WisdomTree Announces Second Quarter 2010 Results
Company reports positive proforma operating income
$121 million net inflows for the second quarter
21 out of 34 equity funds outperformed competitive benchmarks
since
inception through Q2
NEW YORK--(BUSINESS WIRE)-- WisdomTree (Pink Sheets: WSDT), an exchange-traded fund ("ETF") sponsor and asset manager, today reported a GAAP net loss of $1.9 million in the second quarter of 2010, as compared to $3.6 million for the first quarter of 2010. Proforma operating income, which excludes stock-based compensation, depreciation and amortization, and interest and investment income, was $0.2 million in the second quarter, as compared to a proforma operating loss of $1.0 million in the first quarter.
WisdomTree CEO Jonathan Steinberg commented, "We are extremely pleased to report record revenues and, significantly, our first quarter of positive operating income. These are just some of the important milestones we have achieved during the quarter. We are encouraged to see our business performing well and our expectations remain high for the future."
Recent Business Highlights
On July 21, 2010, the WisdomTree India Earnings Fund (EPI) surpassed $1 billion in AUM.
The Company diversified its product line: registration statements for a commodity currency fund and an emerging market local debt fund became effective during the quarter.
On April 27, 2010, nine of WisdomTree's ETFs were cross-listed in Mexico on the Bolsa Mexicana De Valores.
Assets Under Management and Performance
As of June 30, 2010, assets under management ("AUM") managed by WisdomTree or against WisdomTree Indexes was $6.9 billion, down 7% and ETF AUM was $6.2 billion, down 7% from March 31, 2010. Net inflows into WisdomTree ETFs were $121 million in the second quarter, primarily in emerging market and US equity ETFs.
WisdomTree's fundamentally weighted ETFs continue to experience relatively strong investment performance through the second quarter. Approximately 77% of the $5.0 billion invested in WisdomTree's 34 equity ETFs on June 30, 2010 were in funds that, since their respective inceptions, have outperformed their competitive benchmarks through that date. 21 of WisdomTree's 34 equity ETFs have outperformed their competitive benchmarks since inception and through the second quarter of 2010. For more information about WisdomTree ETFs, please click here or visit www.wisdomtree.com.
Second Quarter Financial Highlights
Comparison to the first quarter of 2010
Revenues
Total revenues for the quarter increased 7.1% to a record $9.3 million as compared to $8.7 million in the first quarter. Average ETF assets under management increased 7% in the second quarter as compared to the first quarter primarily due to $121 million of net inflows, partly offset by $594 million in negative market movement. The average advisory fee earned during the second quarter and first quarter was 0.54%.
Expenses
Total expenses decreased 8.9% to $11.2 million from $12.3 million in the first quarter primarily due to lower compensation, marketing and business development and professional fees. Partly offsetting these decreases were higher third party profit sharing costs. Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses decreased 5.8% to $9.1 million from $9.7 million in the first quarter.
-- Compensation and benefits expenses decreased 12.5% to $4.6 million from
$5.3 million in the second quarter primarily due to a decrease in
accrued incentive compensation due to lower levels of inflows in the
quarter and lower stock-based compensation due to equity awards granted
in prior years fully vesting in the first quarter. Excluding stock-based
compensation, expenses decreased 11.4% primarily due to lower accrued
incentive compensation and payroll taxes associated with restricted
stock vesting in the first quarter.
-- Fund management and administration expenses decreased 2.7% to $3.3
million from $3.4 million in the first quarter, due to lower legal fees
and fund related costs related to fund closures on March 29, 2010.
-- Marketing and business development expenses decreased 27.7% to $1.2
million from $1.6 million in the first quarter due to a planned
reduction in TV advertising during the quarter. The first quarter
included higher levels of TV advertising to support the Company's sales
efforts. Partly offsetting this decrease was an increase in sales
related expenses and new product development expenses.
-- Professional fees decreased 31.1% to $0.7 million in the second quarter
as compared to $1.0 million in first quarter primarily due to lower
variable stock-based compensation expense for advisors as well as lower
strategic corporate consulting expense.
-- Occupancy, communications and equipment expenses remained unchanged at
$0.3 million in the second and first quarter of 2010.
-- Other expenses remained unchanged at $0.4 million in the second and
first quarter of 2010.
-- Third party profit sharing expenses increased to $0.6 million in the
second quarter from $0.2 million in the first. This increase is
primarily due to higher average AUM and revenues as well as lower levels
of direct expenses related to the Company's Currency ETFs as compared to
the first quarter. Third party profit sharing arrangements represents
the amount paid to (or received from) the Bank of New York Mellon, after
netting revenues and direct costs, for its collaboration with the
Company's Currency ETFs.
-- Stock-based compensation expenses decreased 20.9% to $2.0 million in the
second quarter from $2.5 million in the first quarter due to equity
awards granted in prior years fully vesting in the first quarter as well
as lower variable expense due to a decline in the Company's stock price.
Year-to-Date Results
Total revenues more than doubled to $18.0 million during the first six months of 2010 from $8.1 million in the comparable period in 2009, as a result of higher asset levels due to higher levels of net inflows and positive market conditions.
Total expenses increased 19.1% to $23.5 million during the first six months of 2010 from $19.8 million in the same period of last year. Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses increased 21.8% to $18.8 million from $15.4 million in the same period last year. This increase was primarily due to higher third party profit sharing arrangements, compensation, marketing and business development and fund management and administration expenses, all related to an increase in assets under management in the first six months of 2010 as compared to 2009.
Balance Sheet
As of June 30, 2010, WisdomTree had total assets of $25.3 million, which consisted primarily of cash and cash equivalents of $12.5 million and investments of $7.7 million. WisdomTree has no debt. There were approximately 115.0 million shares issued as of June 30, 2010. Fully diluted shares issued and outstanding were approximately 136.9 million as of June 30, 2010.
Second Quarter 2010 Earnings Call Information
WisdomTree will discuss its results and operational highlights during a conference call on Thursday, July 29, 2010 at 9:00 a.m. ET. The call-in number will be (888) 713-4213 passcode 49203767. Anyone outside the U.S. or Canada should call (617) 213-4865, passcode 49203767. 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(R) is an exchange-traded fund ("ETF") sponsor and asset manager using its own fundamentally weighted index methodology. 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. Approximately $7.3 billion in assets currently are managed by WisdomTree or are managed against WisdomTree Indexes. For more information, please visit www.wisdomtree.com. WisdomTree 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)
For the Three Months Ended For the Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
Revenues
Advisory fees $ 9,129 $ 8,467 $ 4,290 $ 17,596 $ 7,848
Other income 168 217 $ 151 385 288
Total revenues 9,297 8,684 4,441 17,981 8,136
Expenses
Compensation 4,600 5,255 4,264 9,855 9,015
and benefits
Fund management
and 3,306 3,397 3,205 6,703 6,396
administration
Marketing and
business 1,172 1,620 1,133 2,792 2,043
development
Professional 707 1,024 414 1,731 717
fees
Occupancy,
communication 289 267 281 556 555
and equipment
Depreciation
and 78 77 94 155 184
amortization
Other 427 426 392 853 778
Third party 636 240 40 876 63
profit sharing
Total expenses 11,215 12,306 9,823 23,521 19,751
Operating loss (1,918 ) (3,622 ) (5,382 ) (5,540 ) (11,615 )
Interest and
investment 58 30 185 88 407
income
Net loss $ (1,860 ) $ (3,592 ) $ (5,197 ) $ (5,452 ) $ (11,208 )
Net loss per
share - basic $ (0.02 ) $ (0.03 ) $ (0.05 ) $ (0.05 ) $ (0.11 )
and diluted
Weighted
average common
shares - 111,765 110,820 101,738 111,295 101,650
basic and
diluted
WISDOMTREE INVESTMENTS, INC
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
Revenues
Advisory fees $ 9,129 $ 8,467 $ 4,290 $ 17,596 $ 7,848
Other income 168 217 151 385 288
Total revenues 9,297 8,684 4,441 17,981 8,136
Operating
expenses
Compensation and 2,878 3,250 2,611 6,128 5,343
benefits
Fund management
and 3,306 3,397 3,205 6,703 6,396
administration
Marketing and
business 1,172 1,620 1,133 2,792 2,043
development
Professional 465 532 137 997 367
fees
Occupancy,
communication 289 267 281 556 555
and equipment
Other 377 376 342 753 676
Third party 636 240 40 876 63
profit sharing
Total operating 9,123 9,682 7,749 18,805 15,443
expenses
Proforma
operating income 174 (998 ) (3,308 ) (824 ) (7,307 )
/ (loss)
Stock-based 2,014 2,547 1,980 4,561 4,124
compensation
Depreciation and 78 77 94 155 184
amortization
Interest and
investment (58 ) (30 ) (185 ) (88 ) (407 )
income
Net loss $ (1,860 ) $ (3,592 ) $ (5,197 ) $ (5,452 ) $ (11,208 )
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
June 30, December 31,
2010 2009
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 12,532 $ 11,476
Investments 1,800 2,627
Accounts receivable 3,113 2,884
Other current assets 977 961
Total current assets 18,422 17,948
Fixed assets, net 870 977
Investments 5,890 6,693
Other noncurrent assets 70 85
Total assets $ 25,252 $ 25,703
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 6,189 $ 5,055
Compensation and benefits payable 1,936 2,587
Accounts payable and other liabilities 1,605 1,603
Total current liabilities 9,730 9,245
Other noncurrent liabilities 383 430
Total liabilities 10,113 9,675
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 250,000 shares
authorized:
issued: 115,019 and 114,535 1,150 1,145
outstanding:112,253 and 110,106
Additional paid-in capital 154,045 149,487
Accumulated deficit (140,056 ) (134,604 )
Total stockholders' equity 15,139 16,028
Total liabilities and stockholders' equity $ 25,252 $ 25,703
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
For the Six Months Ended
June 30, June 30,
2010 2009
Cash flows from operating activities
Net loss $ (5,452 ) $ (11,208 )
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation, amortization and other 155 184
Stock-based compensation 4,561 4,124
Deferred rent (47 ) (138 )
Accretion to interest income (9 ) (86 )
Net change in operating assets and liabilities:
Accounts receivable (229 ) (224 )
Other assets (1 ) (272 )
Fund management and administration payable 1,134 (1,884 )
Compensation and benefits payable (651 ) (699 )
Accounts payable and other liabilities 2 28
Net cash used in operating activities (537 ) (10,175 )
Cash flows from investing activities
Purchase of fixed assets (48 ) (282 )
Purchase of investments (3,416 ) (6,785 )
Proceeds from the redemption of investments 5,056 13,262
Net cash provided by investing activities 1,592 6,195
Cash flows from financing activities
Proceeds from exercise of stock options 1 --
Net cash provided by financing activities 1 --
Net increase (decrease) in cash and cash equivalents 1,056 (3,980 )
Cash and cash equivalents - beginning of period 11,476 13,275
Cash and cash equivalents - end of period $ 12,532 $ 9,295
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 4 $ 3
Non-cash investing and financing activities:
Cashless exercise of stock options $ 55 $ --
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
Total assets
under
management (in
thousands)
ETFs 6,240,452 6,712,983 3,663,004 6,240,452 3,663,004
Non-ETFs 628,702 709,048 478,717 628,702 478,717
End of period 6,869,154 7,422,031 4,141,721 6,869,154 4,141,721
assets
Total ETFs (in
thousands)
Beginning of 6,712,983 5,978,605 2,775,647 5,978,605 3,180,133
period assets
Inflows/ 120,981 582,239 280,825 703,220 303,337
(outflows)
Market
appreciation/ (593,512 ) 152,139 606,532 (441,373 ) 179,534
(depreciation)
End of period 6,240,452 6,712,983 3,663,004 6,240,452 3,663,004
assets
Average assets
during the 6,760,290 6,311,374 3,349,826 6,535,834 3,117,538
period
International
Developed
Markets ETFs
(in thousands)
Beginning of 1,994,636 1,953,363 1,119,650 1,953,363 1,339,002
period assets
Inflows/ (38,449 ) 26,262 (27,338 ) (12,187 ) (58,291 )
(outflows)
Market
appreciation/ (281,852 ) 15,011 231,479 (266,841 ) 43,080
(depreciation)
End of period 1,674,335 1,994,636 1,323,791 1,674,335 1,323,791
assets
Average assets
during the 1,906,595 2,168,987 1,295,741 2,037,792 1,238,777
period
International
Emerging
Markets ETFs
(in thousands)
Beginning of 1,737,792 1,430,965 405,647 1,430,965 384,242
period assets
Inflows/ 106,441 229,591 192,536 336,032 220,336
(outflows)
Market
appreciation/ (115,845 ) 77,236 160,366 (38,609 ) 153,971
(depreciation)
End of period 1,728,388 1,737,792 758,549 1,728,388 758,549
assets
Average assets
during the 1,763,321 1,307,976 596,753 1,535,649 493,664
period
Sector ETFs (in
thousands)
Beginning of 228,356 358,187 190,098 358,187 246,501
period assets
Inflows/ (947 ) (124,240 ) (8,358 ) (125,187 ) (27,983 )
(outflows)
Market
appreciation/ (37,533 ) (5,591 ) 40,345 (43,124 ) 3,567
(depreciation)
End of period 189,876 228,356 222,085 189,876 222,085
assets
Average assets
during the 214,148 345,023 210,826 279,586 211,189
period
US ETFs (in
thousands)
Beginning of 1,468,279 1,329,597 866,224 1,329,597 986,568
period assets
Inflows/ 85,148 71,963 15,456 157,111 96,493
(outflows)
Market
appreciation/ (147,096 ) 66,719 157,800 (80,377 ) (43,581 )
(depreciation)
End of period 1,406,331 1,468,279 1,039,480 1,406,331 1,039,480
assets
Average assets
during the 1,506,111 1,405,777 1,001,301 1,455,944 948,853
period
Currency ETFs
(in thousands)
Beginning of 1,283,920 906,493 194,028 906,493 223,820
period assets
Inflows/ (31,212 ) 378,663 108,529 347,451 72,782
(outflows)
Market
appreciation/ (11,186 ) (1,236 ) 16,542 (12,422 ) 22,497
(depreciation)
End of period 1,241,522 1,283,920 319,099 1,241,522 319,099
assets
Average assets
during the 1,370,115 1,083,611 245,205 1,226,863 225,055
period
Average ETF
assets during
the period
International
developed 29 % 34 % 39 % 31 % 40 %
markets ETFs
International
emerging 26 % 21 % 18 % 24 % 16 %
markets ETFs
Sector ETFs 3 % 5 % 6 % 4 % 7 %
US ETFs 22 % 22 % 30 % 22 % 30 %
Currency ETFs 20 % 18 % 7 % 19 % 7 %
Total 100 % 100 % 100 % 100 % 100 %
Average ETF
advisory fee
during the
period
International
developed 0.55 % 0.55 % 0.54 % 0.55 % 0.54 %
markets ETFs
International
emerging 0.75 % 0.76 % 0.75 % 0.76 % 0.75 %
markets ETFs
Sector ETFs 0.58 % 0.58 % 0.58 % 0.58 % 0.58 %
US ETFs 0.34 % 0.34 % 0.33 % 0.34 % 0.33 %
Currency ETFs 0.47 % 0.47 % 0.44 % 0.47 % 0.43 %
Blended total 0.54 % 0.54 % 0.51 % 0.54 % 0.51 %
Number of ETFs
- end of the
period
International
developed 14 14 14 14 14
markets ETFs
International
emerging 4 4 4 4 4
markets ETFs
Sector ETFs 4 4 11 4 11
US ETFs 12 12 13 12 13
Currency ETFs 8 8 9 8 9
Total 42 42 51 42 51
Note: Previously issued statistics may be restated due to trade adjustments
GAAP to Non-GAAP Reconciliation 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 this non-GAAP financial measurement 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 and are therefore unlikely to be comparable to similar measures presented by other companies. These non-GAAP financial measures should be considered in the context with our GAAP results. We have disclosed our results excluding certain non-operating items. We consider stock-based compensation, depreciation and amortization and interest and investment income as non-operating items. Management excludes these costs when measuring our financial performance as they are non-cash charges or not directly related to our business of being an index developer and ETF sponsor. As the company is currently incurring net losses, management focuses on its cash related expenses of being an index developer and ETF sponsor in measuring the financial health of its business and making related decisions. However, stock-based compensation has been and will continue to be for the foreseeable future, a significant recurring expense in our business and stock-based compensation is an important part of our employees' compensation and impacts their performance.
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
GAAP to NON-GAAP RECONCILIATION
(in thousands)
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2010 2010 2009 2010 2009
GAAP expenses as $ 11,215 $ 12,306 $ 9,823 $ 23,521 $ 19,751
reported
Less stock-based
compensation
included in
Compensation and (1,722 ) (2,005 ) (1,653 ) (3,727 ) (3,672 )
benefits
Professional fees (242 ) (492 ) (277 ) (734 ) (350 )
Other (50 ) (50 ) (50 ) (100 ) (102 )
Total stock-based
compensation (2,014 ) (2,547 ) (1,980 ) (4,561 ) (4,124 )
expenses
Less depreciation (78 ) (77 ) (94 ) (155 ) (184 )
and amortization
Proforma
operating $ 9,123 $ 9,682 $ 7,749 $ 18,805 $ 15,443
expenses
GAAP net loss, as $ (1,860 ) $ (3,592 ) $ (5,197 ) $ (5,452 ) $ (11,208 )
reported
Add back
stock-based 2,014 2,547 1,980 4,561 4,124
compensation
Add back
depreciation and 78 77 94 155 184
amortization
Less interest and (58 ) (30 ) (185 ) (88 ) (407 )
investment income
Proforma
operating income $ 174 $ (998 ) $ (3,308 ) $ (824 ) $ (7,307 )
/ (loss)
Forward Looking Statements
Statements in this Press Release regarding WisdomTree Investments, Inc. that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speaks only as of the date made. We have no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect unanticipated events or circumstances occurring after the date of such statements. Forward-looking statements are subject to known and unknown risks, uncertainties and other important factors, some of which are listed below, that could cause actual results or outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. In assessing the forward-looking statements contained herein, readers are urged to carefully read the following risks and considerations:
-- Our ability to become profitable is dependent upon our ability to
increase our assets under management and to control our expenses.
-- Changes in the equity markets have a direct impact on our assets under
management. A downturn in the equity markets can result in a significant
reduction in assets under management, which, in turn, directly reduces
our revenues.
-- The mix of our assets under management could be subject to significant
fluctuations and could adversely affect our revenues.
-- Poor investment performance of our ETFs is likely to lead to a reduction
in our assets under management and a reduction in our revenues.
-- If our reputation is harmed we could suffer losses in revenue.
-- The asset management industry is highly competitive and most of our
competitors are larger companies with greater resources.
-- We rely very heavily on third-party vendors, such as BNY Mellon,
Standard & Poor's, and Bloomberg, to provide us with services that are
very important to our business. If any of those vendors decided to
terminate their relationship with us, we might experience a disruption
in our ability to do business while we retain an alternative vendor.
-- A failure in our operational systems or infrastructure, or those of the
third-party vendors, could disrupt our operations, damage our
reputation, and reduce our revenues.
-- Our business is subject to extensive regulation, and compliance failures
and changes in regulation could adversely affect us.
-- We depend on key personnel and the loss of such personnel could disrupt
our ability to develop new product and conduct our business.
-- Our principal stockholders, including our directors and officers,
control a large percentage of our shares of common stock and can control
our corporate actions.
Past performance is no indication of future results.
Source: WisdomTree
Released July 28, 2010