WisdomTree Announces Fourth Quarter 2019 Results – Diluted EPS of $0.02 ($0.06 as adjusted)

NEW YORK, Jan. 31, 2020 (GLOBE NEWSWIRE) -- WisdomTree Investments, Inc. (NASDAQ: WETF) today reported financial results for the fourth quarter of 2019.

$4.3 million net income ($10.11 million net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.    

$63.6 billion of ending AUM, an increase of 6.1% resulting from market appreciation and net inflows for the quarter and an increase of 17.6% for the full year.

$368 million of net inflows ($560 million of net inflows excluding HEDJ/DXJ), driven by flows into our U.S. equity, fixed income  and emerging markets products, partly offset by outflows from our commodity and international developed market equity products.  For the full year, net inflows were $572 million or $3.3 billion excluding outflows from HEDJ/DXJ.

0.44% average global advisory fee, unchanged from the prior quarter.

$68.9 million of operating revenues, an increase of 1.8% primarily due to higher average AUM of our U.S. listed products.

81.2% gross margin1 for our U.S. Business, a 0.4 point increase due to higher revenues.

70.7% gross margin1 for our International Business, a 1.9 point decrease due to higher market making fees incurred in connection with transitioning to new arrangements as well as costs associated with preparing our products for Brexit.

21.5% operating income margin (22.0%1 as adjusted), a 2.3 point decrease (2.1 point decrease, as adjusted1) primarily due to higher non-compensation expenses, partly offset by higher revenues.

$6.0 million of available capital used to pay down debt, in connection with our capital management strategy.

$0.03 quarterly dividend declared, payable on February 26, 2020 to stockholders of record as of the close of business February 12, 2020.

We are currently pursuing an exit from our $58 million investment in AdvisorEngine Inc.  While the process is not yet finalized, we estimate taking a non-cash impairment charge of $22.0 million to $30.0 million in the fourth quarter, which is not yet included in these unaudited financial results.  The final impairment charge will be recognized and disclosed in our Form 10-K.  We do not anticipate the exit of our investment will drive any asset attrition or change our organic growth outlook.

Update from Jonathan Steinberg, WisdomTree CEO

“WisdomTree exited 2019 with momentum building across our business. The performance track records of our funds remain excellent with thirty-five 4- or 5-star Morningstar rated funds across our ETF and UCITS product range. We’ve generated positive net flows in four of the past five quarters, adoption of our model portfolios by advisors is accelerating and we are excited by the recent launch of the Siegel-WisdomTree models.” 
 
“As we look toward 2020, we are focused on capitalizing on the tailwinds that exist in our business, continuing to drive operating efficiencies and prudently investing to remain at the forefront of industry innovation. For example, in January we announced a strategic investment in Securrency, Inc., a blockchain-based financial services infrastructure company. Blockchain has the potential to be revolutionary in financial services and we believe we have the right vision and the right partner to be a global leader in digital assets. There are reasons to be optimistic, and I believe WisdomTree has reached an inflection point with top line and bottom line growth set to emerge.” 

OPERATING AND FINANCIAL HIGHLIGHTS

  Three Months Ended
  Dec. 31,
2019
Sept. 30,
2019
June 30,
2019
Mar. 31,
2019
Dec. 31,
2018
Consolidated Operating Highlights ($, in billions):          
AUM $ 63.6   $ 60.0   $ 60.4   $ 59.1   $ 54.1  
Net inflows/(outflows) $ 0.4   $ (0.7 ) $ 0.3   $ 0.6   $ 0.2  
Average AUM $ 61.9   $ 60.3   $ 58.6   $ 57.7   $ 56.4  
Average advisory fee   0.44 %   0.44 %   0.45 %   0.46 %   0.47 %
                               
                               
Consolidated Financial Highlights ($, in millions, except per share amounts):                              
Operating revenues $ 68.9   $ 67.7   $ 66.3   $ 65.5   $ 67.9  
Net income/(loss) $ 4.3   $ 4.2   $ 2.5   $ 8.8   $ (11.6 )
Diluted earnings/(loss) per share $ 0.02   $ 0.02   $ 0.01   $ 0.05   $ (0.08 )
Operating income margin   21.5 %   23.8 %   18.0 %   16.3 %   17.4 %
As Adjusted (Non-GAAP1):                              
Gross Margin – U.S. Business   81.2 %   80.8 %   80.3 %   80.4 %   80.2 %
Gross Margin – International Business   70.7 %   72.6 %   69.5 %   70.1 %   69.1 %
Net income, as adjusted $ 10.1   $ 10.6   $ 7.8   $ 7.7   $ 9.8  
Diluted earnings per share, as adjusted $ 0.06   $ 0.06   $ 0.05   $ 0.05   $ 0.06  
Operating income margin, as adjusted   22.0 %   24.1 %   20.2 %   19.9 %   21.9 %
           

RECENT BUSINESS DEVELOPMENTS

Company News

  • In November 2019, we entered into an agreement to sell our Canadian asset management business to CI Financial Corp. (TSX: CIX); and we were named as European Smart Beta Provider of the Year at the Funds Europe Awards 2019.
  • In January 2020, we announced a strategic investment in Securrency, Inc. with plans to pursue the integration of blockchain technology into the ETF ecosystem; we announced the appointment of Ravinder Azad as Head of UK and Nordic Sales; and we announced the collaboration with Professor Jeremy Siegel to design and launch two model portfolios – The Siegel-WisdomTree Global Equity Model and the Siegel-WisdomTree Longevity Model.

Product News

  • In November 2019, we launched the Mortgage Plus Bond Fund (MTGP) in the U.S. on the NYSE Arca; the WisdomTree Artificial Intelligence UCITS ETF (WTAI) reached its one-year anniversary, and the WisdomTree Emerging Markets Equity Income UCITS ETF (DEM) and WisdomTree Emerging Markets Small Cap Dividend UCITS ETF (DGSG) reached their five-year anniversaries.
  • In December 2019, we declared final capital gains distributions for our U.S. ETFs; we announced the closing and liquidation of three ETFs in January 2020 – DYB, WBAL and RPUT; and we announced the launch of the WisdomTree Bitcoin ETP (BTCW) on the Swiss stock exchange (SIX).
  • In January 2020, we announced the unitholders’ approval of proposed change in manager for our Canadian ETFs.


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)

  Three Months Ended
  Years Ended
  Dec. 31,
2019
  Sept. 30,
2019
  June 30,
2019
  Mar. 31,
2019
  Dec. 31,
2018
  Dec. 31,
2019
  Dec. 31,
2018
Operating Revenues:                                                      
Advisory fees $ 68,179     $ 67,006     $ 65,627     $ 64,840     $ 67,191     $ 265,652     $ 271,104  
Other income   728       712       666       645       676       2,751       3,012  
Total revenues   68,907       67,718       66,293       65,485       67,867       268,403       274,116  
Operating Expenses:                                                      
Compensation and benefits   19,280       18,880       21,300       21,301       18,838       80,761       74,515  
Fund management and administration   15,650       15,110       15,576       15,166       15,861       61,502       56,686  
Marketing and advertising   3,551       3,022       2,910       2,680       3,672       12,163       13,884  
Sales and business development   5,329       4,354       4,171       4,422       5,036       18,276       17,153  
Contractual gold payments   3,516       3,502       3,110       3,098       2,917       13,226       8,512  
Professional and consulting fees   1,604       1,259       1,296       1,482       2,854       5,641       7,984  
Occupancy, communications and equipment   1,587       1,549       1,548       1,618       1,544       6,302       6,203  
Depreciation and amortization   253       259       264       269       303       1,045       1,301  
Third-party distribution fees   1,146       1,503       1,919       2,400       1,813       6,968       6,611  
Acquisition and disposition- related costs   366       190       33       313       1,008       902       11,454  
Other   1,816       1,959       2,255       2,053       2,202       8,083       8,534  
Total expenses   54,098       51,587       54,382       54,802       56,048       214,869       212,837  
Operating income   14,809       16,131       11,911       10,683       11,819       53,534       61,279  
Other Income/(Expenses):                                                      
Interest expense   (2,606 )     (2,832 )     (2,910 )     (2,892 )     (2,859 )     (11,240 )     (7,962 )
(Loss)/gain on revaluation of deferred consideration – gold payments   (5,354 )     (6,306 )     (4,037 )     4,404       (5,410 )     (11,293 )     12,220  
Interest income   936       799       818       779       800       3,332       3,093  
Impairments                     (572 )     (17,386 )     (572 )     (17,386 )
Other gains and losses, net   (2 )     843       284       (4,627 )     439       (3,502 )     (205 )
                                                       
Income/(loss) before income taxes   7,783       8,635       6,066       7,775       (12,597 )     30,259       51,039  
Income tax expense/(benefit)   3,525       4,483       3,587       (1,049 )     (1,033 )     10,546       14,406  
                                                       
Net income/(loss) $ 4,258     $ 4,152     $ 2,479     $ 8,824     $ (11,564 )   $ 19,713     $ 36,633  
                                                       
Earnings/(loss) per share – basic $ 0.02     $ 0.02     $ 0.01     $ 0.05     $ (0.08 )   $ 0.12     $ 0.23  
Earnings/(loss) per share – diluted $ 0.022     $ 0.02     $ 0.01     $ 0.05     $ (0.08 )   $ 0.12     $ 0.23  
Weighted average common shares – basic   151,948       151,897       151,818       151,625       151,083       151,823       146,645  
Weighted average common shares – diluted   167,203       167,163       167,249       166,811       151,083       166,977       158,415  
               
As Adjusted (Non-GAAP1)              
Compensation and benefits $ 19,280     $ 18,880     $ 19,825     $ 19,281     $ 16,824      
Total expenses $ 53,732     $ 51,397     $ 52,874     $ 52,469     $ 53,026      
Operating income $ 15,175     $ 16,321     $ 13,419     $ 13,016     $ 14,841      
Income before income taxes $ 13,503     $ 15,131     $ 11,611     $ 10,586     $ 13,221      
Income tax expense $ 3,396     $ 4,489     $ 3,798     $ 2,849     $ 3,392      
Net income $ 10,107     $ 10,642     $ 7,813     $ 7,737     $ 9,829      
Earnings per share – diluted $ 0.06     $ 0.06     $ 0.05     $ 0.05     $ 0.06      
               

QUARTERLY HIGHLIGHTS

Operating Revenues

  • Operating revenues increased 1.8% from the third quarter of 2019 primarily due to higher average AUM of our U.S. listed products arising from market appreciation and net inflows.
  • Operating revenues increased 1.5% from the fourth quarter of 2018 primarily due to higher average AUM of our International listed products arising from market appreciation and net inflows, partly offset by a 3 basis point decline in our average global advisory fee due to AUM mix shift.
  • Our average global advisory fee was 0.44% during the third and fourth quarters of 2019 and 0.47% during the fourth quarter of 2018.

Operating Expenses

  • Operating expenses increased 4.9% from the third quarter of 2019 due to higher sales and business development expenses inclusive of costs associated with the launch of our Bitcoin ETP; higher fund management and administration costs due to higher market making fees in connection with transitioning to new arrangements, as well as costs associated with preparing our products for Brexit; and higher marketing and advertising expenses, compensation, and professional fees.
  • Operating expenses decreased 3.5% from the fourth quarter of 2018 largely due to lower professional fees, acquisition and disposition-related costs and third-party distribution fees.

Other Income/(Expenses)

  • We recognized a non-cash loss on revaluation of deferred consideration of ($5.4) million and ($6.3) million during the fourth and third quarters of 2019, and ($5.4) million during the fourth quarter of 2018.  These losses arose due to an increase in forward-looking gold prices when compared to the previous periods forward-looking gold curves.  The magnitude of any gain or loss recognized is highly correlated to the magnitude of the change in the forward-looking price of gold.
  • Interest expense decreased 8.0% from the third quarter of 2019 due to a lower level of debt outstanding.  During the third and fourth quarters of 2019, we used $21.0 million of available capital to pay down our debt in connection with our capital management strategy.

Income Taxes

  • Our effective income tax rate for the fourth quarter of 45.3% resulted in income tax expense of $3.5 million. Our tax rate differs from the federal statutory tax rate of 21% primarily due to a non-deductible loss on revaluation of deferred consideration, a valuation allowance on foreign net operating losses, state and local taxes and non-deductible executive compensation, partly offset by a lower tax rate on foreign earnings.

    Our adjusted effective income tax rate was 25.1%1.

ANNUAL HIGHLIGHTS

Our operating results for the current year are not directly comparable to the prior year due to our acquisition of ETFS, which was completed on April 11, 2018.

  • Operating revenues decreased 2.1% as compared to 2018 to a 3 basis point decline in our average global advisory fee and lower average AUM of our U.S. listed products due to AUM mix shift, partly offset by higher revenues earned from the ETFS acquired business, which were recognized for the entire year of 2019. 
  • Operating expenses increased 1.0% as compared to 2018 due to expenses associated with the ETFS acquired business, which were recognized for the entire year of 2019, and higher compensation expenses.  These items were partly offset by lower acquisition and disposition-related costs, professional fees, marketing and advertising expenses and fund management and administration costs associated with our U.S. listed products.
  • Significant changes in items reported in other income/(expenses) include a non-cash loss on revaluation of deferred consideration of ($11.3) million in 2019 as compared to a gain of $12.2 million in 2018; a 41.2% increase in interest expense as borrowing under our term loan commenced on April 11, 2018 and a $4.3 million non-cash charge arising from the release of a tax-related indemnification asset which arose from tax exposures assumed from the ETFS acquisition.  This item was recognized upon the expiration of the statute of limitations which occurred in the first quarter of 2019 and an equal and offsetting benefit was recognized in income tax expense.
  • Our effective income tax rate for 2019 of 34.9% resulted in income tax expense of $10.5 million.  Our effective income tax rate differs from the federal statutory rate of 21% primarily due to a valuation allowance on foreign net operating losses, a non-deductible loss on revaluation of deferred consideration, non-deductible executive compensation, state and local income taxes and tax shortfalls associated with the vesting and exercise of stock-based compensation awards, partly offset by a $4.3 million reduction in unrecognized tax benefits and a lower tax rate on foreign earnings.

CONFERENCE CALL

WisdomTree will discuss its results and operational highlights during a conference call on Friday, January 31, 2020 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.

ABOUT WISDOMTREE

WisdomTree Investments, Inc., through its subsidiaries in the U.S., Europe and Canada (collectively, “WisdomTree”), is an ETF and ETP sponsor and asset manager headquartered in New York. WisdomTree offers products covering equity, commodity, fixed income, leveraged and inverse, currency and alternative strategies. WisdomTree currently has approximately $63.2 billion in assets under management globally.

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

Contact Information:

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

 

See “Non-GAAP Financial Measurements.” 

Earnings per share calculated pursuant to the two-class method.

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

The following tables set forth the pre-tax operating results for our U.S. Business and International Business segments.    

U.S. BUSINESS SEGMENT

  Three Months Ended   Years Ended
  Dec. 31,
2019
  Sept. 30,
2019
  June 30,
2019
  Mar. 31,
2019
  Dec. 31,
2018
  Dec. 31,
2019
  Dec. 31,
2018
Operating Revenues:                                                      
Advisory fees $ 42,952     $ 41,950     $ 43,070     $ 42,517     $ 45,633     $ 170,489     $ 204,298  
Other income   76       81       76       106       126       339       608  
Total revenues   43,028       42,031       43,146       42,623       45,759       170,828       204,906  
Operating Expenses:                                                      
Compensation and benefits   14,947       14,531       16,696       16,779       14,370       62,953       58,307  
Fund management and administration   8,070       8,072       8,505       8,340       9,038       32,987       35,728  
Marketing and
advertising
  2,745       2,411       2,336       2,162       2,704       9,654       11,003  
Sales and business development   3,144       3,124       2,867       3,359       3,747       12,494       13,426  
Professional and consulting fees   1,144       908       1,055       1,072       2,166       4,179       6,169  
Occupancy, communications and equipment   1,235       1,215       1,211       1,283       1,205       4,944       5,162  
Depreciation and amortization   235       238       242       246       280       961       1,215  
Third-party distribution fees   914       1,404       1,867       2,338       1,789       6,523       6,457  
Acquisition and disposition-related costs   170                   11       72       181       8,289  
Other   1,403       1,574       1,628       1,586       1,617       6,191       6,674  
Total expenses   34,007       33,477       36,407       37,176       36,988       141,067       152,430  
Operating income   9,021       8,554       6,739       5,447       8,771       29,761       52,476  
Other Income/(Expenses):                                                      
Interest expense   (197 )     (197 )     (194 )     (192 )     (197 )     (780 )     (566 )
Interest income   936       793       818       779       800       3,326       3,093  
Impairments                     (572 )     (17,386 )     (572 )     (17,386 )
Other gains and losses, net   (54 )     235       (54 )     145       266       272       292  
Income/(loss) before income taxes $ 9,706     $ 9,385     $ 7,309     $ 5,607     $ (7,746 )   $ 32,007     $ 37,909  
Operating income margin   21.0 %     20.4 %     15.6 %     12.8 %     19.2 %     17.4 %     25.6 %


INTERNATIONAL BUSINESS SEGMENT

  Three Months Ended
  Years Ended
  Dec. 31,
2019

  Sept. 30,
2019

  June 30,
2019

  Mar. 31,
2019

  Dec. 31,
2018

  Dec. 31,
2019

  Dec. 31,
2018

Operating Revenues:                                                      
Advisory fees $ 25,227     $ 25,056     $ 22,557     $ 22,323     $ 21,558     $ 95,163     $ 66,806  
Other income   652       631       590       539       550       2,412       2,404  
Total revenues   25,879       25,687       23,147       22,862       22,108       97,575       69,210  
Operating Expenses:                                                      
Compensation and benefits   4,333       4,349       4,604       4,522       4,468       17,808       16,208  
Fund management and administration   7,580       7,038       7,071       6,826       6,823       28,515       20,958  
Marketing and advertising   806       611       574       518       968       2,509       2,881  
Sales and business development   2,185       1,230       1,304       1,063       1,289       5,782       3,727  
Contractual gold payments   3,516       3,502       3,110       3,098       2,917       13,226       8,512  
Professional and consulting fees   460       351       241       410       688       1,462       1,815  
Occupancy, communications and equipment   352       334       337       335       339       1,358       1,041  
Depreciation and amortization   18       21       22       23       23       84       86  
Third-party distribution fees   232       99       52       62       24       445       154  
Acquisition and disposition-related costs   196       190       33       302       936       721       3,165  
Other   413       385       627       467       585       1,892       1,860  
Total expenses   20,091       18,110       17,975       17,626       19,060       73,802       60,407  
Operating income   5,788       7,577       5,172       5,236       3,048       23,773       8,803  
Other Income/(Expenses):                                                      
Interest expense   (2,409 )     (2,635 )     (2,716 )     (2,700 )     (2,662 )     (10,460 )     (7,396 )
(Loss)/gain on revaluation of deferred consideration – gold payments   (5,354 )     (6,306 )     (4,037 )     4,404       (5,410 )     (11,293 )     12,220  
Interest income         6                         6        
Other gains and losses, net   52       608       338       (4,772 )     173       (3,774 )     (497 )
(Loss)/income before income taxes $ (1,923 )   $ (750 )   $ (1,243 )   $ 2,168     $ (4,851 )   $ (1,748 )   $ 13,130  
                                                       
Operating income margin   22.4 %     29.5 %     22.3 %     22.9 %     13.8 %     24.4 %     12.7 %


WisdomTree Investments, Inc.                                      
Key Operating Statistics (Unaudited)                                      
                                       
  Three Months Ended
  Dec. 31,
2019
  Sept. 30,
2019
  June 30,
2019
  Mar. 31,
2019
  Dec. 31,
2018
                                       
GLOBAL ETPs (in millions)                                      
                                       
Beginning of period assets $ 59,981     $ 60,389     $ 59,112     $ 54,094     $ 59,140  
Inflows/(outflows)   368       (694 )     337       561       245  
Market appreciation/(depreciation)   3,269       467       940       4,544       (5,291 )
Fund closures   (3 )     (181 )           (87 )      
End of period assets $ 63,615     $ 59,981     $ 60,389     $ 59,112     $ 54,094  
Average assets during the period $ 61,858     $ 60,306     $ 58,575     $ 57,683     $ 56,423  
Average advisory fee during the period   0.44 %     0.44 %     0.45 %     0.46 %     0.47 %
Revenue days   92       92       91       90       92  
Number of ETFs – end of the period   367       366       536       534       537  
                                       
U.S. LISTED ETFs (in millions)                                      
                                       
Beginning of period assets $ 37,592     $ 39,220     $ 39,366     $ 35,486     $ 41,556  
Inflows/(outflows)   563       (1,198 )     (166 )     147       (894 )
Market appreciation/(depreciation)   2,448       (430 )     20       3,820       (5,176 )
Fund closures   (3 )                 (87 )      
End of period assets $ 40,600     $ 37,592     $ 39,220     $ 39,366     $ 35,486  
Average assets during the period $ 39,094     $ 37,857     $ 38,945     $ 38,061     $ 38,246  
Average advisory fee during the period   0.44 %     0.44 %     0.44 %     0.45 %     0.47 %
Number of ETFs – end of the period   80       80       79       77       85  
                                       
INTERNATIONAL LISTED ETPs (in millions)                                      
                                       
Beginning of period assets $ 22,389     $ 21,169     $ 19,746     $ 18,608     $ 17,584  
Inflows/(outflows)   (195 )     504       503       414       1,139  
Market appreciation/(depreciation)   821       897       920       724       (115 )
Fund closures         (181 )                  
End of period assets $ 23,015     $ 22,389     $ 21,169     $ 19,746     $ 18,608  
Average assets during the period $ 22,764     $ 22,449     $ 19,630     $ 19,622     $ 18,177  
Average advisory fee during the period   0.44 %     0.44 %     0.46 %     0.47 %     0.47 %
Number of ETPs – end of the period   287       286       457       457       452  
                                       
PRODUCT CATEGORIES (in millions)                                      
                                       
Commodity & Currency                                      
Beginning of period assets $ 19,954     $ 18,446     $ 16,978     $ 16,213     $ 14,998  
Inflows/(outflows)   (267 )     534       563       227       988  
Market appreciation/(depreciation)   639       974       905       538       227  
End of period assets $ 20,326     $ 19,954     $ 18,446     $ 16,978     $ 16,213  
Average assets during the period $ 20,146     $ 19,796     $ 16,912     $ 16,995     $ 15,620  
                                       
U.S. Equity                                      
Beginning of period assets $ 16,416     $ 16,021     $ 15,880     $ 13,335     $ 15,186  
Inflows/(outflows)   468       242       103       632       393  
Market appreciation/(depreciation)   1,002       153       38       1,913       (2,244 )
End of period assets $ 17,886     $ 16,416     $ 16,021     $ 15,880     $ 13,335  
Average assets during the period $ 17,112     $ 16,004     $ 15,808     $ 14,947     $ 14,291  
                                       
International Developed Market Equity                                      
Beginning of period assets $ 12,541     $ 13,687     $ 14,414     $ 14,508     $ 19,385  
Inflows/(outflows)   (122 )     (1,001 )     (729 )     (1,530 )     (2,216 )
Market appreciation/(depreciation)   1,006       (145 )     2       1,436       (2,661 )
End of period assets $ 13,425     $ 12,541     $ 13,687     $ 14,414     $ 14,508  
Average assets during the period $ 13,001     $ 12,747     $ 13,957     $ 14,506     $ 16,869  


  Three Months Ended
  Dec. 31,
2019
  Sept. 30,
2019
  June 30,
2019
  Mar. 31,
2019
  Dec. 31,
2018
                                       
Emerging Market Equity                                      
Beginning of period assets $ 5,814     $ 6,090     $ 5,730     $ 5,278     $ 5,346  
Inflows/(outflows)   193       173       367       (84 )     232  
Market appreciation/(depreciation)   516       (449 )     (7 )     536       (300 )
End of period assets $ 6,523     $ 5,814     $ 6,090     $ 5,730     $ 5,278  
Average assets during the period $ 6,111     $ 5,851     $ 5,785     $ 5,502     $ 5,148  
                                       
Fixed Income                                      
Beginning of period assets $ 3,655     $ 4,258     $ 4,023     $ 2,570     $ 1,720  
Inflows/(outflows)   220       (582 )     208       1,418       880  
Market appreciation/(depreciation)   34       (21 )     27       35       (30 )
End of period assets $ 3,909     $ 3,655     $ 4,258     $ 4,023     $ 2,570  
Average assets during the period $ 3,856     $ 4,050     $ 4,119     $ 3,511     $ 2,140  
                                       
Leveraged & Inverse                                      
Beginning of period assets $ 1,130     $ 1,149     $ 1,226     $ 1,083     $ 1,250  
Inflows/(outflows)   (55 )     11       (63 )     83       (18 )
Market appreciation/(depreciation)   71       (30 )     (14 )     60       (149 )
End of period assets $ 1,146     $ 1,130     $ 1,149     $ 1,226     $ 1,083  
Average assets during the period $ 1,186     $ 1,154     $ 1,199     $ 1,213     $ 1,193  
                                       
Alternatives                                      
Beginning of period assets $ 468     $ 514     $ 628     $ 755     $ 674  
Inflows/(outflows)   (69 )     (48 )     (108 )     (141 )     178  
Market appreciation/(depreciation)   1       2       (6 )     14       (97 )
End of period assets $ 400     $ 468     $ 514     $ 628     $ 755  
Average assets during the period $ 443     $ 490     $ 574     $ 666     $ 712  
                                       
Closed ETPs                                      
Beginning of period assets $ 3     $ 224     $ 233     $ 352     $ 581  
Inflows/(outflows)         (23 )     (4 )     (44 )     (192 )
Market appreciation/(depreciation)         (17 )     (5 )     12       (37 )
Fund closures   (3 )     (181 )           (87 )      
End of period assets $     $ 3     $ 224     $ 233     $ 352  
Average assets during the period $ 3     $ 214     $ 221     $ 343     $ 450  
                                       
Headcount – U.S. Business segment   137       142       143       141       153  
Headcount – International Business segment   71       70       71       75       75  


Note: Previously issued statistics may be restated due to fund closures and trade adjustments
Source: WisdomTree

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

  Dec. 31,
2019
  Dec. 31,
2018
  (Unaudited)
       
ASSETS              
Current assets:              
Cash and cash equivalents $ 74,972     $ 77,784  
Securities owned, at fair value   17,319       8,873  
Accounts receivable   26,838       25,834  
Income taxes receivable         1,181  
Prepaid expenses   3,724       4,441  
Other current assets   207       163  
               
Total current assets   123,060       118,276  
Fixed assets, net   8,127       9,122  
Notes receivable   33,310       28,722  
Securities held-to-maturity   16,863       20,180  
Deferred tax assets, net   7,398       7,042  
Investments, carried at cost   36,192       28,080  
Right of use assets – operating leases   18,161        
Goodwill   85,856       85,856  
Intangible assets   603,294       603,209  
Other noncurrent assets   983       2,155  
               
Total assets $ 933,244     $ 902,642  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY              
LIABILITIES              
Current liabilities:              
Fund management and administration payable $ 22,021     $ 22,508  
Compensation and benefits payable   26,501       18,453  
Deferred consideration – gold payments   13,953       11,765  
Securities sold, but not yet purchased, at fair value   582       1,698  
Operating lease liabilities   3,682        
Income taxes payable   3,372        
Accounts payable and other liabilities   8,930       8,377  
               
Total current liabilities   79,041       62,801  
Debt   175,956       194,592  
Deferred consideration – gold payments   159,071       149,775  
Operating lease liabilities   19,057        
Deferred rent payable         4,570  
               
Total liabilities   433,125       411,738  
Preferred stock – Series A Non-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding   132,569       132,569  
               
STOCKHOLDERS’ EQUITY              
Common stock, par value $0.01; 250,000 shares authorized:              
Issued and outstanding: 155,264 and 153,202 at December 31, 2019 and December 31, 2018, respectively   1,553       1,532  
Additional paid-in capital   373,043       363,655  
Accumulated other comprehensive income   945       467  
Accumulated deficit   (7,991 )     (7,319 )
               
Total stockholders’ equity   367,550       358,335  
               
Total liabilities and stockholders’ equity $ 933,244     $ 902,642  
               

WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)  

  Years Ended
  Dec. 31,
2019
  Dec. 31,
2018
Cash flows from operating activities:              
Net income $ 19,713     $ 36,633  
Adjustments to reconcile net income to net cash provided by operating activities:              
Advisory fees received in gold and other precious metals   (49,887 )     (32,238 )
Contractual gold payments   13,226       8,512  
Stock-based compensation   11,590       13,255  
Loss/(gain) on revaluation of deferred consideration – gold payments   11,293       (12,220 )
Amortization of right of use asset   3,174        
Amortization of credit facility issuance costs   2,888       2,087  
Paid-in-kind interest income   (2,498 )     (1,974 )
Depreciation and amortization   1,045       1,301  
Impairments   572       17,386  
Deferred income taxes   (349 )     (6,083 )
Other   (173 )     798  
Changes in operating assets and liabilities:              
Securities owned, at fair value   (8,446 )     (7,182 )
Accounts receivable   (19 )     3,804  
Income taxes receivable/payable   4,524       5,706  
Prepaid expenses   738       427  
Gold and other precious metals   35,886       25,604  
Other assets   172       984  
Fund management and administration payable   (476 )     221  
Compensation and benefits payable   7,885       (16,050 )
Securities sold, but not yet purchased, at fair value   (1,116 )     748  
Operating lease liabilities   (3,587 )      
Accounts payable and other liabilities   677       (4,251 )
               
Net cash provided by operating activities   46,832       37,468  
               
Cash flows from investing activities:              
Purchase of fixed assets   (47 )     (71 )
Purchase of investments   (8,112 )      
Funding of notes receivable   (2,090 )     (8,000 )
Proceeds from held-to-maturity securities maturing or called prior to maturity   3,244       1,107  
Proceeds from sales and maturities of debt securities available-for-sale         64,498  
Cash paid for acquisition, net of cash acquired         (239,313 )
               
Net cash used in investing activities   (7,005 )     (181,779 )
               
Cash flows from financing activities:              
Dividends paid   (20,385 )     (19,236 )
Repayment of debt   (21,000 )      
Shares repurchased   (2,341 )     (2,885 )
Credit facility issuance costs         (8,690 )
Preferred stock issuance costs         (181 )
Proceeds from the issuance of debt         200,000  
Proceeds from exercise of stock options   160       191  
               
Net cash (used in)/provided by financing activities   (43,566 )     169,199  
               
Increase/(decrease) in cash flows due to changes in foreign exchange rate   927       (1,297 )
               
(Decrease)/increase in cash and cash equivalents   (2,812 )     23,591  
Cash and cash equivalents – beginning of year   77,784       54,193  
               
Cash and cash equivalents – year $ 74,972     $ 77,784  
               
Supplemental disclosure of cash flow information:              
Cash paid for taxes $ 10,060     $ 14,398  
Cash paid for interest $ 8,037     $ 5,577  
               

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:

  • Adjusted compensation, operating income, total expenses, income before income taxes, income tax expense, net income and diluted earnings per share.  We disclose adjusted compensation, operating income, total expenses, income before income taxes, income tax expense, net income and diluted earnings per share as non-GAAP financial measurements in order to report our results exclusive of items that are non-recurring or not core to our operating business.  We believe presenting these non-GAAP financial measures provides investors with a consistent way to analyze our performance.  These non-GAAP financial measures exclude the following:

    • Unrealized gains or losses on the revaluation of deferred consideration:  Deferred consideration is an obligation we assumed in connection with the ETFS acquisition that is carried at fair value.  This item represents the present value of an obligation to pay fixed ounces of gold into perpetuity and is measured using forward-looking gold prices.  Changes in the forward-looking price of gold may have a material impact on the carrying value of the deferred consideration and our reported financial results.  We exclude this item when calculating our non-GAAP financial measurements as it is not core to our operating business.  The item is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary of ours that is based in Jersey, a jurisdiction where we are subject to a zero percent tax rate.

    • Tax shortfalls and windfalls upon vesting and exercise of stock-based compensation awards: GAAP requires the recognition of tax windfalls and shortfalls within income tax expense.  These items arise upon the vesting and exercise of stock-based compensation awards and the magnitude is directly correlated to the number of awards vesting/exercised as well as the difference between the price of our stock on the date the award was granted and the date the award vested or was exercised.  We exclude these items when calculating our non-GAAP financial measurements as they introduce volatility in earnings and are not core to our operating business.

    • Other items:  Impairment charges, severance expense and acquisition and disposition-related costs are excluded when calculating our non-GAAP financial measurements.

  • Adjusted effective income tax rate.  We disclose our adjusted effective income tax rate as a non-GAAP financial measurement in order to report our effective income tax rate exclusive of items that are non-recurring or not core to our operating business.  We believe reporting our adjusted effective income tax rate provides investors with a consistent way to analyze our income taxes.  Our adjusted effective income tax rate is calculated by dividing adjusted income tax expense by adjusted income before income taxes.  See above for information regarding the items that are excluded. 

  • Gross margin and gross margin percentage.  We disclose our gross margin and gross margin percentage as non-GAAP financial measurements for our U.S. Business segment and International Business segment 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.  These ratios also assist us in analyzing the profitability of our products.  We define gross margin as total operating revenues less fund management and administration expenses.  Gross margin percentage is calculated as gross margin divided by total operating revenues. 

  • Adjusted operating income margin.  We disclose adjusted operating income margin as a non-GAAP financial measurement on a consolidated basis, as well as for our U.S. Business segment and International Business segment in order to report our operating income margin exclusive of items that are non-recurring or not core to our operating business.   

WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION (CONSOLIDATED)
(in thousands)
(Unaudited)

  Three Months Ended
                                       
Adjusted Net Income and Diluted Earnings per Share: Dec. 31,
  Sept. 30,
  June 30,
  Mar. 31,
  Dec. 31,
    2019       2019       2019       2019       2018  
                                       
Net income/(loss), as reported $ 4,258     $ 4,152     $ 2,479     $ 8,824     $ (11,564 )
                                       
Add back/(deduct): Unrealized loss/(gain) on revaluation of deferred consideration   5,354       6,306       4,037       (4,404 )     5,410  
Add back: Severance expense, net of income taxes               1,194       1,521       1,526  
Add back/(deduct): Tax shortfalls/(windfalls) upon vesting and exercise of stock-based compensation awards   142       30       76       971       (403 )
Add back: Impairments, net of income taxes                     572       14,048  
Add back: Acquisition and disposition-related costs, net of income taxes   353       154       27       253       812  
Adjusted net income $ 10,107     $ 10,642     $ 7,813     $ 7,737     $ 9,829  
Weighted average common shares - diluted   167,203       167,163       167,249       166,811       166,686  
Adjusted earnings per share - diluted $ 0.06     $ 0.06     $ 0.05     $ 0.05     $ 0.06  
                                       
                                       
  Three Months Ended
                                       
Adjusted Operating Income and Adjusted Operating Dec. 31,
  Sept. 30,
  June 30,
  Mar. 31,
  Dec. 31,
Income Margin:   2019       2019       2019       2019       2018  
                                       
Operating revenues $ 68,907     $ 67,718     $ 66,293     $ 65,485     $ 67,867  
                                       
Operating income $ 14,809     $ 16,131     $ 11,911     $ 10,683     $ 11,819  
Add back: Severance expense, before income taxes               1,475       2,020       2,014  
Add back: Acquisition and disposition-related costs, before income taxes   366       190       33       313       1,008  
Adjusted operating income $ 15,175     $ 16,321     $ 13,419     $ 13,016     $ 14,841  
Adjusted operating income margin   22.0 %     24.1 %     20.2 %     19.9 %     21.9 %
                                       
                                       
  Three Months Ended
                                       
Adjusted Compensation: Dec. 31,
  Sept. 30,
  June 30,
  Mar. 31,
  Dec. 31,
    2019       2019       2019       2019       2018  
                                       
Compensation expense $ 19,280     $ 18,880     $ 21,300     $ 21,301     $ 18,838  
Deduct: Severance expense, before income taxes               (1,475 )     (2,020 )     (2,014 )
Adjusted compensation expense $ 19,280     $ 18,880     $ 19,825     $ 19,281     $ 16,824  
                                       
                                       
  Three Months Ended
                                       
Adjusted Total Operating Expenses: Dec. 31,
  Sept. 30,
  June 30,
  Mar. 31,
  Dec. 31,
    2019       2019       2019       2019       2018  
                                       
Total operating expenses $ 54,098     $ 51,587     $ 54,382     $ 54,802     $ 56,048  
Deduct: Severance expense, before income taxes               (1,475 )     (2,020 )     (2,014 )
Deduct: Acquisition and disposition-related costs, before income taxes   (366 )     (190 )     (33 )     (313 )     (1,008 )
Adjusted operating expenses $ 53,732     $ 51,397     $ 52,874     $ 52,469     $ 53,026  
                                       
                                       
  Three Months Ended
                                       
Adjusted Income Before Income Taxes: Dec. 31,
  Sept. 30,
  June 30,
  Mar. 31,
  Dec. 31,
    2019       2019       2019       2019       2018  
                                       
Income/(loss) before income taxes $ 7,783     $ 8,635     $ 6,066     $ 7,775     $ (12,597 )
Add back/(deduct): Unrealized loss/(gain) on revaluation of deferred consideration   5,354       6,306       4,037       (4,404)       5,410  
Add back: Loss recognized upon reduction of a tax-related indemnification asset                     4,310        
Add back: Severance expense, before income taxes               1,475       2,020       2,014  
Add back: Impairments, before income taxes                     572       17,386  
Add back: Acquisition and disposition-related costs, before income taxes   366       190       33       313       1,008  
Adjusted income before income taxes $ 13,503     $ 15,131     $ 11,611     $ 10,586     $ 13,221  
                                       
                                       
  Three Months Ended
                                       
Adjusted Income Tax Expense and Adjusted Effective Income Tax Rate: Dec. 31,
  Sept. 30,
  June 30,
  Mar. 31,
  Dec. 31,
    2019       2019       2019       2019       2018  
                                       
Adjusted income before income taxes (above) $ 13,503     $ 15,131     $ 11,611     $ 10,586     $ 13,221  
                                       
Income tax expense/(benefit) $ 3,525     $ 4,483     $ 3,587     $ (1,049 )   $ (1,033 )
Add back: Tax benefit arising from reduction of a tax-related indemnification asset                     4,310        
Add back: Tax benefit arising from severance expense               281       499       488  
Add back: Tax benefit arising from impairments                           3,338  
Add back/(deduct): Tax windfalls/(shortfalls) upon vesting and exercise of stock-based compensation awards   (142 )     (30 )     (76 )     (971 )     403  
Add back: Tax benefit arising from acquisition and disposition-related costs   13       36       6       60       196  
Adjusted income tax expense $ 3,396     $ 4,489     $ 3,798     $ 2,849     $ 3,392  
Adjusted effective income tax rate   25.1 %     29.7 %     32.7 %     26.9 %     25.7 %
                                       


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

GAAP to NON-GAAP RECONCILIATION (SEGMENTS)
(in thousands)
(Unaudited)

  Three Months Ended
Gross Margin and Gross Margin Percentage (U.S. Business): Dec. 31,
2019
  Sept. 30,
2019
  June 30,
2019
  Mar. 31,
2019
  Dec. 31,
2018
Operating revenues $ 43,028     $ 42,031     $ 43,146     $ 42,623     $ 45,759  
Less: Fund management and administration   (8,070 )     (8,072 )     (8,505 )     (8,340 )     (9,038 )
Gross margin $ 34,958     $ 33,959     $ 34,641     $ 34,283     $ 36,721  
Gross margin percentage (U.S. Business)   81.2 %     80.8 %     80.3 %     80.4 %     80.2 %
                                       
                                       
  Three Months Ended
Adjusted Operating Income Margin (U.S. Business):
Dec. 31,
2019
  Sept. 30,
2019
  June 30,
2019
  Mar. 31,
2019
  Dec. 31,
2018
Operating revenues $ 43,028     $ 42,031     $ 43,146     $ 42,623     $ 45,759  
                                       
                                       
Operating income $ 9,021     $ 8,554     $ 6,739     $ 5,447     $ 8,771  
Add back: Severance expense, before income taxes               1,366       2,020       2,014  
Add back: Acquisition and disposition-related costs, before income taxes   170                   11       72  
Adjusted operating income $ 9,191     $ 8,554     $ 8,105     $ 7,478     $ 10,857  
Adjusted operating income margin (U.S. Business)   21.4 %     20.4 %     18.8 %     17.5 %     23.7 %
                                       


  Three Months Ended
Gross Margin and Gross Margin Percentage (International): Dec. 31,
2019
  Sept. 30,
2019
  June 30,
2019
  Mar. 31,
2019
  Dec. 31,
2018
Operating revenues $ 25,879     $ 25,687     $ 23,147     $ 22,862     $ 22,108  
Less: Fund management and administration   (7,580 )     (7,038 )     (7,071 )     (6,826 )     (6,823 )
Gross margin $ 18,299     $ 18,649     $ 16,076     $ 16,036     $ 15,285  
Gross margin percentage (International)   70.7 %     72.6 %     69.5 %     70.1 %     69.1 %
                                       
  Three Months Ended
Adjusted Operating Income Margin (International): Dec. 31,
2019
  Sept. 30,
2019
  June 30,
2019
  Mar. 31,
2019
  Dec. 31,
2018
Operating revenues $ 25,879     $ 25,687     $ 23,147     $ 22,862     $ 22,108  
                                       
                                       
Operating income $ 5,788     $ 7,577     $ 5,172     $ 5,236     $ 3,048  
Add back: Severance expense, before income taxes               109              
Add back: Acquisition and disposition-related costs, before income taxes   196       190       33       302       936  
Adjusted operating income $ 5,984     $ 7,767     $ 5,314     $ 5,538     $ 3,984  
Adjusted operating income margin (International)   23.1 %     30.2 %     23.0 %     24.2 %     18.0 %
                                       

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;
  • competition in our business;
  • our ability to develop new products and services;
  • our ability to maintain current vendors or find new vendors to provide services to us at favorable costs;
  • our ability to successfully operate and expand our business in non-U.S. markets; and
  • the effect of laws and regulations that apply to our business.

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

  • declining prices of securities, precious metals and other commodities can adversely affect our business by reducing the market value of the assets we manage or causing WisdomTree ETP investors to sell their fund shares and trigger redemptions;
  • fluctuations in the amount and mix of our AUM, whether caused by disruptions in the financial markets or otherwise, may negatively impact revenues and operating margins, and may impede our ability to refinance our debt upon maturity, increase the cost of borrowing or result in our debt being called prior to maturity;
  • withdrawals or broad changes in investments in our ETPs by investors with significant positions may negatively impact revenues and operating margins;
  • competitive pressures could reduce revenues and profit margins;
  • we derive a substantial portion of our revenues from a limited number of products, and as a result, our operating results are particularly exposed to investor sentiment toward investing in the products’ strategies and our ability to maintain the AUM of these products, as well as the performance of these products and market-specific and political and economic risk;
  • a significant portion of our AUM is held in ETPs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks;
  • net outflows in our two largest currency hedged ETPs – the WisdomTree Europe Hedged Equity Fund and the WisdomTree Japan Hedged Equity Fund – have had, and in the future could continue to have, a negative impact on our revenues;
  • over the last few years, we have expanded our business globally. This expansion subjects us to increased operational, regulatory, financial and other risks;
  • many of our ETPs have a limited track record, and poor investment performance could cause our revenues to decline; and
  • we depend on third parties to provide many critical services to operate our business and our ETPs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm WisdomTree ETP investors.

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, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018.

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.

WisdomTree Investments, Inc. Logo

Source: WisdomTree Investments, Inc.