October 25, 2013

WisdomTree Announces Third Quarter 2013 Results

Record net income $15.0 million up 230% from year ago quarter; Diluted EPS $0.11

Record revenues, up 83% from year ago quarter

$1.2 billion net inflows in quarter; Net inflow market share 2.1% in third quarter, 9.8% YTD

NEW YORK, Oct. 25, 2013 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (Nasdaq:WETF), an exchange-traded fund ("ETF") sponsor and asset manager, today reported net income of $15.0 million for the third quarter of 2013, or $0.11 per share on a fully diluted basis. This compares to $4.5 million in the third quarter of 2012 and $12.2 million in the second quarter of 2013.

WisdomTree CEO and President Jonathan Steinberg commented, "WisdomTree continues to drive top line growth with $1.2 billion in net inflows in the quarter, comprised by balanced inflows across domestic, international and emerging market equity ETFs; as well as continued strength in our franchise-leading yen hedged Japan fund. We are effectively capitalizing on the greater awareness of our currency hedged equity family which is translating into significant asset growth in sister products. Importantly, we continue to position the company for future growth and have launched eight new ETFs so far this year."

Mr. Steinberg added, "As we continue to grow and reach economies of scale, we are demonstrating the powerful operating leverage in our business. WisdomTree's pre-tax margins reached 38% on a base of $30.5 billion in average assets under management."

Assets Under Management, Net Inflows and Market Share

ETF assets under management ("AUM") were $31.4 billion at September 30, 2013, up 86.8% from $16.8 billion at September 30, 2012, and up 8.2% from $29.0 billion at June 30, 2013. Net inflows for the third quarter of 2013 were $1.2 billion as compared to $1.0 billion in the third quarter of 2012 and $5.0 billion in the second quarter of 2013. WisdomTree's market share of industry net inflows was 2.1% in the third quarter of 2013 as compared to 2.0% in the third quarter of 2012 and 32.2% in the second quarter of 2013. For the first nine months of 2013, WisdomTree's market share was 9.8% as compared to 2.8% in the same period last year.

Summary Operating and Financial Highlights

 Three Months EndedChange From
Operating Highlights ($, in billions):Sep. 30,
2013
Jun. 30,
2013
Sep. 30,
2012
Jun. 30,
2013
Sep. 30,
2012
ETF AUM $31.4 $29.0 $16.8 8.2% 86.8%
ETF net inflows $1.2 $5.0 $1.0 (76.6%) 12.0%
Average ETF AUM $30.5 $28.4 $15.8 7.3% 93.2%
Average ETF advisory fee 0.51% 0.52% 0.54% (.01) (0.3)
Market share of industry inflows 2.1% 32.2% 2.0% (30.1) +0.1
           
Financial Highlights ($, in millions, except per share amounts):        
Total revenues $39.6 $37.3 $21.7 6.2% 83.0%
Net income $15.0 $12.2 $4.5 22.2% 230.1%
Diluted earnings per share  $0.11 $0.09 $0.03 22.2% 266.7%
Proforma operating income (non-GAAP) $15.0 $12.2 $4.8 22.2% 214.9%
Gross margin1 (non-GAAP) 77% 74% 68% +3 +9
Pre-tax margin 38% 33% 21% +5 +17
Proforma pre-tax margin (non-GAAP) 38% 33% 22% +5 +16
           
           
           
 Nine Months Ended      
Operating Highlights ($, in billions):Sep. 30,
2013
Sep. 30,
2012

Change
   
ETF AUM $31.4 $16.8 86.8%    
ETF net inflows $12.0 $3.7 227.1%    
Average ETF AUM $26.9 $15.1 78.9%    
Average ETF advisory fee 0.52% 0.54% (0.02)    
Market share of industry inflows 9.8% 2.8% +7.0    
           
Financial Highlights ($, in millions, except per share amounts):        
Total revenues $106.3 $61.2 73.6%    
Net income $35.1 $5.8 na    
Diluted earnings per share $0.25 $0.04 na    
Proforma operating income (non-GAAP) $35.1 $9.7 259.9%    
Gross margin1 (non-GAAP) 75% 66% +9    
Pre-tax margin 33% 9% +24    
Proforma pre-tax margin (non-GAAP) 33% 16% +17    
           
1 Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements. 

Recent Business Developments

  • On July 25, 2013, WisdomTree announced the launch of the WisdomTree U.S. SmallCap Dividend Growth Fund (DGRS)
  • On August 1, 2013, WisdomTree announced the launch of the WisdomTree Emerging Markets Dividend Growth Fund (DGRE)
  • On September 12, 2013, WisdomTree announced the WisdomTree Japan Hedged SmallCap Equity Fund (DXJS) filed a notification with the Financial Services Agency of Japan and is now available for sale in Japan through Japanese securities companies
  • On September 27, 2013, WisdomTree announced the launch of the WisdomTree Emerging Markets Consumer Growth Fund (EMCG)
  • In September 2013, WisdomTree entered agreements to change fund administration and custody services from Bank of New York Mellon to State Street Bank and Trust Company, effective April 1, 2014
  • On October 17, 2013, WisdomTree announced the launch of the WisdomTree Germany Hedged Equity Fund (DXGE)

Performance

In evaluating the performance of our equity approach, 41% of the $28.6 billion invested in our equity ETFs and 53% (21 of 40) of our equity ETFs outperformed their capitalization-weighted or competitive benchmarks since their respective inceptions as of September 30, 2013.

In evaluating the performance of our Equity, Fixed Income and Alternatives ETFs against actively managed and indexed based mutual funds and ETFs, 85% of the $30.8 billion invested in our ETFs and 55% (26 of 47) of our ETFs outperformed their comparable Morningstar average since inception as of September 30, 2013.

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

Third Quarter Financial Discussion

Revenues

Total revenues increased 83.0% to a record $39.6 million as compared to the third quarter of 2012 and 6.2% compared to the second quarter of 2013 primarily due to higher average AUM as a result of positive net inflows into our ETFs and market appreciation. Our average advisory fee earned was 0.51% as compared to 0.54% for the third quarter of 2012 and 0.52% in the second quarter of 2013 due to the majority of our inflows going to our Japan hedged equity ETF (DXJ), which has an expense ratio of 0.48%.

Margins

Our gross margin, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 77% in the third quarter of 2013 as compared to 68% in the third quarter of 2012 and 74% in the second quarter of 2013.

Our pre-tax margin was 38% in the third quarter of 2013 as compared to 21% (or 22% proforma) in the third quarter of 2012 and 33% in the second quarter of 2013 reflecting the operating scale in our business model.

Expenses

Total expenses increased 44.0% to $24.7 million from $17.1 million in the third quarter of 2012. Included in the prior year quarter was $0.2 million of net costs related to patent litigation. Excluding this cost, total expenses increased 45.9% compared to the third quarter of 2012. Total expenses decreased 1.7% from $25.1 million in the second quarter of 2013.

  • Compensation and benefits expense increased 68.3% to $9.6 million compared to the third quarter of 2012. This increase was primarily due to higher accrued incentive compensation due to our record level of net inflows on a year-to-date basis in 2013; higher headcount related expenses to support our growth; and higher stock based compensation expense due to equity awards granted to our employees as part of 2012 year-end compensation.
     
    Compensation and benefits expense increased 2.1% compared to the second quarter of 2013 primarily due to payroll taxes as a result of option exercises as well as increased headcount. Partly offsetting these increases, was lower accrued incentive compensation due to our lower level of net inflows in the third quarter as compared to the second quarter of 2013.
     
    Our headcount at the end of the third quarter of 2013 was 84 compared to 70 at the end of the third quarter of 2012 and 79 at the end of the second quarter of 2013.
     
  • Fund management and administration expenses increased 55.1% to $8.8 million compared to the third quarter of 2012. At the end of 2012, we ended our joint venture with BNY Mellon. As a result, we began to record certain operating costs related to our currency and fixed income ETFs, which were previously recognized by BNY Mellon as part of the joint venture. This resulted in approximately $0.5 million in higher costs this quarter, while eliminating the expense of the third-party sharing arrangement. Higher average AUM resulted in a $2.3 million increase in variable fees charged by our third party service providers associated with AUM.
     
    Fund management and administration expenses decreased 3.4% compared to the second quarter of 2013 primarily due to variable regulatory fees associated with net inflow levels. We also incurred higher expenses in the second quarter due to the annual rebalancing of our international equity ETFs.
     
  • Marketing and advertising expenses increased $1.2 million to $2.0 million compared to the third quarter of 2012 primarily due to higher levels of advertising related activities to support our growth. This expense decreased 7.5% compared to the second quarter of 2013 due to lower levels of advertising related activities.
     
  • Sales and business development expenses increased 57.0% to $1.3 million compared to the second quarter of 2012 primarily due to new product development related activities as well as higher levels of spending for sales related initiatives.
     
    Sales and business development expenses decreased 14.1% compared to the second quarter of 2013 primarily due to lower level of sales related spending.
     
  • Professional and consulting fees decreased 58.5% to $0.5 million compared to the third quarter of 2012 primarily due to lower variable stock based compensation, which ended as of the end of 2012. Professional and consulting fees decreased 17.5% compared to the second quarter of 2013 due to lower level of spending for business consultants.
     
  • Occupancy, communication and equipment expense increased 93.3% to $0.7 million compared to the third quarter of 2012 and increased 22.3% compared to the second quarter of 2013. This increase was primarily due to costs for new office space which we will occupy in January 2014 as well as expense related to commercial rent tax.
     
  • Third-party sharing arrangements expense decreased 68.7% to $0.4 million compared to the third quarter of 2012 due to the end of our joint venture with BNY Mellon discussed above.
     
    Third-party sharing arrangements expense decreased 12.6% compared to the second quarter of 2013 due to lower inflow levels by our marketing agent in Latin America.
     
  • Other expenses increased 35.5% to $1.2 million compared to the third quarter of 2012 and increased 9.7% compared to the second quarter of 2013 primarily due to higher general and administrative expenses.

Balance Sheet

As of September 30, 2013, WisdomTree had total assets of $118.3 million which consisted primarily of cash and cash equivalents of $87.1 million and investments of $11.6 million. There were approximately 129.4 million shares of common stock issued as of September 30, 2013. Fully diluted weighted average shares outstanding was approximately 140.0 million.

Conference Call

WisdomTree will discuss its results and operational highlights during a conference call on Friday, October 25, 2013 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;
     
  • anticipated levels of inflows into and outflows out of our exchange traded funds;
     
  • 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;
     
  • 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:

  • We have only a limited operating history and, as a result, recent historical growth may not provide an accurate representation of the growth we may experience in the future, which may make it difficult to evaluate our future prospects.
     
  • Challenging market conditions associated with declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETF shareholders to sell their fund shares and trigger redemptions.
     
  • Fluctuations in the amount and mix of our AUM may negatively impact revenue and operating margin.
     
  • Most of our assets under management are held in ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks.
     
  • We derive a substantial portion of our revenue from products invested in emerging markets and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets.
     
  • We derive a substantial amount of our revenue from products invested in securities of Japanese companies and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets and currency fluctuations between the Japanese Yen and the U.S. Dollar.
     
  • We derive a majority of our revenue from a limited number of products--in particular one fund, WisdomTree Japan Hedged Equity Fund, that accounted for more than one third of our ETF AUM at September 30, 2013--and, as a result, our operating results are particularly exposed to the performance of those funds, investor sentiment toward the strategies pursued by those funds and our ability to maintain the assets under management of those funds.
     
  • The WisdomTree ETFs have a limited track record, and poor investment performance could cause our revenue to decline.
     
  • We depend on other third parties to provide many critical services to operate our business and the WisdomTree ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETF shareholders.

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, 2012 and Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013.

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. is a New York-based exchange-traded fund ("ETF") sponsor and asset manager. WisdomTree currently offers 54 ETFs across Equities, Fixed Income, Currency Income and Alternatives asset classes. WisdomTree also licenses its indexes to third parties for proprietary products and promotes the use of WisdomTree ETFs in 401(k) plans. WisdomTree currently has approximately $32.8 billion in ETF assets under management. For more information, please visit www.wisdomtree.com.

WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its wholly owned subsidiary WisdomTree Asset Management, Inc. WisdomTree Asset Management, Inc. is a registered investment advisor and is the investment advisor to the WisdomTree Trust and the WisdomTree ETFs. The WisdomTree Trust is a registered open-end investment company. Each WisdomTree ETF is a series of the WisdomTree Trust.

                 
                 
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
                 
 Three Months Ended% Change FromNine Months Ended
 Sept. 30,
2013
Jun. 30,
2013
Sept. 30,
2012
Jun. 30,
2013
Sept. 30,
2012
Sept. 30,
2013
Sept. 30,
2012
%
Change
                 
Revenues                
 ETF advisory fees  $ 39,437  $ 37,101  $ 21,4406.3%83.9%  $ 105,691  $ 60,64574.3%
 Other income  193  230  221-16.1%-12.7%  611  5795.5%
                 
 Total revenues  39,630  37,331  21,6616.2%83.0%  106,302  61,22473.6%
                 
Expenses                
 Compensation and benefits  9,648  9,447  5,7342.1%68.3%  26,577  17,06855.7%
 Fund management and administration  8,794  9,106  5,671-3.4%55.1%  26,123  16,67756.6%
 Marketing and advertising  2,031  2,196  862-7.5%135.6%  6,164  3,73665.0%
 Sales and business development  1,305  1,520  831-14.1%57.0%  4,626  2,53382.6%
 Professional and consulting fees  542  657  1,305-17.5%-58.5%  1,812  3,815-52.5%
 Occupancy, communication and equipment  723  591  37422.3%93.3%  1,691  1,05061.0%
 Depreciation and amortization  84  83  791.2%6.3%  249  22510.7%
 Third party sharing arrangements  374  428  1,194-12.6%-68.7%  913  4,168-78.1%
 Other  1,164  1,061  8599.7%35.5%  3,086  2,21139.6%
 ETF shareholder proxy  --   --   -- n/an/a  --   3,264n/a
 Patent litigation, net   --   --   219n/an/a  --   700n/a
 Total expenses  24,665  25,089  17,128-1.7%44.0%  71,241  55,44728.5%
                 
Income before provision for income taxes  14,965  12,242  4,53322.2%n/a  35,061  5,777n/a
                 
Provision for income taxes  --   --   --       --   --   
                
Net income  $ 14,965  $ 12,242  $ 4,53322.2%n/a  $ 35,061  $ 5,777n/a
                 
                 
Net income per share - basic   $ 0.12  $ 0.10  $ 0.04      $ 0.28  $ 0.05  
                 
Net income per share - diluted  $ 0.11  $ 0.09  $ 0.03      $ 0.25  $ 0.04  
                 
Weighted average common shares - basic   126,509  125,771  123,214      125,909  121,445  
                 
Weighted average common shares - diluted  140,097  140,081  138,458      139,805  137,878  
           
           
WISDOMTREE INVESTMENTS, INC.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
           
 Three Months EndedNine Months Ended
 Sept. 30,
2013
Jun. 30,
2013
Sept. 30,
2012
Sept. 30,
2013
Sept. 30,
2012
           
Revenues          
 ETF advisory fees  $ 39,437  $ 37,101  $ 21,440  $ 105,691  $ 60,645
 Other income  193  230  221  611  579
           
 Total revenues  39,630  37,331  21,661  106,302  61,224
           
Operating expenses          
 Compensation and benefits  9,648  9,447  5,734  26,577  17,068
 Fund management and administration  8,794  9,106  5,671  26,123  16,677
 Marketing and advertising  2,031  2,196  862  6,164  3,736
 Sales and business development  1,305  1,520  831  4,626  2,533
 Professional and consulting fees  542  657  1,305  1,812  3,815
 Occupancy, communication and equipment  723  591  374  1,691  1,050
 Depreciation and amortization  84  83  79  249  225
 Third party sharing arrangements  374  428  1,194  913  4,168
 Other  1,164  1,061  859  3,086  2,211
 Total proforma operating expenses  24,665  25,089  16,909  71,241  51,483
           
           
Proforma operating income 14,965  12,242  4,752  35,061  9,741
           
 ETF shareholder proxy  --   --   --   --   3,264
 Patent litigation, net   --   --   219  --   700
Income before provision for income taxes  14,965  12,242  4,533  35,061  5,777
           
Provision for income taxes  --   --   --   --   -- 
           
Net income  $ 14,965  $ 12,242  $ 4,533  $ 35,061  $ 5,777
     
     
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amount)
     
 September 30,
2013
December 31,
2012
 (Unaudited)  
     
ASSETS    
Current assets:    
Cash and cash equivalents  $ 87,114  $ 41,246
Accounts receivable 16,254 9,348
Other current assets  1,975  1,273
     
Total current assets  105,343  51,867
     
Fixed assets, net  1,349  480
Investments  11,603  11,036
Other noncurrent assets  50  42
     
Total assets  $ 118,345  $ 63,425
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY    
LIABILITIES    
Current liabilities:    
Fund management and administration payable  $ 10,621  $ 6,924
Compensation and benefits payable  9,391  2,156
Accounts payable and other liabilities  4,026  3,272
     
Total current liabilities  24,038  12,352
     
Other noncurrent liabilities  3,063  13
     
Total liabilities  27,101  12,365
     
     
STOCKHOLDERS' EQUITY    
Common stock, par value $0.01; 250,000 shares authorized:    
 issued: 129,410 and 126,554  1,294  1,265
 outstanding: 127,461 and 125,272    
Additional paid-in capital  182,920  177,826
Accumulated deficit  (92,970)  (128,031)
     
Total stockholders' equity  91,244  51,060
     
Total liabilities and stockholders' equity  $ 118,345  $ 63,425
     
     
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
     
 Nine Months Ended
 September 30,
2013
September 30,
2012
Cash flows from operating activities    
 Net income  $ 35,061  $ 5,777
Non-cash items included in net income:    
Depreciation and amortization   249  225
Stock-based compensation  5,186  5,903
Deferred rent  111  (106)
Accretion to interest income and other  108  89
Changes in operating assets and liabilities:    
Accounts receivable  (3,683)  (3,759)
Other assets  (720)  (185)
Fund management and administration payable  3,697  (736)
Compensation and benefits payable  7,235  (933)
Accounts payable and other liabilities  471  1,251
     
Net cash provided by operating activities  47,715  7,526
     
Cash flows from investing activities    
Purchase of fixed assets  (1,118)  (182)
Purchase of investments  (3,358)  (6,098)
Proceeds from the redemption of investments   2,693  5,657
     
Net cash used in investing activities  (1,783)  (623)
     
Cash flows from financing activities    
Net proceeds from sale of common stock  --   4,329
Shares repurchased  (1,413)  (1,169)
Proceeds from exercise of stock options  1,349  3,910
     
Net cash (used in)/provided by financing activities  (64)  7,070
     
Net increase in cash and cash equivalents  45,868  13,973
     
Cash and cash equivalents - beginning of period   41,246  25,630
     
Cash and cash equivalents - end of period  $ 87,114  $ 39,603
     
Supplemental disclosure of cash flow information    
Cash paid for income taxes  $ 33  $ 29
           
           
WisdomTree Investments, Inc.          
Key Operating Statistics (Unaudited)          
           
 Three Months EndedNine Months Ended
 September 30,
2013
June 30,
2013
September 30,
2012
September 30,
2013
September 30,
2012
Total ETFs (in millions)          
Beginning of period assets  28,975  25,103  15,004  18,286  12,182
Inflows/(outflows)  1,160  4,962  1,036  12,015  3,673
Market appreciation/(depreciation)  1,217  (1,090)  743  1,051  928
End of period assets  31,352  28,975  16,783  31,352  16,783
           
Average assets during the period  30,473  28,390  15,769  26,932  15,051
           
ETF Industry and Market Share (in billions)          
ETF industry net inflows  55.4  15.4  51.8  123.0  130.0
WisdomTree market share of industry inflows 2.1% 32.2% 2.0% 9.8% 2.8%
           
International Developed Equity ETFs (in millions)          
Beginning of period assets  12,903  8,525  2,846  3,732  2,407
Inflows/(outflows)  957  4,433  (58)  9,600  381
Market appreciation/(depreciation)  771  (55)  108  1,299  108
End of period assets  14,631  12,903  2,896  14,631  2,896
           
Average assets during the period  14,063  11,444  2,859  10,526  2,798
           
Emerging Markets Equity ETFs (in millions)          
Beginning of period assets  7,172  8,071  5,430  7,332  3,613
Inflows/(outflows)  286  (51)  736  1,111  2,596
Market appreciation/(depreciation)  245  (848)  376  (740)  333
End of period assets  7,703  7,172  6,542  7,703  6,542
           
Average assets during the period  7,289  7,964  5,915  7,719  5,365
           
US Equity ETFs (in millions)          
Beginning of period assets  5,777  5,161  4,094  4,371  3,429
Inflows/(outflows)  273  547  363  1,111  815
Market appreciation/(depreciation)  221  69  183  789  396
End of period assets  6,271  5,777  4,640  6,271  4,640
           
Average assets during the period  6,214  5,541  4,393  5,502  4,161
           
Fixed Income ETFs (in millions)          
Beginning of period assets  2,437  2,600  1,698  2,118  1,506
Inflows/(outflows)  (320)  78  148  266  301
Market appreciation/(depreciation)  (22)  (241)  58  (289)  97
End of period assets  2,095  2,437  1,904  2,095  1,904
           
Average assets during the period  2,246  2,700  1,749  2,466  1,697
           
Currency ETFs (in millions)          
Beginning of period assets  547  626  769  611  950
Inflows/(outflows)  (48)  (62)  (129)  (98)  (315)
Market appreciation/(depreciation)  3  (17)  14  (11)  19
End of period assets  502  547  654  502  654
           
Average assets during the period  515  607  694  586  819
           
Alternative Strategy ETFs (in millions)          
Beginning of period assets  139  120  167  122  277
Inflows/(outflows)  12  17  (24)  25  (105)
Market appreciation/(depreciation)  (1)  2  4  3  (25)
End of period assets  150  139  147  150  147
           
Average assets during the period  146  134  159  133  211
           
Average ETF assets during the period          
International developed equity ETFs 46% 40% 18% 39% 19%
Emerging markets equity ETFs 24% 28% 38% 29% 36%
US equity ETFs 20% 20% 28% 20% 28%
Fixed income ETFs 7% 10% 11% 9% 11%
Currency ETFs  2% 2% 4% 2% 5%
Alternative strategy ETFs 1% 0% 1% 1% 1%
Total 100% 100% 100% 100% 100%
           
Average ETF advisory fee during the period          
Alternative strategy ETFs 0.94% 0.94% 0.94% 0.94% 0.95%
Emerging markets equity ETFs 0.66% 0.66% 0.67% 0.66% 0.67%
Fixed income ETFs 0.55% 0.55% 0.55% 0.55% 0.55%
Currency ETFs  0.50% 0.51% 0.50% 0.50% 0.50%
International developed equity ETFs 0.50% 0.50% 0.54% 0.51% 0.54%
US equity ETFs 0.35% 0.35% 0.35% 0.35% 0.35%
Blended total 0.51% 0.52% 0.54% 0.52% 0.54%
           
Number of ETFs - end of the period          
International developed equity ETFs  20  20  18  20  18
US equity ETFs  13  12  12  13  12
Emerging markets equity ETFs  7  5  5  7  5
Fixed income ETFs  6  6  5  6  5
Currency ETFs   5  5  7  5  7
Alternative strategy ETFs  2  2  2  2  2
Total  53  50  49  53  49
           
Headcount 84 79 70 84 70
           
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. The non-GAAP financial measurements included in this release include proforma operating income, proforma expenses, proforma pre-tax operating margin and gross margin. 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. We have disclosed our results excluding certain non-operating items including (1) our patent litigation with Research Affiliates LLC; and (2) expenses for the WisdomTree ETF shareholder proxy solicitation. Management excludes these items when measuring our financial performance as they are not directly related to our core business of being an ETF sponsor and asset manager. We disclose gross margin as a non-GAAP financial measurement to allow investors to analyze our revenues less the direct costs paid to third parties attributable to those revenues.

           
           
WISDOMTREE INVESTMENTS, INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
           
 Three Months Ended Nine Months Ended 
 Sept. 30,
2013
Jun. 30,
2013
Sept. 30,
2012
Sept. 30,
2013
Sept. 30,
2012
GAAP total expenses  $ 24,665  $ 25,089  $ 17,128  $ 71,241  $ 55,447
           
 ETF shareholder proxy  --   --   --   --   (3,264)
 Patent litigation, net  --   --   (219)  --   (700)
           
Proforma operating expenses  $ 24,665  $ 25,089  $ 16,909  $ 71,241  $ 51,483
           
           
GAAP net income  $ 14,965  $ 12,242  $ 4,533  $ 35,061  $ 5,777
           
 ETF shareholder proxy  --   --   --   --   3,264
 Patent litigation, net   --   --   219  --   700
           
Proforma operating income   $ 14,965  $ 12,242  $ 4,752  $ 35,061  $ 9,741
           
           
GAAP net income  $ 14,965  $ 12,242  $ 4,533  $ 35,061  $ 5,777
 Divide GAAP total revenue  39,630  37,331  21,661  106,302  61,224
           
GAAP pre-tax margin 37.8% 32.8% 20.9% 33.0% 9.4%
           
           
Proforma pre-tax net income  $ 14,965  $ 12,242  $ 4,752  $ 35,061  $ 9,741
 Divide GAAP total revenue  39,630  37,331  21,661  106,302  61,224
           
Proforma pre-tax operating margin 37.8% 32.8% 21.9% 33.0% 15.9%
           
           
GAAP total revenue  $ 39,630  $ 37,331  $ 21,661  $ 106,302  $ 61,224
 Fund management and administration  (8,794)  (9,106)  (5,671)  (26,123)  (16,677)
 Third party sharing arrangements  (374)  (428)  (1,194)  (913)  (4,168)
           
Gross margin  $ 30,462  $ 27,797  $ 14,796  $ 79,266  $ 40,379
           
Gross margin percentage 76.9% 74.5% 68.3% 74.6% 66.0%
CONTACT: WisdomTree Investments, Inc.

         Stuart Bell / Jessica Zaloom

         +1.917.267.3702 / +1.917.267.3735

         sbell@wisdomtree.com / jzaloom@wisdomtree.com


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