WisdomTree Announces Second Quarter 2011 Results
107% growth in AUM and 79% growth in revenues year over year
$1.7 billion in net inflows; 5.8% market share of industry flows
NEW YORK--(BUSINESS WIRE)-- WisdomTree Investments, Inc. (NASDAQ: WETF), an exchange-traded fund ("ETF") sponsor and asset manager, today reported net income of $0.7 million for the second quarter of 2011 as compared to a net loss of $1.9 million in the second quarter of 2010 and a net income of $0.2 million for the first quarter of 2011.
ETF assets under management ("AUM") reached a record $12.9 billion, more than doubling from June 30, 2010 and up 14.6% from March 31, 2011. Net inflows were a record $1.7 billion in the second quarter which represented 5.8% market share of industry inflows. Revenues increased 78.7% to a record $16.7 million compared to the second quarter of last year and up 15.0% from the first quarter of 2011. As of July 27, 2011, assets under management were $13.4 billion and net inflows so far for the third quarter were approximately $424 million.
WisdomTree CEO Jonathan Steinberg commented, "I am very pleased with our accelerating top-line growth as a result of higher asset levels and growing market share of net inflows in the second quarter, driven in part by continued product innovation and the diversification of our multi-asset class ETF platform. In fact, according to InvestmentNews WisdomTree launched the top two most successful ETFs of the first half of 2011 in terms of assets gathered."
Mr. Steinberg continued, "While 2010 represented our strongest year of inflows with $3.1 billion, as of today we have already surpassed this number, demonstrating consistent and accelerating organic growth. On the back of these strong results, we listed the Company's common stock on The NASDAQ Global Market under the new symbol 'WETF' on July 26."
Summary Operating and Financial Highlights
Three Months Ended % Change From
Jun. 30, Mar. 31, Jun. 30, Mar. 31, Jun. 30,
Operating Highlights (in 2011 2011 2010 2011 2010
millions)
ETF AUM $12,934 $11,284 $6,240 15% 107%
ETF inflows $1,699 $1,264 $121 34% 1,304%
Average ETF AUM $12,062 $10,294 $6,760 17% 78%
Average ETF advisory fee 0.55% 0.56% 0.54% (2%) 2%
Financial Highlights (in
thousands)
Revenues $16,716 $14,533 $9,355 15% 79%
Net income/(loss) $689 $155 ($1,860) 345% -
Six Months Ended % Change
Jun. 30, Jun. 30, Jun. 30,
Operating Highlights (in millions) 2011 2010 2010
ETF AUM $12,934 $6,240 107%
ETF inflows $2,963 $703 321%
Average ETF AUM $11,340 $6,536 74%
Average ETF advisory fee 0.56% 0.54% 0.02%
Financial Highlights (in thousands)
Revenues $31,249 $18,069 73%
Net income/(loss) $844 ($5,452) -
Recent Business Highlights
On July 26, 2011, the Company announced the listing of its common stock on The NASDAQ Global Market under new symbol "WETF."
On July 14, 2011, the Company announced the launch of the WisdomTree Global Real Return Fund.
On July 26, 2011, the Company filed registration statements for the WisdomTree Germany Hedged Equity Fund and the WisdomTree Asia Small Cap Fund.
On July 1, 2011, the Company filed registration statements for the WisdomTree Emerging Markets Inflation Protection Bond Fund, the WisdomTree Emerging Markets Corporate Bond Fund and the WisdomTree China Local Debt Fund.
On June 20, 2011, the Company announced that previously declared changes to seven equity ETFs became effective. As a result, the Company now has more direct commodity themed products.
Performance
Approximately 79% of the $9.5 billion invested in WisdomTree's 34 equity ETFs on June 30, 2011 were in funds that, since their respective inceptions, have outperformed their competitive benchmarks through that date. 22 of WisdomTree's 34 equity ETFs have outperformed their competitive benchmarks since inception and through June 30, 2011. For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.
Second Quarter Financial Discussion
Revenues
Total revenues for the quarter increased 78.7% to a record $16.7 million as compared to the second quarter of 2010 and increased 15.0% from the first quarter of 2011. These increases were primarily due to higher average assets under management from strong net ETF inflows. Average ETF assets under management were $12.1 billion in the second quarter of 2011, as compared to $6.8 billion in the second quarter of 2010 and $10.3 billion in the first quarter of 2011. The average fee earned during the second quarter of 2011 decreased to 0.55% from 0.56% in the first quarter of 2011 due to a decrease in the fee charged for our India ETF from 0.88% to 0.83%. As compared to the second quarter of 2010, our average fee increased from 0.54% due to higher average assets and net inflows into our emerging market funds.
Expenses
Total expenses increased 42.9% to $16.0 million from $11.2 million in the second quarter of 2010 and increased 11.5% from $14.4 million in the first quarter of 2011. These increases were primarily due to higher fund related costs, marketing and advertising, and third party sharing arrangements.
-- Compensation and benefits expense remained relatively unchanged compared
to the second quarter of 2010 as higher headcount related expenses and
incentive compensation due to strong inflows were offset by lower
stock-based compensation expense. This expense decreased 11.6% compared
to the first quarter of 2011 primarily due to lower stock-based
compensation expense and lower payroll taxes associated with the vesting
of restricted stock granted to employees as part of their 2010
compensation, partly offset by higher accrued incentive compensation due
to strong net inflows. Employee stock based compensation decreased to
$0.8 million in the second quarter of 2011 from $1.7 million in the
second of last year and $1.5 million in the first quarter of 2011 as
equity awards granted in prior years become fully vested.
-- Fund management and administration expenses increased 73.5% to $5.7
million compared to the second quarter of 2010. Included in the second
quarter of 2011 is a one-time charge of $0.7 million related to
reimbursing the WisdomTree India ETF for excess fees collected by the
Company as a result of overestimating the Company's operating expense
recapture fees for the India ETF's fiscal year ended March 31, 2011.
Higher average assets under management lead to an increase of $1.2
million in portfolio management, fund administration, accounting and
index licensing fees. Regulatory fees increased $0.2 million due to
higher level of net inflows. Fund management and administration expenses
increased 37.8% compared to the first quarter of this year due to the
one-time charge discussed above as well as $0.5 million in higher
portfolio management, fund administration, accounting and index
licensing fees due to higher average assets under management. Also
during the second quarter, the WisdomTree international equity funds
rebalanced their portfolios leading to higher period transactional
related fees of $0.2 million.
-- Marketing and advertising expenses increased to $1.4 million in the
second quarter compared to $0.4 million in the second quarter of 2010
and $1.0 million in the first quarter of 2011. These increases were
primarily due to higher levels of discretionary television and online
advertising expenses to support our growth.
-- Sales and business development expenses increased 22.4% to $0.9 million
in the second quarter compared to the second quarter of 2010 and
increased 22.6% compared to the first quarter of 2011. These increases
were mainly due to higher levels of business activity.
-- Professional and consulting fees increased 54.2% to $1.1 million in the
second quarter of 2011 as compared to the second quarter of 2010
primarily due to higher variable stock based compensation expense, which
increased to $0.7 million from $0.2 million, due to a higher price in
our common stock. These expenses decreased by 19.8% in the second
quarter as compared to the first quarter of 2011 mainly due to lower
fees associated with the preparation of our registration statement in
connection with our exchange listing, which decreased to $0.1 million
from $0.4 million.
-- Third-party sharing arrangements expense increased to $1.5 million in
the second quarter of 2011 compared to $0.6 million in the second
quarter of last year and $1.1 million in the first quarter of this year.
These increases were primarily due to profit sharing arrangements with
the Bank of New York Mellon Corporation with respect to certain currency
and fixed income ETFs as well as marketing fees paid to third parties
due to higher average assets under management.
-- Other expenses; occupancy, communication and equipment expenses; and
depreciation and amortization expenses all had relatively small dollar
value changes compared to both periods.
Year-to-Date Results
Total revenues increased $13.2 million or 72.9% to $31.2 million for the six months ended June 30, 2011 as compared to $18.1 million in 2010. This increase was primarily due to higher average assets under management, which increased 73.5% to $11.3 billion, which resulted from $3.0 billion of net ETF inflows, as well as higher average ETF advisory fees.
Total expenses increased $6.9 million or 29.3% to $30.4 million for the six months ended June 30, 2011 as compared to $23.5 million in 2010. This increase was primarily due to higher fund management and administration expenses due to higher average asset balances, higher third-party sharing arrangements due to higher asset balances in our currency and fixed income ETFs, and higher marketing and advertising and sales and business development expenses to support our growth.
Balance Sheet
As of June 30, 2011, WisdomTree had total assets of $32.6 million, which consisted primarily of cash and cash equivalents of $16.4 million and investments of $8.2 million. WisdomTree has no debt. There were approximately 115.6 million shares issued as of June 30, 2011. Fully diluted weighted average shares outstanding were approximately 134.9 million as of June 30, 2011.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook," "objective," "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "plans," or "continue," or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect our current expectations regarding future events and operating performance and speak only as of the date of this press release. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to the assumption that the projects will operate and perform in accordance with our expectations. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not or the times at or by which such performance or results will be achieved. A number of risks and other factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the risks discussed below.
These risks include, without limitation:
-- We have only a limited operating history.
-- Difficult market conditions and 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 triggering
redemptions.
-- Volatility and disruption of the capital and credit markets, and adverse
changes in the global economy, may significantly affect our results of
operations and may put pressure on our financial results.
-- The amount and mix of our assets under management, which impact revenue,
are subject to significant fluctuations.
-- Most of our assets under management are held in ETFs that invest in
foreign securities and we have substantial exposure to foreign market
conditions and we are subject to currency exchange rate risks.
-- We derive a substantial portion of our revenues from products invested
in emerging markets.
-- We derive a substantial portion of our revenues from a limited number of
products.
Other factors, such as general economic conditions, including currency exchange rate fluctuations, also may have an effect on the results of our operations. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. For a more complete description of the risks noted above and other risks that could cause our actual results to materially differ from our current expectations, please see Item 1A. "Risk Factors" of Amendment 2 to our Registration Statement on Form 10 filed June 28, 2011.
These forward-looking statements are made as of the date of this press release and, except as expressly required by applicable law, we assume no obligation to update or revise them to reflect new events or circumstances.
Conference Call
WisdomTree will discuss its results and operational highlights during a conference call on Friday, July 29, 2011 at 9:00 a.m. ET. The call-in number will be (888) 713-4214 passcode 63305846. Anyone outside the U.S. or Canada should call (617) 213- 4866, passcode 63305846. The slides used during the presentation will be available at www.wisdomtree.com/ir. For those unable to join the conference call at the scheduled time, an audio replay will be available on www.wisdomtree.com/ir.
About WisdomTree
WisdomTree Investments, Inc. is a New York-based exchange-traded fund ("ETF") sponsor and asset manager. WisdomTree currently offers 47 ETFs across Equities, Currency Income, Fixed Income and Alternatives asset classes. WisdomTree also licenses its indexes to third parties for proprietary products and offers a platform to promote the use of WisdomTree ETFs in 401(k) plans. WisdomTree currently has approximately $13.4 billion in ETF assets under management. For more information, please visit www.wisdomtree.com.
WisdomTree(R) is the marketing name for WisdomTree Investments, Inc. and its wholly owned subsidiaries WisdomTree Asset Management, Inc. and WisdomTree Retirement Services, Inc. WisdomTree Asset Management, Inc. is a registered investment advisor and is the investment advisor to the WisdomTree Trust and the WisdomTree ETFs. The WisdomTree Trust is a registered open-end investment company. Each WisdomTree ETF is a series of the WisdomTree Trust. WisdomTree Retirement Services, Inc. supports the use of the WisdomTree ETFs in retirement plans by financial professionals.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended % Change From For the Six Months Ended
Jun. 30, Mar. 31, Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30, %
2011 2011 2010 2011 2010 2011 2010 Change
Revenues
ETF advisory $ 16,514 $ 14,273 $ 9,129 15.7 % 80.9 % $ 30,787 $ 17,596 75.0 %
fees
Other income 202 260 226 -22.3 % -10.6 % 462 473 -2.3 %
Total revenues 16,716 14,533 9,355 15.0 % 78.7 % 31,249 18,069 72.9 %
Expenses
Compensation 4,610 5,217 4,600 -11.6 % 0.2 % 9,827 9,855 -0.3 %
and benefits
Fund
management and 5,736 4,162 3,306 37.8 % 73.5 % 9,898 6,703 47.7 %
administration
Marketing and 1,357 972 426 39.6 % 218.5 % 2,329 1,586 46.8 %
advertising
Sales and
business 913 745 746 22.6 % 22.4 % 1,658 1,206 37.5 %
development
Professional
and consulting 1,090 1,359 707 -19.8 % 54.2 % 2,449 1,731 41.5 %
fees
Occupancy,
communication 285 273 289 4.4 % -1.4 % 558 556 0.4 %
and equipment
Depreciation
and 67 65 78 3.1 % -14.1 % 132 155 -14.8 %
amortization
Third party
sharing 1,512 1,128 636 34.0 % 137.7 % 2,640 876 201.4 %
arrangements
Other 457 457 427 0.0 % 7.0 % 914 853 7.2 %
Total expenses 16,027 14,378 11,215 11.5 % 42.9 % 30,405 23,521 29.3 %
Income/(loss)
before 689 155 (1,860 ) 844 (5,452 )
provision for
income taxes
Provision for 317 71 -- 388 --
income taxes
Tax benefit (317 ) (71 ) -- (388 ) --
Net income/ $ 689 $ 155 $ (1,860 ) $ 844 $ (5,452 )
(loss)
Net income/
(loss) per $ 0.01 $ 0.00 $ (0.02 ) $ 0.01 $ (0.05 )
share - basic
Net income/
(loss) per $ 0.01 $ 0.00 $ (0.02 ) $ 0.01 $ (0.05 )
share -
diluted
Weighted
average common 113,950 113,463 111,765 113,708 111,295
shares - basic
Weighted
average common 134,887 134,470 111,765 134,694 111,295
shares -
diluted
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amount)
June 30, December 31,
2011 2010
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 16,386 $ 14,233
Investments 299 1,295
Accounts receivable 5,732 4,825
Other current assets 1,523 642
Total current assets 23,940 20,995
Fixed assets, net 679 756
Investments 7,876 7,300
Other noncurrent assets 74 91
Total assets $ 32,569 $ 29,142
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 7,465 $ 5,714
Compensation and benefits payable 2,581 3,638
Accounts payable and other liabilities 2,423 2,263
Total current liabilities 12,469 11,615
Other noncurrent liabilities 220 292
Total liabilities 12,689 11,907
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 250,000 shares
authorized:
issued: 115,630 and 115,291 1,156 1,152
outstanding:114,112 and 113,132
Additional paid-in capital 160,033 158,236
Accumulated deficit (141,309 ) (142,153 )
Total stockholders' equity 19,880 17,235
Total liabilities and stockholders' equity $ 32,569 $ 29,142
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended
June 30, June 30,
2011 2010
Cash flows from operating activities
Net income/(loss) $ 844 $ (5,452)
Adjustments to reconcile net income/(loss) to net cash
provided by/(used in) operating activities:
Depreciation, amortization and other 132 155
Stock-based compensation 3,624 4,561
Deferred rent (77) (47)
Accretion to interest income 46 (9)
Net change in operating assets and liabilities:
Accounts receivable (907) (229)
Other assets (864) (1)
Fund management and administration payable 1,751 1,134
Compensation and benefits payable (1,057) (651)
Accounts payable and other liabilities 165 2
Net cash provided by/(used in) operating activities 3,657 (537)
Cash flows from investing activities
Purchase of fixed assets (55) (48)
Purchase of investments (2,893) (3,416)
Proceeds from the redemption of investments 3,267 5,056
Net cash provided by investing activities 319 1,592
Cash flows from financing activities
Shares repurchased (1,823) --
Proceeds from exercise of stock options -- 1
Net cash (used in)/provided by financing activities (1,823) 1
Net increase in cash and cash equivalents 2,153 1,056
Cash and cash equivalents - beginning of period 14,233 11,476
Cash and cash equivalents - end of period $ 16,386 $ 12,532
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 11 $ 4
Non-cash investing and financing activities:
Cashless exercise of stock options $ 391 $ 55
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
Three Months Ended For the Six Months
Ended
June March 31, June June 30, June 30,
30, 30,
2011 2011 2010 2011 2010
Total ETFs (in
millions)
Beginning of 11,284 9,891 6,713 9,891 5,979
period assets
Inflows/ 1,699 1,264 121 2,963 703
(outflows)
Market
appreciation/ (49) 129 (594) 80 (442)
(depreciation)
End of period 12,934 11,284 6,240 12,934 6,240
assets
Average assets
during the 12,062 10,294 6,760 11,340 6,536
period
International Developed Equity ETFs (in
millions)
Beginning of 2,613 2,062 1,995 2,062 1,953
period assets
Inflows/ 33 481 (38) 514 (12)
(outflows)
Market
appreciation/ (27) 70 (283) 43 (267)
(depreciation)
End of period 2,619 2,613 1,674 2,619 1,674
assets
Average assets
during the 2,596 2,217 1,907 2,407 2,038
period
Emerging Markets Equity ETFs (in
millions)
Beginning of 3,759 3,780 1,738 3,780 1,431
period assets
Inflows/ 344 60 106 404 336
(outflows)
Market
appreciation/ (115) (81) (116) (196) (39)
(depreciation)
End of period 3,988 3,759 1,728 3,988 1,728
assets
Average assets
during the 3,863 3,617 1,763 3,740 1,536
period
International Sector Equity ETFs (in
millions)
Beginning of 252 249 228 249 358
period assets
Inflows/ 1 (7) (1) (6) (125)
(outflows)
Market
appreciation/ (5) 10 (37) 5 (43)
(depreciation)
End of period 248 252 190 248 190
assets
Average assets
during the 258 246 214 252 279
period
US Equity ETFs
(in millions)
Beginning of 2,218 2,057 1,468 2,057 1,330
period assets
Inflows/ 374 53 85 427 157
(outflows)
Market
appreciation/ 20 108 (147) 128 (81)
(depreciation)
End of period 2,612 2,218 1,406 2,612 1,406
assets
Average assets
during the 2,364 2,165 1,506 2,264 1,456
period
Currency ETFs
(in millions)
Beginning of 1,467 1,179 1,284 1,179 907
period assets
Inflows/ 382 271 (31) 653 347
(outflows)
Market
appreciation/ 47 17 (11) 64 (12)
(depreciation)
End of period 1,896 1,467 1,242 1,896 1,242
assets
Average assets
during the 1,677 1,335 1,370 1,506 1,227
period
International Fixed Income ETFs (in millions)
Beginning of 902 564 564
period assets
Inflows/ 442 335 777
(outflows)
Market
appreciation/ 35 3 38
(depreciation)
End of period 1,379 902 1,379
assets
Average assets
during the 1,195 679 1,094
period
Alternative Strategy ETFs (in
millions)
Beginning of 73 - -
period assets
Inflows/ 123 71 194
(outflows)
Market
appreciation/ (4) 2 (2)
(depreciation)
End of period 192 73 192
assets
Average assets
during the 109 35 77
period
Average ETF assets during the period
Emerging
markets equity 32% 35% 26% 33% 24%
ETFs
International
developed 21% 22% 29% 21% 31%
equity ETFs
US equity ETFs 20% 21% 22% 20% 22%
Currency ETFs 14% 13% 20% 13% 19%
International
fixed income 10% 7% 10%
ETFs
International
sector equity 2% 2% 3% 2% 4%
ETFs
Alternative 1% 0% 1%
strategy ETFs
Total 100% 100% 100% 100% 100%
Average ETF advisory fee during the
period
Alternative 0.95% 0.95% 0.95%
strategy ETFs
Emerging
markets equity 0.70% 0.74% 0.75% 0.70% 0.76%
ETFs
International
sector equity 0.58% 0.58% 0.58% 0.58% 0.58%
ETFs
International
fixed income 0.55% 0.55% 0.55%
ETFs
International
developed 0.54% 0.54% 0.55% 0.54% 0.55%
equity ETFs
Currency ETFs 0.49% 0.49% 0.48% 0.51% 0.47%
US equity ETFs 0.34% 0.34% 0.34% 0.34% 0.34%
Blended total 0.55% 0.56% 0.54% 0.56% 0.54%
Number of ETFs - end of the period
International
developed 14 14 14 14 14
equity ETFs
US equity ETFs 12 12 12 12 12
Currency ETFs 9 9 8 9 8
Emerging
markets equity 4 4 4 4 4
ETFs
International
sector equity 4 4 4 4 4
ETFs
International
fixed income 2 2 2
ETFs
Alternative 1 1 1
strategy ETFs
Total 46 46 42 46 42
Headcount 61 61 54 61 54
Note: Previously issued statistics may be restated due to trade
adjustments
Source: WisdomTree Investments, Inc.
Released July 28, 2011