EXHIBIT 99.1

WisdomTree Announces Second Quarter 2016 Results

$0.03 diluted EPS for the quarter, or $0.07 as adjusted

Declares $0.08 quarterly dividend

New York, NY – (GlobeNewswire) – July 29, 2016 – WisdomTree Investments, Inc. (NASDAQ: WETF), an exchange-traded fund (“ETF”) and exchange-traded product (“ETP”) sponsor and asset manager today reported net income of $3.7 million or $0.03 diluted EPS in the second quarter. Excluding the previously announced charge of $6.0 million related to the Company’s accelerated buyout of minority shareholders in its European business, adjusted net income (a non-GAAP measure1) was $9.6 million or $0.07 diluted EPS. This compares to $24.2 million or $0.18 diluted EPS in the second quarter of last year and $12.1 million or $0.09 diluted EPS in the first quarter of 2016.

WisdomTree CEO and President Jonathan Steinberg said, “Our largest Japan and European based exposures experienced outflows as these markets remained broadly out of favor during the quarter, more than offsetting inflows in domestic equities. We remain focused on our long term strategic growth plans.”

Mr. Steinberg added, “We are excited about the growth opportunities for the ETF industry and believe many of WisdomTree’s recent accomplishments and initiatives position us well for the future. Most recently, we completed the buyout of our European business, entered the fast-growing Canadian ETF market with locally listed funds and announced a global product partnership with the goal of providing investors around the world access to a novel China equity strategy in collaboration with one of the largest asset managers in China.”

 

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Summary Operating and Financial Highlights

 

     Three Months Ended     Change From  
     Jun. 30,
2016
    Mar. 31,
2016
    Jun. 30,
2015
    Mar. 31,
2016
    Jun. 30,
2015
 

Operating Highlights

          

U.S. listed ETFs ($, in billions):

          

AUM

   $ 38.0      $ 44.3      $ 61.3        (14.0 %)      (37.9 %) 

Net inflows/(outflows)

   ($ 4.9   ($ 5.4   $ 6.6        n/a        n/a   

Average AUM

   $ 41.8      $ 45.5      $ 61.2        (8.0 %)      (31.6 %) 

Average advisory fee

     0.52     0.52     0.53     —          (0.01

Market share of industry inflows

     n/a        n/a        15.9     n/a        n/a   

European listed ETPs ($, in millions):

          

AUM

   $ 952.0      $ 885.0      $ 612.7        7.6     55.4

Net inflows

   $ 57.9      $ 193.3      $ 194.6        (70.1 %)      (70.3 %) 

Average advisory fee

     0.68     0.68     0.68     —          —     

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

  

Consolidated Results

          

Total revenues

   $ 56.0      $ 60.9      $ 81.6        (8.0 %)      (31.4 %) 

Net income

   $ 3.7      $ 12.1      $ 24.2        (69.8 %)      (84.9 %) 

Diluted earnings per share

   $ 0.03      $ 0.09      $ 0.18      ($ 0.06   ($ 0.15

Pre-tax margin

     19.9     35.6     50.2     -15.7        -30.3   

Non-GAAP1:

          

Net income, as adjusted

   $ 9.6        —          —          —          —     

Diluted earnings per share, as adjusted

   $ 0.07        —          —          —          —     

Pre-tax margin, as adjusted

     30.6     —          —          —          —     

U.S. listed ETFs

          

Gross margin1 (non-GAAP)

     81.5     82.9     86.4     -1.4        -4.9   

Pre-tax margin

     35.6     40.7     53.2     -5.1        -17.6   

 

2


     Six Months Ended     Change from  
     Jun. 30,
2016
    Jun. 30,
2015
    Jun. 30,
2015
 

Operating Highlights

      

U.S. listed ETFs ($, in billions):

      

AUM

   $ 38.0      $ 61.3        (37.9 %) 

Net inflows/(outflows)

   ($ 10.3   $ 20.1        n/a   

Average AUM

   $ 43.7      $ 53.8        (18.8 %) 

Average advisory fee

     0.52     0.52     —     

Market share of industry inflows

     n/a        20.8     n/a   

European listed ETPs ($, in millions):

      

AUM

   $ 952.0      $ 612.7        55.4

Net inflows

   $ 251.2      $ 368.8        (31.9 %) 

Average advisory fee

     0.68     0.68     —     

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

  

Consolidated Results

      

Total revenues

   $ 116.9      $ 141.7        (17.5 %) 

Net income

   $ 15.7      $ 36.2        (56.6 %) 

Diluted earnings per share

   $ 0.11      $ 0.26      ($ 0.15

Pre-tax margin

     28.1     43.7     -15.6   

Non-GAAP1:

      

Net income, as adjusted

   $ 21.7        —          —     

Diluted earnings per share, as adjusted

   $ 0.16        —          —     

Pre-tax margin, as adjusted

     33.2     —          —     

U.S. listed ETFs

      

Gross margin1 (non-GAAP)

     82.2     85.0     -2.8   

Pre-tax margin

     38.3     46.9     -8.6   

 

3


Recent Business Developments

Company News

 

    In May 2016, the Company announced it completed the buyout of its European business to position it for continued growth; and presented at the William Blair 36th Annual Growth Stock Conference

 

    In June 2016, the Company announced the increase in sales coverage in Germany with key new hires; announced it surpassed $1 billion in AUM in Europe; and celebrated the 10th anniversary of its first ETFs

 

    In July 2016, the Company and ICBC Credit Suisse jointly announced the global product partnership on S&P China 500 index

US Listed Product News

 

    In June 2016, the Company announced six WisdomTree domestic dividend ETFs received a 5-Star overall Morningstar Rating™

 

    In July 2016, the Company announced an index change to the WisdomTree Managed Futures Strategy Fund (WDTI); that ten additional ETFs filed notification with the Financial Services Agency of Japan (FSA); and expanded its offering on Schwab ETF OneSource

European Listed Product News

 

    In May 2016, the Company announced the launch of the Enhanced Commodity UCITS ETF on the London Stock Exchange

 

    In June 2016, the Company announced the launch of the Enhanced Commodity UCITS ETF on the Borsa Italiana and Deutsche Börse Xetra; two Quality Dividend Growth UCITS ETFs on the London Stock Exchange, the Borsa Italiana and Deutsche Börse Xetra; and Boost Volatility and Emerging Markets ETPs on the Deutsche Börse Xetra; announced that its UCITS ETFs are now available in France and Sweden; and broadened the Boost Range of Oil ETPs with cross-listing on the London Stock Exchange

 

    In July 2016, the Company announced the launch of the Eurozone Quality Dividend Growth UCITS ETF on the London Stock Exchange, Borsa Italiana and the Deutsche Börse Xetra

Canadian Listed Product News

 

    In July 2016, the Company announced the launch of its first ETFs in Canada

Assets Under Management and Net Inflows

U.S. listed ETF assets under management (“AUM”) were $38.0 billion at June 30, 2016, down 26.3% from December 31, 2015 primarily due to $10.3 billion of net outflows and $3.5 billion of negative market movement. U.S. listed AUM was down 37.9% from June 30, 2015 primarily due to net outflows in 2016. Net outflows were primarily in our two largest funds, HEDJ and DXJ.

European listed AUM was $952.0 million at June 30, 2016, up 23.0% from December 31, 2015 primarily due to $251.2 million of net inflows. European listed AUM was up 55.4% from June 30, 2015 primarily due to net inflows.

 

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Performance

In evaluating the performance of our U.S. listed equity, fixed income and alternative ETFs against actively managed and index based mutual funds and ETFs, 74% of the $37.2 billion invested in our ETFs and 57% (43 of 76) of our ETFs outperformed their comparable Morningstar average since inception as of June 30, 2016.

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

 

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Second Quarter Financial Discussion

Revenues

Total revenues decreased 31.4% from the second quarter of 2015 and 8.0% from the first quarter of 2016 due to declines in our AUM from outflows in our two largest ETFs and negative market movement. Our average advisory fee remained 0.52% during the quarter.

Margins

Gross margin1 for our U.S. listed ETFs, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 81.5% in the second quarter of 2016 as compared to 86.4% in the second quarter of 2015 and 82.9% in the first quarter of 2016. The decline over these periods was due to lower average AUM as well as the costs due to additional ETF launches.

Pre-tax margin was 19.9% in the second quarter of 2016 as compared to 50.2% in the second quarter of 2015 and 35.6% in the first quarter of 2016. Excluding the European buyout charge, adjusted pre-tax margin1 was 30.6% for the quarter. Pre-tax margin for our U.S. listed ETF business was 35.6% in the second quarter of 2016 as compared to 53.2% in the second quarter of 2015 and 40.7% in the first quarter of 2016.

Expenses

Total expenses increased 10.3% from the second quarter of 2015 and 14.3% from the first quarter of 2016. Excluding the European buyout charge of $6.0 million, adjusted total expenses1 declined 4.4% from the second quarter of 2015 and 1.0% from the first quarter of 2016 as lower compensation was partly offset by higher marketing and sales related spending.

 

  Compensation and benefits expense declined 23.2% from the second quarter of 2015 to $14.3 million due to lower accrued incentive compensation relating to outflows we experienced in the first half partly offset by higher headcount related expenses to support our growth and higher stock based compensation due to equity awards we granted as part of 2015 incentive compensation. Our headcount was 149 in the U.S. and 204 globally at the end of the quarter.

This expense declined 5.8% from the first quarter of 2016 due to lower accrued incentive compensation and higher seasonal taxes due to bonus payments in the first quarter which were partly offset by higher headcount related expenses.

 

  Fund management and administration expense decreased 5.2% from the second quarter of 2015 primarily due to lower fund costs for our U.S. listed ETF business as a result of lower average AUM partly offset by higher costs for additional fund launches by our European business.

 

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This expense increased 5.7% compared to the first quarter of 2016 due to fund costs for our European business partly offset by lower U.S. listed fees due to lower average AUM. We had 99 U.S. listed ETFs and 94 ETPs at the end of the quarter.

 

  Marketing and advertising expense increased 25.9% from the second quarter of 2015 and 19.2% from the first quarter of 2016 to $4.6 million primarily due to higher levels of advertising related activities to support our growth.

 

  Sales and business development expense increased 84.7% from the second quarter of 2015 and 56.7% from the first quarter of 2016 to $3.8 million primarily due to higher spending for sales related initiatives.

 

  Professional and consulting fees decreased 14.9% from the second quarter of 2015 and 51.9% compared to the first quarter of 2016 to $1.4 million due to lower corporate consulting related services and fees associated with our acquisition of the GreenHaven family of commodity ETFs, which was completed in January 2016.

 

  Occupancy, communications and equipment expense increased 31.6% from the second quarter of 2015 to $1.2 million primarily due to technology initiatives and higher costs for our office space in London. This expense was relatively unchanged compared to the first quarter of 2016.

 

  Depreciation and amortization expense increased 48.0% from the second quarter of 2015 to $0.3 million primarily due to higher amortization for leasehold improvements to our New York office space. This expense was essentially unchanged from the first quarter of 2016.

 

  Third-party sharing arrangements expense increased 42.7% from the second quarter of 2015 to $0.7 million due to higher fees to our third party marketing agent in Latin America due to higher AUM. This expense declined 21.8% from the first quarter of 2016 due to lower AUM in Latin America.

 

  Acquisition payment expense was $6.0 million in the second quarter of 2016. In April 2014, WisdomTree expanded into Europe through a 75% majority investment in U.K. based ETP sponsor Boost, with an obligation to buy out the remaining minority investment in four years. In May 2016, WisdomTree accelerated the buyout and completed the purchase of the remaining minority stake and made management changes to drive continued growth. As a result, the Company took a charge of $6.0 million to reflect the accelerated purchase of the remaining 25% stake and other related expenses.

 

  Other expense increased 20.8% from the second quarter of 2015 and 11.7% from the first quarter of 2016 to $1.8 million due to higher general and administrative expenses.

 

  Income tax expense was $7.5 million for the second quarter of 2016. Our overall effective tax rate was 67.3% which was significantly higher than prior periods due to the non-deductibility of the European buyout charge. Excluding the buyout charge, the overall adjusted effective tax rate1 was 43.8%.

 

7


Six Months Results

Total revenues declined 17.5% to $116.9 million due to lower average AUM as a result of outflows in our two largest ETFs and negative market movement. Total expenses increased 5.4% to $84.0 million. Excluding the European buyout charge of $6.0 million, adjusted total expenses1 declined 2.1% as lower compensation was partly offset by higher marketing and sales related expenses.

Balance Sheet

As of June 30, 2016, the Company had total assets of $247.8 million which consisted primarily of cash and cash equivalents of $174.9 million and investments of $18.7 million. There were approximately 134.1 million shares of common stock outstanding as of June 30, 2016. Fully diluted weighted average shares outstanding were 137.3 million for the quarter.

Quarterly Dividend

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 August 24, 2016 to stockholders of record as of the close of business on August 10, 2016.

Conference Call

WisdomTree will discuss its results and operational highlights during a conference call on Friday, July 29, 2016 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 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

 

8


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:

 

    Financial growth in recent years may not provide an accurate representation of the financial growth we may experience in the future, which may make it difficult to evaluate our future prospects.

 

    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.

 

    Fluctuations in the amount and mix of our AUM may negatively impact revenues and operating margins.

 

    We derive a substantial portion of our revenues from two products – the WisdomTree Europe Hedged Equity Fund and the WisdomTree Japan Hedged Equity Fund – and, as a result, our operating results are particularly exposed to the performance of these funds and our ability to maintain the AUM of these funds, as well as investor sentiment toward investing in the funds’ strategies and market-specific and political and economic risk.

 

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    Most of our AUM 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.

 

    Many of our ETPs and ETFs 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 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, 2015.

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., Europe, Canada and Japan (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 $40.8 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.”

Contact Information

Investor Relations:

Stuart Bell

+1.917.267.3702

sbell@wisdomtree.com

Media Relations:

Jessica Zaloom / Melissa Chiles

+1.917.267.3735 / +1.917.267.3797

jzaloom@wisdomtree.com / mchiles@wisdomtree.com

 

10


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended      % Change From     Six Months Ended  
     Jun. 30,
2016
     Mar. 31,
2016
     Jun. 30,
2015
     Mar. 31,
2016
    Jun. 30,
2015
    Jun. 30,
2016
     Jun. 30,
2015
     %
Change
 

Revenues:

                     

Advisory fees

   $ 55,931       $ 60,615       $ 81,320         -7.7     -31.2   $ 116,546       $ 141,189         -17.5

Other income

     50         263         239         -81.0     -79.1     313         511         -38.7
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total revenues

     55,981         60,878         81,559         -8.0     -31.4     116,859         141,700         -17.5

Expenses:

                     

Compensation and benefits

     14,343         15,226         18,669         -5.8     -23.2     29,569         38,270         -22.7

Fund management and administration

     10,621         10,044         11,208         5.7     -5.2     20,665         21,376         -3.3

Marketing and advertising

     4,566         3,832         3,628         19.2     25.9     8,398         6,704         25.3

Sales and business development

     3,834         2,447         2,076         56.7     84.7     6,281         3,976         58.0

Professional and consulting fees

     1,365         2,835         1,604         -51.9     -14.9     4,200         3,067         36.9

Occupancy, communications and equipment

     1,241         1,222         943         1.6     31.6     2,463         1,861         32.3

Depreciation and amortization

     330         316         223         4.4     48.0     646         443         45.8

Third-party sharing arrangements

     709         907         497         -21.8     42.7     1,616         780         107.2

Acquisition payment

     5,993         745         264         704.4     2170.1     6,738         521         n/a   

Other

     1,823         1,632         1,509         11.7     20.8     3,455         2,744         25.9
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total expenses

     44,825         39,206         40,621         14.3     10.3     84,031         79,742         5.4
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Income before taxes

     11,156         21,672         40,938         -48.5     -72.7     32,828         61,958         -47.0

Income tax expense

     7,505         9,600         16,766         —          —          17,105         25,724         —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net income

   $ 3,651       $ 12,072       $ 24,172         -69.8     -84.9   $ 15,723       $ 36,234         -56.6
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net income per share - basic

   $ 0.03       $ 0.09       $ 0.18           $ 0.11       $ 0.27      

Net income per share - diluted

   $ 0.03       $ 0.09       $ 0.18           $ 0.11       $ 0.26      

Weighted average common shares - basic

     136,503         137,599         135,895             137,051         134,990      

Weighted average common shares - diluted

     137,274         138,424         137,951             137,849         137,620      

 

11


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

NON-GAAP SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

(Unaudited)

 

     U.S.
Listed
Business
Q2/16
    European
Listed
Business
Q2/16
    Total
Q2/16
    U.S. Listed Business  
                                % Change From  
           Q2/16      Q1/16      Q2/15      Q1/16     Q2/15  

Revenues:

                   

Advisory fees

   $ 54,061      $ 1,870      $ 55,931      $ 54,061       $ 59,092       $ 80,409         -8.5     -32.8

Other income

     386        (336     50        386         221         238         74.7     62.2
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total revenues

     54,447        1,534        55,981        54,447         59,313         80,647         -8.2     -32.5

Expenses:

                   

Compensation and benefits

     12,955        1,388        14,343        12,955         13,677         17,437         -5.3     -25.7

Fund management and administration

     9,339        1,282        10,621        9,339         9,260         10,462         0.9     -10.7

Marketing and advertising

     3,975        591        4,566        3,975         3,510         3,256         13.2     22.1

Sales and business development

     3,621        213        3,834        3,621         2,362         2,048         53.3     76.8

Professional and consulting fees

     1,261        104        1,365        1,261         2,493         1,541         -49.4     -18.2

Occupancy, communications and equipment

     1,138        103        1,241        1,138         1,116         889         2.0     28.0

Depreciation and amortization

     325        5        330        325         311         221         4.5     47.1

Third-party sharing arrangements

     709        —          709        709         907         497         -21.8     42.7

Acquisition payment

     —          5,993        5,993        —           —           —           n/a        n/a   

Other

     1,739        84        1,823        1,739         1,537         1,413         13.1     23.1
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total expenses

     35,062        9,763        44,825        35,062         35,173         37,764         -0.3     -7.2
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Income/(loss) before taxes

     19,385        (8,229     11,156        19,385         24,140         42,883         -19.7     -54.8

Income tax expense/(benefit)

     7,607        (102     7,505        7,607         9,651         16,785         -21.2     -54.7
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Net income/(loss)

   $ 11,778      $ (8,127   $ 3,651      $ 11,778       $ 14,489       $ 26,098         -18.7     -54.9
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Pretax margin

     35.6       19.9             

Gross margin

     81.5       79.8             

 

12


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

     June 30,
2016
    December 31,
2015
 
     (Unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 174,914      $ 210,070   

Investments

     3,088        —     

Accounts receivable

     17,939        27,576   

Other current assets

     4,659        2,899   
  

 

 

   

 

 

 

Total current assets

     200,600        240,545   

Fixed assets, net

     12,062        11,974   

Investments

     15,615        23,689   

Deferred tax asset, net

     5,356        14,071   

Goodwill

     3,475        1,676   

Intangible asset

     9,953        —     

Other noncurrent assets

     763        738   
  

 

 

   

 

 

 

Total assets

   $ 247,824      $ 292,693   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

    

LIABILITIES

    

Current liabilities:

    

Fund management and administration payable

   $ 13,183      $ 12,971   

Compensation and benefits payable

     7,531        28,060   

Acquisition payable

     7,194        —     

Accounts payable and other liabilities

     7,123        8,063   
  

 

 

   

 

 

 

Total current liabilities

     35,031        49,094   

Other noncurrent liabilities:

    

Acquisition payable

     —          3,942   

Deferred rent payable

     5,015        5,155   
  

 

 

   

 

 

 

Total liabilities

     40,046        58,191   
  

 

 

   

 

 

 

STOCKHOLDERS' EQUITY

    

Common stock, par value $0.01; 250,000 shares authorized:

    

issued: 136,578 and 138,415;

     1,366        1,384   

outstanding: 134,146 and 136,794;

    

Additional paid-in capital

     236,444        257,960   

Accumulated other comprehensive income/(loss)

     794        (126

Accumulated deficit

     (30,826     (24,716
  

 

 

   

 

 

 

Total stockholders' equity

     207,778        234,502   
  

 

 

   

 

 

 

Total liabilities and stockholders' equity

   $ 247,824      $ 292,693   
  

 

 

   

 

 

 

 

13


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

     Six Months Ended  
     June 30,
2016
    June 30,
2015
 

Cash flows from operating activities:

    

Net income

   $ 15,723      $ 36,234   

Non-cash items included in net income:

    

Income tax expense

     15,490        25,218   

Depreciation and amortization

     646        443   

Stock-based compensation

     7,270        4,952   

Deferred rent

     (115     (70

Accretion to interest income and other

     (34     6   

Changes in operating assets and liabilities:

    

Accounts receivable

     9,561        (10,318

Other assets

     (1,889     (2,279

Acquisition payable

     3,295        521   

Fund management and administration payable

     240        3,219   

Compensation and benefits payable

     (20,481     7,290   

Accounts payable and other liabilities

     (710     316   
  

 

 

   

 

 

 

Net cash provided by operating activities

     28,996        65,532   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of fixed assets

     (599     (364

Purchase of investments

     —          (8,449

Acquisition less cash acquired

     (11,818     —     

Proceeds from the redemption of investments

     5,025        1,187   
  

 

 

   

 

 

 

Net cash used in investing activities

     (7,392     (7,626
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Dividends paid

     (21,833     (21,794

Shares repurchased

     (35,654     (15,264

Proceeds from exercise of stock options

     104        3,293   
  

 

 

   

 

 

 

Net cash used in financing activities

     (57,383     (33,765
  

 

 

   

 

 

 

Increase/(decrease) in cash flows due to changes in foreign exchange rate

     623        (153
  

 

 

   

 

 

 

Net (decrease )/increase in cash and cash equivalents

     (35,156     23,988   

Cash and cash equivalents - beginning of period

     210,070        165,284   
  

 

 

   

 

 

 

Cash and cash equivalents - end of period

   $ 174,914      $ 189,272   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid for taxes

   $ 3,748      $ 356   
  

 

 

   

 

 

 

 

14


WisdomTree Investments, Inc.

Key Operating Statistics (Unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,
2016
    March 31,
2016
    June 30,
2015
    June 30,
2016
    June 30,
2015
 

U.S. LISTED ETFs

          

Total ETFs (in millions)

          

Beginning of period assets

     44,256        51,639        55,758        51,639        39,281   

Assets acquired

       225          225     

Inflows/(outflows)

     (4,949     (5,359     6,598        (10,308     20,118   

Market appreciation/(depreciation)

     (1,261     (2,249     (1,057     (3,510     1,900   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     38,046        44,256        61,299        38,046        61,299   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     41,830        45,475        61,153        43,652        53,772   

Revenue days

     91        91        91        182        181   

ETF Industry and Market Share (in billions)

          

ETF industry net inflows

     31.9        34.6        41.4        66.5        96.9   

WisdomTree market share of industry inflows

     n/a        n/a        15.9     n/a        20.8

International Hedged Equity ETFs (in millions)

          

Beginning of period assets

     25,140        33,311        33,925        33,311        17,760   

Inflows/(outflows)

     (4,927     (5,396     6,083        (10,323     19,523   

Market appreciation/(depreciation)

     (1,415     (2,775     (786     (4,190     1,939   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     18,798        25,140        39,222        18,798        39,222   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     22,633        27,846        38,548        25,239        31,553   

U.S. Equity ETFs (in millions)

          

Beginning of period assets

     8,966        8,603        9,748        8,603        9,390   

Inflows/(outflows)

     500        (8     (320     492        (26

Market appreciation/(depreciation)

     300        371        (183     671        (119
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     9,766        8,966        9,245        9,766        9,245   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     9,252        8,225        9,664        8,738        9,717   

International Developed Equity ETFs (in millions)

          

Beginning of period assets

     4,653        4,525        4,323        4,525        3,988   

Inflows/(outflows)

     (251     160        497        (91     685   

Market appreciation/(depreciation)

     (218     (32     9        (250     156   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     4,184        4,653        4,829        4,184        4,829   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     4,633        4,304        4,790        4,469        4,450   

Emerging Markets Equity ETFs (in millions)

          

Beginning of period assets

     3,803        3,825        6,068        3,825        6,187   

Inflows/(outflows)

     (160     (171     250        (331     85   

Market appreciation/(depreciation)

     40        149        (74     189        (28
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     3,683        3,803        6,244        3,683        6,244   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     3,703        3,476        6,336        3,590        6,242   

Fixed Income ETFs (in millions)

          

Beginning of period assets

     828        799        904        799        1,152   

Inflows/(outflows)

     (47     (14     67        (61     (143

Market appreciation/(depreciation)

     9        43        (15     52        (53
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     790        828        956        790        956   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     811        788        929        799        974   

Alternative Strategy ETFs (in millions)

          

Beginning of period assets

     440        208        225        208        205   

Assets acquired

     —          225        —          225        —     

Inflows/(outflows)

     (10     5        14        (5     31   

Market appreciation/(depreciation)

     22        2        (9     24        (6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     452        440        230        452        230   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     448        432        235        440        225   

Currency ETFs (in millions)

          

Beginning of period assets

     426        368        565        368        599   

Inflows/(outflows)

     (54     65        7        11        (37

Market appreciation/(depreciation)

     1        (7     1        (6     11   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     373        426        573        373        573   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     350        404        651        377        611   

 

15


     Three Months Ended     For the Six Months Ended  
     June 30,
2016
    March 31,
2016
    June 30,
2015
        June 30,    
2016
        June 30,    
2015
 

Average ETF assets during the period

          

International hedged equity ETFs

     54     61     63     58     59

U.S. equity ETFs

     22     18     16     20     18

International developed equity ETFs

     11     9     8     10     8

Emerging markets equity ETFs

     9     8     10     8     12

Fixed income ETFs

     2     2     2     2     2

Currency ETFs

     1     1     1     1     1

Alternative strategy ETFs

     1     1     0     1     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average ETF advisory fee during the period

          

Alternative strategy ETFs

     0.87     0.88     0.95     0.87     0.95

Emerging markets equity ETFs

     0.71     0.71     0.71     0.71     0.71

International developed equity ETFs

     0.56     0.56     0.56     0.56     0.56

International hedged equity ETFs

     0.54     0.54     0.54     0.54     0.53

Currency ETFs

     0.50     0.50     0.50     0.50     0.50

Fixed income ETFs

     0.48     0.49     0.52     0.49     0.52

U.S. equity ETFs

     0.35     0.35     0.35     0.35     0.35
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Blended total

     0.52     0.52     0.53     0.52     0.52
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Number of ETFs - end of the period

          

International hedged equity ETFs

     23        23        16        23        16   

International developed equity ETFs

     21        20        18        21        18   

U.S. equity ETFs

     15        15        13        15        13   

Fixed income ETFs

     17        13        12        17        12   

Emerging markets equity ETFs

     10        9        8        10        8   

Alternative strategy ETFs

     7        7        2        7        2   

Currency ETFs

     6        6        6        6        6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     99        93        75        99        75   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EUROPEAN LISTED ETPs

          

Total ETPs (in thousands)

          

Beginning of period assets

     488,069        437,934        288,801        437,934        165,018   

Inflows

     20,578        123,461        50,331        144,039        195,712   

Market appreciation/(depreciation)

     51,416        (73,326     44,957        (21,910     23,359   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     560,063        488,069        384,089        560,063        384,089   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     544,676        428,230        336,588        486,453        278,534   

 

Average ETP advisory fee during the period

     0.84     0.84     0.82     0.84     0.82

Number of ETPs - end of the period

     67        67        57        67        57   

 

Total UCITS ETFs (in thousands)

          

Beginning of period assets

     396,901        335,938        45,846        335,938        16,179   

Inflows

     37,272        69,878        144,234        107,150        173,085   

Market appreciation/(depreciation)

     (42,273     (8,915     38,508        (51,188     39,324   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period assets

     391,900        396,901        228,588        391,900        228,588   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average assets during the period

     400,047        356,814        204,568        378,431        117,138   

 

Average ETP advisory fee during the period

     0.46     0.47     0.44     0.46     0.42

Number of ETPs - end of the period

     27        22        10        27        10   

 

U.S. headcount

     149        146        117        149        117   

Non-U.S. headcount

     55        45        28        55        28   

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

Source: Investment Company Institute, Bloomberg, WisdomTree

 

16


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 release include:

 

  Gross margin and gross margin percentage. We disclose gross margin, which we define as total revenues less fund management and administration expenses and third-party sharing arrangements, 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 and third party marketing agents whose fees are associated with our AUM level. Management tracks gross margin and gross margin percentage to analyze the profitability of operating our products.

 

  Operating results for our U.S. listed ETF business. We disclose the results of our U.S. listed ETF business separately from the start up stage of our European business to allow investors to better understand and track the performance and operating efficiency of our core U.S. operations, which make up the vast majority of our operating and financial results.

 

  Operating results for the second quarter of 2016 excluding a $6.0 million charge related to the accelerated buyout of the minority shareholders of our European business. We exclude this charge, which is not deductible for tax purposes, when analyzing our results as it is a one-time, non-recurring charge and not core to our operating business.

 

17


WISDOMTREE INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

GAAP to NON-GAAP RECONCILIATION

(in thousands)

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     Jun. 30,
2016
    Mar. 31,
2016
    Jun. 30,
2015
    Jun. 30,
2016
    Jun. 30,
2015
 

GAAP total revenue

   $ 55,981      $ 60,878      $ 81,559      $ 116,859      $ 141,700   

Fund management and administration

     (10,621     (10,044     (11,208     (20,665     (21,376

Third-party sharing arrangements

     (709     (907     (497     (1,616     (780
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

   $ 44,651      $ 49,927      $ 69,854      $ 94,578      $ 119,544   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin percentage

     79.8     82.0     85.6     80.9     84.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

U.S. listed ETFs:

          

GAAP total revenue

   $ 54,447      $ 59,313      $ 80,647      $ 113,760      $ 140,227   

Fund management and administration

     (9,339     (9,260     (10,462     (18,599     (20,195

Third-party sharing arrangements

     (709     (907     (497     (1,616     (780
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

   $ 44,399      $ 49,146      $ 69,688      $ 93,545      $ 119,252   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin percentage

     81.5     82.9     86.4     82.2     85.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income and diluted earnings per share:

          

Net income, as reported

   $ 3,651          $ 15,723     

Add back acquisition payment

     5,993            5,993     
  

 

 

       

 

 

   

Adjusted net income

   $ 9,644          $ 21,716     

Weighted average common shares—diluted

     137,274            137,849     

Adjusted net income per share—diluted

   $ 0.07          $ 0.16     

Adjusted pretax margin:

          

Income before income taxes

   $ 11,156          $ 32,828     

Add back acquisition payment

     5,993            5,993     
  

 

 

       

 

 

   

Adjusted income before income taxes

   $ 17,149          $ 38,821     

Total revenues

   $ 55,981          $ 116,859     

Adjusted pretax margin

     30.6         33.2  
  

 

 

       

 

 

   

Tax rate:

          

Adjusted income before income taxes (from above)

   $ 17,149           

Income tax expense

     7,505           

Adjusted income tax rate

     43.8        

Adjusted total expenses:

          

Total expenses, as reported

   $ 44,825          $ 84,031     

Less acquisition payment

     (5,993         (5,993  
  

 

 

       

 

 

   

Adjusted total expenses

   $ 38,832          $ 78,038     

 

18