated other comprehensive income on our short-term investment grade bond portfolio.  In addition, the first quarter of 2017 included a reimbursement of fund-related costs of $0.8 million.  These items were partly offset by an insurance claim receivable of $0.6 million and paid-in-kind ("PIK") interest on a note receivable from AdvisorEngine Inc., both of which were recognized in the current quarter.  Other income increased 51.3% from the fourth quarter of 2017, primarily due to the previously mentioned insurance receivable claim and accrual of PIK interest, partly offset by the realized losses on our short-term investment grade bond portfolio.  

Margins

Gross margin for our U.S. Business segment, which is U.S. advisory fee revenue less U.S. fund management and administration expenses, was 83.8%1 in the first quarter of 2018 as compared to 83.7%1 2 in the first quarter of 2017 and 83.9%1 2 in the fourth quarter of 2017.

Pre-tax margin was 23.4% in the first quarter of 2018 (as adjusted 26.8%1) as compared to 27.1% in the first quarter of 2017 and 9.2% in the fourth quarter of 2017 (as adjusted 17.11).  Pre-tax margin for our U.S. Business segment was 30.8% in the first quarter of 2018 (as adjusted 32.9%1) as compared to 34.2% in the first quarter of 2017 and 15.2% in the fourth quarter of 2017 (as adjusted 23.5%1).  

Expenses

Total expenses were $45.7 million for the first quarter of 2018, up 14.8% from the first quarter of 2017 and down 18.0% from the fourth quarter of 2017.  Included within the first quarter of 2018 and fourth quarter of 2017 were acquisition-related costs of $2.1 million and $4.8 million, respectively. 

  • Compensation and benefits expense increased 5.4% from the first quarter of 2017 to $18.8 million.  The increase was primarily due to higher accrued incentive compensation and other headcount related expenses.  Compensation and benefits expense decreased 26.7% from the fourth quarter of 2017 primarily due to changes in accrued incentive compensation made during the end of the prior year.  During the fourth quarter of 2017, we shifted a greater portion of our employees' incentive compensation to cash from stock and increased the incentive compensation pool to recognize the achievement of certain milestones involving several important strategic initiatives as well as the addition of a key executive.  Also, we accelerated the vesting of certain stock-based compensation awards to the end of the prior year that were originally scheduled to vest in the first quarter of 2018.  These changes were partly offset by the seasonally higher payroll taxes associated with bonus payments made in the first quarter of 2018.  Headcount of our U.S. Business segment was 157, 162 and 163 and our International Business segment was 34, 42 and 47 at March 31, 2018, December 31, 2017 and March 31, 2017, respectively.     

  • Fund management and administration expense increased 13.7% from the first quarter of 2017 to $10.9 million primarily attributable to higher average global AUM.  This expense decreased 5.7% from the fourth quarter of 2017 largely due to the closure of nine U.S. listed ETFs occurring in the first quarter of 2018, partly offset by higher expenses for our India ETF.  We had 81 U.S. listed ETFs, 87 European ETPs and 12 Canadian ETFs at the end of the quarter.

  • Marketing and advertising expense decreased 9.7% from the first quarter of 2017 and 14.3% from the fourth quarter of 2017 to $3.2 million primarily due to lower levels of advertising related activities globally.

  • Sales and business development expense increased 28.7% from the first quarter of 2017 to $3.8 million primarily due to higher spending on sales related activities within our U.S. Business segment.  This expense was essentially unchanged from the fourth quarter of 2017.
     
  • Professional and consulting fees of $1.6 million were essentially unchanged from the first quarter of 2017.  These expenses increased 13.6% from the fourth quarter of 2017 primarily due to higher professional fees and corporate consulting related expenses within our U.S. Business segment.

  • Third-party sharing arrangements expense increased 85.1% from the first quarter of 2017 and 59.6% from the fourth quarter of 2017 to $1.7 million primarily due to a new distribution relationship announced in the fourth quarter of 2017.

  • Acquisition-related costs decreased 57.3% from the fourth quarter of 2017 to $2.1 million and include severance and other compensation costs of $0.9 million, professional fees of $0.9 million and integration and other costs of $0.3 million which were incurred in connection with the completion of ETFS acquisition.  Costs incurred in the prior quarter were principally professional fees relating to our entering into a definitive agreement to acquire ETFS.  We anticipate incurring additional acquisition and integration-related costs, including a transaction fee of $5.5 million payable upon completion of the ETFS acquisition.

  • Our estimated effective income tax rate for the three months ended March 31, 2018 of 32.3% resulted in income tax expense of $4.5 million.  Our tax rate differs from the federal statutory tax rate of 21% (reduced from 35% due to the enactment of the Tax Cuts and Jobs Act) primarily due to a valuation allowance on foreign net operating losses and state and local income taxes, partly offset by tax windfalls associated with the vesting of stock-based compensation awards.

Balance Sheet

As of March 31, 2018, the Company had total assets of $240.0 million which consisted primarily of cash and cash equivalents of $105.7 million, investments of $35.2 million, securities held-to-maturity of $21.3 million, accounts receivable of $20.7 million, a note receivable of $19.2 million and securities owned of $4.6 million.  There were approximately 137.8 million shares of the Company's common stock outstanding as of March 31, 2018. Fully diluted weighted average shares outstanding were 136.5 million for the quarter.  

Quarterly Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.03 per share of the Company's common stock. The dividend will be paid on May 23, 2018 to stockholders of record as of the close of business on May 9, 2018.

Conference Call

WisdomTree will discuss its results and operational highlights during a conference call on Friday, April 27, 2018 at 9:00 a.m. ET. The call-in number will be (877) 303-7209. Anyone outside the U.S. or Canada should call (970) 315-0420. The slides used during the presentation will be available at http://ir.wisdomtree.com. For those unable to join the conference call at the scheduled time, an audio replay will be available on http://ir.wisdomtree.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, the risks described below. If one or more of these or other risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this press release completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

In particular, forward-looking statements in this press release may include statements about:

  • anticipated trends, conditions and investor sentiment in the global markets and ETPs;

  • anticipated levels of inflows into and outflows out of our ETPs;

  • our ability to deliver favorable rates of return to investors;

  • our ability to develop new products and services;

  • our ability to maintain current vendors or find new vendors to provide services to us at favorable costs;

  • our ability to successfully expand our business into non-U.S. markets;

  • competition in our business; and

  • the effect of laws and regulations that apply to our business.

Our business is subject to many risks and uncertainties, including without limitation:

  • Net outflows in our two largest ETFs — the WisdomTree Europe Hedged Equity Fund and the WisdomTree Japan Hedged Equity Fund — have had, and in the future could continue to have, a negative impact on our revenues.

  • Over the last few years, we have expanded our business into Europe, Japan and Canada. This expansion subjects us to increased operational, regulatory, financial and other risks.

  • The ETFS acquisition is significant in size relative to our assets and operations and may result in significant changes in our business. Our failure to integrate and manage ETFS successfully could materially and adversely affect our business, results of operations and financial condition.

  • Declining prices of securities, precious metals and other commodities can adversely affect our business by reducing the market value of the assets we manage or causing customers to sell their fund shares and trigger redemptions.

  • Fluctuations in the amount and mix of our AUM, whether caused by disruptions in the financial markets or otherwise, may negatively impact revenues and operating margins, and may impede our ability to refinance our debt upon maturity, increase the cost of borrowing or result in our debt being called prior to maturity.

  • We derive a substantial portion of our revenues from a limited number of products, and as a result, our operating results are particularly exposed to the performance of these products and our ability to maintain the AUM of these products, as well as investor sentiment toward investing in the funds' strategies and market-specific and political and economic risk.

  • Much of our AUM is held in our U.S. listed ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to foreign currency exchange rate risks.

  • Many of our ETPs and ETFs have a limited track record, and poor investment performance could cause our revenues to decline.

  • We depend on third parties to provide many critical services to operate our business and our ETPs and ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm our customers.

Other factors, such as general economic conditions, including currency exchange rate fluctuations, also may have an effect on the results of our operations. For a more complete description of the risks noted above and other risks that could cause our actual results to differ from our current expectations, please see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

The forward-looking statements in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Therefore, these forward-looking statements do not represent our views as of any date other than the date of this press release.

About WisdomTree

WisdomTree Investments, Inc., through its subsidiaries in the U.S., Europe, Canada and Japan (collectively, "WisdomTree"), is an exchange-traded fund ("ETF") and exchange-traded product ("ETP") sponsor and asset manager headquartered in New York. WisdomTree offers products covering equities, fixed income, currencies, commodities and alternative strategies. WisdomTree currently has approximately $63.2 billion in assets under management globally.

WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.
_______________
See "Non-GAAP Financial Measurements."

Amounts previously reported as gross margin and gross margin percentage of our U.S. Business Segment have been adjusted to conform with our current computation.  Gross margin and gross margin percentage of our U.S. Business Segment is now calculated without deducting third-party sharing arrangements.  See "Non-GAAP Financial Measurements" below for additional information.  

Contact Information:

  
Investor Relations Media Relations
WisdomTree Investments, Inc. WisdomTree Investments, Inc.
Jason Weyeneth, CFA Jessica Zaloom
+1.917.267.3858 +1.917.267.3735
jweyeneth@wisdomtree.com jzaloom@wisdomtree.com
  

 

 
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS 
(in thousands, except per share amounts) 
(Unaudited)
      
 Three Months Ended  
 % Change From  
  Mar. 31,
2018
  Dec. 31,
2017
  Mar. 31,
2017
 Dec. 31,
2017
  Mar. 31,
2017
 
Revenues:              
Advisory fees $  58,756 $  60,825  $  53,262    -3.4%   10.3%
Other income    849    561     1,337    51.3%   -36.5%
    Total revenues    59,605    61,386     54,599    -2.9%   9.2%
Expenses:     
Compensation and benefits    18,832    25,706     17,874    -26.7%   5.4%
Fund management and administration    10,912    11,570     9,600    -5.7%   13.7%
Marketing and advertising    3,195    3,726     3,537    -14.3%   -9.7%
Sales and business development    3,813    3,843     2,962    -0.8%   28.7%
Professional and consulting fees    1,636    1,440     1,558    13.6%   5.0%
Occupancy, communications and equipment    1,363    1,313     1,353    3.8%   0.7%
Depreciation and amortization    355    353     337    0.6%   5.3%
Third-party sharing arrangements    1,725    1,081     932    59.6%   85.1%
Acquisition-related costs    2,062    4,832   —    -57.3%    n/a 
Other    1,790    1,873     1,624    -4.4%   10.2%
    Total expenses    45,683    55,737     39,777    -18.0%   14.8%
Income before taxes    13,922    5,649     14,822    146.5%   -6.1%
Income tax expense    4,498    5,411     7,942    -16.9%   -43.4%
Net income $  9,424 $  238  $  6,880    n/a    37.0%
Net income per share — basic $  0.07 $  0.00  $  0.05   
Net income per share — diluted $  0.07 $  0.00  $  0.05   
Weighted average common shares — basic    135,329    134,800     134,385   
Weighted average common shares — diluted    136,468    136,568     135,509   
           


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(in thousands)
(Unaudited)

The following table sets forth the pre-tax operating results for the Company's U.S. Business and International Business segments.  The U.S. Business segment represents the results of the Company's U.S. operations and Japan sales office.  The results of the Company's European and Canadian operations are reported as the International Business segment. 

      
U.S. Business Segment     
 Three Months Ended
 % Change From  
  Mar. 31,
2018
   Dec. 31,
2017
   Mar. 31,
2017
  Dec. 31,
2017
  Mar. 31,
2017
 
Revenues:                 
Advisory fees $  55,518   $  57,605   $  51,026   -3.6%   8.8  %
Other income    883      539      1,312   63.8%   -32.7  %
    Total revenues    56,401      58,144      52,338   -3.0%   7.8  %
Expenses:                 
Compensation and benefits    16,371      23,132      15,070   -29.2%   8.6  %
Fund management and administration    8,973      9,247      8,327   -3.0%   7.8  %
Marketing and advertising    2,843      3,169      3,069   -10.3%   -7.4  %
Sales and business development    3,455      3,427      2,610   0.8%   32.4  %
Professional and consulting fees    1,325      1,190      1,322   11.3%   0.2  %
Occupancy, communications and equipment    1,225      1,178      1,228   4.0%   -0.2  %
Depreciation and amortization    339      339      331   0.0%   2.4  %
Third-party sharing arrangements    1,649      1,072      927   53.8%   77.9  %
Acquisition-related costs    1,197      4,832    —   -75.2%   n/a 
Other    1,653      1,734      1,546   -4.7%   6.9  %
    Total expenses    39,030      49,320      34,430   -20.9%   13.4  %
Income before taxes $  17,371   $  8,824   $  17,908   96.9%   -3.0  %
Pre-tax margin   30.8 %    15.2 %    34.2 %  
              


      
 International Business Segment     
 Three Months Ended  
 % Change From  
  Mar. 31,
2018
   Dec. 31,
2017
   Mar. 31,
2017
  Dec. 31,
2017
  Mar. 31,
2017
 
Revenues:                 
Advisory fees $  3,238   $  3,220   $  2,236   0.6 %   44.8  %
Other income/(loss)    (34)     22      25   -254.5 %   -236.0  %
    Total revenues    3,204      3,242      2,261   -1.2 %   41.7  %
Expenses:     
Compensation and benefits    2,461      2,574      2,804   -4.4 %   -12.2  %
Fund management and administration    1,939      2,323      1,273   -16.5 %   52.3  %
Marketing and advertising    352      557      468   -36.8 %   -24.8  %
Sales and business development    358      416      352   -13.9 %   1.7  %
Professional and consulting fees    311      250      236   24.4 %   31.8  %
Occupancy, communications and equipment    138      135      125   2.2 %   10.4  %
Depreciation and amortization    16      14      6   14.3 %   166.7  %
Third-party sharing arrangements    76      9      5   n/a      n/a   
Acquisition-related costs    865    —    —   n/a      n/a   
Other    137      139      78   -1.4 %   75.6  %
    Total expenses    6,653      6,417      5,347   3.7 %   24.4  %
Loss before taxes$  (3,449)  $  (3,175)  $  (3,086)  8.6 %   11.8  %
Pre-tax margin n/a   n/a   n/a   
              


 
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS 
(in thousands, except per share amounts)
   
  March 31,
2018
   December 31,
2017 
 
  (Unaudited)     
ASSETS       
Current assets:       
Cash and cash equivalents $  105,651   $  54,193  
Securities owned, at fair value    4,585      66,294  
Securities held-to-maturity    1,000      1,000  
Accounts receivable   20,732      21,309  
Income taxes receivable    2,665      6,978  
Prepaid expenses    3,910      3,550  
Other current assets    181      1,007  
    Total current assets    138,724      154,331  
Fixed assets, net    10,391      10,693  
Note receivable    19,165      18,748  
Securities held-to-maturity   20,264      20,299  
Deferred tax asset, net    1,053      1,050  
Investments, carried at cost    35,187      35,187  
Goodwill    1,799      1,799  
Intangible asset    12,029      12,085  
Other noncurrent assets    1,378      793  
Total assets $  239,990   $  254,985  
   
LIABILITIES AND STOCKHOLDERS' EQUITY  
LIABILITIES  
Current liabilities:  
Fund management and administration payable $  18,411   $  20,099  
Compensation and benefits payable    6,199      28,053  
Securities sold, but not yet purchased, at fair value    —      950  
Accounts payable and other liabilities    9,138      8,246  
    Total current liabilities    33,748      57,348  
Deferred rent payable    4,637      4,686  
Total liabilities    38,385      62,034  
   
STOCKHOLDERS' EQUITY  
Common stock, par value $0.01; 250,000 shares authorized:  
Issued and outstanding: 137,751 and 136,996 at March 31, 2018 and December 31, 2017, respectively    1,378      1,370  
Additional paid-in capital    218,488      216,006  
Accumulated other comprehensive income    1,163      291  
Accumulated deficit    (19,424)     (24,716) 
Total stockholders' equity   201,605      192,951  
Total liabilities and stockholders' equity $  239,990   $  254,985  
   

 

 
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) 
(Unaudited)
   
  Three Months Ended
  Mar. 31,
2018
   Mar. 31,
2017
 
Cash flows from operating activities:       
Net income$  9,424  $  6,880 
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:   
Stock-based compensation    3,309     3,421 
Realized losses on securities available-for-sale    716     176 
Deferred income taxes    (136)    6,302 
Paid-in-kind interest income    (416)    — 
Depreciation and amortization    355     337 
Other    (55)    (56)
Changes in operating assets and liabilities:   
Securities owned, at fair value    1,106     1,292 
Accounts receivable    606     (1,553)
Income taxes receivable/payable    4,297     177 
Prepaid expenses   (360)    127 
Other assets    160     64 
Acquisition payable    —      (3,538)
Fund management and administration payable    (1,744)    (400)
Compensation and benefits payable    (22,003)    (9,772)
Securities sold, but not yet purchased, at fair value    (950)    (1,222)
Accounts payable and other liabilities    855     212 
    Net cash (used in)/provided by operating activities    (4,836)    2,447 
   
Cash flows from investing activities:  
Purchase of fixed assets    (17)    (193)
Purchase of securities held-to-maturity    —     (759)
Purchase of securities available-for-sale    —     (21,340)
Proceeds from held-to-maturity securities maturing or called prior to maturity   32     51 
Proceeds from sales and maturities of securities available-for-sale    60,498     21,000 
Net cash provided by/(used in) investing activities    60,513      (1,241)
   
Cash flows from financing activities:  
Dividends paid    (4,132)    (10,930)
Shares repurchased    (734)    (3,628)
Proceeds from exercise of stock options    54      5  
    Net cash used in financing activities    (4,812)    (14,553)
Increase in cash flows due to changes in foreign exchange rate    593      262  
Net increase/(decrease) in cash and cash equivalents    51,458      (13,085)
Cash and cash equivalents — beginning of period    54,193      92,722  
Cash and cash equivalents — end of period $  105,651   $  79,637  
Supplemental disclosure of cash flow information:  
    Cash paid for taxes $  339   $  1,247  
   

 

    
WisdomTree Investments, Inc.   
Key Operating Statistics (Unaudited)   
 Three Months Ended  
  Mar. 31,
2018
   Dec. 31,
2017
   Mar. 31,
2017
 
U.S. LISTED ETFs (in millions)           
Beginning of period assets $  46,827   $  44,398  $  40,164 
Inflows/(outflows)    (2,167)    306     (58)
Market appreciation/(depreciation)    (1,774)    2,123       1,834 
End of period assets $  42,886  $  46,827  $  41,940 
Average assets during the period $  45,618  $  46,030  $  41,292 
Revenue days    90     92     90 
Number of ETFs — end of the period    81     89     88 
ETF Industry and Market Share (in billions)   
ETF industry net inflows $  61.0  $  137.7  $  133.9 
WisdomTree market share of industry inflows   n/a     0.2%    n/a 
Average ETF advisory fee during the period   
Alternative strategy ETFs    0.55%    0.55%    0.66%
Emerging markets equity ETFs    0.67%    0.69%    0.70%
International developed equity ETFs    0.55%    0.55%    0.56%
International hedged equity ETFs   0.53%    0.53%    0.53%
Currency ETFs    0.50%    0.50%    0.50%
Fixed income ETFs    0.33%    0.37%    0.42%
U.S. equity ETFs    0.35%    0.35%    0.35%
Blended total   0.49%    0.50%    0.50%
    
    
EUROPEAN LISTED ETPs   
Total ETPs (in thousands)   
Beginning of period assets $  932,953  $  979,608  $  626,280 
Inflows/(outflows)    (134,316)     (102,453)    160,327 
Market appreciation/(depreciation)    75,031     55,798     (12,120)
End of period assets $  873,668  $  932,953  $  774,487 
Average assets during the period $  879,342  $  933,975  $  704,843 
Average ETP advisory fee during the period    0.77%    0.77%    0.79%
Number of ETPs — end of the period    70     70     68 
    
Total UCITS ETFs (in thousands)   
Beginning of period assets $  871,202  $  785,899  $  398,015 
Inflows/(outflows)    35,638     36,711     159,774 
Market appreciation/(depreciation)    (42,983)    48,592     18,714 
End of period assets $  863,857  $  871,202  $  576,503 
Average assets during the period $  901,698  $  830,637  $  504,294 
Average UCITS ETF advisory fee during the period    0.43%    0.44%    0.43%
Number of UCITS ETFs — end of the period    17     17     17  
    
CANADIAN LISTED ETFs (in thousands)   
Beginning of period assets $  305,476  $  205,469  $  68,618 
Assets acquired    —      77,403     —  
Inflows/(outflows)    50,766     15,034     (2)
Market appreciation/(depreciation)    (18,623)    7,570     4,311 
End of period assets $  337,619  $  305,476  $  72,927 
Average assets during the period $  324,990  $  270,901  $  71,234 
Average ETF advisory fee during the period    0.39%    0.30%    0.46%
Number of ETFs — end of the period    12     12     6 
    
Headcount — U.S. Business segment     157     162      163 
Headcount — International segment    34     42     47 
            

Note: Previously issued statistics may be restated due to trade adjustments
Source: Investment Company Institute, Bloomberg, WisdomTree

Non-GAAP Financial Measurements

In an effort to provide additional information regarding our results as determined by GAAP, we also disclose certain non-GAAP information which we believe provides useful and meaningful information. Our management reviews these non-GAAP financial measurements when evaluating our financial performance and results of operations; therefore, we believe it is useful to provide information with respect to these non-GAAP measurements so as to share this perspective of management. Non-GAAP measurements do not have any standardized meaning, do not replace nor are superior to GAAP financial measurements and are unlikely to be comparable to similar measures presented by other companies. These non-GAAP financial measurements should be considered in the context with our GAAP results. The non-GAAP financial measurements contained in this release include:

  • Gross margin and gross margin percentage (U.S. Business segment). We disclose our gross margin and gross margin percentage for our U.S. Business segment separately from the start up stage of our international businesses (Europe and Canada) to allow investors to better understand and track the performance and operating efficiency of our core U.S. operations, which make up the vast majority of our operating and financial results. We disclose U.S. Business segment gross margin, which we define as U.S. advisory fees less U.S. fund management and administration expenses, and U.S. Business segment gross margin percentage as non-GAAP financial measurements because we believe they provide investors with a consistent way to analyze the amount we retain after paying third-party service providers to operate our ETPs.  Management tracks gross margin and gross margin percentage to analyze the profitability of our products.

  • Consolidated and U.S. Business segment operating results and pre-tax margin for the first quarter of 2018 excluding acquisition-related costs of $2.1 million (or $1.9 million after-tax) and for the fourth quarter of 2017 excluding acquisition-related costs of $4.8 million (or $4.5 million after-tax) and an after-tax charge of $0.4 million to remeasure our net DTAs in connection with tax reform.  We exclude these costs when analyzing our results as they represent non-recurring charges which are not core to our operating business.

 
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES 
GAAP to NON-GAAP RECONCILIATION 
(in thousands) 
(Unaudited)
    
  Three Months Ended
   Mar. 31,   Dec. 31,   Mar. 31, 
Gross Margin and Gross Margin Percentage (U.S. Business segment):    2018     2017     2017   
Advisory fees  $  55,518  $  57,605  $  51,026 
Less: Fund management and administration     (8,973)    (9,247)    (8,327)
U.S. Gross margin  $  46,545  $  48,358  $  42,699 
U.S. Gross margin percentage     83.8%    83.9%    83.7%
             
  Three Months Ended
   Mar. 31,   Dec. 31,   Mar. 31, 
Adjusted Net Income and Diluted Earnings per Share (Consolidated):    2018     2017     2017   
Net income, as reported  $  9,424  $  238   n/a 
Add back: Acquisition-related costs, net of income taxes     1,851     4,540   n/a 
Add back: Remeasurement of net deferred tax assets (tax reform)     —     411   n/a 
Adjusted net income  $  11,275  $  5,189   n/a 
Weighted average common shares - diluted     136,468     136,568   n/a 
Adjusted net income per share - diluted  $  0.08  $  0.04   n/a 
             
  
Three Months Ended
   Mar. 31,   Dec. 31,   Mar. 31, 
Adjusted Pre-tax Margin (Consolidated):    2018     2017     2017   
Total revenues  $  59,605  $  61,386   n/a 
             
Income before income taxes  $  13,922  $  5,649     
Add back: Acquisition-related costs, before income taxes     2,062     4,832   n/a 
Adjusted income before income taxes  $  15,984  $  10,481   n/a 
Adjusted pre-tax margin     26.8%    17.1%  n/a 
    


   
Three Months Ended
   Mar. 31,   Dec. 31,   Mar. 31,
Adjusted Pre-tax Margin (U.S. Business Segment):    2018     2017     2017  
Total revenues  $  56,401  $  58,144     n/a
            
Income before income taxes  $  17,371  $  8,824     n/a
Add back: Acquisition-related costs, before income taxes     1,197     4,832     n/a
Adjusted income before income taxes  $  18,568  $  13,656     n/a
Adjusted pre-tax margin     32.9%    23.5%    n/a
      

  
      
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