July 29, 2016

WisdomTree Announces Second Quarter 2016 Results

$0.03 diluted EPS for the quarter, or $0.07 as adjusted

Declares $0.08 quarterly dividend

NEW YORK, July 29, 2016 (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 $3.7 million or $0.03 diluted EPS in the second quarter.  Excluding the previously announced charge of $6.0 million related to the Company's accelerated buyout of minority shareholders in its European business, adjusted net income (a non-GAAP measure1) was $9.6 million or $0.07 diluted EPS.  This compares to $24.2 million or $0.18 diluted EPS in the second quarter of last year and $12.1 million or $0.09 diluted EPS in the first quarter of 2016.

WisdomTree CEO and President Jonathan Steinberg said, "Our largest Japan and European based exposures experienced outflows as these markets remained broadly out of favor during the quarter, more than offsetting inflows in domestic equities.  We remain focused on our long term strategic growth plans."

Mr. Steinberg added, "We are excited about the growth opportunities for the ETF industry and believe many of WisdomTree's recent accomplishments and initiatives position us well for the future.  Most recently, we completed the buyout of our European business, entered the fast-growing Canadian ETF market with locally listed funds and announced a global product partnership with the goal of providing investors around the world access to a novel China equity strategy in collaboration with one of the largest asset managers in China." 

Summary Operating and Financial Highlights

 Three Months EndedChange From
 Jun. 30,Mar. 31,Jun. 30,Mar. 31,Jun. 30,
Operating Highlights 2016  2016  2015  2016  2015 
U.S. listed ETFs ($, in billions):     
AUM$38.0 $44.3 $61.3  (14.0%) (37.9%)
Net inflows/(outflows)$(4.9)$(5.4)$6.6  n/a  n/a 
Average AUM$41.8 $45.5 $61.2  (8.0%) (31.6%)
Average advisory fee 0.52% 0.52% 0.53% -  (0.01)
Market share of industry inflows n/a  n/a  15.9% n/a  n/a 
      
European listed ETPs ($, in millions):     
AUM$952.0 $885.0 $612.7  7.6% 55.4%
Net inflows$57.9 $193.3 $194.6  (70.1%) (70.3%)
Average advisory fee 0.68% 0.68% 0.68% -  - 
      
Financial Highlights ($, in millions, except per share amounts):
Consolidated Results     
Total revenues$56.0 $60.9 $81.6  (8.0%) (31.4%)
Net income$3.7 $12.1 $24.2  (69.8%) (84.9%)
Diluted earnings per share$0.03 $0.09 $0.18 $(0.06)$(0.15)
Pre-tax margin 19.9% 35.6% 50.2% -15.7  -30.3 
Non-GAAP1:     
Net income, as adjusted$9.6  -  -  -  - 
Diluted earnings per share, as adjusted$0.07  -  -  -  - 
Pre-tax margin, as adjusted 30.6% -  -  -  - 
      
U.S. listed ETFs     
Gross margin1 (non-GAAP) 81.5% 82.9% 86.4% -1.4  -4.9 
Pre-tax margin 35.6% 40.7% 53.2% -5.1  -17.6 
                


 Six Months EndedChange from
 Jun. 30,Jun. 30,Jun. 30,
Operating Highlights 2016  2015  2015 
U.S. listed ETFs ($, in billions):   
AUM$38.0 $61.3  (37.9%)
Net inflows/(outflows)$(10.3)$20.1  n/a 
Average AUM$43.7 $53.8  (18.8%)
Average advisory fee 0.52% 0.52% - 
Market share of industry inflows n/a  20.8% n/a 
    
European listed ETPs ($, in millions):   
AUM$952.0 $612.7  55.4%
Net inflows$251.2 $368.8  (31.9%)
Average advisory fee 0.68% 0.68% - 
    
 
Financial Highlights ($, in millions, except per share amounts):
Consolidated Results   
Total revenues$116.9 $141.7  (17.5%)
Net income$15.7 $36.2  (56.6%)
Diluted earnings per share$0.11 $0.26 $(0.15)
Pre-tax margin 28.1% 43.7% -15.6 
Non-GAAP1:   
Net income, as adjusted$21.7  -  - 
Diluted earnings per share, as adjusted$0.16  -  - 
Pre-tax margin, as adjusted 33.2% -  - 
    
U.S. listed ETFs   
Gross margin(non-GAAP) 82.2% 85.0% -2.8 
Pre-tax margin 38.3% 46.9% -8.6 
          

Recent Business Developments

Company News

  • In May 2016, the Company announced it completed the buyout of its European business to position it for continued growth; and presented at the William Blair 36th Annual Growth Stock Conference
  • In June 2016, the Company announced the increase in sales coverage in Germany with key new hires; announced it surpassed $1 billion in AUM in Europe; and celebrated the 10th anniversary of its first ETFs
  • In July 2016, the Company and ICBC Credit Suisse jointly announced the global product partnership on S&P China 500 index

U.S. Listed Product News

  • In June 2016, the Company announced six WisdomTree domestic dividend ETFs received a 5-Star overall Morningstar Rating™
  • In July 2016, the Company announced an index change to the WisdomTree Managed Futures Strategy Fund (WDTI); that ten additional ETFs filed notification with the Financial Services Agency of Japan (FSA); and expanded its offering on Schwab ETF OneSource

European Listed Product News

  • In May 2016, the Company announced the launch of the Enhanced Commodity UCITS ETF on the London Stock Exchange
  • In June 2016, the Company announced the launch of the Enhanced Commodity UCITS ETF on the Borsa Italiana and Deutsche Börse Xetra; two Quality Dividend Growth UCITS ETFs on the London Stock Exchange, the Borsa Italiana and Deutsche Börse Xetra; and Boost Volatility and Emerging Markets ETPs on the Deutsche Börse Xetra; announced that its UCITS ETFs are now available in France and Sweden; and broadened the Boost Range of Oil ETPs with cross-listing on the London Stock Exchange
  • In July 2016, the Company announced the launch of the Eurozone Quality Dividend Growth UCITS ETF on the London Stock Exchange, Borsa Italiana and the Deutsche Börse Xetra

Canadian Listed Product News

  • In July 2016, the Company announced the launch of its first ETFs in Canada

Assets Under Management and Net Inflows

U.S. listed ETF assets under management ("AUM") were $38.0 billion at June 30, 2016, down 26.3% from December 31, 2015 primarily due to $10.3 billion of net outflows and $3.5 billion of negative market movement. U.S. listed AUM was down 37.9% from June 30, 2015 primarily due to net outflows in 2016.  Net outflows were primarily in our two largest funds, HEDJ and DXJ.

European listed AUM was $952.0 million at June 30, 2016, up 23.0% from December 31, 2015 primarily due to $251.2 million of net inflows.  European listed AUM was up 55.4% from June 30, 2015 primarily due to net inflows.

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% of the $37.2 billion invested in our ETFs and 57% (43 of 76) of our ETFs outperformed their comparable Morningstar average since inception as of June 30, 2016.

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

Second Quarter Financial Discussion

Revenues

Total revenues decreased 31.4% from the second quarter of 2015 and 8.0% from the first quarter of 2016 due to declines in our AUM from outflows in our two largest ETFs and negative market movement.  Our average advisory fee remained 0.52% during the quarter.

Margins

Gross margin1 for our U.S. listed ETFs, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 81.5% in the second quarter of 2016 as compared to 86.4% in the second quarter of 2015 and 82.9% in the first quarter of 2016. The decline over these periods was due to lower average AUM as well as the costs due to additional ETF launches.

Pre-tax margin was 19.9% in the second quarter of 2016 as compared to 50.2% in the second quarter of 2015 and 35.6% in the first quarter of 2016. Excluding the European buyout charge, adjusted pre-tax margin1 was 30.6% for the quarter.  Pre-tax margin for our U.S. listed ETF business was 35.6% in the second quarter of 2016 as compared to 53.2% in the second quarter of 2015 and 40.7% in the first quarter of 2016.

Expenses

Total expenses increased 10.3% from the second quarter of 2015 and 14.3% from the first quarter of 2016.  Excluding the European buyout charge of $6.0 million, adjusted total expenses1 declined 4.4% from the second quarter of 2015 and 1.0% from the first quarter of 2016 as lower compensation was partly offset by higher marketing and sales related spending. 

  • Compensation and benefits expense declined 23.2% from the second quarter of 2015 to $14.3 million due to lower accrued incentive compensation relating to outflows we experienced in the first half partly offset by higher headcount related expenses to support our growth and higher stock based compensation due to equity awards we granted as part of 2015 incentive compensation.  Our headcount was 149 in the U.S. and 204 globally at the end of the quarter.

    This expense declined 5.8% from the first quarter of 2016 due to lower accrued incentive compensation and higher seasonal taxes due to bonus payments in the first quarter which were partly offset by higher headcount related expenses.
  • Fund management and administration expense decreased 5.2% from the second quarter of 2015 primarily due to lower fund costs for our U.S. listed ETF business as a result of lower average AUM partly offset by higher costs for additional fund launches by our European business.

    This expense increased 5.7% compared to the first quarter of 2016 due to fund costs for our European business partly offset by lower U.S. listed fees due to lower average AUM. We had 99 U.S. listed ETFs and 94 ETPs at the end of the quarter. 
  • Marketing and advertising expense increased 25.9% from the second quarter of 2015 and 19.2% from the first quarter of 2016 to $4.6 million primarily due to higher levels of advertising related activities to support our growth.
     
  • Sales and business development expense increased 84.7% from the second quarter of 2015 and 56.7% from the first quarter of 2016 to $3.8 million primarily due to higher spending for sales related initiatives.
     
  • Professional and consulting fees decreased 14.9% from the second quarter of 2015 and 51.9% compared to the first quarter of 2016 to $1.4 million due to lower corporate consulting related services and fees associated with our acquisition of the GreenHaven family of commodity ETFs, which was completed in January 2016. 
     
  • Occupancy, communications and equipment expense increased 31.6% from the second quarter of 2015 to $1.2 million primarily due to technology initiatives and higher costs for our office space in London.  This expense was relatively unchanged compared to the first quarter of 2016.  
     
  • Depreciation and amortization expense increased 48.0% from the second quarter of 2015 to $0.3 million primarily due to higher amortization for leasehold improvements to our New York office space.   This expense was essentially unchanged from the first quarter of 2016.
     
  • Third-party sharing arrangements expense increased 42.7% from the second quarter of 2015 to $0.7 million due to higher fees to our third party marketing agent in Latin America due to higher AUM.  This expense declined 21.8% from the first quarter of 2016 due to lower AUM in Latin America.
     
  • Acquisition payment expense was $6.0 million in the second quarter of 2016.  In April 2014, WisdomTree expanded into Europe through a 75% majority investment in U.K. based ETP sponsor Boost, with an obligation to buy out the remaining minority investment in four years. In May 2016, WisdomTree accelerated the buyout and completed the purchase of the remaining minority stake and made management changes to drive continued growth. As a result, the Company took a charge of $6.0 million to reflect the accelerated purchase of the remaining 25% stake and other related expenses. 
     
  • Other expense increased 20.8% from the second quarter of 2015 and 11.7% from the first quarter of 2016 to $1.8 million due to higher general and administrative expenses.
     
  • Income tax expense was $7.5 million for the second quarter of 2016.  Our overall effective tax rate was 67.3% which was significantly higher than prior periods due to the non-deductibility of the European buyout charge.  Excluding the buyout charge, the overall adjusted effective tax rate1 was 43.8%.    

Six Months Results

Total revenues declined 17.5% to $116.9 million due to lower average AUM as a result of outflows in our two largest ETFs and negative market movement.  Total expenses increased 5.4% to $84.0 million.  Excluding the European buyout charge of $6.0 million, adjusted total expenses1 declined 2.1% as lower compensation was partly offset by higher marketing and sales related expenses.

Balance Sheet

As of June 30, 2016, the Company had total assets of $247.8 million which consisted primarily of cash and cash equivalents of $174.9 million and investments of $18.7 million.  There were approximately 134.1 million shares of common stock outstanding as of June 30, 2016. Fully diluted weighted average shares outstanding were 137.3 million for the quarter.

Quarterly Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.08 per share of the Company's common stock.  The dividend will be paid on August 24, 2016 to stockholders of record as of the close of business on August 10, 2016. 

Conference Call 

WisdomTree will discuss its results and operational highlights during a conference call on Friday, July 29, 2016 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;
  • timing of payment of our cash income taxes;
  • 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:

  • Financial growth in recent years may not provide an accurate representation of the financial growth we may experience in the future, which may make it difficult to evaluate our future prospects.
  • Declining prices of securities 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 may negatively impact revenues and operating margins.
  • We derive a substantial portion of our revenues from two products — the WisdomTree Europe Hedged Equity Fund and the WisdomTree Japan Hedged Equity Fund — and, as a result, our operating results are particularly exposed to the performance of these funds and our ability to maintain the AUM of these funds, as well as investor sentiment toward investing in the funds' strategies and market-specific and political and economic risk.
  • Most of our AUM are 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 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, 2015.

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 $40.8 billion in assets under management globally. 

WisdomTree® is the marketing name for WisdomTree Investments, Inc. and its subsidiaries worldwide.

See "Non-GAAP Financial Measurements."

    
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES   
CONSOLIDATED STATEMENTS OF OPERATIONS    
(in thousands, except per share amounts)   
(Unaudited)   
                   
 Three Months Ended % Change From Six Months Ended   
 Jun. 30, Mar. 31, Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30, %   
  2016   2016   2015   2016   2015   2016   2015  Change   
                   
Revenues:                  
Advisory fees$  55,931  $  60,615  $  81,320   -7.7%  -31.2% $  116,546  $  141,189   -17.5%   
Other income   50     263     239   -81.0%  -79.1%    313     511   -38.7%   
                   
Total revenues   55,981     60,878     81,559   -8.0%  -31.4%    116,859     141,700   -17.5%   
                   
Expenses:                  
Compensation and benefits   14,343     15,226     18,669   -5.8%  -23.2%    29,569     38,270   -22.7%   
Fund management and administration   10,621     10,044     11,208   5.7%  -5.2%    20,665     21,376   -3.3%   
Marketing and advertising   4,566     3,832     3,628   19.2%  25.9%    8,398     6,704   25.3%   
Sales and business development   3,834     2,447     2,076   56.7%  84.7%    6,281     3,976   58.0%   
Professional and consulting fees   1,365     2,835     1,604   -51.9%  -14.9%    4,200     3,067   36.9%   
Occupancy, communications and equipment   1,241     1,222     943   1.6%  31.6%    2,463     1,861   32.3%   
Depreciation and amortization   330     316     223   4.4%  48.0%    646     443   45.8%   
Third-party sharing arrangements   709     907     497   -21.8%  42.7%    1,616     780   107.2%   
Acquisition payment   5,993     745     264   704.4%  2170.1%    6,738     521  n/a   
Other   1,823     1,632     1,509   11.7%  20.8%    3,455     2,744   25.9%   
Total expenses   44,825     39,206     40,621   14.3%  10.3%    84,031     79,742   5.4%   
                   
Income before taxes   11,156     21,672     40,938   -48.5%  -72.7%    32,828     61,958   -47.0%   
                   
Income tax expense   7,505     9,600     16,766     -      -      17,105     25,724     -     
                   
Net income$  3,651  $  12,072  $  24,172   -69.8%  -84.9% $  15,723  $  36,234   -56.6%   
                   
                   
Net income per share - basic $  0.03  $  0.09  $  0.18      $  0.11  $  0.27      
                   
Net income per share - diluted$  0.03  $  0.09  $  0.18      $  0.11  $  0.26      
                   
Weighted average common shares - basic    136,503     137,599     135,895         137,051     134,990      
                   
Weighted average common shares - diluted   137,274     138,424     137,951         137,849     137,620      
                   

 

WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES     
NON-GAAP SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS     
(in thousands)     
(Unaudited)     
                  
  U.S.European              
  ListedListed  U.S. Listed Business     
  BusinessBusinessTotal     % Change From     
  Q2/16Q2/16Q2/16 Q2/16Q1/16Q2/15 Q1/16 Q2/15     
Revenues:                 
Advisory fees $  54,061 $  1,870 $  55,931  $  54,061 $  59,092 $  80,409   -8.5%  -32.8%     
Other income    386    (336)   50     386    221    238   74.7%  62.2%     
                  
Total revenues    54,447    1,534    55,981     54,447    59,313    80,647   -8.2%  -32.5%     
                  
Expenses:                 
Compensation and benefits    12,955    1,388    14,343     12,955    13,677    17,437   -5.3%  -25.7%     
Fund management and administration    9,339    1,282    10,621     9,339    9,260    10,462   0.9%  -10.7%     
Marketing and advertising    3,975    591    4,566     3,975    3,510    3,256   13.2%  22.1%     
Sales and business development    3,621    213    3,834     3,621    2,362    2,048   53.3%  76.8%     
Professional and consulting fees    1,261    104    1,365     1,261    2,493    1,541   -49.4%  -18.2%     
Occupancy, communications and equipment    1,138    103    1,241     1,138    1,116    889   2.0%  28.0%     
Depreciation and amortization    325    5    330     325    311    221   4.5%  47.1%     
Third-party sharing arrangements    709    -     709     709    907    497   -21.8%  42.7%     
Acquisition payment    -     5,993    5,993     -     -     -   n/a n/a     
Other    1,739    84    1,823     1,739    1,537    1,413   13.1%  23.1%     
Total expenses    35,062    9,763    44,825     35,062    35,173    37,764   -0.3%  -7.2%     
                  
Income/(loss) before taxes    19,385    (8,229)   11,156     19,385    24,140    42,883   -19.7%  -54.8%     
                  
Income tax expense/(benefit)    7,607    (102)   7,505     7,607    9,651    16,785   -21.2%  -54.7%     
                  
Net income/(loss) $  11,778 $  (8,127)$  3,651  $  11,778 $  14,489 $  26,098   -18.7%  -54.9%     
                  
Pre-tax margin  35.6%  19.9%             
                  
Gross margin  81.5%  79.8%             

 

WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS 
(in thousands, except per share amounts) 
  
 June 30, December 31, 
  2016   2015  
 (Unaudited)   
     
ASSETS    
Current assets:    
Cash and cash equivalents$  174,914  $  210,070  
Investments    3,088     -   
Accounts receivable 17,939   27,576  
Other current assets   4,659     2,899  
     
Total current assets   200,600     240,545  
     
Fixed assets, net   12,062     11,974  
Investments   15,615     23,689  
Deferred tax asset, net   5,356     14,071  
Goodwill   3,475     1,676  
Intangible asset   9,953     -   
Other noncurrent assets   763     738  
     
Total assets$  247,824  $  292,693  
       
       
LIABILITIES AND STOCKHOLDERS' EQUITY   
LIABILITIES   
Current liabilities:    
Fund management and administration payable$  13,183  $  12,971  
Compensation and benefits payable   7,531     28,060  
Acquisition payable   7,194     -   
Accounts payable and other liabilities   7,123     8,063  
     
Total current liabilities   35,031     49,094  
     
Other noncurrent liabilities:    
Acquisition payable   -      3,942  
Deferred rent payable   5,015     5,155  
     
Total liabilities   40,046     58,191  
     
     
STOCKHOLDERS' EQUITY    
Common stock, par value $0.01; 250,000 shares authorized:    
issued: 136,578 and 138,415;   1,366     1,384  
outstanding: 134,146 and 136,794;    
Additional paid-in capital   236,444     257,960  
Accumulated other comprehensive income/(loss)   794     (126) 
Accumulated deficit   (30,826)    (24,716) 
     
Total stockholders' equity   207,778     234,502  
     
Total liabilities and stockholders' equity$  247,824  $  292,693  

 

WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(in thousands) 
(Unaudited) 
     
 Six Months Ended 
 June 30,   June 30,  
  2016   2015  
Cash flows from operating activities:    
Net income$  15,723  $  36,234  
Non-cash items included in net income:    
Income tax expense   15,490     25,218  
Depreciation and amortization   646     443  
Stock-based compensation   7,270     4,952  
Deferred rent   (115)    (70) 
Accretion to interest income and other   (34)    6  
Changes in operating assets and liabilities:    
Accounts receivable   9,561     (10,318) 
Other assets   (1,889)    (2,279) 
Acquisition payable   3,295     521  
Fund management and administration payable   240     3,219  
Compensation and benefits payable   (20,481)    7,290  
Accounts payable and other liabilities   (710)    316  
     
Net cash provided by operating activities   28,996     65,532  
     
Cash flows from investing activities:    
Purchase of fixed assets   (599)    (364) 
Purchase of investments   -      (8,449) 
Acquisition less cash acquired   (11,818)    -   
Proceeds from the redemption of investments    5,025     1,187  
     
Net cash used in investing activities   (7,392)    (7,626) 
     
Cash flows from financing activities:    
Dividends paid   (21,833)    (21,794) 
Shares repurchased   (35,654)    (15,264) 
Proceeds from exercise of stock options   104     3,293  
     
Net cash used in financing activities   (57,383)    (33,765) 
     
Increase/(decrease) in cash flows due to changes in foreign exchange rate   623     (153) 
     
     
Net (decrease)/increase in cash and cash equivalents   (35,156)    23,988  
     
Cash and cash equivalents - beginning of period    210,070     165,284  
    
Cash and cash equivalents - end of period$  174,914  $  189,272  
     
Supplemental disclosure of cash flow information:    
     
Cash paid for taxes$  3,748  $  356  

 

             
 WisdomTree Investments, Inc.          
 Key Operating Statistics (Unaudited)          
             
   Three Months Ended Six Months Ended 
   June 30,  March 31, June 30, June 30,  June 30, 
    2016   2016   2015   2016   2015  
 U.S. LISTED ETFs          
 Total ETFs (in millions)   
  Beginning of period assets   44,256     51,639     55,758     51,639     39,281  
  Assets acquired     225       225    
  Inflows/(outflows)   (4,949)    (5,359)    6,598     (10,308)    20,118  
  Market appreciation/(depreciation)   (1,261)    (2,249)    (1,057)    (3,510)    1,900  
  End of period assets   38,046     44,256     61,299     38,046     61,299  
             
  Average assets during the period   41,830     45,475     61,153     43,652     53,772  
  Revenue days   91     91     91     182     181  
             
 ETF Industry and Market Share (in billions)          
  ETF industry net inflows   31.9     34.6     41.4     66.5     96.9  
  WisdomTree market share of industry inflows n/a   n/a   15.9%  n/a   20.8% 
             
 International Hedged Equity ETFs (in millions)          
  Beginning of period assets   25,140     33,311     33,925     33,311     17,760  
  Inflows/(outflows)   (4,927)    (5,396)    6,083     (10,323)    19,523  
  Market appreciation/(depreciation)   (1,415)    (2,775)    (786)    (4,190)    1,939  
  End of period assets   18,798     25,140     39,222     18,798     39,222  
             
  Average assets during the period   22,633     27,846     38,548     25,239     31,553  
             
 U.S. Equity ETFs (in millions)          
  Beginning of period assets   8,966     8,603     9,748     8,603     9,390  
  Inflows/(outflows)   500     (8)    (320)    492     (26) 
  Market appreciation/(depreciation)   300     371     (183)    671     (119) 
  End of period assets   9,766     8,966     9,245     9,766     9,245  
             
  Average assets during the period   9,252     8,225     9,664     8,738     9,717  
             
 International Developed Equity ETFs (in millions)          
  Beginning of period assets   4,653     4,525     4,323     4,525     3,988  
  Inflows/(outflows)   (251)    160     497     (91)    685  
  Market appreciation/(depreciation)   (218)    (32)    9     (250)    156  
  End of period assets   4,184     4,653     4,829     4,184     4,829  
             
  Average assets during the period   4,633     4,304     4,790     4,469     4,450  
             
 Emerging Markets Equity ETFs (in millions)          
  Beginning of period assets   3,803     3,825     6,068     3,825     6,187  
  Inflows/(outflows)   (160)    (171)    250     (331)    85  
  Market appreciation/(depreciation)   40     149     (74)    189     (28) 
  End of period assets   3,683     3,803     6,244     3,683     6,244  
             
  Average assets during the period   3,703     3,476     6,336     3,590     6,242  
             
 Fixed Income ETFs (in millions)          
  Beginning of period assets   828     799     904     799     1,152  
  Inflows/(outflows)   (47)    (14)    67     (61)    (143) 
  Market appreciation/(depreciation)   9     43     (15)    52     (53) 
  End of period assets   790     828     956     790     956  
             
  Average assets during the period   811     788     929     799     974  
             
 Alternative Strategy ETFs (in millions)          
  Beginning of period assets   440     208     225     208     205  
  Assets acquired   -      225     -      225     -   
  Inflows/(outflows)   (10)    5     14     (5)    31  
  Market appreciation/(depreciation)   22     2     (9)    24     (6) 
  End of period assets   452     440     230     452     230  
             
  Average assets during the period   448     432     235     440     225  
             
 Currency ETFs (in millions)          
  Beginning of period assets   426     368     565     368     599  
  Inflows/(outflows)   (54)    65     7     11     (37) 
  Market appreciation/(depreciation)   1     (7)    1     (6)    11  
  End of period assets   373     426     573     373     573  
             
  Average assets during the period   350     404     651     377     611  
             
             
   Three Months Ended For the Six Months Ended 
   June 30,  March 31, June 30, June 30,  June 30, 
    2016   2016   2015   2016   2015  
 Average ETF assets during the period          
  International hedged equity ETFs 54%  61%  63%  58%  59% 
  U.S. equity ETFs 22%  18%  16%  20%  18% 
  International developed equity ETFs 11%  9%  8%  10%  8% 
  Emerging markets equity ETFs 9%  8%  10%  8%  12% 
  Fixed income ETFs 2%  2%  2%  2%  2% 
  Currency ETFs  1%  1%  1%  1%  1% 
  Alternative strategy ETFs 1%  1%  0%  1%  0% 
  Total 100%  100%  100%  100%  100% 
      
 Average ETF advisory fee during the period          
  Alternative strategy ETFs 0.87%  0.88%  0.95%  0.87%  0.95% 
  Emerging markets equity ETFs 0.71%  0.71%  0.71%  0.71%  0.71% 
  International developed equity ETFs 0.56%  0.56%  0.56%  0.56%  0.56% 
  International hedged equity ETFs 0.54%  0.54%  0.54%  0.54%  0.53% 
  Currency ETFs  0.50%  0.50%  0.50%  0.50%  0.50% 
  Fixed income ETFs 0.48%  0.49%  0.52%  0.49%  0.52% 
  U.S. equity ETFs 0.35%  0.35%  0.35%  0.35%  0.35% 
  Blended total 0.52%  0.52%  0.53%  0.52%  0.52% 
        
 Number of ETFs - end of the period          
  International hedged equity ETFs   23     23     16     23     16  
  International developed equity ETFs   21     20     18     21     18  
  U.S. equity ETFs   15     15     13     15     13  
  Fixed income ETFs   17     13     12     17     12  
  Emerging markets equity ETFs   10     9     8     10     8  
  Alternative strategy ETFs   7     7     2     7     2  
  Currency ETFs    6     6     6     6     6  
  Total   99     93     75     99     75  
      
 EUROPEAN LISTED ETPs        
 Total ETPs (in thousands)        
  Beginning of period assets   488,069     437,934     288,801     437,934     165,018  
  Inflows   20,578     123,461     50,331     144,039     195,712  
  Market appreciation/(depreciation)   51,416     (73,326)    44,957     (21,910)    23,359  
  End of period assets   560,063     488,069     384,089     560,063     384,089  
      
  Average assets during the period   544,676     428,230     336,588     486,453     278,534  
      
 Average ETP advisory fee during the period 0.84%  0.84%  0.82%  0.84%  0.82% 
 Number of ETPs - end of the period   67     67     57     67     57  
             
 Total UCITS ETFs (in thousands)          
  Beginning of period assets   396,901     335,938     45,846     335,938     16,179  
  Inflows   37,272     69,878     144,234     107,150     173,085  
  Market appreciation/(depreciation)   (42,273)    (8,915)    38,508     (51,188)    39,324  
  End of period assets   391,900     396,901     228,588     391,900     228,588  
             
  Average assets during the period   400,047     356,814     204,568     378,431     117,138  
             
 Average ETP advisory fee during the period 0.46%  0.47%  0.44%  0.46%  0.42% 
 Number of ETPs - end of the period   27     22   10     27   10  
             
 U.S. headcount   149     146     117     149     117  
 Non-U.S. headcount   55     45     28     55     28  
    
 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.  We disclose gross margin, which we define as total revenues less fund management and administration expenses and third-party sharing arrangements, and 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 and third party marketing agents whose fees are associated with our AUM level.  Management tracks gross margin and gross margin percentage to analyze the profitability of operating our products.
  • Operating results for our U.S. listed ETF business. We disclose the results of our U.S. listed ETF business separately from the start up stage of our European business 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.
  • Operating results for the second quarter of 2016 excluding a $6.0 million charge related to the accelerated buyout of the minority shareholders of our European business.  We exclude this charge, which is not deductible for tax purposes, when analyzing our results as it is a one-time, non-recurring charge and not core to our operating business.
 
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
     
 Three Months Ended   Six Months Ended
 Jun. 30, Mar. 31,  Jun. 30,  Jun. 30, Jun. 30,
  2016   2016    2015    2016   2015 
GAAP total revenue$  55,981  $  60,878   $  81,559   $  116,859  $  141,700 
Fund management and administration   (10,621)    (10,044)     (11,208)     (20,665)    (21,376)
Third-party sharing arrangements   (709)    (907)     (497)     (1,616)    (780)
            
Gross margin$  44,651  $  49,927   $  69,854   $  94,578  $  119,544 
            
Gross margin percentage 79.8%  82.0%   85.6%   80.9%  84.4%
            
            
U.S. listed ETFs:           
            
GAAP total revenue$  54,447  $  59,313   $  80,647   $  113,760  $  140,227 
Fund management and administration   (9,339)    (9,260)     (10,462)     (18,599)    (20,195)
Third-party sharing arrangements   (709)    (907)     (497)     (1,616)    (780)
            
Gross margin$  44,399  $  49,146   $  69,688   $  93,545  $  119,252 
            
Gross margin percentage 81.5%  82.9%   86.4%   82.2%  85.0%
            
            
Adjusted net income and diluted earnings per share:           
Net income, as reported$  3,651        $  15,723   
Add back acquisition payment   5,993           5,993   
Adjusted net income$  9,644        $  21,716   
            
Weighted average common shares - diluted   137,274           137,849   
Adjusted net income per share - diluted$  0.07        $  0.16   
            
Adjusted pre-tax margin:           
Income before income taxes$  11,156        $  32,828   
Add back acquisition payment   5,993           5,993   
Adjusted income before income taxes$  17,149        $  38,821   
            
Total revenues$  55,981        $  116,859   
Adjusted pre-tax margin 30.6%        33.2%  
            
Tax rate:           
Adjusted income before income taxes (from above)$17,149           
Income tax expense 7,505           
Adjusted income tax rate 43.8%          
            
Adjusted total expenses:           
Total expenses, as reported$  44,825        $  84,031   
Less acquisition payment   (5,993)          (5,993)  
Adjusted total expenses$  38,832        $  78,038   


Contact Information
Investor Relations:
Stuart Bell
+1.917.267.3702
sbell@wisdomtree.com

Media Relations:
Jessica Zaloom / Melissa Chiles
+1.917.267.3735 / +1.917.267.3797
jzaloom@wisdomtree.com / mchiles@wisdomtree.com


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