October 28, 2016

WisdomTree Announces Third Quarter 2016 Results

$0.06 diluted EPS for the quarter

Declares $0.08 quarterly dividend

NEW YORK, Oct. 28, 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 $8.0 million or $0.06 diluted EPS in the third quarter.  This compares to $23.3 million or $0.17 diluted EPS in the third quarter of last year and $3.7 million or $0.03 diluted EPS (as adjusted, $9.6 million or $0.07 diluted EPS (non-GAAP measures1)) in the second quarter of 2016.

WisdomTree CEO and President Jonathan Steinberg said, "This quarter, we continue to build upon strong U.S. equity flows despite experiencing outflows, as Japan and Europe exposures remained broadly out of favor."

Mr. Steinberg added, "We stay focused on making the prudent investments required to compete in a rapidly changing global industry while being mindful of shareholder returns. The DOL's fiduciary rule is driving rapid change in the asset management industry. WisdomTree is uniquely positioned to benefit from the anticipated industry shifts, offering the best of both active and passive strategies based on our proprietary methodologies."

 
Summary Operating and Financial Highlights
  Three Months Ended
   Change From
              
  Sept. 30,
2016  
   Jun. 30,
2016
   Sept. 30,
2015  
   Jun. 30,
2016
   Sept. 30,
2015
 
Operating Highlights                   
U.S. listed ETFs ($, in billions):                   
AUM$  37.7  $  38.0  $  53.0     (0.8%)    (28.9%)
Net outflows$  (2.4) $  (4.9) $  (0.7)    51.0%    (242.9%)
Average AUM$  38.7  $  41.8  $  59.6     (7.4%)    (35.1%)
Average advisory fee   0.51%    0.52%    0.53%     (0.01)    (0.02)
Market share of industry inflows n/a   n/a   n/a   n/a   n/a 
European listed ETPs ($, in millions):                   
AUM$  1,018.8  $  952.0  $  695.7     7.0%    46.4%
Net inflows$  33.1  $  47.5  $  253.3     (30.3%)    (86.9%)
Average advisory fee   0.66%    0.68%    0.69%     (0.02)     (0.03)
Canadian listed ETFs ($, in millions):                   
AUM$  68.4  $    $     n/a   n/a 
Net inflows$  68.5  $    $     n/a   n/a 
Average advisory fee   0.51%  n/a   n/a   n/a       n/a 
 
Financial Highlights ($, in millions, except per share amounts):
Consolidated Results     
Total revenues$  51.8  $  56.0  $  80.8     (7.5%)    (35.9%)
Net income$  8.0  $  3.7  $  23.3     117.9%    (65.8%)
Diluted earnings per share$  0.06  $  0.03  $  0.17  $    0.03  $  (0.11)
Pre-tax margin   27.5%    19.9%    49.0%    7.6     -21.5 
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)   80.5%    81.5%    87.2%    -1.0     -6.7 
Pre-tax margin   32.3%    35.6%    52.3%    -3.3     -20.0 
                    


Recent Business Developments

Company News

  • In August 2016, the Company announced it was named to Forbes'® 2016 list of "America's 50 Most Trustworthy Financial Companies"
  • In September 2016, the Company announced the naming of Anita Rausch as Head of Capital Markets; and that it bolstered the Institutional Distribution Team to capture expanding market opportunity with the hiring of Christina Cryer as Head of U.S. Consultant Relations and Nate Miles as Head of U.S. Retirement Solutions

U.S. Listed Product News

  • In August 2016, the Company announced the closing and liquidation of six WisdomTree ETFs; and the Company celebrated the one-year anniversary of The WisdomTree Barclays U.S. Aggregate Bond Enhanced Yield Fund (AGGY)

European Listed Product News

  • In July 2016, the Company announced the launch of the ICBCCS WisdomTree S&P China 500 UCITS ETF on the London Stock Exchange
  • In September 2016, the Company announced the launch of the ICBCCS WisdomTree S&P China 500 UCITS ETF in offshore yuan on the London Stock Exchange; and announced that Morgan Lee was appointed as the new Head of European Distribution
  • In October 2016, the Company announced that it would host a new series of ETF Roadshow events in London in collaboration with BMO Global Asset Management, ETF Securities and Source

Assets Under Management and Net Inflows

U.S. listed ETF assets under management ("AUM") were $37.7 billion at September 30, 2016, down 0.8% from June 30, 2016 primarily due to $2.4 billion of net outflows partly offset by $2.0 billion of market appreciation. U.S. listed AUM was down 28.9% from September 30, 2015 primarily due to net outflows in Q4 2015 and 2016. Net outflows were primarily in our two largest funds, HEDJ and DXJ.

European listed AUM was $1.0 billion at September 30, 2016, up 7.0% from June 30, 2016 primarily due to market appreciation of $33.7 million and net inflows of $33.1 million. European listed AUM was up 46.4% from September 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 $37.0 billion invested in our ETFs and 62% (46 of 74) of our ETFs outperformed their comparable Morningstar average since inception as of September 30, 2016.

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

Third Quarter Financial Discussion

Revenues

Total revenues decreased 35.9% from the third quarter of 2015 and 7.5% from the second quarter of 2016 due to declines in our AUM primarily in our two largest ETFs. Our average U.S. advisory fee decreased to 0.51% from 0.52% during the quarter due to product mix.

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 80.5% in the third quarter of 2016 as compared to 87.2% in the third quarter of 2015 and 81.5% in the second 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 27.5% in the third quarter of 2016 as compared to 49.0% in the third quarter of 2015 and 19.9% (as adjusted, 30.6%, (a non-GAAP measure1)) in the second quarter of 2016. Pre-tax margin for our U.S. listed ETF business was 32.3% in the third quarter of 2016 as compared to 52.3% in the third quarter of 2015 and 35.6% in the second quarter of 2016.

Expenses

Total expenses decreased 8.9% from the third quarter of 2015 primarily due to lower compensation.  Total expenses decreased 16.2% from the second quarter of 2016 principally as a result of the $6.0 million European buyout charge recorded in the second quarter.

  • Compensation and benefits expense declined 21.0% from the third quarter of 2015 to $15.3 million due to lower accrued incentive compensation relating to year-to-date outflows we experienced 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 151 in the U.S. and 203 globally at the end of the quarter.

    This expense increased 6.9% from the second quarter of 2016 due to changes in accrued incentive compensation as well as headcount related expenses associated with our European business.

  • Fund management and administration expense declined 1.4% from the third 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 and Canadian businesses.

    This expense declined 2.3% compared to the second quarter of 2016 primarily due to lower fund costs for our U.S. listed ETF business partly offset by higher costs due to our Canadian listed products.  We had 93 U.S. listed ETFs, 94 European ETPs and 6 Canadian ETFs at the end of the quarter. 

  • Marketing and advertising expense was essentially unchanged from the third quarter of 2015 and declined 21.2% from the second quarter of 2016 to $3.6 million primarily due to lower levels of marketing related activities in the U.S.

  • Sales and business development expense increased 26.1% from the third quarter of 2015 due to higher spending for sales data related initiatives.

    This expense decreased 19.8% from the second quarter of 2016 to $3.1 million primarily due to lower levels of sales related activities.

  • Professional and consulting fees decreased 34.1% from the third quarter of 2015 primarily due to fees incurred in the prior year associated with our acquisition of the GreenHaven family of commodity ETFs, which was completed in January 2016.

    This expense decreased 24.2% from the second quarter of 2016 to $1.0 million primarily due to lower recruiting expenses.

  • Occupancy, communications and equipment expense increased 24.2% from the third quarter of 2015 primarily due to technology initiatives and higher costs for our office space in London.

    This expense increased 18.4% from the second quarter of 2016 to $1.5 million primarily due to real estate taxes on our U.S. office space.

  • Depreciation and amortization expense was essentially unchanged from the third quarter of 2015 and the second quarter of 2016.

  • Third-party sharing arrangements expense increased 28.2% from the third quarter of 2015 to $0.6 million due to higher fees to our third party marketing agent in Latin America. This expense was essentially unchanged from the second quarter of 2016.

  • Acquisition payment expense was $6.0 million in the second quarter of 2016, which was incurred in connection with the completion of the buyout of the remaining minority stake in our European business in May 2016.
     
  • Other expense was essentially unchanged from the third quarter of 2015 and the second quarter of 2016.

  • Our effective income tax rate for the third quarter of 2016 was 44.1%, which resulted in income tax expense of $6.3 million.  Our tax rate differs from the federal statutory tax rate of 35% primarily due to a valuation allowance on our foreign net operating losses and state and local income taxes.   

Balance Sheet

As of September 30, 2016, the Company had total assets of $248.5 million which consisted primarily of cash and cash equivalents of $178.1 million, accounts receivable of $17.3 million and investments of $16.2 million. There were approximately 136.4 million shares of common stock outstanding as of September 30, 2016. Fully diluted weighted average shares outstanding were 135.2 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 November 23, 2016 to stockholders of record as of the close of business on November 9, 2016.

Conference Call

WisdomTree will discuss its results and operational highlights during a conference call on Friday, October 28, 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 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.

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.

See "Non-GAAP Financial Measurements."

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 $38.9 billion in assets under management globally.

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

 
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
    
  Three Months Ended 
  % Change From
  Nine Months Ended
                                
  Sept. 30,
2016
    Jun. 30,
2016
   Sept. 30,
2015
   Jun. 30,
2016
   Sept. 30,
2015 
   Sept. 30,
2016
   Sept. 30,
2015
   %
Change
 
Revenues:                               
Advisory fees$  51,553  $  55,931  $  80,520     -7.8 %     -36.0% $168,099  $221,709      -24.2%
Other income   236     50     233    372.0 %      1.3%    549     744      -26.2%
Total revenues   51,789     55,981     80,753     -7.5 %     -35.9%    168,648     222,453      -24.2%
                                
Expenses:                               
Compensation and benefits   15,328     14,343     19,407     6.9 %     -21.0%    44,897     57,677      -22.2%
Fund management and administration   10,372     10,621     10,519     -2.3 %     -1.4%    31,037     31,895      -2.7%
Marketing and advertising   3,600     4,566     3,573     -21.2 %     0.8%    11,998     10,277      16.7%
Sales and business development   3,075     3,834     2,438     -19.8 %     26.1%    9,356     6,414      45.9%
Professional and consulting fees   1,035     1,365     1,570     -24.2 %     -34.1%    5,235     4,637      12.9%
Occupancy, communications and equipment   1,469     1,241     1,183     18.4 %     24.2%    3,932     3,044      29.2%
Depreciation and amortization   332     330     253     0.6 %     31.2%    978     696      40.5%
Third-party sharing arrangements   622     709     485     -12.3 %     28.2%    2,238     1,265      76.9%
Acquisition payment      5,993     172   n/a   n/a     6,738     693        n/a 
Other   1,731     1,823     1,620     -5.0 %     6.9%    5,186     4,364      18.8%
Total expenses   37,564     44,825     41,220     -16.2 %     -8.9%    121,595     120,962      0.5%
Income before taxes   14,225     11,156     39,533     27.5 %     -64.0%    47,053     101,491      -53.6%
Income tax expense   6,270     7,505     16,245     -16.5 %    -61.4%    23,375     41,969     -44.3%
Net income$  7,955  $  3,651  $  23,288    117.9 %     -65.8% $  23,678  $  59,522      -60.2%
                                
 Net income per share - basic$ 0.06  $  0.03  $  0.17          $  0.17  $  0.44     
                                
Net income per share - diluted$  0.06  $  0.03  $  0.17          $  0.17  $  0.43     
                                
Weighted average common shares - basic   134,046     134,115     136,582             134,541     135,527     
                          
Weighted average common shares - diluted   135,190     135,132     138,181             135,583     137,833     


 
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
NON-GAAP SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
              
   U.S.   European         
  Listed  Listed     U.S. Listed Business
  Business  Business   Total     % Change From  
  Q3/16    Q3/16   Q3/16   Q3/16   Q2/16    Q3/15    Q2/16   Q3/15  
Revenues:                               
Advisory fees$49,638   $  1,915  $51,553   $  49,638   $  54,061   $  79,242       -8.2%     -37.4%
Other income   322       (86)    236      322      386      230       -16.6%     40.0%
Total revenues   49,960      1,829     51,789      49,960      54,447      79,472       -8.2%     -37.1%
                                
Expenses:                               
Compensation and benefits   13,639      1,689     15,328      13,639      12,955      17,915       5.3%     -23.9%
Fund management and administration   9,110      1,262     10,372      9,110      9,339      9,666       -2.5%     -5.8%
Marketing and advertising   3,236      364     3,600      3,236      3,975      3,156       -18.6%    2.5%
Sales and business development   3,033      42     3,075      3,033      3,621      2,419       -16.2%     25.4%
Professional and consulting fees   902      133     1,035      902      1,261      1,414       -28.5%     -36.2%
Occupancy, communications and equipment   1,305      164     1,469      1,305      1,138      1,079       14.7%     20.9%
Depreciation and amortization   327      5     332      327      325      249       0.6%     31.3%
Third-party sharing arrangements   622           622      622      709      485      -12.3%     28.2%
Other   1,641      90     1,731      1,641      1,739      1,517       -5.6%     8.2%
Total expenses   33,815      3,749     37,564      33,815      35,062      37,900       -3.6%     -10.8%
Income/(loss) before taxes   16,145      (1,920)    14,225      16,145      19,385      41,572       -16.7%     -61.2%
Income tax expense   6,270         6,270      6,270      7,607      16,263       -17.6%     -61.4%
Net income/(loss)$  9,875   $  (1,920) $  7,955   $  9,875   $  11,778   $  25,309       -16.2%     -61.0%
                                
Pretax margin   32.3%        27.5%   32.3   35.6   52.3        
Gross margin   80.5%        78.8%  80.5%  81.5%  87.2%   


   
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
 
 September 30,
2016  

  December 31,
2015
 
 (Unaudited)
    
ASSETS       
Current assets:       
Cash and cash equivalents$  178,132  $  210,070 
Investments   1,991    
Accounts receivable   17,282     27,576 
Other current assets   4,142     2,899 
Total current assets   201,547     240,545 
Fixed assets, net   11,790     11,974 
Investments   14,238     23,689 
Deferred tax asset, net   6,662     14,071 
Goodwill   3,475     1,676 
Intangible asset   9,953    
Other noncurrent assets   787     738 
Total assets$  248,452  $  292,693 
        
LIABILITIES AND STOCKHOLDERS' EQUITY       
LIABILITIES       
Current liabilities:       
Fund management and administration payable$  13,375  $  12,971 
Compensation and benefits payable   9,065     28,060 
Income taxes payable   5,342     3,024 
Acquisition payable    3,697   —  
Accounts payable and other liabilities   6,160     5,039 
Total current liabilities   37,639     49,094 
Other noncurrent liabilities:       
Acquisition payable —      3,942 
Deferred rent payable   4,957     5,155 
Total liabilities   42,596     58,191 
        
STOCKHOLDERS' EQUITY       
Common stock, par value $0.01; 250,000 shares authorized:       
Issued and outstanding: 136,424 and 138,415 at September 30, 2016 and December 31, 2015, respectively   1,364     1,384 
Additional paid-in capital   237,378     257,960 
Accumulated other comprehensive income/(loss)   900     (126)
Accumulated deficit   (33,786)    (24,716)
Total stockholders' equity   205,856     234,502 
Total liabilities and stockholders' equity$  248,452  $  292,693 


 
WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
 Nine Months Ended
  Sept. 30,
2016
   Sept. 30,
2015
 
Cash flows from operating activities:       
Net income$  23,678  $  59,522 
Non-cash items included in net income:       
Income tax expense   14,761     40,573 
Depreciation and amortization   978     696 
Stock-based compensation   11,092     7,878 
Deferred rent   (173)      (26)
Accretion to interest income and other   (75)    9 
Changes in operating assets and liabilities:       
Accounts receivable   10,207     (7,253)
Other assets   (1,371)    (1,892)
Acquisition payable   (218)    693 
Fund management and administration payable   414     1,216 
Compensation and benefits payable   (18,944)    7,402 
Income taxes payable    2,260      840 
Accounts payable and other liabilities   1,336     490 
Net cash provided by operating activities   43,945     110,148 
Cash flows from investing activities:       
Purchase of fixed assets   (654)    (1,606)
Purchase of investments    (6,048)    (11,353)
Acquisition less cash acquired   (11,818)   
Proceeds from the redemption of investments   13,579     1,681 
Net cash used in investing activities   (4,941)    (11,278)
Cash flows from financing activities:       
Dividends paid   (32,748)    (32,867)
Shares repurchased   (39,116)    (23,689)
Proceeds from exercise of stock options   107     4,471 
Net cash used in financing activities   (71,757)    (52,085)
Increase/(decrease) in cash flows due to changes in foreign exchange rate   815     (77)
Net (decrease)/increase in cash and cash equivalents   (31,938)    46,708 
Cash and cash equivalents - beginning of period   210,070     165,284 
Cash and cash equivalents - end of period$  178,132  $  211,992 
Supplemental disclosure of cash flow information:       
Cash paid for taxes$  6,664  $  551 


 
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
 
 Three Months Ended
  Sept. 30,
2016

  Jun. 30,
2016
   Sept. 30,
2015
 
U.S. LISTED ETFs           
Total ETFs (in millions)           
Beginning of period assets$  38,046   $  44,256   $  61,299  
Inflows/(outflows)   (2,380)    (4,949)      (661)
Market appreciation/(depreciation)   2,038     (1,261)    (7,591)
End of period assets$  37,704   $  38,046   $  53,047  
Average assets during the period$  38,710   $  41,830   $  59,572 
Revenue days   92     91      92 
Number of ETFs — end of the period   93     99      79 
ETF Industry and Market Share (in billions)           
ETF industry net inflows   90.1     30.8      43.2 
WisdomTree market share of industry inflows   n/a   n/a   n/a 
Average ETF advisory fee during the period           
Alternative strategy ETFs   0.78%    0.87 %    0.95%
Emerging markets equity ETFs   0.71%    0.71 %    0.72%
International developed equity ETFs   0.56%    0.56 %    0.56%
International hedged equity ETFs   0.54%    0.54 %    0.54%
Currency ETFs   0.50%    0.50 %    0.50%
Fixed income ETFs   0.47%    0.48 %    0.51%
U.S. equity ETFs   0.35%    0.35%    0.35%
Blended total   0.51%    0.52 %    0.53%
            
EUROPEAN LISTED ETPs           
Total ETPs (in thousands)           
Beginning of period assets$  560,063  $  488,069   $  384,089 
Inflows/(outflows)   92,045     20,578     191,044 
Market appreciation/(depreciation)   (4,611)    51,416     (143,874)
End of period assets$  647,497  $  560,063   $  431,259 
Average assets during the period$  575,248  $  544,677   $  419,112 
Average ETP advisory fee during the period   0.82%    0.84%    0.83%
Number of ETPs — end of the period   67     67      62 
            
Total UCITS ETFs (in thousands)           
Beginning of period assets$  391,900   $  396,901   $  228,588 
Inflows/(outflows)   (58,908)    26,931     62,217 
Market appreciation/(depreciation)   38,315       (31,932)    (26,353)
End of period assets$  371,307   $  391,900   $  264,452 
Average assets during the period$  434,767   $  400,047   $  246,558 
Average UCITS ETF advisory fee during the period   0.44%    0.46%    0.45%
Number of UCITS ETFs — end of the period   27     27      12 
            
CANADIAN LISTED ETFs           
            
Total ETFs (in thousands)           
Beginning of period assets           — 
Inflows/(outflows)*$  68,531         
Market appreciation/(depreciation)   (104)       — 
End of period assets$  68,427          
Average assets during the period$  68,177   n/a   n/a 
Average ETF advisory fee during the period   0.51%  n/a     n/a 
Number of ETFs — end of the period   6     n/a   n/a 
            
U.S. Headcount    151     149     128 
Non-U.S. Headcount   52     55     34 
    

* ETFs inception date July 14, 2016.

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
  Sept. 30,
2016
   Jun. 30,
2016
   Sept. 30,
2015  
 
GAAP total revenue$  51,789  $  55,981  $  80,753 
Fund management and administration   (10,372)    (10,621)    (10,519)
Third-party sharing arrangements   (622)    (709)    (485)
Gross margin$  40,795  $  44,651  $  69,749 
Gross margin percentage   78.8%    79.8%    86.4%
U.S. listed ETFs:           
Total revenue$  49,960  $  54,447  $  79,472 
Fund management and administration   (9,110)    (9,339)    (9,666)
Third-party sharing arrangements   (622)    (709)    (485)
Gross margin$  40,228  $  44,399  $  69,321 
Gross margin percentage   80.5%    81.5%    87.2%
            
Adjusted net income and diluted earnings per share:           
Net income, as reported    $  3,651     
Add back acquisition payment       5,993     
Adjusted net income    $  9,644     
Weighted average common shares—diluted       135,132     
Adjusted net income per share—diluted    $  0.07     
Adjusted pretax margin:           
Income before income taxes    $  11,156     
Add back acquisition payment       5,993     
Adjusted income before income taxes    $  17,149     
Total revenues    $  55,981     
Adjusted pretax margin       30.6%    
            
    
Contact Information:

Investor Relations
WisdomTree Investments, Inc.
Jason Weyeneth, CFA
+1.917.267.3858
jweyeneth@wisdomtree.com

Media Relations
WisdomTree Investments, Inc.
Jessica Zaloom / Melissa Chiles
+1.917.267.3735 / +1.917.267.3797
jzaloom@wisdomtree.com / mchiles@wisdomtree.com


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