Form 10-Q
false2020Q20000880631--12-31DE0.000.00Recorded as an income tax benefit of $5,981 during the six months ended June 30, 2020, along with an equal and offsetting amount recorded in other gains and losses, net, to recognize a reduction in the indemnification asset. During the six months ended June 30, 2019, an income tax benefit of $4,309 was recorded along with an equal and offsetting amount in other gains and losses, net.The gross unrecognized tax benefits were accrued in British pounds sterling.Derecognized upon the sale of the Company’s Canadian ETF business (Note 25).WTJ also recognized an impairment expense of $572 in connection with the termination of its office lease on March 31, 2019Excludes 15,010,897 and 14,991,139 participating securities for the three and six months ended June 30, 2020 as the Company reported a net loss for those periods. 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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form
10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
.
Commission File Number
001-10932
 
 
WisdomTree Investments, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
13-3487784
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
 
245 Park Avenue, 35
th
Floor
New York, New York
 
10167
(Address of principal executive offices)
 
(Zip Code)
212-801-2080
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
  Yes    
  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer
 
 
Accelerated filer
 
             
Non-accelerated
filer
 
 
Smaller reporting company
 
             
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  
    No  
Securities registered pursuant to Section 12(b) of the Exchange Act:
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
WETF
 
The NASDAQ Stock Market LLC
As of July
27
, 2020, there were 145,875,749 shares of the registrant’s Common Stock, $0.01 par value per share, outstanding.
 
 
 

Table of Contents
WISDOMTREE INVESTMENTS, INC.
Form
10-Q
For the Quarterly Period Ended June 30, 2020
TABLE OF CONTENTS
 
    
Page

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Unless otherwise indicated, references to “the Company,” “we,” “us,” “our” and “WisdomTree” mean WisdomTree Investments, Inc. and its subsidiaries.
WisdomTree
®
and Modern Alpha
®
are trademarks of WisdomTree Investments, Inc. in the United States and in other countries. All other trademarks are the property of their respective owners.
 
2

Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
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 our results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in the section entitled “Risk Factors” included in this Report and in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2019 and Quarterly Report on Form
10-Q
for the quarter ended March 31, 2020. 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 Report and the documents that we reference in this Report and have filed with the Securities and Exchange Commission, or the SEC, as exhibits to this Report, 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 Report may include statements about:
 
   
the ultimate duration of the
COVID-19
pandemic and its short-term and long-term impact on our business and the global economy;
 
   
anticipated trends, conditions and investor sentiment in the global markets and exchange traded products, or ETPs;
 
   
anticipated levels of inflows into and outflows out of our ETPs;
 
   
our ability to deliver favorable rates of return to investors;
 
   
competition in our business;
 
   
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 operate and expand our business in
non-U.S.
markets; and
 
   
the effect of laws and regulations that apply to our business.
The forward-looking statements in this Report represent our views as of the date of this Report. 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 Report.
 
3

Table of Contents
PART I: FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS
WisdomTree Investments, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Per Share Amounts)
 
June 30,
2020
 
 
December 31,
2019
 
 
(Unaudited)
 
 
 
Assets
 
 
 
 
 
 
Current assets:
   
     
 
Cash and cash equivalents
  $
50,255
    $
74,972
 
Securities owned, at fair value (including $12,929 and $16,886 invested in WisdomTree ETFs at June 30, 2020 and December 31, 2019, respectively)
   
13,110
     
17,319
 
Accounts receivable (including $22,026 and $25,667 due from related parties at June 30, 2020 and December 31, 2019, respectively)
   
24,372
     
26,838
 
Prepaid expenses
   
5,621
     
3,724
 
Other current assets
   
1,414
     
207
 
                 
Total current assets
   
94,772
     
123,060
 
Fixed assets, net
   
7,835
     
8,127
 
Notes receivable, net (Note 8)
   
—  
     
28,172
 
Indemnification receivable (Note 22)
   
24,364
     
32,101
 
Securities
held-to-maturity
   
581
     
16,863
 
Deferred tax assets, net
   
5,540
     
7,398
 
Investments (Note 9)
   
11,192
     
11,192
 
Right of use assets – operating leases (Note 15)
   
17,230
     
18,161
 
Goodwill (Note 24)
   
85,856
     
85,856
 
Intangible assets (Note 24)
   
601,247
     
603,294
 
Other noncurrent assets
   
184
     
983
 
                 
Total assets
  $
848,801
    $
935,207
 
                 
Liabilities and stockholders’ equity
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Current liabilities:
   
     
 
Fund management and administration payable
  $
23,240
    $
22,021
 
Compensation and benefits payable
   
7,629
     
26,501
 
Deferred consideration – gold payments (Note 11)
   
16,364
     
13,953
 
Securities sold, but not yet purchased, at fair value
   
—  
     
582
 
Operating lease liabilities (Note 15)
   
3,293
     
3,682
 
Income taxes payable
   
2,277
     
3,372
 
Accounts payable and other liabilities
   
9,376
     
8,930
 
                 
Total current liabilities
   
62,179
     
79,041
 
Convertible notes (Note 13)
   
141,479
     
—  
 
Debt (Note 12)
   
—  
     
175,956
 
Deferred consideration – gold payments (Note 11)
   
182,420
     
159,071
 
Operating lease liabilities (Note 15)
   
18,258
     
19,057
 
Other noncurrent liabilities (Note 22)
   
24,364
     
32,101
 
                 
Total liabilities
   
428,700
     
465,226
 
 
 
 
 
 
 
 
 
 
Preferred stock – Series A
Non-Voting
Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding; redemption value of $50,244 and $71,630 at June 30, 2020 and December 31, 2019, respectively) (Note 14)
   
132,569
     
132,569
 
                 
Contingencies (Note
16
)
       
Stockholders’ equity
 
 
 
 
 
 
Preferred stock, par value $0.01; 2,000 shares authorized:
   
—  
     
—  
 
Common stock, par value $0.01; 250,000 shares authorized; issued and outstanding: 149,796 and 155,264 at June 30, 2020 and December 31, 2019, respectively
   
1,498
     
1,553
 
Additional
paid-in
capital
   
325,406
     
352,658
 
Accumulated other comprehensive income
   
260
     
945
 
Accumulated deficit
   
(39,632
)    
(17,744
)
                 
Total stockholders’ equity
   
287,532
     
337,412
 
                 
Total liabilities and stockholders’ equity
  $
848,801
    $
935,207
 
                 
The accompanying notes are an integral part of these consolidated financial statements
 
4

Table of Contents
WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
 
Three Months Ended June 30,
   
Six Months Ended June 30,
 
 
2020
   
2019
   
2020
   
2019
 
Operating Revenues:
 
 
   
 
   
 
   
 
 
Advisory fees
  $
57,208
    $
65,627
    $
120,158
    $
130,467
 
Other income
   
918
     
666
     
1,842
     
1,311
 
                                 
Total revenues
   
58,126
     
66,293
     
122,000
     
131,778
 
                                 
Operating Expenses:
 
 
   
 
   
 
   
 
 
Compensation and benefits
   
17,455
     
21,300
     
34,750
     
42,601
 
Fund management and administration
   
14,461
     
15,576
     
28,946
     
30,742
 
Marketing and advertising
   
1,949
     
2,910
     
4,417
     
5,590
 
Sales and business development
   
2,181
     
4,171
     
5,598
     
8,593
 
Contractual gold payments (Note 11)
   
4,063
     
3,110
     
7,823
     
6,208
 
Professional and consulting fees
   
1,357
     
1,296
     
2,630
     
2,778
 
Occupancy, communications and equipment
   
1,643
     
1,548
     
3,194
     
3,166
 
Depreciation and amortization
   
251
     
264
     
507
     
533
 
Third-party distribution fees
   
1,340
     
1,919
     
2,695
     
4,319
 
Acquisition and disposition-related costs
   
33
     
33
     
416
     
346
 
Other
   
1,596
     
2,255
     
3,593
     
4,308
 
                                 
Total
operating
expenses
   
46,329
     
54,382
     
94,569
     
109,184
 
                                 
Operating income
   
11,797
     
11,911
     
27,431
     
22,594
 
Other Income/(Expenses):
 
 
   
 
   
 
   
 
 
Interest expense
   
(2,044
   
(2,910
   
(4,463
   
(5,802
(Loss)/gain on revaluation of deferred consideration – gold payments (Note 11)
   
(23,358
   
(4,037
   
(25,566
   
367
 
Interest income
   
119
     
818
     
282
     
1,597
 
Impairments (Note 7 and 25)
   
—  
     
—  
     
(19,672
   
(572
Loss on extinguishment of debt (Note 12)
   
(2,387
   
—  
     
(2,387
   
—  
 
Other gains and losses, net
   
1,819
     
284
     
(688
   
(4,343
                                 
(Loss)/income before income taxes
   
(14,054
   
6,066
     
(25,063
   
13,841
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax (benefit)/expense
   
(804
   
3,587
     
(3,175
   
2,538
 
                                 
Net (loss)/income
  $
(13,250
  $
2,479
    $
(21,888
  $
11,303
 
                                 
(Loss)/earnings per share
 
basic
  $
(0.09
  $
0.01
    $
(0.15
  $
0.07
 
                                 
(Loss)/earnings per share
 –
diluted
  $
(0.09
  $
0.01
    $
(0.15
  $
0.07
 
                                 
Weighted-average common shares
 
basic
   
151,623
     
151,818
     
152,071
     
151,722
 
                                 
Weighted-average common shares
 –
diluted
   
151,623
     
167,249
     
152,071
     
166,855
 
                                 
Cash dividends declared per common share
  $
0.03
    $
0.03
    $
0.06
    $
0.06
 
                                 
The accompanying notes are an integral part of these consolidated financial statements
 
5

Table of Contents
WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Comprehensive (Loss)/Income
(In Thousands)
(Unaudited)
 
Three Months Ended June 30,
   
Six Months Ended June 30,
 
 
2020
 
 
2019
 
 
2020
 
 
2019
 
Net (loss)/income
  $
(13,250
  $
2,479
    $
(21,888
  $
11,303
 
Other comprehensive income/(loss)
 
 
 
 
 
 
 
 
 
 
 
 
Reclassification of foreign currency translation adjustment to other gains and losses, net, upon the sale of WisdomTree Asset Management Canada, Inc. (“WTAMC” or “Canadian ETF business”) (Note 25)
   
—  
     
—  
     
(167
   
—  
 
Foreign currency translation adjustment
   
168
     
(33
   
(518
   
258
 
                                 
Other comprehensive income/(loss)
   
168
     
(33
   
(685
   
258
 
                                 
Comprehensive (loss)/income
  $
(13,082
  $
2,446
    $
(22,573
  $
11,561
 
                                 
The accompanying notes are an integral part of these consolidated financial statements
 
6

Table of Contents
WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(In Thousands)
(Unaudited)
 
For the Three Months Ended June 30, 2020
 
    
Common Stock
   
Additional
Paid-In

Capital
   
Accumulated
Other
    
Accumulated
Deficit
   
Total
 
    
Shares
Issued
   
Par
Value
   
Comprehensive
Income
 
Balance – April 1, 2020
   
156,424
    $
1,564
    $
349,495
    $
92
    $
(26,382)
    $
324,769
 
Restricted stock issued and vesting of restricted stock units, net
   
110
     
1
     
(1
   
—  
     
—  
     
—  
 
Shares repurchased
   
(6,738
   
(67
   
(24,882
   
—  
     
—  
     
(24,949)
 
Stock-based compensation
   
—  
     
—  
     
2,920
     
—  
     
—  
     
2,920
 
Allocation of equity component related to convertible notes, net
of issuance costs of $128 and deferred taxes of $1,017
   
—  
     
—  
     
3,008
     
—  
     
—  
     
3,008
 
Other comprehensive income
   
—  
     
—  
     
—  
     
168
     
—  
     
168
 
Dividends
   
—  
     
—  
     
(5,134
   
—  
     
—  
     
(5,134
)
Net loss
   
—  
     
—  
     
—  
     
—  
     
(13,250
   
(13,250
)
                                                 
Balance – June 30, 2020
   
149,796
    $
1,498
    $
325,406
    $
260
    $
(39,632
  $
287,532
 
                                                 
 
For the Three Months Ended June 30, 2019
 
    
Common Stock
    
Additional
Paid-In

Capital
   
Accumulated
Other
   
Accumulated
Deficit
   
Total
 
    
Shares
Issued
   
Par
Value
   
Comprehensive
Income
 
Balance – April 1, 2019
   
155,056
    $
1,551
    $
364,717
    $
758
    $
(3,592
  $
363,434
 
Restricted stock issued and vesting of restricted stock units, net
   
66
     
—  
     
—  
     
—  
     
—  
     
—  
 
Shares repurchased
   
(14
   
—  
     
(102
   
—  
     
—  
     
(102
)
Stock-based compensation
   
—  
     
—  
     
3,135
     
—  
     
—  
     
3,135
 
Other comprehensive loss
   
—  
     
—  
     
—  
     
(33
   
—  
     
(33
)
Dividends
   
—  
     
—  
     
—  
     
—  
     
(5,094
   
(5,094
)
Net income
   
—  
     
—  
     
—  
     
—  
     
2,479
     
2,479
 
                                                 
Balance – June 30, 2019
   
155,108
    $
1,551
    $
367,750
    $
725
    $
(6,207
  $
363,819
 
                                                 
The accompanying notes are an integral part of these consolidated financial statements
 
7

Table of Contents
WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (Continued)
(In Thousands)
(Unaudited)
    
For the Six Months Ended June 30, 2020
 
    
Common Stock
   
Additional
Paid-In

Capital
   
Accumulated
Other
   
Accumulated
Deficit
   
Total
 
    
Shares
Issued
   
Par
Value
   
Comprehensive
Income
 
Balance – January 1, 2020
   
155,264
    $
1,553
    $
352,658
    $
945
    $
(17,744
  $
337,412
 
Restricted stock issued and vesting of restricted stock units, net
   
1,549
     
15
     
(15
   
—  
     
—  
     
—  
 
Shares repurchased
   
(7,124
   
(70
   
(26,374
   
—  
     
—  
     
(26,444
Exercise of stock options, net
   
107
     
—  
     
240
     
—  
     
—  
     
240
 
Stock-based compensation
   
—  
     
—  
     
6,159
     
—  
     
—  
     
6,159
 
Allocation of equity component related to convertible notes, net of issuance costs of $128 and deferred taxes of $1,017
   
—  
     
—  
     
3,008
     
—  
     
—  
     
3,008
 
Other comprehensive loss
   
—  
     
—  
     
—  
     
(685
   
—  
     
(685
Dividends
   
—  
     
—  
     
(10,270
   
—  
     
—  
     
(10,270
Net loss
   
—  
     
—  
     
—  
     
—  
     
(21,888
   
(21,888
                                                 
Balance – June 30, 2020
   
149,796
    $
1,498
    $
325,406
    $
260
    $
(39,632
  $
287,532
 
                                                 
 
    
For the Six Months Ended June 30, 2019
 
    
Common Stock
   
Additional
Paid-In

Capital
   
Accumulated
Other
    
Accumulated
Deficit
   
Total
 
    
Shares
Issued
   
Par
Value
   
Comprehensive
Income
 
Balance – January 1, 2019
   
153,202
    $
1,532
    $
363,655
    $
467
    $
(7,319
  $
358,335
 
Restricted stock issued and vesting of restricted stock units, net
   
2,211
     
21
     
(21
   
—  
     
—  
     
—  
 
Shares repurchased
   
(325
   
(2
   
(2,105
   
—  
     
—  
     
(2,107
Exercise of stock options, net
   
20
     
—  
     
14
     
—  
     
—  
     
14
 
Stock-based compensation
   
—  
     
—  
     
6,207
     
—  
     
—  
     
6,207
 
Other comprehensive income
   
—  
     
—  
     
—  
     
258
     
—  
     
258
 
Dividends
   
—  
     
—  
     
—  
     
—  
     
(10,191
   
(10,191
Net income
   
—  
     
—  
     
—  
     
—  
     
11,303
     
11,303
 
                                                 
Balance – June 30, 2019
   
155,108
    $
1,551
    $
367,750
    $
725
    $
(6,207
  $
363,819
 
                                                 
The accompanying notes are an integral part of these consolidated financial statements
 
8

Table of Contents
WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
    
Six Months Ended June 30,
 
    
2020
   
2019
 
Cash flows from operating activities:
 
 
   
 
 
Net (loss)/income
  $
(21,888
  $
11,303
 
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
   
     
 
Advisory fees received in gold and other precious metals
   
(29,135
   
(22,872
Loss/(gain) on revaluation of deferred consideration
 
 
gold payments
   
25,566
     
(367
Impairments
   
19,672
     
572
 
Contractual gold payments
   
7,823
     
6,208
 
Stock-based compensation
   
6,159
     
6,207
 
Gain on sale – Canadian ETF business
   
(2,877
   
—   
 
Loss on extinguishment of debt
   
2,387
     
 
Amortization of right of use asset
   
1,588
     
1,590
 
Amortization of issuance costs – former credit facility
   
1,328
     
1,430
 
Deferred income taxes
   
832
     
2,443
 
Depreciation and amortization
   
507
     
533
 
Amortization of issuance costs – convertible notes
   
115
     
 
Paid-in-kind interest income
   
     
(1,223
Other
   
(83
   
5
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
Securities owned, at fair value
   
4,209
     
(222
Accounts receivable
   
4,461
     
1,833
 
Income taxes payable
   
(1,046
   
(44
Prepaid expenses
   
(2,016
   
(1,746
Gold and other precious metals
   
20,882
     
16,318
 
Other assets
   
(702
   
(552
Fund management and administration payable
   
1,677
     
1,231
 
Compensation and benefits payable
   
(18,431
   
(3,938
Securities sold, but not yet purchased, at fair value
   
(582
   
(1,155
Operating lease liabilities
   
(1,845
   
(1,760
Accounts payable and other liabilities
   
781
     
(435
                 
Net cash provided by operating activities
   
19,382
     
15,359
 
 
 
               
Cash flows from investing activities:
 
 
 
 
 
 
Purchase of fixed assets
   
(224
   
(15
Funding of notes receivable
   
     
(1,540
Proceeds from held-to-maturity securities maturing or called prior to maturity
   
16,365
     
39
 
Proceeds from the sale of the Company’s financial interests in AdvisorEngine Inc.
   
8,155
     
 
Proceeds from sale of Canadian ETF business, net
 
 
2,774
 
 
 
 
                 
Net cash provided by/(used in) investing activities
   
27,070
     
(1,516
                 
Cash flows from financing activities:
 
 
 
 
 
 
Repayment of debt
   
(179,000
   
—  
 
Shares repurchased
   
(26,444
   
(2,107
Dividends paid
   
(10,270
   
(10,191
Convertible notes issuance costs
   
(4,611
   
—  
 
Proceeds from the issuance of convertible notes (Note 13)
   
150,000
     
—  
 
Proceeds from exercise of stock options
   
240
     
14
 
                 
Net cash used in financing activities
   
(70,085
   
(12,284
                 
(Decrease)/increase in cash flow due to changes in foreign exchange rate
   
(1,084
   
268
 
                 
(Decrease)/increase in cash and cash equivalents
   
(24,717
   
1,827
 
Cash and cash equivalents – beginning of period
   
74,972
     
77,784
 
                 
Cash and cash equivalents – end of period
  $
50,255
    $
79,611
 
                 
Supplemental disclosure of cash flow information:
 
 
 
 
 
 
Cash paid for taxes
  $
2,200
    $
4,403
 
                 
Cash paid for interest
  $
3,390
    $
4,559
 
                 
The accompanying notes are an integral part of these consolidated financial statements
 
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Table of Contents
WisdomTree Investments, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In Thousands, Except Share and Per Share Amounts)
1. Organization and Description of Business
WisdomTree Investments, Inc., through its global subsidiaries (collectively, “WisdomTree” or the “Company”), is an exchange traded product (“ETP”) sponsor and asset manager headquartered in New York. WisdomTree offers ETPs covering equity, commodity, fixed income, leveraged and inverse, currency and alternative strategies. The Company has the following wholly-owned operating subsidiaries:
 
 
 
WisdomTree Asset Management, Inc.
is a New York based investment adviser registered with the SEC, providing investment advisory and other management services to the WisdomTree Trust (“WTT”) and WisdomTree exchange-traded funds (“ETFs”). The WisdomTree ETFs are issued in the U.S. by WTT. WTT, a
non-consolidated
third party, is a Delaware statutory trust registered with the SEC as an
open-end
management investment company. The Company has licensed to WTT the use of certain of its own indexes on an exclusive basis for the WisdomTree ETFs in the U.S.
 
 
 
WisdomTree Management Jersey Limited
(“ManJer”) is a Jersey based management company providing management services to eight issuers (the “ManJer Issuers”) in respect of the ETPs issued and listed by the ManJer Issuers covering commodity, currency, cryptocurrency and
leveraged-and-inverse
strategies.
 
 
 
WisdomTree Multi Asset Management Limited
(“WTMAML”) is a Jersey based management company providing management services to WisdomTree Multi Asset Issuer PLC (“WMAI”) in respect of the ETPs issued by WMAI. WMAI, a
non-consolidated
third party, is a public limited company domiciled in Ireland.
 
 
 
WisdomTree Management Limited
(“WML”)
is an Ireland based management company providing management services to WisdomTree Issuer ICAV (“WTI”) in respect of the WisdomTree UCITS ETFs issued by WTI. WTI, a
non-consolidated
third party, is a public limited company domiciled in Ireland.
 
 
 
WisdomTree UK Limited
(“WTUK”)
is a U.K. based company registered with the Financial Conduct Authority currently providing distribution and support services to ManJer, WTMAML and WML.
 
 
 
WisdomTree Europe Limited
is a U.K. based company which is the legacy distributor of the WMAI ETPs and WisdomTree UCITS ETFs. These services are now provided directly by WTUK. WisdomTree Europe Limited is no longer regulated and does not provide any regulated services.
 
 
 
WisdomTree Ireland Limited
is an Ireland based company authorized by the Central Bank of Ireland providing distribution services to ManJer, WTMAML and WML.
 
 
 
WisdomTree Commodity Services, LLC
(“WTCS”) is a New York based company that serves as the managing owner and commodity pool operator of the WisdomTree Continuous Commodity Index Fund. WTCS is registered with the Commodity Futures Trading Commission and is a member of the National Futures Association.
Sale of Canadian ETF Business
On February 19, 2020, the Company completed the sale of WTAMC to CI Financial Corp. (Note 25).
2. Significant Accounting Policies
Basis of Presentation
These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and in the opinion of management reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of financial condition, results of operations, and cash flows for the periods presented. The consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Consolidation
The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”). The usual condition for a controlling financial interest in a VOE is ownership of a majority voting interest. If the Company has a majority voting interest in a VOE, the entity is consolidated. The Company has a controlling financial interest in a VIE when the Company has a variable interest that provides it with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
 
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Table of Contents
The Company reassesses its evaluation of whether an entity is a VIE when certain reconsideration events occur.
Segment and Geographic Information
Effective January 1, 2020, the Company, through its subsidiaries in the U.S. and Europe, conducts business as a single operating segment as an ETP sponsor and asset manager which is based upon the Company’s current organizational and management structure, as well as information used by the chief operating decision maker to allocate resources and other factors. Previously, the Company’s financial results were reported in its U.S. Business and International Business reportable segments.
Foreign Currency Translation
Assets and liabilities of subsidiaries whose functional currency is not the U.S. dollar are translated based on the end of period exchange rates from local currency to U.S. dollars. Results of operations are translated at the average exchange rates in effect during the period. The impact of the foreign currency translation adjustment is included in the Consolidated Statements of Comprehensive (Loss)/Income as a component of other comprehensive income/(loss). 
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet dates and the reported amounts of revenues and expenses for the periods presented. Actual results could differ materially from those estimates.
Revenue Recognition
The Company earns substantially all of its revenue in the form of advisory fees from its ETPs and recognizes this revenue over time, as the performance obligation is satisfied. Advisory fees are based on a percentage of the ETPs’ average daily net assets. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which the Company has a right to invoice.
Contractual Gold Payments
Contractual gold payments are measured and paid monthly based upon the average daily spot price of gold (Note 11).
Marketing and Advertising
Advertising costs, including media advertising and production costs, are expensed when incurred.
Depreciation and Amortization
Depreciation is provided for using the straight-line method over the estimated useful lives of the related assets as follows:
 
Equipment
   
5 years
 
Furniture and fixtures
   
15
 
years
 
Leasehold improvements are amortized over the term of their respective leases or service lives of the improvements, whichever is shorter. Fixed assets are recorded at cost less accumulated depreciation and amortization.
Stock-Based Awards
Accounting for stock-based compensation requires the measurement and recognition of compensation expense for all equity awards based on estimated fair values. Stock-based compensation is measured based on the grant-date fair value of the award and is amortized over the relevant service period. Forfeitures are recognized when they occur.
Third-Party Distribution Fees