WisdomTree Announces First Quarter 2010 Results
Total assets under management increase 11% from Q4 2009 to record $7.4 billion
$582 million net inflows for the quarter
22 out of 34 equity funds outperformed benchmarks since inception through Q1
NEW YORK--(BUSINESS WIRE)-- WisdomTree (Pink Sheets: WSDT - News), an exchange-traded fund ("ETF") sponsor and asset manager, today reported a GAAP net loss of $3.6 million in the first quarter of 2010, as compared to $5.0 million for the fourth quarter of 2009. Proforma operating net loss, which excludes stock-based compensation, depreciation and amortization, and interest and investment income, was just below $1.0 million in the first quarter, a 34.3% improvement from a proforma operating net loss of $1.5 million in the fourth quarter.
WisdomTree CEO Jonathan Steinberg commented, "WisdomTree garnered more than 7% of the ETF industry market share in the first quarter and continued to raise assets in emerging market equities and currencies. We continued to build awareness of emerging market currencies as an asset class, led by the WisdomTree Dreyfus Chinese Yuan Fund (CYB). CYB is now our second largest fund and is poised to benefit from the potential appreciation of the Chinese yuan, a trend many investors are watching."
Mr. Steinberg continued, "We are off to a strong start in the second quarter with an impressive $423 million in net inflows already captured as of April 29, 2010. On the back of this progress, the Company has further strengthened its financial position and is now generating positive cash-flow. We continue to balance prudent cost management while still investing in important growth initiatives and we believe we are positioned to see significant operating leverage in the business going forward."
Assets Under Management and Performance
As of March 31, 2010, assets under management ("AUM") managed by WisdomTree or against WisdomTree Indexes was $7.4 billion, up 11% and ETF AUM was $6.7 billion, up 12% from December 31, 2009. Net inflows into WisdomTree ETFs were $582 million in the first quarter, primarily in emerging market currency and emerging market equity ETFs. Included in this amount was $152 million of outflows related to previously announced fund liquidations which occurred on March 29, 2010.
WisdomTree's fundamentally weighted ETFs experienced relatively strong investment performance through the first quarter. Approximately 78% of the $5.4 billion invested in WisdomTree's 34 equity ETFs on March 31, 2010 were in funds that, since their respective inceptions, have outperformed their comparable benchmarks through that date. 22 of WisdomTree's 34 equity ETFs have outperformed their comparable benchmarks since inception and through the first quarter of 2010. For more information about WisdomTree ETFs, please click here or visit www.wisdomtree.com.
Recent Business Activity
On March 29, 2010, WisdomTree completed the planned closure and liquidation of 10 ETFs.
On April 1, 2010, the WisdomTree Japan Total Dividend Fund (DXJ) was renamed the WisdomTree Japan Hedged Equity Fund and began to hedge its Japanese yen exposure. Since the change was made, DXJ has taken in approximately $38 million.
On April 27, 2010, nine of WisdomTree's ETFs were cross-listed in Mexico on the Bolsa Mexicana De Valores.
First Quarter Financial Highlights
Comparison to the fourth quarter of 2009
Total revenues for the quarter increased 13.7% to a record $8.7 million as compared to $7.6 million in the fourth quarter. Average ETF assets under management increased 16% in the first quarter as compared to the fourth quarter primarily due to $582 million of net inflows as well as $152 million of market appreciation. Included in the quarter were fund liquidations of $152 million which occurred on March 29, 2010. The average advisory fee earned during the first quarter and fourth quarter was 0.54%.
Total expenses decreased to $12.3 million from $12.8 million in the fourth quarter primarily due to lower stock issuance costs, marketing and business development and fund management and administration expenses. Partly offsetting these decreases were higher compensation and benefits and professional fees. Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses increased 5.7% to $9.7 million from $9.2 million in the fourth quarter.
-- Compensation and benefits expenses increased 10.1% to $5.3 million from $4.8 million in the first quarter primarily due to an increase in accrued incentive compensation due to higher levels of inflows, as well as payroll taxes associated with vesting of restricted stock. -- Fund management and administration expenses decreased 7.8% to $3.4 million from $3.7 million in the fourth quarter. Included in the first quarter was a one-time reduction adjustment of $0.2 million related to the Company's previously announced fund closures. In addition, fund administration related expenses decreased due to cost efficiency changes initiated in the Company's fund operations as well as lower index calculation fees as a result of consolidating vendors. Partly offsetting these decreases was an increase in fund related legal expenses. -- Marketing and business development expenses decreased 22.9% to $1.6 million from $2.1 million in the fourth quarter. This expense was higher in the fourth quarter of last year due to increased levels of television advertising to support the Company's emerging market currency and emerging market equity sales efforts as compared to the first quarter of this year. In addition, the fourth quarter included a one-time charge of $0.2 million to write off an intangible asset. -- Professional fees increased 62.3% to $1.0 million in the first quarter as compared $0.6 million in fourth quarter primarily due to strategic corporate consulting. -- Occupancy, communications and equipment expenses increased 7.2% to $0.3 million in the first quarter from $0.2 million in the fourth quarter. The fourth quarter of last year included a one-time reduction of overhead costs related to the Company's sub-leased space. -- Other expenses decreased 66.7% to $0.4 million in the first quarter from $1.3 million in the fourth quarter. The fourth quarter of last year included an expense of $1.0 million related to the Company's final issuance of common stock to Treasury Equity LLC as a result of the satisfaction of certain conditions related to the Company's Currency ETFs. -- Partner sharing arrangements increased to $0.2 million in the first quarter from ($0.04) million in the fourth quarter. Net revenue sharing represents the amount paid to (or received from) the Bank of NY Mellon, after netting revenues and costs, for its collaboration with the Company's Currency ETFs. This amount increased primarily due to significantly higher average AUM as a result of the Company's currency sales efforts. -- Stock based compensation expenses decreased 27.6% to $2.5 million in the first quarter from $3.5 million in the fourth quarter. As referred to above, the fourth quarter of last year included an expense of $1.0 million related to the Company's final issuance of common stock to Treasury Equity LLC as a result of the satisfaction of certain conditions related to the Company's Currency ETFs.
As of March 31, 2010, WisdomTree had total assets of $24.6 million, which consisted primarily of cash and cash equivalents of $11.2 million and investments of $7.9 million. WisdomTree has no debt. There were approximately 114.9 million shares issued as of March 31, 2010. Fully diluted shares issued and outstanding were approximately 136.9 million as of March 31, 2010.
First Quarter 2010 Earnings Call Information
WisdomTree will discuss its results and operational highlights during a conference call on Friday, April 30, 2010 at 9:00 a.m. ET. The call-in number will be (888) 679-8037 passcode 45913077. Anyone outside the U.S. or Canada should call (617) 213-4849, passcode 45913077. 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.
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 $7.8 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 March 31, December 31, March 31, 2010 2009 2009 Revenues Advisory fees $ 8,467 $ 7,428 $ 3,558 Other income 217 208 137 Total revenues 8,684 7,636 3,695 Expenses Compensation and benefits 5,255 4,775 4,751 Fund management and administration 3,389 3,674 3,191 Marketing and business development 1,620 2,101 910 Professional fees 1,024 631 303 Occupancy, communication and equipment 267 249 274 Depreciation and amortization 77 88 90 Other 426 1,281 386 Partner sharing arrangements 248 (36 ) 23 Total expenses 12,306 12,763 9,928 Operating loss (3,622 ) (5,127 ) (6,233 ) Interest and investment income 30 95 222 Net loss $ (3,592 ) $ (5,032 ) $ (6,011 ) Net loss per share - basic and diluted $ (0.03 ) $ (0.05 ) $ (0.06 ) Weighted average common shares - basic 110,820 108,374 101,561 and diluted
WISDOMTREE INVESTMENTS, INC NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands) (Unaudited) For the Three Months Ended March 31, December 31, March 31, 2010 2009 2009 Revenues Advisory fees $ 8,467 $ 7,428 $ 3,558 Other income 217 208 137 Total revenues 8,684 7,636 3,695 Operating expenses Compensation and benefits 3,250 2,807 2,732 Fund management and administration 3,389 3,674 3,191 Marketing and business development 1,620 2,101 910 Professional fees 532 130 230 Occupancy, communication and equipment 267 249 274 Other 376 231 334 Partner sharing arrangements 248 (36 ) 23 Total operating expenses 9,682 9,156 7,694 Operating loss (998 ) (1,520 ) (3,999 ) Stock-based compensation 2,547 3,519 2,144 Depreciation and amortization 77 88 90 Interest and investment income (30 ) (95 ) (222 ) Net loss $ (3,592 ) $ (5,032 ) $ (6,011 )
WISDOMTREE INVESTMENTS, INC. CONSOLIDATED BALANCE SHEET (in thousands, except per share amounts) March 31, December 31, 2010 2009 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 11,153 $ 11,476 Investments 2,470 2,627 Accounts receivable 3,223 2,884 Other current assets 1,308 961 Total current assets 18,154 17,948 Fixed assets, net 920 977 Investments 5,457 6,693 Other noncurrent assets 55 85 Total assets $ 24,586 $ 25,703 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Current liabilities: Fund management and administration payable $ 6,360 $ 5,055 Compensation and benefits payable 1,124 2,587 Accounts payable and other liabilities 1,710 1,603 Total current liabilities 9,194 9,245 Other noncurrent liabilities 407 430 Total liabilities 9,601 9,675 STOCKHOLDERS' EQUITY Common stock, par value $0.01; 250,000 shares authorized: issued: 114,988 and 114,535 1,149 1,145 outstanding:111,162 and 110,106 Additional paid-in capital 152,032 149,487 Accumulated deficit (138,196 ) (134,604 ) Total stockholders' equity 14,985 16,028 Total liabilities and stockholders' equity $ 24,586 $ 25,703
WISDOMTREE INVESTMENTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) For the Three Months Ended March 31, March 31, 2010 2009 Cash flows from operating activities Net loss $ (3,592 ) $ (6,011 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation, amortization and other 77 90 Stock-based compensation 2,547 2,144 Deferred rent (23 ) (106 ) Accretion to interest income (9 ) (61 ) Net change in operating assets and liabilities: Accounts receivable (338 ) 170 Other assets (317 ) (316 ) Fund management and administration payable 1,305 1,661 Compensation and benefits payable (1,463 ) (1,277 ) Accounts payable and other liabilities 107 8 Net cash used in operating activities (1,706 ) (3,698 ) Cash flows from investing activities Purchase of fixed assets (20 ) (8 ) Purchase of investments (966 ) (2,786 ) Proceeds from the redemption of investments 2,368 3,780 Net cash provided by investing activities 1,382 986 Cash flows from financing activities Proceeds from exercise of stock options 1 -- Net cash provided by financing activities 1 -- Net decrease in cash and cash equivalents (323 ) (2,712 ) Cash and cash equivalents - beginning of period 11,476 13,275 Cash and cash equivalents - end of period $ 11,153 $ 10,563 Supplemental disclosure of cash flow information Cash paid for income taxes $ 4 $ 3 Non-cash investing and financing activities: Cashless exercise of stock options $ 28 $ --
WisdomTree Investments, Inc. Key Operating Statistics (Unaudited) For the Three Months Ended March 31, December 31, March 31, 2010 2009 2009 Total assets under management (in thousands) ETFs 6,712,983 5,978,605 2,775,647 Non-ETFs 709,048 689,103 399,110 End of period assets 7,422,031 6,667,708 3,174,757 Total ETFs (in thousands) Beginning of period assets 5,978,605 4,901,755 3,180,133 Inflows/(Outflows) 582,239 910,989 22,512 Market appreciation/(depreciation) 152,139 165,861 (426,998 ) End of period assets 6,712,983 5,978,605 2,775,647 Average assets during the period 6,311,374 5,438,756 2,885,250 International Developed Markets ETFs (in thousands) Beginning of period assets 1,953,363 1,794,248 1,339,002 Inflows/(Outflows) 26,262 135,791 (30,953 ) Market appreciation/(depreciation) 15,011 23,324 (188,399 ) End of period assets 1,994,636 1,953,363 1,119,650 Average assets during the period 2,168,987 1,896,356 1,181,812 International Emerging Markets ETFs (in thousands) Beginning of period assets 1,430,965 1,118,413 384,242 Inflows/(Outflows) 229,591 232,308 27,800 Market appreciation/(depreciation) 77,236 80,244 (6,395 ) End of period assets 1,737,792 1,430,965 405,647 Average assets during the period 1,307,976 1,297,459 390,576 Sector ETFs (in thousands) Beginning of period assets 358,187 322,145 246,501 Inflows/(Outflows) (124,240 ) 34,154 (19,625 ) Market appreciation/(depreciation) (5,591 ) 1,888 (36,778 ) End of period assets 228,356 358,187 190,098 Average assets during the period 345,023 338,336 211,554 US ETFs (in thousands) Beginning of period assets 1,329,597 1,271,172 986,568 Inflows/(Outflows) 71,963 (2,514 ) 81,037 Market appreciation/(depreciation) 66,719 60,939 (201,381 ) End of period assets 1,468,279 1,329,597 866,224 Average assets during the period 1,405,777 1,272,642 896,404 Currency ETFs (in thousands) Beginning of period assets 906,493 395,777 223,820 Inflows/(Outflows) 378,663 511,250 (35,747 ) Market appreciation/(depreciation) (1,236 ) (534 ) 5,955 End of period assets 1,283,920 906,493 194,028 Average assets during the period 1,083,611 633,963 204,904 Average ETF assets during the period International Developed Markets ETFs 34 % 35 % 41 % International Emerging Markets ETFs 21 % 24 % 14 % Sector ETFs 5 % 6 % 7 % US ETFs 22 % 23 % 31 % Currency ETFs 18 % 12 % 7 % Average ETF advisory fee during the period International Developed Markets ETFs 0.55 % 0.55 % 0.54 % International Emerging Markets ETFs 0.76 % 0.76 % 0.74 % Sector ETFs 0.58 % 0.58 % 0.58 % US ETFs 0.34 % 0.34 % 0.33 % Currency ETFs 0.47 % 0.46 % 0.42 % Blended Total 0.54 % 0.54 % 0.50 % Number of ETFs - end of the period International Developed Markets ETFs 14 15 14 International Emerging Markets ETFs 4 4 4 Sector ETFs 4 11 11 US ETFs 12 13 13 Currency ETFs 8 9 8 Total 42 52 50 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 March 31, December 31, March 31, 2010 2009 2009 GAAP expenses as reported $ 12,306 $ 12,763 $ 9,928 Less stock-based compensation included in Compensation and benefits (2,005 ) (1,968 ) (2,019 ) Professional fees (492 ) (501 ) (73 ) Other (50 ) (1,050 ) (52 ) Total stock-based compensation expenses (2,547 ) (3,519 ) (2,144 ) Less depreciation and amortization (77 ) (88 ) (90 ) Proforma operating expenses $ 9,682 $ 9,156 $ 7,694 GAAP net loss, as reported $ (3,592 ) $ (5,032 ) $ (6,011 ) Add back stock-based compensation 2,547 3,519 2,144 Add back depreciation and amortization 77 88 90 Less interest and investment income (30 ) (95 ) (222 ) Proforma net loss $ (998 ) $ (1,520 ) $ (3,999 )
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:
-- We have a limited operating history in our investment management business upon which you may evaluate us and we have experienced significant losses to date. -- 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.
Released April 29, 2010