WisdomTree Announces Fourth Quarter and Year-End 2009 Results
Total Assets under management increase 22% from Q3 to record $6.7 billion; up 83% for 2009
$911 million net inflows for the quarter, $1.8 billion total net inflows for 2009
26 out of 42 equity funds outperformed benchmarks since inception through 2009
NEW YORK--(BUSINESS WIRE)-- WisdomTree (Pink Sheets: WSDT), an innovative exchange-traded fund ("ETF") sponsor and asset manager, today reported a GAAP net loss of $5.0 million in the fourth quarter of 2009, flat with the third quarter. Proforma operating net loss, which excludes stock-based compensation, depreciation and amortization, and interest and investment income, was $1.5 million in the fourth quarter, a 37.7% improvement from a proforma operating net loss of $2.4 million in the third quarter. For the full year, net loss was $21.2 million compared to $27.0 million in 2008. Proforma operating net loss for the full year was $11.3 million, a 39.8% improvement from proforma operating net loss of $18.7 million in 2008.
WisdomTree CEO Jonathan Steinberg commented, "WisdomTree achieved our best fourth quarter in Company history. We are encouraged to see the market responding to our innovations in the emerging markets - namely the industry's first India, and emerging markets small cap ETFs, as well as the first "1940 Act" family of currency ETFs which collectively were responsible for the majority of the $911 million net inflows in the fourth quarter."
Mr. Steinberg continued, "Our agility proved to be an asset during a challenging year; we pared down operating costs without impeding our ability to grow existing funds and continued to develop innovative products. In fact, we are closer than ever to becoming cash flow positive at a time when the ETF industry, as a whole, is poised for mainstream acceptance."
Assets Under Management and Performance
As of December 31, 2009, assets under management ("AUM") managed by WisdomTree or against WisdomTree Indexes by third parties under license from WisdomTree was $6.7 billion and ETF AUM was $6.0 billion, both up 22% from September 30, 2009. Net inflows into WisdomTree ETFs were $911 million in the fourth quarter primarily in Emerging Market Currency and Emerging Market Equity ETFs. For the full year, ETF AUM increased 88% and net inflows were $1.8 billion.
WisdomTree's fundamentally weighted ETFs experienced relatively strong investment performance through the fourth quarter. Approximately 76% of the $5.1 billion invested in WisdomTree's 42 equity ETFs on December 31, 2009 were in funds that, since their respective inceptions, have outperformed their benchmarks through that date. 26 of WisdomTree's 42 equity ETFs outperformed their comparable benchmarks since inception and through the fourth quarter of 2009. For more information about WisdomTree ETFs, please click here or visit www.wisdomtree.com.
Recent Business Activity
-- On January 29, 2010, the Company announced the closure of 10 funds that
collectively represented approximately 3% of ETF AUM as of that date, to
liquidate by the end of the first quarter 2010.
-- On January 22, the Company announced that effective after the close of
business on March 31, 2010, the WisdomTree Japan Total Dividend Fund
(DXJ) will be renamed the WisdomTree Japan Hedged Equity Fund and will
begin to hedge Japanese yen exposure.
-- On December 31, 2009, the Company launched the WisdomTree International
Hedged Equity Fund (HEDJ).
-- On December 30, 2009, the Company filed for the WisdomTree Rising Dollar
Fund and the WisdomTree Commodity Currency Fund.
Fourth Quarter Financial Highlights
Comparison to the third quarter of 2009
Revenues
Total revenues for the fourth quarter increased 33.6% to a record $7.6 million as compared to $5.7 million in the third quarter. Average ETF assets under management increased 30% in the fourth quarter as compared to the third quarter primarily due to $911 million of net inflows as well as $166 million of market appreciation. The average advisory fee earned during the fourth quarter was 0.54%, up from 0.53% in the third quarter primarily due to higher inflows into the Company's Emerging Market ETFs.
Expenses
Total expenses increased 18.1% to $12.8 million from $10.8 million in the third quarter primarily due to higher marketing related expenses and stock-based compensation expenses. Excluding stock-based compensation, depreciation and amortization charges, proforma operating expenses increased 12.3% to $9.2 million from $8.2 million in the third quarter.
-- Compensation and benefits expenses decreased 7.3% to $4.8 million from
$5.2 million in the third quarter primarily due to lower stock-based
compensation. Excluding stock-based compensation, compensation and
benefits expense decreased 2.4% to $2.8 million in the fourth quarter
from $2.9 million due to lower annual incentive compensation than
anticipated in the third quarter.
-- Fund management and administration expenses increased 10.8% to $3.7
million from $3.3 million in the third quarter due to higher average
asset balances.
-- Marketing and business development expenses increased 88.8% to $2.1 from
$1.1 million in the third quarter primarily due to increased television
advertising during the quarter to support the Emerging Market and
Currency ETF sales campaigns.
-- Professional fees increased 46.1% to $0.6 million in the fourth quarter
as compared $0.4 million in third quarter. Excluding stock based
compensation, professional fees decreased 31.9% to $0.1 million from
$0.2 million primarily due to lower corporate consulting expenses.
-- Occupancy, communications and equipment expenses decreased 12.0% to $0.2
million in the fourth quarter from $0.3 million in the third quarter due
to lower overhead costs.
-- Other expenses increased $0.8 million to $1.2 million in the fourth
quarter from $0.4 million in the third quarter, primarily as a result of
the Company's final issuance of common stock to Treasury Equity LLC for
satisfaction of certain conditions related to the Company's Currency
ETFs. Other expenses also increased due to one-time charges to terminate
certain contracts with vendors.
Full-Year Results
Total revenues decreased 2.7% to $21.5 million during the year ended December 31, 2009 from $22.1 million in the comparable period in 2008 primarily due to lower average assets levels experienced in the first quarter of 2009, which is partly offset by the significant increases in AUM experienced in the fourth quarter of the year.
Total expenses decreased 14.5% to $43.3 million during the year ended December 31, 2009 from $50.7 million in the same period of last year. Excluding stock-based compensation and depreciation and amortization charges, proforma operating expenses decreased 19.7% to $32.8 million from $40.8 million over the comparable period. This was primarily due to lower discretionary advertising spending as a result of negative market conditions during the year. Also decreasing were fund-related costs as a result of lower average assets under management during the first quarter of 2009 as compared to the same period in 2008.
Balance Sheet
As of December 31, 2009, WisdomTree had total assets of $25.7 million, which consisted primarily of cash and cash equivalents of $11.5 million and investments of $9.3 million. WisdomTree has no debt. There were approximately 114.5 million shares issued as of December 31, 2009. Fully diluted shares issued and outstanding were approximately 135.9 million as of December 31, 2009.
Fourth Quarter 2009 Earnings Call Information
WisdomTree will discuss its results and operational highlights during a conference call on Tuesday, February 9 at 9:00 a.m. ET. The call-in number will be (888) 679-8034 passcode 44922793. Anyone outside the U.S. or Canada should call (617) 213-4847, passcode 44922793. 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 innovative 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 $6.6 billion in assets currently are managed by WisdomTree or are managed against WisdomTree Indexes by third parties under license from WisdomTree. 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 Twelve Months
Ended
December September December December December
31, 30, 31, 31, 31,
2009 2009 2008 2009 2008
(Audited)
Revenues
Advisory fees $ 7,428 $ 5,536 $ 4,056 $ 20,812 $ 21,643
Other income 208 180 165 676 431
Total revenues 7,636 5,716 4,221 21,488 22,074
Expenses:
Compensation 4,775 5,153 2,750 18,943 20,338
and benefits
Fund
management and 3,674 3,317 3,910 13,387 15,167
administration
Marketing and
business 2,101 1,113 989 5,257 9,122
development
Professional 631 432 295 1,780 1,871
fees
Occupancy,
communication 249 283 363 1,087 1,564
and equipment
Depreciation
and 88 88 90 360 337
amortization
Other 1,245 423 1,030 2,509 2,257
Total expenses 12,763 10,809 9,427 43,323 50,656
Operating loss (5,127 ) (5,093 ) (5,206 ) (21,835 ) (28,582 )
Interest and
investment 95 105 245 607 1,537
income
Net loss $ (5,032 ) $ (4,988 ) $ (4,961 ) $ (21,228 ) $ (27,045 )
Net loss per
share - basic $ (0.05 ) $ (0.05 ) $ (0.05 ) $ (0.21 ) $ (0.27 )
and diluted
Weighted
average common 108,374 101,857 100,955 103,397 100,236
shares - basic
and diluted
WISDOMTREE INVESTMENTS, INC
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
For the Three Months Ended For the Twelve Months Ended
December September December December 31, December 31,
31, 30, 31,
2009 2009 2008 2009 2008
Revenues
Advisory fees $ 7,428 $ 5,536 $ 4,056 $ 20,812 $ 21,643
Other income 208 180 165 676 431
Total revenues 7,636 5,716 4,221 21,488 22,074
Operating
expenses:
Compensation 2,807 2,877 1,030 11,026 12,392
and benefits
Fund
management and 3,674 3,317 3,910 13,387 15,167
administration
Marketing and
business 2,101 1,113 989 5,257 9,122
development
Professional 130 191 420 688 1,478
fees
Occupancy,
communication 249 283 363 1,087 1,564
and equipment
Other 195 375 490 1,309 1,050
Total
operating 9,156 8,156 7,202 32,754 40,773
expenses
Operating loss (1,520 ) (2,440 ) (2,981 ) (11,266 ) (18,699 )
Stock-based 3,519 2,565 2,135 10,209 9,546
compensation
Depreciation
and 88 88 90 360 337
amortization
Interest and
investment (95 ) (105 ) (245 ) (607 ) (1,537 )
income
Net loss $ (5,032 ) $ (4,988 ) $ (4,961 ) $ (21,228 ) $ (27,045 )
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
December 31, December 31,
2009 2008
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 11,476 $ 13,275
Investments 2,627 4,593
Accounts receivable 2,884 1,530
Other current assets 961 875
Total current assets 17,948 20,273
Fixed assets, net 977 1,266
Investments 6,693 13,191
Other long-term assets 85 126
Total assets $ 25,703 $ 34,856
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Fund management and administration payable $ 5,055 $ 8,966
Compensation and benefits payable 2,587 2,012
Accounts payable and other liabilities 1,603 1,207
Total current liabilities 9,245 12,185
Other liabilities 430 615
Total liabilities 9,675 12,800
Stockholders' equity
Common stock, par value $0.01; 250,000,000 shares
authorized:
issued: 114,535,630 and 105,244,385 1,145 1,052
outstanding: 110,105,507 and 101,339,143
Additional paid-in capital 149,487 134,383
Accumulated other comprehensive income (3 )
Accumulated deficit (134,604 ) (113,376 )
Total stockholders' equity 16,028 22,056
Total liabilities and stockholders' equity $ 25,703 $ 34,856
WISDOMTREE INVESTMENTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
For the Twelve Months Ended
December 31, December 31,
2009 2008
(Audited)
Cash flows from operating activities
Net loss $ (21,228 ) $ (27,045 )
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation, amortization and other 583 675
Stock-based compensation 10,209 9,546
Loss on sub-lease -- 139
Deferred rent (185 ) (36 )
Accretion to interest income (68 ) 111
Net change in operating assets and liabilities:
Accounts receivable (1,354 ) 468
Other assets (45 ) 579
Fund management and administration payable (3,911 ) 2,600
Compensation and benefits payable 575 (1,531 )
Other accounts payable and other liabilities 396 (1,121 )
Net cash used in operating activities (15,028 ) (15,615 )
Cash flows from investing activities
Purchase of fixed assets (295 ) (703 )
Purchase of investments (7,290 ) (16,809 )
Proceeds from the redemption of investments 15,825 31,260
Net cash provided by investing activities 8,240 13,748
Cash flows from financing activities
Net proceeds from sale of common stock 4,989 --
Proceeds from exercise of stock options and -- 4
warrants
Net cash provided by financing activities 4,989 4
Net decrease in cash and cash equivalents (1,799 ) (1,863 )
Cash and cash equivalents - beginning of period 13,275 15,138
Cash and cash equivalents - end of period $ 11,476 $ 13,275
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 3 $ 5
WisdomTree Investments, Inc.
Key Operating Statistics (Unaudited)
For the Three Months Ended For the Twelve Months
Ended
December September December December December 31,
31, 30, 31, 31,
2009 2009 2008 2009 2008
Total assets
under
management (in
thousands)
ETFs 5,978,605 4,901,755 3,180,133 5,978,605 3,180,133
Non-ETFs 689,103 567,627 462,513 689,103 462,513
End of period 6,667,708 5,469,382 3,642,646 6,667,708 3,642,646
assets
Total ETFs (in
thousands)
Beginning of 4,901,755 3,663,004 4,074,954 3,180,133 4,558,796
period assets
Inflows/ 910,989 558,437 29,955 1,772,764 906,847
(Outflows)
Market
appreciation/ 165,861 680,314 (924,776 ) 1,025,708 (2,285,510 )
(depreciation)
End of period 5,978,605 4,901,755 3,180,133 5,978,605 3,180,133
assets
Average assets
during the 5,438,756 4,181,938 3,176,375 3,963,943 4,327,160
period
International
ETFs (in
thousands)
Beginning of 2,912,661 2,082,340 2,301,003 1,723,244 2,985,606
period assets
Inflows/ 368,099 400,985 10,011 931,129 284,914
(Outflows)
Market
appreciation/ 103,568 429,336 (587,770 ) 729,955 (1,547,276 )
(depreciation)
End of period 3,384,328 2,912,661 1,723,244 3,384,328 1,723,244
assets
Average assets
during the 3,193,815 2,397,470 1,763,032 2,264,042 2,552,438
period
Sector ETFs (in
thousands)
Beginning of 322,145 222,085 361,435 246,501 546,565
period assets
Inflows/ 34,154 52,241 (32,180 ) 58,413 (47,184 )
(Outflows)
Market
appreciation/ 1,888 47,819 (82,754 ) 53,273 (252,880 )
(depreciation)
End of period 358,187 322,145 246,501 358,187 246,501
assets
Average assets
during the 338,336 268,661 262,956 257,344 453,033
period
US ETFs (in
thousands)
Beginning of 1,271,172 1,039,480 983,435 986,568 1,026,625
period assets
Inflows/ (2,514 ) 42,970 241,244 136,949 409,325
(Outflows)
Market
appreciation/ 60,939 188,722 (238,111 ) 206,080 (449,382 )
(depreciation)
End of period 1,329,597 1,271,172 986,568 1,329,597 986,568
assets
Average assets
during the 1,272,642 1,163,833 844,368 1,083,545 984,204
period
Currency/Fixed
Income ETFs (in
thousands)
Beginning of 395,777 319,099 429,081 223,820 -
period assets
Inflows/ 511,250 62,241 (189,120 ) 646,273 259,792
(Outflows)
Market
appreciation/ (534 ) 14,437 (16,141 ) 36,400 (35,972 )
(depreciation)
End of period 906,493 395,777 223,820 906,493 223,820
assets
Average assets
during the 633,963 351,974 306,019 359,012 337,485
period
Average ETF
assets during
the period
International 59 % 58 % 55 % 57 % 59 %
ETFs
Sector ETFs 6 % 6 % 8 % 7 % 10 %
US ETFs 23 % 28 % 27 % 27 % 23 %
Currency/Fixed 12 % 8 % 10 % 9 % 8 %
Income ETFs
Average ETF
advisory fee
during the
period
International 0.63 % 0.62 % 0.59 % 0.62 % 0.58 %
ETFs
Sector ETFs 0.58 % 0.58 % 0.58 % 0.58 % 0.58 %
US ETFs 0.34 % 0.33 % 0.34 % 0.33 % 0.34 %
Currency/Fixed 0.46 % 0.44 % 0.42 % 0.44 % 0.43 %
Income ETFs
Blended Total 0.54 % 0.53 % 0.51 % 0.52 % 0.52 %
Number of ETFs
International 19 18 18 19 18
ETFs
Sector ETFs 11 11 11 11 11
US ETFs 13 13 13 13 13
Currency/Fixed 9 9 8 9 8
Income ETFs
Total 52 51 50 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 For the Twelve Months Ended
December September December 31, December 31, December 31,
31, 30,
2009 2009 2008 2009 2008
GAAP
expenses as $ 12,763 $ 10,809 $ 9,427 $ 43,323 $ 50,656
reported
Less
Stock-Based
Compensation
included in:
Compensation (1,968 ) (2,276 ) (1,720 ) (7,917 ) (7,946 )
and benefits
Professional (501 ) (241 ) 125 (1,092 ) (393 )
fees
Other (1,050 ) (48 ) (540 ) (1,200 ) (1,207 )
Total
stock-based (3,519 ) (2,565 ) (2,135 ) (10,209 ) (9,546 )
compensation
expenses
Less
depreciation (88 ) (88 ) (90 ) (360 ) (337 )
and
amortization
Proforma
operating $ 9,156 $ 8,156 $ 7,202 $ 32,754 $ 40,773
expenses
GAAP net
loss, as $ (5,032 ) $ (4,988 ) $ (4,961 ) $ (21,228 ) $ (27,045 )
reported
Add back
stock-based 3,519 2,565 2,135 10,209 9,546
compensation
Add back
depreciation 88 88 90 360 337
and
amortization
Less
interest and (95 ) (105 ) (245 ) (607 ) (1,537 )
investment
income
Proforma net $ (1,520 ) $ (2,440 ) $ (2,981 ) $ (11,266 ) $ (18,699 )
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:
-- 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.
Source: WisdomTree
Released February 8, 2010