8-K
false 0000880631 0000880631 2022-07-27 2022-07-27

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 27, 2022

 

 

WisdomTree Investments, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-10932   13-3487784

(State or other jurisdiction

of incorporation)

 

Commission

File Number:

 

(IRS Employer

Identification No.)

250 West 34th Street

3rd Floor

New York, NY 10119

(Address of principal executive offices, including zip code)

(212) 801-2080

(Registrant’s telephone number, including area code)

 

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

 

Trading
Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.01 par value   WETF   The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02.

Results of Operations and Financial Condition

On July 29, 2022, WisdomTree Investments, Inc. (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2022. A copy of the press release containing this information is being furnished as Exhibit 99.1 to this Report on Form 8-K and is incorporated herein by reference.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section and shall not be deemed incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended.

 

Item 8.01.

Other Events

On July 27, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.03 per share of common stock, payable on August 24, 2022 to stockholders of record as of the close of business on August 10, 2022. A copy of the press release issued in connection with the dividend is attached as Exhibit 99.1 to this Report on Form 8-K and is incorporated herein by reference.

 

Item 9.01.

Financial Statements and Exhibits

(d) Exhibits:

 

Exhibit 99.1    Press Release, dated July 29, 2022
Exhibit 104    Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    WisdomTree Investments, Inc.
Date: July 29, 2022     By:  

/s/ Bryan Edmiston

      Bryan Edmiston
      Chief Financial Officer

 

3

EX-99.1

Exhibit 99.1

LOGO

WisdomTree Announces Second Quarter 2022 Results - Diluted Earnings Per Share of $0.05 ($0.07, as adjusted)

New York, NY – (GlobeNewswire) – July 29, 2022 – WisdomTree Investments, Inc. (NASDAQ: WETF) today reported financial results for the second quarter of 2022.

$8.0 million net income ($11.3(1) million net income, as adjusted), see “Non-GAAP Financial Measurements” for additional information.

$74.3 billion of ending AUM, a decrease of 6.4% arising from market depreciation, partly offset by net inflows.

$3.9 billion of net inflows, primarily driven by inflows into our fixed income products.

0.39% average advisory fee, a decrease of 1 basis point due to AUM mix shift.

$77.3 million of operating revenues, a decrease of 1.4% due to a lower average advisory fee.

79.2% gross margin(1), a 1 point decrease from the previous quarter due to product launches and higher transaction-based fees.

20.5% operating income margin (23.1%(1) as adjusted), a 2.1 point decrease (2.6 point decrease, as adjusted(1)). Our unadjusted operating income margin is impacted by $2.0 million of expenses incurred in responding to an activist campaign. On May 25, 2022, we entered into a cooperation agreement and therefore we do not anticipate incurring any significant activist campaign-related expenses during the remainder of this year.

$0.03 quarterly dividend declared, payable on August 24, 2022 to stockholders of record as of the close of business on August 10, 2022.

Update from Jonathan Steinberg, WisdomTree CEO

“I’m very pleased with WisdomTree’s execution of our strategy and our ability to navigate a difficult macro backdrop. We are one of very few asset managers generating strong organic growth, and we expect that momentum will continue as client engagement remains high. Additionally, we remain focused on the diversification, growth and performance of our robust lineup of products, model portfolios and solutions. Our digital assets rollout remains on track, and our responsible DeFi approach to digital assets, our trusted brand and opportunities arising from the “Crypto Winter” has us well-positioned for success in this space. There is a massive runway for sustainable growth ahead of us, and I am confident in WisdomTree’s ability to execute moving forward.”

Update from Jarrett Lilien, WisdomTree COO and President

“WisdomTree’s perpetual focus is on growth — both today’s and tomorrow’s — team and efficiency. I am proud of our continued innovation and controlling what we can in this challenging market environment. We are generating best-in-class organic growth but more importantly, we have built a franchise poised for sustainable growth going forward. Our ETF business is extremely scalable with robust incremental margins, and we expect our operating leverage will deliver improving margins as the market normalizes and our AUM scales higher. Strong sustainable growth and momentum today and our digital asset initiatives to drive future growth have us both enthusiastic and optimistic about the future.”

 

1


OPERATING AND FINANCIAL HIGHLIGHTS

 

     Three Months Ended  
     June 30,
2022
    Mar. 31,
2022
    Dec. 31,
2021
    Sept. 30,
2021
    June 30,
2021
 

Consolidated Operating Highlights ($ in billions):

          

AUM—end of period

     $74.3       $79.4       $77.5       $72.8       $73.9  

Net inflows

     $3.9       $1.3       $1.9       $0.5       $0.9  

Average AUM

     $77.7       $77.8       $76.0       $74.5       $73.6  

Average advisory fee

     0.39%       0.40%       0.40%       0.41%       0.40%  

Consolidated Financial Highlights ($ in millions, except per share amounts):

          

Operating revenues

     $77.3       $78.4       $79.2       $78.1       $75.8  

Net income/(loss)

     $8.0       $(10.3)       $11.2       $5.8       $17.6  

Diluted earnings/(loss) per share

     $0.05       $(0.08)       $0.07       $0.04       $0.11  

Operating income margin

     20.5%       22.6%       28.5%       31.0%       31.3%  

As Adjusted (Non-GAAP(1)):

          

Gross margin

     79.2%       80.2%       80.5%       80.6%       81.0%  

Net income, as adjusted

     $11.3       $14.1       $15.7       $16.3       $16.8  

Diluted earnings per share, as adjusted

     $0.07       $0.09       $0.10       $0.10       $0.10  

Operating income margin, as adjusted

     23.1%       25.7%       28.5%       31.0%       31.3%  

RECENT BUSINESS DEVELOPMENTS

Company News

 

   

In May 2022, we expanded our Board with two new independent directors, and we implemented governance enhancements, including the termination of our stockholders rights plan and submission of board declassification for stockholder approval.

 

   

Also in May 2022, we entered into an agreement with Fireblocks to build on our technology stack for our new blockchain-native mobile app, WisdomTree Prime.

 

   

In June 2022, for the second year in a row, we won ‘Asset Manager Website of the Year’ at the 2022 Mutual Fund & ETF Awards.

 

   

In July 2022, WisdomTree Europe was certified as one of the UK’s ‘Best Workplaces for Women’ by Great Place to Work UK.

Product News

 

   

In May 2022, staking was activated for WisdomTree Solana (SOLW), a process by which a network participant gets selected to add the latest batch of transactions to the blockchain and earn crypto in exchange.

 

   

In June 2022, we extended passporting for products issued by WisdomTree Multi Asset Issuer to cover Belgium, Denmark, Finland, France, the Netherlands, Poland, Spain and Sweden. This allowed a larger range of products, including short-and-leveraged and commodities products, to be accessible across the European Union.

 

2


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,
2022
    Mar. 31,
2022
    Dec. 31,
2021
    Sept. 30,
2021
    June 30,
2021
    June 30,
2022
    June 30,
2021
 

Operating Revenues:

              

Advisory fees

   $ 75,586     $ 76,517     $ 77,441     $ 76,400     $ 74,169     $ 152,103     $ 144,211  

Other income

     1,667       1,851       1,734       1,712       1,606       3,518       2,820  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     77,253       78,368       79,175       78,112       75,775       155,621       147,031  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expenses:

              

Compensation and benefits

     24,565       24,787       23,178       22,027       20,331       49,352       42,958  

Fund management and administration

     16,076       15,494       15,417       15,181       14,367       31,570       28,314  

Marketing and advertising

     3,894       4,023       4,565       2,925       3,594       7,917       6,600  

Sales and business development

     3,131       2,609       2,668       2,935       2,159       5,740       4,304  

Contractual gold payments

     4,446       4,450       4,262       4,250       4,314       8,896       8,584  

Professional fees

     4,308       4,459       2,099       1,583       1,921       8,767       3,934  

Occupancy, communications and equipment

     1,049       753       725       1,163       1,266       1,802       2,741  

Depreciation and amortization

     53       47       45       185       256       100       508  

Third-party distribution fees

     1,818       2,212       1,830       1,873       2,130       4,030       3,473  

Other

     2,109       1,845       1,823       1,787       1,752       3,954       3,323  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     61,449       60,679       56,612       53,909       52,090       122,128       104,739  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     15,804       17,689       22,563       24,203       23,685       33,493       42,292  

Other Income/(Expenses):

              

Interest expense

     (3,733     (3,732     (3,740     (3,729     (2,567     (7,465     (4,863

Gain/(loss) on revaluation of
deferred consideration—gold payments

     2,311       (17,018     (3,048     1,737       497       (14,707     3,329  

Interest income

     770       794       864       689       225       1,564       456  

Impairments

                       (15,853                 (303

Other losses and gains, net

     (4,474     (24,707     (1,368     (714     49       (29,181     (5,844
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) before income taxes

     10,678       (26,974     15,271       6,333       21,889       (16,296     35,067  

Income tax expense/(benefit)

     2,673       (16,713     4,084       500       4,259       (14,040     2,290  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss)

   $ 8,005     $ (10,261   $ 11,187     $ 5,833     $ 17,630     $ (2,256   $ 32,777  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings/(loss) per share—basic

   $ 0.05 (2)    $ (0.08 )(2)    $ 0.07 (2)    $ 0.04     $ 0.11 (2)    $ (0.02 )(2)    $ 0.20 (2) 

Earnings/(loss) per share—diluted

   $ 0.05     $ (0.08 )(2)    $ 0.07     $ 0.04     $ 0.11     $ (0.02   $ 0.20 (2) 

Weighted average common shares—basic

     143,046       142,782       142,070       142,070       145,542       142,915       145,652  

Weighted average common shares—diluted

     158,976       142,782       159,826       159,213       164,855       142,915       163,062  

As Adjusted (Non-GAAP(1))

              

Total operating expenses

   $ 59,425     $ 58,244     $ 56,612     $ 53,909     $ 52,090      

Operating income

   $ 17,828     $ 20,124     $ 22,563     $ 24,203     $ 23,685      

Income before income taxes

   $ 14,498     $ 17,674     $ 19,968     $ 20,991     $ 21,253      

Income tax expense

   $ 3,241     $ 3,611     $ 4,232     $ 4,674     $ 4,458      

Net income

   $ 11,257     $ 14,063     $ 15,736     $ 16,317     $ 16,795      

Earnings per share—diluted

   $ 0.07     $ 0.09     $ 0.10     $ 0.10     $ 0.10      

 

3


QUARTERLY HIGHLIGHTS

Operating Revenues

 

   

Operating revenues decreased 1.4% from the first quarter of 2022 due to a lower average advisory fee.

 

   

Operating revenues increased 2.0% from the second quarter of 2021 due to higher average AUM, partly offset by a lower average advisory fee.

 

   

Our average advisory fee was 0.39%, 0.40% and 0.40% during the second quarter of 2022, the first quarter of 2022 and the second quarter of 2021, respectively.

Operating Expenses

 

   

Operating expenses increased 1.3% from the first quarter of 2022 primarily due to higher fund management and administration costs and higher sales and business development expenses. These increases were partly offset by lower third-party distribution fees.

 

   

Operating expenses increased 18.0% from the second quarter of 2021 primarily due to higher incentive compensation and headcount, higher professional fees including $2.0 million incurred in response to an activist campaign, higher fund management and administration costs and higher sales and business development expenses. These increases were partly offset by lower occupancy expenses, lower depreciation and amortization expenses and lower third-party distribution fees.

Other Income/(Expenses)

 

   

Interest expense was essentially unchanged from the first quarter of 2022. This expense increased 45.4% from the second quarter of 2021 due to a higher level of debt outstanding, partly offset by a lower effective interest rate.

 

   

We recognized a non-cash gain on revaluation of deferred consideration of $2.3 million during the second quarter of 2022. The gain was due to lower spot gold prices, partly offset by a steepening of the forward-looking gold curve. 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 income was essentially unchanged from the first quarter of 2022. Interest income increased 242.2% from the second quarter of 2021 due to an increase in our securities owned.

 

   

Other net losses were $4.5 million for the second quarter of 2022 and included losses on our securities owned of $4.2 million. Gains and losses also generally arise from the sale of gold earned from management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items.

Income Taxes

 

   

Our effective income tax rate for the second quarter of 2022 was 25.0%, resulting in income tax expense of $2.7 million. Our tax rate differs from the federal statutory rate of 21% primarily due to a valuation allowance on losses recognized on securities owned and non-deductible compensation. These items were partly offset by a non-taxable gain on revaluation of deferred consideration and a lower tax rate on foreign earnings.

 

   

Our adjusted effective income tax rate was 22.4%(1).

SIX MONTH HIGHLIGHTS

 

   

Operating revenues increased 5.8% as compared to 2021 due to higher average AUM, partly offset by a lower average advisory fee.

 

   

Operating expenses increased 16.6% as compared to 2021 primarily due to higher incentive compensation and headcount, higher professional fees including $4.5 million incurred in response to an activist campaign, higher fund management and administration costs, as well as higher sales and business development expenses, higher marketing expenses and higher third-party distribution fees. These increases were partly offset by lower occupancy expenses and lower depreciation and amortization expenses.

 

   

Significant items reported in other income/(expense) in 2022 include: an increase in interest expense of 53.5% due to a higher level of debt outstanding; a non-cash loss on revaluation of deferred consideration of $14.7 million; an increase in interest income of 243.0% due to an increase in our securities owned; a non-cash charge of $19.9 million upon the release of tax-related indemnification assets arising from a favorable resolution of certain tax audits as well as the expiration of the statute of limitations (an equal and offsetting benefit was recognized in income tax expense); and losses on our securities owned of $9.3 million. Gains and losses also generally arise from the sale of gold earned on management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items.

 

   

Our effective income tax rate benefit for 2022 was 86.2%, resulting in an income tax benefit of $14.0 million. Our tax rate differs

 

4


 

from the federal statutory rate of 21% primarily due to a reduction in unrecognized tax benefits associated with the release of the

tax-related indemnification asset described above and a lower tax rate on foreign earnings. These items were partly offset by a non-taxable loss on revaluation of deferred consideration and an increase in the deferred tax asset valuation allowance on losses recognized on securities owned.

WEBCAST DETAILS

The conference call and accompanying presentation will be accessible by clicking the Registration Link and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call 10 minutes ahead of the scheduled start time. A replay of the webcast will also be available shortly after the call at http://ir.wisdomtree.com.

ABOUT WISDOMTREE

WisdomTree Investments, Inc., through its subsidiaries in the U.S. and Europe (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, cryptocurrency and alternative strategies. WisdomTree currently has over $74.3 billion in assets under management globally.

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

 

(1)

See “Non-GAAP Financial Measurements.”

(2)

Earnings/(loss) per share (“EPS”) is calculated pursuant to the two-class method as it results in a lower EPS amount as compared to the treasury stock method.

(3)

Cash flows from purchasing securities owned, at fair value of ($29,819) and selling securities owned, at fair value of $5,212 during the six months ended June 30, 2021 that were not acquired specifically for resale or associated with our business activities have been reclassified from operating activities to investing activities to conform to our current presentation in the Consolidated Statements of Cash Flows.

Contact Information:

 

Investor Relations    Media Relations
Jeremy Campbell    Jessica Zaloom
+1.646.522.2602    +1.917.267.3735
Jeremy.campbell@wisdomtree.com    jzaloom@wisdomtree.com

 

5


WisdomTree Investments, Inc.

Key Operating Statistics (Unaudited)

                                                                                              
     Three Months Ended  
     June 30,
2022
    Mar. 31,
2022
    Dec. 31,
2021
    Sept. 30,
2021
    June 30,
2021
 
GLOBAL ETPs ($ in millions)           

Beginning of period assets

   $ 79,390     $ 77,456     $ 72,760     $ 73,923     $ 69,515  

Inflows/(outflows)

     3,852       1,319       1,902       548       931  

Market appreciation/(depreciation)

     (8,941     615       2,809       (1,711     3,481  

Fund closures

     (4     —         (15     —         (4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 74,297     $ 79,390     $ 77,456     $ 72,760     $ 73,923  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 77,731     $ 77,794     $ 75,972     $ 74,535     $ 73,603  

Average advisory fee during the period

     0.39     0.40     0.40     0.41     0.40

Revenue days

     91       90       92       92       91  

Number of ETFs—end of the period

     344       341       329       322       318  
U.S. LISTED ETFs ($ in millions)                               

Beginning of period assets

   $ 48,622     $ 48,210     $ 44,742     $ 45,129     $ 42,163  

Inflows/(outflows)

     4,278       2,250       1,865       612       1,130  

Market appreciation/(depreciation)

     (5,645     (1,838     1,618       (999     1,836  

Fund closures

     —         —         (15     —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 47,255     $ 48,622     $ 48,210     $ 44,742     $ 45,129  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 48,273     $ 47,503     $ 46,944     $ 45,508     $ 44,183  

Number of ETFs—end of the period

     77       77       75       73       73  
EUROPEAN LISTED ETPs ($ in millions)                               

Beginning of period assets

   $ 30,768     $ 29,246     $ 28,018     $ 28,794     $ 27,352  

Inflows/(outflows)

     (426     (931     37       (64     (199

Market appreciation/(depreciation)

     (3,296     2,453       1,191       (712     1,645  

Fund closures

     (4     —         —         —         (4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 27,042     $ 30,768     $ 29,246     $ 28,018     $ 28,794  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 29,458     $ 30,291     $ 29,028     $ 29,027     $ 29,420  

Number of ETPs—end of the period

     267       264       254       249       245  
PRODUCT CATEGORIES ($ in millions)                               

Commodity & Currency

          

Beginning of period assets

   $ 26,301     $ 24,597     $ 23,825     $ 24,772     $ 23,656  

Inflows/(outflows)

     (475     (1,053     (251     (249     (318

Market appreciation/(depreciation)

     (2,201     2,757       1,023       (698     1,434  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 23,625     $ 26,301     $ 24,597     $ 23,825     $ 24,772  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 25,765     $ 25,890     $ 24,423     $ 24,853     $ 25,550  

U.S. Equity

          

Beginning of period assets

   $ 23,738     $ 23,860     $ 21,383     $ 21,285     $ 20,019  

Inflows/(outflows)

     306       779       784       351       191  

Market appreciation/(depreciation)

     (2,986     (901     1,693       (253     1,075  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 21,058     $ 23,738     $ 23,860     $ 21,383     $ 21,285  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 22,366     $ 23,139     $ 22,964     $ 21,792     $ 20,982  

International Developed Market Equity

          

Beginning of period assets

   $ 11,407     $ 11,876     $ 11,163     $ 10,776     $ 9,975  

Inflows/(outflows)

     79       97       440       404       398  

Market appreciation/(depreciation)

     (1,523     (566     273       (17     403  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 9,963     $ 11,407     $ 11,876     $ 11,163     $ 10,776  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 10,687     $ 11,527     $ 11,507     $ 11,130     $ 10,511  

 

6


                                                                                              
     Three Months Ended  
     June 30,
2022
    Mar. 31,
2022
    Dec. 31,
2021
    Sept. 30,
2021
    June 30,
2021
 

Emerging Market Equity

          

Beginning of period assets

   $ 9,991        $ 10,375       $ 10,666       $ 11,519        $ 10,477     

Inflows/(outflows)

     (223     189       (3     (149     531  

Market appreciation/(depreciation)

     (1,382     (573     (288     (704     511  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 8,386     $ 9,991     $ 10,375     $ 10,666     $ 11,519  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 9,155     $ 10,116     $ 10,550     $ 11,038     $ 11,012  

Fixed Income

          

Beginning of period assets

   $ 5,417     $ 4,352     $ 3,525     $ 3,436     $ 3,241  

Inflows/(outflows)

     4,038       1,242       837       115       168  

Market appreciation/(depreciation)

     (264     (177     (10     (26     27  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 9,191     $ 5,417     $ 4,352     $ 3,525     $ 3,436  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 7,425     $ 4,688     $ 4,114     $ 3,497     $ 3,332  

Leveraged & Inverse

          

Beginning of period assets

   $ 1,856     $ 1,775     $ 1,663     $ 1,691     $ 1,519  

Inflows/(outflows)

     90       (2     10       41       (2

Market appreciation/(depreciation)

     (328     83       102       (69     174  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 1,618     $ 1,856     $ 1,775     $ 1,663     $ 1,691  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 1,765     $ 1,830     $ 1,761     $ 1,715     $ 1,664  

Cryptocurrency

          

Beginning of period assets

   $ 383     $ 357     $ 295     $ 229     $ 377  

Inflows/(outflows)

     3       37       28       12       8  

Market appreciation/(depreciation)

     (235     (11     34       54       (156
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 151     $ 383     $ 357     $ 295     $ 229  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 265     $ 324     $ 406     $ 277     $ 300  

Alternatives

          

Beginning of period assets

   $ 293     $ 261     $ 222     $ 198     $ 227  

Inflows/(outflows)

     34       29       56       22       (39

Market appreciation/(depreciation)

     (22     3       (17     2       10  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ 305     $ 293     $ 261     $ 222     $ 198  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 299     $ 275     $ 229     $ 214     $ 231  

Closed ETPs

          

Beginning of period assets

   $ 4     $ 3     $ 18     $ 17     $ 24  

Inflows/(outflows)

     —         1       1       1       (6

Market appreciation/(depreciation)

     —         —         (1     —         3  

Fund closures

     (4     —         (15     —         (4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

   $ —       $ 4     $ 3     $ 18     $ 17  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

   $ 4     $ 5     $ 18     $ 19     $ 21  

Headcount

     264       253       241       235       227  

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

Source: WisdomTree

 

7


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

     June 30,
2022
    Dec. 31,
2021
 
     (Unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 109,736     $ 140,709  

Securities owned, at fair value

     128,852       127,166  

Accounts receivable

     34,061       31,864  

Prepaid expenses

     7,461       3,952  

Income taxes receivable

     1,290       —    

Other current assets

     391       276  
  

 

 

   

 

 

 

Total current assets

     281,791       303,967  

Fixed assets, net

     641       557  

Indemnification receivable

     1,351       21,925  

Securities held-to-maturity

     277       308  

Deferred tax assets, net

     6,067       8,881  

Investments

     26,012       14,238  

Right of use assets—operating leases

     2,034       520  

Goodwill

     85,856       85,856  

Intangible assets

     601,971       601,247  

Other noncurrent assets

     473       361  
  

 

 

   

 

 

 

Total assets

   $ 1,006,473     $ 1,037,860  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

LIABILITIES

    

Current liabilities:

    

Convertible notes—current

   $ 173,325     $ —    

Fund management and administration payable

     20,797       20,661  

Compensation and benefits payable

     18,647       32,782  

Deferred consideration—gold payments

     16,626       16,739  

Operating lease liabilities

     1,093       209  

Income taxes payable

     —         3,979  

Accounts payable and other liabilities

     11,135       9,297  
  

 

 

   

 

 

 

Total current liabilities

     241,623       83,667  

Convertible notes—long term

     146,592       318,624  

Deferred consideration—gold payments

     226,141       211,323  

Operating lease liabilities

     941       328  

Other noncurrent liabilities

     1,351       21,925  
  

 

 

   

 

 

 

Total liabilities

     616,648       635,867  

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: 146,511 and 145,107 at June 30, 2022 and December 31, 2021, respectively

     1,465       1,451  

Additional paid-in capital

     282,017       289,736  

Accumulated other comprehensive (loss)/income

     (1,525     682  

Accumulated deficit

     (24,701     (22,445
  

 

 

   

 

 

 

Total stockholders’ equity

     257,256       269,424  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 1,006,473     $ 1,037,860  
  

 

 

   

 

 

 

 

8


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

     Six Months Ended  
     June 30,
2022
    June 30,
2021(3)
 

Cash flows from operating activities:

    

Net (loss)/income

   $ (2,256   $ 32,777  

Adjustments to reconcile net (loss)/income to net cash provided by operating activities:

    

Advisory and license fees paid in gold, other precious metals and cryptocurrency

     (31,511     (39,341

Loss/(gain) on revaluation of deferred consideration—gold payments

     14,707       (3,329

Losses on securities owned, at fair value

     9,322       696  

Contractual gold payments

     8,896       8,584  

Stock-based compensation

     5,368       5,264  

Deferred income taxes

     3,378       3,367  

Amortization of issuance costs—convertible notes

     1,293       899  

Amortization of right of use asset

     332       1,340  

Depreciation and amortization

     100       508  

Impairments

     —         303  

Other

     120       (372

Changes in operating assets and liabilities:

    

Accounts receivable

     (3,718     (2,622

Prepaid expenses

     (3,613     (2,497

Gold and other precious metals

     23,743       27,959  

Other assets

     (241     (202

Intangibles—software development

     (724     —    

Fund management and administration payable

     423       (896

Compensation and benefits payable

     (13,537     (7,396

Income taxes payable

     (5,235     (1,852

Operating lease liabilities

     (348     (1,658

Accounts payable and other liabilities

     2,043       858  
  

 

 

   

 

 

 

Net cash provided by operating activities

     8,542       22,390  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of securities owned, at fair value

     (32,488     (29,819

Purchase of investments

     (11,863     (5,750

Purchase of fixed assets

     (205     (173

Proceeds from the sale of securities owned, at fair value

     21,455       5,212  

Proceeds from held-to-maturity securities maturing or called prior to maturity

     31       77  
  

 

 

   

 

 

 

Net cash used in investing activities

     (23,070     (30,453
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Dividends paid

     (9,679     (9,865

Shares repurchased

     (3,394     (34,506

Convertible notes issuance costs

     —         (4,297

Proceeds from the issuance of convertible notes

     —         150,000  

Proceeds from exercise of stock options

     —         815  
  

 

 

   

 

 

 

Net cash (used in)/provided by financing activities

     (13,073     102,147  
  

 

 

   

 

 

 

(Decrease)/increase in cash flow due to changes in foreign exchange rate

     (3,372     126  
  

 

 

   

 

 

 

Net (decrease)/increase in cash and cash equivalents

     (30,973     94,210  

Cash and cash equivalents—beginning of period

     140,709       73,425  
  

 

 

   

 

 

 

Cash and cash equivalents—end of period

   $ 109,736       167,635  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

 

Cash paid for income taxes

   $ 7,724       5,846  
  

 

 

   

 

 

 

Cash paid for interest

   $ 6,156     $ 3,719  
  

 

 

   

 

 

 

 

9


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 press release include:

Adjusted Operating Income, Operating Expenses, Income Before Income Taxes, Income Tax Expense, Net Income and Diluted Earnings per Share

We disclose adjusted operating income, operating 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 measurements provides investors with a consistent way to analyze our performance. These non-GAAP financial measurements 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 and changes in the discount rate used to compute the present value of the annual payment obligations 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.

Gains or losses on securities owned: We account for our securities owned as trading securities, which requires these instruments to be measured at fair value with gains and losses reported in net income. In the third quarter of 2021, we began excluding these items when calculating our non-GAAP financial measurements as these securities have become a more meaningful percentage of total assets and the gains and losses introduce volatility in earnings and are not core to our operating business.

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: Unrealized gains and losses recognized on our investments, changes in the deferred tax asset valuation allowance on securities owned, expenses incurred in response to an activist campaign, impairment charges and the remeasurement of contingent consideration payable to us from the sale of our Canadian ETF business.

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 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 measures 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.

 

10


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:    June 30,
2022
    Mar. 31,
2022
    Dec. 31,
2021
    Sept. 30,
2021
    June 30,
2021
 

Net income/(loss), as reported

   $ 8,005     $ (10,261   $ 11,187     $ 5,833     $ 17,630  

Deduct/add back: (Gain)/loss on revaluation of deferred consideration

     (2,311     17,018       3,048       (1,737     (497

Add back: Increase in deferred tax asset valuation allowance on securities owned

     901       2,010       —         —         —    

Add back: Losses on securities owned, net of income taxes

     3,165       3,893       1,501       1,006       —    

Add back: Expenses incurred in response to an activist campaign, net of income taxes

     1,532       1,844       —         —         —    

Add back/deduct: Tax shortfalls/(windfalls) upon vesting and exercise of stock-based compensation awards

     20       (565     —         —         (233

Deduct/add back: Unrealized (gain)/loss recognized on our investments, net of income taxes

     (55     124       —         —         (105

Add back: Impairments, net of income taxes (where applicable)

     —         —         —         12,002       —    

Deduct: Remeasurement of contingent consideration – sale of Canadian ETF business

     —         —         —         (787     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 11,257     $ 14,063     $ 15,736     $ 16,317     $ 16,795  

Weighted average common shares - diluted

     158,976       158,335       159,826       159,213       164,855  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings per share - diluted

   $ 0.07     $ 0.09     $ 0.10     $ 0.10     $ 0.10  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Gross Margin and Gross Margin Percentage:    June 30,
2022
    Mar. 31,
2022
    Dec. 31,
2021
    Sept. 30,
2021
    June 30,
2021
 

Operating revenues

   $ 77,253     $ 78,368     $ 79,175     $ 78,112     $ 75,775  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less: Fund management and administration

     (16,076     (15,494     (15,417     (15,181     (14,367
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

   $ 61,177     $ 62,874     $ 63,758     $ 62,931     $ 61,408  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin percentage

     79.2     80.2     80.5     80.6     81.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Adjusted Operating Income and Adjusted Operating Income Margin:    June 30,
2022
    Mar. 31,
2022
    Dec. 31,
2021
    Sept. 30,
2021
    June 30,
2021
 

Operating revenues

   $ 77,253     $ 78,368     $ 79,175     $ 78,112     $ 75,775  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 15,804     $ 17,689     $ 22,563     $ 24,203     $ 23,685  

Add back: Expenses incurred in response to an activist campaign

     2,024       2,435       —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income

   $ 17,828     $ 20,124     $ 22,563     $ 24,203     $ 23,685  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income margin

     23.1     25.7     28.5     31.0     31.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

11


     Three Months Ended  
Adjusted Total Operating Expenses:    June 30,
2022
    Mar. 31,
2022
    Dec. 31,
2021
    Sept. 30,
2021
    June 30,
2021
 

Total operating expenses

   $ 61,449     $ 60,679     $ 56,612     $ 53,909     $ 52,090  

Deduct: Expenses incurred in response to an activist campaign

     (2,024     (2,435     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted total operating expenses

   $ 59,425     $ 58,244     $ 56,612     $ 53,909     $ 52,090  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Adjusted Income Before Income Taxes:    June 30,
2022
    Mar. 31,
2022
    Dec. 31,
2021
    Sept. 30,
2021
    June 30,
2021
 

Income/(loss) before income taxes

   $ 10,678     $ (26,974   $ 15,271     $ 6,333     $ 21,889  

Deduct/add back: (Gain)/loss on revaluation of deferred consideration

     (2,311     17,018       3,048       (1,737     (497

Add back: Losses on securities owned

     4,180       5,142       1,649       1,329       —    

Add back: Expenses incurred in response to an activist campaign

     2,024       2,435       —         —         —    

Deduct/add back: Unrealized (gain)/loss recognized on investments

     (73     163       —         —         (139

Add back: Impairments

     —         —         —         15,853       —    

Add back: Loss recognized upon reduction of a tax-related indemnification asset

     —         19,890       —         —         —    

Deduct: Remeasurement of contingent consideration – sale of Canadian ETF business

     —         —         —         (787     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income before income taxes

   $ 14,498     $ 17,674     $ 19,968     $ 20,991     $ 21,253  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended  
Adjusted Income Tax Expense and Adjusted Effective Income Tax Rate:    June 30,
2022
    Mar. 31,
2022
    Dec. 31,
2021
    Sept. 30,
2021
    June 30,
2021
 

Adjusted income before income taxes (above)

   $ 14,498     $ 17,674     $ 19,968     $ 20,991     $ 21,253  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense/(benefit)

   $ 2,673     $ (16,713   $ 4,084     $ 500     $ 4,259  

Deduct: Increase in deferred tax asset valuation allowance on securities owned

     (901     (2,010     —         —         —    

Add back: Tax benefit arising from losses on securities owned

     1,015       1,249       148       323       —    

Add back: Tax benefit arising from expenses incurred in response to an activist campaign

     492       591       —         —         —    

Deduct/add back: Tax (expense)/benefit on unrealized gains and losses on investments

     (18     39       —         —         (34

Deduct/add back: Tax (shortfalls)/windfalls upon vesting and exercise of stock-based compensation awards

     (20     565       —         —         233  

Add back: Tax benefit arising from impairments

     —         —         —         3,851       —    

Add back: Tax benefit arising from reduction of a tax-related indemnification asset

     —         19,890       —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income tax expense

   $ 3,241     $ 3,611     $ 4,232     $ 4,674     $ 4,458  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted effective income tax rate

     22.4     20.4     21.2     22.3     21.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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

 

   

the ultimate duration of the COVID-19 pandemic, or the war in Ukraine, and its short-term and long-term impact on our business and the global economy;

 

   

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;

 

   

whether we will experience future growth;

 

   

our ability to develop new products and services and their success;

 

   

our ability to maintain current vendors or find new vendors to provide services to us at favorable costs;

 

   

our ability to successfully implement our digital assets strategy, including WisdomTree Prime, and achieve its objectives;

 

   

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:

 

   

adverse market developments arising from the COVID-19 pandemic could negatively impact our assets under management, resulting in a decline in our revenues and other potential operational challenges;

 

   

declining prices of securities, gold and other 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, including but not limited to a pandemic event such as COVID-19, or the war in Ukraine, may negatively impact revenues and operating margins, and may impede our ability to refinance our debt upon maturity or, increase the cost of borrowing upon a refinancing;

 

   

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 products with exposure to U.S. and international developed markets and we therefore have exposure to domestic and foreign market conditions and are subject to currency exchange rate risks;

 

   

withdrawals or broad changes in investments in our ETPs by investors with significant positions may negatively impact revenues and operating margins;

 

   

over the last few years, we have expanded our business internationally. 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;

 

   

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; and

 

   

actions of activist stockholders against us have been costly and may be disruptive and cause uncertainty about the strategic direction of our business.

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, 2021, as amended.

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.

 

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