EXHIBIT 99.1

WisdomTree Announces Third Quarter 2014 Results

$0.08 diluted net income EPS

Pre-tax income increases 35% and revenues increase 19% from year ago quarter

Declares $0.08 quarterly dividend and $100 million share buyback program

Lowers baseline US tax rate to approximately 38%

New York, NY – (GlobeNewswire) – October 31, 2014 – WisdomTree Investments, Inc. (NASDAQ: WETF), an exchange-traded fund (“ETF”) and exchange-traded product (“ETP”) sponsor and asset manager today reported net income of $10.6 million or $0.08 per diluted EPS in the third quarter. Pre-tax income was $20.3 million in the third quarter, an increase of 35.4% from the third quarter of 2013 and 0.6% from the second quarter of 2014. Pre-tax income is comparable to previous periods since prior to 2014, the Company did not record tax expense because of its net operating losses.

Included in the quarter was a loss of $1.5 million, or $0.01 per diluted EPS, associated with the Company’s European listed ETP business, which was acquired in April 2014. The Company also lowered its US income tax rate to approximately 38% from 45% (see “Income Taxes” for further discussion).

WisdomTree CEO and President Jonathan Steinberg said, “WisdomTree reported another quarter of record revenues and strong financial results. Despite the challenging market, net inflow levels increased from the second quarter to $748 million.”

Mr. Steinberg continued, “The growing scale and positive momentum of our business is driving powerful cash generation. In addition, we are lowering our tax rate which will increase our earnings going forward, further propelling WisdomTree to a position of financial strength. As a result, we believe the time is right to institute a new component of our capital management program.”

Capital Return Program - Quarterly Dividend and Share Buyback

The Company’s Board of Directors declared a quarterly cash dividend of $0.08 per share of the Company’s common stock. The dividend will be paid on November 26, 2014, to stockholders of record as of the close of business on November 12, 2014.

The Board also authorized the Company to purchase up to $100 million of its common stock over three years, including purchases to offset future equity grants made under the Company’s equity plans. Purchases under this program will be made in open market or privately negotiated transactions. This authority may be exercised from time to time and in such amounts as market conditions warrant, and subject to regulatory considerations. The timing and actual number of


shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. The repurchase program may be suspended or terminated at any time without prior notice.

“We have structured a capital management plan which reflects WisdomTree’s strength, strategy and commitment to our shareholders. With $164 million in cash and investments, we are confident we can continue to profitably grow the business and reinvest aggressively for future growth while continuing to generate surplus cash,” added Mr. Steinberg.

Summary Operating and Financial Highlights

 

     Three Months Ended     Change From  
     Sep. 30,     Jun. 30,     Sep. 30,     Jun. 30,     Sep. 30,  
Operating Highlights    2014     2014     2013     2014     2013  

US listed ETFs ($, in billions):

          

AUM

   $ 35.8      $ 35.5      $ 31.4        0.9     14.3

Net inflows/(outflows)

   $ 0.7      $ 0.3      $ 1.2        124.0     (35.5 %) 

Average AUM

   $ 35.6      $ 34.1      $ 30.5        4.1     16.7

Average advisory fee

     0.52     0.51     0.51     0.01        0.01   

Market share of industry inflows

     1.5     0.6     2.2     0.9        (0.7

European listed ETPs ($, in millions):

          

AUM

   $ 123.2      $ 113.2        —          8.8     —     

Net inflows/(outflows)

   $ 19.2      $ 17.7        —          8.7     —     

Average advisory fee

     0.79     0.82     —          (0.03     —     

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

          

Consolidated Results:

          

Total revenues

   $ 47.1      $ 44.1      $ 39.6        6.8     18.9

Pre-tax income

   $ 20.3      $ 20.1      $ 15.0        0.6     35.4

Net income

   $ 10.6      $ 10.6      $ 15.0        0.2     (29.0 %) 

Diluted earnings per share

   $ 0.08      $ 0.08      $ 0.11        —          ($  0. 03) 

Pre-tax margin

     43.0     45.6     37.8     (2.6     5.2   

US listed ETFs:

          

Total revenues

   $ 46.9      $ 43.9      $ 39.6        6.7     18.3

Pre-tax income

   $ 21.8      $ 21.7      $ 15.0        0.6     45.9

Gross margin1 (non-GAAP)

     82.2     82.4     76.9     (0.2     5.3   

Pre-tax margin

     46.6     49.4     37.8     (2.8     8.8   

 

1  Gross margin is defined as total revenues less fund management and administration expenses and third-party sharing arrangements.

 

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Recent Business Developments

 

    On September 18, 2014, WisdomTree announced six of its ETFs are available on Schwab ETF OneSource

 

    On August 12, 2014, WisdomTree announced a strategic alliance with leading Australian ETP provider BetaShares

 

    On October 24, 2014, WisdomTree Europe announced the launch of 4 UCITS ETFs on the London Stock Exchange (LSE)

Assets Under Management and Net Inflows

US listed ETF assets under management (“AUM”) were $35.8 billion at September 30, 2014, up 14.3% from September 30, 2013 primarily due to inflow levels. US listed AUM was up 0.9% from June 30, 2014 primarily due to $0.7 billion of net inflows partly offset by $0.4 billion of negative market movement.

European listed AUM was $123.2 million, up 8.8% from $113.2 million at June 30, 2014 primarily due to $19.2 million of net inflows partly offset by $9.2 million of negative market movement.

Performance

In evaluating the performance of our US listed equity, fixed income and alternative ETFs against actively managed and index based mutual funds and ETFs, 86% of the $35.3 billion invested in our ETFs and 56% (29 of 52) of our ETFs outperformed their comparable Morningstar average since inception as of September 30, 2014.

For more information about WisdomTree ETFs including standardized performance, please click here or visit www.wisdomtree.com.

Third Quarter Financial Discussion

Revenues

Total revenues increased 18.9% from the third quarter of 2013 and 6.8% compared to the second quarter of 2014 to $47.1 million primarily due to higher average AUM and average fee capture. Included in the third quarter was $0.2 million in revenues from our European listed ETPs, which were acquired in April 2014. Our average advisory fee for our US listed ETFs was 0.52% as compared to 0.51% for the third quarter of 2013 and 0.51% in the second quarter of 2014.

Margins

Gross margin for our US listed ETFs, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 82.2% in the third quarter of 2014 as compared to 76.9% in the third quarter of 2013 and 82.4% in the second quarter of 2014. The increase was primarily due to beneficial pricing changes for our fund accounting, administration and custody services, which took effect April 2014.

 

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Pre-tax margin was 43.0% in the third quarter of 2014 as compared to 37.8% in the third quarter of 2013 and 45.6% in the second quarter of 2014. Pre-tax margin for our US listed ETFs was 46.6% in the quarter.

Expenses

Total expenses increased 8.9% from the third quarter of 2013 and 11.9% compared to the second quarter of 2014 to $26.9 million. Included in the quarter was $1.8 million of expenses associated with our European listed ETPs.

 

  Compensation and benefits expense increased 3.5% from the third quarter of 2013 to $10.0 million as lower accrued incentive compensation due to our inflow levels were offset by higher headcount related expenses to support our growth. In addition, we incurred higher compensation costs due to our acquisition of Boost in April 2014. This expense increased 32.3% as compared to the second quarter of 2014 primarily due to higher accrued incentive compensation and headcount related expenses. Our global headcount was 114 at the end of the third quarter of 2014.

 

  Fund management and administration expense decreased 3.7% from the third quarter of 2013 to $8.5 million. This decrease was primarily due to the transfer of our fund accounting, administration and custody services to State Street, despite the higher average AUM. Partly offsetting this decrease was $0.3 million of expenses for our European listed ETPs. This expense increased 8.3% from the second quarter of 2014 primarily due to variable costs related to higher average AUM. We had 69 US listed ETFs and 42 European listed ETPs at the end of the third quarter of 2014.

 

  Marketing and advertising expense increased 64.5% from the third quarter of 2013 and 22.6% from the second quarter of 2014 to $3.3 million primarily due to higher levels of advertising related activities to support our growth.

 

  Sales and business development expense decreased 2.0% from the third quarter of 2013 and 25.9% from the second quarter of 2014 to $1.3 million primarily due to lower spending for sales and product development related initiatives.

 

  Professional and consulting fees increased $0.8 million from the third quarter of 2013 to $1.4 million primarily due to higher strategic corporate consulting costs. This expense decreased 24.8% compared to the second quarter of 2014. The second quarter of 2014 included advisory and other costs associated with our transaction to acquire Boost, which we completed in April 2014.

 

  Occupancy, communication and equipment expense increased 22.0% from the third quarter of 2013 to $0.9 million primarily due to costs for new office space which we began to occupy in January 2014. This expense was relatively unchanged compared to the second quarter of 2014.

 

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  Depreciation and amortization expense increased $0.1 million to $0.2 million from the third quarter of 2013 primarily due to amortization of leasehold improvements for our new office space. This expense was essentially unchanged compared to the second quarter of 2014.

 

  Third-party sharing arrangements expense decreased 50.0% to $0.2 million in the third quarter of 2014 as compared to the third quarter of 2013 primarily due to lower fees to our third party marketing agent in Latin America. This expense was relatively unchanged as compared to the second quarter of 2014.

 

  Other expenses remained relatively unchanged as compared to the third quarter of 2013 and second quarter of 2014 at $1.1 million.

Income Taxes

The Company completed state tax planning which resulted in a reduction of its current baseline operating tax rate in the US from 45% to approximately 38%. As a result, the Company recorded a charge to tax expense to reduce the value of its deferred tax asset, which had previously been recorded at a 45% rate. In addition, the Company accounted for non-deductible expenses associated with its acquisition of Boost in April 2014. As a result of these items, the Company recorded a charge of $1.3 million to tax expense. Management will discuss income taxes further on its conference call.

Balance Sheet

As of September 30, 2014, the Company had total assets of $202.2 million which consisted primarily of cash and cash equivalents of $151.3 million and investments of $12.2 million. There were approximately 131.9 million shares of common stock outstanding as of September 30, 2014. Fully diluted weighted average shares outstanding were 138.3 million for the third quarter.

Conference Call

WisdomTree will discuss its results and operational highlights during a conference call on Friday, October 31, 2014 at 9:00 a.m. ET. The call-in number will be (877) 303-7209. Anyone outside the U.S. or Canada should call (970) 315-0420. The slides used during the presentation will be available at http://ir.wisdomtree.com. For those unable to join the conference call at the scheduled time, an audio replay will be available on http://ir.wisdomtree.com.

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

 

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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:

 

    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;

 

    our ability to develop new products and services;

 

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

 

    our ability to successfully expand our business into non-U.S. markets;

 

    timing of payment of our cash income taxes;

 

    competition in our business; and

 

    the effect of laws and regulations that apply to our business.

Our business is subject to many risks and uncertainties, including without limitation:

 

    We have only a limited operating history and, as a result, recent historical growth may not provide an accurate representation of the growth we may experience in the future, which may make it difficult to evaluate our future prospects.

 

    Challenging market conditions associated with declining prices of securities can adversely affect our business by reducing the market value of the assets we manage or causing customers to sell their fund shares and trigger redemptions.

 

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    Fluctuations in the amount and mix of our AUM may negatively impact revenue and operating margin.

 

    Most of our assets under management are held in our U.S. listed ETFs that invest in foreign securities and we therefore have substantial exposure to foreign market conditions and are subject to currency exchange rate risks.

 

    We derive a substantial portion of our revenue from products invested in emerging markets and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets.

 

    We derive a substantial amount of our revenue from products invested in securities of Japanese companies and are exposed to the market-specific political and economic risks as well as general investor sentiment regarding future growth of those markets and currency fluctuations between the Japanese Yen and the U.S. Dollar.

 

    We derive a majority of our revenue from a limited number of products – in particular one fund, WisdomTree Japan Hedged Equity Fund, that accounted for approximately 30% of our ETF AUM – and, as a result, our operating results are particularly exposed to the performance of those funds, investor sentiment toward the strategies pursued by those funds and our ability to maintain the assets under management of those funds.

 

    Our ETPs and ETFs have a limited track record, and poor investment performance could cause our revenue to decline.

 

    We depend on other third parties to provide many critical services to operate our business and our ETPs and ETFs. The failure of key vendors to adequately provide such services could materially affect our operating business and harm our customers.

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, please see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

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.

About WisdomTree

WisdomTree Investments, Inc., through its subsidiaries in the U.S. and Europe (collectively, “WisdomTree”), is an exchange-traded fund (“ETF”) and exchange-traded product (“ETP”) sponsor and asset manager headquartered in New York. WisdomTree offers products covering equities, fixed income, currencies, commodities and alternative strategies. WisdomTree currently has approximately $35.9 billion in assets under management globally.

 

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

Contact Information:

WisdomTree Investments, Inc.

Stuart Bell / Jessica Zaloom

+1.917.267.3702 / +1.917.267.3735

sbell@wisdomtree.com / jzaloom@wisdomtree.com

 

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WISDOMTREE INVESTMENTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended      % Change From     Nine Months Ended  
     Sep. 30,      Jun. 30,      Sep. 30,      Jun. 30,     Sep. 30,     Sep. 30,      Sep. 30,      %  
     2014      2014      2013      2014     2013     2014      2013      Change  

Revenues

                     

Advisory fees

   $ 46,942       $ 43,938       $ 39,437         6.8     19.0   $ 133,489       $ 105,691         26.3

Other income

     172         190         193         -9.5     -10.9     673         611         10.1
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total revenues

     47,114         44,128         39,630         6.8     18.9     134,162         106,302         26.2

Expenses

                     

Compensation and benefits

     9,990         7,551         9,648         32.3     3.5     26,896         26,577         1.2

Fund management and administration

     8,465         7,818         8,794         8.3     -3.7     25,451         26,123         -2.6

Marketing and advertising

     3,341         2,726         2,031         22.6     64.5     8,645         6,164         40.2

Sales and business development

     1,279         1,727         1,305         -25.9     -2.0     4,307         4,626         -6.9

Professional and consulting fees

     1,383         1,840         542         -24.8     155.2     5,018         1,812         176.9

Occupancy, communication and equipment

     882         853         723         3.4     22.0     2,635         1,691         55.8

Depreciation and amortization

     207         201         84         3.0     146.4     600         249         141.0

Third party sharing arrangements

     187         115         374         62.6     -50.0     312         913         -65.8

Other

     1,123         1,164         1,164         -3.5     -3.5     3,429         3,086         11.1
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total expenses

     26,857         23,995         24,665         11.9     8.9     77,293         71,241         8.5
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Income before taxes

     20,257         20,133         14,965         0.6     35.4     56,869         35,061         62.2

Income tax expense

     9,634         9,531         —           —          —          5,440         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net income

   $ 10,623       $ 10,602       $ 14,965         0.2     -29.0   $ 51,429       $ 35,061         46.7
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Income before taxes per share - basic

   $ 0.15       $ 0.15       $ 0.12           $ 0.43       $ 0.28      

Income before taxes per share - diluted

   $ 0.15       $ 0.15       $ 0.11           $ 0.41       $ 0.25      

Net income per share - basic

   $ 0.08       $ 0.08       $ 0.12           $ 0.39       $ 0.28      

Net income per share - diluted

   $ 0.08       $ 0.08       $ 0.11           $ 0.37       $ 0.25      

Weighted average common shares - basic

     131,778         131,533         126,509             131,418         125,909      

Weighted average common shares - diluted

     138,346         138,258         140,097             138,476         139,805      

 

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WISDOMTREE INVESTMENTS, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

 

     US     European                                         
     Listed     Listed           US Listed Business  
     Business     Business     Total                          % Change From  
     Q3/14     Q3/14     Q3/14     Q3/14      Q2/14      Q3/13      Q2/14     Q3/13  

Revenues

                   

Advisory fees

   $ 46,659      $ 283      $ 46,942      $ 46,659       $ 43,753       $ 39,437         6.6     18.3

Other income

     224        (52     172        224         182         193         23.1     16.1
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total revenues

     46,883        231        47,114        46,883         43,935         39,630         6.7     18.3

Expenses

                   

Compensation and benefits

     9,250        740        9,990        9,250         7,026         9,648         31.7     -4.1

Fund management and administration

     8,139        326        8,465        8,139         7,625         8,794         6.7     -7.4

Marketing and advertising

     3,244        97        3,341        3,244         2,675         2,031         21.3     59.7

Sales and business development

     1,185        94        1,279        1,185         1,653         1,305         -28.3     -9.2

Professional and consulting fees

     945        438        1,383        945         1,026         542         -7.9     74.4

Occupancy, communication and equipment

     809        73        882        809         807         723         0.2     11.9

Depreciation and amortization

     206        1        207        206         199         84         3.5     145.2

Third party sharing arrangements

     187        —          187        187         115         374         62.6     -50.0

Other

     1,088        35        1,123        1,088         1,105         1,164         -1.5     -6.5
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total expenses

     25,053        1,804        26,857        25,053         22,231         24,665         12.7     1.6
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Income/(loss) before taxes

     21,830        (1,573     20,257        21,830         21,704         14,965         0.6     45.9

Income tax expense/(benefit)

     9,662        (28     9,634        9,662         9,873         —           -2.1     n/a   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Net income/(loss)

   $ 12,168      $ (1,545   $ 10,623      $ 12,168       $ 11,831       $ 14,965         2.8     -18.7
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Pretax margin

     46.6       43.0             

Gross margin

     82.2       81.6             

 

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WISDOMTREE INVESTMENTS, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

 

     US     European                            
     Listed     Listed           US Listed Business  
     Business     Business     Total                   %  
     9M/14     9M/14     9M/14     9M/14      9M/13      Change  

Revenues

              

Advisory fees

   $ 133,021      $ 468      $ 133,489      $ 133,021       $ 105,691         26

Other income

     717        (44     673        717         611         17
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total revenues

     133,738        424        134,162        133,738         106,302         26

Expenses

              

Compensation and benefits

     25,631        1,265        26,896        25,631         26,577         -4

Fund management and administration

     24,932        519        25,451        24,932         26,123         -5

Marketing and advertising

     8,497        148        8,645        8,497         6,164         38

Sales and business development

     4,139        168        4,307        4,139         4,626         -11

Professional and consulting fees

     3,766        1,252        5,018        3,766         1,812         108

Occupancy, communication and equipment

     2,516        119        2,635        2,516         1,691         49

Depreciation and amortization

     597        3        600        597         249         140

Third party sharing arrangements

     312        —          312        312         913         -66

Other

     3,335        94        3,429        3,335         3,086         8
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total expenses

     73,725        3,568        77,293        73,725         71,241         3
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Income/(loss) before taxes

     60,013        (3,144     56,869        60,013         35,061         71

Income tax expense/(benefit)

     5,810        (370     5,440        5,810         —           n/a   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net income/(loss)

   $ 54,203      $ (2,774   $ 51,429      $ 54,203       $ 35,061         55
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Pretax margin

     44.9       42.4        

Gross margin

     81.1       80.8        

 

11


WISDOMTREE INVESTMENTS, INC.

CONSOLIDATED BALANCE SHEET

(in thousands, except per share amounts)

 

     September 30,     December 31,  
     2014     2013  
     (Unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 151,287      $ 104,316   

Accounts receivable

     16,268        18,100   

Other current assets

     2,208        1,320   
  

 

 

   

 

 

 

Total current assets

     169,763        123,736   

Fixed assets, net

     10,263        6,252   

Investments

     12,224        11,748   

Deferred tax asset, net

     8,253        —     

Goodwill

     1,676        —     

Other noncurrent assets

     56        55   
  

 

 

   

 

 

 

Total assets

   $ 202,235      $ 141,791   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

LIABILITIES

    

Current liabilities:

    

Fund management and administration payable

   $ 8,833      $ 10,394   

Compensation and benefits payable

     7,062        14,278   

Accounts payable and other liabilities

     4,956        4,384   
  

 

 

   

 

 

 

Total current liabilities

     20,851        29,056   

Other noncurrent liabilities:

    

Acquisition payable

     1,757        —     

Deferred rent payable

     5,326        3,706   
  

 

 

   

 

 

 

Total liabilities

     27,934        32,762   
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

    

Common stock, par value $0.01; 250,000 shares authorized:
issued: 133,516 and 132,247
outstanding: 131,947 and 130,350

     1,335        1,322   

Additional paid-in capital

     198,040        184,201   

Accumulated other comprehensive loss

     (9     —     

Accumulated deficit

     (25,065     (76,494
  

 

 

   

 

 

 

Total stockholders’ equity

     174,301        109,029   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 202,235      $ 141,791   
  

 

 

   

 

 

 

 

12


WISDOMTREE INVESTMENTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

     Nine Months Ended  
     September 30,     September 30,  
     2014     2013  

Cash flows from operating activities

    

Net income

   $ 51,429      $ 35,061   

Non-cash items included in net income:

    

Income tax expense

     5,396        —     

Depreciation and amortization

     600        249   

Stock-based compensation

     6,122        5,186   

Deferred rent

     1,620        111   

Accretion to interest income and other

     (76     108   

Changes in operating assets and liabilities:

    

Accounts receivable

     2,049        (3,683

Other assets

     (811     (720

Fund management and administration payable

     (1,579     3,697   

Compensation and benefits payable

     (7,510     7,235   

Accounts payable and other liabilities

     (590     471   
  

 

 

   

 

 

 

Net cash provided by operating activities

     56,650        47,715   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Purchase of fixed assets

     (4,580     (1,118

Purchase of investments

     (1,384     (3,358

Cash acquired on acquisition

     1,349        —     

Proceeds from the redemption of investments

     868        2,693   
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,747     (1,783
  

 

 

   

 

 

 

Cash flows from financing activities

    

Shares repurchased

     (6,259     (1,413

Proceeds from exercise of stock options

     341        1,349   
  

 

 

   

 

 

 

Net cash used in financing activities

     (5,918     (64
  

 

 

   

 

 

 

Decrease in cash flows due to changes in foreign exchange rate

     (14     —     
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     46,971        45,868   

Cash and cash equivalents - beginning of period

     104,316        41,246   
  

 

 

   

 

 

 

Cash and cash equivalents - end of period

   $ 151,287      $ 87,114   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

Cash paid for taxes

   $ 66      $ 33   
  

 

 

   

 

 

 

 

13


WisdomTree Investments, Inc.

Key Operating Statistics (Unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,     September 30,     September 30,  
     2014     2014     2013     2014     2013  

US LISTED ETFs

          

Total ETFs (in millions)

          

Beginning of period assets

     35,500        33,884        28,975        34,884        18,286   

Inflows/(outflows)

     748        334        1,160        580        12,015   

Market appreciation/(depreciation)

     (425     1,282        1,217        359        1,051   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     35,823        35,500        31,352        35,823        31,352   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     35,554        34,141        30,473        34,518        26,932   

Revenue Days

     92        91        92        273        273   

ETF Industry and Market Share (in billions)

          

ETF industry net inflows

     48.5        57.7        53.7        120.7        121.3   

WisdomTree market share of industry inflows

     1.5     0.6     2.2     0.5     9.9

International Hedged Equity ETFs (in millions)

          

Beginning of period assets

     12,557        12,612        10,270        13,348        1,258   

Inflows/(outflows)

     799        (502     752        285        9,199   

Market appreciation/(depreciation)

     615        447        459        338        1,024   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     13,971        12,557        11,481        13,971        11,481   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     12,654        12,189        11,175        12,631        7,744   

US Equity ETFs (in millions)

          

Beginning of period assets

     8,052        7,505        5,777        7,181        4,371   

Inflows/(outflows)

     84        221        273        494        1,111   

Market appreciation/(depreciation)

     (197     326        221        264        789   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     7,939        8,052        6,271        7,939        6,271   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     8,067        7,721        6,214        7,655        5,502   

Emerging Markets Equity ETFs (in millions)

          

Beginning of period assets

     7,606        6,753        7,172        7,448        7,332   

Inflows/(outflows)

     270        388        286        26        1,111   

Market appreciation/(depreciation)

     (381     465        245        21        (740
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     7,495        7,606        7,703        7,495        7,703   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     7,878        7,088        7,289        7,247        7,719   

International Developed Equity ETFs (in millions)

          

Beginning of period assets

     5,340        4,830        2,633        3,864        2,474   

Inflows/(outflows)

     (452     518        205        878        401   

Market appreciation/(depreciation)

     (394     (8     312        (248     275   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     4,494        5,340        3,150        4,494        3,150   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     5,016        5,135        2,888        4,833        2,782   

Fixed Income ETFs (in millions)

          

Beginning of period assets

     1,376        1,610        2,437        1,906        2,118   

Inflows/(outflows)

     69        (278     (320     (515     266   

Market appreciation/(depreciation)

     (66     44        (22     (12     (289
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     1,379        1,376        2,095        1,379        2,095   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     1,385        1,435        2,246        1,522        2,466   

Currency ETFs (in millions)

          

Beginning of period assets

     406        422        547        979        611   

Inflows/(outflows)

     (35     (21     (48     (605     (98

Market appreciation/(depreciation)

     (9     5        3        (12     (11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     362        406        502        362        502   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     380        413        515        468        586   

Alternative Strategy ETFs (in millions)

          

Beginning of period assets

     163        152        139        158        122   

Inflows/(outflows)

     13        8        12        17        25   

Market appreciation/(depreciation)

     7        3        (1     8        3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     183        163        150        183        150   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     174        160        146        162        133   

Average ETF assets during the period

          

International hedged equity ETFs

     36     36     37     37     29

US equity ETFs

     23     23     20     22     20

Emerging markets equity ETFs

     22     21     24     21     29

International developed equity ETFs

     14     15     9     14     10

Fixed income ETFs

     4     4     7     4     9

Currency ETFs

     1     1     2     1     2

Alternative strategy ETFs

     0     0     1     1     1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average ETF advisory fee during the period

          

Alternative strategy ETFs

     0.94     0.94     0.94     0.94     0.94

Emerging markets equity ETFs

     0.68     0.67     0.66     0.67     0.66

International developed equity ETFs

     0.56     0.57     0.56     0.56     0.56

Fixed income ETFs

     0.55     0.55     0.55     0.55     0.55

International hedged equity ETFs

     0.50     0.50     0.49     0.50     0.49

Currency ETFs

     0.49     0.49     0.50     0.49     0.50

US equity ETFs

     0.35     0.35     0.35     0.35     0.35
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Blended total

     0.52     0.51     0.51     0.52     0.52
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Number of ETFs - end of the period

          

International developed equity ETFs

     17        17        16        17        16   

US equity ETFs

     13        13        13        13        13   

Fixed income ETFs

     12        12        6        12        6   

International hedged equity ETFs

     12        12        4        12        4   

Emerging markets equity ETFs

     7        7        7        7        7   

Currency ETFs

     6        6        5        6        5   

Alternative strategy ETFs

     2        2        2        2        2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     69        69        53        69        53   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EUROPEAN LISTED ETPs

          

Total ETPs (in thousands)

          

Beginning of period assets***

     113,244        96,817          96,817     

Inflows/(outflows)

     19,192        17,658          36,850     

Market appreciation/(depreciation)

     (9,226     (1,231       (10,457  
  

 

 

   

 

 

     

 

 

   

End of period assets

     123,210        113,244          123,210     
  

 

 

   

 

 

     

 

 

   

Average ETP advisory fee during the period

     0.79     0.82       0.80  

Number of ETPs - end of the period

     42        38          42     

Global headcount

     114        103        84        114        84   

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

Source: Investment Company Institute, Bloomberg, WisdomTree

 

*** Q1 and 9 month stats began April 16, 2014

 

14


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. The non-GAAP financial measurements included in this release include gross margin, gross margin percentage and our operating results for our US listed ETF business. 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. We disclose gross margin as a non-GAAP financial measurement to allow investors to analyze our revenues less the direct costs paid to third parties attributable to those revenues. We disclose the results of our US listed ETF business to allow investors to better compare our results to the prior year as in April 2014, we acquired Boost ETP, a UK based ETP sponsor.

 

15


WISDOMTREE INVESTMENTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

GAAP to NON-GAAP RECONCILIATION

(in thousands)

(Unaudited)

 

     Three Months Ended     For the Nine Months Ended  
     Sep. 30,     Jun. 30,     Sep. 30,     Sep. 30,     Sep. 30,  
     2014     2014     2013     2014     2013  

GAAP total revenue

   $ 47,114      $ 44,128      $ 39,630      $ 134,162      $ 106,302   

Fund management and administration

     (8,465     (7,818     (8,794     (25,451     (26,123

Third party sharing arrangements

     (187     (115     (374     (312     (913
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

   $ 38,462      $ 36,195      $ 30,462      $ 108,399      $ 79,266   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin percentage

     81.6     82.0     76.9     80.8     74.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

US listed ETFs:

          

GAAP total revenue

   $ 46,883      $ 43,935         

Fund management and administration

     (8,139     (7,625      

Third party sharing arrangements

     (187     (115      
  

 

 

   

 

 

       

Gross margin

   $ 38,557      $ 36,195         
  

 

 

   

 

 

       

Gross margin percentage

     82.2     82.4      
  

 

 

   

 

 

       

 

16